EXHIBIT 2.6
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
MANHEIM AUCTIONS, INC.
AND
ADT GENERAL HOLDINGS, INC.
DATED AS OF
JANUARY 13, 2000
TABLE OF CONTENTS
PAGE
1. DEFINITIONS............................................................1
2. COVENANTS AND UNDERTAKINGS.............................................1
2.1 Purchase and Sale of Shares......................................1
2.2 Purchase Price...................................................2
2.3 Discharge of Debt and Other Obligations..........................4
2.4 Cooperation......................................................4
2.5 Consents and Approvals...........................................5
2.6 Non-Competition Agreement........................................6
2.7 Resignations.....................................................6
2.8 Tax Matters......................................................6
2.9 Employee Plans and Compensation Arrangements....................12
2.10 Conduct of Parties Prior to the Closing.........................16
2.11 Brokers.........................................................18
2.12 Publicity.......................................................18
2.13 No Shop.........................................................19
2.14 Redemption or Repurchase of Preferred Stock.....................19
2.15 Access to Books and Records.....................................19
2.16 Confidentiality.................................................20
2.17 Certain Post-Closing Environmental Procedures...................20
2.18 Certain Intellectual Property Matters...........................22
2.19 Insurance Claims................................................23
3. REPRESENTATIONS AND WARRANTIES OF SELLER..............................23
3.1 Organization, Standing and Foreign Qualification................23
3.2 Authority and Status............................................23
3.3 Capitalization..................................................24
3.4 Absence of Equity Investments...................................24
3.5 Liabilities and Obligations of the Company Entities.............25
3.6 Tax Matters.....................................................25
3.7 Personal Property...............................................26
3.8 Bank Accounts...................................................26
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3.9 Consents and Approvals; Noncontravention........................27
3.10 Absence of Changes..............................................27
3.11 Litigation......................................................28
3.12 Licenses and Permits; Compliance With Law.......................28
3.13 Real Property...................................................29
3.14 Environmental Matters...........................................30
3.15 Contracts, Etc..................................................31
3.16 Patents, Trademarks, Trade Names, Etc...........................31
3.17 Labor Matters and Employee Relations............................31
3.18 Benefit Plans...................................................33
3.19 Title to Assets.................................................36
3.20 Accounts Receivable.............................................36
3.21 Insurance.......................................................36
3.22 Guaranties......................................................36
3.23 Full Disclosure.................................................37
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................37
4.1 Organization and Standing.......................................37
4.2 Authority and Status............................................37
4.3 Consents and Approvals; Noncontravention........................37
4.4 Purchase for Investment.........................................38
4.5 Inspections; No Other Representations...........................38
4.6 Availability of Funds...........................................38
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER......................38
5.1 Representations True at Closing.................................39
5.2 Covenants.......................................................39
5.3 No Material Adverse Change......................................39
5.4 Officer's Certificate...........................................39
5.5 Consents and Waivers............................................39
5.6 Regulatory Approvals............................................39
5.7 Judgment........................................................40
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.8 Redemption or Repurchase of Preferred Stock.....................40
5.9 Deliveries......................................................40
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.........................40
6.1 Representations True at Closing.................................40
6.2 Covenants.......................................................40
6.3 Officers' Certificate...........................................41
6.4 Regulatory Approvals............................................41
6.5 Judgment........................................................41
6.6 Deliveries......................................................41
7. CLOSING...............................................................41
7.1 Time and Place of Closing.......................................41
7.2 Transactions at Closing.........................................42
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION........44
8.1 Survival of Representations and Warranties of Seller............44
8.2 Survival of Representations and Warranties of Purchaser.........45
8.3 Assertion of Indemnification Claims.............................45
8.4 Certain Limitations on Obligation to Indemnify..................46
9. TERMINATION...........................................................47
9.1 Agreement between Seller and Purchaser..........................47
9.2 Termination by Seller...........................................47
9.3 Termination by Purchaser........................................48
9.4 Effect of Termination...........................................48
9.5 Attorneys' Fees.................................................49
9.6 Exclusivity.....................................................49
10. GENERAL PROVISIONS....................................................49
10.1 Notices.........................................................49
10.2 Further Assurances..............................................50
10.3 Waiver..........................................................50
10.4 Expenses........................................................51
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TABLE OF CONTENTS
(CONTINUED)
PAGE
10.5 Assignment......................................................51
10.6 Headings........................................................51
10.7 Entire Agreement; Amendment.....................................51
10.8 Counterparts....................................................51
10.9 Pronouns and Number.............................................51
10.10 Schedules and Exhibits Incorporated.............................52
10.11 Disclosure Schedules............................................52
10.12 Severability....................................................52
10.13 Governing Law...................................................52
10.14 Jurisdiction....................................................52
10.15 Third-Party Beneficiaries.......................................53
10.16 Waiver of Jury Trial............................................53
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EXHIBITS
Exhibit A List of Subsidiaries and Auctions
Exhibit B Definitions
Exhibit C Form of Closing Report
Exhibit D Form of Adjustment Escrow Agreement
Exhibit E Form of Non-Competition Agreement
Exhibit F Form of ADT License Agreement
Exhibit G Form of Opinion of Counsel for Seller, Parent and U.S. Parent
Exhibit H Form of Opinion of Counsel for Purchaser
SCHEDULES
Schedule 2.2.2(a) Excluded Current Assets and Current Liabilities
Schedule 2.2.2.2 Certain Capital Expenditures
Schedule 2.3 Debt and Other Obligations to be Discharged
Schedule 2.8 Responsibility for Returns
Schedule 2.9.5 Severance Benefits
Schedule 3.1 Jurisdiction of Organization, Subsidiaries and
Qualifications
Schedule 3.3.1 Capitalization of Company Entities
Schedule 3.4 Investment Interests
Schedule 3.5.1 Financial Statements
Schedule 3.5.2 Liabilities
Schedule 3.5.3 Default
Schedule 3.6 Tax Matters
Schedule 3.8 Bank Accounts
Schedule 3.9 Consents and Noncontravention
Schedule 3.10 Changes and Events
Schedule 3.11 Litigation
Schedule 3.12 Licenses and Permits; Compliance with Law
Schedule 3.13 Real Property
Schedule 3.14 Environmental Matters
Schedule 3.15 Material Contracts
Schedule 3.16 Patents, Trademarks, Trade Names, Etc.
Schedule 3.17 Employees; Labor Matters
Schedule 3.18 Benefit Plans
Schedule 3.19 Title to Assets
Schedule 3.21 Insurance Policies
Schedule 3.22 Guaranties
Schedule 4.3 Consents and Noncontravention
Schedule 5.6 Certain Regulatory Approvals
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), made as of this 13th
day of January 2000, by and between MANHEIM AUCTIONS, INC., a Delaware
corporation ("PURCHASER"), and ADT GENERAL HOLDINGS, INC., a Delaware
corporation ("SELLER"),
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ADT Automotive Holdings, Inc., a Delaware corporation (the
"ACQUIRED COMPANY"), directly and/or through the subsidiaries listed on EXHIBIT
A attached hereto (which, together with the Acquired Company, are referred to
herein as the "COMPANY ENTITIES") owns and operates 28 automobile auction
facilities listed on EXHIBIT A, together with certain ancillary businesses,
including vehicle transport, reconditioning and title services, and related
assets, including patents, intellectual property and technology;
WHEREAS, the parties hereto desire to enter into this Agreement
pursuant to which Purchaser will purchase from Seller all of the issued and
outstanding shares of capital stock of the Acquired Company (the "SHARES") upon
the terms and subject to the conditions set forth herein; and
WHEREAS, pursuant to that certain Guaranty, dated of even date herewith
(the "GUARANTY"), among Purchaser, Tyco International Ltd., a Bermuda
corporation ("PARENT"), and Tyco International (U.S.) Inc., a Delaware
corporation ("U.S. PARENT"), Parent and U.S. Parent have guaranteed the
performance of Seller's obligations hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, the
parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise stated in this Agreement, certain terms used
herein shall have the meanings set forth in EXHIBIT B attached hereto.
2. COVENANTS AND UNDERTAKINGS.
--------------------------
2.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
hereinafter set forth, Seller shall, at Closing, sell, assign, transfer, convey
and deliver to Purchaser the Shares, free and clear of all Encumbrances. Such
sale, assignment, transfer, conveyance and delivery shall be evidenced by a
share certificate duly endorsed in blank or by instruments of transfer
reasonably satisfactory in form and substance to Purchaser and its counsel.
2.2 Purchase Price.
--------------
2.2.1 Subject to the adjustments to be made in accordance with the
provisions set forth in this Section 2.2, in consideration of the sale,
assignment, transfer, conveyance and delivery of the Shares and in reliance upon
the representations and warranties made herein by Seller, Purchaser, in full
payment for the Shares, the Non-Competition Agreement and the royalties under
the ADT License Agreement, shall pay to Seller by wire transfer at Closing, the
aggregate amount of One Billion Dollars ($1,000,000,000) (the "PURCHASE PRICE").
The parties agree that the Purchase Price shall be paid as follows:
2.2.1.1 Fifty Million Dollars ($50,000,000) shall be paid to
Licensor in full payment for the royalties under the ADT License Agreement; and
2.2.1.2 the balance of the Purchase Price after the payment
set forth in Section 2.2.1.1 shall be paid to Seller in full payment for the
Shares and to Seller and U.S. Parent in full payment for the Non-Competition
Agreement.
2.2.2 Adjustments to Purchase Price.
-----------------------------
2.2.2.1 The Purchase Price shall be (i) increased by
the amount by which the Working Capital (as defined below) as of the Adjustment
Time exceeds the Target Working Capital (as defined below) or (ii) decreased by
the amount by which the Working Capital as of the Adjustment Time is less than
the Target Working Capital. "WORKING CAPITAL" as of any date shall mean, on a
consolidated basis, current assets less current liabilities of the Company
Entities as defined below. "TARGET WORKING CAPITAL" shall mean Forty-Two Million
Four Hundred Thousand Dollars ($42,400,000). Current assets shall include cash
and cash equivalents, accounts receivable, notes receivable, prepaid expenses,
federal and state income tax receivables that are Booked Taxes and other current
assets consistently reported in accordance with the Financial Statements and in
each case in accordance with GAAP (except as otherwise set forth on SCHEDULE
2.2.2(a)). Current liabilities shall include accounts payable, accrued expenses,
Booked Taxes and unearned income consistently reported in accordance with the
Financial Statements and in each case in accordance with GAAP (except as
otherwise set forth on SCHEDULE 2.2.2(a)). Any adjustments to the Purchase Price
shall be an adjustment to the portion of the Purchase Price paid to Seller for
the Shares.
2.2.2.2 The Purchase Price shall be increased by the amount
of the capital expenditures that are set forth on SCHEDULE 2.2.2.2, subject to
the limitations that are set forth on SCHEDULE 2.2.2.2, made by or on behalf of
the Company Entities between the date hereof and the Closing Date.
2.2.3 Determination of Adjusted Purchase Price.
----------------------------------------
2.2.3.1 At least seven business days prior to the Closing,
Seller will deliver to Purchaser a report substantially in the form of EXHIBIT C
attached hereto (the
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"PRELIMINARY REPORT"), certified as to completeness and accuracy by Seller,
showing in detail the preliminary determination of the adjustments referred to
in this Section 2.2, which are calculated in accordance with this Section 2.2 as
of the Adjustment Time (or as of any other date(s) to which the parties agree),
together with any documents substantiating the determination of the adjustments
to the Purchase Price proposed in the Preliminary Report. The parties shall
negotiate in good faith to resolve any dispute and to reach an agreement prior
to the Closing Date on such preliminary adjustments to the Purchase Price as of
the Closing Date. The adjustments shown in the Preliminary Report, as adjusted
by agreement of the parties, will be reflected as an adjustment to the Purchase
Price payable at the Closing; provided that Purchaser has not given notice to
Seller that, in Purchaser's reasonable opinion, the proposed adjustments are
materially incorrect. If Purchaser gives Seller notice that in its reasonable
opinion the proposed adjustments are materially incorrect, and if the parties
have not been able to resolve the matter prior to the Closing Date, any disputed
amounts shall be paid by the party to be charged with a disputed adjustment into
escrow and shall be held by an escrow agent (which shall be a commercial bank
selected by Purchaser and reasonably acceptable to Seller) in accordance with an
escrow agreement, substantially in the form of EXHIBIT D attached hereto, until
the adjustments are finally determined pursuant to Section 2.2.3.2, at which
▇▇▇▇ ▇▇▇▇▇▇ and Purchaser shall deliver a joint written notice to such escrow
agent setting forth appropriate instructions as to the disposition from escrow
of such disputed amounts deposited thereunder.
2.2.3.2 Within 90 days after the Closing Date, Purchaser
shall deliver to Seller a report (the "FINAL REPORT"), certified as to
completeness and accuracy by Purchaser, showing in detail the final
determination of any adjustments which were not calculated as of the Closing
Date and containing any corrections to the Preliminary Report, together with any
documents substantiating the final calculation of the adjustments proposed in
the Final Report. If Seller shall conclude that the Final Report does not
accurately reflect the adjustments to be made to the Purchase Price in
accordance with this Section 2.2, Seller shall, within 30 days after its receipt
of the Final Report, provide to Purchaser its written statement of any
discrepancies believed to exist. Purchaser and Seller shall use good faith
efforts to jointly resolve the discrepancies within 30 days of Purchaser's
receipt of Seller's written statement of discrepancies, which resolution, if
achieved, shall be binding upon all parties to this Agreement and not subject to
dispute or judicial review. If Purchaser and Seller cannot resolve the
discrepancies to their mutual satisfaction within such 30-day period, Purchaser
and Seller shall, within the following ten days, jointly designate a national
independent public accounting firm to be retained to review the Final Report
together with Seller's discrepancy statement and any other relevant documents.
The parties agree that the foregoing independent public accounting firm shall
not be one that is, or within two years prior to the Closing Date has been,
regularly engaged by Purchaser or Seller. Such firm shall report its conclusions
as to adjustments pursuant to this Section 2.2, which shall be conclusive on all
parties to this Agreement and not subject to dispute or judicial review. If
Purchaser or Seller is determined to owe an amount to the other, the appropriate
party shall pay such amount thereof to the other, within three business days
after receipt of such determination. The cost of retaining such independent
public accounting firm shall be borne (i) by the party whose amounts, on
Purchaser's Final Report or Seller's written statement of any discrepancies
3
thereto, were further from the determination of the conclusion of the
independent public accounting firm as to the adjustments pursuant to this
Section 2.2, or (ii) equally by the parties in the event that such conclusion is
equidistant between the amounts on Purchaser's Final Report and Seller's written
statement of any discrepancies thereto. Purchaser shall provide Seller with
reasonable access to all records that Purchaser has in its possession that are
necessary for Seller to review the Final Report.
2.3 Discharge of Debt and Other Obligations.
---------------------------------------
2.3.1 On or before the Closing Date, Seller shall cause the
Company Entities to cause to be paid, discharged in full or otherwise satisfied
and released, and shall deliver satisfactory releases, and terminations of any
security interest held in respect of, or other evidence thereof reasonably
satisfactory to Purchaser, (i) all Indebtedness of the Company Entities; (ii)
unpaid consulting or non-competition fees or additional payments due in
connection with any acquisitions or other similar obligations of the Company
Entities, if any; (iii) any debt or liabilities or any other inter-company
arrangement owed by any of the Company Entities to Seller or any Affiliate of
Seller (other than a Company Entity); and (iv) any long-term obligations
(including any guaranties or similar obligations) of the Company Entities
whether or not directly related to the operations of the Auctions owned by such
entities other than obligations under the Material Licenses or agreements,
leases, contracts or other instruments which have been disclosed under this
Agreement or which otherwise are not required to be disclosed hereunder. All
documents evidencing obligations under subsections (i), (ii) and (iv) of this
Section 2.3.1 are listed on SCHEDULE 2.3 attached hereto.
2.3.2 On or before the Closing Date, Seller shall also cause
any Affiliate of Seller (other than a Company Entity) to cause to be paid,
discharged in full or otherwise satisfied and released, and shall deliver
evidence thereof reasonably satisfactory to Purchaser, any inter-company debt or
liabilities owed by any of such Affiliates to any of the Company Entities (A)
without any residual or continuing obligation or liability on the part of any of
the Company Entities, (B) which action shall not result in any equity of any of
the Company Entities being issued to an entity that is not in the Selling Group,
and (C) so that immediately prior to Closing, all of the issued and outstanding
capital stock of the Acquired Company shall be held by Seller.
2.3.3 On or before the Closing Date, Seller shall cause the
Acquired Company to distribute to Seller or otherwise dispose of the 10,000
shares of 7.25% preferred stock, par value $10,000 per share, of ADT Security
Services, Inc. held by the Acquired Company without any residual or continuing
obligation or liability on the part of any of Company Entities.
2.4 Cooperation. Purchaser and Seller shall cooperate fully with each
other and their respective counsel and accountants in connection with any
actions required to be taken as a part of their respective obligations under
this Agreement, and Purchaser and Seller shall execute such other documents as
may be necessary and desirable to the implementation and consummation of
4
this Agreement and otherwise use their commercially reasonable efforts to
consummate the transactions contemplated hereby and to fulfill their obligations
hereunder.
2.5 Consents and Approvals.
----------------------
2.5.1 Subject to the last sentence of this Section 2.5.1,
Purchaser and Seller agree to use commercially reasonable efforts and to take
any and all commercially reasonable actions necessary to obtain the written
waiver, consent and approval of all Persons whose waiver, consent or approval is
required (i) in order to consummate the transactions contemplated by this
Agreement, or (ii) by any agreement, lease, instrument, arrangement, judgment,
writ, decree, order or license to which any of the Company Entities is a party
or subject on the Closing Date and which would prohibit, or require the waiver,
consent or approval of any Person to such transactions or under which, without
such waiver, consent or approval, the consummation of such transactions would
constitute an occurrence of default under the provisions thereof, result in the
acceleration of any obligation thereunder or result in the creation or
imposition of any Encumbrance upon the Shares or any property or asset of the
Company Entities or give rise to a right of any party thereto to terminate its
obligations thereunder. Notwithstanding anything to the contrary contained in
this Agreement (including obligations to act commercially reasonably), Purchaser
shall not be required to accept or honor (nor shall any of the Company Entities
be permitted to accept or honor except with Purchaser's prior written consent)
any conditions, changes, modifications or additions to, or in connection with,
any contracts, agreements, licenses, permits or other authorizations of any
Company Entity that may be imposed or required by the party from whom consent or
approval is sought under this Agreement or in connection with the transactions
contemplated hereby, other than those of an immaterial or ministerial nature.
