EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of April 11,
2003, is made and entered into by and between ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Corporation, an
Ohio corporation ("Buyer"), and MTS Systems Corporation, a Minnesota corporation
("Seller").
WHEREAS, Seller desires to sell and assign to Buyer, and Buyer desires
to purchase and assume from Seller, on the terms and subject to the conditions
set forth in this Agreement, substantially all of the assets and certain
specific liabilities of the Business (as defined below); and
WHEREAS, for purposes of this Agreement the term "Business" means the
business of Seller's Automation Division, as currently conducted primarily from
Seller's New Ulm, Minnesota location, of selling and manufacturing in New Ulm,
Minnesota (i) motors; (ii) drive amplifiers and controllers intended for motors;
and (iii) custom military amplifiers, including but not limited to the Products
listed on Schedule 1.01(j); and
WHEREAS, as of an even date herewith, Seller and Parker Hannifin
Holding GmbH, a German corporation and a subsidiary of Buyer ("Parker-Europe"),
have entered into the German Share Purchase and Transfer Agreement (the "German
Stock Agreement") pursuant to which ▇▇▇▇▇▇-Europe will acquire Seller's
automation division business in Germany by purchasing all of the outstanding
shares of MTS Systems Holdings for Europe GmbH from Seller (the "Shares").
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements and the conditions set forth in this
Agreement, Buyer and Seller hereby agree as follows:
ARTICLE 1
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
1.01 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, Seller shall, at the Closing (as defined in Section
3.01 hereof), sell, transfer and assign to Buyer, and Buyer shall purchase and
acquire from Seller, all of Seller's right, title and interest, as of the
Closing Date (as defined in Section 3.01 hereof), in all of the assets of Seller
used primarily in the Business, including, but not necessarily limited to, the
following, provided, however, that with respect to trade marks, trade names,
patents and patent applications, Seller shall transfer and assign only those
that are listed on Schedule 1.01(l) (collectively, the "Assets"):
(a) All inventories, including raw materials, work in process, finished
goods, research and development inventory, consigned inventory, packaging and
supplies for the Business which are listed on Schedule 1.01(a) (the
"Inventory");
(b) All prepaid deposits to vendors, prepaid expenses or deposits on
leased personal property paid by Seller for the Business which are listed on
Schedule 1.01(b);
(c) All customer advances and deposits, prepaid contracts, maintenance
fees or installation fees and all similar pre-payments for the Business which
are listed on Schedule 1.01(c);
(d) Seller's interest in the agreements for the leasing of the facility
in New Ulm, Minnesota which are identified on Schedule 1.01(d) (the "Lease");
(e) Seller's interest in all unfilled or uncompleted customer
contracts, commitments or sales orders for the Business which are listed on
Schedule 1.01(e) (the "Contracts");
(f) Seller's interest in all unfilled or uncompleted purchase orders or
commitments for the Business which are listed on Schedule 1.01(f);
(g) Seller's interest in the personal property leases for the Business
which are listed on Schedule 1.01(g);
(h) All contracts or agreements to which the Business is a party,
including warranty agreements, service agreements, garbage disposal, sales rep
agreements, and supply agreements which are listed on Schedule 1.01(h);
(i) All accounts, trade and other receivables of the Business, which
are listed on Schedule 1.01(i) (the "Accounts Receivable");
(j) Seller's rights to all products now made in the Business and
manufactured in New Ulm, Minnesota, including but not limited to the products
listed on Schedule 1.01(j), and including the product designs, engineering
documentation, manufacturing records, and know-how related to those products
(the "Products");
(k) Seller's interest to all license agreements from third parties used
in the Business, which are listed on Schedule 1.01(k);
(l) All trademarks, trade names, patents and patent applications listed
on Schedule 1.01(l);
(m) All software, logos, service marks, content relating exclusively to
the Business that is located at Uniform Resource Locators of the Business listed
on Schedule 1.01(m), logos, slogans, all registrations of and applications to
register the foregoing, inventions, all trade dress, all registered and
unregistered statutory and common law copyrights, all semiconductor maskworks
and registrations therefor, and all other data and information relating
primarily to the Business, whether patentable or not, including without
limitation all know how, trade secrets, confidential information, ideas,
developments, drawings, specifications, bills of material, processes, formulae,
supplier
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lists, marketing information, sales and promotional material, business plans,
test reports, component lists, manuals, instructions, catalogs, all documents
and files (including electronic files) relating primarily to the foregoing and
to the Business, and other intellectual property used primarily in the Business
(together with the trade marks, patents and patent applications listed on
Schedule 1.01(l), the "Intellectual Property") including all rights to damages
for past infringement;
(n) All machinery, tools, warehouse equipment, computers, fixtures,
office equipment, testing equipment (including all related spare parts,
accessories and supplies) and other similar equipment used in the Business,
which are listed on Schedule 1.01(n), including but not limited to linear motor
coil winding machinery and equipment located at Airex Corporation (the
"Equipment");
(o) All vehicles, including Seller's interest in all lease and purchase
agreements relating thereto used in the Business which are listed on Schedule
1.01(o) ("Vehicles");
(p) All permits and governmental approvals and licenses used in the
Business (to the extent they are assignable) which are listed on Schedule
1.01(p);
(q) Advertising and promotional literature and materials, with use of
the name "MTS Automation" and "MTS" included in such literature only as
described in Section 6.03(d);
(r) All of Seller's books, records and other documents relating
exclusively to the Assets of the Business, including, without limitation, all
customer, prospect, inventory records, purchase orders and invoices, sales
orders and sales order log books, customer information, correspondence, product
data, material safety data sheets, price lists, product demonstrations, quotes
and bids (the "Business Records"); and
(s) Current telephone listings exclusively related to the Business.
1.02 Excluded Assets. The purchase of the Assets under Section 1.01
excludes any and all assets not primarily related to the Business, including,
but not limited to, the following assets of Seller as of the Closing Date (the
"Excluded Assets"):
(a) All prepayments for insurance and other prepaid expenses not listed
on Schedule 1.01(b), including without limitation refunds against the same;
(b) All assets used primarily in Seller's business currently conducted
primarily from Seller's Montgomeryville, Pennsylvania location and consisting of
manufacturing, selling and servicing gradient amplifiers;
(c) All assets wherever located used primarily in Seller's business
consisting of manufacturing, selling and servicing custom military amplifiers,
other than those
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assets listed on the Schedules attached to Section 1.01, and other than the
machinery, equipment and inventory previously located in Montgomeryville related
to sales of custom military amplifiers to General Motors of Canada, Universal
and MSI Defense;
(d) Any and all life insurance policies;
(e) Any and all cash or liquid securities of any kind;
(f) All corporate charter documents and minutes books, stock books, tax
returns, schedules, tax work papers and other corporate records of Seller;
(g) All tax refunds against payments made by Seller prior to Closing;
(h) All trademarks, trade names, patents and applications therefor of
Seller not listed on Schedule 1.01(l) and Seller's interest in all license
agreements from third parties not listed on Schedule 1.01(k);
(i) All intercompany accounts; and
(j) All records relating to the employees of the Business.
1.03 Assumed Liabilities. Buyer shall assume, pay, perform in
accordance with their terms or otherwise satisfy, as of and after the Closing
Date, the following liabilities (collectively, the "Assumed Liabilities"):
(a) All accounts and trade payables of the Business which are listed on
Schedule 1.03(a);
(b) The liabilities of Seller for paid time off (which includes
vacation and sick time and also includes the "seed" and the monthly accrual
portions of the paid time off program) and accrued commissions of employees of
the Business;
(c) Seller's obligations under the leases, agreements, contracts and
arrangements which are listed on Schedules 1.01(b), (d), (e), (f), (g), (h) and
(k);
(d) All obligations and liabilities of Seller relating to the
Intellectual Property which is listed on Schedules 1.01(l) and (m), including
any and all obligations for patent maintenance fees and other regulatory
filings;
(e) All responsibility for product warranty arising out of the
Business, including, without limitation, the cost of services and materials of
the Buyer responding to and providing service or materials to any purchaser of a
product manufactured and sold by Seller which product is covered by a valid and
unexpired warranty given by Seller, or imposed by law, prior to the Closing
Date, or given by the Buyer, or imposed by law, after the Closing Date; and
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(f) Any and all liability arising out of Buyer's operation of the
Business or the Assets on or after the Closing Date or specifically identified
on Schedule 1.03(f).
1.04 Excluded Liabilities. Other than the Assumed Liabilities set forth
above in Section 1.03, Seller shall retain, and Buyer shall not assume, nor
shall it be liable for, and nothing contained in this Agreement shall be
construed as an assumption by Buyer of, any liabilities, obligations or
undertakings of Seller of any nature whatsoever, whether accrued, absolute,
fixed or contingent, known or unknown due or to become due, unliquidated or
otherwise, including but not limited to any liability for intercompany accounts,
any liability for stay or retention bonuses of any Employee other than ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, or any liability or obligation of
the Business resulting from workers' compensation claims having a date of
singular and identifiable injury before the Closing Date (claims for
occupational diseases or injuries (those that are not singular and identifiable)
that become manifested after the Closing Date shall be allocated between Buyer
and Seller on a basis proportionate to time employed by each) (the "Retained
Liabilities"). Seller shall be responsible for the Retained Liabilities.
ARTICLE 2
PURCHASE PRICE
2.01 Amount. The total purchase price for the Assets and the Shares
(the "Purchase Price") shall be eleven million seven hundred fifty thousand
Dollars ($11,750,000). If the German Stock Agreement is terminated or the Shares
are not acquired thereunder for any reason, the Purchase Price shall not be
adjusted but rather shall be attributable solely to the transactions
contemplated hereby.
2.02 Manner of Payment. Buyer shall pay the Purchase Price to Seller on
the Closing Date by wire transfer to the Seller account identified by Seller
prior to Closing, it being understood that Buyer shall be making the payment for
the Shares on ▇▇▇▇▇▇-Europe's behalf.
