<PAGE>
Exhibit 10 (b)
EXECUTION COPY
Eaton Corporation
2006 Annual Report on Form 10-K
Item 15 (b)
================================================================================
PURCHASE AGREEMENT
Between
V.G.A.T. INVESTORS, LLC
and
EATON CORPORATION
Dated as of December 24, 2006
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S>
A<C>
Article I.
DEFINITIONS...........................................................................................
1
Section 1.1. Certain
Definitions...................................................................
1
Section 1.2. Terms
Generally.......................................................................
12
Article II. PURCHASE AND SALE OF THE
SHARES......................................................................
12
Section 2.1. Purchase
and Sale of the
Shares.......................................................
12
Section 2.2. Purchase
Price........................................................................
12
Section 2.3. Estimated
Purchase Price
Adjustment...................................................
12
Section 2.4.
Post-Closing Purchase Price
Adjustment................................................
13
Section 2.5.
Closing...............................................................................
15
Section 2.6. Closing
Deliveries....................................................................
15
Section 2.7.
Satisfaction of
Conditions............................................................
16
Section 2.8. Transfer
Taxes........................................................................
16
Section 2.9.
Reorganization
Taxes..................................................................
16
Article III. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
GROUP.......................................... 18
Section
3.1.
Organization of the Company and the Company
Group..................................... 18
Section 3.2.
Noncontravention......................................................................
18
Section 3.3. Title to
Shares.......................................................................
19
Section 3.4.
Subsidiaries of the Company;
Capitalization...........................................
19
Section 3.5. Government
Authorizations.............................................................
20
Section 3.6. Financial
Statements; Securities
Filings.............................................. 20
Section 3.7. Absence of
Certain
Changes............................................................
21
Section 3.8. Tax
Matters...........................................................................
21
Section 3.9. Real
Property.........................................................................
23
Section 3.10. Intellectual
Property.................................................................
23
Section 3.11. Environmental
Matters.................................................................
24
Section 3.12.
Contracts.............................................................................
25
Section 3.13.
Insurance.............................................................................
27
Section 3.14.
Litigation............................................................................
28
Section 3.15. Employee
Matters......................................................................
28
Section 3.16. Legal
Compliance......................................................................
31
Section 3.17. Licenses and
Permits..................................................................
31
Section 3.18. Brokers'
Fees.........................................................................
31
Section 3.19. No Undisclosed
Liabilities............................................................
32
Section 3.20. Internal
Controls and
Procedures......................................................
32
Section 3.21. Transactions
with
Affiliates..........................................................
32
Section 3.22. Customers and
Suppliers...............................................................
33
Section 3.23.
Warranties............................................................................
33
Section 3.24. List of
Government Contracts, Subcontracts and
Bids................................... 33
</TABLE>
<PAGE>
<TABLE>
<S>
<C>
Section 3.25.
Compliance,
Performance, Termination and Breach of Government
Contracts............... 34
Section 3.26. Internal
Controls, Audits and
Investigations..........................................
35
Section 3.27. Debarment,
Suspension and
Exclusion...................................................
35
Section 3.28. Absence of
Unlawful
Payments..........................................................
35
Section 3.29. No Undisclosed
Liabilities of Carter Ground Fueling,
Ltd.............................. 35
Section 3.30. NO ADDITIONAL
REPRESENTATIONS.........................................................
36
Article IV. REPRESENTATIONS AND WARRANTIES REGARDING
SELLER......................................................
36
Section 4.1.
Organization..........................................................................
36
Section 4.2.
Authorization.........................................................................
36
Section 4.3.
Noncontravention......................................................................
37
Section 4.4. Brokers'
Fees.........................................................................
37
Article V. REPRESENTATIONS AND WARRANTIES REGARDING
BUYER........................................................
37
Section 5.1.
Organization..........................................................................
37
Section 5.2.
Authorization.........................................................................
37
Section 5.3. Financial
Capacity....................................................................
38
Section 5.4.
Noncontravention......................................................................
38
Section 5.5. Government
Authorizations.............................................................
38
Section 5.6.
Litigation............................................................................
38
Section 5.7. Brokers'
Fees.........................................................................
38
Section 5.8.
Investment............................................................................
39
Section 5.9.
Information...........................................................................
39
Article VI.
COVENANTS............................................................................................
39
Section 6.1. Conduct of
the
Company................................................................
39
Section 6.2. Access to
Information.................................................................
42
Section 6.3.
Commercially Reasonable
Efforts.......................................................
43
Section 6.4. HSR Act
Compliance; Government
Approvals..............................................
43
Section 6.5. Public
Announcements..................................................................
44
Section 6.6.
Notification of Certain
Matters.......................................................
45
Section 6.7.
Post-Closing Access; Preservation of
Records.......................................... 45
Section 6.8. Further
Assurances....................................................................
46
Section 6.9. Director
and Officer
Indemnification..................................................
46
Section 6.10.
Exclusivity...........................................................................
