EXHIBIT 10.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
------------------------------------------
STOCK PURCHASE AGREEMENT
dated as of July 2, 1999
by and between
C.P. CLARE CORPORATION,
a Massachusetts corporation,
and
SUMIDA ELECTRIC CO., LTD.,
a Japanese corporation
------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I - PURCHASE OF SHARES; CLOSING..........................................................................2
Section 1.1 Purchased Shares.......................................................................2
Section 1.2 Purchase Price.........................................................................2
Section 1.3 Closing................................................................................4
Section 1.4 Transactions at Closing................................................................4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE SELLER.........................................................5
Section 2.1 Organization of the Seller and EMG; Authority..........................................5
Section 2.2 Capitalization; Subsidiary.............................................................6
Section 2.3 No Conflict. ..........................................................................7
Section 2.4 Financial Statements; Undisclosed Liabilities; Financial Condition.....................7
Section 2.5 Absence of Certain Changes.............................................................8
Section 2.6 Consents and Approvals.................................................................9
Section 2.7 Litigation............................................................................10
Section 2.8 Taxes.................................................................................10
Section 2.9 Employee Benefit Plans................................................................11
Section 2.10 Real and Personal Property............................................................12
Section 2.11 Labor and Employment Matters..........................................................13
Section 2.12 Contracts and Commitments.............................................................14
Section 2.13 Intellectual Property.................................................................15
Section 2.14 Environmental Matters.................................................................15
Section 2.15 Compliance with Laws; Permits.........................................................16
Section 2.16 Insurance.............................................................................17
Section 2.17 Brokers...............................................................................17
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER........................................................17
Section 3.1 Organization of the Buyer; Authority..................................................17
Section 3.2 No Conflict...........................................................................18
Section 3.3 Consents and Approvals................................................................18
Section 3.4 Litigation............................................................................19
Section 3.5 Financing.............................................................................19
Section 3.6 Brokers...............................................................................19
Section 3.7 Investment Intent.....................................................................19
ARTICLE IV - CERTAIN COVENANTS AND AGREEMENTS OF
THE BUYER AND SELLER........................................................................................19
Section 4.1 Conduct of Business Prior to Closing..................................................19
(i)
Section 4.2 Access to Information.................................................................20
Section 4.3 Confidentiality.......................................................................21
Section 4.4 Regulatory and Other Authorizations; Consents.........................................21
Section 4.5 Further Action........................................................................22
Section 4.6 Press Releases........................................................................22
Section 4.7 No Solicitation.......................................................................22
Section 4.8 Transfer of Assets; Discharge of Certain Liabilities..................................23
Section 4.9 Noncompetition........................................................................24
Section 4.10 ▇▇▇▇▇▇▇ Consent, Waiver and Estoppel..................................................24
Section 4.11 Non-Solicitation; Non-Hire............................................................25
Section 4.12 Structuring Matters...................................................................25
ARTICLE V - EMPLOYEE MATTERS.....................................................................................26
Section 5.1 Employees.............................................................................26
Section 5.2 Employee Benefits.....................................................................27
Section 5.3 Other Employee Benefits...............................................................27
Section 5.4 Indemnity.............................................................................27
Section 5.5 No Third Party Beneficiaries..........................................................27
ARTICLE VI - TAX MATTERS.........................................................................................28
Section 6.1 Conveyance Taxes; Costs...............................................................28
Section 6.2 Treatment of Indemnity Payments.......................................................28
Section 6.3 Employee Withholding..................................................................28
Section 6.4 Tax Cooperation; Structuring Matters..................................................28
Section 6.5 338(h)(10) Election...................................................................29
ARTICLE VII - CONDITIONS TO CLOSING..............................................................................30
Section 7.1 Conditions to Obligations of the Seller...............................................30
Section 7.2 Conditions to Obligations of the Buyer................................................31
ARTICLE VIII - INDEMNIFICATION AND TERMINATION...................................................................32
Section 8.1 Survival..............................................................................32
Section 8.2 [Intentionally Omitted]...............................................................33
Section 8.3 Indemnification by the Seller.........................................................33
Section 8.4 Indemnification by the Buyer..........................................................36
Section 8.5 Termination...........................................................................38
Section 8.6 Effect of Termination.................................................................39
Section 8.7 Waiver................................................................................39
(ii)
ARTICLE IX - GENERAL PROVISIONS..................................................................................39
Section 9.1 Notices...............................................................................39
Section 9.2 Certain Definitions...................................................................40
Section 9.3 Interpretation........................................................................43
Section 9.4 Counterparts..........................................................................44
Section 9.5 Entire Agreement; No Third-Party Beneficiaries; Severability..........................44
Section 9.6 Governing Law; Venue..................................................................44
Section 9.7 Assignment............................................................................44
Section 9.8 Undertakings of EMG and the Subsidiary................................................45
(iii)
EXHIBITS LIST
Exhibit A Form of Press Release
Exhibit B Form of Transition Services Agreement
Exhibit C Form of Supply Agreement
Exhibit D Form of Transferor's Certificate of Non-Foreign Status
Exhibit E Form of Trademark and Trade Style License Agreement
SCHEDULES LIST
Schedule 2.2(b) Subsidiary
Schedule 2.3 Conflicts of Seller
Schedule 2.4 Unaudited Consolidated Balance Sheet
Schedule 2.4(a) Exceptions to GAAP Presentation
Schedule 2.4(c) Liabilities
Schedule 2.5 Absence of Certain Changes
Schedule 2.6(a) Government Consents
Schedule 2.6(b) Third-Party Consents
Schedule 2.7 Litigation
Schedule 2.8 Taxes
Schedule 2.9 Employee Benefit Plans
Schedule 2.10(a) Owned Real Property
Schedule 2.10(b) Leased Real Property
Schedule 2.10(c) Property Consents
Schedule 2.11(a) Employment Matters
Schedule 2.11(b) Labor Matters
Schedule 2.12(a) Certain Contracts
Schedule 2.12(b) Certain Contract Exceptions
Schedule 2.13 Intellectual Property
Schedule 2.14 Environmental Matters
Schedule 2.16 Insurance
Schedule 4.1(a) Conduct of Business
Schedule 4.1(b) Intercompany Accounts
Schedule 4.1(c) Restrictions on Conduct of Business
Schedule 4.1(c)(1) Capital Budget
Schedule 4.6 Form of Press Release
Schedule 4.8 List of Transferred Assets
Schedule 4.11 Seller Employees Whom the Buyer May Solicit
Schedule 9.2(ee) Buyer's Knowledge
Schedule 9.2(ff) Seller's Knowledge
(iv)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of this 2nd
day of July, 1999, by and between C.P. CLARE CORPORATION, a Massachusetts
corporation (the "Seller"), and SUMIDA ELECTRIC CO., LTD., a Japanese
corporation (the "Buyer").
WHEREAS, on May 18, 1999 the Seller incorporated Clare EMG Inc., a Delaware
corporation ("EMG"), for the purpose of consolidating the Seller's operations
related to the manufacture and distribution of advanced magnetic components,
▇▇▇▇ relays and surge protection devices as more fully described in the
Descriptive Memorandum dated March 1999 (the "Business");
WHEREAS, the Seller is the sole owner of all of the issued and outstanding
capital stock of EMG;
WHEREAS, prior to the Closing Date (as hereinafter defined), the Seller
will transfer to EMG certain assets and liabilities related to the Business,
including, without limitation, all of the Seller's interest in the equity
capital of Clare Mexicana S.A. de C.V. (the "Subsidiary"); and
WHEREAS, the Seller desires to sell, and the Buyer desires to purchase, all
of the issued and outstanding capital stock of EMG (the "Acquired Shares").
NOW, THEREFORE, in consideration of the mutual agreements and covenants
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I - PURCHASE OF SHARES; CLOSING
Section 1.1 PURCHASED SHARES. Subject to the terms and conditions set forth
in this Agreement, at the Closing (as hereinafter defined), the Seller shall
sell, assign, transfer, convey and deliver (the "Transfer") to the Buyer, and
the Buyer shall buy and receive from the Seller all, and not less than all, of
the right, title and interest as of the Closing Date (as hereinafter defined),
in and to the Acquired Shares.
Section 1.2 PURCHASE PRICE.
(a) Subject to the terms and conditions set forth in this Agreement,
at the Closing, the
2
Buyer shall pay, or cause to be paid, to the Seller the aggregate amount of
Thirty-Six Million Four Hundred and Twenty-Six Thousand U.S. Dollars
(US$36,426,000) in cash by wire transfer of immediately available funds to a
bank account or accounts designated in writing by the Seller, such amount
constituting the aggregate purchase price for the Acquired Shares (the
"Preliminary Purchase Price").
(b) Within ninety (90) days after the Closing Date, the Seller shall at
its expense prepare and deliver to the Buyer a Statement of Net Assets to be
Sold, accompanied by a report of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, which will set forth, as
of the Closing Date and on a consolidated basis, the respective values of (i)
all of the assets and all of the liabilities of the Subsidiary and (ii) the net
inventory, the net property and equipment and all liabilities (including,
without limitation, all liabilities related to those employees of the Seller who
become employees of EMG as of the Closing Date and the account payable of EMG to
the Subsidiary) of EMG (the "Closing Statement"). The Closing Statement shall
have been audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and shall have been prepared in
accordance with generally accepted accounting principles in the United States,
as in effect from time to time ("GAAP"), applied on a basis consistent with the
Seller's historical accounting practices. The Closing Statement will have a line
item called "Net Assets," which will equal the number that remains when the
total liabilities set forth on the Closing Statement are subtracted from the
total assets set forth on the Closing Statement. That number equal to the Net
Assets plus Sixteen Million Eight Hundred Thousand Dollars ($16,800,000) will
equal the "Final Purchase Price." If the Final Purchase Price is greater than
the Preliminary Purchase Price, the Buyer shall, pursuant to Subsection 1.2(e),
pay to the Seller the amount by which the Final Purchase Price exceeds the
Preliminary Purchase Price. If the Preliminary Purchase Price is greater than
the Final Purchase Price, the Seller shall, pursuant to Subsection 1.2(e), pay
to the Buyer the amount by which the Preliminary Purchase Price exceeds the
Final Purchase Price.
(c) The Buyer and the Buyer's independent public accountants, Ernst &
Young, shall be entitled to make an independent review of the Closing Statement
and shall, during the forty-five (45) day period after delivery of the Closing
Statement (the "Review Period"), have access to all relevant work papers of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, subject to customary restrictions on work paper access,
prepared as a part of the audit of the Closing Statement.
(d) Before expiration of the Review Period, the Buyer shall deliver to
the Seller its objection, if any, in writing to the Closing Statement, together
with details of the disputed items (the "Disputed Items") set forth in the
Closing Statement and the proposed adjustments to such items. If the Buyer fails
to provide notice of objection prior to the end of the Review Period, then the
Closing Statement shall be final and binding on all of the parties. If the Buyer
so notifies the Seller prior to the end of the Review Period of the Buyer's
disapproval of the
3
Closing Statement, then the Buyer and the Seller shall attempt to reach
agreement with respect to the Disputed Items. In the event that the Buyer and
the Seller are unable to reach agreement on the Disputed Items, then either
shall be entitled to refer the matter to a nationally recognized accounting
firm, independent of the Seller and the Buyer, mutually agreed upon by the Buyer
and the Seller; PROVIDED, HOWEVER, that if the Buyer and the Seller are unable
to agree upon such accounting firm within a period of fifteen (15) days from the
receipt by the Seller of the Buyer's objection, such accounting firm shall be
chosen at random by the Buyer and the Seller from among the "Big Five"
accounting firms which are independent of the Buyer and the Seller (the
"Arbitrating Accountant"). The Arbitrating Accountant shall determine the
Disputed Items within sixty (60) days after the Disputed Items are submitted to
them, and such determination shall be final and binding upon all of the parties.
If the final determination of the Disputed Items results in an increase in the
Net Assets as set forth on the Closing Statement equal to or greater than one
percent (1%), the fees and expenses of the Arbitrating Accountant shall be paid
by the Buyer and if the final determination of the Disputed Items results in a
decrease in the Net Assets as set forth on the Closing Statement equal to or
greater than one percent (1%), the fees and expenses of the Arbitrating
Accountant shall be paid by the Seller.
(e) The amount owed by the Seller to the Buyer or by the Buyer to the
Seller, as the case may be, pursuant to the procedures described in paragraphs
(b) through (d) of this Section 1.2 shall be paid by wire transfer of
immediately available funds, within five (5) business days after final
determination of such amount.
Section 1.3 CLOSING. The closing of the Transfer and delivery of all
documents and instruments necessary to consummate the transactions contemplated
by this Agreement (the "Closing") shall be held at the offices of ▇▇▇▇▇▇▇,
Procter & ▇▇▇▇ LLP, Exchange Place, Boston, Massachusetts on July 30, 1999 or at
such other time or such other place as the Buyer and the Seller may agree but in
any event not more than five (5) business days subsequent to the date when all
of the conditions to closing specified herein have been duly satisfied or
waived, as the case may be. The date on which the Closing is actually held
hereunder is sometimes referred to herein as the "Closing Date." The Closing
will be deemed to be effective for purposes of this Agreement as of the opening
of business on the Closing Date.