2.03 Allocation Of Purchase Price. As soon as practicable after final
determination of the Purchase Price, the parties shall use their best efforts to
enter into an agreement in accordance with the allocation schedule attached as
Exhibit 2.03 allocating the Purchase Price among the Assets and the Shares after
taking into account the applicable Treasury Regulations and the fair market
value of such items (determined in accordance with an appraisal of the property,
plant and equipment of the Business by Buyer performed as soon as practicable
after the Closing Date). Buyer shall prepare for filing Form 8594 with respect
to the transaction provided for herein pursuant to Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code"), any Treasury Regulations
promulgated thereunder, any other similar provision of the Code and any other
similar, applicable foreign, state or local tax law or regulation. Seller shall
provide information that may be required by Buyer for the purpose of preparing
such Form, execute and file such Form as requested by Buyer and file all other
returns and tax information on a basis that is consistent with such Form
prepared by Buyer.
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ARTICLE 3
CLOSING AND KNOWLEDGE
3.01 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Robins, Kaplan,
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., Minneapolis, Minnesota at 10:00 a.m. on April 11, 2003,
which is referred to herein as the "Closing Date," or at such other place and
such other time as may be mutually agreed, and the Closing shall be deemed
effective as of 11:59 P.M. Central Time on the Closing Date.
3.02 General Procedure. At the Closing, each party shall deliver to the
party entitled to receipt thereof the documents required to be delivered
pursuant to Article 7 hereof and such other documents, instruments and materials
(or complete and accurate copies thereof, where appropriate) as may be
reasonably required in order to effectuate the intent and provisions of this
Agreement. The conveyance, transfer, assignment and delivery of the Assets shall
be effected by Seller's execution and delivery to Buyer of a ▇▇▇▇ of sale
substantially in the form attached hereto as Exhibit A (the "▇▇▇▇ of Sale") and
such other instruments of conveyance, transfer, assignment and delivery as Buyer
shall reasonably request to cause Seller to transfer, convey, assign and deliver
the Assets to Buyer, and the assignment and assumption of the Assumed
Liabilities to Buyer shall be effected by Seller's and Buyer's execution of an
assignment and assumption agreement substantially in the form attached hereto as
Exhibit B (the "Assignment and Assumption Agreement"), and the separate
assignment and assumption agreements in the forms attached hereto as Exhibits H
and I.
3.03 Knowledge. As used in this agreement, the term "Knowledge" means
the actual knowledge after reasonable investigation of a party's executive
officers and the person identified in the applicable section of this Agreement.
3.04 Net Asset Value Calculation; Purchase Price Adjustment.
(a) As of the Closing Date, Buyer shall perform a full closing of the
books of the Business to derive a balance sheet for the Business and a
calculation of the preliminary Net Asset Value (as defined below) based on and
as reflected in such balance sheet, calculated in accordance with GAAP based on
the formula set forth and in a form consistent with the form of Schedule 3.04
("Closing Date Statement"). "Net Asset Value" shall mean the Total Assets minus
Total Liabilities, where "Total Assets" shall include all Assets listed on the
balance sheet of the Business attached hereto as Schedule 3.04 (provided that
all Inventory that exceeds one-year's usage shall be fully reserved), and "Total
Liabilities" shall include all Assumed Liabilities, determined in accordance
with GAAP and consistent with Schedule 3.04. No later than forty-five (45) days
after Closing, Buyer shall deliver to Seller its proposed preliminary Closing
Date
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Statement and preliminary Net Asset Value calculation as of such Closing Date.
No later than one hundred (100) days after the Closing, the Buyer shall prepare
a final Closing Date Statement and a calculation of final Net Asset Value. The
final Net Asset Value shall identify the amount of any pending dispute with
respect to the determination of the preliminary Net Asset Value. The Purchase
Price shall be decreased, dollar-for-dollar, by the amount that the final Net
Asset Value, as agreed to or determined in accordance with Section 3.04(c)
below, is less than an amount equal to the Target Amount, as applicable and more
specifically set forth below in subsection (b). For purposes of this Agreement,
"Target Amount" shall mean $5,710,000.
(b) If the final Net Asset Value is less than $5,710,000, Seller shall
return to Buyer a portion of the Purchase Price equal to the difference between
$5,710,000 and the final Net Asset Value.
(c) Following the Closing, Buyer shall make available such books and
records and access to the New Ulm facility and access to such books and records
relating to the preliminary Closing Date Statement and preliminary Net Asset
Value calculation as Seller may reasonably request. If Seller disagrees with
Buyer's determination of the preliminary Net Asset Value calculation Seller
shall so notify Buyer in writing within 45 days after Seller's receipt of the
preliminary Closing Date Statement, specifying in detail the basis of such
disagreement; provided, however, that if Seller fails to notify Buyer of any
disagreement within such 45-day period, then the determination of the Net Asset
Value as reflected in the preliminary Closing Date Statement shall be final,
conclusive and binding upon the parties.
(d) Seller and Buyer shall negotiate in good faith to resolve any
disagreement related to the Net Asset Value. If any such disagreement cannot be
resolved by the parties within 30 days after receipt of a notice of
disagreement, then the parties shall jointly engage ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or other
mutually agreeable national accounting firm which has no business dealings with
Seller or Buyer (the "Accounting Firm") to act as an arbitrator to resolve as
expeditiously as possible all points of disagreement with respect to the Net
Asset Value. All determinations made by the Accounting Firm with respect to the
Net Asset Value shall be final, conclusive and binding on the parties hereto.
Each party shall be responsible for its own fees and expenses. The party that
does not prevail in such arbitration shall pay all of the fees and expenses of
the Accounting Firm incurred in connection with the resolution of the dispute,
but only if such party's determination of the Net Asset Value is at least twenty
percent (20%) less than the final Net Asset Value, as determined by the
Accounting Firm under this Section 3.04(d); otherwise, each party shall pay its
own fees and expenses and one-half (1/2) of the fees and expenses of the
Accounting Firm.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that, except as set
forth in the Disclosure Schedule delivered by Seller to Buyer on the date hereof
(the "Seller
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Disclosure Schedule") (which Seller Disclosure Schedule sets forth the
exceptions to representations and warranties contained in this Article 4 under
captions referencing the Sections to which such exceptions apply):
4.01 Incorporation and Corporate Power. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Minnesota and has all requisite corporate power and authority and all
material authorizations, licenses, permits and certifications necessary to carry
on the Business as now being conducted and to own, lease and operate the Assets.
4.02 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Seller and no other proceedings on its part are necessary
to authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by Seller and, assuming that this
Agreement is the valid and binding agreement of Buyer, constitutes the valid and
binding obligation of Seller, enforceable in accordance with its terms.
4.03 Authority; No Breach. Seller has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. Except as would not have a material adverse effect on the
transactions contemplated hereby and assuming the receipt of the consents listed
on Schedule 4.04, the execution, delivery and performance of this Agreement by
Seller and the consummation of the transactions contemplated hereby do not
conflict with or result in any breach of any of the provisions of, or constitute
a default under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Seller or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Seller or the Assets are
bound or affected, or any law, statute, rule or regulation or order, judgment or
decree to which Seller or the Assets are subject. There is no lawsuit,
proceeding or investigation pending or, to the Knowledge of Seller, threatened
against Seller which might prevent the consummation of any of the transactions
contemplated by this Agreement. The Knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
applies to this section.
4.04 Consents. No material consent, approval or authorization of any
governmental or regulatory authority or any other party or person is required to
be obtained by Seller in connection with its execution, delivery and performance
of this Agreement or the transactions contemplated hereby (including without
limitation assignment of the Contracts) except as set forth in Schedule 4.04.
The Knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ applies to this section.
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4.05 Title to Properties.
(a) Seller does not own any real property relating to the Business.
Except as set forth in Schedule 4.05(a), the real property demised by the Lease
constitutes all of the real property primarily used or occupied by Seller used
in connection with the Business (the "New Ulm Facility"). The New Ulm Facility
has access, sufficient for the conduct of the Business as now conducted, to
public roads and to all utilities, including electricity, sanitary and storm
sewer, potable water, natural gas and other utilities, used in the operation of
the Business at that location.
(b) The Lease is in full force and effect, and Seller holds a valid and
existing leasehold interest under the Lease for the term of the Lease. Seller
has delivered to Buyer a complete and accurate copy of the Lease. Except as set
forth in Schedule 4.05(b), Seller is not in material default, and no
circumstances exist which, if unremedied, would, either with or without notice
or the passage of time or both, result in such default under the Lease; nor, to
the Knowledge of Seller, is the other party to the Lease in default.
(c) Seller owns good and marketable title to each and all of the
Assets, free and clear of all liens, claims and encumbrances (the
"Encumbrances"), except as set forth in Schedule 4.05(c) and except Encumbrances
which do not materially affect the operation of the Assets.
(d) The Equipment is in good working condition, normal wear and tear
excepted and is fit for its particular use or purpose in the Business. The
Assets represent, in all material respects, substantially all of the assets
which have been necessary for Seller to operate the Business prior to the
Closing.
(e) Seller has no Knowledge of improvements made or contemplated to be
made by any public or private authority, the costs of which are to be assessed
as special taxes or charges against the New Ulm Facility, and there are no
present assessments.
4.06 Tax Matters. For purposes of this Agreement, the term "Taxes"
means all taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated, severance, stamp,
occupation, property, or other taxes, customs duties, fees, assessments, or
charges of any kind whatsoever, including, without limitation, all interest and
penalties thereon, and additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign, upon Seller or any Seller tax affiliate.
As of the Closing Date, in connection with, or relating to, Seller's operation
of the Business:
(a) All material Tax returns required to be filed with any governmental
authority with respect to any Tax period prior to the Closing Date by or on
behalf of
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Seller have been or will be, to the extent required to be filed on or before the
date hereof, filed when due, including extensions, in accordance with all
Applicable Laws;
(b) All such Tax returns are, or will be at the time of filing, true,
complete, and accurate in all material respects;
(c) All material Taxes shown as due and payable on the Tax returns that
have been filed have been timely paid, or withheld and remitted to the
appropriate governmental authority;
(d) Seller is not delinquent in the payment of any material Tax;
(e) Seller has not granted any extension or waiver of the statute of
limitations period applicable to any Tax return, which period (after giving
effect to such extension or waiver) has not yet expired;
(f) Except as set forth in Schedule 4.06(f), there is no material
claim, audit, action, suit, or proceeding now pending or, to Seller's Knowledge,
threatened against or with respect to Seller in respect of any Tax or Tax
return;
(g) Seller has not entered into any agreement or arrangement with any
governmental authority with regard to the Tax liability of Seller;
(h) There is no lien or encumbrance on any of the Assets that arose in
connection with the failure (or alleged failure) to pay any Tax, except for
inchoate liens for Taxes not yet due and payable;
(i) Seller has not participated in or cooperated with an international
boycott within the meaning of Section 999 of the Code nor has been requested to
do so in connection with any transaction or proposed transaction; and
(j) Seller has withheld and paid all material Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third party.