2.5.2 Purchaser and Seller shall within ten business days
after the date hereof file or cause to be filed all necessary Notification and
Report Forms (the "HSR REPORTS") mandated by the HSR Act and the HSR Rules to be
filed by them or by any other Person as a result of the transactions
contemplated by this Agreement and coordinate the concurrent filing of such HSR
Reports with the Federal Trade Commission (the "FTC") and the Department of
Justice (the "DOJ"). The parties shall use best efforts to respond, or to cause
such other Persons to respond, as promptly as reasonably practicable to any
inquiries received from the FTC or the DOJ for additional information or
documentation, including, without limitation, a "second request" for information
from the FTC or the DOJ, and to respond, or to cause such other Persons to
respond, as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters. The parties shall use their respective best efforts to overcome any
objections that may be raised by the FTC or the DOJ or any other Governmental
Authority having jurisdiction over antitrust matters. Notwithstanding anything
to the contrary in this Agreement, Purchaser shall not be required to agree to
any prohibition, limitation or other requirement that would (i) prohibit or
limit the ownership or operation by Purchaser or any of its Affiliates of any
portion of the business, operations or assets of Purchaser or any of its
Affiliates, (ii) compel Purchaser or any of its
5
Affiliates to dispose of or hold separate any portion of the business,
operations or assets of Purchaser or any of its Affiliates, (iii) impose
limitations (other than routine reporting requirements) on the ability of
Purchaser to acquire or hold, or exercise full rights of ownership of, any
shares of capital stock of any of the Company Entities, including the right to
vote such capital stock on all matters properly presented to the applicable
shareholders, or (iv) prohibit Purchaser or any of its Affiliates from
effectively controlling in any respect the business or operations of Purchaser
or any of its Affiliates.
2.6 Non-competition Agreement. Seller, U.S. Parent and Purchaser
shall enter into the Non-Competition Agreement at Closing.
2.7 Resignations. At Closing, Seller shall cause to be delivered
to Purchaser the resignation of each of the directors and officers of each of
the Company Entities, which resignations shall be effective immediately
subsequent to Closing.
2.8 Tax Matters.
-----------
2.8.1 "BOOKED TAXES" means Taxes of each Company Entity
payable with respect to a Straddle Period (as defined in Section 2.8.2.1 below)
that are reflected on the Final Report as current assets or current liabilities
with respect to such Taxes and that are taken into account in computing the
adjustment to the Purchase Price under Section 2.2 hereof.
2.8.2 Taxes of each Company Entity with respect to the period
ending on (and including) the Closing Date, other than Booked Taxes, shall be
the responsibility of Seller. Taxes of each Company Entity with respect to the
period after the Closing Date shall be the responsibility of Purchaser.
2.8.2.1 Seller agrees to pay and, notwithstanding any
disclosure of potential tax liabilities made by Seller or the Company Entities,
to indemnify, reimburse and hold harmless Purchaser and the Company Entities and
their respective successors, and their respective officers, directors,
employees, agents and representatives, from and against any and all Taxes of the
Company Entities payable with respect to, and any and all claims, liabilities,
losses, damages, costs and expenses (including, without limitation, court costs
and reasonable professional fees incurred in the investigation, defense or
settlement of any claims covered by this indemnity) (herein referred to as
"INDEMNIFIABLE TAX DAMAGES"), arising out of or in any manner incident, relating
or attributable to Taxes of the Company Entities payable with respect to, or Tax
Returns required to be filed by the Company Entities under Section 2.8.7 with
respect to, (i) any taxable year (or other applicable reporting period) (a
"REPORTING PERIOD") of the Company Entities ending on or before the Closing
Date, and (ii) any Reporting Period of the Company Entities that begins before
the Closing Date and that ends after the Closing Date (a "STRADDLE PERIOD"),
whether such Taxes are imposed directly on the Company Entities or as a result
of including the Company Entities in consolidated or combined returns filed by
the affiliated group of which the Company Entities are members (the "SELLER
CONSOLIDATED
6
GROUP"), except that with respect to any Straddle Period, Seller shall be
responsible for the payment of such Taxes only to the extent that they exceed
Booked Taxes. Seller shall be entitled to any credits or refunds of Taxes of the
Company Entities payable with respect to any Reporting Period of the Company
Entities ending on or before the Closing Date. Purchaser shall cause the amount
of any credits or refunds of Taxes to which Seller is entitled under this
Section 2.8, but which are received by or credited to the Company Entities after
the Closing Date, to be paid to Seller within ten business days following such
receipt or crediting; provided that Seller shall reimburse the Company Entities
to the extent of any required subsequent repayment of, or reduction in, the
amount of such credits or refunds of Taxes so received or credited.
2.8.2.2 In accordance with Code Section 1442 and the
Treasury Regulations promulgated thereunder, Purchaser shall withhold from the
payment to Licensor set forth in Section 2.2.1.1 hereof, and pay-over to the
U.S. Treasury, a U.S. federal withholding tax in an amount equal to 30% of the
gross amount of such payment, or such other withholding percentage rate
reflected on a properly completed and duly executed original I.R.S. Form W-8BEN
(or other appropriate form) delivered to Purchaser at Closing pursuant to
Section 7.2.1 of this Agreement. Seller shall also indemnify and hold harmless
Purchaser and the Company Entities from and against any and all Taxes of Seller
and members of the Seller Consolidated Group other than the Company Entities for
any and all periods, whether before or after the Closing Date, and from and
against any and all Indemnifiable Tax Damages arising out of or in any manner
incident, relating or attributable to such Taxes or to Tax Returns filed or
required to be filed by Seller and members of the Seller Consolidated Group
other than the Company Entities (including Taxes and Indemnifiable Tax Damages
arising from any and all of Purchaser's U.S. federal withholding tax obligations
with respect to payments made by Purchaser in accordance with this Agreement,
the ADT License Agreement and the Non-Competition Agreement, but not including
Taxes and Indemnifiable Tax Damages arising from Purchaser's failure to pay over
to the U.S. Treasury U.S. federal withholding tax as required by this Section
2.8.2.2).
2.8.2.3 Purchaser agrees to pay and to indemnify,
reimburse and hold harmless Seller (and other members of the Seller Consolidated
Group) and their successors, and their officers, directors, employees, agents
and representatives, from and against (i) any and all Booked Taxes and (ii) any
and all Taxes of the Company Entities payable with respect to, and any and all
Indemnifiable Tax Damages, arising out of or in any manner incident, relating or
attributable to Taxes of the Company Entities payable with respect to, or Tax
Returns required to be filed by the Company Entities with respect to, (A) any
Reporting Period of the Company Entities beginning after the Closing Date and
(B) any Reporting Period that includes the Closing Date but only for that
portion of such period commencing the day after the Closing Date, whether such
Taxes are imposed directly on the Company Entities or as a result of including
the Company Entities in consolidated or combined returns filed by any
consolidated group of which the Company Entities are members.
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2.8.3 Any tax sharing agreement, practice or other similar
arrangement between the Company Entities and other members of the Seller
Consolidated Group shall be terminated as of the Closing Date.
2.8.4 The Tax liabilities for each Straddle Period for the
Company Entities shall be determined by closing the books and records of the
Acquired Company as of the Closing Date, by treating each such Straddle Period
as if it were a separate Reporting Period and by employing accounting methods
which are consistent with those employed in preparing the Tax Returns for the
Company Entities in prior Reporting Periods and which do not have the effect of
distorting income or expenses (taking into account the transactions contemplated
by this Agreement), except that Taxes based on items other than income or sales
shall be computed for the Reporting Period beginning on the first day of the
applicable Straddle Period and prorated on a time basis between the Straddle
Period and the period beginning on the first day after the Closing Date and
ending on the last day of the Reporting Period which includes the Closing Date;
provided that with respect to any Tax which is not in effect during the entire
Straddle Period, the proration of such Tax shall be based on the period during
the Straddle Period that such Tax was in effect.
2.8.5 Except as shown on SCHEDULE 2.8, Seller shall be
responsible for preparing and filing on behalf of the Company Entities all Tax
Returns for Reporting Periods of the Company Entities ending on or before the
Closing Date, including Tax Returns of the Company Entities for such periods
which are due after the Closing Date, and Seller shall be responsible for the
contents of such returns; provided, however, that Seller shall furnish Purchaser
and the Company Entities with copies of such returns of the Company Entities, on
a separate company basis, within 30 days following the filing date. Purchaser
shall be responsible for preparing and filing on behalf of the Company Entities
all Tax Returns for Reporting Periods of the Company Entities ending after the
Closing Date (including for Reporting Periods beginning before and ending after
the Closing Date).
2.8.6 Section 338(h)(10) Election.
---------------------------
2.8.6.1 Seller represents and warrants to Purchaser,
with respect to its most recently filed federal income tax return, that (i) ADT
Holdings, Inc. has filed or has caused to be filed a consolidated federal income
tax return on the basis that ADT Holdings, Inc. is the parent corporation of an
affiliated group of corporations pursuant to Code Section 1501 (the "SELLING
GROUP"), (ii) each of the Company Entities was included as a member of the
Selling Group on such recently filed tax return, and (iii) the Selling Group has
not elected to discontinue the filing of consolidated federal income tax returns
pursuant to Code Section 1501.
2.8.6.2 The Selling Group shall make timely and
irrevocable elections under Section 338(h)(10) of the Code and, if permissible,
similar elections under any applicable state or local income tax laws with
respect to the Company Entities (the "SECTION 338(h)(10) ELECTIONS"), and Seller
shall cause the Selling Group to join with Purchaser in making the
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Section 338(h)(10) Elections. Seller and Purchaser shall report the transactions
contemplated by this Agreement consistent with such Section 338(h)(10) Elections
and shall take no position contrary thereto, unless otherwise required by a
determination within the meaning of Section 1313 of the Code (or similar
provision of state or local law). Seller shall pay to the applicable taxing
authority any Tax attributable to the Section 338(h)(10) Elections.
2.8.6.3 Seller and Purchaser agree to allocate the
modified Aggregate Deemed Sale Price (as defined under applicable Treasury
Regulations) among the assets of the Company Entities in accordance with the
agreement of Seller and Purchaser reached within the earlier of 30 days after
the determination of the final Purchase Price pursuant to Section 2.2.3 of this
Agreement or 100 days following the Closing (the "AGREEMENT PERIOD"); provided,
however, that if Seller and Purchaser do not reach such an agreement within such
Agreement Period, such allocation shall be determined by either of the following
methods selected by Seller in its sole discretion within 3 business days
following the expiration of the Agreement Period: (1) such allocation shall be
in accordance with the appraisal of Bond & ▇▇▇▇▇▇, the fees and expenses of
which shall be paid by Purchaser, or (2) such allocation shall be in accordance
with the appraisal obtained through the following process: (i) Seller shall
select an appraiser (the fees and expenses of which shall be paid by Seller),
(ii) Purchaser shall select an appraiser (the fees and expenses of which shall
be paid by Purchaser), (iii) the two aforesaid appraisers shall select a third
appraiser experienced in appraising auto auctions, (iv) such allocation shall be
in accordance with the appraisal of such third appraiser, and (v) the fees and
expenses of such third appraiser shall be paid one-half by Purchaser and
one-half by Seller. If Seller fails to timely select either method (1) or (2),
then such allocation shall be determined by method (1). Seller and Purchaser
shall reflect such allocation in all applicable Tax Returns filed by any of
them. Neither Seller nor Purchaser shall take a position before any Taxing
Authority or otherwise (including in any Tax Return) inconsistent with such
allocation, unless otherwise required by a determination within the meaning of
Section 1313 of the Code (or similar provision of state or local law).
2.8.7 Cooperation On Tax Matters.
--------------------------
2.8.7.1 Seller and Purchaser shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 2.8 and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such Tax Return, audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Seller and Purchaser agree (i) to retain all books
and records with respect to Tax matters pertinent to the Company Entities
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Seller
or Purchaser, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing authority,
and (ii) to give the other party reasonable written notice prior to
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transferring, destroying or discarding any such books and records and, if the
other party so requests, Seller or Purchaser, as the case may be, shall allow
the other party to take possession of such books and records to the extent they
would otherwise be destroyed or discarded.
2.8.7.2 Seller and Purchaser further agree, upon
request, to use commercially reasonable efforts to obtain any certificate or
other document from any Governmental Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including Taxes with respect to the transactions contemplated hereby).
2.8.7.3 Each of Purchaser and Seller shall promptly
deliver to the other any notice from any Tax authority received by it relating
to Taxes for which the other is or may be liable pursuant to this Agreement.
2.8.8 Tax Indemnities. The provisions set forth in this
Section 2.8, including, without limitation, the indemnification provisions,
shall be separate and distinct from the provisions of Article 8 and shall not be
subject to the limitations on indemnification obligations set forth therein.
2.8.8.1 All representations, warranties, agreements,
covenants and obligations made or undertaken by Seller in this Section 2.8 or in
any document or instrument executed and delivered pursuant hereto are material,
have been relied upon by Purchaser and shall survive the Closing hereunder, and
shall not merge in the performance of any obligation by any party hereto. Seller
agrees, from and after Closing, to indemnify and hold Purchaser or any of
Purchaser's Affiliates, including the Company Entities, and their respective
successors and assigns, harmless from and against all liability, loss, damages
or injury and all reasonable costs and expenses (including reasonable counsel
fees and costs of any suit related thereto) (collectively, "TAX DAMAGES")
suffered or incurred by Purchaser or any of Purchaser's Affiliates, including
any of the Company Entities, and their respective successors or assigns arising
from, resulting from or relating to any misrepresentation by, or breach of any
covenant, agreement or warranty of, Seller contained in this Section 2.8 or any
certificate, schedule, document or instrument furnished by Seller pursuant
thereto. It is understood and agreed by Seller that since the Acquired Company
will be owned by Purchaser following the Closing, any recovery by Purchaser
hereunder after Closing will be against Seller, who will have no right of
reimbursement or contribution against the Acquired Company or any of the other
Company Entities. Any examination, inspection or audit of the assets or business
of the Company Entities conducted pursuant to this Section 2.8 shall in no way
limit, affect or impair the ability of Purchaser, its successors or assigns to
rely upon the representations, warranties, covenants and obligations of Seller
set forth herein.
2.8.8.2 All representations, warranties, agreements,
covenants and obligations made or undertaken by Purchaser in this Section 2.8 or
in any document or instrument executed and delivered pursuant hereto are
material, have been relied upon by Seller
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and shall survive the Closing hereunder and shall not merge in the performance
of any obligation by any party hereto. Purchaser agrees from and after Closing
to indemnify and hold Seller harmless from and against all Tax Damages suffered
or incurred by Seller or any of Seller's Affiliates, and their respective
successors or assigns arising from any misrepresentation by, or breach of any
covenant or warranty of, Purchaser contained in this Section 2.8 or any
certificate, document or instrument furnished by Purchaser pursuant thereto.
2.8.8.3 Any Person entitled to indemnification is
hereinafter referred to as the "TAX INDEMNIFIED PARTY," and any Person obligated
to provide such indemnification thereunder is hereinafter referred to as the
"TAX INDEMNIFYING PARTY." The Tax Indemnified Party shall promptly notify the
Tax Indemnifying Party in writing of any notice, letter, correspondence, claim,
determination, decision or decree (a "TAX CLAIM") received by the Tax
Indemnified Party that might raise a claim for indemnification hereunder. The
failure of the Tax Indemnified Party to notify the Tax Indemnifying Party
promptly shall not relieve the Tax Indemnifying Party of any obligations under
this Agreement except to the extent such failure materially prejudices the
ability of the Tax Indemnifying Party to defend the claim. The Tax Indemnifying
Party, at its cost and expense, shall have the sole and exclusive right to (and
shall promptly notify the Tax Indemnified Party as to whether or not it will)
handle, answer, defend, compromise or settle such Tax Claim and any tax
examination, audit, contest or litigation in connection therewith. If the Tax
Indemnifying Party fails within a reasonable time after notice to defend or
handle any Tax Claim or any examination, audit, contest or litigation as
provided herein, the Tax Indemnified Party shall be bound by the results
obtained by the Tax Indemnifying Party or its successors or assigns in
connection with such Tax Claim and such examination, audit, contest or
litigation. The Tax Indemnified Party promptly shall provide, or shall cause to
be provided, to the Tax Indemnifying Party any relevant information relating to
such Tax Claim which may be particularly within the knowledge of the Tax
Indemnified Party or its Affiliates and otherwise to cooperate fully with the
Tax Indemnifying Party in good faith with respect to such Tax Claim; provided
that the Tax Indemnifying Party shall be responsible for the payment of any
interest and penalties resulting from any delay by the Tax Indemnifying Party in
payment of the Tax Claim. Notwithstanding the foregoing, the Tax Indemnifying
Party shall not agree, without the consent of the Tax Indemnified Party (which
consent shall not be unreasonably withheld or delayed), to any adjustment which
will legally bind the Tax Indemnified Party.
2.8.8.4 Except as otherwise provided in this Section
2.8, any amounts owed by the Tax Indemnifying Party to the Tax Indemnified Party
under this Section 2.8 shall be paid within ten business days of notice from the
Tax Indemnified Party; provided that if such party has not paid such amounts and
such amounts are being contested before the appropriate Governmental Authorities
in good faith, the Tax Indemnifying Party shall not be required to make payment
until it is determined finally by an appropriate Governmental Authority that
payment is due, provided that the Tax Indemnifying Party posts appropriate
security as necessary to protect such party from (i) the immediate imposition of
a lien that arises or attaches from nonpayment after assessment and demand of
such amounts, or (ii) seizures of assets.
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2.9 Employee Plans and Compensation Arrangements.
--------------------------------------------
2.9.1 With respect to all of its group health plans,
Seller shall retain full responsibility and liability for compliance with the
continuation health care coverage requirements of Code Section 4980B and ERISA
Sections 601 through 608 (the "CONTINUATION COVERAGE REQUIREMENTS") for all
Qualifying Events within the meaning of Section 4980B(f)(3) of the Code and
Section 603 of ERISA. On or after the Closing Date, Seller shall continue to
comply with the Continuation Coverage Requirements with respect to all
Qualifying Events affecting any current or former employees of the Company
Entities and any qualifying beneficiary of such employees or former employees
that occurred on or prior to the Closing Date. Seller shall hold Purchaser and
any entity required to be combined with Purchaser (within the meaning of
Sections 414(b), (c), (m) or (o) of the Code) harmless from and fully indemnify
them against any costs, expenses, losses, damages and liabilities incurred or
suffered by them directly or indirectly, including, but not limited to,
reasonable attorneys' fees and expenses, which relate to continuation coverage
and arise as a result of any action or omission by Seller.