46
Section 6.11.
Reorganization........................................................................
47
Section 6.12. Severance and
Transaction Bonus
Payments.............................................. 48
Section 6.13. Split-Dollar
Life Insurance
Policy....................................................
48
Section 6.14. Pre Closing
Financials................................................................
48
Section 6.15. Cooperation with
Davis Litigation and LETS
Dispute.................................... 48
Section 6.16. Support for
Indemnification
Obligations...............................................
49
Section 6.17. 280G
Compliance.......................................................................
49
Section 6.18. Insurance
Policies....................................................................
50
</TABLE>
2
<PAGE>
<TABLE>
<S>
<C>
Article VII. CONDITIONS TO
CLOSING...............................................................................
50
Section 7.1. Conditions
Precedent to Obligations of Buyer and
Seller............................... 50
Section 7.2. Conditions
Precedent to Obligation of
Seller.......................................... 50
Section 7.3. Conditions
Precedent to Obligations of
Buyer.......................................... 51
Article VIII.
LIMITATIONS........................................................................................
52
Section 8.1. Waiver of
Damages.....................................................................
52
Section 8.2.
Consequential
Damages.................................................................
52
Article IX.
INDEMNIFICATION......................................................................................
53
Section 9.1. General
Indemnification by
Seller.....................................................
53
Section 9.2. General
Indemnification by
Buyer......................................................
53
Section 9.3. Certain
Limitations...................................................................
54
Section 9.4.
Indemnification
Procedures............................................................
56
Section 9.5. Exclusive
Remedy......................................................................
58
Section 9.6.
Mitigation............................................................................
58
Article X.
TERMINATION...........................................................................................
58
Section 10.1. Termination
Events....................................................................
58
Section 10.2. Effect of
Termination.................................................................
58
Article XI.
MISCELLANEOUS........................................................................................
59
Section 11.1. Parties in
Interest...................................................................
59
Section 11.2.
Assignment............................................................................
59
Section 11.3.
Notices...............................................................................
59
Section 11.4. Amendments and
Waivers................................................................
61
Section 11.5. Exhibits and
Disclosure
Schedule......................................................
61
Section 11.6.
Headings..............................................................................
61
Section 11.7.
Construction..........................................................................
61
Section 11.8. No Other
Representations or
Warranties................................................
61
Section 11.9. Entire
Agreement......................................................................
62
Section 11.10.
Severability..........................................................................
62
Section 11.11.
Expenses..............................................................................
62
Section 11.12. Governing
Law.........................................................................
63
Section 11.13. Consent to
Jurisdiction; Waiver of Jury
Trial......................................... 63
Section 11.14. Specific
Performance..................................................................
63
Section 11.15.
Counterparts..........................................................................
64
</TABLE>
EXHIBITS
Exhibit A - Form of Release
Exhibit B - Form of Lease
3
<PAGE>
DISCLOSURE SCHEDULES
<TABLE>
<S>
<C>
Schedule 2.3(a)
Purchase Price Adjustment
Schedule 3.1
Organization
Schedule 3.2
Noncontravention
Schedule 3.3
Title to Shares
Schedule 3.4(a)
Subsidiaries of the Company; Capitalization
Schedule 3.4(b)
Subsidiaries of the Company; Capitalization
Schedule 3.4(c)
Capital Stock
Schedule 3.6
Financial Statements
Schedule 3.7
Absence of Certain Changes
Schedule 3.8
Past Tax Returns
Schedule 3.8(k)
Section 280G Matters
Schedule 3.9(b)
Leased Real Property
Schedule 3.10(a)
Intellectual Property
Schedule 3.10(b)
Intellectual Property
Schedule 3.11
Environmental Matters
Schedule 3.12(a)(i)-(xx) Material Contracts
Schedule 3.13
Insurance
Schedule 3.14
Litigation
Schedule 3.15(a)
Employee Benefit Plans
Schedule 3.15(g)
Defined Benefit Plans
Schedule 3.15(i)
Employee Welfare Benefit Plan
Schedule 3.15(j)
Foreign Plans
Schedule 3.15(k)
Labor Relations
Schedule 3.15(l)
Triggering Events
Schedule 3.15(n)
Employees
Schedule 3.18
Brokers' Fees
Schedule 3.19
No Undisclosed Liabilities
Schedule 3.21
Transactions with Affiliates
Schedule 3.22
Customers and Suppliers
Schedule 3.23
Warranties
Schedule 3.24
Government Contracts, Subcontracts and Bids
Schedule 3.25
Compliance Regarding Government Contracts and Bids
</TABLE>
4
<PAGE>
<TABLE>
<S>
<C>
Schedule 3.26
Internal Controls, Audits and Investigations
Schedule 3.29
No Undisclosed
Liabilities of Carter Ground Fueling, Ltd.