Section 1.4 TRANSACTIONS AT CLOSING.
(a) At the Closing, the Seller will deliver or cause to be delivered to
the Buyer the following:
(i) stock certificates, evidencing all, and not less than all, of the
Acquired Shares,
4
in each case duly endorsed in blank or accompanied by stock powers duly executed
in blank, and with all required stock transfer tax stamps affixed;
(ii) the minute books and stock transfer books of EMG and the
Subsidiary;
(iii) one or more receipts acknowledging receipt of the
Preliminary Purchase Price;
(iv) each of the certificates and other documents required to be
delivered at the Closing pursuant to Section 7.2 hereof; and
(v) access to and possession of all assets of EMG and the
Subsidiary and all books and records of EMG and the Subsidiary, including an
accurate listing of the purchase order backlog of EMG.
(b) At the Closing, the Buyer will deliver or cause to be delivered to
the Seller the following:
(i) the Preliminary Purchase Price, by wire transfer of
immediately available funds pursuant to, and in the manner set forth in, Section
1.2 hereof; and
(ii) each of the certificates and other documents required to be
delivered at the Closing pursuant to Section 7.1 hereof.
(c) At the Closing, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the President and Chief Executive
Officer of the Seller, shall transfer to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the President and
Chief Executive Officer of the Buyer, or his designee, the one share of capital
stock of the Subsidiary owned by ▇▇. ▇▇▇▇▇▇▇▇ duly endorsed in blank or
accompanied by stock powers duly executed in blank, and with all required stock
transfer tax stamps affixed.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as disclosed in the Schedules attached hereto, the Seller represents
and warrants to the Buyer that as of the date of this Agreement and as of the
Closing Date:
Section 2.1 ORGANIZATION OF THE SELLER AND EMG; AUTHORITY.
(a) The Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of The Commonwealth of Massachusetts and has all
the requisite corporate
5
power and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. EMG is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all the requisite corporate power and
authority to carry on its business as now being conducted and to own, operate
and lease the properties owned, operated and leased by it, and, to the extent
required, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby insofar as EMG's actions are required in
connection therewith. EMG is qualified to do business in each jurisdiction in
which the nature of its business requires it to be so qualified, except to the
extent the failure to so qualify would not, either individually or in the
aggregate, have a reasonable expectation of a Material Adverse Effect (as
defined in Section 9.2).
(b) The execution and delivery of this Agreement, the performance by
the Seller of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of the Seller and no other corporate proceedings on the part of the Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Seller and assuming the due authorization, execution and delivery of this
Agreement by the Buyer, this Agreement constitutes a legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles.
Section 2.2 CAPITALIZATION; SUBSIDIARY.
(a) All of the issued and outstanding shares of capital stock of EMG
are duly authorized, validly issued, fully paid and nonassessable. There are no
outstanding options, warrants or other rights of any kind to acquire any
additional shares of capital stock of EMG or securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof any right to
acquire, any such additional shares, nor is EMG committed to issue any such
option, warrant, right or security. The Seller owns, or will own as of the
Closing Date, the Acquired Shares, free and clear of any and all liens, claims,
security interests or options, except for (A) Encumbrances (as defined in
Section 9.2) arising out of, under or in connection with this Agreement and (B)
Encumbrances that will be released at or prior to the Closing, and the Seller
has full legal right, power and authority to sell, transfer and convey the
Acquired Shares to the Buyer in the manner contemplated by this Agreement,
except for restrictions on transfer under applicable federal and state
securities laws. Upon consummation of the transactions contemplated by this
Agreement and registration of the Acquired Shares in the name of the Buyer in
the stock records of EMG, and assuming that the Buyer shall have
6
purchased the Acquired Shares for value, the Buyer will own all of the issued
and outstanding capital stock of EMG free and clear of all Encumbrances, other
than any Encumbrances resulting from any facts or circumstances relating solely
to the Buyer (including, without limitation, its sources of financing).
(b) SCHEDULE 2.2(b) sets forth the name, jurisdiction and date of
incorporation or formation, and the number of issued and outstanding shares of
the Subsidiary. Except as set forth on SCHEDULE 2.2(b), EMG owns all of the
outstanding capital stock of the Subsidiary free and clear of any and all liens,
claims, security interests or options, except for (i) Encumbrances arising out
of, under or in connection with this Agreement, and (ii) Encumbrances that will
be released at or prior to the Closing. The Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction specified on SCHEDULE 2.2(b) and has all the requisite corporate
power and authority to carry on its business as now being conducted and to own,
operate and lease the properties owned, operated and leased by it, and, to the
extent required, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby insofar as its actions are required in
connection herewith. The Subsidiary is qualified to do business in each
jurisdiction in which the nature of its business requires it to be so qualified,
except to the extent the failure to so qualify would not, either individually or
in the aggregate, have a reasonable expectation of a Material Adverse Effect.
Section 2.3 NO CONFLICT. Except as provided in SCHEDULE 2.3, and except as
may result from any facts or circumstances relating solely to the Buyer
(including, without limitation, its sources of financing), and assuming that all
consents, approvals, authorizations and other actions set forth in Section 2.6
have been obtained and all filings and notifications set forth on SCHEDULES
2.6(a) and 2.6(b) have been made, neither the Seller, EMG, nor the Subsidiary is
subject to or bound by any provision of:
(a) to the Seller's Knowledge (as defined in Section 9.2), any law,
statute, rule, regulation or judicial or administrative decision,
(b) any articles or certificate of incorporation or by-laws (or similar
organizational, constitutive or governing document),
(c) any mortgage, deed of trust, lease, note, shareholders' agreement,
partnership agreement, bond, indenture, license, permit, trust, or
(d) any judgment, order, writ, injunction or decree of any court,
governmental body, administrative agency or arbitrator,
7
that would prevent or be violated or under which there would be a default as a
result of, nor, is the consent of any Person (as defined in Section 9.2) or
entity under any material contract or agreement or under federal or state law or
the law of any jurisdiction applicable to the Subsidiary, which has not been
obtained and cannot be obtained prior to the Closing, required for the
execution, delivery, and performance by the Seller of this Agreement and the
transactions contemplated hereby, except for violations, defaults, or failures
to obtain consents or to make filings or provide notices which would not have
(i) a reasonable expectation of a Material Adverse Effect or (ii) a material
adverse effect on the ability of the Seller to perform its obligations under
this Agreement.
Section 2.4 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; FINANCIAL
CONDITION.
(a) Attached hereto as SCHEDULE 2.4 is the reviewed consolidated pro
forma Statement of Net Assets to be Sold of EMG, dated as of March 28, 1999 (the
"March Statement"), which (i) includes all adjustments, consisting of normal
recurring adjustments necessary for the fair presentation of financial position
(none of which are material), including those normally included for year-end
statements in accordance with GAAP, except as noted on SCHEDULE 2.4(a) hereto,
and (ii) presents fairly, in all material respects, the financial position of
EMG, on a consolidated basis with the Subsidiary at March 28, 1999; such March
Statement has been reviewed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the Seller's independent
certified public accountants.
(b) When delivered, the Closing Statement will accurately state, on a
consolidated basis as of the Closing Date, the respective values of (i) all of
the assets and all of the liabilities of the Subsidiary and (ii) the net
inventory, the net property and equipment and all liabilities (including,
without limitation, all liabilities related to those employees of the Seller who
become employees of EMG as of the Closing Date and the account payable of EMG to
the Subsidiary) of EMG.
(c) As of the date hereof, EMG and the Subsidiary have no liabilities
except for (i) liabilities stated or adequately reserved against on the March
Statement, (ii) liabilities which arose in the ordinary course of business after
▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) liabilities which will not have a reasonable expectation
of a Material Adverse Effect, (iv) liabilities set forth on SCHEDULES 2.4(c) OR
2.7 and (v) liabilities under EMG's and the Subsidiary's existing contracts and
agreements that are either disclosed pursuant to Section 2.12(a) hereof or that
are not required to be so disclosed and that were entered into in the ordinary
course of the Subsidiary's business. For purposes of this paragraph,
"liabilities" means, all liabilities of EMG and the Subsidiary of any nature,
whether accrued, absolute, contingent or otherwise, asserted or unasserted,
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for taxes due or then accrued
or to become due or
8
contingent or potential liabilities relating to activities of EMG and/or the
Subsidiary or the conduct of the Business prior to the date hereof regardless of
whether claims in respect thereof had been asserted as of such date).
Section 2.5 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 2.5
or resulting from the execution of this Agreement or the transactions
contemplated hereby, since March 28, 1999, the Seller has operated the Business,
and EMG and the Subsidiary have operated, only in the ordinary course of
business consistent with past practice and there has not been any of the
following:
(a) change in, or effect on, the Business, EMG and/or the Subsidiary
resulting in or that would reasonably be expected to result in a Material
Adverse Effect;
(b) change in EMG's and/or the Subsidiary's authorized or issued
capital stock; grant of any option, right to purchase or similar right regarding
the capital stock of EMG and/or the Subsidiary; grant of any registration rights
by EMG and/or the Subsidiary; purchase, redemption, retirement, or other
acquisition by EMG of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of the capital stock of EMG
and/or the Subsidiary;
(c) amendment to the certificate of incorporation or bylaws of EMG or
the Subsidiary, or any action with respect to the certificate of incorporation
or bylaws of EMG or the Subsidiary, which would impair the Seller's ability to
consummate the transactions contemplated hereby or to perform the Seller's
obligations hereunder;
(d) payment of any bonuses, or increase in salaries or other
compensation, by the Seller (with respect solely to the Business), EMG or the
Subsidiary to any of their respective directors, officers, or employees, except
for annual bonus awards and increases in salaries consistent with past practice;
or entry into any employment, severance, or similar agreement or understanding
with any director, officer or employee except for any severance agreement or
understanding under and in accordance with those retention bonus agreements and
understandings and severance agreements, plans, policies and understandings
("Severance Arrangements") set forth on SCHEDULE 2.5;
(e) adoption of, or increase in the schedule of payments or benefits
under, any Benefit Plan (as hereinafter defined), for or with any employee of
the Seller whose principal responsibilities relate to the Business or any
officer, director or employee of EMG or the Subsidiary;
9
(f) damage to or destruction or loss of any asset or property of the
Seller (with respect solely to the Business), EMG or the Subsidiary, whether or
not covered by insurance, which has had, or has the reasonable prospect of
eventually having, a Material Adverse Effect;
(g) sale, purchase, lease, license or other transfer of any Acquired
Shares or mortgage, pledge, or imposition of any Encumbrance on any Acquired
Shares;
(h) incurrence of indebtedness or guarantee of debt or other liability
of the third party by EMG or the Subsidiary;
(i) material change in the accounting methods or principles used by the
Seller (with respect to the assets, liabilities, financial condition or results
of operations of EMG or the Subsidiary) except for (A) write-downs or write-offs
in the value of assets as required by GAAP or (B) such adjustments as are
required by GAAP as a result of the transactions contemplated by this Agreement;
or
(j) entering into an agreement, whether oral or written, by the
applicable party bound by clauses (a) through (i), as the case may be, to do any
of the actions described in clauses (a) through (i).
Section 2.6 CONSENTS AND APPROVALS.
(a) Except as set forth on SCHEDULE 2.6(a), the execution, delivery and
performance of this Agreement by the Seller will not, as of the Closing Date,
require any consent, approval, authorization or other action by, or filing with
or notification to, any federal, state, local, or foreign government,
governmental, regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body (a "Governmental Authority"),
except (i) the notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and/or the Mexican
antitrust statutes, if applicable, (ii) where failure to obtain such consent,
approval, authorization or action, or to make such filing or notification, would
not have (A) a Material Adverse Effect or (B) a material adverse effect on the
ability of the Seller to perform its obligations under this Agreement, and (iii)
as may be necessary as a result of any facts or circumstances relating solely to
the Buyer (including, without limitation, its sources of financing).
(b) Except as set forth on SCHEDULE 2.6(b), the execution, delivery and
performance of this Agreement by the Seller will not, as of the Closing Date,
require any third-party consents, approvals, authorizations or actions, except
where failure to obtain such consents, approvals, authorizations or actions
would not have (i) a Material Adverse Effect or (ii) a material adverse
10
effect on the ability of the Seller to perform its obligations under this
Agreement.
Section 2.7 LITIGATION. Except as set forth in SCHEDULE 2.7, there is no
action, suit or proceeding, claim, arbitration or investigation against the
Seller (with respect solely to the Business), EMG or the Subsidiary pending or,
to the Seller's Knowledge, threatened, which, if adversely determined, (a) would
have a Material Adverse Effect, (b) would delay or prevent the consummation of
the transactions contemplated by this Agreement, or (c) would have a material
adverse effect on the ability of the Seller to perform its obligations under
this Agreement.
Section 2.8 TAXES.
(a) In all material respects and except as set forth on SCHEDULE
2.8:
(i) EMG and the Subsidiary have paid or caused to be paid all
Taxes (as defined in Section 2.8(b)) required to be so paid and have made
provision, in accordance with GAAP, for all Taxes owed or accrued.
(ii) EMG and the Subsidiary have timely filed or been included in,
or will timely file or be included in, all material Tax Returns (as defined
in Section 2.8(b)) required to be filed by it or in which it is to be
included with respect to Taxes, taking into account any extension of time
to file granted to or obtained on behalf of the Seller, EMG, or the
Subsidiary. All such filed Tax Returns are complete and accurate in all
material respects.