2.9.2 Seller shall cause the employment of any
employees listed on SCHEDULE 3.18 who currently are receiving long-term
disability benefit coverage under a long-term disability program previously
sponsored by the Company Entities to be transferred to Seller or to one of its
Affiliates prior to the Closing Date. Seller shall hold Purchaser and any entity
required to be combined with Purchaser (within the meaning of Sections 414(b),
(c), (m) or (o) of the Code), including the Company Entities, harmless from and
fully indemnify them against any costs, expenses, losses, damages and
liabilities incurred or suffered by them directly or indirectly, including, but
not limited to, reasonable attorneys' fees and expenses, which relate to such
long-term disability benefit coverage or to any transfers of employment pursuant
to this Section 2.9.2.
2.9.3 Prior to the Closing Date, Seller shall cause
the Acquired Company and each of the other Company Entities to terminate any
Employee Plans described on SCHEDULE 3.18 that provide medical or death benefit
coverage to former employees of the Company Entities (the "RETIREE MEDICAL
PLANS"), except to the extent required by Section 4980B of the Code, in a manner
that precludes the imposition of any future liability on the Company Entities
under such Retiree Medical Plans. Seller shall hold Purchaser and any entity
required to be combined with Purchaser (within the meaning of Sections 414(b),
(c), (m) or (o) of the Code), including the Company Entities, harmless from and
fully indemnify them against any costs, expenses, losses, damages and
liabilities incurred or suffered by them directly or indirectly, including, but
not limited to, reasonable attorneys' fees and expenses, which relate to the
Retiree Medical Plans. Notwithstanding the foregoing, Seller shall assume the
responsibility and liability for providing benefits under the Retiree Medical
Plans with respect to employees of the Company Entities that terminated their
employment on or prior to the Closing Date.
2.9.4 Prior to the Closing Date, Seller shall cause
the Acquired Company to terminate the ADT Automotive Holdings, Inc. Executive
Pension Plan (the "PENSION PLAN") in a
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manner that precludes the imposition of any future liability on the Company
Entities under such Pension Plan and to make full and final settlement with the
Company Entities' employees and former employees with respect to all liabilities
and obligations relating to their participation in the Pension Plan. Seller
shall hold Purchaser and any entity required to be combined with Purchaser
(within the meaning of Sections 414(b), (c), (m) or (o) of the Code), including
the Company Entities, harmless from and fully indemnify them against any costs,
expenses, losses, damages and liabilities incurred or suffered by them directly
or indirectly, including, but not limited to, reasonable attorneys' fees and
expenses, which relate to the Pension Plan.
2.9.5 Prior to the Closing Date, Seller shall cause
the Company Entities to terminate the employment of any employees of the Company
Entities for whom Purchaser has provided notice that it does not intend to
retain after the Closing Date, provided such notice shall be delivered to Seller
in writing not less than 15 days prior to the Closing Date. With respect to such
terminated employees, Seller shall make full and final settlement with any
terminated employees listed on SCHEDULE 2.9.5 with respect to any severance
and/or other benefits (the "SELLER SEVERANCE BENEFITS") owed under any Employee
Plans or Compensation Arrangements sponsored by the Acquired Company, or any of
the other Company Entities. Without regard to whether they are terminated prior
to the Closing Date, Seller shall make full and final settlement with the
employees listed on SCHEDULE 2.9.5 with respect to Seller Severance Benefits
upon their termination of employment to the extent such employees are terminated
within 12 months after the Closing Date. Seller shall hold Purchaser and any
entity required to be combined with Purchaser (within the meaning of Sections
414(b), (c), (m) or (o) of the Code), including the Company Entities, harmless
from and fully indemnify them against any costs, expenses, losses, damages and
liabilities incurred or suffered by them directly or indirectly, including, but
not limited to, reasonable attorneys' fees and expenses, which relate to the
Seller Severance Benefits. With respect to employees terminated under this
Section 2.9.5 who are not listed on SCHEDULE 2.9.5, Purchaser shall cause the
Company Entities to make full and final settlement with respect to any severance
and/or other benefits (the "PURCHASER SEVERANCE BENEFITS") owed thereto under
any Employee Plans or Compensation Arrangements sponsored by the Acquired
Company, or any of the other Company Entities. Purchaser shall hold Seller and
any entity required to be combined with Seller (within the meaning of Sections
414(b), (c), (m) or (o) of the Code) harmless from and fully indemnify them
against any costs, expenses, losses, damages and liabilities incurred or
suffered by them directly or indirectly, including, but not limited to,
reasonable attorneys' fees, back pay, expenses and punitive, compensatory,
liquidated and/or exemplary damages in connection with Seller's termination of
such employees as requested by Purchaser, which relate to the Purchaser
Severance Benefits, including but not limited to any liability that arises under
the Workers Adjustment and Retraining Notification Act and any applicable state
or local plant closing law. Purchaser's obligations and liabilities under this
Section 2.9.5 shall not relate to any employees listed on SCHEDULE 3.18 who
currently are receiving long-term disability coverage and who are covered by the
provisions of Section 2.9.2, and shall not be applicable to any liability to
provide benefits under the Retiree Medical Plans and the Pension Plan or to any
liability under the bonus and incentive plans and programs referenced in Section
2.9.6.
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2.9.6 Prior to the Closing Date, Seller shall cause
the Company Entities to terminate any existing bonus and other incentive plans
or programs, including deferred bonus plans or programs, that provide benefits
to employees or former employees of the Company Entities, and to make full and
final settlement with the Company Entities' employees and former employees with
respect to all liabilities and obligations relating to their participation in
such plans or programs. Seller shall hold Purchaser and any entity required to
be combined with Purchaser (within the meaning of Sections 414(b), (c), (m) or
(o) of the Code), including the Company Entities, harmless from and fully
indemnify them against any costs, expenses, losses, damages and liabilities
incurred or suffered by them directly or indirectly, including, but not limited
to, reasonable attorneys' fees and expenses, which relate to such bonus and
other incentive plans or programs.
2.9.7 After the Closing Date, Purchaser shall waive,
or cause the Company Entities to waive, limitations on benefits relating to any
pre-existing conditions under any welfare benefit plan in which the employees of
the Company Entities participate immediately following the Closing Date. After
the Closing Date, Purchaser shall recognize, or cause the Company Entities to
recognize, expenses paid by employees of the Company Entities in the calendar
year in which the Closing occurs under the medical and dental plans of the
Company Entities for purposes of the annual deductible and out-of-pocket
limitations applied in medical and dental plans that provide coverage to such
employees immediately following the Closing Date to the extent such recognition
is permissible under the medical and dental plans that provide coverage to such
employees; provided that the obligation to recognize such expenses is contingent
upon Seller providing to Purchaser documentation that indicates the amount of
such expenses paid in the calendar year by the employees of the Company Entities
prior to the Closing.
2.9.8 Purchaser shall grant and shall continue to
grant, or shall cause the Company Entities to grant and continue to grant, to
all employees of the Company Entities employed as of the Closing Date credit for
all employment service with the Company Entities, to the extent that such
service was credited under similar employee benefit plans, programs and
arrangements that cover the employees as of the Closing Date, under the employee
plans, programs and arrangements that cover such employees immediately following
the Closing Date unless such credit is not permitted by applicable law or would
result in the duplication of benefits; provided, that no such service credit
shall be granted for purposes of benefit accruals or for determining eligibility
for retiree medical benefits.
2.9.9 Purchaser shall cause the Company Entities to
provide benefit coverage under the Employee Plans and Compensation Arrangements
listed in SCHEDULE 3.18 for a period of three months after the Closing Date;
provided that the obligation to provide such coverage shall not extend beyond
December 31, 2000. Notwithstanding the foregoing, the obligation to provide
coverage under such Employee Plans and Compensation Arrangements shall not apply
to any plans or programs that provide equity-based compensation, including, but
not limited to,
14
stock option or stock purchase plans, deferred compensation, bonus or incentive
plans, severance plans or retirement welfare benefit plans.
2.9.10 Seller shall hold Purchaser and any entity
required to be combined with Purchaser (within the meaning of Sections 414(b),
(c), (m) or (o) of the Code), including the Company Entities, harmless from and
fully indemnify them against any costs, expenses, losses, damages and
liabilities incurred or suffered by them directly or indirectly, including, but
not limited to, reasonable attorneys' fees and expenses, which relate to the
imposition of withdrawal liability, as defined under Section 4201 ET SEQ. of
ERISA, under any Multiemployer Plan in existence as the Closing Date; provided,
that Seller's liabilities and obligations hereunder shall be limited to that
portion of any such withdrawal liability that is based on the employer
contributions to any such Multiemployer Plan that are attributable to the
aggregate number of employees for which the Company Entities or any one of them
has an obligation to contribute to the Multiemployer Plan as of the Closing
Date.
2.9.11 All representations, warranties, agreements,
covenants and obligations made or undertaken by Seller in this Section 2.9 or in
any document or instrument executed and delivered pursuant hereto are material,
have been relied upon by Purchaser and shall survive the Closing hereunder, and
shall not merge in the performance of any obligation by any party hereto. Seller
agrees, from and after Closing, to indemnify and hold Purchaser or any of
Purchaser's Affiliates, including the Company Entities, and their respective
successors and assigns, harmless from and against all Damages suffered or
incurred by Purchaser or any of Purchaser's Affiliates, including any of the
Company Entities, and their respective successors or assigns arising from,
resulting from or relating to any misrepresentation by, or breach of any
covenant, agreement or warranty, of Seller contained in this Section 2.9 or any
certificate, schedule, document or instrument furnished by Seller pursuant
thereto. It is understood and agreed by Seller that since the Acquired Company
will be owned by Purchaser following the Closing, any recovery by Purchaser
hereunder after Closing will be against Seller, who will have no right of
reimbursement or contribution against the Acquired Company or any of the other
Company Entities. Any examination, inspection or audit of the assets or business
of the Company Entities conducted pursuant to this Section 2.9 shall in no way
limit, affect or impair the ability of Purchaser, its successors or assigns to
rely upon the representations, warranties, covenants and obligations of Seller
set forth herein.
2.9.12 All representations, warranties, agreements,
covenants and obligations made or undertaken by Purchaser in this Section 2.9 or
in any document or instrument executed and delivered pursuant hereto are
material, have been relied upon by Seller and shall survive the Closing
hereunder and shall not merge in the performance of any obligation by any party
hereto. Purchaser agrees from and after Closing to indemnify and hold Seller
harmless from and against all Damages suffered or incurred by Seller or any of
Seller's Affiliates, and their respective successors or assigns arising from any
misrepresentation by, or breach of any covenant or warranty of, Purchaser
contained in this Section 2.9 or any certificate, document or instrument
furnished by Purchaser pursuant thereto.
15
2.9.13 The indemnification provisions set forth in
this Section 2.9 shall be separate and distinct from the provisions of Article 8
and shall not be subject to the limitations on indemnification obligations set
forth therein; provided, however, that all claims for indemnification under this
Section 2.9 shall be asserted and resolved in accordance with the procedures set
forth in Section 8.3.
2.10 Conduct of Parties Prior to the Closing. Except as
expressly contemplated by this Agreement or with the prior written consent of
Purchaser, during the period from the date hereof to the Closing Date, Seller
shall cause the Company Entities to maintain their business, properties and
assets in good operating condition and repair and conduct the Business
consistent with prior practice and in the ordinary and usual course of business
and abide by the following affirmative and negative covenants.
2.10.1 Affirmative Covenants. Seller shall cause each
of the Company Entities to:
2.10.1.1 continue its current efforts to
preserve its business relationships with its employees, suppliers, distributors,
advertisers, customers and others having business relationships with it;
2.10.1.2 maintain all existing insurance
coverage with respect to the Company Entities and use the proceeds of any claims
for loss payable under such insurance policies, plus such additional funds as
may be required, to replace or restore any of the assets of the Company Entities
destroyed by fire or other casualties to their former condition as soon as
possible after the loss and prior to the Closing Date;
2.10.1.3 promptly notify Purchaser in
writing of any unusual or material developments with respect to the business or
operations of the Company Entities and of any material change in any of the
information contained in the representations and warranties set forth in Article
3 or in the Schedules hereto; provided that such notification shall not relieve
Seller of any obligations hereunder; and
2.10.1.4 furnish to Purchaser within 30 days
after the end of each month ending between the date hereof and the Closing Date
a statement of income and expense of the Acquired Company for the month just
ended and such financial information (including information on payables and
receivables) as Purchaser may reasonably request and which is prepared in the
ordinary course of business.
2.10.2 Negative Covenants. Seller shall not permit
the Company Entities to:
2.10.2.1 permit any material increase in the
rate or terms of compensation payable or to become payable to employees of the
Company Entities, including, without limitation, any Employee Plan or
Compensation Arrangement, except increases occurring in accordance with
customary practices which have been disclosed to Purchaser;
16
2.10.2.2 enter into, modify, amend, renew,
extend, terminate or waive any right under any Contract or commitment involving
total payments or expenditures to any single Person of more than $50,000 on any
single Contract or commitment or $500,000 in the aggregate for all such
Contracts or commitments;
2.10.2.3 release, cancel or assign any
material indebtedness owed to them or waive any rights or claims having value,
except rights or claims not in excess of $100,000 and waived in the ordinary
course of business;
2.10.2.4 violate in any material respect any
laws, ordinances, orders, injunctions or decrees applicable to the Business or
the Company Entities;
2.10.2.5 do any act or fail to do any act
which might result in the expiration, revocation, suspension or modification of
any of the Material Licenses of the Company Entities, or fail to prosecute with
due diligence any material applications to any Governmental Authority in
connection with the operation of the Business of the Company Entities;
2.10.2.6 fail to collect the accounts
receivable or to pay the accounts payable and other current liabilities of the
Company Entities in any manner other than consistent with past practices;
2.10.2.7 suffer, create or assume any
monetary Encumbrance or any material non-monetary Encumbrance with respect to
the Business or the assets of the Company Entities, whether now owned or
hereafter acquired;
2.10.2.8 sell, assign, lease, transfer or
otherwise dispose of, or enter into any agreement for the sale, assignment,
lease, transfer or disposition of, any material part of the Business or material
assets of the Company Entities, except in the ordinary course of business and
consistent with past practices and (i) in connection with the acquisition of
equivalent replacement property or (ii) pursuant to transactions not exceeding
$50,000 in the aggregate;
2.10.2.9 declare, set aside or pay any
dividend or other distribution or payment (whether in cash, stock or property)
in respect of shares of its capital stock owned by any Person, or purchase,
redeem or otherwise acquire any of its capital stock or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities;
2.10.2.10 permit or effect any change by any
Company Entity in accounting or bookkeeping methods, principles or practices,
except as required by GAAP, or elect to discontinue the filing of consolidated
federal income tax returns pursuant to Code Section 1501;
2.10.2.11 permit or effect any borrowing of
money, including, without limitation, any increase or extension of purchase
money credit, swaps, collars, caps, ▇▇▇▇▇▇ or
17
other agreements relating to the fixing of interest rates on indebtedness, by
any Company Entity, or permit any increase in the liabilities of any Company
Entity, other than current liabilities incurred in the ordinary course of
business and consistent with past practices;
2.10.2.12 Subject to Section 2.3, enter into
any inter-company transactions with Seller or any Affiliates or other operating
units of Seller, other than in the ordinary course of business and consistent
with past practices;
2.10.2.13 make, approve or permit any change
in the Articles or Certificate of Incorporation or Bylaws or applicable
governing instruments of each of the Company Entities, or in their authorized,
issued or outstanding securities;
2.10.2.14 issue, sell or grant shares of
capital stock, options, warrants or rights to purchase or subscribe to, or enter
into any arrangement or contract with respect to the issuance or sale of any of
the capital stock of the Company Entities or rights or obligations convertible
into or exchangeable for any shares of capital stock of the Company Entities and
not make any changes (by split-up, stock dividend, combination, reorganization
or otherwise) in the capital structure of the Company Entities;
2.10.2.15 make any material increase in the
size of the workforce employed by Seller or any of the Company Entities;
2.10.2.16 enter into, modify, amend, renew,
extend, terminate or waive any rights under any collective bargaining agreement;
or
2.10.2.17 voluntarily recognize any union or
other collective bargaining agent as the representative of any of the employees
of Seller or any of the Company Entities for purposes of collective bargaining,
except as may be required by law.
2.11 Brokers. Purchaser shall pay Chase Securities Inc. and agrees to
indemnify and hold harmless the Acquired Company and Seller against any fee,
loss or expense arising out of any claim by any other broker or finder employed
or alleged to have been employed by it, and Seller shall pay ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ Securities Corporation and agree to indemnify and hold harmless
Purchaser against any fee, loss or expense arising out of any claim by any other
broker or finder employed or alleged to have been employed by Seller or any of
its Affiliates, including the Acquired Company. The indemnification provisions
of this Section 2.11 shall be separate and distinct from the provisions of
Article 8 and shall not be subject to the limitations on indemnification
obligations set forth therein.
2.12 Publicity. Except as otherwise required by law or regulation, none
of the parties hereto shall issue any press release or make any other public
statement, in each case relating to or connected with or arising out of this
Agreement or the matters contained herein, without obtaining the prior written
approval of Purchaser and Seller to the contents and the manner of
18
presentation and publication thereof. The parties agree to cooperate and seek
the other party's comment with respect to any disclosures required by law.
2.13 No Shop. None of Seller, the Company Entities, their Affiliates or
any agent or representative of any of them will, during the period commencing on
the date of this Agreement and ending with the earlier to occur of the Closing
or the termination of this Agreement in accordance with Article 9 below,
directly or indirectly, (i) solicit or initiate the submission of proposals or
offers from any Person for; (ii) participate in any discussions pertaining to or
(iii) furnish any information to any Person other than Purchaser relating to any
direct or indirect acquisition or purchase of all or any portion of the capital
stock or assets of any of the Company Entities. Seller and the Acquired Company
shall promptly notify Purchaser if either receives an unsolicited offer from any
Person relating to any direct or indirect acquisition or purchase of all or any
portion of the capital stock or assets of any of the Company Entities.