Schedule 4.3
Noncontravention
Schedule 4.4
Brokers' Fees
Schedule 6.1
Conduct of the Company
Schedule 6.11(a)
Reorganization
Schedule 6.12
Severance and Transaction Bonus Payments
Schedule 6.13
Split-Dollar Insurance Policy
Schedule 7.3(e)
Consents and Approvals
Schedule 7.3(f)
Payoff Letters
</TABLE>
5
<PAGE>
PURCHASE AGREEMENT
Purchase
Agreement, dated as of December 24, 2006, by and between
V.G.A.T.
Investors, LLC, a limited liability company organized under the
laws of Delaware
("Seller"), and Eaton Corporation, an Ohio corporation ("Buyer").
Seller and
Buyer are referred to collectively herein as the "Parties."
WITNESSETH
WHEREAS,
Seller owns all of the issued and outstanding shares of common
stock (the "Shares") in AT Holdings Corporation, a Delaware
corporation (the
"Company");
WHEREAS,
Seller and Buyer intend that Seller shall retain certain assets
that are currently held by the Company or one of its Subsidiaries,
as defined
herein as the Excluded Assets;
WHEREAS, Seller
desires to sell to Buyer, and Buyer desires to purchase
from Seller, all of the Shares, on the terms and subject to the
conditions set
forth in this Agreement; and
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants
and promises herein made, and in consideration of the
representations and
warranties, herein contained, and for other good and valuable
consideration the
receipt and adequacy of which are hereby acknowledged, the Parties
hereto,
intending to become legally bound, hereby agree as follows:
Article I.
DEFINITIONS
Section
1.1. Certain Definitions. As used in this Agreement, the
following
terms shall have the following meanings:
"9.25%
Notes" means the 9.25% notes issued under the Indenture, dated
as
of June 23, 2004, among Argo-Tech, the Subsidiary Guarantors (as
defined
therein) and BNY Midwest Trust Company, as Trustee.
"11.75%
Notes" means the 11.75% notes issued under and the Indenture,
dated as of October 28, 2005, between the Company and the Bank of
New York Trust
Company, N.A., as Trustee.
"ACS
Spin-Off" means each of the creation of Aviation Component
Solutions,
Inc. ("ACSI"), the contribution of assets and Liabilities to ACSI
and the
distribution of the stock of ACSI to or from a member of the
Company Group.
"ACSI" has
the meaning set forth in the definition of ACS Spin-Off.
<PAGE>
"Action"
means any action, charge, complaint, material grievance,
arbitration, investigation, suit, claim or other proceeding, at law
or in
equity, by or before any court or other Governmental Authority.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations
promulgated under the Securities Exchange Act.
"Agreement" means this Purchase Agreement, including all Exhibits
and
Schedules hereto (including the Disclosure Schedule), as the same
may be
amended, modified or supplemented from time to time in accordance
with its
terms.
"Arbitrator" has the meaning set forth in Section 2.4(b).
"Argo-Tech" means Argo-Tech Corporation, a Delaware
corporation.
"ATC Costa
Mesa" has the meaning set forth in the definition of Excluded
Assets.
"ATC
(HBP)" has the meaning set forth in the definition of Excluded
Assets.
"Audited
Financial Statements" has the meaning set forth in Section
3.6(a).
"Balance
Sheet Date" means October 28, 2006.
"Basket
Damages" has the meaning set forth in Section 9.3(b).
"Benchmark" has the meaning set forth in Section 2.3(b).
"Bonus
Payments" has the meaning set forth in Section 6.12.
"Business
Day" means any day other than Saturday, Sunday or any other day
on which banking institutions in New York are not open for the
transaction of
normal banking business.
"Buyer"
has the meaning set forth in the preamble to this Agreement.
"Buyer
Group" has the meaning set forth in Section 9.1.
"Buyer's
Surviving Representations" has the meaning set forth in Section
9.2.
"Capitalized Lease Obligations" means, with respect to any Person,
for any
applicable period, the obligations of such Person under a lease
that are
required to be classified and accounted for as capital lease
obligations under
GAAP, and the amount of such obligations at any date shall be the
capitalized
amount of such obligations at such date, determined in accordance
with GAAP.
"Cash"
means at any particular time, all cash and cash equivalents of
the
Company Group, determined in accordance with GAAP, other than any
cash and cash
equivalents subject to any Lien or any limitation on repatriation
to the United
States or similar limitation.
2
<PAGE>
"Closing"
has the meaning set forth in Section 2.5.
"Closing
Adjustment Statement" has the meaning set forth in Section
2.4(a).
"Closing
Cash" has the meaning set forth in Section 2.4(a).
"Closing
Date" means the date the Closing occurs pursuant to Section
2.5.
"Closing Debt"
has the meaning set forth in Section 2.4(a).
"Closing
Working Capital" has the meaning set forth in Section 2.4(a).
"COBRA"
means Part 6 of Subtitle B of Title I of ERISA, section 4980B
of
the Code, and any similar state Law.
"Code"
means the United States Internal Revenue Code of 1986, as
amended.
"Commission" has the meaning set forth in Section 3.6(b).