4.07 Contracts.
(a) Except as set forth in Schedule 4.07(a), Seller has performed in
all material respects all obligations required to be performed by it on or
before the date hereof in connection with the Contracts or commitments
constituting Assumed Liabilities and is not in receipt of any claim of default
under any such Contract or commitment. Seller has no Knowledge of any breach or
anticipated breach by any other party to any such Contract or commitment. Prior
to the date of this Agreement, Seller has made available to Buyer a true and
correct copy of each such Contract or commitment, together with all amendments,
waivers or other changes thereto. The Knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
applies to this section.
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(b) There does not exist any agreement, contract or commitment (whether
oral or written) regarding the sale of any goods or services by the Business
except for the Contracts. All Contracts are valid, binding and in full force and
effect.
4.08 Litigation. Schedule 4.08 hereto contains a complete and correct
list of all judgments, decrees, suits, actions, claims, proceedings or
investigations pending, or to the Knowledge of Seller, threatened against the
Seller or involving the Assets or any products or services made, used or sold in
the conduct of the Business of Seller within the last twelve (12) months
including with limitation all claims based upon any theory of tort (including
but not limited to product liability) or contract (including but not limited to
product or service warranty), other than claims involving amounts not in excess
of $10,000. There are no actions, suits, proceedings, orders or investigations
pending or, to the Knowledge of Seller, threatened against Seller, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, relating to the Business, which would have a material adverse effect on
Seller's performance under this Agreement or the consummation of the
transactions contemplated under this Agreement. The Knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇ applies to this section.
4.09 Compliance with Laws; Permits. Except as set forth in Schedule
4.09, Seller has complied in all material respects with all applicable laws,
regulations and other requirements, including, but not limited to, federal,
state, local and foreign laws, ordinances, rules, regulations and other
requirements pertaining to product labeling, consumer products safety, employee
benefits, equal employment opportunity, employee retirement, affirmative action
and other hiring practices, occupational safety and health, workers'
compensation, unemployment and building and zoning codes, which affect the
Business, the Assets or the New Ulm Facility and to which Seller may be subject
(hereinafter, "Applicable Laws"), and no written claims have been filed against
Seller alleging a violation of any such laws, regulations or other requirements.
4.10 Environmental Matters.
(a) Seller, with respect to the Business and the New Ulm Facility, has
been and currently is in material compliance with all applicable Environmental
Laws. Except as would not have a material adverse effect on the Business, there
has been no Release of Hazardous Materials or other violation of Environmental
Laws or any costs arising under or violation of Environmental Laws with respect
to the Business, the Assets or the New Ulm Facility. No material expenditure
will be required in order for Buyer to comply with any Environmental Laws in
effect at the time of the Closing in connection with the operation or continued
operation of the Business or the New Ulm Facility in a manner consistent with
the current operation thereof by Seller.
(b) Seller has not, during its use of the New Ulm Facility, disposed of
any Hazardous Materials in violation of Environmental Laws.
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(c) As used in this Section 4.10, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or
substance as defined in or governed by any federal, state or local law,
statute, code, ordinance, regulation, rule or other requirement
relating to such substance or otherwise relating to the environment or
human health or safety, including without limitation any waste,
material, substance, pollutant or contaminant that might cause any
injury to human health or safety or to the environment or might subject
Seller to any imposition of costs or liability under any Environmental
Law.
(ii) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules, regulations, codes, ordinances, orders,
decrees, directives, permits, licenses and judgments relating to
pollution, contamination or protection of the environment (including,
without limitation, all applicable federal, state, local and foreign
laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to Hazardous
Materials in effect as of the date of this Agreement).
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether
intentional or unintentional, of any Hazardous Material.
4.11 Warranty and Other Claims. Except to the extent of claims in
amounts up to the warranty reserve at September 28, 2002, reflected on the 2002
Financial Statements (as defined in Section 4.15 (a)) (the "Warranty Reserve"),
to the Knowledge of Seller, all Products manufactured or sold by the Business
have in all material respects been in conformity with all Applicable Laws,
contractual commitments and all express and implied warranties. Except for
warranty service provided in the ordinary course of business and claims in
amounts up to the Warranty Reserve, there are no existing claims against Seller,
or to Seller's Knowledge any threatened claims, for Products manufactured or
sold by the Business which are defective or fail to meet any express product
warranties, contract or industry standards, or standards set forth in Applicable
Laws. Seller has provided the Buyer with copies of (i) all product labels,
catalogs, brochures, instruction manuals or other promotional material
describing the Seller's products, and (ii) the Seller's current standard terms
and conditions of purchase and sale (including all product warranties). The
Knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ applies to this section.
4.12 Brokerage. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC, whose fee shall
be the obligation of Seller, no third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Seller.
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4.13 Corporate Records; Business Records. None of the records, systems,
controls, data or information which are material to the operation of the
Business are recorded, stored, maintained, operated or otherwise wholly or
partly dependent upon or held by any means (including any electronic, mechanical
or photographic process, whether or not computerized) which (including all means
of access thereto and therefrom) are not under the exclusive ownership and
direct control of Seller, except to the extent dependent on the availability of
utilities such as electricity, phone or data communications access provided by
third parties. The Business Records are complete and accurate in all material
respects and none of the Business Records material to the current operation of
the Business have been destroyed.
4.14 Intellectual Property.
(a) Seller has made available to Buyer correct and complete copies of
all patents and trademarks and all registrations and applications relating
thereto, as well as all licenses and agreements (as amended to date), listed on
Schedules 1.01(k) and (l), and has made available to Buyer correct and complete
copies of all other written documentation evidencing ownership and prosecution
(if applicable) of each such item. Except as set forth on Schedule 4.14(a), with
respect to each item of Intellectual Property sold to Buyer hereunder: (i)
Seller possesses all right, title and interest, free of any mortgage, lien or
pledge, in and to the item, or has the rights to use such item pursuant to valid
and enforceable license agreements, free and clear of Encumbrances, (ii) the
item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge, (iii) no proceeding is pending or, to the Knowledge of
Seller, threatened which challenges the legality, validity, enforceability, use
or ownership of the item and (iv) other than routine indemnities given to
distributors, sales representatives, dealers and customers, Seller does not have
any current obligations to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item. The
Intellectual Property sold and transferred to Buyer hereunder constitutes all
intellectual property necessary or required to conduct the Business by Buyer as
of the Closing Date. The Knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ applies to
this section.
(b) Each item of Intellectual Property identified in Sections 1.01(k),
(l) and (m) owned or used by Seller immediately prior to the Closing Date will
be owned or available for use by Buyer on substantially similar terms and
conditions immediately subsequent to the Closing Date subject only to the
receipt of the consents set forth on Schedule 4.04, and Seller has taken
reasonable commercial actions to maintain and protect each item of Intellectual
Property material to the Business.
(c) To the Knowledge of Seller, Seller has not in connection with the
Business interfered with, infringed upon, misappropriated or otherwise come into
conflict with any intellectual property rights of third parties, and Seller has
not received any written charge, complaint, claim, demand or notice alleging any
such interference, infringement, misappropriation or violation (including any
claim that Seller must license or refrain from
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using any intellectual property rights of any third party) which has not been
resolved. To the Knowledge of Seller, no third party has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any of the
intellectual property. During the last 5 years, Seller has not, with respect to
the Intellectual Property, received any opinion of counsel concerning the
validity or infringement of any proprietary property of any third party.
(d) Schedule 4.14(d) specifically identifies each material license,
sublicense or agreement pursuant to which Seller uses intellectual property in
the Business that any third party owns. Seller has made available to Buyer
correct and complete copies of all such licenses, sublicenses and other
agreements (as amended to date). With respect to each such license, sublicense
or agreement required to be identified in Schedule 4.14(d) (and assuming the
receipt of required consents, if any): (i) the license, sublicense or other
agreement is enforceable, (ii) to the Knowledge of Seller, following the
Closing, the license, sublicense or other agreement will continue to be
enforceable on substantially similar terms and conditions, (iii) neither Seller,
nor to the Knowledge of Seller, any other party to the license, sublicense or
other agreement is in material breach or default thereof, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit early termination, modification or acceleration thereunder,
(iv) no other party to the license, sublicense or other agreement has repudiated
any provision thereof, (v) to the Knowledge of Seller, the underlying item of
intellectual property is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge, (vi) to the Knowledge of Seller, no proceeding
is pending or threatened which challenges the legality, validity or
enforceability of the underlying item of intellectual property, and (vii) Seller
has not granted any sublicense or similar right with respect to the license,
sublicense or other agreement except for non-exclusive licenses granted in the
ordinary course of business.
(e) Since September 28, 2002, except as set forth in this Agreement or
the contracts, leases or other documents listed in any schedule hereto, Seller
has not, in the conduct of the Business, sold, assigned or granted rights under
any patent, trade name, trademark or copyright, or any application therefor, or
any trade secrets or designs or other proprietary property for any Products
manufactured or sold or services provided by the Business.
4.15 Financial Information.
(a) Attached as Schedule 4.15 are an internally prepared unaudited
balance sheet and unaudited statements of net income for the Business for the
twelve months ended September 28, 2002 (the "2002 Financial Statements"). The
2002 Financial Statements (A) have been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP"), (B) are complete
and correct in all material respects as of the date hereof and (C) except as
indicated therein, reflect all claims against and all debts and liabilities of
the Business and its operations, fixed or contingent, as at the respective dates
thereof which would be required to be reflected or disclosed in financial
statements prepared in accordance with GAAP, and the
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statements of income, included therein fairly present in all material respects
the results of operations of the Business for the periods indicated.