(iii) Neither the Internal Revenue Service (the "IRS") nor any
other U.S. or foreign Governmental Authority is asserting by written notice
to the Seller or EMG or the Subsidiary or, to the Seller's Knowledge,
threatening to assert against the Seller or EMG or the Subsidiary, any
deficiency or claim for any material amount of additional Taxes.
(iv) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are pending with regard to
any Taxes or Tax Returns of the Seller, EMG or the Subsidiary and none of
the Seller, EMG or the Subsidiary have received a written notice of any
actual or threatened audits or proceedings or is otherwise aware of any
such audits or proceedings.
(v) Neither EMG nor the Subsidiary is a party to an intercompany
tax sharing agreement of any kind, nor do EMG or the Subsidiary have any
responsibility or liability fixed or contingent for the Taxes of any other
Person, either retrospectively or
11
prospectively.
(b) "Taxes" shall mean any and all taxes, charges, fees, levies,
customs duties, value added taxes, franchise charges or other assessments,
including, without limitation, income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, service, use, license, net worth, payroll, franchise, transfer and
recording fees and charges, imposed by the IRS or any taxing authority (whether
domestic or foreign including, without limitation, any state, county, local or
foreign government or any subdivision or taxing agency thereof (including a
United States possession)), whether computed on a separate, consolidated,
unitary, combined or other basis; and such term shall include any interest
whether paid or received, fines, penalties or additional amounts attributable
to, or imposed upon, or with respect to, any such taxes, charges, fees, levies
or other assessments.
"Tax Return" shall mean any report, return, document, declaration
or other information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any document, with respect to or accompanying
payments of estimated taxes, or with respect to or accompanying requests for the
extension of time in which to file any such, report, return, document,
declaration or other information.
Section 2.9 EMPLOYEE BENEFIT PLANS. With respect to all the plans, programs
and arrangements maintained for the benefit of any current or former employee,
officer or director of EMG or the Subsidiary (the "Benefit Plans"), except for
such matters as, individually or in the aggregate, would not have a Material
Adverse Effect or as set forth in SCHEDULE 2.9, (a) each Benefit Plan and any
related trust intended to be qualified under Sections 401(a) and 501(a) of the
Internal Revenue Code of 1986, as amended (the "Code") or under analogous
Mexican law has received a favorable determination letter from the IRS or the
applicable Mexican authorities that it is so qualified and nothing has occurred
since the date of such letter that could reasonably be expected to materially
adversely affect the qualified status of such Benefit Plan or related trust, (b)
each Benefit Plan has been operated in accordance with the terms and
requirements of applicable law, (c) neither EMG nor the Subsidiary, nor any
entity that could be treated as a single employer with either of them under
Section 414 of the Code or any analogous Mexican law has incurred any direct or
indirect liability under, arising out of or by operation of Title I or Title IV
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
under any analogous Mexican law, in connection with any Benefit Plan or other
retirement plan or arrangement, and to the Seller's Knowledge no fact or event
exists that could reasonably be expected to give rise to any such liability, (d)
all contributions due and payable on or before the date of this Agreement or
that became due and payably on or
12
before the Closing Date in respect of each Benefit Plan have been made (or will
have been made) in full and in proper form, (e) neither EMG nor the Subsidiary
has sponsored or been obligated to contribute to any "multiemployer plan" (as
defined in Section 3(37) of ERISA), "multiple employer plan" (as defined in
Section 413 of the Code) (including any plan meeting such description that is
governed by Mexican law) or "defined benefit plan" (as defined in Section 3(35)
of ERISA) (including any plan meeting such description that is governed by
Mexican law), (f) except as set forth on SCHEDULE 2.9 and, except as otherwise
required under ERISA, the Code and applicable state laws, no Benefit Plan
currently or previously maintained by EMG or the Subsidiary provides any
post-retirement health or life insurance benefits, and neither EMG nor the
Subsidiary maintains any obligation to provide post-retirement health or life
insurance benefits in the future, (g) all reporting and disclosure obligations
imposed under ERISA, the Code and analogous Mexican laws have been satisfied
with respect to each Benefit Plan, and (h) except as set forth on SCHEDULE 2.9,
no benefit or amount payable or which may become payable by EMG or the
Subsidiary pursuant to any Benefit Plan (including any agreement or contract
with any employee) shall constitute an "excess parachute payment," within the
meaning of Section 280G of the Code, which is or may be subject to the
imposition of any excise tax under Section 4999 of the Code or which could not
reasonably be expected to be deductible by reason of Section 280G of the Code.
Section 2.10 REAL AND PERSONAL PROPERTY. The Seller represents as follows:
(a) TITLE TO OWNED REAL PROPERTY. Except as set forth in SCHEDULE
2.10(a) attached hereto, EMG and/or the Subsidiary, respectively, has good,
clear, record and marketable title to all real property it owns ("Owned Real
Property"), free and clear of all Encumbrances, other than:
(i) easements, covenants, restrictions and similar encumbrances
that do not and could not materially interfere with the use of the Owned
Real Property as currently used and improved;
(ii) minor encroachments that do not and could not materially
adversely affect the value or use of the Owned Real Property as currently
used and improved; and
(iii) such title matters or exceptions as are disclosed in the
title insurance applicable to such Owned Real Property, copies of which
policies have been delivered to the Buyer.
(b) STATUS OF LEASES. All real property leased by the Seller (with
respect solely to the Business), EMG and the Subsidiary ("Leased Real Property")
is identified in SCHEDULE 2.10(b)
13
attached hereto, and true and complete copies of the agreements by which such
property is currently under lease have been delivered to the Buyer. Each of said
leases is in full force and effect. Neither the Seller, EMG nor the Subsidiary,
as the case may be, is in material default under any of said leases or has
received any notice thereof, nor has any event occurred which, with notice or
the passage of time, or both, would give rise to such a default. To the Seller's
Knowledge, none of the other parties to said leases is in material default
thereunder and, to the Seller's Knowledge, there is no event which, with notice
or the passage of time, or both, would give rise to such a default.
(c) CONSENTS. Except as set forth in SCHEDULE 2.10(c) attached hereto,
no approval is required to consummate the transactions contemplated by this
Agreement from the other parties to any lease of the Leased Real Property or
from the holder of any Encumbrance on any Owned Real Property.
(d) CONDITION OF OWNED REAL PROPERTY. To the Seller's Knowledge, there
are no material defects in the physical condition of any land, buildings or
improvements constituting part of the Owned Real Property, including, without
limitation, structural elements, mechanical systems, parking and loading areas.
(e) PERSONAL PROPERTY. The Seller has good and valid legal title to all
of its personal property relating to the Business, and EMG and/or the
Subsidiary, as the case may be, has good and valid legal title to all of its
personal property; provided that, as of the Closing, EMG shall have good and
valid legal title to all such personal property currently owned by the Seller.
All of the Seller's machinery and equipment relating to the Business, and all of
EMG's and the Subsidiary's machinery and equipment, are in good repair and
working order and have been maintained in the ordinary course of business,
reasonable wear and tear excepted, and, as of the Closing the machinery and
equipment owned by EMG and the Subsidiary will be sufficient for, usable in, and
appropriate for, the conduct of the Business as presently conducted.
Section 2.11 LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) and as would not have a
Material Adverse Effect, each of the Seller (with respect solely to those
employees of the Seller who perform services for the Business), EMG and the
Subsidiary, as the case may be, is, as of the date hereof, in compliance in all
material respects with all federal, state, municipal and foreign laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, including but not limited to ERISA, the Code, Title VII of the
Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the
Age Discrimination in
14
Employment Act of 1967, as amended, the Americans with Disabilities Act and the
related rules and regulations adopted by those federal agencies responsible for
the administration of such laws (and, as applicable, the corresponding foreign
laws, terms and conditions), and there are no arrearages in the payment of
wages, social security tax or any other employment related levy or tax,
including, without limitation, matters which would be accrued at the end of a
fiscal year under GAAP.
(b) Except as set forth on SCHEDULE 2.11(b) and as would not have a
Material Adverse Effect, neither EMG nor the Subsidiary is a party to or
otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. Except as
set forth on SCHEDULE 2.11(b) and as would not have a Material Adverse Effect,
as of the date of this Agreement, neither EMG nor the Subsidiary is subject to
any charge, demand, petition or representation proceeding seeking to compel,
require or demand it to bargain with any labor union or labor organization nor,
as of the date of this Agreement, is there pending or, to the Seller's
Knowledge, threatened, any material labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving EMG or the Subsidiary.
Section 2.12 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 2.12(a) lists each of the following types of contracts or
agreements (if any) of the Seller (with respect solely to the Business), EMG and
the Subsidiary:
(i) agreements to which the Seller (with respect solely to
agreements related to the Business), EMG or the Subsidiary is a party which
requires a payment, or delivery of assets or services, in excess of $50,000
per year and all material amendments, modifications and supplements
thereto;
(ii) leases of Leased Real Property;
(iii) employment, severance or consulting agreements with any
director or officer of the Seller (with respect solely to officers of the
Seller who provide service to the Business), EMG or the Subsidiary
requiring an annual payment of cash compensation in excess of $50,000;
(iv) agreements granting to any third party a first-refusal,
first-offer or other right to purchase or acquire any of the Acquired
Shares or any assets listed on SCHEDULE 4.8;
15
(v) agreements materially limiting or restricting the ability of
the Seller (with respect solely to the Business), EMG or the Subsidiary to
enter into or engage in any market or line of business; and
(vi) agreements and letters of intent with financial advisors,
bankers and investment bankers.
(b) True and complete copies of the contracts and agreements disclosed
pursuant to Section 2.12(a) hereof have been made available to the Buyer. Except
as disclosed on SCHEDULE 2.12(b) or as would not have a Material Adverse Effect
(i) to the Seller's Knowledge, each contract and agreement disclosed pursuant to
Section 2.12(a) hereof is valid and binding on the respective parties thereto
and is in full force and effect in accordance with its respective terms, (ii)
upon consummation of the transactions contemplated by this Agreement, each such
contract and agreement shall continue in full force and effect in accordance
with its respective terms without penalty or other adverse consequence, (iii)
neither the Seller, EMG nor the Subsidiary is in breach of, or default under,
any such contract or agreement and (iv) to the Seller's Knowledge, no other
party to any such contract or agreement is in breach thereof or default
thereunder.
Section 2.13 INTELLECTUAL PROPERTY. Except as set forth on SCHEDULE 2.13,
the Seller owns and has licensed EMG to use or EMG and the Subsidiary own, or
have the right to use, all patents, trademarks, trade names, service marks,
trade secrets, copyrights and other intellectual property rights (collectively,
the "Intellectual Property Rights"), as are necessary in connection with the
Business, except where the failure to own or have the right to use such
Intellectual Property Rights would not have a Material Adverse Effect.
Section 2.14 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 2.14
and except for any matter which would not result in a Material Adverse Effect,
to Seller's Knowledge, (a) EMG and the Subsidiary are in compliance in all
material respects with all applicable Environmental Laws (as hereinafter
defined), (b) there are no material Environmental Liabilities and Costs (as
hereinafter defined) of EMG or the Subsidiary, (c) there are no material
Environmental Conditions (as hereinafter defined) on or related to the Owned
Real Property or the Leased Real Property, (d) neither EMG nor the Subsidiary
has received any written notice prior to the date of this Agreement from any
governmental agency or other third party alleging any violation of, or
noncompliance with, any Environmental Law, or requiring the removal, clean-up,
or remediation of any Environmental Condition, whether or not on any of the
Owned Real Property or the Leased Real Property relating to EMG or the
Subsidiary, which such matter has not been resolved as of the date of this
Agreement, and (e) neither EMG nor the Subsidiary has received written notice
prior to the date of this Agreement that it is
16
subject to any enforcement or investigatory action by any governmental agency
regarding an Environmental Condition with respect to any Owned Real Property or
Leased Real Property, which such matter has not been resolved as of the date of
this Agreement. As used herein, the terms "toxic" or "hazardous" wastes,
substances or materials shall include, without limitation, all those so
designated in and in any way regulated by any current Environmental Laws. The
Seller has previously made available to the Buyer copies of the following
written materials in its possession or in the possession of the Subsidiary:
copies of environmental audits, site assessments, documentation regarding
off-site disposal of hazardous materials, and material correspondence with any
federal, state or local government, foreign government, administrative agency,
or other U.S. or foreign Governmental Authority, regarding the foregoing.
For purposes of this Agreement, the following definitions shall apply:
"Environmental Laws" means all applicable federal, state and local
statutes or laws, judgments, orders, regulations, licenses, permits, rules
and ordinances relating to pollution or protection of health, safety or the
environment, including, but not limited to the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 ET SEQ.), Resources Conservation and
Recovery Act (42 U.S.C. Section 6901 ET. SEQ.), Safe Drinking Water Act (42
U.S.C. Section 3000(F) ET. SEQ.), Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.), Clean Air Act (42 U.S.C. Section 7401 ET. SEQ.),
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.), and other similar state, local and foreign
statutes.