2.14 Redemption or Repurchase of Preferred Stock. Anything in this
Agreement to the contrary notwithstanding, prior to Closing, Seller shall (i)
cause the Acquired Company to redeem or repurchase for cash paid in full all of
the shares of 7.25% cumulative preferred stock, par value $10,000 per share (the
"PREFERRED STOCK"), of the Acquired Company owned by Tyco Holding II, ApS, a
Danish corporation (the "PREFERRED STOCKHOLDER") in accordance with the
Certificate of Incorporation of the Acquired Company, (ii) cause the Acquired
Company to declare and pay all dividends and interest payable with respect to
the Preferred Stock, and (iii) make all capital contributions necessary in order
to fund the payments contemplated by clauses (i) and (ii) of this Section 2.14,
in each case with respect to the actions contemplated by clauses (i), (ii) and
(iii) of this Section 2.14, (A) without any residual or continuing obligation or
liability on the part of any of the Company Entities, (B) no Company Entity
shall issue equity to an entity that is not in the Selling Group as a result of
such action, and (C) so that immediately prior to Closing, all of the issued and
outstanding capital stock of the Acquired Company shall be held by Seller. The
redemption or repurchase of the Preferred Stock, including, without limitation,
any amounts paid or payable with respect to the redemption or repurchase of the
Preferred Stock or the payment of dividends and interest with respect thereto
pursuant to this Section 2.14, shall not be taken into account in Working
Capital.
2.15 Access to Books and Records.
---------------------------
2.15.1 Between the date of this Agreement and the Closing
Date, Seller will cause the Company Entities to allow Purchaser, its counsel and
other representatives and agents access to the books, records, files, documents,
assets, properties, contracts and agreements, including, without limitation, any
personnel records or any environmental studies, title policies or surveys
relating to the Real Property, of the Company Entities as Purchaser may
reasonably request. In the event that Purchaser desires to obtain title
commitments or environmental audits of the Real Property owned by the Company
Entities, Seller shall also, and shall cause the Company Entities to, assist
Purchaser in obtaining such commitments or audits, including by delivering a
"non-imputation" endorsement to the effect that the title defects known to the
19
officers, directors and shareholders of the Company Entities shall not be deemed
"facts known to the insured" for purposes of the title insurance policy.
Purchaser will conduct any investigation in a manner that will not unreasonably
interfere with the business of the Company Entities. Purchaser will treat as
confidential all confidential information disclosed to it or its representatives
in connection with Purchaser's investigation of the Company Entities, except as
otherwise required by law.
2.15.2 After the Closing Date, Purchaser shall, upon request
of Seller, and with reasonable notice to Purchaser, in connection with the
preparation by Seller of financial statements and tax returns and for such other
purposes as Seller shall reasonably request (but only with respect to operations
of the Company Entities prior to Closing), (i) provide to Seller reasonable
access, during normal business hours, to files, books, records, documents and
other information of the Company Entities (and, at Seller's expense, copies
thereof), (ii) cause its officers and personnel and the Acquired Company to
furnish to Seller any and all financial and operating data and other information
pertaining to the Company Entities, and (iii) make available, for consultation
with Seller, personnel of Purchaser and of the Acquired Company having access to
such information and documents. In exercising its rights under this Section
2.15, Seller and its representatives shall not interfere with the Company
Entities' normal operations. Purchaser shall retain the files, books, records
and documents of the Acquired Company, and comply with the aforesaid provisions,
for at least three years after the Closing Date. Seller acknowledges and agrees
that any and all information to which it is granted access pursuant hereto shall
be the subject of the confidentiality provisions set forth and contained in the
Non-Competition Agreement.
2.16 Confidentiality. ▇▇▇ Enterprises, Inc. and U.S. Parent
are parties to a letter agreement, dated December 20, 1999 (the "CONFIDENTIALITY
AGREEMENT"). Notwithstanding the execution, delivery and performance of this
Agreement, or the termination of this Agreement prior to Closing, the
Confidentiality Agreement shall remain in full force and effect in accordance
with its terms, but shall expire concurrently with the Closing hereunder.
2.17 Certain Post-closing Environmental Procedures.
---------------------------------------------
2.17.1 From and after Closing, with respect to
environmental liabilities or breaches of representations set forth in Section
3.14, Purchaser shall provide written notice to Seller, specifying the nature of
and basis for such environmental liability or breach, and Seller shall have the
option to control the resolution of any remedial action relating thereto,
including, without limitation, the performance of any tests, reports,
investigations or any other activities relating to such remedial action and
contacting Governmental Authorities, making any reports to such Governmental
Authorities, submitting any remedial action plans to such Governmental
Authorities and negotiating with such Governmental Authorities; provided that,
in addition to the provisions set forth in Section 2.17.4 below, Seller agrees
(i) to provide Purchaser, in advance, with a reasonably detailed description of
any such proposed remedial action and a reasonable period of time, given the
specific circumstances, to permit Purchaser to comment on such
20
proposed activity, and Seller agrees to consider in good faith any such
comments, (ii) to perform any such remedial action in a reasonably prudent
manner to avoid any harm to the environment or to human health and safety, to
comply with all laws, including Environmental Laws, to obtain and maintain all
necessary permits, financial assurances and insurance and to obtain their own
EPA Identification Number (if practicable), arrange for disposal and be
identified on manifests as the "generator" (if practicable), of all Hazardous
Materials generated from or otherwise arising out of any such remedial action,
(iii) to perform all actions reasonably necessary to remove or remediate the
Hazardous Materials, contamination or environmental degradation arising out of
or relating to the indemnification claim and to bring the facility or property
into compliance with all Environmental Laws with respect to such Hazardous
Materials, contamination or degradation and agree to obtain written governmental
approval confirming that no further actions are required with respect to such
Hazardous Materials, contamination or degradation, and (iv) not to perform any
remedial action in a manner which is reasonably likely to reduce the value of or
materially alter the use of the Real Property. Purchaser and Seller agree that
the use of the Real Property as of the Closing Date shall be the appropriate
property classification to be used in determining which actions are reasonably
necessary pursuant to clause (iii) above with respect to such Real Property.
Notwithstanding the foregoing, Seller must provide Purchaser with written notice
within ten days of their receipt of Purchaser's notice pursuant to this Section
2.17.1 whether or not they desire to control the resolution of such remedial
action, and, if no such written notice is received by Purchaser within such
ten-day period, Purchaser shall have the option to control the resolution of
such remedial action.
2.17.2 From and after Closing, Purchaser agrees that, without
Seller's prior consent, it shall not, and it shall not permit any of its
directors, officers, employees and agents to, voluntarily perform any
environmental testing of the soil or groundwater at any Real Property that may
reasonably be expected to lead to the identification of any contamination
thereof, unless and to the extent (i) required by any law (including any
Environmental Law), any applicable Governmental Authority or in connection with
any third party claim, (ii) the performance of such testing would reasonably be
expected to decrease the risk or scope of injury to human health or the
environment in the event of an emergency or (iii) subject to providing Seller
with advance written notice and a reasonably detailed description of the planned
environmental testing, as reasonably necessary to permit a financing, sale,
closure, lease, sublease, lease or sublease termination or assignment or other
disposal of a facility or Real Property or a business including any facility or
Real Property.
2.17.3 Except as contemplated by Section 2.17.2 above,
Purchaser and Seller each agree to maintain in strict confidence all information
concerning any environmental matters of any Company Entity. If any Environmental
Law requires Seller to disclose any such information, Seller agrees to promptly
notify Purchaser of such requirement and to give Purchaser the opportunity to
review and comment in advance upon the content and timing of any disclosures
that Seller propose to make.
21
2.17.4 Purchaser and Seller agree that each shall, in
connection with any activities they each undertake in connection with this
Section 2.17 or otherwise, (i) provide or be provided with reasonable access to
employees with relevant facts about such activities, (ii) provide copies of any
material documents to the other parties and a reasonable opportunity to comment
on such documents, (iii) keep the other parties reasonably informed relating to
the progress of such activities, (iv) where applicable, select counsel,
contractors and consultants of recognized standing and competence after
consultation with the other parties, (v) take all steps necessary in the defense
of any claims which are the subject of such activities, (vi) at all times
diligently and promptly pursue the resolution of any claims which are the
subject of such activities, (vii) allow the other parties to participate in any
communications or proceedings involving any Governmental Authority or any other
Person and consult with the other parties hereto as to the manner of managing or
resolving such communications or proceedings, in each case, except to the extent
necessary to protect attorney-client privilege or attorney work product and
(viii) use reasonable efforts to avoid unreasonable interference with the other
parties' normal business operations.
2.18 Certain Intellectual Property Matters.
-------------------------------------
2.18.1 At Closing, Seller shall cause ADT Service AG,
a Swiss corporation ("LICENSOR"), to enter into a license agreement with
Purchaser (the "ADT LICENSE AGREEMENT"), substantially in the form of EXHIBIT F
attached hereto, pursuant to which Licensor will license to Purchaser and/or one
or more Company Entities the trademark and trade name "ADT," on a non-exclusive,
fully-paid basis, for a period of ten years.
2.18.2 Seller represents that U.S. Patent No.
5,774,873 granted to ▇▇▇▇▇▇ et al. on June 30, 1998 (the "PATENT") has been
assigned to and is currently owned by ADT Automotive, Inc., one of the Company
Entities. Purchaser agrees that if at any time during the grant period of the
Patent, Purchaser intends to initiate an infringement action against any third
party to enforce the Patent (an "ENFORCEMENT ACTION"), Purchaser shall, at least
30 days prior to the institution of an Enforcement Action, provide written
notice to Seller of such determination (the "NOTICE"), and Seller shall have the
right, exercisable by written notice of such election (the "ELECTION NOTICE")
delivered to Purchaser within 30 days of Seller's receipt of the Notice, to
elect to participate in such Enforcement Action. Purchaser agrees to provide
Seller such information as it has in its possession relating to such proposed
Enforcement Action as Seller may reasonably request. If Seller delivers the
Election Notice to Purchaser within such 30-day period, Seller shall be entitled
to 50% of any lump-sum settlement payments or royalty payments resulting from
the Enforcement Action; provided, however, that Seller shall also bear 50% of
all costs and expenses incurred with respect to such Enforcement Action,
including, without limitation, attorneys' fees, expert witness fees and court
costs, such payments to be made on an ongoing basis by Seller promptly upon
receipt of written notice from Purchaser of the amount of such costs and
expenses (together with appropriate supporting documentation). Purchaser shall
periodically keep Seller apprised of the status of any Enforcement Action in
which Seller has elected to participate. The parties acknowledge and agree (i)
that the decision to initiate an
22
Enforcement Action shall be entirely at Purchaser's discretion, (ii) that
Purchaser shall be under no obligation to enforce the Patent against any third
party or restricted, in any way whatsoever, from granting exclusive or
nonexclusive licenses of the inventions subject of the Patent, whether to
affiliated or unaffiliated parties, and (iii) Purchaser shall control the
Enforcement Action, including, without limitation, the selection of counsel and
venue and the determination of any settlement with respect to any such
Enforcement Action. If Seller fails to deliver the Election Notice to Purchaser
within the required 30-day period, Seller shall have no rights or
responsibilities with respect to such Enforcement Action.
2.19 Insurance Claims. After Closing, Seller shall maintain
responsibilityfor and administrative control of all insurance claims resulting
from occurrences or losses prior to the Closing Date.
3. Representations and Warranties of Seller.
----------------------------------------
Seller represents and warrants to Purchaser, as of the date hereof and
as of the Closing Date, as follows (any representation made "to the knowledge of
Seller" shall be deemed a representation made to the knowledge of Seller and the
Company Entities):
3.1 Organization, Standing and Foreign Qualification. Seller and each
of the Company Entities is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization as set forth in
SCHEDULE 3.1. SCHEDULE 3.1 sets forth a list of all Subsidiaries of the Acquired
Company and their respective jurisdictions of organization and identifies the
Acquired Company's direct or indirect percentage ownership interest therein.
Each of the Company Entities has all corporate, partnership or other similar
powers required to carry on its business as now conducted, except for such
matters as would not have a Material Adverse Effect. Seller and each of the
Company Entities is duly qualified and licensed to do business as a foreign
corporation or other foreign legal entity and are in good standing in each
jurisdiction where such qualification and/or licensing is necessary, except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect. Complete and correct copies of each Company Entity's articles or
certificate of incorporation and bylaws or other applicable governing
instruments, all as amended to date, and of the stock ledgers of each Company
Entity have been delivered to Purchaser.
3.2 Authority and Status. Seller has the full corporate power and
authority to execute and deliver this Agreement and all other agreements,
instruments and certificates contemplated hereby and thereby (collectively, the
"RELATED AGREEMENTS") to be executed and delivered by it, to carry out and
perform its obligations under the terms of this Agreement and the Related
Agreements to be executed and delivered by it and to consummate the transactions
contemplated hereby and thereby, without the necessity of any act, approval or
consent of any other Person whomsoever. All corporate action on the part of
Seller and its directors and shareholders necessary for the authorization,
execution, delivery and performance by Seller of this Agreement and the Related
Agreements to be executed and delivered by Seller has been taken. This
23
Agreement and the Related Agreements to be executed and delivered by Seller
constitute or will, when executed and delivered by Seller, constitute the valid
and legally binding obligations of Seller, enforceable against Seller in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally and except as enforcement of remedies may be limited by general
equitable principles.
3.3 Capitalization.
--------------
3.3.1 SCHEDULE 3.3.1 sets forth the authorized, issued and
outstanding capital stock of the Acquired Company and each of the other Company
Entities, and no shares are held in the treasury of any of the Company Entities.
All of the issued and outstanding shares of capital stock of the Acquired
Company are owned by Seller, free and clear of all Encumbrances and preemptive
or other rights or options of any nature whatsoever, and the authorization of no
other Person is required in order to consummate the transactions contemplated by
this Agreement by virtue of any such Person having an equitable or beneficial
interest in the Acquired Company. All of the outstanding shares of capital stock
of, or other equity or voting interest in, the Company Entities (other than the
Acquired Company) are owned by the Acquired Company or another Company Entity
free and clear of all Encumbrances and preemptive or other rights or options of
any nature whatsoever, and the authorization of no other Person is required in
order to consummate the transactions contemplated by this Agreement by virtue of
any such Person having an equitable or beneficial interest in any Company
Entity. All of the Shares and the issued and outstanding capital stock of the
Company Entities are duly authorized, validly issued, fully paid and
nonassessable. Except for this Agreement, there are no (i) outstanding
subscriptions, options, warrants, calls, demands, commitments, plans or
agreements to issue any additional shares of any of the Company Entities'
capital stock or to pay any dividends on such shares, or to purchase, redeem or
retire any outstanding shares of its capital stock, (ii) outstanding stock
appreciation rights, phantom stock rights or other instruments or obligations of
any Company Entity which depend, in whole or in part, on the value of any of the
capital stock of any Company Entity or the business or financial performance or
asset value of any Company Entity, or (iii) outstanding securities or
obligations which are convertible into or exchangeable for any shares of capital
stock of any of the Company Entities.
3.3.2 All issuances, transfers or purchases of the capital
stock of each of the Company Entities have been effected in compliance with all
applicable agreements and all applicable laws, including federal and state
securities laws, and all Taxes thereon, if any, have been paid. No former or
present holder of any of the Shares or any other capital stock of any of the
Company Entities has any legally cognizable claim against Seller or any of the
Company Entities based on any issuance, sale, purchase, redemption or
involvement in any transfer of any Shares or any such other capital stock by any
of the Company Entities.
3.4 Absence of Equity Investments. Except as described in
SCHEDULE 3.4 hereto (the "INVESTMENT INTERESTS"), none of the Company Entities
owns or has the right or obligation to
24
acquire voting securities or other ownership interests in any other Person,
other than the Company Entities. The Investment Interests are owned free and
clear of any and all Encumbrances, other than Encumbrances described in SCHEDULE
3.4 or arising pursuant to the governing instruments of such Persons in which
the Company Entities own such Investment Interests.
3.5 Liabilities and Obligations of the Company Entities.
---------------------------------------------------
3.5.1 Attached hereto as SCHEDULE 3.5.1 are true, correct and
complete copies of the consolidated balance sheets of the Company Entities as of
September 30, 1997, 1998 and 1999, and the related statements of income for the
years then ended, and the consolidated balance sheet of the Company Entities as
of December 24, 1999, and the related statement of income for the three months
then ended (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements
are correct and complete, are in accordance with the books and records of the
Company Entities, have been prepared in accordance with GAAP, consistently
applied, and fairly present the financial position and results of operations of
the Company Entities as of the respective dates and for the respective periods
presented therein (subject to normal recurring year-end adjustments which are
not, and are not expected to be, material in amount and except for the absence
of footnotes).
3.5.2 None of the Company Entities has any actual or potential
liability or obligation related to its assets, business, operations or financial
condition (whether accrued, absolute, contingent or otherwise) which is of a
nature required to be reflected in financial statements prepared in accordance
with GAAP, consistently applied, including, without limitation, any liability
that might result from an audit of its Tax Returns by any appropriate
Governmental Authority, except for (i) the liabilities and obligations of the
Company Entities which are disclosed or reserved against in the Financial
Statements or disclosed on SCHEDULE 3.5.2 hereto, to the extent and in the
amounts so disclosed or reserved against, and (ii) liabilities incurred or
accrued in the ordinary course of business since the date of the most recent
Financial Statements, and which do not, either individually or in the aggregate,
have (and would not reasonably be expected to have) a Material Adverse Effect.
3.5.3 Except as set forth in SCHEDULE 3.5.3, none of the
Company Entities is in default in any material respect with respect to any
liabilities or obligations which are related to the assets, business or
operations of the Company Entities.
3.6 Tax Matters.
-----------
3.6.1 Seller has filed or has caused to be filed in a timely
manner all required Tax Returns of the Company Entities with the appropriate
Governmental Authorities in all jurisdictions in which such Tax Returns are
required to be filed by the Company Entities (except Tax Returns for which the
filing date has not expired or has been extended and such extension period has
not expired), and all Taxes shown on such Tax Returns have been properly accrued
or
25
paid to the extent such Taxes have become due and payable. SCHEDULE 3.6 lists
all jurisdictions where Tax Returns are required to be filed with respect to the
Company Entities. Except as set forth in SCHEDULE 3.6, the Financial Statements
reflect an adequate reserve in accordance with GAAP (without regard to any
amounts reserved for deferred taxes) for all unpaid Taxes payable by the Company
Entities for all Tax periods and portions thereof through the date of such
Financial Statements. Except as disclosed in SCHEDULE 3.6, Seller has not, and
none of the Company Entities has, executed any waiver or extension of any
statute of limitations on the assessment or collection of any Tax or with
respect to any liability arising therefrom. Except as disclosed in SCHEDULE 3.6,
none of the federal, state or local income Tax Returns filed by or on behalf of
the Company Entities are currently being audited by any taxing authority, and
there are no other examinations, requests for information or other
administrative or judicial proceedings pending with respect to Taxes of the
Company Entities. Except as disclosed in SCHEDULE 3.6, (i) neither the Internal
Revenue Service nor any other taxing authority has asserted any deficiency or
claim for additional Taxes against, or any adjustment of Taxes relating to, any
of the Company Entities, and (ii) there are no proposed reassessments of any
property owned by any of the Company Entities that would affect the Taxes of any
of the Company Entities. None of the Company Entities has any liability for the
Taxes of any Person (other than the members of the Selling Group) pursuant to
Section 1.1502-6 of the Treasury Regulations promulgated under the Code or
comparable provisions of any taxing authority in respect of a consolidated,
combined or unitary Tax Return. There are no Tax liens on any assets of the
Company Entities, other than liens for current Taxes not yet due and payable
without penalty and liens for Taxes that are being contested in good faith by
appropriate proceedings.