(b) All Accounts Receivable were actually made in the ordinary course
of business and, assuming that Buyer will use its commercially reasonable
efforts to continue the collection of such Accounts Receivable, will be good and
collectible in full in the ordinary course of business, net of reserves and
allowances provided for in the 2002 Financial Statements and the Target Amount.
The Accounts Receivable are not subject to any defense, counterclaim, or
set-off, net of reserves and allowances provided for in the 2002 Financial
Statements.
(c) (i) The amounts shown for inventory on the September 28, 2002
Balance Sheet reflect, and the amounts to be shown for the inventory of Seller
on its books on the Closing Date will reflect, valuations at the lower of cost
or market, and are not and will not be in excess of the values of such inventory
computed in accordance with GAAP applied on a consistent basis, with adequate
provision for obsolescence, shrinkage, excess or slow-moving quantities,
defective materials and deterioration in all material respects. The value of
Inventory shown on the 2002 Financial Statements is true and correct in all
material respects as of the dates indicated therein; (ii) Seller has good and
marketable title to all of its Inventory free and clear of all Encumbrances;
(iii) except as set forth in Schedule 4.15(c)(iii), none of the Inventory is on
consignment; and (iv) the Inventory net of any reserves set forth on the 2002
Financial Statements and the Target Amount for excess and obsolete inventory
consists of inventories of good and merchantable quality and of the kind and
quality regularly and currently used in the Business and usable or saleable in
the ordinary course of business of Seller. Any on-hand balance of Inventory that
exceeds one-year's usage is fully reserved in the 2002 Financial Statements.
4.16 Employee Benefits.
(a) Benefit Plans. Schedule 4.16(a) lists each "employee benefit plan,"
as defined in Section 3(3) of ERISA, maintained with respect to Employees (as
that term is defined in Section 4.17) to which Seller has an obligation to make
contributions with respect to Employees, or for which Seller has any liability
for Employees ("Benefit Plans").
(b) Employee Arrangements. Schedule 4.16(b) lists each material bonus
or other incentive compensation, deferred compensation, salary continuation
during any absence from active employment for disability or other reasons,
severance, sick days, stock award, stock option, stock purchase, tuition
assistance, vacation pay or other employee benefit agreements, policies or
arrangements (other than Benefit Plans or Individual Arrangements), primarily
related to the Business or for which Seller has any liability for Employees
("Employee Arrangements").
(c) Individual Arrangements. Schedule 4.16(c) lists each individual
employment, severance, termination, bonus or other compensation arrangements or
15
agreements with respect to Employees to which Seller is a party or for which
Seller has any liabilities (the "Individual Arrangements").
(d) Certain Benefit Plans. With respect to each Benefit Plan:
(i) True, complete and correct copies of the following
documents, have been made available or delivered to the Buyer by
Seller: (A) the most recent forms 5500 and all schedules thereto; (B)
the most recent IRS determinations letter(s), if applicable; and (C)
the most recent summary plan descriptions.
(ii) that is intended to be qualified under Code Section
401(a) (the "Qualified Plans"), the IRS has issued a favorable
determination letter to the effect that the form of the Qualified Plan
satisfies the requirements of Code Section 401(a) and related sections
of the Code. To the Knowledge of Seller, there are no facts or
circumstances that would jeopardize the qualified status of any
Qualified Plan.
(iii) As of the Closing, full contributions will be made or
accrued with respect to each Benefit Plan that are either required
under the terms thereof or under ERISA or the Code. No "accumulated
funding deficiency" (as defined in ERISA Section 302 or Code Section
412), whether or not waived, exists with respect to any Benefit Plan to
which such rules apply.
(iv) Each Benefit Plan has been administered in accordance
with its terms in all material respects, and each Benefit Plan
complies, and has been administered in accordance with, any applicable
Laws in all material respects, except in each case where the failure so
to administer or comply, individually or in the aggregate, would not
have a material adverse effect. Except as disclosed in Schedule
4.16(d)(iv) no lawsuits, complaints, investigations or proceedings
(other than routine claims for benefits) to or by any person or
governmental authority have been filed or, to the Knowledge of Seller,
are proposed or threatened with respect to any Benefit Plan.
4.17 Labor Matters. Seller has made available to Buyer a complete and
correct list of each current employee of Seller who is employed in the Business
and listed in the attached Schedule 4.17 (the "Employees") and for each such
Employee: his or her name, position or job title, his or her base compensation
and bonus compensation earned in calendar year 2002, and his or her current base
compensation. There has not been during the last five (5) years, nor is there
currently pending or, to Seller's Knowledge, threatened, any activity by
employees of the Seller or by any trade union relating to the representation of
such employees by any trade union nor has there been any strike, work stoppage
or labor troubles involving the employees of the Seller during the last five (5)
years. The Knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ applies to this section.
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4.18 Insurance. Seller has made available to Buyer a complete and
accurate list of all current policies or binders of insurance (showing as to
each policy or binder the carrier, policy number, coverage limits, expiration
dates, annual premiums, deductibles and a general description of the type of
coverage provided and policy exclusions) maintained by Seller and relating to
the Business, its personnel and/or the Assets. All of the Insurance is
"occurrence" based insurance. The insurance is in full force and effect and
sufficient for compliance in all material respects with all requirements of
applicable law and of all Contracts to which Seller is a party. Seller is not in
material default under any of the insurance.
4.19 Absence of Certain Payments. Neither Seller, nor any of its
representatives, nor any other person or entity acting on behalf of any of them,
has with respect to the Business (a) engaged in any activity prohibited by the
United States Foreign Corrupt Practices Act of 1977 or any other similar law,
regulation or decree, directive or order of any governmental authority or (b)
without limiting the generality of the preceding clause, used any corporate or
other funds for unlawful contributions, payments, gifts or entertainment, or
made any unlawful expenditures relating to political activity to officials of
any governmental authority.
4.20 Customers.
(a) Schedule 4.20 lists the top 10 customers of the Business for the
year ended September 28, 2002. No customer of the Business has given Seller
written notice of termination or intent to terminate a material portion of its
business with Seller and Seller is not aware of any customers of the Business
that, within the past one (1) year, have threatened to terminate a material
portion of their business with Seller.
(b) The work substantially completed by Seller prior to the Closing
Date which will require either customer or third party approval or acceptance
but which has not yet received the required customer or third party approval of
acceptance will meet all material requirements and specifications of the
Contract under which such work was completed, as modified through the Closing
Date in all material respects.
4.21 Actions Since September 28, 2002. Since September 28, 2002, except
as set forth in or contemplated by Schedule 4.21, this Agreement or the
contracts, leases or documents listed in any other Schedule hereto, Seller has
not with respect to the Business:
(a) Incurred any obligation or liability or entered into any
transaction, in each case other than in the ordinary course of business;
(b) Satisfied and discharged any lien, or paid any obligation or
liability other than current liabilities included in the September 28, 2002
Balance Sheet or notes thereto and current liabilities incurred since that date
in the ordinary course of business;
17
(c) Made any general wage or salary increase or any increase in
compensation payable or to become payable to any officers or employees, or
entered into any employment contract with any officer or employee, except for
increases made in the ordinary course of business consistent with past
practices;
(d) Mortgaged, pledged, charged or subjected to lien or other
encumbrance any of its property;
(e) Sold or transferred any of its assets or prepaid or cancelled any
debts or claims, except in each case in the ordinary course of business;
(f) Sold, assigned or granted rights under any Intellectual Property;
(g) Knowingly waived any rights of material value;
(h) Acquired any other business or entered into any licensing
arrangement or joint venture;
(i) Become involved or threatened with any labor dispute that has had
or could have a material adverse effect on its business or its financial
condition;
(j) Suffered any unusual loss not in the ordinary course of business;
(k) Suffered any damage or destruction, whether or not covered by
insurance, materially and adversely affecting the Business of Seller or its
properties; or
(l) Experienced any other event or condition of any character which is,
or with the lapse of time or occurrence of such event or condition would be,
adverse to the financial condition, business, assets, properties or operations
of the Business of Seller.
4.22 True, Complete and Correct Documents. All documents provided to
the Buyer by Seller are true, complete and correct copies of the documents they
purport to represent.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that, except as set
forth in the Disclosure Schedule delivered by Buyer to Seller on the date hereof
(the "Buyer Disclosure Schedule") (which Buyer Disclosure Schedule sets forth
the exceptions to the representations and warranties contained in this Article 5
under captions referencing the Sections to which such exceptions apply):
5.01 Incorporation and Corporate Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Ohio,
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with the requisite corporate power and authority to enter into this Agreement
and perform its obligations hereunder.
5.02 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Buyer and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Buyer and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement.
This Agreement has been duly executed and delivered by Buyer and constitutes,
assuming that the Agreement is the valid and binding agreement of Seller, the
valid and binding obligation of Buyer, enforceable in accordance with its terms.
5.03 No Breach. Buyer has the requisite corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
Except as would not have a material adverse effect on the transactions
contemplated hereby, the execution, delivery and performance of this Agreement
by Buyer and the consummation of the transactions contemplated hereby do not
conflict with or result in any breach of any of the provisions of, or constitute
a default under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Buyer or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Buyer is bound or affected,
or any law, statute, rule or regulation or order, judgment or decree to which
Buyer is subject.
5.04 Consents. No material consent, approval or authorization of any
governmental or regulatory authority or any other party or person is required to
be obtained by Buyer in connection with its execution, delivery and performance
of this Agreement or the transactions contemplated hereby.
5.05 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the Knowledge of Buyer, threatened against Buyer,
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would have a material adverse effect on Buyer's
performance under this Agreement or the consummation of the transactions
contemplated under this Agreement.
5.06 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Buyer.