"Environmental Condition" means the introduction into the environment of
any contaminant, pollutant, hazardous or toxic waste, substance or material
(whether or not upon the Owned Real Property or the Leased Real Property) at
levels or in amounts in excess of applicable regulatory permits, limits or
standards, as a result of which the Seller (with respect solely to the
Business), EMG or the Subsidiary, with respect to Section 2.14, (1) have or may
become liable to any Person, (2) are in violation of any Environmental Law, or
(3) by reason of which any of the properties or other assets of the Seller (with
respect solely to the Business), EMG or the Subsidiary, with respect to this
Section 2.14, may suffer or be subject to any lien.
"Environmental Liabilities and Costs" means all liabilities, obligations,
responsibilities, obligations to conduct cleanup, losses, damages, deficiencies,
punitive damages, costs and expenses (including, without limitation, all
reasonable fees, disbursements and expenses of counsel, expert and consulting
fees and costs of any necessary investigations and feasibility studies and
responding to government requests for information or documents), fines,
penalties, monetary sanctions, known or unknown, absolute or contingent, past,
present or future, resulting from any claim or demand, by any Person, whether
based in contract, tort, implied or
17
express warranty, strict liability, joint and several liability, criminal or
civil statute, under any Environmental Law, or arising from Environmental
Conditions, as a result of past or present ownership, leasing or operation of
any properties, owned, leased or operated by the Seller (with respect solely to
the Business), EMG or the Subsidiary with respect to this Section 2.14.
Section 2.15 COMPLIANCE WITH LAWS; PERMITS. To the Seller's Knowledge,
neither the Seller, EMG nor the Subsidiary is in violation of any judgment,
order or decree, or any statute, law, ordinance, rule or regulation ("Law")
applicable to the Business, EMG, the Subsidiary or any of their respective
properties or assets, except such violations as would not have a Material
Adverse Effect. The Seller (with respect solely to the Business), EMG and the
Subsidiary have obtained all material licenses, permits and other authorizations
and have taken all actions required by applicable law or governmental
regulations in connection with the Business or their respective businesses as
now or previously conducted where the failure to obtain any such license, permit
or authorization or to take any such action, individually or in the aggregate,
would have a Material Adverse Effect, and no licenses or permits are now subject
to, and none will by virtue of this transaction become subject to suspension,
termination, revocation or the imposition of altered fees, charges or conditions
to enjoyment and use.
Section 2.16 INSURANCE. SCHEDULE 2.16 sets forth a true and correct summary
of the insurance policies held by, or for the benefit of, EMG and the Subsidiary
including the underwriter of such policies and the amount of coverage
thereunder.
Section 2.17 BROKERS. No broker, investment banker, financial advisor or
other Person, other than ▇▇▇▇▇▇▇ & Company, Inc., the fees and expenses of which
will be paid by the Seller, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 3.1 ORGANIZATION OF THE BUYER; AUTHORITY.
(a) The Buyer is a corporation duly incorporated, validly existing and
in good standing under the laws of Japan and has all the requisite corporate
power and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The Buyer is
qualified to do business in each jurisdiction in which the nature of its
business requires it to be so qualified except to the extent the failure to so
qualify would not, either individually or in the aggregate, have a material
adverse effect on the ability
18
of the Buyer to perform its obligations under this Agreement.
(b) The execution and delivery of this Agreement, the performance by
the Buyer of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of the Buyer. This Agreement has been duly executed and delivered by
the Buyer and assuming the due authorization, execution and delivery of this
Agreement by the Seller, this Agreement constitutes a legal, valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles.
Section 3.2 NO CONFLICT. Except as may result from any facts or
circumstances related solely to the Seller, and assuming that all consents,
approvals, authorizations and other actions described in Section 3.3 have been
obtained and all filings and notifications described in Section 3.3 have been
made, the Buyer is not subject to or bound by any provision of:
(a) any law, statute, rule, regulation or judicial or administrative
decision,
(b) any articles or certificate of incorporation or by-laws, (or
similar organizational, constitutive or governing document),
(c) any mortgage, deed of trust, lease, note, shareholders' agreement,
partnership agreement, bond, indenture, license, permit, trust, or
(d) any judgment, order, writ, injunction or decree of any court,
governmental body, administrative agency or arbitrator,
that would prevent or be violated or under which there would be a default as a
result of, nor, is the consent of any Person or entity under any material
contract or agreement or under federal, state or foreign law, which has not been
obtained and cannot be obtained prior to the Closing, required for the
execution, delivery, and performance by the Buyer of this Agreement and the
transactions contemplated hereby, except for violations, defaults, or failures
to obtain consents or to make filings or provide notices which would not have a
material adverse effect on the ability of the Buyer to perform its obligations
under this Agreement.
Section 3.3 CONSENTS AND APPROVALS.
(a) Except for possible notifications to the appropriate Japanese
Governmental
19
Authorities after the Closing, the execution, delivery and performance of this
Agreement by the Buyer will not, as of the Closing Date, require any consent,
approval, authorization or other action by, or filing with or notification to,
any Governmental Authority, except (i) the notification requirements of the HSR
Act and/or of Mexican antitrust statutes, if applicable, (ii) where failure to
obtain such consent, approval, authorization or action, or to make such filing
or notification, would not have a material adverse effect on the ability of the
Buyer to perform its obligations under this Agreement, and (iii) as may be
necessary as a result of any facts or circumstances relating solely to the
Seller.
(b) The execution, delivery and performance of this Agreement by the
Buyer will not, as of the Closing Date, require any third-party consents,
approvals, authorizations or actions, except where failure to obtain such
consents, approvals, authorizations or actions would not have a material adverse
effect on the ability of the Buyer to perform its obligations under this
Agreement.
Section 3.4 LITIGATION. There is no action, suit or proceeding, claim,
arbitration or investigation against the Buyer or, to the Buyer's Knowledge,
threatened, which, if adversely determined, (a) would delay or prevent the
consummation of the transactions contemplated by this Agreement, or (b) would
have a material adverse effect on the ability of the Buyer to perform its
obligations under this Agreement.
Section 3.5 FINANCING. The Buyer has, or has available to it, all funds
necessary to consummate the transactions contemplated by this Agreement.
Section 3.6 BROKERS. No broker, investment banker, financial advisor or
other Person, other than First Albany Corporation, the fees and expenses of
which will be paid by the Buyer, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement.
Section 3.7 INVESTMENT INTENT. The Buyer is acquiring the Acquired Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
ARTICLE IV - CERTAIN COVENANTS AND AGREEMENTS OF
THE BUYER AND SELLER
Section 4.1 CONDUCT OF BUSINESS PRIOR TO CLOSING.
20
(a) The Seller covenants and agrees that, between the date hereof and
the Closing Date, it shall operate the Business in the ordinary course,
consistent with past practice, and shall cause EMG and the Subsidiary to operate
in the ordinary course of business, consistent with past practice, except as
otherwise provided in this Agreement or as described in SCHEDULE 4.1(a).
(b) The Seller and the Buyer agree that all intercompany accounts
receivable, accounts payable and indebtedness between the Seller, on the one
hand, and the Subsidiary, on the other hand, shall be transferred from the
Seller to EMG at or prior to the Closing. Attached hereto as SCHEDULE 4.1(b) is
a list of all such intercompany accounts receivable, accounts payable and
indebtedness as they stand as of the date hereof.
(c) In furtherance and not in limitation of the foregoing, the Seller
covenants and agrees that, except as described in SCHEDULE 4.1(c), the Seller
(with respect to the Business only), EMG and the Subsidiary will not, prior to
the Closing, without the express prior written consent of the Buyer, which shall
not be unreasonably withheld:
(i) Make any purchase, sale or disposition of any asset or
property with a purchase price in excess of $50,000 other than in the ordinary
course of business, purchase any capital asset costing more than $50,000 except
as provided in EMG's written capital budget attached hereto as SCHEDULE
4.1(c)(i), or grant any Encumbrance on any of its properties or assets other
than in the ordinary course of business, except for any such Encumbrance which,
by its terms, will be terminated or otherwise be extinguished at or prior to the
Closing;
(ii) Incur any indebtedness or incur any material contingent
liability as a guarantor or otherwise with respect to the obligations of others,
or incur any other material contingent or fixed obligations or liabilities
except in the ordinary course of business;
(iii) Make any change or incur any obligation to make a change in
its certificate of incorporation, by-laws or authorized or issued capital stock;
(iv) Declare, set aside or pay any dividend, make any other
distribution in respect of its capital stock or make any direct or indirect
issuance, redemption, purchase or other acquisition of its capital stock;
(v) Make any change in the compensation payable or to become
payable to any of its officers, employees, agents or independent contractors
other than in the ordinary course of business consistent with past practice; or
21
(vi) Amend, modify or terminate any contract or agreement
disclosed pursuant to Section 2.12(a) hereof.
Section 4.2 ACCESS TO INFORMATION.
(a) From the date hereof until the Closing Date, upon reasonable
notice, the Seller shall, and shall cause EMG and the Subsidiary and each of
their respective officers, directors, employees, auditors and agents to, (i)
afford the officers, employees, authorized agents and representatives of the
Buyer reasonable access, during normal business hours, to the offices,
properties, books and records of the Seller (with respect solely to the
Business), EMG and the Subsidiary, and (ii) furnish to the officers, employees
and authorized agents and representatives of the Buyer such additional financial
and operating data and other information regarding the Business, EMG and the
Subsidiary as the Buyer may from time to time reasonably request; PROVIDED,
HOWEVER, that (A) such investigation shall not unreasonably interfere with any
of the businesses or operations of the Seller, EMG or the Subsidiary, (B) the
Buyer shall not, prior to the Closing Date, have any contact whatsoever with
respect to the Business, EMG or the Subsidiary or with respect to the
transactions contemplated by this Agreement with any partner, lender, ground
lessor, vendor or supplier of the Seller, EMG or the Subsidiary, except in
consultation with the Seller and then only with the express prior approval of
the Seller, which approval shall not be unreasonably withheld, and (C) all
requests by the Buyer for access or information pursuant to this Section 4.2(a)
shall be submitted or directed exclusively to an individual or individuals to be
designated by the Seller. The Buyer shall not be permitted to conduct any
invasive tests on any Leased Real Property or Owned Real Property without the
Seller's prior written consent.
(b) During the preparation, review and dispute resolution time periods
contemplated by Section 1.2, upon reasonable notice, the Buyer shall, and shall
cause EMG and the Subsidiary (or any successor thereto) and each of their
respective officers, directors, employees, auditors and agents to, (i) afford
the officers, employees, auditors, attorneys, authorized agents and
representatives of the Seller reasonable access, during normal business hours,
to the offices, properties, books and records of EMG and the Subsidiary (or any
successor or successors thereto), (ii) furnish to the officers, employees,
auditors, attorneys, authorized agents and representatives of the Seller such
additional financial and operating data and other information regarding EMG and
the Subsidiary (or any successor or successors thereto) as the Seller may from
time to time reasonably request to perform its obligations, or avail itself of
its rights, contained, in each case, in Section 1.2 hereof; PROVIDED, HOWEVER,
that such investigation shall not unreasonably interfere with any of the
businesses or operations of EMG and the Subsidiary (or any successor or
successors thereto).
22
Section 4.3 CONFIDENTIALITY. Subject to the requirements of applicable Law,
the parties will, and will instruct each of their respective Affiliates,
associates, partners, employees, agents and advisors (the "Representatives") to,
hold in confidence all such information as is confidential or proprietary, will
use such information only in connection with the consummation of the
transactions contemplated by this Agreement and, if this Agreement is terminated
in accordance with its terms, will deliver promptly to the others (or destroy
and certify to the other the destruction of) all copies of such information (and
any copies, compilations or extracts thereof or based thereon) then in their
possession or under their control. Each party hereto agrees that money damages
would not be a sufficient remedy for any breach of this Section 4.3 by the other
party hereto or any of its Representatives, and that, in addition to all other
remedies, such non-breaching party shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach, and each
such party further agrees to waive, and to use its best efforts to cause its
Representatives to waive, any requirement for the securing or posting of any
bond in connection with any such remedy. Each party agrees to be responsible for
any breach of this Section 4.3 by any of its Representatives.
Section 4.4 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) The Seller shall use its good faith commercially reasonable efforts
to obtain the authorizations, consents, orders and approvals necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement, including, without limitation, the consent of (i) Governmental
Authorities, (ii) landlords under the ground leases, and (iii) lenders, and the
Buyer shall cooperate fully with the Seller in promptly seeking to obtain all
such authorizations, consents, orders and approvals. If required by the HSR Act,
each party hereto agrees to make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement within ten (10) business days after the date
hereof and to supply promptly any additional information and documentary
material that may be requested pursuant to the HSR Act. The parties hereto will
not take any action that will have the effect of delaying, impairing or impeding
the receipt of any required approvals.
(b) The Buyer shall use its good faith commercially reasonable efforts
to assist the Seller in obtaining the consents of third parties listed in
SCHEDULE 2.6(b), including (i) providing to such third parties such financial
statements and other financial information as such third parties may reasonably
request, (ii) agreeing to commercially reasonable adjustments to the terms of
the agreements with such third parties (provided that neither party hereto shall
be required to agree to any increase in the amount payable with respect thereto)
and (iii) executing agreements to effect the assumption of such agreements on or
before the Closing Date.