3.6.2 Except as disclosed in SCHEDULE 3.6, none of the Company
Entities has been at any time a member of any partnership, joint venture or
other arrangement or contract which is treated as a partnership for federal,
state, local or foreign tax purposes or the holder of a beneficial interest in
any trust for any period for which the statute of limitations for any Tax has
not expired.
3.6.3 As of the Closing, there will be no tax sharing
agreements or similar arrangements with respect to or involving any of the
Company Entities.
3.7 Personal Property. All of the tangible assets material to the
operations of the Company Entities are in good operating condition and repair
(ordinary wear and tear excepted), are performing satisfactorily and are
available for immediate use in the conduct of the Business of the Company
Entities as presently conducted.
3.8 Bank Accounts. Set forth and described on SCHEDULE 3.8 hereto is a
complete list of all bank accounts and safe deposit boxes of the Company
Entities, all powers of attorney in connection with such accounts and the names
of all persons authorized to draw thereon or to have access thereto.
26
3.9 Consents and Approvals; Noncontravention.
----------------------------------------
3.9.1 Except as set forth on SCHEDULE 3.9 and except for
compliance with any applicable requirements of the HSR Act, there is no
requirement applicable to Seller or any Company Entity to make any filing with,
or to obtain any permit, authorization, consent or approval of, any Governmental
Authority as a condition to the lawful consummation by Seller of the sale of the
Shares and to enable Purchaser to hold the Shares and conduct the full operation
of the Business as presently conducted by the Company Entities pursuant to this
Agreement.
3.9.2 Except as set forth on SCHEDULE 3.9, the execution,
delivery and performance of this Agreement by Seller do not, and the
consummation of the transactions contemplated hereby will not (with or without
the giving of notice, the lapse of time or both), (i) conflict with or result in
any breach of any provision of the Articles or Certificate of Incorporation,
Bylaws or other applicable governing instruments, each as amended to date, of
Seller or any of the Company Entities; (ii) violate, result in a breach of or
constitute an occurrence of default under any provision of, or conflict with, or
result in acceleration of any obligation under, or give rise to a right by any
party to terminate its obligations under, or result in the creation or
imposition of any Encumbrance upon the property of any Company Entity pursuant
to any provision of, any Material Contract; or (iii) violate any Material
License or any applicable law, rule, regulation, order, writ, judgment,
ordinance, injunction or decree of any Governmental Authority to which any
Company Entity or Seller is a party or is bound or by which the assets or
business of the Company Entities are affected.
3.10 Absence of Changes. Since September 30, 1999, none of the Company
Entities has, except as otherwise expressly provided in this Agreement or
disclosed on SCHEDULE 3.10:
3.10.1 transferred, assigned, conveyed or liquidated any of
the assets of the Company Entities or entered into any transaction or incurred
any liability or obligation that materially affects the business, operations or
financial condition of the Company Entities other than in the ordinary course of
its business;
3.10.2 suffered any material adverse change in the business,
operations or financial condition of any of the Company Entities or become aware
of any event or state of facts that may reasonably be expected to result in any
such material adverse change;
3.10.3 suffered any physical destruction, damage or loss,
materially and adversely affecting the assets of any Company Entity, whether or
not covered by insurance;
3.10.4 incurred the imposition of any Encumbrance or claim
upon any of the material assets of any Company Entity, except for any current
year lien with respect to personal or real property Taxes not yet due and
payable and except for liens of suppliers, lessors and others reflected by
Working Capital;
27
3.10.5 committed or permitted any default in any liability or
obligation which has had or will have a Material Adverse Effect;
3.10.6 declared, promised or made any distribution or other
payment from the assets of any Company Entity to Seller (except for cash
distributed to Seller in accordance with Seller's cash-consolidation practices
which are reflected as inter-company receivables to Company Entities) or issued
any additional shares or rights, options or calls with respect to any Company
Entity's capital stock, or redeemed, purchased or otherwise acquired any of any
Company Entity's capital stock, or made any change whatsoever in any Company
Entity's capital structure;
3.10.7 except in the ordinary course of business and
consistent with past practices, paid, agreed to pay or incurred any obligation
for any payment for, any contribution or other amount to, or with respect to,
any Employee Plan or Compensation Arrangement, or paid any bonus to, or granted
any increase in the compensation of, any Company Entity's directors, officers,
agents or employees, or made any increase in the pension, retirement or other
benefits of its directors, officers, agents or other employees;
3.10.8 changed its accounting methods, practices or
principles; or
3.10.9 incurred any other material liability or obligation or
entered into any transaction, in each case other than in the ordinary course of
business.
3.11 Litigation. Except as otherwise set forth in SCHEDULE 3.11 hereto,
there is no suit, action, proceeding, claim or investigation pending or, to the
best knowledge of Seller, threatened against or affecting any Company Entity.
None of the items described in SCHEDULE 3.11, singly or in the aggregate, would
(if determined adversely to any Company Entity) have a material adverse effect
on the assets, Business, operations or financial condition of the Company
Entities, or the right of Seller to consummate the transactions contemplated
hereby.
3.12 Licenses and Permits; Compliance With Law. Each of the Company
Entities holds all material licenses, certificates, permits, franchises and
rights (the "MATERIAL LICENSES") from all appropriate federal, state or other
Governmental Authorities required for the conduct of the Business as currently
conducted by the Company Entities, and none of the Material Licenses is subject
to any restriction or condition which would limit the full operation of the
Business of the Company Entities as presently operated. All of the Material
Licenses are listed on SCHEDULE 3.12. Except as noted in SCHEDULE 3.12, each of
the Company Entities is presently conducting the Business so as to comply in all
material respects with all applicable statutes, ordinances, rules, regulations,
laws and orders of any Governmental Authority. Further, none of the Company
Entities is presently charged with, nor to the best knowledge of Seller, is
under governmental investigation with respect to, any actual or alleged
violation of any statute, ordinance, rule or regulation, nor is presently the
subject of any pending or threatened adverse proceeding by any Governmental
Authority having jurisdiction over the assets or Business of the
28
Company Entities. Neither the execution nor delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will result in the
termination of any Material License held by the Company Entities.
3.13 Real Property.
-------------
3.13.1 SCHEDULE 3.13 lists all Real Property owned or leased
by any of the Company Entities and used or held for use in the Business,
indicating in each case whether the property is owned or leased. The Real
Property disclosed on SCHEDULE 3.13 includes all real property or interests
therein necessary to conduct lawfully the Business as presently conducted.
Except as otherwise set forth on SCHEDULE 3.13, all of the Real Property
(including the improvements thereon) has full legal and practical access to
public roads or streets and is supplied in all material respects with all
utilities and other services, including gas, electricity, water, telephone,
sanitary sewer and storm sewer, necessary for the conduct and operation of the
Business of the Company Entities as now conducted, all of which services are
adequate in accordance in all material respects with all applicable laws,
ordinances, rules and regulations and are provided via public roads or via
permanent, irrevocable, appurtenant easements benefiting the Real Property.
Except as otherwise set forth on SCHEDULE 3.13, all improvements, installations,
equipment and facilities made by or constructed for any of the Company Entities
or utilized in connection with the Company Entities were constructed and are
maintained, placed and located in compliance in all material respects with all
applicable federal, state or other statutes, laws, ordinances, regulations,
rules, codes, orders, deeds, easements, restrictions, leases, licenses, permits
or other arrangements or requirements (including, but not limited to, any
building, zoning or Environmental Laws or codes) affecting such premises and are
located entirely on the Real Property, and none of the Real Property is located
within any flood plain.
3.13.2 Except as otherwise set forth on SCHEDULE 3.13, with
respect to each leasehold interest included in the Real Property, neither the
Company Entity holding such interest nor the landlord is in default under any
agreement relating thereto (nor, to the knowledge of Seller, is any other party
thereto), and such leasehold interest (i) is valid, subsisting and in full force
and effect; (ii) is free and clear of all Encumbrances of any nature whatsoever,
and without reservation or exclusion of any mineral, timber or other rights or
interests, except for (a) liens for real estate Taxes not yet due and payable,
(b) easements, rights-of-way and restrictions of record, all of which, to the
knowledge of Seller, are described in SCHEDULE 3.13, and (c) statutory liens in
favor of landlords with respect to rent not yet due and payable, (d) any other
claims or Encumbrances which are described in SCHEDULE 3.13 and annotated to
indicate whether such claims or Encumbrances will be removed prior to or at
Closing, and (e) those non-monetary Encumbrances which do not, individually or
in the aggregate, materially interfere with the use of such Real Property or
materially detract from its value; and (iii) will at Closing include enforceable
rights to nondisturbance with respect to all prior Encumbrances and peaceful and
quiet enjoyment, so long as the Company Entity party thereto fulfills its
obligations under the lease and/or mortgage therefor.
29
3.13.3 Except as otherwise set forth on SCHEDULE 3.13, all
Real Property (including the improvements thereon) (i) is in good condition and
repair in accordance with normal and customary industry practices (excepting
ordinary wear and tear), (ii) is available for immediate use in the conduct of
the business or operations of the Company Entities and (iii) complies in all
material respects with all applicable building, safety and zoning codes and the
regulations of any Governmental Authority having jurisdiction. Except as
otherwise set forth on SCHEDULE 3.13, none of the Real Property or buildings or
improvements thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications. There are no condemnation proceedings
or eminent domain proceedings, lawsuits or legal proceedings of any kind pending
or, to the knowledge of Seller, threatened in connection with any of the Real
Property. The Real Property and the present use and condition thereof do not
violate in any material respect any applicable deed restrictions or other
covenants, restrictions, agreements, existing site plan approvals, or in any
material respect, any zoning or subdivision regulations or urban redevelopment
plans applicable to the Real Property as modified by any duly issued variances,
and no permits, licenses or certificates pertaining to the ownership or
operation of the Real Property, other than those which are transferable with the
Real Property and the Material Licenses, are required by any Governmental
Authority having jurisdiction over the Real Property or their operation. Except
as otherwise set forth on SCHEDULE 3.13, the Company Entities have paid, or
shall have paid prior to Closing, all amounts owing by any of the Company
Entities to any architect, contractor, subcontractor or materialman for labor or
materials performed, rendered or supplied to or in connection with any Real
Property. SCHEDULE 3.13 sets forth a true and complete list of all construction,
architect, engineering and other agreements, if any, relating to uncompleted
construction projects entered into by any of the Company Entities in connection
with any Real Property involving amounts in excess of $250,000.
3.14 Environmental Matters.
---------------------
3.14.1 Except as disclosed on SCHEDULE 3.14 hereto, (i) each
Company Entity's operations with respect to the Business and all Real Property
has complied and currently complies in all material respects with all applicable
Environmental Laws; (ii) none of the Company Entities' operations thereon are
subject to any judicial or administrative proceeding alleging the violation of
any Environmental Law; (iii) to the knowledge of Seller, none of the Real
Property is the subject of any federal or state investigation concerning any use
or release of any Hazardous Material; (iv) neither Seller or any Company Entity
nor, to the knowledge of Seller, any predecessor-in-title to the Real Property
has filed any notice under any federal or state law indicating past or present
treatment, storage or disposal of a hazardous waste or reporting a spill or
release of a Hazardous Material into the environment; (v) none of the Company
Entities has any material contingent liability in connection with any release of
any Hazardous Material into the environment, and no release which could require
material remediation has occurred; (vi) none of the operations of the Company
Entities on the Real Property involves the generation, transportation,
treatment, storage or disposal of Hazardous Materials of "Reportable Quantity"
(as defined by CERCLA); and (vii) except in accordance in all material respects
with all legal requirements, none of the Company Entities has disposed of any
Hazardous Material of
30
Reportable Quantity in, on or about the Real Property and, to the knowledge of
Seller, neither has any lessee, prior owner or other Person.
3.14.2 Except as disclosed in SCHEDULE 3.14, there are no
surface impoundments or above ground or underground storage tanks located in, on
or about the Real Property.
3.15 Contracts, Etc. All Material Contracts are listed in SCHEDULE 3.15
hereto, and the Company Entities and Seller have delivered to Purchaser a true
and complete copy of each such Material Contract. All of the Material Contracts
are valid and binding upon the Company Entity that is party thereto, and, to the
best knowledge of Seller, the other parties thereto and are in full force and
effect. Except as set forth on SCHEDULE 3.15 hereto, there is no existing
material default, event of default or other event with respect to the Material
Contracts to which any of the Company Entities is a party or by which any
Company Entity or its properties is bound which, with or without due notice or
lapse of time or both, would constitute a material default or event of default
on the part of any of the Company Entities.
3.16 Patents, Trademarks, Trade Names, Etc. SCHEDULE 3.16 hereto sets
forth a complete and correct list of all trademarks, trade names, service marks,
service names, brand names, copyrights, patents, privileges, domain names, url's
and other similar intangible property rights and interests, registrations
thereof and applications therefor used or useful in the conduct of the business
of the Company Entities (collectively, the "PATENT AND TRADEMARK RIGHTS"),
together with a complete list of all licenses granted by or to the Company
Entities with respect to any of the above other than the ADT License Agreement.
The Patent and Trademark Rights are sufficient to conduct the business of each
of the Company Entities as it is now being conducted. The Company Entities'
right, title and interest in and to the Patent and Trademark Rights are valid
and enforceable and uncontested and will be owned or available for continued use
by the Company Entities after the Closing. No claims, notices, oppositions or
demands have been asserted by any third party with respect to any of the items
listed in SCHEDULE 3.16, and no Person has interfered with, infringed upon,
misappropriated, acted adversely to or otherwise come into conflict with the
rights of any of the Company Entities in any of such items. To the best
knowledge and belief of Seller, none of the Company Entities has interfered
with, infringed upon, misappropriated, acted adversely to or otherwise come into
conflict with any trademarks, trade names, copyrights, patents, patent
applications, know-how, methods or processes owned by any other Person or
Persons, and there is no claim or action pending or, to the knowledge of Seller,
threatened with respect thereto.
3.17 Labor Matters and Employee Relations. Attached hereto as SCHEDULE
3.17 is a list of all current employees of the Company Entities with an annual
base salary in excess of $50,000, including their titles and annual wages,
salary and bonus information. Except as otherwise set forth on SCHEDULE 3.17
hereto:
3.17.1 Neither Seller nor any of the Company Entities has
received notice (or has knowledge) that any present or former employee, or union
or other collective bargaining agents
31
claiming to represent any employee, of the Company Entities has advanced a claim
in writing or orally against any Company Entity (whether under any foreign,
federal, state or common law, through any Governmental Authority, under an
employment agreement, collective bargaining agreement, personal service or
independent contractor agreement or otherwise) that is currently pending or
threatened, including without limitation, any claim for (i) overtime pay, other
than overtime pay for the current period; (ii) wages, salaries or profit sharing
(excluding wages, salaries or profit sharing for the current payroll period);
(iii) vacations, time off (including, without limitation, potential sick leave)
or pay in lieu of vacation or time off, other than vacation or time off (or pay
in lieu thereof) earned in respect of any Company Entity's current fiscal year;
(iv) any violation of any statute, ordinance or regulation relating to minimum
wages or maximum hours of work; (v) discrimination against employees on any
basis; (vi) unlawful employment or termination practices; (vii) unfair labor
practices or alleged violations of collective bargaining agreements; (viii) any
violation of occupational safety and/or health standards; (ix) benefits under
any Employee Plan or Compensation Agreement; (x) breach of any employment,
personal service or independent contractor agreement; or (xi) the
misclassification of employees as independent contractors.
3.17.2 Except as set forth in SCHEDULE 3.17, within the past
five years, none of the Company Entities has been the subject of any union
organizing activity or labor dispute, nor has there been any strike, slowdown,
picketing or work stoppage of any kind called, or, to the knowledge of Seller,
threatened to be called, against any Company Entity. None of the Company
Entities has violated in any material respect any applicable federal or state
law or regulation relating to labor or labor practices, including, without
limitation, those related to wages, hours, collective bargaining, occupational
safety, discrimination and the payment of social security and other
payroll-related Taxes. Except as set forth in SCHEDULE 3.17, none of the Company
Entities is a party to any collective bargaining agreement, no such agreement
determines the terms and conditions of employment of any employee of any of the
Company Entities, no union or other collective bargaining agent has been
recognized or certified, or claims to be, or has requested recognition as, a
representative of any of the employees of any of the Company Entities and, to
the knowledge of Seller, no representation campaign or election is now in
progress or threatened with respect to any of the employees of any of the
Company Entities.
3.17.3 There is not pending or threatened by written notice to
any of the Company Entities or Seller any charge or complaint against any of the
Company Entities by or before the National Labor Relations Board, any
representative thereof or any comparable foreign or state agency or authority.
3.17.4 Except as set forth on SCHEDULE 3.17, neither Seller
nor any of the Company Entities has any written or oral contracts of employment
with any current employee of the Company Entities, except for oral employment
contracts terminable at will without penalty.
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3.18 Benefit Plans.
-------------
3.18.1 All of the Employee Plans and Compensation Arrangements
that provide benefit coverage to employees or former employees of the Company
Entities are listed and described in SCHEDULE 3.18, and complete and accurate
copies of (including any amendments to) any such written Employee Plans and
Compensation Arrangements (or related insurance policies) have been furnished to
Purchaser, along with copies of any employee handbooks or similar documents
describing such Employee Plans and Compensation Arrangements. Any unwritten
Employee Plans or Compensation Arrangements also are listed in SCHEDULE 3.18,
and complete descriptions have been furnished to Purchaser. Except as disclosed
in SCHEDULE 3.18, neither Seller nor any of the Company Entities is a party to
and/or has in effect or to become effective after the date of this Agreement any
plan arrangement or other scheme which will become an Employee Plan or
Compensation Arrangement (including, but not limited to, any bonus, cash or
deferred compensation, severance, medical, pension, profit sharing or thrift,
stock option, employee stock ownership, life or group insurance, death benefit,
vacation, sick leave, disability or trust agreement or arrangement) or any
amendment to an Employee Plan or Compensation Arrangement.
3.18.2 Seller has furnished to Purchaser the Forms 5500 filed
for each of the Employee Plans listed in SCHEDULE 3.18 (including all
attachments and schedules) and all actuarial reports, summaries of material
modifications, summary annual reports and any other employer notices (including
governmental filings and descriptions of material changes to Employee Plans)
relating to the such Employee Plans, all of which shall be provided for the last
three plan years. Seller also have furnished to Purchaser the current summary
plan descriptions for such Employee Plans.