"Company"
has the meaning set forth in the recitals to this Agreement.
"Company
Group" means the Company and the Company's Subsidiaries but
excludes the entities and assets included in the Excluded Assets
and the
Excluded Liabilities.
"Company
Intellectual Property" has the meaning set forth in Section
3.10(b).
"Company
Plans" has the meaning set forth in Section 3.15(a).
"Consents"
means consents, approvals, exemptions, waivers, authorizations,
filings, registrations and notifications.
"Control"
means, with respect to any Person, the possession, direct or
indirect, of the power to direct or cause the direction of the
management and
policies of such Person, whether through the ownership of voting
securities or
partnership interests, by contract or otherwise.
"Costa
Mesa Property" has the meaning set forth in the definition of
Excluded Assets.
"Credit
Agreement" means the Fourth Amended and Restated Credit
Agreement,
dated as of September 13, 2005, between Argo-Tech, National City
Bank, as
Administrative Agent, and the other signatories thereto.
"Cryogenics" has the meaning set forth in the definition of
Excluded
Assets.
"Current
Policy" has the meaning set forth in Section 6.18.
"Damages"
means all losses, claims, damages, payments, penalties, fines,
interest, Taxes, Liabilities, costs and expenses (including costs
and expenses
of Actions, amounts paid in
3
<PAGE>
connection with any assessments, judgments or settlements relating
thereto,
interest and penalties recovered by a third party with respect
thereto and
out-of pocket expenses and reasonable attorneys', experts',
consultants' and
other representatives' fees and expenses reasonably incurred in
defending
against any such Actions or in enforcing a Party's rights
hereunder).
"Davis
Litigation" has the meaning set forth in the definition of
Excluded
Assets.
"De
Minimis Amount" has the meaning set forth in Section 9.3(b).
"Disclosure Schedule" means the disclosure schedule delivered by
Seller to
Buyer on the date hereof.
"Effective
Time" has the meaning set forth in Section 2.5.
"Environmental Laws" means any Law existing on the date hereof
concerning
(i) pollution or protection of the environment or (ii) exposure of
persons to
toxic or hazardous substances; provided, however, that the term
"Environmental
Law" shall not include any Law relating to worker safety matters to
the extent
not related to exposure to Hazardous Materials.
"ERISA"
means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA
Affiliate" means any Person that at any relevant time is
considered
a single employer with the Company Group under section 414 of the
Code.
"Estimated
Cash" has the meaning set forth in Section 2.3(a).
"Estimated
Debt" has the meaning set forth in Section 2.3(a).
"Estimated
Reorganization Taxes" means the amount of the Reorganization
Taxes, as estimated in good faith by the Company's accountants, in
consultation
with Buyer's accountants, prior to the Closing.
"Estimated
Working Capital" has the meaning set forth in Section 2.3(a).
"Excluded
Assets" means: (i) the cryogenics division of Argo-Tech
Corporation Costa Mesa, a California corporation wholly-owned by
Argo-Tech ("ATC
Costa Mesa", and the cryogenics division, "Cryogenics"), the assets
and
liabilities of which are identified on Section 6.11(i) of the
Disclosure
Schedule; (ii) the real property located at 671 West Seventeenth
Street, Costa
Mesa, California 92627 owned by ATC Costa Mesa (the "Costa Mesa
Property");
(iii) Argo-Tech Corporation (HBP), a Delaware corporation
wholly-owned by
Argo-Tech ("ATC (HBP)"); (iv) Argo Tracker Corporation, a Delaware
corporation
wholly-owned by the Company; and (v) J.C. Carter Japan K.K., a
Japanese limited
liability company wholly-owned by ATC Costa Mesa ("JKK"). The
Excluded Assets
will also include all Intellectual Property that would otherwise
constitute
Company Intellectual Property but that primarily relates to, or is
used in the
business of or otherwise in connection with, any of the Excluded
Assets
identified in the prior sentence, subject to a worldwide,
royalty-free, fully
paid-up, non-exclusive right and license to Buyer and its
Affiliates to use and
sublicense such Intellectual Property in connection with the
business of the
Company Group and the business of Buyer and its Affiliates as of
the
4
<PAGE>
date hereof, including (A) a worldwide, royalty-free, fully
paid-up,
non-exclusive right and license to use and sublicense the "Carter"
name and Mark
and the "J.C. Carter" name and Mark in connection with the current
businesses of
Cryogenics and JKK and (B) a worldwide, royalty-free, fully
paid-up,
non-exclusive right and license to use the "Argo-Tech" name and
Mark on existing
inventory of stationary, signage and similar items, but only for a
transitional
period after the Closing Date. Notwithstanding the above, the term
"Excluded
Assets" shall not include the Company Plans (as defined in Section
3.15(a)) or
any assets related thereto.
"Excluded
Assets Distribution" has the meaning set forth in Section
6.16(a).