23
Section 4.5 FURTHER ACTION. Each of the parties hereto shall use its
respective best efforts to take or cause to be taken all appropriate action
(including by causing their respective directors, officers, employees and agents
to take such action), do or cause to be done all things necessary, proper or
advisable, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
Section 4.6 PRESS RELEASES. The parties hereto will, and will cause each of
their Affiliates to, maintain this Agreement confidential and will not, and will
cause each of their Affiliates not to, issue or cause the publication of any
press release or other public announcement with respect to this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party hereto which consent shall not be unreasonably withheld; PROVIDED,
HOWEVER, that nothing herein will prohibit the Seller from issuing or causing
publication of any such press release or public announcement to the extent that
the Seller reasonably determines, after consultation with outside legal counsel,
such action to be required by Law or the rules of any applicable self-regulatory
organization, in which event the Seller will use its commercially reasonable
efforts to allow the Buyer reasonable time to comment on such release or
announcement in advance of its issuance. The parties acknowledge that a press
release in the form of EXHIBIT A shall be made immediately following the
execution of this Agreement.
Section 4.7 NO SOLICITATION. Except as otherwise provided herein, unless
and until this Agreement shall have been terminated in accordance with its
terms, the Seller agrees and covenants that neither the Seller, EMG nor the
Subsidiary shall, and each of them shall direct and use their best efforts to
cause their respective officers, directors, employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or the Subsidiary) not to, directly or indirectly,
initiate, solicit or encourage any inquiries or the making or implementation of
any proposal or offer with respect to a merger, acquisition, or similar
transaction involving the purchase of EMG, the Subsidiary or the Acquired Shares
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any negotiations with, or provide any confidential
information or data to, or have any discussions with, any Person relating to, an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal.
Section 4.8 TRANSFER OF ASSETS; DISCHARGE OF CERTAIN LIABILITIES.
(a) Prior to the Closing Date, the Seller shall completely and duly
transfer to EMG the assets, contracts and liabilities listed on SCHEDULE 4.8
attached hereto and such transfer (i) shall be effected without impairment of
any kind with respect to the ownership, rights to enjoyment,
24
license rights, Maquiladora rights, lessee interests, contract rights and any
and all other comparable rights and entitlements necessary for the continued
operation of the Business by EMG and the Subsidiary and (ii) in and of itself,
shall not create any additional operating expense, royalty, rent, taxes, fees,
rates, or other charges of any kind above those experienced by the Seller or the
Subsidiary prior to such transfer.
(b) The Buyer agrees and acknowledges that either EMG or the
Subsidiary, as the case may be, shall from and after the Closing pay, discharge
and perform, in accordance with their respective terms, (i) all liabilities set
forth on the Closing Statement, (ii) all liabilities set forth on SCHEDULE 4.8,
(iii) the contractual obligations listed on SCHEDULE 4.8 and (iv) any and all
liabilities arising out of or relating to the operation of the Business after
the Closing, including, without limitation, all severance and similar payments
due upon termination of EMG Employees (as hereinafter defined). Notwithstanding
anything to the contrary set forth in this Agreement (including, without
limitation, Section 8.3), under no circumstances will the Seller be obligated to
indemnify the Buyer, EMG or the Subsidiary with respect to (x) liabilities set
forth on the Closing Statement, (y) those liabilities described on SCHEDULE 4.8
transferred by the Seller to EMG (other than the contracts assigned by the
Seller) or (z) liabilities arising out of or relating to the operation of the
Business after the Closing.
(c) Notwithstanding anything to the contrary set forth in this Section
4.8 or anywhere else in this Agreement, the Seller shall retain, and shall not
transfer to EMG or the Buyer, the accounts receivable on the Seller's books
related to the Business.
(d) The Seller agrees and acknowledges that, prior to the Closing, it
shall make a cash investment in the capital of the Subsidiary sufficient to
cause the Subsidiary to have shareholders' equity not less than the minimum
amount required under Mexican law, but in no event less than a shareholders'
equity of zero on the Closing Date.
25
Section 4.9 NONCOMPETITION.
(a) The Seller agrees that, for a period of three (3) years after the
Closing Date, it will not, without the prior written consent of the Buyer,
directly or indirectly, engage or participate in, or assist in any manner or in
any capacity, or have any interest in or make any loan to any person, firm,
corporation or business which engages in any activity anywhere in the world
which is similar to or competitive with the Business; PROVIDED, HOWEVER, that
the foregoing shall not prevent the Seller from owning beneficially or of record
up to two (2) percent of the outstanding securities of a publicly-held
corporation which engages in the Business or in activities that compete with the
Business. In addition, the Seller shall refrain from soliciting or encouraging
any employee of the Buyer or any Affiliate of or successor to the Buyer to
terminate his or her employment with the Buyer and to become employed by the
Seller, or any business or entity with which the Seller is affiliated as an
owner, investor, lender or in any other capacity.
(b) The Seller and the Buyer each acknowledge that any breach of the
covenants contained in this Section 4.9 would cause an irreparable injury to the
Buyer and that damages and remedies at law for any breach of any such covenant
would be inadequate. The Seller hereby accordingly consents to the entry of an
order by any court of competent jurisdiction for specific performance or for
injunctive relief and other equitable relief to prevent an actual, intended or
probable breach of any such covenant.
(c) It is the desire and intent of the parties to this Agreement that
the provisions of this Section 4.9 be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. If any particular provision or portion of this Section
4.9 shall be adjudicated to be invalid, ineffective or unenforceable, this
Section 4.9 shall be deemed automatically amended to delete therefrom such
provision or portion adjudicated to be invalid, ineffective or unenforceable,
such amendment to apply only with respect to the operation of such provision in
the particular jurisdiction with respect to which adjudication is made.
Section 4.10 ▇▇▇▇▇▇▇ CONSENT, WAIVER AND ESTOPPEL. The Seller shall use its
reasonable best efforts to obtain, prior to the Closing, (i) the written consent
to the transfer of EMG of that certain Supply Agreement by and among the Seller,
Tongeren Manufacturing Company, ▇▇▇▇▇▇▇ GmbH, ▇. ▇▇▇▇▇▇▇ GmbH and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, dated as of January 17, 1997 (the "▇▇▇▇▇▇▇ Agreement"), (ii) the written
waiver from Tongeren Manufacturing Company (and/or any other party whose written
waiver is required) of the right of first refusal with respect to the sale by
the Seller of any equipment owned by the Seller related to the manufacture of
mercury switches or mercury relays as more fully set forth in the ▇▇▇▇▇▇▇
26
Agreement and (iii) a written estoppel letter from the appropriate party or
parties confirming that the Seller has fully satisfied its obligations under
Section 5 of the ▇▇▇▇▇▇▇ Agreement to purchase from Tongeren Manufacturing
Company the dry ▇▇▇▇ relay and TAP automation tooling, fixtures and equipment
set forth on Exhibit D to the ▇▇▇▇▇▇▇ Agreement; PROVIDED, HOWEVER, the Buyer
and the Seller agree and acknowledge that the Seller shall have no obligation to
pay any consideration whatsoever to obtain such written consent, written waiver
and/or written estoppel letter.
Section 4.11 NON-SOLICITATION; NON-HIRE.
(a) With the exception of those people named on SCHEDULE 4.11, whom the
Buyer may solicit, the Buyer agrees that, for a period of eighteen (18) months
after the date of this Agreement, it will not, without the prior written consent
of the Seller directly or indirectly, solicit or encourage any employee of the
Seller or any Affiliate of or successor to the Seller to either terminate his or
her employment with the Seller or to become employed by the Buyer, or any
business or entity with which the Buyer is affiliated as an owner, investor,
lender or in any other capacity.
(b) With the exception of those people named on SCHEDULE 4.11, whom the
Buyer may hire, the Buyer agrees that, for a period of eighteen (18) months
after the date of this Agreement, neither it nor any business or entity with
which the Buyer is directly or indirectly affiliated as an owner, investor,
lender or in any other capacity will, without the prior written consent of the
Seller, hire any employee of the Seller or any employee of an Affiliate of or
successor to the Seller.
(c) The Seller and the Buyer each acknowledge that any breach of the
covenants contained in this Section 4.11 would cause an irreparable injury to
the Seller and that damages and remedies at law for any breach of any such
covenant would be inadequate. The Buyer hereby accordingly consents to the entry
of an order by any court of competent jurisdiction for specific performance or
for injunctive relief and other equitable relief to prevent an actual, intended
or probable breach of any such covenant.
(d) It is the desire and intent of the parties to this Agreement that
the provisions of this Section 4.11 be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provision or portion of this
Section 4.11 shall be adjudicated to be invalid, ineffective or unenforceable,
this Section 4.11 shall be deemed automatically amended to delete therefrom such
provision or portion adjudicated to be invalid, ineffective or unenforceable,
such amendment to apply only with respect to the operation of such provision in
the particular jurisdiction with respect to which
27
adjudication is made.
Section 4.12 STRUCTURING MATTERS.
(a) If and to the extent so requested by the Seller, the Seller may
revise the method of either (i) effecting Buyer's acquisition of EMG or (ii)
transferring those assets, contracts and liabilities of the Seller related to
the Business from the method described in Section 4.8; PROVIDED, HOWEVER, that
(x) any breach of this Agreement by Buyer and any inability of the Buyer to
satisfy any condition to the Closing arising, in each case, solely as a result
of such revised method of effecting such acquisition or transferring such
assets, liabilities and contracts shall not be deemed a breach or a failure of
such condition to the Closing and (y) the Buyer receives substantially the same
economic benefit as a result of such revised method of effecting such
acquisition or transferring such assets, liabilities and contracts as it would
have received had such revised method of effecting such acquisition or
transferring such assets, liabilities and contracts not occurred (other than in
respect of increases in operating costs not material to EMG and its
subsidiary(ies) taken as a whole).
(b) The Buyer hereby (i) acknowledges that the Seller is currently
considering (x) forming a new maquiladora affiliated with EMG and (y)
transferring certain assets, liabilities and/or contracts of the Seller and the
Subsidiary to the new maquiladora and/or the Subsidiary and (ii) consents to the
transactions described in clause (i) above, to the extent such transactions
would be consistent with subsection (a) above.
(c) The Buyer hereby acknowledges and agrees that, upon the payment by
the Seller or an Affiliate of the Seller of any refundable Mexican value added
tax required to be paid by virtue of a revision in the method of transferring
those assets, contracts and liabilities of the Seller related to the Business
from the method described in Section 4.8, the Buyer, at the Seller's expense,
will, within five (5) business days of receiving notice from the Seller of such
payment, issue to the Seller a standby letter of credit drawn on a bank
reasonably acceptable to the Seller in an amount equal to the amount of such
refundable Mexican value added tax paid by the Seller or an Affiliate of the
Seller. Such letter of credit shall provide that, at such time as a refund of
the value added tax previously paid by the Seller or an Affiliate of the Seller
is made to the Buyer or an Affiliate of the Buyer, the Seller may present the
letter of credit for payment in an amount not to exceed the amount of the refund
if and to the extent the amount so refunded has not been paid over to the
Seller.
ARTICLE V - EMPLOYEE MATTERS
28
Section 5.1 EMPLOYEES.
(a) The Buyer shall ensure that (i) all persons who were employed by
EMG immediately preceding the Closing Date, (ii) all persons who were employed
by the Subsidiary immediately preceding the Closing Date and (iii) those
employees of the Seller who are offered and accept employment with EMG as of the
Closing Date, including those employees described in clauses (i), (ii) and (iii)
above who are on vacation, leave of absence or disability (all such employees,
collectively, the "EMG Employees"), will remain employed in comparable positions
for a period of six (6) months following the Closing Date, at not less than the
same base rate of pay, except as otherwise provided in this Section 5.1.
(b) To the extent that service is relevant for purposes of eligibility,
vesting, calculation of any benefit, or benefit accrual under any employee
benefit plan, program or arrangement established or maintained by the Buyer, EMG
or the Subsidiary, as the case may be, (other than any defined benefit pension
plan) following the Closing Date for the benefit of EMG Employees, such plan,
program or arrangement shall credit such employees for service on or prior to
the Closing Date that was recognized by the Seller, EMG or the Subsidiary, as
the case may be, for purposes of employee benefit plans, programs or
arrangements maintained by any of them. In addition, with respect to any welfare
benefit plan (as defined in Section 3(1) of ERISA) established or maintained by
the Buyer following the Closing Date for the benefit of EMG Employees, such plan
shall waive any pre-existing condition exclusions and provide that any covered
expenses incurred on or before the Closing Date by an EMG Employee or by a
covered dependent shall be taken into account for purposes of satisfying
applicable deductible coinsurance and maximum out-of-pocket provisions after the
Closing Date.
Section 5.2 EMPLOYEE BENEFITS. For a period of one (1) year following the
Closing Date, the Buyer shall provide the EMG Employees with benefits
(including, without limitation, retirement and welfare benefits) that either are
substantially comparable, in the aggregate, to the benefits provided under the
Benefit Plans as in effect immediately prior to the Closing Date.
Section 5.3 OTHER EMPLOYEE BENEFITS. From and after the Closing Date, the
Buyer will, or will cause EMG and/or the Subsidiary to, honor in accordance with
their terms only the Severance Arrangements as reflected on SCHEDULE 5.3 between
EMG, the Seller or the Subsidiary and the EMG Employees in effect prior to the
Closing Date.