3.18.3 Each Employee Plan and Compensation Arrangement has
been administered in compliance with its own terms and in material compliance
with the provisions of ERISA, the Code, the Age Discrimination in Employment Act
and any other applicable federal or state laws.
3.18.4 Except as set forth in SCHEDULE 3.18, none of the
Company Entities nor any ERISA Affiliate thereof is contributing to, is required
to contribute to, or has contributed within the last six years to, any
Multiemployer Plan, and none of the Company Entities nor any ERISA Affiliate
thereof has incurred within the last six years, or reasonably expects to incur,
any "withdrawal liability," as defined under Section 4201 ET SEQ. of ERISA.
3.18.5 At all times on or prior to the Closing, each Employee
Plan, to the extent such Employee Plan is intended to be tax-qualified,
satisfies all minimum coverage and minimum participation requirements, if any,
imposed on such Employee Plan by the applicable terms of the Code and ERISA.
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3.18.6 Neither Seller nor any of the Company Entities is aware
of the existence of any governmental inspection, investigation, audit or
examination of any Employee Plan or Compensation Arrangement or of any facts
which would lead them to believe that any such governmental inspection,
investigation, audit or examination is pending or threatened. There exists no
action, suit or claim (other than routine claims for benefits) with respect to
any Employee Plan or Compensation Arrangement pending or, to the knowledge of
Seller and any of the Company Entities, threatened against any of such plans or
arrangements, and neither Seller nor any of the Company Entities possesses any
knowledge of any facts which could give rise to any such action, suit or claim.
3.18.7 Except as described in SCHEDULE 3.18, neither Seller
nor any ERISA Affiliate thereof sponsors, maintains or contributes to any
Employee Plan or Compensation Arrangement that provides medical or death benefit
coverage to former employees of the Company Entities, except to the extent
required by Section 4980B of the Code. SCHEDULE 3.18 lists all active and former
employees of the Company Entities eligible for a benefit, if any, described in
the preceding sentence.
3.18.8 Except as described in SCHEDULE 3.18, with respect to
each Employee Plan and, to the extent applicable, each Compensation Arrangement:
(i) each Employee Plan that is intended to be tax-qualified, and each amendment
thereto, is the subject of a favorable determination letter, and no plan
amendment that is not the subject of a favorable determination letter would
affect the validity of an Employee Plan's letter; (ii) no condition or event
exists or is expected to occur that could subject, directly or indirectly,
Seller or any ERISA Affiliate thereof to any material liability, contingent or
otherwise, or the imposition of any lien on the assets of the Company Entities
or any ERISA Affiliate thereof under the Code or Title IV of ERISA whether to
the Pension Benefit Guaranty Corporation, the Internal Revenue Service or any
other Person; (iii) no Employee Plan ever has incurred an "accumulated funding
deficiency," as such term is defined in Section 302(a)(2) of ERISA and Section
412(a) of the Code, whether or not waived, and otherwise always has fully met
the funding standards required under Title I of ERISA and Section 412 of the
Code; (iv) no "reportable event," as that term is defined in Section 4043(b)(1)
through (8) of ERISA and, to the knowledge of Seller and the Company Entities,
Section 4043(b)(9) of ERISA, ever has occurred with respect to any Employee Plan
and no reportable event requires prior notice; (v) there are no unfunded
liabilities with respect to any Employee Plan, i.e., the actuarial present value
of all "benefit liabilities" (determined within the meaning of Section 401(a)(2)
of the Code) under such Employee Plan, whether or not vested, does not exceed
the current value of the assets of such Employee Plan; (vi) no prohibited
transaction, within the definition of Section 4975 of the Code or Title 1, Part
4 of ERISA, has occurred which would subject Seller or any ERISA Affiliate
thereof to any liability; and (vii) all contributions, premiums or payments
accrued, in whole or in part, under each Employee Plan or Compensation
Arrangement or with respect thereto as of the Closing will be paid by Seller, on
or prior to Closing or, if later, within the time period permitted by ERISA and
the Code.
34
3.18.9 With respect to the Company Entities, SCHEDULE 3.18
contains a complete and accurate list of all qualified beneficiaries, as defined
under Section 4980B(g)(1) of the Code, as of the effective date of this
Agreement (including qualified beneficiaries who are in the election period for
continuation coverage but who have not yet elected continuation coverage), the
date of the applicable qualifying event and the nature of the qualifying event
relating to the duration of such coverage. There have been no failures to
provide continuation coverage as required by Section 4980B(f) of the Code.
Seller agrees to provide to Purchaser at Closing an updated list of such
qualified beneficiaries, as described above, effective as of the Closing Date.
3.18.10 Except as disclosed on SCHEDULE 3.18, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any material payment
(including, without limitation, severance or unemployment compensation) becoming
due to any director or employee of the Company Entities; (ii) result in the
acceleration of vesting under any Employee Plan or Compensation Arrangement; or
(iii) materially increase any benefits otherwise payable under any Employee
Plan; and any such payment or increase in benefits is fully deductible under the
Code, including, but not limited to, Sections 162, 280G and 404.
3.18.11 Except as set forth on SCHEDULE 3.18, all Employee
Plans that provide health and welfare benefits coverage to current and/or former
employees, directors or independent contractors of the Company Entities are
fully insured.
3.18.12 The assets in the ADT Automotive Holdings, Inc.
Executive Retirement Trust out of which the benefits accrued under the Pension
Plan are paid consist of an amount sufficient to provide for lump sum payments
to those employees and/or former employees of Seller and/or the Company Entities
entitled to benefits under the Pension Plan either upon termination of the
Pension Plan or in the event of a "change of control," as such term is defined
in the Pension Plan.
3.18.13 No current or former employee of the Company Entities
is entitled to make a claim for long-term disability benefit coverage under any
Employee Plan, except for those employees or former employees of the Company
Entities set forth in SCHEDULE 3.18 who currently are receiving long-term
disability benefit coverage under a long-term disability program previously
sponsored by the Company Entities that is fully insured. The Company Entities
retain no liability of any nature, including, but not limited to, the payment of
insurance premiums, with respect to the provision of long-term disability
coverage to the employees or former employees set forth in SCHEDULE 3.18.
3.18.14 For purposes of this Agreement, the following terms
shall have the meanings indicated: (i) "EMPLOYEE PLAN" shall mean any retirement
or welfare plan or arrangement or any other employee benefit plan as defined in
Section 3(3) of ERISA to which the Company Entities or any ERISA Affiliate
thereof contribute or to which the Company Entities or any ERISA Affiliate
thereof sponsor, maintain or otherwise are bound; (ii)
35
"COMPENSATION ARRANGEMENT" shall mean any plan or compensation arrangement other
than an Employee Plan, whether written or unwritten, which provides to
employees, former employees, officers, directors and shareholders of the Company
Entities or any ERISA Affiliate thereof any compensation or other benefits,
whether deferred or not, in excess of base salary or wages, including, but not
limited to, any bonus or incentive plan, stock rights plan, deferred
compensation arrangement, life insurance, stock purchase plan, severance pay
plan and any other employee fringe benefit plan; (iii) "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended, any successor
thereto and any regulations promulgated thereunder; (iv) "MULTIEMPLOYER PLAN"
means a plan, as defined in ERISA Section 3(37), to which the Company Entities
or any ERISA Affiliate thereof has contributed, is contributing or is required
to contribute; and (v) "ERISA AFFILIATE" shall mean any trade or business
related to the Company Entities under the terms of Sections 414(b), (c), (m) or
(o) of the Code.
3.19 Title to Assets. Except for leased assets described in SCHEDULE
3.19 or as otherwise set forth in SCHEDULE 3.19, the Company Entities have sole,
good, valid and, in the case of Real Property, marketable title to, all Real
Property, and all tangible and intangible personal properties and assets used in
the conduct of the Business of the Company Entities, including, without
limitation, the Patent and Trademark Rights (and no Affiliate of the Company
Entities (other than a Company Entity) has any right, title or interest
therein); except for (i) such as are no longer used or useful in the conduct of
the Business or as have been disposed of in the ordinary course of business
consistent with past practices, (ii) with respect to owned Real Property, other
than those which do not materially interfere with the use or materially detract
from the value of the Real Property, as currently used and as reasonably
anticipated to be used, all of which, to the knowledge of Seller, are described
in SCHEDULE 3.19, (iii) liens arising from current Taxes not yet due and payable
and (iv) any other Encumbrances which are described in SCHEDULE 3.19 and
annotated to indicate whether such Encumbrances will be removed prior to or at
Closing. Except pursuant to this Agreement, neither Seller nor any of the
Company Entities is a party to any contract or obligation whereby there has been
granted to anyone an absolute or contingent right to purchase, obtain or acquire
any rights in any of the assets, properties or operations of any of the Company
Entities.
3.20 Accounts Receivable. All of the accounts receivable of the
Acquired Company shown on the Financial Statements or thereafter acquired
reflect actual transactions, arose in the ordinary course of business and are
not subject to offset or deduction.
3.21 Insurance. SCHEDULE 3.21 contains a complete list and brief
description of all insurance policies maintained by the Company Entities. All
policies of insurance listed in SCHEDULE 3.21 are in full force and effect and
will remain in effect until the Closing Date.
3.22 Guaranties. Except as set forth in SCHEDULE 3.22, none of the
Company Entities is, directly or indirectly, (i) liable, by guaranty or
otherwise, upon or with respect to, (ii) obligated by discount or repurchase
agreement or in any other way to provide funds in respect of or (iii) obligated
to guarantee or assume any debt, dividend or other obligation of any Person,
36
2
except endorsements made in the ordinary course of business in connection with
the deposit of items for collection.
3.23 Full Disclosure. To the knowledge of Seller, no statement
contained herein or in any certificate, Schedule, Exhibit, list or other
instrument furnished to Purchaser pursuant to the provisions hereof contains, or
will contain, any untrue statement of any material fact or omits, or will omit,
to state a material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they were made,
not misleading.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
-------------------------------------------
Purchaser represents and warrants to Seller, as of the date hereof and
as of the Closing Date, as follows:
4.1 Organization and Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. Purchaser is duly qualified and licensed to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification and/or licensing is necessary.
4.2 Authority and Status. Purchaser has the full corporate power and
authority to execute and deliver this Agreement and the Related Agreements to be
executed and delivered by Purchaser, to carry out and perform its obligations
under the terms of this Agreement and the Related Agreements to be executed and
delivered by it and to consummate the transactions contemplated hereby, without
the necessity of any act, approval or consent of any other Person whomsoever.
All corporate action on the part of Purchaser and its directors and shareholders
necessary for the authorization, execution, delivery and performance by
Purchaser of this Agreement and the Related Agreements to be executed and
delivered by Purchaser has been taken or will have been taken on or prior to the
Closing Date. This Agreement and the Related Agreements to be executed and
delivered by Purchaser constitute or will, when executed and delivered,
constitute the valid and binding obligations of Purchaser, enforceable against
it in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws from time to time in effect affecting the enforcement of creditors' rights
generally, and except as enforcement of remedies may be limited by general
equitable principles.
4.3 Consents and Approvals; Noncontravention.
----------------------------------------
4.3.1 Except as set forth on SCHEDULE 4.3 and except for
compliance with any applicable requirements of the HSR Act, there is no
requirement applicable to Purchaser to make any filing with, or to obtain any
permit, authorization, consent or approval of, any Governmental Authority as a
condition to the lawful consummation by Purchaser of the purchase of the Shares
or to enable Purchaser to hold the Shares and conduct the full Business and
operations of the Company Entities as presently conducted pursuant to this
Agreement.
37
4.3.2 Except as set forth on SCHEDULE 4.3, the execution,
delivery and performance of this Agreement by Purchaser do not, and the
consummation of the transactions contemplated hereby will not (with or without
the giving of notice, the lapse of time or both), (i) conflict with or result in
any breach of any provision of the Articles of Incorporation or Bylaws of
Purchaser or (ii) violate any applicable law, rule, regulation, order, writ,
judgment, ordinance, injunction or decree of any Governmental Authority to which
Purchaser is a party or is bound.
4.4 Purchase for Investment. Purchaser is purchasing the Shares for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof. Purchaser (either alone or together with its
advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and is capable of bearing the economic risks of such investment.
4.5 Inspections; No Other Representations. Purchaser agrees to accept
the Shares and the Company Entities on the condition they are in on the Closing
Date based upon its own inspection, examination and determination with respect
thereto as to all matters, and without reliance upon any express or implied
representations or warranties of any nature made by or on behalf of or imputed
to Seller, except as expressly set forth in this Agreement. Without limiting the
generality of the foregoing, Purchaser acknowledges that Seller make no
representation or warranty with respect to (i) any projections, estimates or
budgets delivered or made available to Purchaser of future revenues, future
results of operations (or any component thereof), future cash flows or future
financial condition (or any component thereof) of any of the Company Entities or
the future business and operations of any of the Company Entities or (ii)
operations or any other information or documents made available to Purchaser or
its counsel, accountants or advisors with respect to any of the Company Entities
or their respective businesses or operations, except as expressly set forth in
this Agreement. Notwithstanding the foregoing, nothing in this Section 4.5 shall
limit, affect or impair the ability of Purchaser, its successors or assigns to
rely upon the representations, warranties, covenants and obligations of Seller
set forth herein.
4.6 Availability of Funds. Purchaser has, and will have, as of the
Closing Date, available sufficient cash, available or committed lines of credit
or other immediately available funds to enable it to consummate the transactions
contemplated hereby.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
------------------------------------------------
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement to occur at Closing shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
Purchaser, but without prejudice to any other right or remedy which Purchaser
may have hereunder as a result of any misrepresentation by, or breach of any
covenant or warranty of, Seller contained in this Agreement or any other
certificate or instrument furnished by Seller hereunder.
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5.1 Representations True At Closing. The representations and warranties
of Seller set forth in Sections 3.2, 3.3, 3.4 and 3.19 shall be true and correct
in all material respects as of the Closing Date, as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct in all material respects as of such earlier date). All other
representations and warranties of Seller set forth in this Agreement shall be
true and correct as of the Closing Date, as though made on the Closing Date,
except (i) to the extent any such representation or warranty expressly relates
to an earlier date (in which case such representation and warranty shall be true
and correct as of such earlier date, subject to clause (iii) below); (ii) for
changes in the accuracy of such representations or warranties that result from
actions which are expressly permitted by this Agreement; or (iii) any inaccuracy
in the representations and warranties that, individually or in the aggregate
(and without regard to any materiality qualifiers contained therein) are not
reasonably likely to have a Material Adverse Effect.
5.2 Covenants. Seller shall have duly performed in all material
respects all of the covenants, acts and undertakings to be performed by it on or
prior to the Closing Date.
5.3 No Material Adverse Change. Since the date of this Agreement, there
shall not have been any Material Adverse Effect or any damage, destruction or
loss materially adversely affecting the assets or the business of the Company
Entities.
5.4 Officer's Certificate. A duly authorized officer of Seller shall
deliver to Purchaser a certificate dated as of the Closing Date certifying,
without personal liability, to the compliance with the conditions set forth in
Sections 5.1, 5.2 and 5.3 above.
5.5 Consents and Waivers. Purchaser shall have received a true and
correct copy of each consent and waiver that has been marked with an asterisk on
SCHEDULE 3.9 in form and substance consistent with the requirements of Section
2.5 and otherwise reasonably satisfactory to Purchaser, without any conditions
(on any Company Entity, Purchaser or any of their Affiliates), changes,
modifications or additions to the underlying contract, agreement, license,
permit or other authorizations for which consent or approval was sought, other
than those of an immaterial or ministerial nature.
5.6 Regulatory Approvals. The waiting period specified under the HSR
Act shall have lapsed or been terminated, and no action, suit or other
proceeding shall have been instituted, threatened or proposed by any
Governmental Authority, and no order issued by any Governmental Authority shall
be outstanding which would (i) enjoin, restrain, prohibit or obtain substantial
damages against Purchaser or any of its Affiliates in respect of, or which is
related to, or arising out of, this Agreement or the consummation of the
transactions contemplated hereby, (ii) prohibit or limit the ownership or
operation by Purchaser or any of its Affiliates of all or any portion of the
business, operations or assets of Purchaser or any of its Affiliates, (iii)
compel Purchaser or any Affiliate of Purchaser to dispose of or hold separate
all or any portion of the business, operations or assets of Purchaser or any of
its Affiliates, (iv) impose limitations (other
39
than routine reporting requirements) on the ability of Purchaser to acquire or
hold, or exercise full rights of ownership of, any shares of capital stock of
any of the Company Entities, including the right to vote such capital stock on
all matters properly presented to the applicable shareholders, or (v) prohibit
Purchaser or any of its Affiliates from effectively controlling in any respect
the business or operations of Purchaser or its Affiliates. The execution and the
delivery of this Agreement and the consummation of the transactions contemplated
hereby shall have been approved by all regulatory authorities whose approvals
are required by law, including state governmental approvals with respect to
auction and dealer licenses held by any of the Company Entities listed on
SCHEDULE 5.6 attached hereto.
5.7 Judgment. There shall not be in effect on the date on which the
Closing is to occur any judgment, decree, order or other prohibition of a court
of competent jurisdiction having the force of law that would prevent the
Closing; provided that Purchaser shall have used commercially reasonable efforts
to prevent the entry of any such judgment, decree, order or other prohibition
and to appeal as expeditiously as possible any such judgment, decree, order or
other prohibition that may be entered.
5.8 Redemption or Repurchase of Preferred Stock. Seller shall have
caused the Acquired Company to redeem or repurchase the Preferred Stock held by
the Preferred Stockholder pursuant to Section 2.14.
5.9 Deliveries. Seller shall have made or stand willing to make all the
deliveries to Purchaser described in Section 7.2.1.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
---------------------------------------------
The obligations of Seller to consummate the transactions contemplated
by this Agreement to occur at Closing shall be subject to the satisfaction, on
or before the Closing Date, of each and every one of the following conditions,
all or any of which may be waived, in whole or in part, by Seller, but without
prejudice to any other right or remedy which Seller may have hereunder as a
result of any misrepresentation by, or breach of any covenant or warranty of,
Purchaser contained in this Agreement or any other certificate or instrument
furnished by Purchaser hereunder.
6.1 Representations True at Closing. The representations and warranties
of Purchaser set forth in this Agreement shall be true and correct in all
material respects at and as of the Closing Date (except to the extent such
representations and warranties expressly relate to an earlier date in which case
such representations shall be true and correct in all material respects as of
such earlier date) as though made at and as of the Closing Date.