"Excluded
Liabilities" means any and all Liabilities arising from or
related to: (i) the ownership, use or operation of the assets or
business
constituting the Excluded Assets or of any entity the stock or
other equity
interests of which is included in the Excluded Assets; (ii) the
Reorganization
(including any Taxes arising out of or related thereto); (iii) the
ACS Spin-Off
and the ownership, use or operation of the assets or business of
ACSI by any
member of the Company Group; (iv) Brian Davis, et al. v. Argo-Tech
Corporation,
et al. (Cuyahoga County Court of Common Pleas, Case No. 05 CV
552002) (the
"Davis Litigation") and (v) the contract dispute between Carter
Ground Fueling,
Ltd. and Leading Edge Technologies Services LLC, a Dubai based IT
services
company ("LETS Dispute"); provided that in no event will the
Excluded
Liabilities include any Liabilities for: (A) Taxes (except as
expressly set
forth in this Agreement); (B) any breach of Environmental Law or
any permit or
other authorization required by any Environmental Law; (C) any
Action brought
pursuant to any Environmental Law, any disposal or release of
Hazardous
Materials, or that otherwise relate to pollution or protection of
the
environment or the exposure of persons to toxic or hazardous
substances; or (D)
the Company Plans (as defined in Section 3.15(a)) or any
Liabilities related
thereto.
"Expected
Payment" has the meaning set forth in Section 3.8(k).
"Expiration Date" has the meaning set forth in Section 10.1(b).
"Expired
Policy" has the meaning set forth in Section 6.18.
"Final
Closing Adjustment Statement" has the meaning set forth in
Section
2.4(f).
"Final
Reorganization Taxes Statement" has the meaning set forth in
Section 2.9(h).
"Financial
Statements" has the meaning set forth in Section 3.6(a).
"Foreign
Plans" has the meaning set forth in Section 3.15(j).
"Fundamental Representations" has the meaning set forth in Section
9.1.
"GAAP"
means United States generally accepted accounting principles
consistently applied.
"Giveback
Provision" has the meaning set forth in Section 6.16(a).
5
<PAGE>
"Government Bid" means any bid, offer, proposal or response to
solicitation that, if accepted or awarded, would result in the
establishment of
a Government Contract.
"Government Contract" means any contract, agreement, subcontract,
teaming
agreement or arrangement, joint venture, basic ordering agreement,
blanket
purchase agreement, letter agreement, purchase order, delivery
order, task
order, grant, cooperative agreement, change order or other
commitment or funding
vehicle that exists between any member of the Company Group and (i)
any
Governmental Authority, (ii) any prime contractor to any
Governmental Authority
or (iii) any subcontractor with respect to any contract described
in clause (i)
or (ii).
"Governmental Authority" means any US or foreign federal, state or
local
government, court of competent jurisdiction, administrative agency
or commission
or other governmental or regulatory authority or
instrumentality.
"Hazardous
Materials" means (i) asbestos, polychlorinated biphenyls or
petroleum, (ii) any substance that requires removal or remediation
under any
Environmental Law, or is defined, listed or identified as a
"hazardous waste" or
"hazardous substance" by any Environmental Law, or (iii) any
substance, material
or waste that is regulated by any Environmental Law because it is
toxic,
explosive, corrosive, flammable, infectious, radioactive,
carcinogenic,
mutagenic or otherwise hazardous.
"HSR Act"
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indebtedness" means, without duplication: (i) all indebtedness of
the
Company Group for borrowed money, whether current, short-term, or
long-term,
secured or unsecured (including all obligations for principal and
accrued but
unpaid interest, but excluding prepayment premiums, penalties,
breakage costs
and other similar obligations, and also excluding trade accounts
payable); (ii)
all indebtedness of the Company Group for the deferred purchase
price for
purchases of property outside the ordinary course of business that
is not
evidenced by trade accounts payables; (iii) any payment or
obligations of the
Company Group in respect of letters of credit (other than stand-by
letters of
credit in support of ordinary course trade payables); (iv) any
Liability of the
Company Group with respect to interest rate swaps, collars, caps
and similar
hedging obligations; (v) any Capitalized Lease Obligations of the
Company Group;
(vi) any indebtedness referred to in clauses (i) through (v) above
that is
directly or indirectly guaranteed by any member of the Company
Group and (v) to
the extent not paid at or prior to Closing, the Bonus Payments.
"Indemnified Claim" has the meaning set forth in Section
9.4(f).
"Indemnified Officers" has the meaning set forth in Section
6.9.
"Indemnified Party" has the meaning set forth in Section 9.2.
"Indemnifying Party" has the meaning set forth in Section 9.2.
"Indemnity
Reduction Amounts" has the meaning set forth in Section 9.3(c).
6
<PAGE>
"Indentures" mean, collectively, the Indenture, dated as of June
23, 2004,
among Argo-Tech, the Subsidiary Guarantors (as defined therein) and
BNY Midwest
Trust Company, as Trustee, and the Indenture, dated as of October
28, 2005,
between the Company and the Bank of New York Trust Company, N.A.,
as Trustee.