Section 5.4 INDEMNITY. Anything in this Agreement to the contrary
notwithstanding, the Buyer hereby agrees to indemnify the Seller and its
Affiliates against and hold the Seller and its Affiliates harmless from any and
all Losses (as defined in Section 9.2) arising out of or
29
otherwise in respect of (a) any claim, other than claims first arising prior to
the Closing, made by any EMG Employee against the Seller or any of its
Affiliates for any severance or termination benefits pursuant to the provisions
of the Severance Arrangements or any applicable federal or state law, (b) any
action taken after the Closing by the Buyer with respect to any plan (including
any Benefit Plan), (c) any claim for payments or benefits by EMG Employees or
their beneficiaries under any Benefit Plan assumed by EMG pursuant to Section
4.8 or sponsored by the Buyer, EMG or the Subsidiary at any time after the
Closing and (d) any failure of the Buyer to discharge its obligations under this
Article V. The provisions of Section 8.4 shall apply to the Buyer's
indemnification obligations under this Section 5.4.
Section 5.5 NO THIRD PARTY BENEFICIARIES. Notwithstanding anything else
contained herein to the contrary, nothing in this Article V shall be construed
to create any third party beneficiary rights in any Person who is not a party to
this Agreement.
ARTICLE VI - TAX MATTERS
Section 6.1 CONVEYANCE TAXES; COSTS. Except for (i) taxes measured by the
net income or capital gain of the Seller and (ii) any Taxes arising as a result
of the transfer of property by the Seller to EMG and the Subsidiary as
contemplated by Section 4.8 or associated with the formation of EMG and its
capitalization, each of which shall be the Seller's sole responsibility, the
Buyer shall be liable for and shall hold the Seller harmless against any real
property transfer tax or sales, use, transfer, value added, excise, stock
transfer, stamp, recording, registration and any similar Taxes that become
payable in connection with the acquisition by the Buyer contemplated hereby, and
the applicable parties shall file such applications and documents as shall
permit any such Tax to be assessed and paid on or prior to the Closing Date in
accordance with any available pre-sale filing procedure. The Seller agrees to
cooperate with the Buyer and, subject to the other terms of this Agreement, to
take any action reasonably requested by the Buyer, at no cost to the Seller, in
order to minimize the amount of such Taxes. The parties shall execute and
deliver all instruments and certificates necessary to permit compliance with the
foregoing. The Buyer shall pay the entire cost of any title insurance (for
itself or any lender, including lenders of indebtedness assumed by the Buyer
hereunder), surveys, title inspections, and appraisals that the Buyer elects to
obtain in connection with the transactions contemplated hereby. The Buyer shall
pay any and all attorneys' fees of its lenders and lenders of indebtedness
assumed by the Buyer hereunder.
Section 6.2 TREATMENT OF INDEMNITY PAYMENTS. All payments made by the
Seller or the Buyer, as the case may be, to or for the benefit of the other
party pursuant to any indemnification obligations under this Agreement shall be
treated as adjustments to the
30
consideration for Tax purposes, and such agreed treatment shall govern for
purposes of this Agreement.
Section 6.3 EMPLOYEE WITHHOLDING. The Seller and the Buyer agree that,
pursuant to and to the extent permitted by the "Alternative Procedure" provided
in Section 5 of Revenue Procedure 96-60, 1996-53 I.R.B. 24, with respect to
filing and furnishing IRS Forms W-2, W-3 and 941, (a) the Seller and the Buyer
shall each report on a "predecessor-successor" basis, as set forth therein, (b)
the Seller shall be relieved from furnishing Forms W-2 to any of the Seller's
employees that become employees of EMG, the Subsidiary or the Buyer and (c) the
Buyer shall assume the obligations of the Seller to furnish such Forms W-2 to
such employees for the full 1999 calendar year.
Section 6.4 TAX COOPERATION; STRUCTURING MATTERS. After the Closing the
Seller shall, and shall cause its Affiliates to, cooperate fully with the Buyer
in the preparation of all tax returns for EMG and the Subsidiary relating to
periods ending after the Closing Date and shall provide to the Buyer, or cause
to be provided at the Seller's sole cost and expense, any records and other
information requested by such parties in connection therewith as well as access
to, and the cooperation of, the auditors of the Seller and its Affiliates. After
the Closing, the Seller shall, and shall cause its Affiliates to, cooperate
fully with the Buyer in connection with any tax investigation, audit or other
proceeding relating to EMG or the Subsidiary. The Seller will have all decision
making authority in the preparation of EMG's Tax Returns for all periods ending
on or prior to the Closing. After the Closing, the Buyer shall, and shall cause
its Affiliates to, cooperate fully with the Seller in the preparation of all tax
returns required to be filed by the Seller relating to the Business, EMG or the
Subsidiary and to periods ending on or prior to the Closing Date and shall
provide to the Seller, or cause to be provided at the Buyer's sole cost and
expense, any records and other information requested by such parties in
connection therewith as well as access to, and the cooperation of, the Buyer's
auditors. After the Closing, the Buyer shall, and shall cause its Affiliates to,
cooperate fully with the Seller in connection with any tax investigation, audit
or other proceeding relating to the Business, EMG or the Subsidiary. Any
information obtained pursuant to this Section 6.4 or pursuant to any other
Section hereof providing for the sharing of information or the review of any tax
return or other Schedule relating to taxes shall be subject to Section 4.3
hereof.
Section 6.5 338(h)(10) ELECTION.
(a) The Buyer and the Seller shall join in the making of an election
under Section 338(h)(10) of the Code and any similar provision of state or local
law (the "Section 338(h)(10) Election"). In connection with such Section
338(h)(10) Election, the Buyer and the Seller shall file such documents as may
be required pursuant to Section 1060 of the Code and shall file
31
their respective Tax Returns consistent therewith, which documents and Tax
Returns shall allocate to the fixed assets and inventory acquired by Buyer an
amount equal to the United States Federal adjusted tax basis thereof as of the
Closing Date and the remainder of the purchase price to goodwill or other
intangible assets, provided that no portion of the purchase price shall be
allocated to any noncompetition agreement.
(b) On and after the Closing Date, the Buyer shall indemnify the Seller
for that portion of any increase in its Taxes which results, by virtue of the
Section 338(h)(10) Elections, from the Seller recognizing more ordinary income
and less capital gain than would be the case in the absence of such Section
338(h)(10) Elections and any such increase in Taxes shall be determined taking
into account, among other things, both the increased ordinary income and
decreased capital gain; PROVIDED, HOWEVER, such indemnification obligation of
the Buyer shall be limited to $750,000 (unless the payments required by the next
sentence of this paragraph causes the amount to be paid by the Buyer to the
Seller to exceed $750,000, in which case the Buyer's obligation to the Seller
shall not be capped at $750,000). Any indemnification payment required by the
preceding sentence of this Section 6.5(b) shall be increased by an amount equal
to the increase in Taxes incurred by the Seller as a result of any payment
pursuant to this Section 6.5(b) (including payments under this sentence).
Payment by the Buyer to the Seller of any amount due under this Section 6.5(b)
shall be made within three (3) days following written notice by the Seller that
payment of such amounts to the appropriate Governmental Authority or other
Person is due.
ARTICLE VII - CONDITIONS TO CLOSING
Section 7.1 CONDITIONS TO OBLIGATIONS OF THE SELLER.
(a) The obligations of the Seller to consummate the transactions
contemplated by this Agreement for the Closing shall be subject to the
satisfaction or waiver, at or prior to the Closing, of each of the following
conditions:
(i) REPRESENTATIONS. All of the representations and warranties
made by the Buyer in this Agreement shall have been true in all material
respects as of the date hereof and as of the Closing Date with the same force
and effect as though such representations and warranties had been made as of the
Closing Date, except for changes contemplated by this Agreement, and the Buyer
shall have delivered to the Seller a certificate to such effect dated the
Closing Date and signed by its Secretary.
(ii) COVENANTS. All covenants contained in this Agreement to be
complied with by the Buyer on or before the Closing shall have been complied
with in all respects, except
32
where the failure to so comply would not have a material adverse effect on the
Buyer's ability to perform its obligations under this Agreement, and the Seller
shall have received a certificate of the Buyer to such effect signed by a duly
authorized officer of the Buyer;
(iii) ANTITRUST FILINGS. Any waiting period (and any extension
thereof) under the HSR Act or under any Mexican antitrust statute applicable to
the transactions to be consummated at the Closing shall have expired or been
terminated;
(iv) NO ORDER. No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and has the effect of making the
transactions contemplated by this Agreement for the Closing illegal or otherwise
restraining or prohibiting consummation of such transactions; PROVIDED, HOWEVER,
that the provisions of this Section 7.1(a)(iv) shall not apply unless the Seller
has used its best efforts to have any such order or injunction vacated;
(v) CONSENTS. The Buyer shall have received the authorizations,
orders, approvals and consents of Governmental Authorities and third parties
described in SCHEDULES 3.3(a) and 3.3(b), in form and substance reasonably
satisfactory to the Seller, except where the failure to so receive would not
have a material adverse effect on the Buyer's ability to perform its obligations
under this Agreement;
(vi) ▇▇▇▇▇▇▇ CONSENT AND WAIVER. The Seller shall have received
(i) the written consent to the transfer of the ▇▇▇▇▇▇▇ Agreement to EMG and (ii)
the written waiver from Tongeren Manufacturing Company (and any other party
whose written waiver is required) of the right of first refusal with respect to
the sale by the Seller of any equipment owned by the Seller related to the
manufacture of mercury switches or mercury relays as more fully set forth in the
▇▇▇▇▇▇▇ Agreement;
(vii) TRANSITION SERVICES AGREEMENT. The Buyer shall have executed
and delivered a transition services agreement substantially in the form attached
hereto as Exhibit B;
(viii) SUPPLY AGREEMENT. The Buyer shall have executed and
delivered a supply agreement substantially in the form attached hereto as
Exhibit C;
(ix) TRADEMARK AND TRADE STYLE LICENSE AGREEMENT. The Buyer shall
have executed and delivered a trademark and trade style license agreement
substantially in the form attached hereto as Exhibit E; and
33
(x) OPINION OF THE BUYER'S COUNSEL. The Seller shall have received
the favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel for the Buyer, as to such
matters as the Seller may reasonably request.
Section 7.2 CONDITIONS TO OBLIGATIONS OF THE BUYER.
(a) The obligations of the Buyer to consummate the transactions
contemplated by this Agreement for the Closing shall be subject to the
satisfaction or waiver, at or prior to the Closing, of each of the following
conditions:
(i) REPRESENTATIONS. All of the representations and warranties
made by the Seller in this Agreement shall have been true in all material
respects as of the date hereof and as of the Closing Date with the same force
and effect as though such representations and warranties had been made as of the
Closing Date, except for changes contemplated by this Agreement, and the Seller
shall have delivered to the Buyer a certificate to such effect dated the Closing
Date and signed by its Secretary.
(ii) COVENANTS. All covenants contained in this Agreement to be
complied with by the Seller on or before the Closing shall have been complied
with in all respects, except where the failure to so comply would not have (A) a
Material Adverse Effect or (B) a material adverse effect on the Seller's ability
to perform its obligations under this Agreement, and the Buyer shall have
received a certificate of the Seller to such effect signed by a duly authorized
officer thereof;
(iii) ANTITRUST FILINGS. Any waiting period (and any extension
thereof) under the HSR Act or under any Mexican antitrust statute applicable to
the transactions to be consummated at the Closing shall have expired or been
terminated;
(iv) NO ORDER. No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and has the effect of making the
transactions contemplated by this Agreement for the Closing illegal or otherwise
restraining or prohibiting consummation of such transactions; PROVIDED, HOWEVER,
that the provisions of this Section 7.2(a)(iv) shall not apply unless the Buyer
has used its best efforts to have any such order or injunction vacated;
(v) CONSENTS. The Seller, EMG and the Subsidiary, as applicable,
shall have received the authorizations, orders, approvals and consents of
Governmental Authorities and third parties described in SCHEDULES 2.6(a) and
2.6(b) in form and substance reasonably
34
satisfactory to the Buyer, except where the failure to so receive would not have
(A) a Material Adverse Effect or (B) a material adverse effect on the Seller's
ability to perform its obligations under this Agreement;
(vi) FIRPTA WITHHOLDING. At or prior to the Closing, the Buyer
shall have received from the Seller a "transferor's certificate of non-foreign
status" as provided in the Treasury Regulations under Section 1445 of the Code
in the form attached hereto as Exhibit D;
(vii) SUPPLY AGREEMENT. The Seller shall have executed and
delivered a supply agreement substantially in the form attached hereto as
Exhibit C;
(viii) TRANSITION SERVICES AGREEMENT. The Seller shall have
executed and delivered a transition services agreement substantially in the form
attached hereto as Exhibit B;
(ix) TRADEMARK AND TRADE STYLE LICENSE AGREEMENT. The Seller shall
have executed and delivered a trademark and trade style license agreement
substantially in the form attached hereto as Exhibit E; and
(x) OPINION OF THE SELLER'S COUNSEL. The Buyer shall have received
the favorable opinion of ▇▇▇▇▇▇▇ Procter & ▇▇▇▇ LLP, counsel for the Seller, and
the favorable opinion of Abogados ▇▇▇▇▇ y Asociados, S.C., special Mexican
counsel for the Seller, in each case as to such matters as the Buyer may
reasonably request.