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ARTICLE 6
COVENANTS
6.01 Seller's Covenants. From the Date hereof until the Closing Date:
(a) Seller will conduct the Business only in the usual and ordinary
course of business as heretofore conducted, including, without limitation,
paying all payables in the ordinary course (subject to good faith disputes);
(b) Seller will use reasonable efforts to retain its employees in the
Business and to assist Buyer in entering into employment arrangements with its
employees;
(c) Except as set forth in Schedule 6.01, Seller will not without
consent of Buyer, directly or indirectly, (i) sell, pledge, dispose of or
encumber any of the Assets, except sales of Inventory or finished Products in
the ordinary course of business; or (ii) enter into or propose to enter into, or
modify or propose to modify, any agreement, arrangement or understanding being
assigned to Buyer, except in each case in the ordinary course of business
consistent with past practices. Seller will maintain and keep the Assets and the
New Ulm Facility in as good repair, working order and condition as at present,
except for depreciation due to ordinary wear and tear and damage due to
casualty;
(d) Seller will (i) use commercially reasonable efforts to preserve
intact the Business and Assets and goodwill thereof and maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with the Business; and (ii) confer on a regular and frequent basis
with representatives of Buyer to report operational matters and the general
status of ongoing operations of the Business;
(e) Seller will afford to Buyer and its authorized representatives (the
"Buyer's Representatives") full access at all reasonable times and upon
reasonable notice to the offices, properties, books, records, officers,
employees and other items of the Business and otherwise provide such assistance
as is reasonably requested by Buyer in order that Buyer may have a full
opportunity to make such investigation and evaluation as it shall reasonably
desire to make of the business and affairs of the Business and the Assets. In
addition, Seller will cooperate fully (including providing introductions where
necessary) with Buyer to enable Buyer to contact such third parties, including
major customers, prospective customers, governmental agencies, vendors or
suppliers of the Business, as Buyer deems reasonably necessary;
(f) Seller will use its best efforts to cause the consummation of the
transactions contemplated by this Agreement in accordance with the terms and
conditions hereof and applicable law;
(g) Seller will promptly inform Buyer in writing of any variances from
the representations and warranties contained in Article 4 hereof;
20
(h) Seller will not, without the consent of Buyer, (a) increase any
salaries of or award any bonus to any Employees, except in connection with
regularly scheduled annual salary reviews or bonus determination dates, (b)
discount any Accounts Receivable, or (c) change its methods of accounting for
the Business;
(i) Seller will perform in all material respects obligations to be
performed under the Contracts;
(j) Seller will use its best efforts to obtain all of the consents
required to transfer the Assets or otherwise required under this Agreement.
However, this Agreement will not constitute an agreement to assign or transfer
any interest in any instrument, contract, lease, permit or other agreement or
arrangement of the Seller or any claim, right or benefit arising thereunder or
resulting therefrom, if an assignment or transfer without the consent of a third
party would constitute a breach or violation thereof or adversely affect the
rights of Buyer or Seller. If a consent of a third party that is required to
assign any instrument, contract, lease, permit, or other agreement or
arrangement or any claim, right, or benefit arising thereunder or resulting
therefrom, is not obtained prior to the Closing, or if an attempted assignment
would be ineffective or would adversely affect any interest of Buyer or Seller,
Seller will at its own expense cooperate with Buyer to obtain such consent
within three (3) months of the Closing, or in any other reasonable arrangement
to provide that Buyer will receive the interest of Seller in the benefits under
any such instrument, contract, lease, permit, or other agreement or arrangement
and that Buyer will undertake Seller's obligations thereunder; and
(k) Nonsolicitation of Employees. During the twelve (12) month period
commencing on the Closing Date, other than ▇▇▇▇ ▇▇▇▇▇▇▇▇, Seller agrees not to
hire any individuals who were employees of or assigned to the Business on or
during the six-month period preceding the Closing Date without Buyer's prior
written consent.
6.02 Buyer's Covenants. From the date hereof until the Closing Date:
(a) Buyer will use its best efforts to cause the consummation of the
transactions contemplated by this Agreement in accordance with the terms and
conditions hereof and applicable law; and
(b) Buyer will promptly inform Seller in writing of any variances from
the representation and warranties contained in Article 5 hereof.
6.03 Additional Covenants.
(a) Employees and Service Credit.
21
(i) Offer of Employment. Buyer agrees to offer immediate
employment to all of the Employees as of the Closing Date on terms and
conditions comparable to similarly situated employees of Buyer.
(ii) The Parties' Responsibilities. On and after the Closing
Date, Buyer shall be solely responsible for the terms and conditions of
employment of all Employees and for any change thereof. Seller shall
remain solely responsible for any and all liabilities, obligations and
claims arising as of or prior to the Closing Date which relate to the
Employees' employment with Seller, including any such claims that may
first become known after the Closing Date.
(iii) Employee Benefits. Effective as of the Closing Date, the
Buyer shall make available to the Employees and their eligible
dependents employee welfare benefit plans, as that term is defined in
ERISA Section 3.1 (the "Buyer Welfare Plans") and certain employee
pension benefit plans, as that term is defined in ERISA Section 3.2
(the "Buyer Retirement Plans") and other employment arrangements on the
terms described below.
(iv) Service Credit. If and to the extent the Employees are
eligible to participate in any Buyer Retirement Plan and Buyer Welfare
Plan under their respective terms, the Employees shall be given credit
under such Plans for all service prior to the Closing Date with Seller
and for all service with the Buyer or any Affiliate of the Buyer prior
to the time such Employees become participants in the Buyer Welfare
Plans and the Buyer Retirement Plans. Such credit for service shall be
given for all purposes for which such service is either taken into
account or recognized (including, without limitation, the satisfaction
of any waiting periods under the Buyer Welfare or Retirement Plans);
provided, however, that in the case of the Buyer Retirement Plans,
service shall be credited for vesting purposes only.
(v) Vacation. From and after the Closing Date, the Employees
shall be entitled to annual paid vacation entitlement comparable to
what Buyer provides comparably situated employees, with credit for
vacation purposes for all service recognized by Seller prior to the
Closing Date.
(vi) Incentive Compensation and Bonuses. The Seller shall be
liable, responsible and obligated for the payment of all incentive
compensation and bonuses of the Employees up to the Closing Date in
accordance with the terms of the applicable plans providing for such
incentive compensation and bonuses from Seller.
(b) Seller Retirement Plans. Effective as of the Closing Date, the
Employees shall cease participation and shall cease to accrue any benefits under
Seller's retirement savings plan ("Seller's Defined Contribution Plan"). As of
the Closing Date, Seller shall fully vest all participating Employees in their
accrued benefits under the Seller's Defined Contribution Plan. To the extent
that following the Closing, the Buyer sponsors a defined contribution plan
("Buyer Defined Contribution Plan"), and one or
22
more Employees elect to rollover or transfer their accounts under any Seller
Defined Contribution Plan to the Buyer Defined Contribution Plan, the Buyer
shall cause the Buyer Defined Contribution Plan to accept a direct rollover (as
defined in Code section 401(a)(31)) of any such Employees' accounts in the
Seller Defined Contribution Plan. Any such rollover shall be in cash, except
that Buyer's Defined Contribution Plan shall accept a rollover of any existing
plan loan held within the Employee's account under Seller's Defined Contribution
Plan.
(c) Seller Welfare Benefits.
(i) Dates of Coverage; Deductibles; Payment of Claims.
Coverage for all Employees and their respective eligible dependents
under the welfare benefit plans (as defined in ERISA Section 3(1))
maintained for the benefit of Employees (the "Seller Welfare Plans")
shall terminate as of the Closing Date. The Buyer Welfare Plans shall
provide coverage and benefits to such Employees (and the eligible
dependents of such Employees) beginning as of the Closing Date. The
Employees shall be entitled to apply deductibles and out-of-pocket
payments expended for covered medical and dental expenses under the
Seller Welfare Plans in the plan year in which the Closing Date occurs
to the deductibles and out-of-pocket maximums under the Buyer Welfare
Plans for the Buyer's plan year which ends with or after the plan year
of the Seller Welfare Plan. The Seller Welfare Plans shall be liable
for claims for medical or dental services rendered to Employees (and
the eligible dependents of such Employees) on or prior to the Closing
Date (whether or not reported at such date), and the Buyer Welfare
Plans shall be liable for any claims for medical or dental services
rendered to Employees (and the eligible dependents of such Employees)
after the Closing Date.
(ii) Waiver of Certain Limitations. No pre-existing condition
limitations, exclusions or waiting periods applicable with respect to
life and accidental death and dismemberment insurance, disability,
sickness and accident and medical benefits under the Buyer Welfare
Plans shall apply to Employees to the extent that such limitations,
exclusions or waiting periods exceed those in effect under the Seller
Welfare Plans as of the Closing Date.
(iii) COBRA. Seller and the Seller Welfare Plans shall retain
the obligation to provide continuation coverage under COBRA for any
former employees of the Business who had a qualifying event on or prior
to the Closing Date; provided, however, that the Buyer and the Buyer
Welfare Plans shall assume the obligation to provide continuation
coverage under COBRA for any qualifying beneficiary who elected COBRA
on or prior to the Closing Date and who is a qualifying beneficiary as
a result of being a covered dependent of an Employee.
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(iv) Severance. Each Employee terminated by Buyer within the
60-day period following the Closing shall be entitled to severance
payments from Buyer equal to an amount calculated under Seller's
severance policy.
(v) WARN Act Compliance. Buyer agrees that for purposes of the
Worker Adjustment and Retraining Notification Act ("WARN") and
applicable state law, (a) the Employees shall become employees of Buyer
on the Closing Date, and (b) Buyer assumes all responsibility for any
60-day advance WARN notice with regard to any layoffs by Buyer
following the Closing. Buyer further agrees that to the extent it lays
off (or refuses to hire) employees after the Closing who may be
aggregated with employees laid off by Seller within ninety (90) days
prior to the Closing, and the sum total of all such layoffs by Buyer
and Seller constitutes a mass layoff or plant closing under WARN, Buyer
assumes responsibility for WARN penalties, if any, arising out of such
layoffs due to failure to provide 60 days' notice to any persons who
are entitled to such notice. Seller agrees to distribute, as agent for
Buyer, all WARN notices requested by Buyer prior to the Closing.
Schedule 6.03 sets forth the number of employees of the Business laid
off by Seller during the 90-day period prior to the date of this
Agreement.