"Injunction" has the meaning set forth in Section 6.3.
"Intellectual Property" means all: (a) patents and patent
applications,
together with reissues, continuations, continuations-in-part,
revisions,
divisionals, extensions and reexaminations thereof; (b) trademarks,
service
marks, trade dress, logos, trade names and Internet domain names,
and
applications, registrations, and renewals in connection therewith,
and all
goodwill associated therewith (collectively, "Marks"); (c)
copyrights, whether
registerered or unregistered and all other rights corresponding,
registrations
and applications thereof); (d) trade secrets, research records,
processes,
procedures, formulae, know-how, engineering process, records of
invention,
customer lists and related customer information, databases,
confidential
business information, copyrightable work, technology, blue prints,
designs,
plans, invention disclosures, inventions (whether or not patentable
or reduced
to practice), in each case to the extent protectable under
applicable Law; and
(e) computer software (including source code, data, databases and
related
documentation).
"International Competition Laws" has the meaning set forth in
Section
6.4(c).
"Inventory" means inventory of raw materials, work in process,
finished
goods, packaging materials and supplies and related items,
including all
inventory (as defined in the Uniform Commercial Code in effect in
the State of
Ohio as of the date hereof), in each case whether on hand or in
transit and
including inventory on consignment to customers.
"JKK" has
the meaning set forth in the definition of Excluded Assets.
"Knowledge" means: (i) with respect to Seller, the actual
knowledge, or
the knowledge one would be expected to have after reasonable
inquiry and
investigation with respect to matters within the scope of one's
employment
and/or assigned duties, of Michael Lipscomb, Paul R. Keen, Frank
Dubey, Richard
T. Walker, John S. Glover, Chris Michael and Catherine Kramer, and,
solely with
respect to Section 3.15 and the benefit related provisions of
Section 3.8,
Sharon Iafelice and Michelle McCormick; and (ii) with respect to
Buyer, the
actual knowledge, or the knowledge one would be expected to have
after
reasonable inquiry and investigation with respect to matters within
the scope of
one's employment and/or assigned duties, of David S. Barrie, Ken D.
Semelsberger
and Mary E. Huber.
"Laws"
means all applicable federal, state, local and foreign laws,
statutes, constitutions, rules, regulations, ordinances and similar
provisions
having the force of law and all judgments, rulings, orders,
decrees,
injunctions, guidance and guidelines of Governmental
Authorities.
"Leased
Real Property" has the meaning set forth in Section 3.9(b).
7
<PAGE>
"Liability" means any liability (whether known or unknown,
whether
asserted or unasserted, whether absolute or contingent, whether
accrued or
unaccrued, whether liquidated or unliquidated, and whether due or
to become
due).
"Licenses"
means licenses, permits, consents, approvals, authorizations,
registrations, qualifications and certifications of any
governmental or
administrative agency or authority (whether federal, state or
local) and
accrediting bodies.
"Lien"
means any mortgage, pledge, lien, encumbrance, restriction,
option,
charge, claim, easement, deed of trust, mortgage, conditional sales
agreement,
right of first refusal or other security interest or restriction on
use, voting,
transfer, receipt of income or exercise of any other attribute of
ownership,
voluntarily incurred or arising by operation of law.
"LLC
Agreement" has the meaning set forth in Section 6.16(a).
"Marks"
has the meaning set forth in the definition of Intellectual
Property.
"Material
Adverse Effect" means: (a) with respect to the Company Group,
an
event, factor, circumstance, development, condition, change,
effect, fact or
occurrence having, individually or in the aggregate, a material
adverse effect
on: (A) the business, operations, assets, Liabilities or condition
(financial or
otherwise), or results of operations, of the Company Group, taken
as a whole,
excluding, in each case, any such event, factor or occurrence
resulting from or
arising out of or in connection with (i) general economic, industry
or market
events, occurrences, developments, circumstances or conditions,
(ii) changes in
applicable Laws, (iii) changes in accounting principles that are
required to be
made by the Company Group under GAAP, (iv) changes in political
conditions
(including acts of war, whether or not declared, armed hostilities
or terrorism
unless in any such case causing material damage to the facilities
of the Company
Group), (v) the public announcement of the transactions
contemplated by this
Agreement (other than the Reorganization), or (vi) any action
permitted under
this Agreement or taken with the consent of the Buyer, except in
the case of
each of clauses (i) and (ii), to the extent the Company Group is
affected in a
disproportionate manner as compared to other Persons engaged in the
businesses
in which the Company Group is engaged; or (B) the ability of Seller
or the
Company Group to perform its obligations under, or to consummate
the
transactions contemplated by, this Agreement; and (b) with respect
to Buyer, a
material adverse effect on the ability of Buyer to perform its
obligations
under, or to consummate the transaction contemplated by, this
Agreement.
"Material
Contracts" has the meaning set forth in Section 3.12.