ARTICLE VIII - INDEMNIFICATION AND TERMINATION
Section 8.1 SURVIVAL.
(a) Subject to the limitations and other provisions of this Agreement,
the representations and warranties of the parties hereto contained herein, as
the case may be, shall survive the Closing and shall remain in full force and
effect for a period of eighteen (18) months after the Closing Date PROVIDED,
HOWEVER, that the Seller's representations and warranties set forth in Section
2.1, Section 2.2(a) and Section 2.8 shall not terminate. In addition, Seller's
indemnification obligation with respect to the following matters shall not
terminate: (i) Environmental Liabilities and Costs associated with the Seller's
real property located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ in Chicago, Illinois and (ii)
any claim arising under Section 5 of the ▇▇▇▇▇▇▇ Agreement that the Seller, or
its assignee, has failed to purchase from Tongeren Manufacturing Company the dry
▇▇▇▇ relay and TAP automation tooling, fixtures and equipment set forth on
Exhibit D to the ▇▇▇▇▇▇▇ Agreement.
35
(b) Subject to the limitations and other provisions of this Agreement,
each covenant and agreement of the parties hereto contained herein shall survive
the Closing and shall remain in full force and effect for the shortest of the
following: (i) eighteen (18) months or (ii) until the end of the applicable
period specified elsewhere in this Agreement with respect to such covenant or
agreement.
Section 8.2 [INTENTIONALLY OMITTED]
Section 8.3 INDEMNIFICATION BY THE SELLER.
(a) The Seller agrees, subject to the other terms and conditions of
this Agreement, to indemnify the Buyer and its Affiliates, officers, directors,
employees, agents, successors and assigns (each a "Buyer Indemnified Party")
against and hold them harmless from all Losses (as defined in Section 9.2)
arising out of (i) the breach of any representation or warranty of the Seller
contained herein, (ii) any breach of any covenant or agreement of the Seller
contained herein, (iii) any Environmental Liabilities and Costs associated with
the Seller's real property located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ in Chicago,
Illinois, (iv) any claim arising under Section 5 of the ▇▇▇▇▇▇▇ Agreement that
the Seller, or its assignee, has failed to purchase from Tongeren Manufacturing
Company the dry ▇▇▇▇ relay and TAP automation tooling, fixtures and equipment
set forth on Exhibit D to the ▇▇▇▇▇▇▇ Agreement and (v) the Seller's operation
of the Business prior to the Closing Date other than those liabilities set forth
on the Closing Statement and SCHEDULE 4.8 attached hereto. Anything in Section
8.1 to the contrary notwithstanding, no claim may be asserted nor any action
commenced against the Seller for breach of any representation or warranty
contained herein, unless written notice of such claim or action is received by
the Seller describing in detail the facts and circumstances with respect to the
subject matter of such claim or action on or prior to the thirtieth (30th) day
after the date on which the representation or warranty on which such claim or
action is based ceases to survive as set forth in Section 8.1, and such claim or
action arose on or prior to the date such representation or warranty ceased to
survive, in which case such representation or warranty, will survive as to such
claim until such claim has been finally resolved.
(b) The indemnification obligations of the Seller pursuant to Section
8.3(a) shall not be effective until the aggregate dollar amount of all Losses
(including without limitation the Buyer's expenses of defending and/or settling
any claim or dispute giving rise to such indemnification obligation) that would
otherwise be indemnifiable pursuant to Section 8.3(a) exceeds $250,000 (the
"Threshold Amount"), and then only to the extent such aggregate amount exceeds
the Threshold Amount; PROVIDED, HOWEVER, that the indemnification obligation of
the Seller arising out of the following matters shall be effective and
enforceable by the Buyer without respect to whether the aggregate Losses arising
from such matters exceed the
36
Threshold Amount: (x) any breach by the Seller of Section 2.1(b) of this
Agreement and (y) any claim arising under Section 5 of the ▇▇▇▇▇▇▇ Agreement
that the Seller, or its assignee, has failed to purchase from Tongeren
Manufacturing Company the dry ▇▇▇▇ relay and TAP automation tooling, fixtures
and equipment set forth on Exhibit D to the ▇▇▇▇▇▇▇ Agreement. The
indemnification obligations of the Seller pursuant to Section 8.3(a) shall be
effective only until the dollar amount paid in respect of the Losses (including
without limitation the Buyer's expenses of defending and/or settling any claim
or dispute giving rise to such indemnification obligation) indemnified against
under Section 8.3(a) aggregates an amount equal to ten percent (10%) of the
Final Purchase Price (the "Maximum Amount"); PROVIDED, HOWEVER, that such
limitation on the liability of the Seller shall not apply to, and there shall be
no cap or limit on the liability of the Seller to the Buyer for Losses of the
Buyer arising out of: (i) the breach of Seller's representations and warranties
set forth in Section 2.1(b), Section 2.2(a) and Section 2.8, (ii) any
Environmental Liabilities and Costs associated with the Seller's real property
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ in Chicago, Illinois and (iii) any claim
arising under Section 5 of the ▇▇▇▇▇▇▇ Agreement that the Seller, or its
assignee, has failed to purchase from Tongeren Manufacturing Company the dry
▇▇▇▇ relay and TAP automation tooling, fixtures and equipment set forth on
Exhibit D to the ▇▇▇▇▇▇▇ Agreement. The Seller's obligations hereunder are
effective only after a Buyer Indemnified Party pursues to completion
reimbursement of Losses from all other sources, including, but not limited to,
insurance, indemnity, contribution or other similar payment from third parties.
For purposes of this Section 8.3(b), in computing such individual or aggregate
amounts of claims, the amount of any insurance proceeds and any indemnity,
contribution or other similar payment actually received by the Buyer Indemnified
Parties from any third party with respect thereto shall be deducted from each
such claim.
(c) Payments by the Seller pursuant to Section 8.3(a) shall be limited
to the amount of any liability or damage that remains after deducting therefrom
any insurance proceeds and any indemnity, contribution or other similar payment
actually received by the Buyer Indemnified Parties from any third party with
respect thereto.
(d) A Buyer Indemnified Party shall give the Seller written notice of
any claim, assertion, event or proceeding by or in respect of a third party as
to which such Buyer Indemnified Party may request indemnification hereunder or
as to which the Threshold Amount may be applied as soon as is practicable and in
any event within thirty (30) days of the time that such Buyer Indemnified Party
learns of such claim, assertion, event or proceeding; PROVIDED, HOWEVER, that
the failure to so notify the Seller shall not affect rights to indemnification
hereunder except to the extent that the Seller is actually prejudiced by such
failure. The Seller shall have the right to direct, through counsel of its own
choosing, the defense or settlement of any such claim or proceeding at its own
expense. If the Seller elects
37
to assume the defense of any such claim or proceeding, the Seller shall consult
with the Buyer Indemnified Party and the Buyer Indemnified Party may participate
in such defense, but in such case the expenses of the Buyer Indemnified Party
shall be paid by the Buyer Indemnified Party. The Buyer Indemnified Party shall
provide the Seller with access to its records and personnel relating to any such
claim, assertion, event or proceeding during normal business hours and shall
otherwise cooperate with the Seller in the defense or settlement thereof, and
the Seller shall reimburse the Buyer Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith. If the Seller elects to direct
the defense of any such claim or proceeding, the Buyer Indemnified Party shall
not pay, or permit to be paid, any part of any claim or demand arising from such
asserted liability unless the Seller consents in writing to such payment or
unless the Seller, subject to the last sentence of this Section 8.3(d),
withdraws from the defense of such asserted liability or unless a final judgment
from which no appeal may be taken by or on behalf of the Seller is entered
against the Buyer Indemnified Party for such liability. If the Seller fails to
defend or if, after commencing or undertaking any such defense, the Seller fails
to prosecute or withdraw from such defense, the Buyer Indemnified Party shall
have the right to undertake the defense or settlement thereof, at the Seller's
expense. If the Buyer Indemnified Party assumes the defense of any such claim or
proceeding pursuant to this Section 8.3(d) and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then the Buyer Indemnified Party shall give the Seller prompt
written notice thereof, and the Seller shall have the right to participate in
the settlement or assume or reassume the defense of such claim or proceeding.
(e) The Buyer hereby acknowledges and agrees that, from and after the
Closing, its sole and exclusive remedy with respect to any and all claims
relating to this Agreement, including the Acquired Shares, shall be pursuant to
the indemnification provisions set forth in this Article VIII. In furtherance of
the foregoing and except as specified therein, the Buyer hereby waives, to the
fullest extent permitted under applicable Law, any and all rights, claims and
causes of action relating to the subject matter of this Agreement that they may
have against the Seller arising under or based upon any Law (including, without
limitation, any such rights, claims or causes of action arising under or based
upon common law or otherwise).
(f) Except as set forth in this Agreement, the Seller is not making any
representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of the Buyer, after the consummation of the
transactions contemplated hereby, to rescind this Agreement or any of the
transactions contemplated hereby.
(g) The Seller shall have no liability under any provision of this
Agreement for, and in
38
no event shall the Threshold Amount be applied to any consequential damages. The
Buyer shall take all reasonable steps to mitigate Losses for which
indemnification may be claimed pursuant to this Agreement upon and after
becoming aware of any event that could reasonably be expected to give rise to
any such Losses.
(h) Except to the extent provided to the contrary in Section 8.1(a), no
indemnification shall be payable to a Buyer Indemnified Party with respect to
claims asserted by such Buyer Indemnified Party pursuant to Section 8.3(a) after
the date that is eighteen (18) months after the Closing Date (the
"Indemnification Cut-Off Date").
Section 8.4 INDEMNIFICATION BY THE BUYER.
(a) The Buyer agrees, subject to the other terms and conditions of this
Agreement, to indemnify the Seller and its Affiliates, officers, directors,
employees, agents, successors and assigns (each a "Seller Indemnified Party")
against and hold them harmless from all Losses arising out of (i) the breach of
any representation or warranty of the Buyer contained herein, (ii) any breach of
any covenant or agreement of the Buyer contained herein and (iii) the Buyer's,
EMG's and/or the Subsidiary's operation of the Business on and after the Closing
Date. Anything in Section 8.1 to the contrary notwithstanding, no claim may be
asserted nor may any action be commenced against the Buyer for breach of any
representation or warranty contained herein, unless written notice of such claim
or action is received by the Buyer describing in detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the thirtieth (30th) day after the date on which the representation or
warranty on which such claim or action is based ceases to survive as set forth
in Section 8.1, and such claim or action arose on or prior to the date such
representation or warranty ceased to survive, in which case such representation
or warranty will survive as to such claim until such claim has been finally
resolved.
(b) The indemnification obligations of the Buyer pursuant to Section
8.4(a) shall not be effective until the aggregate dollar amount of all Losses
(including without limitation the Seller's expenses of defending and/or settling
any claim or dispute giving rise to such indemnification obligation) that would
otherwise be indemnifiable pursuant to this Section 8.4(a) exceeds the Threshold
Amount, and then only to the extent such aggregate amount exceeds the Threshold
Amount; PROVIDED, HOWEVER, that any indemnification obligation of the Buyer
pursuant to Section 5.4 and/or Section 6.5 of this Agreement shall be effective
and enforceable by the Seller without respect to whether the aggregate Losses
arising from such matters exceed the Threshold Amount. The indemnification
obligations of the Buyer pursuant to Section 8.4(a) shall be effective only
until the dollar amount paid in respect of the Losses (including without
limitation the Seller's expenses of defending and/or settling any claim or
39
dispute giving rise to such indemnification obligation) indemnified against
under Section 8.4(a) aggregates the Maximum Amount. For purposes of this Section
8.4(b), in computing such individual or aggregate amounts of claims, the amount
of any insurance proceeds and any indemnity, contribution or other similar
payment actually recovered by the Seller Indemnified Parties from any third
party with respect thereto shall be deducted from each such claim.
(c) Payments by the Buyer pursuant to Section 8.4(a) shall be limited
to the amount of any liability or damage that remains after deducting therefrom
any insurance proceeds and any indemnity, contribution or other similar payment
actually recovered by Seller Indemnified Parties from any third party with
respect thereto.