6.2 Covenants. Purchaser shall have duly performed in all material
respects all of the covenants, acts and undertakings to be performed by it on or
prior to the Closing Date.
40
6.3 Officers' Certificate. A duly authorized officer of Purchaser shall
deliver a certificate dated as of the Closing Date certifying, without personal
liability, to the compliance with the conditions set forth in Sections 6.1 and
6.2 above.
6.4 Regulatory Approvals. The waiting period specified under the HSR
Act shall have lapsed or been terminated, and no action, suit or other
proceeding shall have been instituted, threatened or proposed by any
Governmental Authority, and no order issued by any Governmental Authority shall
be outstanding which would (i) enjoin, restrain, prohibit or obtain substantial
damages against Seller or any of its Affiliates in respect of, or which is
related to, or arising out of, this Agreement or the consummation of the
transactions contemplated hereby, (ii) prohibit or limit the ownership or
operation by Seller or any of its Affiliates of all or any portion of the
business, operations or assets of Seller or any of its Affiliates, (iii) compel
Seller or any Affiliate of Seller to dispose of or hold separate all or any
portion of the business, operations or assets of Seller or any of its
Affiliates, or (iv) prohibit Seller or any of its Affiliates from effectively
controlling in any respect the business or operations of Seller or its
Affiliates. For purposes of this Section 6.4, Affiliates of Seller shall not
include the Company Entities.
6.5 Judgment. There shall not be in effect on the date on which the
Closing is to occur any judgment, decree, order or other prohibition of a court
of competent jurisdiction having the force of law that would prevent the
Closing; provided that the Company Entities and Seller shall have used
commercially reasonable efforts to prevent the entry of any such judgment,
decree, order or other prohibition and to appeal as expeditiously as possible
any such judgment, decree, order or other prohibition that may be entered.
6.6 Deliveries. Purchaser shall have made or stand willing to make all
the deliveries to Seller described in Section 7.2.2.
7. CLOSING.
-------
7.1 Time and Place of Closing.
-------------------------
7.1.1 Subject to the satisfaction or, to the extent permitted
by law, waiver, of the closing conditions set forth in Articles 5 and 6, and
subject to Sections 7.1.2 and 7.1.3, the Closing shall be held at the offices of
Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PLLC, located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, on the date and time specified by Purchaser by notice to
Seller, which specified date shall be on the first Friday which is at least
three business days after (i) the consents described in Section 5.5 shall have
been obtained or waived, and (ii) the applicable waiting periods required under
the HSR Act have expired or otherwise terminated (or at such other place and/or
on such other date as Purchaser and Seller may mutually agree), but, subject to
Section 7.1.3, in no event will the Closing be held later than ten months from
the date hereof (the "UPSET DATE"). The Closing contemplated hereunder shall,
for all purposes hereunder, be final, effective and deemed to have occurred at
and as of 11:59 p.m. Eastern Time on the Closing Date, with any reference to
Closing Date hereunder for the purpose of closing
41
adjustments being deemed to mean such time (the "ADJUSTMENT TIME"). Seller shall
have been deemed to have retained all of the Shares with all attendant benefits,
rights, obligations and liabilities, in the Company Entities until 11:59 p.m.
Eastern Time on the Closing Date.
7.1.2 If on the date on which the Closing would otherwise be
required to take place pursuant to Section 7.1.1 above there shall be in effect
(i) any judgment, decree, order or other prohibition of a court of competent
jurisdiction having the force of law that would prevent or make unlawful the
Closing, or (ii) any other circumstance beyond the reasonable control of the
Company Entities, Seller or Purchaser shall exist that would prevent the Closing
or the satisfaction of any of the conditions precedent to any party set forth in
Article 5 or 6, then either Seller or Purchaser may, at its option, postpone the
date on which the Closing is required to take place until such date, to be set
by the party that elects to postpone the date for Closing pursuant to this
Section 7.1.2 on at least ten business days' written notice to the other party,
as soon as practicable after such judgment, decree, order or other prohibition
ceases to be in effect, or such other circumstance ceases to exist; provided,
however, that any postponement of the date on which the Closing is required to
take place to a date beyond the Upset Date shall require the consent of Seller
and Purchaser.
7.1.3 Notwithstanding anything in this Agreement to the
contrary, if on the date scheduled for Closing, the Closing has not occurred
because any notice period required by Section 7.1.1 or 7.1.2 has not lapsed, the
Upset Date shall be extended until one business day after the lapse of such
period.
7.2 Transactions At Closing. At the Closing, each of the following
transactions shall occur:
7.2.1 At the Closing, Seller shall deliver to Purchaser the
following:
(i) all certificates representing the Shares,
including the Preferred Stock, duly endorsed for transfer or accompanied by
instruments of transfer reasonably satisfactory in form and substance to
Purchaser and its counsel;
(ii) copies of the consents and waivers described in
Section 5.5 which have been obtained;
(iii) certificates of compliance or a certificate of
good standing of each of the Company Entities, as of the most recent practicable
date, from the appropriate Governmental Authority of the jurisdiction of its
incorporation and any other jurisdiction which is set forth in SCHEDULE 3.1
hereto;
(iv) certified copies of resolutions of the Board of
Directors of Seller approving the transactions set forth in this Agreement;
(v) certificate of incumbency for the officers of
Seller;
42
(vi) the Non-Competition Agreement, executed by
Seller and U.S. Parent;
(vii) the certificate of a duly authorized officer of
Seller described in Section 5.4;
(viii) an opinion of internal counsel for Seller,
Parent and U.S. Parent substantially in the form of EXHIBIT G;
(ix) the ADT License Agreement, executed by Licensor;
(x) all minute books, corporate seals and corporate
records of the Company Entities;
(xi) copies of the Certificate of Incorporation or
other applicable governing instruments, and all amendments thereof, of each of
the Company Entities, certified by the Secretary of State of the state in which
such entity is incorporated;
(xii) copies of the bylaws or other applicable
governing instruments of each of the Company Entities certified by the
respective Secretary of each such Company Entity as being correct, complete and
in full force and effect on the Closing Date;
(xiii) the resignation of each of the directors and
officers of the Company Entities described in Section 2.7;
(xiv) instruments and documents reasonably
satisfactory to Purchaser evidencing the redemption or repurchase by the
Acquired Company of all of the Preferred Stock held by the Preferred
Stockholder; and
(xv) a properly completed original I.R.S. Form W-8BEN
(or other appropriate form), duly executed by Licensor, certifying that the
royalty paid to Licensor under the ADT License Agreement is subject to U.S.
federal withholding tax at a rate other than 30%.
7.2.2 At the Closing, Purchaser shall deliver to Seller the
following:
(i) cash, in immediately available funds, by wire
transfer, in the amount of the Purchase Price, as adjusted pursuant to Section
2.2 hereof;
(ii) the Non-Competition Agreement, executed by
Purchaser;
(iii) certified copies of the resolutions of the
Board of Directors of Purchaser approving the transactions set forth in this
Agreement;
(iv) certificates of incumbency for the officers of
Purchaser;
43
(v) the certificate of a duly authorized officer of
Purchaser described in Section 6.3;
(vi) an opinion of counsel for Purchaser
substantially in the form of EXHIBIT H; and
(vii) the ADT License Agreement, executed by
Purchaser.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.
--------------------------------------------------------------
8.1 Survival of Representations and Warranties of Seller. All
representations, warranties, agreements, covenants and obligations made or
undertaken by Seller in this Agreement or in any document or instrument executed
and delivered pursuant hereto are material, have been relied upon by Purchaser
and shall survive the Closing hereunder, subject to the limitations set forth in
Section 8.4 to the extent applicable, and shall not merge in the performance of
any obligation by any party hereto. Subject to the limitations set forth in this
Article 8, Seller agrees from and after Closing to indemnify and hold Purchaser
or any of Purchaser's Affiliates, including the Company Entities, and their
respective successors and assigns, harmless from and against all liability,
loss, damages or injury and all reasonable costs and expenses (including
reasonable counsel fees and costs of any suit related thereto) (collectively,
"DAMAGES") suffered or incurred by Purchaser or any of Purchaser's Affiliates,
including any of the Company Entities, and their respective successors or
assigns arising from, resulting from or relating to:
8.1.1 any misrepresentation by, or breach of any covenant,
agreement or warranty, of Seller contained in this Agreement or the Related
Agreements or any certificate, schedule, document or instrument furnished by
Seller pursuant thereto; or
8.1.2 (i) the business or operations of the Company Entities
on or prior to the Closing Date whether or not disclosed on the Schedules
hereto, except as and to the extent taken into account in calculating Working
Capital as of the Adjustment Time; or (ii) liabilities or obligations of the
Company Entities attributable to acts or omissions, or the business or
operations, of Seller or any of its Affiliates (other than the Company
Entities); and in the case of either clause (i) or (ii) irrespective of when any
claim, suit, action, proceeding or investigation in respect of such matters is
asserted or made.
It is understood and agreed by Seller that since the Acquired Company will be
owned by Purchaser following the Closing, any recovery by Purchaser hereunder
after Closing will be against Seller, who will have no right of reimbursement or
contribution against the Acquired Company or any of the other Company Entities.
Any examination, inspection or audit of the assets or business of the Company
Entities conducted pursuant to this Agreement shall in no way
44
limit, affect or impair the ability of Purchaser, its successors or assigns to
rely upon the representations, warranties, covenants and obligations of Seller
set forth herein.
8.2 Survival of Representations and Warranties of Purchaser. All
representations, warranties, agreements, covenants and obligations made or
undertaken by Purchaser in this Agreement or in any document or instrument
executed and delivered pursuant hereto are material, have been relied upon by
Seller and shall survive the Closing hereunder and shall not merge in the
performance of any obligation by any party hereto. Subject to the limitations
set forth in this Article 8, Purchaser agrees from and after Closing to
indemnify and hold Seller harmless from and against all Damages, suffered or
incurred by Seller, its Affiliates and its successors or assigns arising from
any misrepresentation by, or breach of any covenant or warranty of, Purchaser
contained in this Agreement, the Related Agreements or any certificate, document
or instrument furnished by Purchaser pursuant thereto.
8.3 Assertion of Indemnification Claims. All claims for indemnification
under Section 8.1 or 8.2 shall be asserted and resolved as follows:
8.3.1 Any Person entitled to indemnification is hereinafter
referred to as the "INDEMNIFIED PARTY," and any Person obligated to provide such
indemnification thereunder is hereinafter referred to as the "INDEMNIFYING
PARTY." If any claim or demand is asserted against or sought to be collected
from an Indemnified Party by a third party, said Indemnified Party shall within
15 days after the receipt of such claim or demand notify the Indemnifying Party
of the claim or demand in writing, specifying the nature of and specific basis
for such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (the "CLAIM NOTICE"); provided, however, that the failure
of the Indemnified Party to give timely notice hereunder shall not relieve the
Indemnifying Party of its obligations under this Section 8.3.1 unless, and only
to the extent that, the Indemnifying Party has been materially prejudiced
thereby. The Indemnifying Party shall have 30 days from the personal delivery or
receipt of the Claim Notice (the "NOTICE PERIOD") to notify the Indemnified
Party whether or not it desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such claim or
demand; provided, however, that any Indemnified Party is hereby authorized prior
to and during the Notice Period to file any motion, answer or other pleading
that it shall deem necessary or appropriate to protect its interests or those of
the Indemnifying Party but only to the extent such motion, answer or other
pleading is not prejudicial to the Indemnifying Party. If the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such claim or demand then, except as
hereinafter provided, the Indemnifying Party shall have the right to fully
control, defend and take remedial action with respect to such matters. If the
Indemnified Party desires to participate in, but not control, any such defense,
settlement or remedial activity, it may do so at its sole cost and expense.
Notwithstanding the foregoing, the Indemnified Party shall have the right to
employ separate counsel at the expense of the Indemnifying Party and to control
its own defense with respect to any such claim or demand if (i) there are legal
defenses available to the Indemnified Party that are different from or
additional to those available to the Indemnifying Party, and (ii) a material
45
potential conflict of interest exists between the Indemnified Party and the
Indemnifying Party that would require such separate representation. If requested
by the Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any claim or demand that the
Indemnifying Party elects to contest, or, if appropriate and related to the
claim in question, in making any counterclaim against the Person asserting the
third party claim or demand, or any cross-complaint against any Person. No claim
may be settled or otherwise compromised without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld if the
Indemnifying Party shall be released in full from any and all liabilities or
obligations relating to such claim.
8.3.2 If an Indemnified Party should have a claim against an
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party, and the Indemnifying Party shall have the right to fully
control, defend and take remedial action with respect to such matters.
8.4 Certain Limitations On Obligation to Indemnify. Notwithstanding
anything contained in this Article 8 to the contrary, no party shall have any
obligation to indemnify any other party or hold it harmless pursuant to this
Article 8:
8.4.1 with regard to any claim for breach or alleged breach of
any representation or warranty of such party, unless such claim is asserted by
notice to Seller or Purchaser, as the case may be, on or prior to the first
anniversary of the Closing Date; provided, however that (i) any claim for
violation of the representations and warranties regarding title to the Shares
and the assets of the Company Entities contained in this Agreement or in any
documents or instruments delivered pursuant hereto shall survive indefinitely,
(ii) any claim for violation of the representations and warranties set forth in
Section 3.14 shall survive until the third anniversary of the Closing Date;
(iii) any claim for violation of the representations and warranties set forth in
Sections 3.3, 3.6, 3.17 and 3.18, shall survive until the expiration of the
applicable statute of limitations applicable to any claim or right of action
related thereto, (iv) the covenants and agreements contained in this Agreement
to be performed at Closing or during the period following Closing will survive
until fully performed in accordance with their terms, (v) any claim for
indemnity asserted pursuant to Section 8.1.2 shall survive indefinitely and (vi)
the covenants and agreements contained in Sections 2.3 and 2.14 shall survive
indefinitely;
8.4.2 until the aggregate amount of such other party's Damages
exceeds Two Million Dollars ($2,000,000) (the "THRESHOLD AMOUNT"), in which case
Seller or Purchaser, as the case may be, shall then be liable for such Threshold
Amount and any amounts in excess of the Threshold Amount; provided, however,
that the limitations on Seller's indemnification obligations set forth in this
Section 8.4.2 (i.e. the Threshold Amount) shall not apply (i) to any claim under
Section 2.2, (ii) to any claim for a violation of the representations and
warranties regarding title to the Shares and the assets of the Company Entities
contained in this Agreement or in any documents or instruments delivered
pursuant hereto, (iii) with respect to those matters
46
which are the subject of Section 8.1.2, (iv) to any covenants and agreements
contained in this Agreement to be performed at Closing or during the period
following Closing or (v) to the covenants and agreements contained in Sections
2.3 and 2.14; and
8.4.3 to the extent that the aggregate amount of such other
party's damages exceeds Seventy-Five Million ($75,000,000) (the "CAP");
provided, however, that the limitations on Seller's indemnification obligations
set forth in this Section 8.4.3 (i.e. the Cap) shall not apply (i) to any claim
under Section 2.2, (ii) to any claim for a violation of the representations and
warranties regarding title to the Shares and the assets of the Company Entities
contained in this Agreement or in any documents or instruments delivered
pursuant hereto, (iii) with respect to those matters which are the subject of
Section 8.1.2, (iv) to any covenants and agreements contained in this Agreement
to be performed at Closing or during the period following Closing or (v) to the
covenants and agreements contained in Sections 2.3 and 2.14.
9. TERMINATION.
-----------
9.1 Agreement Between Seller and Purchaser. This Agreement may be
terminated at any time prior to the Closing, and the purchase and sale of the
Shares abandoned, by written agreement among Seller and Purchaser.
9.2 Termination by Seller. This Agreement may be terminated at any time
prior to the Closing by Seller, and the purchase and sale of the Shares
abandoned, upon written notice to Purchaser, upon the occurrence of any of the
following:
9.2.1 Conditions. If on any date determined for the Closing in
accordance with Section 7.1 if each condition set forth in Article 5 has been
satisfied (or will be satisfied by the delivery of documents at the Closing) or
waived in writing by Purchaser on such date and either (i) a condition set forth
in Article 6 has not been satisfied (or will not be satisfied by the delivery of
documents at the Closing) or waived in writing by Seller on such date or (ii)
Purchaser has nonetheless refused to consummate the Closing. Notwithstanding the
foregoing, Seller may not rely on the failure of any condition set forth in
Article 6 to be satisfied if such failure was caused by Seller's failure to act,
or to cause the Company Entities to act, in good faith or a breach of or failure
to perform, or to cause the Company Entities to perform, any of its
representations, warranties, covenants or other obligations in accordance with
the terms of this Agreement.
9.2.2 Upset Date. If the Closing shall not have occurred on or
prior to the Upset Date, as extended as provided in Section 7.1.3, unless the
failure of the Closing to occur was caused by Seller's failure to act, or to
cause the Company Entities to act, in good faith or a breach of or failure to
perform, or to cause the Company Entities to perform, any of its
representations, warranties, covenants or other obligations in accordance with
the terms of this Agreement.
47
9.3 Termination by Purchaser. This Agreement may be terminated at any
time prior to the Closing by Purchaser, and the purchase and sale of the Shares
abandoned, upon written notice to Seller, upon the occurrence of any of the
following:
9.3.1 Conditions. If on any date determined for the Closing in
accordance with Section 7.1 if each condition set forth in Article 6 has been
satisfied (or will be satisfied by the delivery of documents at the Closing) or
waived in writing by Seller on such date and either (i) a condition set forth in
Article 5 has not been satisfied (or will not be satisfied by the delivery of
documents at the Closing) or waived in writing by Purchaser on such date or (ii)
Seller has nonetheless refused to consummate the Closing. Notwithstanding the
foregoing, Purchaser may not rely on the failure of any condition set forth in
Article 5 to be satisfied if such failure was caused by Purchaser's failure to
act in good faith or a breach of or failure to perform any of its
representations, warranties, covenants or other obligations in accordance with
the terms of this Agreement.
9.3.2 Upset Date. If the Closing shall not have occurred on or
prior to the Upset Date, as extended as provided in Section 7.1.3, unless the
failure of the Closing to occur was caused by Purchaser's failure to act in good
faith or a breach of or failure to perform any of its representations,
warranties, covenants or other obligations in accordance with the terms of this
Agreement.
9.4 Effect of Termination. If this Agreement is terminated as provided
in this Article 9, then, subject to Purchaser's right to specific performance
provided below, which may be asserted without termination of this Agreement,
this Agreement will forthwith become null and void, and there will be no
liability on the part of any party to any other party or any other Person in
respect thereof; provided that:
9.4.1 Surviving Obligations. The obligations of the parties
described in Sections 2.12, 9.4, 9.5 and 10.4 (and all other provisions of this
Agreement relating to expenses) will survive any such termination.