"Merger"
means the transactions consummated in connection with the
Agreement and Plan of Merger, dated as of September 13, 2005, among
the Company,
Argo-Tech, Greatbanc Trust Company, as Trustee for the Argo-Tech
Corporation
Employee Stock Ownership Plan, Seller and Vaughn Merger Sub,
Inc.
"Nonassignable Policy" has the meaning set forth in Section
6.18.
8
<PAGE>
"Non-Company Software" means any and all third party software,
applications and modules, whether in source code or object code,
licensed to,
used by or held for use by any member of the Company Group.
"Objection" has the meaning set forth in Section 2.4(b).
"Open
Source Software" means computer software or firmware that is
distributed at no charge or under a compulsory license agreement
(including but
not limited to the GNU General Public License, GNU Lesser General
Public
License, Mozilla Public License, and Eclipse Public License) that
requires the
licensee to (i) include the source code of such software or
firmware with any
distribution of such software or firmware, (ii) distribute any
modifications of
such software or firmware under such license agreement, and/or
(iii) permit the
licensee's downstream licensees to modify such software or
firmware.
"Other
Parties" has the meaning set forth in Section 3.12(b).
"Owned
Real Property" means all land, together with all buildings,
structures, improvements and fixtures located thereon, and all
easements and
other rights and interests appurtenant thereto, owned by a member
of the Company
Group and used in the Company's business.
"Parties"
has the meaning set forth in the preamble to this Agreement.
"Permitted
Liens" means any: (a) mechanic's, materialmen's, laborer's,
workmen's, repairmen's, carrier's and similar Liens, including all
statutory
Liens, arising or incurred in the ordinary course of business for
amounts not
delinquent; (b) Liens for Taxes, assessments and other governmental
charges not
yet due and payable as of the Closing Date or, if so due, (i) not
delinquent or
(ii) being contested in good faith through appropriate proceedings;
(c) purchase
money Liens and Liens securing rental payments under capital lease
arrangements;
(d) pledges or deposits under workers' compensation legislation,
unemployment
insurance Laws or similar Laws; (e) zoning, building codes and
other land use
Laws regulating the use or occupancy of real property or the
activities
conducted thereon which are imposed by any Governmental Authority
having
jurisdiction over such real property, which are not materially
violated by the
current use or occupancy of such real property or the operation of
the Company
Group thereon; (f) all exceptions, restrictions, easements,
charges,
rights-of-way and monetary and nonmonetary encumbrances which are
set forth in
any permits, licenses, governmental authorizations, registrations
or approvals
listed in the Disclosure Schedule; and (g) Liens that do not
materially
interfere with the use of any asset that is material to the
business conducted
by the Company Group.
"Person"
means an individual, partnership, limited liability
partnership,
corporation, limited liability company, association, joint stock
company, trust,
estate, joint venture, unincorporated organization, or governmental
entity (or
any department, agency, or political subdivision thereof).
"Proposed
Reorganization Taxes Statement" has the meaning set forth in
Section 2.9(c).
9
<PAGE>
"Public
Reports" has the meaning set forth in Section 3.6(b).
"Purchase
Price" means $695,000,000, subject to adjustment as set forth
in
Article II.
"Real
Property Leases" has the meaning set forth in Section 3.9(b).
"Remedies
Exception" means (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and other Laws of general application,
heretofore or
hereafter enacted or in effect, affecting the rights and remedies
of creditors
generally, and (ii) the exercise of judicial or administrative
discretion in
accordance with general equitable principles, particularly as to
the
availability of the remedy of specific performance or other
injunctive relief.
"Reorganization" has the meaning set forth in Section 6.11(a).
"Reorganization Taxes" means the net amount of Taxes payable by
the
Company or any of its Subsidiaries solely as a result of (i) the
transactions
constituting the Reorganization (as described in Section 6.11(a) of
the
Disclosure Schedule) and (ii) the ACS Spin-Off (for the avoidance
of doubt,
taking into account any item of loss or expense generated by any
aspect of the
Reorganization or the ACS Spin-Off).
"Reorganization Taxes Indemnification Period" has the meaning set
forth in
Section 9.3(d).
"Right"
means any option, warrant, convertible or exchangeable security
or
other right, however denominated, to subscribe for, purchase or
otherwise
acquire any equity interest or other security of any class or any
restricted
stock or phantom equity, with or without payment of additional
consideration in
cash or property, either immediately or upon the occurrence of a
specified date
or a specified event or the satisfaction or happening of any other
condition or
contingency.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as
amended.
"Seller"
has the meaning set forth in the preamble to this Agreement.
"Seller
Group" has the meaning set forth in Section 9.2.
"Seller's
Surviving Representations" has the meaning set forth in Section
9.1.
"Shares"
has the meaning set forth in the recitals to this agreement.