(d) Use of Seller's Name. Some of the packaging materials, sales
literature and inventory described in Section 1.01(a) and those to be acquired
by ▇▇▇▇▇▇-Europe under the German Stock Agreement have been imprinted with
Seller's name and logo which are exclusively Seller's intellectual property not
sold to Buyer under this Agreement. Seller hereby grants to Buyer, for a period
commencing on the Closing Date and expiring on the six-month anniversary of the
Closing Date, a non-transferable, non-renewable, non-assignable, non-exclusive,
royalty-free right and license to use and reproduce the "MTS" trade ▇▇▇▇ (the
"MTS ▇▇▇▇") in a derivative form that clearly identifies the source of the
Product as being other than from Seller (a "Derivative ▇▇▇▇") solely in
connection with the Business and, after the consummation of the transactions
contemplated by the German Stock Agreement, in connection with the business
being sold under the German Stock Agreement. Prior to any use of any such
Derivative ▇▇▇▇, Buyer shall provide Seller with an example of the proposed use
the MTS ▇▇▇▇ and shall obtain Seller's prior written consent to use the proposed
Derivative ▇▇▇▇. Seller shall have sole discretion in how the MTS ▇▇▇▇ is used
and the appearance of the MTS ▇▇▇▇ as it relates to a particular Derivative ▇▇▇▇
and such use by Buyer shall at all times conform to Seller's policies on proper
trademark usage. Buyer shall properly identify the MTS ▇▇▇▇ as a registered
trademark of Seller. Buyer shall also be given a reasonable period of time, not
to exceed one (1) year after the Closing Date, in which to sell inventory
including such MTS Marks in their current form and to use up current labels,
containers and promotional materials bearing such MTS ▇▇▇▇. Buyer has no
ownership right of any kind to the MTS ▇▇▇▇ and shall not have the right to
subject the MTS ▇▇▇▇ to any encumbrance, pledge or lien. Buyer shall indemnify
and hold harmless Seller from and against any and all claims, losses, costs or
liabilities, asserted against, resulting to, imposed upon, or incurred or
suffered by Seller, directly or indirectly, as a
24
result of or arising from a breach by Buyer of this Section 6.03(d) or from
usage by Buyer of the MTS ▇▇▇▇ not in accordance with Seller's written approval.
(e) Transition Assistance. From the date hereof until ninety (90) days
after the Closing Date, each party will use commercially reasonable efforts,
upon the request of the other party, to aid each other in the transition of (i)
the Business to Buyer, and (ii) the replacement and termination of services
previously provided by the Business to Seller.
(f) Intercompany Accounts. Seller agrees to settle and pay all
inter-company accounts in any way related to the Business prior to Closing.
6.04 Non-Competition.
(a) Non-Compete. Subject to Sections 6.04(b) and 6.04(c) below, for a
period of five (5) years from and after the Closing Date, Seller will not,
directly or indirectly, anywhere in the world, engage in the business of
manufacturing and selling Products or other identical products.
(b) Exclusions from Non-Compete. The foregoing shall not prohibit
Seller from:
(i) Engaging in the business of manufacturing and selling
gradient amplifiers as currently conducted from Seller's
Montgomeryville, Pennsylvania location (the "Pennsylvania Operations");
(ii) Selling systems and products which incorporate as
components any of the Products or other identical products;
(iii) Selling Products or other identical products as service
or replacement parts for Seller's systems or other products which
incorporate them;
(iv) Continuing the business of its divisions other than the
Automation Division, which may include the manufacturing and selling of
system components such as amplifiers or controllers intended for
applications other than automation applications of the Business;
(v) Investing in funds or partnerships which in turn invest in
companies that engage in a business which the Business conducts as of
the Closing Date, so long as Seller does not exercise control over such
investment decisions;
(vi) Owning and disposing of the Excluded Assets and
satisfying its obligations with respect to the Excluded Liabilities; or
(vii) Acquiring up to five (5%) of the outstanding voting
securities of any corporation or other entity principally engaged in
the business conducted by the
25
Business on the Closing Date which is listed on a national securities
exchange or the Nasdaq Stock Market or whose securities are regularly
traded in the over-the-counter market.
(c) Further Exclusions. If, at any time, substantially all of the
assets or voting power of Seller is sold to or acquired by a third party, such
third party purchaser shall not be bound by this Section 6.04 with respect to
the business and operations of such third party purchaser independent of Seller.
Further, any purchaser of Seller's Pennsylvania Operations shall not be bound by
the Seller's non-compete obligations contained in this Section 6.04.
(d) Enforceability. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this subsection is invalid
or unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(e) Equitable Relief. Each party acknowledges that (i) the restrictions
contained in this Section 6.04 are necessary, fundamental and required for the
protection of the Business in the hands of Buyer and (ii) a remedy at law for
any breach by any party of the provisions of this Section will be inadequate and
that any breach of these provisions will cause irreparable injury to Buyer. Each
party hereby agrees that Buyer shall be entitled to injunctive relief in case of
any breach, without limiting any other relief to which Buyer may be entitled at
law or in equity or under this Agreement or otherwise. The parties obligations
under this Section are in addition to, and not in lieu of, any other obligations
imposed under applicable law.
6.05 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Article 8, neither Seller nor any of its representatives
shall, directly or indirectly, (i) solicit, initiate or encourage the submission
of any proposal by any person or entity with respect to, or which includes, a
purchase of all or any significant portion of the assets of the Business, or any
other transaction that would involve a change of ownership or control of any of
the Assets, other than with respect to assets in the ordinary course of business
and in each case other than as part of a sale of all or substantially all of the
assets or outstanding stock of Seller as a whole ("Acquisition Proposal"), or
(ii) participate in any discussions or negotiations regarding, or furnish to any
person or entity any information with respect to, or take any action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal.
6.06 Environmental Liabilities. Seller shall retain all liability for
and shall indemnify and hold harmless Buyer from and against any and all claims,
costs or
26
liabilities, asserted against, resulting to, imposed upon, or incurred or
suffered by Buyer, directly or indirectly, as a result of or arising from a
Release or presence of any circumstances or facts causing or relating to
Hazardous Materials in soils, surface water or groundwater in, on or under the
real property related to the Business, violation of or noncompliance with
Environmental Laws, or otherwise resulting from the operation of the Business,
prior to the Closing Date. Buyer shall retain all liability for and shall
indemnify and hold harmless Seller from and against any and all claims, costs or
liabilities, asserted against, resulting to, imposed upon, or incurred or
suffered by Seller, directly or indirectly, as a result of or arising from a
Release or presence (provided that such presence did not exist prior to the
Closing Date) of any circumstances or facts causing or relating to Hazardous
Materials in soils, surface water or groundwater in, on or under the real
property related to the Business, violation of or noncompliance with
Environmental Laws, or otherwise resulting from the operation of the Business,
after the Closing Date.
6.07 OFCCP Audit. Seller shall retain all liability for and shall
indemnify and hold harmless Buyer from and against any and all claims, costs or
liabilities, asserted against, resulting to, imposed upon, or incurred or
suffered by Buyer, directly or indirectly (i) resulting from the OFCCP audit of
the New Ulm Facility (the "OFCCP Audit") and additional wages payable for all
periods ending on or prior to the Closing Date as a result of any retroactive
pay adjustment, or (ii) any penalties imposed in connection with the OFCCP Audit
prior to the Closing Date; provided, however, that Buyer shall be liable for any
such additional wages payable for post-Closing periods and any such penalties to
the extent the same relate to periods following the Closing Date or are imposed
as a result of the actions of Buyer following the Closing Date, including
without limitation a failure by Buyer to implement any adjustments or actions
required or requested in connection with the OFCCP Audit, and Buyer shall
indemnify and hold harmless Seller against any and all claims, costs or
liabilities, asserted against, resulting to, imposed upon, or incurred or
suffered by Seller, directly or indirectly, in connection therewith.
6.08 Inter-Company Accounts. Included in the inter-company accounts
described in Section 5.04(b)(i) of the German Stock Agreement is a loan by
Seller to MTS Systems Holdings for Europe GmbH, which will be repaid prior to
the closing of the transactions contemplated by the German Stock Agreement. If
the payment by MTS Systems Holdings for Europe GmbH in satisfaction thereof is
required to be repaid by Seller to MTS Systems Holdings for Europe GmbH for any
legal reason (including but not limited to equitable subordination or
preference-type claims), Buyer shall indemnify and hold harmless Seller against
any and all losses, damages and expenses resulting therefrom.