(d) A Seller Indemnified Party shall give the Buyer written notice of
any claim, assertion, event or proceeding by or in respect of a third party as
to which such Seller Indemnified Party may request indemnification hereunder or
as to which the Threshold Amount may be applied as soon as is practicable and in
any event within thirty (30) days of the time that such Seller Indemnified Party
learns of such claim, assertion, event or proceeding; PROVIDED, HOWEVER, that
the failure to so notify the Buyer shall not affect rights to indemnification
hereunder except to the extent that the Buyer is actually prejudiced by such
failure. The Buyer shall have the right to direct, through counsel of its own
choosing, the defense or settlement of any such claim or proceeding at its own
expense. If the Buyer elects to assume the defense of any such claim or
proceeding, the Buyer shall consult with the Seller Indemnified Party, the
Seller Indemnified Party may participate in such defense, but in such case the
expenses of the Seller Indemnified Party shall be paid by the Seller Indemnified
Party. The Seller Indemnified Party shall provide the Buyer with access to its
records and personnel relating to any such claim, assertion, event or proceeding
during normal business hours and shall otherwise cooperate with the Buyer in the
defense or settlement thereof, and the Buyer shall reimburse the Seller
Indemnified Party for all the reasonable out-of-pocket expenses of such Seller
Indemnified Party in connection therewith. If the Buyer elects to direct the
defense of any such claim or proceeding, the Seller Indemnified Party shall not
pay, or permit to be paid, any part of any claim or demand arising from such
asserted liability, unless the Buyer consents in writing to such payment or
unless the Buyer, subject to the last sentence of this Section 8.4(d), withdraws
from the defense of such asserted liability, or unless a final judgment from
which no appeal may be taken by or on behalf of the Buyer is entered against the
Seller Indemnified Party for such liability. If the Buyer fails to defend or if,
after commencing or undertaking any such defense, the Buyer fails to prosecute
or withdraws from such defense, the Seller Indemnified Party shall have the
right to undertake the defense or settlement thereof, at the Buyer's expense. If
the Seller Indemnified Party assumes the defense of any such claim or proceeding
pursuant to this Section 8.4(d) and proposes to settle such claim or proceeding
prior to a final judgment thereon or to forego appeal with respect thereto,
40
then such Seller Indemnified Party shall give the Buyer prompt written notice
thereof and the Buyer shall have the right to participate in the settlement or
assume or reassume the defense of such claim or proceeding.
(e) The Seller hereby acknowledges and agrees that from and after the
Closing, its sole and exclusive remedy with respect to any and all claims
relating to this Agreement shall be pursuant to the indemnification provisions
set forth in this Article VIII. In furtherance of the foregoing and except as
specified therein, the Seller hereby waives to the fullest extent permitted
under applicable Law, any and all rights, claims and causes of action relating
to the subject matter of this Agreement that it may have against the Buyer
arising under or based upon any Law (including, without limitation, any such
rights, claims or causes of action arising under or based upon common law or
otherwise).
(f) Except as set forth in this Agreement, the Buyer is not making any
representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of the Seller, after the consummation of the
transactions contemplated by this Agreement, to rescind this Agreement or any of
the transactions contemplated hereby.
(g) The Buyer shall have no liability under any provision of this
Agreement for, and in no event shall the Threshold Amount be applied to, any
consequential damages. The Seller shall take all reasonable steps to mitigate
Losses for which indemnification may be claimed pursuant to this Agreement upon
and after becoming aware of any event that could reasonably be expected to give
rise to any such Losses.
(h) No indemnification shall be payable to a Seller Indemnified Party
with respect to claims asserted by such Seller Indemnified Party pursuant to
Section 8.4(a) after the Indemnification Cut-Off Date.
Section 8.5 TERMINATION. This Agreement may be terminated:
(a) at any time, by the mutual written consent of the Seller and the
Buyer;
(b) by the Seller, if the Closing shall not have occurred prior to
November 30, 1999; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 8.5(b) will not be available to the Seller if, at the
time of such termination by the Seller, its failure to perform any of its
obligations under this Agreement has resulted in the failure of the Closing to
occur at the time of such termination;
41
(c) by the Seller, upon written notice to the Buyer, upon a material
breach of any representation, warranty or covenant of the Buyer contained in
this Agreement, provided that such breach is not capable of being cured or has
not been cured within thirty (30) days after the giving of notice thereof by the
Seller to the Buyer;
(d) by the Buyer, if the Closing shall not have occurred prior to
November 30, 1999; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 8.5(d) will not be available to the Buyer if, at the
time of such termination by the Buyer, its failure to perform any of its
obligations under this Agreement has resulted in the failure of the Closing to
occur at the time of such termination;
(e) by the Buyer, upon written notice to the Seller, upon a material
breach of any representation, warranty or covenant of the Seller contained in
this Agreement, provided that such breach is not capable of being cured or has
not been cured within thirty (30) days after the giving of notice thereof by the
Buyer to the Seller.
Section 8.6 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.5, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto except as set
forth in Sections 2.17, 3.6, 4.3, and this Article VIII; PROVIDED, HOWEVER, that
nothing herein shall relieve either party from liability for (a) any willful
breach of this Agreement occurring prior to such termination or (b) any breach
arising from facts or circumstances as to which either the Buyer or the Seller,
as the case may be, had Knowledge prior to the date of this Agreement.
Section 8.7 WAIVER. At any time prior to the Closing, the Buyer and the
Seller may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered by the other party pursuant hereto or (c) waive compliance
with any of the agreements of the other party or conditions to its own
obligations contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Waiver of any term or condition of this Agreement by a party shall not
be construed as a waiver of any subsequent breach or waiver of the same term or
condition by such party, or a waiver of any other term or condition of this
Agreement by such party.
ARTICLE IX - GENERAL PROVISIONS
Section 9.1 NOTICES. All notices, requests, claims, demands and other
communications
42
under this Agreement will be in writing and will be deemed given if delivered
personally, sent by overnight courier (providing proof of delivery), or via
facsimile to the parties at the following addresses (or at such other address
for a party as specified by like notice):
(a) if to the Seller, to:
C.P. Clare Corporation
▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
43
with copy to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. Cable, P.C.
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Buyer, to:
Sumida Electric Co., Ltd.
3-6, 3-Chome Nihonbashi
▇▇▇▇▇▇▇▇▇, ▇▇▇▇-▇▇
▇▇▇▇▇ ▇▇▇-▇▇▇▇, ▇▇▇▇▇
Attn: Chief Executive Officer
Facsimile: 011-81-3-3667-3457
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.2 CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) "Acquired Shares" means as specified in the Recitals.
(b) "Acquisition Proposal" means as specified in Section 4.7.
(c) An "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person.
(d) "Agreement" means this Agreement.
(e) "Alternative Procedure" means as specified in Section 6.3.
44
(f) "Arbitrating Accountant" means as specified in Section 1.2(d).
(g) "Benefit Plans" means as specified in Section 2.9.
(h) "Business" means as specified in the Recitals.
(i) "Buyer" means Sumida Electric Co., Ltd.
(j) "Buyer Indemnified Party" means as specified in Section 8.3(a).
(k) "Closing" means as specified in Section 1.3.
(l) "Closing Date" means as specified in Section 1.3.
(m) "Closing Statement" means as specified in Section 1.2(b).
(n) "Code" means as specified in Section 2.9.
(o) "Disputed Items" means as specified in Section 1.2(d).
(p) "EMG" means Clare EMG Inc., a Delaware corporation.
(q) "EMG Employees" means as specified in Section 5.1(a).
(r) "Encumbrance" means any and all easements, covenants, restrictions,
leases, mortgages, liens (including without limitation, environmental and tax
liens), assessments, charges, claims, rights, judgments, encroachments, pledges,
conditional sale agreements, security interests, encumbrances, or other matters
affecting title.
(s) "Environmental Condition" means as specified in Section 2.14.
(t) "Environmental Laws" means as specified in Section 2.14.
(u) "Environmental Liabilities and Costs" means as specified in Section
2.14.
(v) "ERISA" means as specified in Section 2.9.
(w) "Final Purchase Price" means as specified in Section 1.2(b).
45
(x) "GAAP" means as specified in Section 1.2(b).
(y) "Governmental Authority" means as specified in Section 2.6.
(z) "▇▇▇▇▇▇▇ Agreement" means as specified in Section 4.10.
(aa) "HSR Act" means as specified in Section 2.6.
(bb) "Indemnification Cut-Off Date" means as specified in Section
8.3(h).
(cc) "Intellectual Property Rights" means as specified in Section 2.13.
(dd) "IRS" means as specified in Section 2.8(a)(iii).
(ee) "to the knowledge of the Buyer," or to the "Buyer's Knowledge"
means the actual knowledge (and not constructive, imputed or implied knowledge)
on the date hereof and on the Closing Date, as applicable, of those persons
listed on SCHEDULE 9.2(ee) none of whom shall have any personal liability or
obligations regarding such knowledge. The Buyer has not undertaken, nor shall it
have any duty to undertake, any investigation concerning any matter as to which
a representation or warranty is made as to its knowledge.
(ff) "to the knowledge of the Seller," or to the "Seller's Knowledge"
means the actual knowledge (and not constructive, imputed or implied knowledge)
on the date hereof and on the Closing Date, as applicable, of those persons
listed on SCHEDULE 9.2(ff) none of whom shall have any personal liability or
obligations regarding such knowledge. The Seller has not undertaken, nor shall
it have any duty to undertake, any investigation concerning any matter as to
which a representation or warranty is made as to its knowledge.
(gg) "Law" means as specified in Section 2.15.
(hh) "Leased Real Property" means as specified in Section 2.10(b).
(ii) "Losses" of a Person means any and all losses, liabilities,
damages, claims, awards, judgments, costs and expenses (including, without
limitation, reasonable attorneys' fees) actually suffered or incurred by such
Person.
(jj) "March Statement" means as specified in Section 2.4(a).
(kk) "Material Adverse Effect" means any change in, or effect on, EMG
and/or the
46
Subsidiary that is (individually or in the aggregate with any other changes
therein or effects thereon that would be specifically addressed by a
representation or warranty contained in this Agreement but for a "Material
Adverse Effect" exception or qualification) materially adverse to the assets,
liabilities, financial condition or results of operations of EMG and/or the
Subsidiary, other than any such changes or effects resulting from any of the
following (the change in or effect of which shall not constitute or result in
(i) a Material Adverse Effect or (ii) a breach of a representation or warranty
under this Agreement): (A) changes in general (national, regional or local)
economic, regulatory or political conditions or changes in the industry in which
the Business is conducted generally or (B) this Agreement, the transactions
contemplated hereby, or any announcement or indication thereof, or any actions
taken by the Buyer hereunder or in contemplation hereof, or any actions which
the Seller was required to take or permitted to take, hereunder, or any contact
by the Buyer with any of the customers or suppliers, or potential customers or
suppliers, or any of the employees of, EMG and/or the Subsidiary (including any
departure of any such employee).
(ll) "Maximum Amount" means as specified in Section 8.3(b).
(mm) "Net Assets" means as specified in Section 1.2(b).
(nn) "Owned Real Property" means as specified in Section 2.10(a).
(oo) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(pp) "Preliminary Purchase Price" means as specified in Section 1.2(a).
(qq) "Representatives" means as specified in Section 4.3.
(rr) "Review Period" means as specified in Section 1.2(c).
(ss) "Seller" means C.P. Clare Corporation, a Massachusetts
corporation.
(tt) "Seller Indemnified Party" means as specified in Section 8.4(a).
(uu) "Severance Agreements" means as specified in Section 2.5(d).
(vv) "Subsidiary" means as specified in the Recitals.
(ww) "Taxes" means as specified in Section 2.8(b).
47
(xx) "Tax Return" means as specified in Section 2.8(b).
(yy) "Threshold Amount" means as specified in Section 8.3(b).
(zz) "Transfer" means as specified in Section 1.1.
Section 9.3 INTERPRETATION. When a reference is made in this Agreement to
an Article, Section, Schedule or Exhibit, such reference will be to an Article
or Section of, or a Schedule or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they will be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement will refer to this Agreement
as a whole and not to any particular provision of this Agreement. All terms used
herein with initial capital letters have the meanings ascribed to them herein
and all terms defined in this Agreement will have such defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
Section 9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES; SEVERABILITY.
This Agreement (including the documents and instruments referred to herein), and
the confidentiality agreements previously executed between the parties hereto
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement. Notwithstanding anything else contained herein
to the contrary, nothing in this Agreement shall be construed to create any
third party beneficiary rights in any Person who is not a party to this
Agreement. If
48
any term, condition or other provision of this Agreement is found to be invalid,
illegal or incapable of being enforced by virtue of any rule of law, public
policy or court determination, all other terms, conditions and provisions of
this Agreement shall nevertheless remain in full force and effect.
Section 9.6 GOVERNING LAW; VENUE. This Agreement will be governed by, and
construed in accordance with, the internal laws of The Commonwealth of
Massachusetts regardless of the laws that might otherwise govern under
applicable principles of conflict of laws. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
shall be brought against any of the parties in the courts of The Commonwealth of
Massachusetts, Suffolk County, or, if it has or can acquire jurisdiction, in the
United States District Court for the District of Massachusetts, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
Section 9.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party; PROVIDED, HOWEVER, that the Buyer
may assign this Agreement to a directly or indirectly wholly-owned subsidiary
corporation, provided that any such assignment shall not in any way affect or
diminish the Buyer's obligations or liabilities under this Agreement. Any
assignment in violation of the preceding sentence will be void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
Section 9.8 UNDERTAKINGS OF EMG AND THE SUBSIDIARY. The obligations for
performance by EMG or the Subsidiary of certain duties specified herein to be
performed prior to Closing, shall be deemed to be the responsibility of the
Seller insofar as any given obligation is one which the Seller could itself
perform or which EMG or the Subsidiary, as applicable, could perform upon the
direction of the Seller.
[End of Text]
49
IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
C.P. CLARE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
SUMIDA ELECTRIC CO., LTD.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and Chief Executive Officer