9.4.2 Withdrawal of Applications. All filings, applications
and other submissions relating to the consummation of the transaction
contemplated hereby shall, to the extent practicable, be withdrawn from the
Governmental Authority or other Person to whom made.
9.4.3 Breach by Purchaser. No such termination will relieve
Purchaser from liability for a breach by Purchaser of this Agreement, and, in
such event, Seller shall have the right to monetary damages.
9.4.4 Breach by Seller. No such termination will relieve
Seller from liability for a breach of this Agreement. Purchaser may elect to
specifically enforce rather than terminate this Agreement in the event of
Seller's breach, and, in such event, the parties recognize that
48
monetary damages alone will not be adequate. Purchaser, therefore, shall be
entitled, in addition to any other remedies which may be available, including
monetary damages, to obtain specific performance of the terms of this Agreement.
In the event of any action to enforce this Agreement, Seller hereby waives the
defense that there is an adequate remedy at law.
9.5 Attorneys' Fees. Notwithstanding any provision in this Agreement
that may limit or qualify a party's remedies, in the event of a default by any
party that results in a lawsuit or other proceeding for any remedy available
under this Agreement, the prevailing party shall be entitled to reimbursement
from the defaulting party of its reasonable legal fees and expenses (whether
incurred at trial or on appeal).
9.6 Exclusivity. In the absence of fraud and other than any action to
enforce Sections 10.14 and 10.16 hereof, after the Closing Date, Sections 2.8,
2.9, 2.11 and 10.4 and the provisions of Article 8 shall provide the sole and
exclusive remedy of any party for any misrepresentation or any breach of a
warranty or covenant set forth in or made pursuant to this Agreement; provided,
however, that this provision shall not be construed to apply to the enforcement
of the Non-Competition Agreement, the ADT License Agreement or the Guaranty.
10. GENERAL PROVISIONS.
------------------
10.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by courier or personal
delivery, telecopier (to be followed promptly by written confirmation mailed by
certified mail as provided below) or mailed by certified mail, return receipt
requested, postage prepaid, addressed as follows:
10.1.1 If to Seller:
ADT General Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President
with a copy to:
ADT General Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel
49
10.1.2 If to Purchaser:
Manheim Auctions, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Mr. G. ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇ Enterprises, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
and:
Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PLLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
10.1.3 If delivered personally by courier or facsimile
transmission (confirmed as aforesaid and provided written confirmation and
receipt is obtained by the sender), the date on which the delivery of a notice,
request, instruction or document is effective shall be the date on which such
delivery is actually received. Notices given by mail as aforesaid shall be
effective and deemed received upon the date of actual receipt.
10.1.4 Any party hereto may change its address specified for
notices herein by designating a new address by notice given to the other party
in accordance with this Section 10.1.
10.2 Further Assurances. Each party hereto covenants that at any time,
and from time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
10.3 Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a waiver of any failure
other than that waived.
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10.4 Expenses. Except as otherwise set forth herein, all expenses
incurred by the parties hereto in connection with or related to the
authorization, preparation and execution of this Agreement and the Closing of
the transactions contemplated hereby, including, without limitation of the
generality of the foregoing, all fees and expenses of agents, representatives,
counsel and accountants employed by any such party, shall be borne solely and
entirely by the party which has incurred the same. In no event shall any of the
assets of any of the Company Entities be utilized for or reduced by the payment
of any such fees or expenses (except, in each case, for time devoted to this
transaction by management, administrative and clerical personnel of any of the
Company Entities), and Seller shall indemnify Purchaser from any and all such
fees or expenses (including broker fees) that have been paid from or may at any
time become payable from any of the assets of any of the Company Entities. The
indemnification provisions of this Section 10.4 shall be separate and distinct
from the provisions of Article 8 and shall not be subject to the limitations on
indemnification obligations set forth therein.
10.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties hereto and their respective permitted successors and assigns.
10.6 Headings. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference and are not a part
of this Agreement.
10.7 Entire Agreement; Amendment. This Agreement constitutes the entire
agreement among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties or communications, whether oral or
written, among the parties hereto relating to the transactions contemplated
hereby or the subject matter herein. Neither this Agreement nor any provision
hereof may be modified, changed, waived, discharged or terminated orally, other
than by an agreement in writing signed by the party against whom or which the
enforcement of such modification, change, waiver, discharge or termination is
sought.
10.8 Counterparts. This Agreement may be executed in multiple
counterpart copies, each of which will be considered an original and all of
which constitute one and the same instrument, binding on all parties hereto,
even though all the parties are not signatory to the same counterpart. Any
counterpart of this Agreement which has attached to it separate signature pages,
which taken together contain the signature of all parties hereto, shall for all
purposes be deemed a fully executed original and a facsimile transmission shall
be deemed to be an original signature.
10.9 Pronouns and Number. All pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter gender as the context requires.
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10.10 Schedules and Exhibits Incorporated. All Schedules and Exhibits
attached hereto are incorporated herein by reference, and all blanks in such
Schedules and Exhibits, if any, will be filled in as required in order to
consummate the transactions contemplated herein and in accordance with this
Agreement.
10.11 Disclosure Schedules. The parties acknowledge and agree that (i)
the Schedules to this Agreement may include certain items and information solely
for informational purposes for the convenience of Purchaser and (ii) the
disclosure by Seller of any matter in the Schedules shall not be deemed to
constitute an acknowledgment by Seller that the matter is required to be
disclosed by the terms of this Agreement or that the matter is required to be
disclosed by the terms of this Agreement or that the matter is material. If any
Schedule discloses an item or information in such a way as to make its relevance
to the disclosure required by another Schedule readily apparent, the matter
shall be deemed to have disclosed in such other Schedule, notwithstanding the
omission of an appropriate cross-reference to such other Schedule.
10.12 Severability. In the event that any provision of this Agreement
or any word, phrase, clause, sentence or other portion thereof should be held to
be unenforceable or invalid for any reason, such provision or portion thereof
shall be modified or deleted in such a manner so as to make this Agreement, as
modified, legal and enforceable to the fullest extent permitted under applicable
laws.
10.13 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to the
conflicts of law principles of such State.
10.14 Jurisdiction. Except as otherwise expressly provided in this
Agreement, the parties hereto agree that any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or related
to, this Agreement, or the transactions contemplated hereby, may be brought in
either the United States District Court for the District of Delaware or any
Delaware state court, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objections which it may now or hereafter have that
the venue of any such suit, action or proceeding which is brought in any such
court is improper or that the suit, action or proceeding has been brought in an
inconvenient forum; provided, however, that if such court for any reason
determines that it does not have subject matter or personal jurisdiction over
one or more necessary parties or one or more claims in such suit, action or
proceeding, or if the consent to jurisdiction and venue or the waiver of forum
conveniens contained in this Section 10.14 is deemed not to be enforceable by
such court, or if such court determines for any reason that venue is not proper
or that forum non conveniens applies, a party may bring such suit, action or
proceeding in any court having jurisdiction with respect thereto, and, provided
further, that any judgment obtained in any court pursuant to this Section 10.14
may be domesticated and enforced anywhere in the world. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or
52
without the jurisdiction of any such court. Without limiting the generality of
the foregoing, each party hereto agrees that service upon such party as provided
in Section 10.1 shall be deemed effective service of process on such party.
10.15 Third-party Beneficiaries. No person other than the parties
hereto and their respective successors and permitted assigns (and in the case of
Article 8, the parties specified therein) is intended to be a beneficiary of
this Agreement. In executing this Agreement, the parties do not intend to create
third-party beneficiary rights in anyone not a party to this Agreement.
10.16 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any suit, action,
proceeding, counterclaim or crossclaim seeking to enforce any provision of, or
based on any matter arising out of or related to, this Agreement or the
transactions contemplated hereby.
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IN WITNESS WHEREOF, each party hereto has executed or caused this
Agreement to be executed under seal on its behalf, all on the day and year first
above written.
MANHEIM AUCTIONS, INC.
By:
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
ADT GENERAL HOLDINGS, INC.
By:
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
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EXHIBIT B
CERTAIN DEFINITIONS
1.1 "AFFILIATES" means any Person directly or indirectly
controlling, controlled by, or under common control with, the Person with
respect to whom the term "Affiliate" is used. Notwithstanding the foregoing a
Person shall be deemed an "Affiliate" of a Person with respect to whom the term
"Affiliate" is used if 10% or more of the voting securities of such Person is
owned, directly or indirectly, by the Person with respect to whom the term
"Affiliate" is used.
1.2 "AUCTIONS" means those auctions listed on EXHIBIT A attached
hereto.
1.3 "BUSINESS" shall mean the operation of a wholesale automobile
auction and any related businesses, including, without limitation, transport,
reconditioning and repairs, title services and internet, software and other
technology efforts conducted by the Company Entities or otherwise conducted
ancillary to the Business, as such operations are currently conducted by the
Company Entities.
1.4 "CAPITALIZED LEASE OBLIGATIONS" means (without duplication) that
portion of any obligation of a Company Entity as lessee under a lease which at
the time would be required to be capitalized on the balance sheet of such lessee
in accordance with GAAP.
1.5 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
1.6 "CLOSING" shall mean the consummation of the transactions
provided for in this Agreement.
1.7 "CLOSING DATE" shall mean the date on which the Closing occurs
pursuant to Section 7.1 hereof.
1.8 "CODE" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations thereunder, or any subsequent legislative enactment thereof,
as in effect from time to time.
1.9 "CONTRACTS" means all contracts, agreements, options, leases,
commitments, undertakings, written and oral, and other similar rights and
interests of the Company Entities relating to the conduct of the business and
operations of the Company Entities, plus such contracts entered into between the
date hereof and the Closing Date (including amendments or other modifications of
existing contracts).
1.10 "ENCUMBRANCE" means any claim, mortgage, lien, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, pledge, option,
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charge, assessment, restrictive agreement, restriction, encumbrance, adverse
interest, restriction on transfer or any exception to or defect in title or
other ownership interest (including reservations, rights of way, possibilities
of reverter, encroachments, easements, rights of entry, restrictive covenants,
leases and licenses) of any nature whatsoever.
1.11 "ENVIRONMENTAL LAW" means any Legal Requirement pertaining to
land use, air, soil, surface water, groundwater (including protection, cleanup,
removal, remediation or damage thereof), public or employee health or safety or
any other environmental matter, including, without limitation, the following
laws as the same may be amended from time to time: (i) Clean Air Act (42
▇.▇.▇.▇▇. 7401, ET SEQ.), (ii) Clean Water Act (33 ▇.▇.▇.▇▇. 1251 et SEQ.),
(iii) Resource Conservation and Recovery Act (42 ▇.▇.▇.▇▇. 6901, ET SEQ.)
("RCRA"), (iv) Comprehensive Environmental Response Compensation Liability Act,
as amended (42 ▇.▇.▇.▇▇. 9601, ET SEQ.) ("CERCLA"), (v) Safe Drinking Water Act
(42 ▇.▇.▇.▇▇. 300f ET SEQ.), (vi) Toxic Substance Control Act (15 U.S.C. ss.
2601, ET SEQ.), (vii) Rivers and Harbors Act (33 ▇.▇.▇.▇▇. 401, ET SEQ.), (viii)
Endangered Species Act (16 ▇.▇.▇.▇▇. 1531, ET SEQ.), and (ix) Occupational
Safety and Health Act (29 ▇.▇.▇.▇▇. 651, ET seq.), together with any other
applicable federal, state or local laws relating to emissions, discharges,
releases or threatened releases of any Hazardous Substance into ambient air,
land, surface water, ground water, personal property or structures, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, discharge or handling of any Hazardous Substance.
1.12 "GAAP" means generally accepted accounting principles as in
effect from time to time in the United States.
1.13 "GOVERNMENTAL AUTHORITY" means (i) the United States of
America, (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like) or (iii) any agency, authority or instrumentality
of any of the foregoing, including any court, tribunal, department, bureau,
commission or board.
1.14 "HAZARDOUS MATERIALS" shall mean (i) hazardous materials,
contaminants, constituents, hazardous wastes and hazardous substances as those
terms are defined in the following statutes and their implementing regulations,
as amended: the Hazardous Materials Transportation Act, 49 ▇.▇.▇.▇▇. 1801 ET
SEQ., RCRA, 42 ▇.▇.▇.▇▇. 6901 ET SEQ., CERCLA, as amended by the Superfund
Amendments and Reauthorization Act, 42 ▇.▇.▇.▇▇. 9601 ET SEQ., the Clean Water
Act, 33 ▇.▇.▇.▇▇. 1251 ET SEQ., and the Toxic Substance Control Act, 15
▇.▇.▇.▇▇. 2601 ET SEQ., (ii) petroleum, including crude oil and any fractions
thereof, (iii) natural gas, synthetic gas and any mixtures thereof, (iv)
asbestos and/or asbestos-containing materials, (v) polychlorinated biphenyls
(PCBs), or PCB-containing materials or fluids, (vi) any other substances with
respect to which any federal, state or local agency or other Governmental
Authority may require either an environmental investigation or environmental
remediation, and (vii) any other hazardous or noxious substance, material,
pollutant or solid or liquid waste that is regulated by any Environmental Laws.
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1.15 "HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended from time to time.
1.16 "HSR RULES" means the rules and regulations promulgated under
the HSR Act.
1.17 "INDEBTEDNESS" means, at any particular time, with respect to
any Company Entity (without duplication), all indebtedness of such Company
Entity for borrowed money or on account of advances to such Company Entity or
obligations under acquisition agreements, in respect of which such Company
Entity is liable or evidenced by any bond, debenture, note or similar instrument
issued by such Company Entity, including all principal, accrued and unpaid
interest, prepayment premiums, penalties and other fees or charges related
thereto, any Capitalized Lease Obligations, swaps, collars, caps, ▇▇▇▇▇▇ or
other agreements relating to the fixing of interest rates of indebtedness, but
excluding in any event, inter-company indebtedness owing from a Company Entity
to one or more other Company Entities.
1.18 "MATERIAL ADVERSE EFFECT" shall mean any change, effect or
circumstance (other than any change, effect or circumstance resulting from the
public announcement of the transactions contemplated by this Agreement) that,
individually or when taken together with all other changes, effects or
circumstances that have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, is, or is reasonably likely to be,
materially adverse to the business, assets (including intangible assets),
financial condition or results of operation of the Company Entities, as the case
may be, in each case taken as a whole.
1.19 "MATERIAL CONTRACTS" means, with respect to each Company
Entity, (i) all Contracts currently in effect which involve either (a) payments
or receipts in excess of $250,000 on an annual basis or (b) material nonmonetary
obligations or commitments; (ii) all leases of Real Property; (iii) all
collective bargaining agreements and (iv) all Employee Plans and Compensation
Arrangements.
1.20 "NON-COMPETITION AGREEMENT" shall mean the Non-Competition
Agreement of Seller, U.S. Parent and Purchaser substantially in the form
attached hereto as EXHIBIT E.
1.21 "PERSON" means an individual, corporation, partnership, limited
liability company, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
1.22 "RCRA" shall mean the Resource Conservation and Recovery Act,
and the rules and regulations promulgated thereunder.
1.23 "REAL PROPERTY" means all of the fee estates and buildings and
other improvements thereon, leasehold interests, easements, licenses, rights to
access, rights-of-way, and other real property interest which are used by any
Company Entity, or owned by any
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Company Entity, as of the date hereof, in the business or operations of the
Company Entities, plus such additions thereto and deletions therefrom arising in
the ordinary course of business and permitted by this Agreement between the date
hereof and the Closing Date.
1.24 "SUBSIDIARY" shall mean, as to any Person, any other Person of
which at least 50% of the equity and voting interests are owned, directly or
indirectly, by such first Person.
1.25 "TAX" (and, with correlative meaning, "TAXES" and "Taxable")
means all federal, state, local or foreign income, gross receipts, windfall
profits, severance, property, production, sales, use, license, excise,
franchise, capital, transfer, employment, withholding and other taxes and
assessments, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties, and any
interest, additions and penalties with respect to a failure to file a Tax Return
or a failure to file a complete and correct Tax Return and any interest in
respect of such additions or penalties.
1.26 "TAX RETURNS" means all federal, state, local and foreign
income and franchise Tax returns and Tax reports (including any attached
schedules) and other Tax statements and other similar filings required to be
filed, including any information return (including, without limitation, any
information return required to be filed under Section 60501 of the Code), claim
for refund, amended return or declaration of estimated Tax.
2.2 List of Additional Definitions. The following is a list of
additional terms used in this Agreement and a reference to the Section hereof
in which such term is defined:
Term Section
---- -------
Acquired Company Preamble
Adjustment Time 7.1.1
ADT License Agreement 2.18.1
Agreement Preamble
Agreement Period 2.8.6.3
Booked Taxes 2.8.1
Cap 8.4.3
Claim Notice 8.3.1
Company Entities Preamble
Compensation Arrangement 3.18.14
Confidentiality Agreement 2.16
Continuation Coverage Requirements 2.9.1
Damages 8.1
DOJ 2.5.2
Employee Plan 3.18.14
Election Notice 2.18.2
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Enforcement Action 2.18.2
ERISA 3.18.14
ERISA Affiliate 3.18.14
Final Report 2.2.3.2
Financial Statements 3.5.1
FTC 2.5.2
Guaranty Preamble
HSR Reports 2.5.2
Indemnifiable Tax Damages 2.8.2.1
Indemnified Party 8.3.1
Indemnifying Party 8.3.1
Investment Interests 3.4
Material Licenses 3.12
Multiemployer Plan 3.18.14
Licensor 2.18
Notice 2.18.2
Notice Period 8.3.1
Parent Preamble
Patent 2.18.2
Patent and Trademark Rights 3.16
Pension Plan 2.9.4
Preferred Stock 2.14
Preferred Stockholder 2.14
Preliminary Report 2.2.3.1
Purchase Price 2.2.1
Purchaser Preamble
Purchaser Severance Benefits 2.9.5
Related Agreements 3.2
Reporting Period 2.8.2.1
Retiree Medical Plans 2.9.3
Section 338(h)(10) Elections 2.8.6.2
Seller Preamble
Seller Consolidated Group 2.8.2.1
Seller Severance Benefits 1.1.5
Selling Group 2.8.6.1
Shares Preamble
Straddle Period 2.8.2.1
Target Working Capital 2.2.2
Tax Claim 2.8.8.3
Tax Damages 2.8.8.1
Tax Indemnified Party 2.8.8.3
Tax Indemnifying Party 2.8.8.3
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Threshold Amount 8.4.2
Upset Date 7.1.1
U.S. Parent Preamble
Working Capital 2.2.2
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