27
ARTICLE 7
CONDITIONS TO CLOSING
7.01 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transaction contemplated by this Agreement is subject to
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article 4 hereof
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties, except
that any such representation or warranty made as of a specified date shall only
need to have been true on and as of such date;
(b) Seller shall have performed in all material respects all of the
covenants and agreements required to be performed and complied with by it under
this Agreement prior to the Closing;
(c) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Buyer of all or a material portion of the Assets, or
to compel Buyer or any of its subsidiaries to dispose of or to hold separately
all or a material portion of the Assets, as a result of the transactions
contemplated hereby, (iii) seeking to invalidate or render unenforceable any
material provision of this Agreement, or (iv) otherwise relating to and
materially adversely affecting the transactions contemplated hereby;
(d) Airex shall have executed and delivered to Buyer the License
Agreement between Buyer and Airex, in substantially the form attached hereto as
Exhibit C;
(e) The New Ulm Economic Development Corporation and the City of New
Ulm shall have executed and delivered the Assignment of Third Party Lease, in
substantially the form attached hereto as Exhibit D (the "Assignment of Third
Party Lease") and the employment commitment pursuant to Section 7.3 of the
Development Agreement, dated November 29, 2000, by and between the City of New
Ulm, Minnesota and the New Ulm Economic Development Corporation and consented to
by Seller (the "Development Agreement") shall have been waived or reduced to a
maximum of 55;
(f) On the Closing Date, Seller shall have delivered to Buyer all of
the following:
28
(i) A certificate of the Chief Executive Officer or a Vice
President of Seller, dated the Closing Date, stating that the
conditions precedent set forth in subsections (a) and (b) above have
been satisfied;
(ii) The ▇▇▇▇ of Sale and such other instruments of
conveyance, transfer, assignment and delivery as Buyer shall have
reasonably requested pursuant to Section 3.02 hereof, each duly
executed by Seller;
(iii) The Assignment and Assumption Agreement, duly executed
by Seller;
(iv) The Assignment of Third Party Lease, duly executed by
Seller;
(v) Resolutions of the Board of Directors of Seller
authorizing the transactions contemplated hereby, certified by the
Secretary or an Assistant Secretary of Seller;
(vi) The Supply Agreement in substantially the form attached
hereto as Exhibit E, duly executed by Seller (the "Supply Agreement");
(vii) The Termination Agreement in substantially the form
attached hereto as Exhibit F (the "Termination Agreement"), duly
executed by Seller and Airex, terminating the License Agreement and the
Consulting Agreement, each dated December 11, 1998, between Seller and
Airex;
(viii) The German Stock Agreement in the form attached hereto
as Exhibit G, duly executed by Seller;
(ix) A duly executed assignment to and assumption by Buyer, in
substantially the form attached hereto as Exhibit H (the "Patent
License Assignment and Assumption Agreement"), to the Patent License
Agreement, dated March 31, 2003, by and between Seller and Hitachi
Medical Corporation;
(x) A duly executed assignment to and assumption by Buyer, in
substantially the form attached hereto as Exhibit I (the "PCI
Assignment and Assumption Agreement"), to the Transitional Services
Agreement, dated March 31, 2003, by and between Seller and Performance
Controls, Inc.;
(xi) The New Ulm Economic Development Corporation shall have
executed and delivered the Option to Purchase Real Estate, in
substantially the form attached hereto as Exhibit J;
(xii) The New Ulm Transitional Services Agreement in the form
attached hereto as Exhibit K (the "New Ulm Transition Agreement"), duly
executed by Seller; and
29
(xiii) The European Transitional Services and Supply Agreement
in the form attached hereto as Exhibit L (the "European Transition
Agreement"), duly executed by Seller.
7.02 Conditions to Seller's Obligations. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article 5 hereof
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties, except
that any such representation or warranty made as of a specified date shall only
need to have been true on and as of such date;
(b) Buyer shall have performed in all material respects all of the
covenants and agreements required to be performed and complied with by it under
this Agreement prior to the Closing;
(c) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Buyer of all or a material portion of the Assets, or
to compel Buyer or any of its subsidiaries to dispose of or to hold separately
all or a material portion of Assets, as a result of the transactions
contemplated hereby, (iii) seeking to invalidate or render unenforceable any
material provision of this Agreement, or (iv) otherwise relating to and
materially adversely affecting the transactions contemplated hereby;
(d) Buyer shall have paid, by wire transfer, the Purchase Price
required by Section 2.01 hereof;
(e) The New Ulm Economic Development Commission and the City of New Ulm
shall have executed and delivered the Assignment of Third Party Lease and the
employment commitment pursuant to Section 7.3 of the Development Agreement shall
have been waived or reduced to a maximum of 55;
(f) Airex shall have executed and delivered the Termination Agreement;
(g) On the Closing Date, Buyer shall have delivered to Seller all of
the following:
30
(i) A certificate of the Chief Executive Officer or a Vice
President of Buyer, dated the Closing Date, stating that the conditions
precedent set forth in subsections (a) and (b) above have been
satisfied;
(ii) All consents required under Buyer's material agreements
necessary for Buyer to consummate the transactions contemplated by this
Agreement;
(iii) The ▇▇▇▇ of Sale and the Assignment and Assumption
Agreement, duly executed or acknowledged by Buyer, as applicable;
(iv) The Assignment of Third Party Lease, duly executed by
Buyer;
(v) Resolutions of the Board of Directors of Buyer authorizing
the transactions contemplated hereby, certified by the Secretary or an
Assistant Secretary of Buyer;
(vi) The German Stock Agreement, duly executed by
▇▇▇▇▇▇-Europe;
(vii) The Patent License Assignment and Assumption Agreement,
duly executed by Buyer;
(viii) The PCI Assignment and Assumption Agreement, duly
executed by Buyer;
(ix) The Supply Agreement, duly executed by Buyer;
(x) The New Ulm Transition Agreement, duly executed by Buyer;
and
(xi) The European Transition Agreement, duly executed by
Buyer.
ARTICLE 8
TERMINATION
8.01 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) By the mutual consent of Buyer and Seller;
(b) By either Buyer or Seller, if there has been a material breach of
any representation, warranty, covenant or agreement on the part of the other set
forth in this Agreement, which breach shall not have been cured or waived prior
to Closing;
(c) By either Buyer or Seller, if the Closing has not occurred on or
prior to December 31, 2003; provided, however, that neither party shall be
entitled to terminate this Agreement pursuant to this Section 8.01(c) if such
party's breach of this Agreement
31
has prevented the consummation of the transactions contemplated by this
Agreement at or prior to such time.
8.02 Effect of Termination. In the event of termination of this
Agreement by either Buyer or Seller as provided in Section 8.01, this Agreement
shall become void and there shall be no liability on the part of either Buyer or
Seller, except with respect to breaches of this Agreement prior to the time of
such termination.
ARTICLE 9
SURVIVAL; INDEMNIFICATION
9.01 Survival of Representations, Warranties and Covenants. The
representations and warranties contained in Article 4 and Article 5 hereof shall
survive, without regard to any investigation of the parties, for eighteen (18)
months from the Closing Date provided, however, that the (a) representations and
warranties set forth in Sections 4.01, 4.02, 4.03, 4.05(c), 5.01, 5.02 and 5.03
shall survive in perpetuity, (b) the representations and warranties set forth in
Section 4.06 (Taxes) shall survive the Closing until thirty (30) days after the
expiration of all applicable statutes of limitation, as extended, shall have
expired and (c) the representations and warranties set forth in Section 4.10
(Environmental) shall survive the Closing for a period of ten (10) years after
the Closing Date.
9.02 Indemnification by Seller. Subject to Section 9.05 of this
Agreement, Seller agrees to indemnify in full Buyer and its subsidiaries and
their respective officers, directors, employees, agents and stockholders
(collectively, the "Buyer Indemnified Parties") and hold them harmless against
any loss, liability, deficiency, damage, expense or cost (including reasonable
legal expenses) (collectively, "Losses"), which Buyer Indemnified Parties may
suffer, sustain or become subject to, as a result of (i) any breach of the
representations and warranties of Seller contained in this Agreement or the
German Stock Agreement, (ii) any breach of, or failure to perform, any covenant
or agreement of Seller contained in this Agreement or the German Stock
Agreement, including, but not limited to, failure to pay or otherwise discharge
any Retained Liabilities; (iii) the conduct of the Business at any time on or
prior to the Closing Date including, but not limited to, any proceeding against
Seller and any litigation or similar matter arising out of such conduct, whether
or not described or required to be described on a schedule to this Agreement,
except to the extent that the Loss arises from or relates to one or more of the
Assumed Liabilities of Buyer; (iv) any liability, payment or obligation in
respect of any Taxes owing by Seller of any kind or description (including
interest and penalties with respect thereto) for all periods on or before
Closing related to the Business; (v) any employee benefit plan maintained by
Seller for the employees of the Business prior to the Closing; and (vii)
warranty claims for products manufactured by the Business prior to the Closing
to the extent such claims exceed the warranty reserve set forth on the Closing
Statement.
9.03 Indemnification by Buyer. Subject to Section 9.05 of this
Agreement, Buyer agrees to indemnify in full Seller and its officers, directors,
employees, agents
32
and stockholders (collectively, the "Seller Indemnified Parties") and hold them
harmless against any Losses which any of Seller Indemnified Parties may suffer,
sustain or become subject to as a result of (i) any breach of the
representations and warranties of Buyer contained in this Agreement and any
breach of the representations and warranties of ▇▇▇▇▇▇-Europe contained in the
German Stock Agreement, (ii) any breach of, or failure to perform, any covenant
or agreement of Buyer contained in this Agreement, including, but not limited
to, failure to pay, perform or otherwise discharge the Assumed Liabilities, and
any breach of, or failure to perform, any covenant or agreement of ▇▇▇▇▇▇-Europe
contained in the German Stock Agreement; (iii) the conduct of the Business by
Buyer at any time following the Closing Date, including, but not limited to, any
proceeding against Buyer and any litigation or similar matter arising out of
such conduct, except to the extent the Loss arises from or relates to one or
more Retained Liabilities; (iv) any liability, payment or obligation in respect
of any Taxes owing by Buyer of any kind or description (including interest and
penalties with respect thereto) after Closing related to the Business; and (v)
any employee benefit plan maintained by Buyer for the Employees.
9.04 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Buyer Indemnified Party" or "Seller Indemnified Party," as
applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Claim"), the Notifying Party shall give the Indemnifying Party reasonably
prompt notice thereof. The failure to give such notice shall not affect any
Indemnified Party's ability to seek reimbursement unless such failure has
materially and adversely affected the Indemnifying Party's ability to defend
successfully a Claim. The Indemnifying Party shall be entitled to contest and
defend such Claim; provided, that the Indemnifying Party (i) has a reasonable
basis for concluding that such defense may be successful and (ii) diligently
contests and defends such Claim. Notice of the intention so to contest and
defend shall be given by the Indemnifying Party to the Notifying Party within 20
business days after the Notifying Party's notice of such Claim (but, in all
events, at least five business days prior to the date that an answer to such
Claim is due to be filed). Such contest and defense shall be conducted by
reputable attorneys employed by the Indemnifying Party. The Notifying Party
shall be entitled at any time, at its own cost and expense (which expense shall
not constitute a Loss unless the Notifying Party reasonably determines that the
Indemnifying Party is not adequately representing or, because of a conflict of
interest, may not adequately represent, any interests of the Indemnified
Parties, and only to the extent that such expenses are reasonable), to
participate in such contest and defense and to be represented by attorneys of
its or their own choosing. If the Notifying Party elects to participate in such
defense, the Notifying Party will cooperate with the Indemnifying Party in the
conduct of such defense. Neither the Notifying Party nor the
33
Indemnifying Party may concede, settle or compromise any Claim without the
consent of the other party, which consents will not be unreasonably withheld.
Notwithstanding the foregoing, (i) if a Claim seeks equitable relief or (ii) if
the subject matter of a Claim relates to the ongoing business of any of the
Indemnified Parties, which Claim, if decided against any of the Indemnified
Parties, would materially adversely affect the ongoing business or reputation of
any of the Indemnified Parties, then, in each such case, the Indemnified Parties
alone shall be entitled to contest, defend and settle such Claim in the first
instance and, if the Indemnified Parties do not contest, defend or settle such
Claim, the Indemnifying Party shall then have the right to contest and defend
(but not settle) such Claim. Any contest and defense by the Indemnified Party
shall be conducted by reputable attorneys employed by the Indemnified Party.
Notice of an intention so not to contest or defend by the Indemnified Party
shall be given by the Indemnified Party to the Indemnifying Party within 20
business days after the Notifying Party's notice of such Claim (but, in all
events, at least five business days prior to the date that an answer to such
Claim is due to be filed). The Indemnifying Party shall be entitled at any time,
at its own cost and expense to participate in such contest and defense and to be
represented by reputable attorneys of its or their own choosing.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a written notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party that
it does not dispute the claim described in such notice or fails to notify the
Notifying Party within 30 days after delivery of such notice by the Notifying
Party whether the Indemnifying Party disputes the claim described in such
notice, the Loss in the amount specified in the Notifying Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its liability with respect to such
claim, the parties will proceed in good faith to negotiate a resolution of such
dispute subject to the following provisions:
(i) Any such dispute may, at the option of either party, first
be submitted for discussion and possible resolution by senior officers
of Seller and Buyer, as designated by their respective chief executive
officers. If either party elects to have the dispute so submitted, the
other party agrees to designate senior officers to participate in such
discussion.
(ii) If either (A) neither party has elected to submit a
dispute for discussion in accordance with the preceding clause (i)
within thirty (30) days after both parties have been notified of such
dispute, or (B) within a period of thirty (30) days after submission of
a matter in accordance with such clause (i) the respective senior
officers are unable to agree upon a resolution of such dispute, either
party may, within thirty (30) days following the applicable aforesaid
30-day period, elect to have the dispute promptly submitted to and
finally resolved by binding arbitration. Any arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Arbitration
34
shall be by a single arbitrator experienced in the matters at issue and
selected by the parties in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. The decision of the
arbitrator shall be final and binding as to the resolution of the
dispute; provided, however, if necessary, such decision may be enforced
in any court having jurisdiction over the subject matter or over any of
the parties to this Agreement. Each party shall bear its own costs and
expenses incurred in connection with any such arbitration proceeding.
(iii) Notwithstanding the foregoing provisions, either party
may seek equitable relief from a court with proper jurisdiction in
appropriate circumstances.
(c) The Indemnified Party shall take all reasonable steps to mitigate
indemnifiable Losses upon and after becoming aware of any event which could
reasonably be expected to give rise to any Losses that are indemnifiable
hereunder.
(d) To the extent that the Indemnitor discharges any claim for
indemnification hereunder, the Indemnitor shall be subrogated to all rights of
the Indemnified Party against third parties.
(e) In determining the amount of any claim for which an Indemnified
Party is entitled to indemnification pursuant to this Article 9, there shall be
subtracted an amount equal to all insurance proceeds actually received or
reasonably expected to be received by an Indemnified Party by reason of such
claim (net of any retrospective insurance premium adjustments related to such
claim charged to the Indemnified Party). If a claim of an Indemnified Party is
covered by insurance of the Indemnified Party, the Indemnified Party agrees to
use all reasonable efforts to recover the amount of such claim from the issuer
before seeking indemnification hereunder.
(f) The enforcement of the agreements of indemnification contained in
this Article 9 shall be, after the date hereof, the exclusive remedy of the
parties hereto for any breach of any covenant, representation or warranty hereof
or any certificate delivered pursuant to this Agreement and the German Stock
Agreement, whether sounding in tort, contract or otherwise, and the parties
hereto waive all remedies otherwise available to such parties save only remedies
which by law may not be waived.
9.05 Limitation of Liability. Notwithstanding the foregoing provisions
of this Article 9, neither party shall be obligated to indemnify the other
pursuant to Sections 9.02 or 9.03 until the aggregate of all Losses has exceeded
$50,000 after which the indemnifying party shall be responsible for the
aggregate of all Losses in excess of $50,000; provided however that such
limitation shall not apply to (i) any breach of, or failure to perform, any
covenant agreement of Seller contained in this Agreement, including, but not
limited to, failure to pay or otherwise discharge any Retained Liabilities, or
in the German Stock Agreement or (ii) any breach of, or failure to perform, any
covenant agreement of Buyer contained in this Agreement, including, but not
limited to, failure to pay or otherwise discharge any Assumed Liabilities, or in
the German
35
Stock Agreement. In addition, notwithstanding the foregoing provisions of this
Article 9, except with respect to claims pursuant to Sections 9.02(iii), (iv)
and (v) or Section 9.03 (iii), (iv) and (v), neither party shall be obligated to
indemnify the other pursuant to Article 9 beyond a maximum aggregate amount
equal to $5,000,000.
ARTICLE 10
MISCELLANEOUS
10.01 Expenses. Except as otherwise expressly provided for herein,
Seller and Buyer will pay all of their own expenses (including attorneys' and
accountants' fees) in connection with the negotiation of this Agreement, the
performance of their respective obligations hereunder and the consummation of
the transactions contemplated by this Agreement, whether consummated or not.
10.02 Cooperation and Exchange of Information. Buyer and Seller shall
cooperate, shall take further action and shall execute and deliver such further
documents as may be reasonably requested by the other party in order to carry
out the provisions of this Agreement. Buyer and Seller shall also provide each
other with such cooperation and information as either of them reasonably may
request of the other in filing any Tax return, amended return or claim for
refund, determining a liability for Taxes or a right to a refund of Taxes or in
conducting any audit or proceeding in respect of Taxes relating to the Assets or
the Business. Such cooperation and information shall include providing copies of
relevant Tax returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by Taxing authorities. Each party shall make its employees
available on a mutually convenient basis to provide explanation of any documents
or information provided hereunder. Seller upon written request by Buyer, will
provide to Buyer such factual information reasonably necessary for filing Tax
returns, Tax planning and contesting any Tax audit that Seller possesses as
Buyer may reasonably request with respect to the Assets (which information
Seller agrees to maintain and preserve for so long as it may be needed by
Buyer).
10.03 Announcements. Buyer and Seller shall cooperate and mutually
agree upon any press release or public announcements prior to the Closing
concerning the transactions contemplated by this Agreement; provided, however,
that Buyer and Seller may communicate with analysts, institutional investors or
similar individuals with regard to the substance of any items disclosed in any
press release mutually agreed upon by the parties; and, provided further that,
nothing contained herein shall prevent Buyer or Seller, after giving reasonable
advance notice to the other party hereto, from making any announcement
reasonably determined by it, upon advice of counsel, to be required by law.
10.04 Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify or
amend any part of
36
this Agreement or any rights or obligations of any person under or by reason of
this Agreement.
10.05 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
three business days after being mailed by first class U.S. mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Buyer and Seller will, unless another address is specified in writing, be sent
to the address indicated below:
Notices to Buyer:
-----------------
With a copy to:
---------------
▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Corporation ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Automation Group Controller Attn: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Notices to Seller:
-----------------
With a copy to:
---------------
MTS Systems Corporation Robins, Kaplan, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attention: CEO ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
10.06 Assignment. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by
either party hereto without the prior written consent of the other party hereto.
10.07 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
37
10.08 Complete Agreement. This Agreement and the Exhibits hereto, the
Disclosure Schedule and the other documents referred to herein contain the
complete agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
10.09 Counterparts. This Agreement may be executed by facsimile
signature and in one or more counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together,
when executed and delivered, will constitute one and the same instrument.
10.10 Governing Law. The internal law, without regard to conflicts of
laws principles, of the State of Minnesota will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
10.11 Transfer, Sales and Use Tax. Any and all transfer, sales and use
tax liability arising as a result of the sale and purchase of the Assets shall
be the responsibility of the party who would customarily pay such tax and such
tax liability shall not be subject to the limitations of liability set forth in
the first sentence of Section 9.05.
[THE REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK.]
38
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
MTS SYSTEMS CORPORATION
EIN: ▇▇-▇▇▇▇▇▇▇
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-------------------------------------
Its Chairman, President and
Chief Executive Officer
-------------------------------------
▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ CORPORATION
EIN: ▇▇-▇▇▇▇▇▇▇
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Its Vice President and
President - Automation Group
-------------------------------------
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
EXHIBIT LIST
------------
A. ▇▇▇▇ of Sale
B. Assignment and Assumption Agreement
C. License Agreement between Buyer and Airex
D. Assignment of Third Party Lease
E. Supply Agreement
F. Termination Agreement
G. German Stock Agreement
H. Patent License Assignment and Assumption Agreement
I. PCI Assignment and Assumption Agreement
J. Option to Purchase Real Estate
K. New Ulm Transition Agreement
L. European Transition Agreement
SCHEDULES (See Disclosure Letter)
---------
Schedule 1.01(a) Inventory
Schedule 1.01(b) Prepaid Expenses
Schedule 1.01(c) Customer Deposits
Schedule 1.01(d) Real Estate Lease Agreements
Schedule 1.01(e) Contracts
Schedule 1.01(f) Unfilled Purchase Orders
Schedule 1.01(g) Personal Property Leases
Schedule 1.01(h) Agreements
Schedule 1.01(i) Accounts Receivable
Schedule 1.01(j) Products
Schedule 1.01(k) Licenses
Schedule 1.01(l) Intellectual Property
Schedule 1.01(m) URL Content
Schedule 1.01(n) Equipment
Schedule 1.01(o) Vehicles
Schedule 1.01(p) Governmental Approvals
Schedule 1.03(a) Assumed Payables
Schedule 1.03(f) Assumed Liabilities
Schedule 3.04 Net Asset Calculation