"Subsidiary," when used with respect to any Person, means any other
Person
of which (a) in the case of a corporation, at least (i) a majority
of the equity
or (ii) a majority of the voting interests are owned or Controlled,
directly or
indirectly, by such first Person, by any one or more of its
Subsidiaries, or by
such first Person and one or more of its Subsidiaries or (b) in the
case of any
Person other than a corporation, such first Person, one or more of
its
Subsidiaries,
10
<PAGE>
or such first Person and one or more of its Subsidiaries (i) owns a
majority of
the equity interests thereof or (ii) has the power to elect or
direct the
election of a majority of the members of the governing body
thereof.
"Surviving
Covenants" has the meaning set forth in Section 9.3(d).
"Surviving
Representations" has the meaning set forth in Section 9.2.
"Tax"
means any federal, state, local, or foreign tax, charge, duty,
fee,
levy or other assessment, in each case imposed by a Governmental
Authority,
including income, gross receipts, license, payroll, employment,
excise,
severance, stamp, occupation, premium, windfall profits,
environmental
(including taxes under Section 59A of the Code), customs duties,
capital stock,
franchise, profits, withholding, social security (or similar),
unemployment,
disability, real or personal property, sales, use, transfer,
registration, value
added, alternative or add-on minimum, estimated or other tax of any
kind
whatsoever, and including any interest, penalty, or addition
thereto.
"Tax
Return" means any return, declaration, report, claim for refund,
or
information return or statement relating to Taxes, including any
extension,
schedule or attachment thereto, and including any amendment
thereof, required to
be filed with any taxing authority.
"Third
Party Claim" has the meaning set forth in Section 9.4(a).
"Threshold
Amount" has the meaning set forth in Section 9.3(b).
"Transaction
Documents" means this Agreement and all other documents
delivered or required to be delivered by any Party pursuant to this
Agreement.
"Transfer
Taxes" means all transfer or similar Taxes (excluding Taxes
measured by net income), including sales, real property, use,
excise, stock
transfer, stamp, documentary, filing, recording, permit, license,
authorization
and similar Taxes, filing fees and similar charges.
"Unaudited
Financial Statements" has the meaning set forth in Section
3.6(a).
"Unlawful
Payment" has the meaning set forth in Section 3.28(a).
"WARN Act"
has the meaning set forth in Section 3.15(k).
"Working
Capital" means those categories of current assets and
liabilities
of the Company Group identified as being included in working
capital as set
forth in the "Working Capital" portion of Section 2.3(a) of the
Disclosure
Schedule; provided that for purposes of determining Estimated
Working Capital in
accordance with Section 2.3 and Closing Working Capital in
accordance with
Section 2.4, accrued but unpaid income Taxes which shall take into
account any
non-deductible payment under Section 280G of the Code and income
Tax
receivables, net of any applicable valuation allowance, shall be
included in the
calculation of "Working Capital" (for the avoidance of doubt,
taking into
account any deduction, expense or loss attributable to the payment
of the Bonus
Payments or the exercise or termination of all outstanding options
to purchase
Shares or any Expected Payments for any Tax period ending on
11
<PAGE>
or prior to the Closing Date). Also for the avoidance of doubt,
Working Capital
shall exclude deferred Tax assets and Liabilities and the Excluded
Assets and
Excluded Liabilities and shall include accrued income Taxes of the
Excluded
Assets.
Section
1.2. Terms Generally. The definitions in Section 1.1 shall
apply
equally to both the singular and plural forms of the terms defined.
Whenever the
context may require, any pronoun shall include the corresponding
masculine,
feminine and neuter forms. The words "include", "includes" and
"including" shall
be deemed to be followed by the phrase "without limitation." The
words "herein",
"hereof" and "hereunder" and words of similar import refer to this
Agreement
(including the Exhibits to this Agreement and the Disclosure
Schedule) in its
entirety and not to any part hereof unless the context shall
otherwise require.
All references herein to Articles, Sections, Exhibits and the
Disclosure
Schedule shall be deemed references to Articles and Sections of,
and Exhibits
and the Disclosure Schedule to, this Agreement unless the context
shall
otherwise require. Unless the context shall otherwise require, any
references to
any agreement or other instrument or statute or regulation are to
it as amended
and supplemented from time to time (and, in the case of a statute
or regulation,
to any successor provisions). Any reference to any federal, state,
local, or
foreign statute or Law shall be deemed also to refer to all rules
and
regulations promulgated thereunder, unless the context requires
otherwise. Any
reference in this Agreement to a "day" or a number of "days"
(without explicit
reference to "Business Days") shall be interpreted as a reference
to a calendar
day or number of calendar days. If any action is to be taken or
given on or by a
particular calendar day, and such calendar day is not a Business
Day, then such
action may be deferred until the next Business Day.
Article II.
PURCHASE AND SALE OF THE SHARES
Section
2.1. Purchase and Sale of the Shares. Upon the terms and
subject
to the conditions of this Agreement, Buyer agrees to purchase from
Seller, and
Seller agrees to sell to Buyer, all of the Shares at the Closing,
for the
consideration specified in Section 2.2. Prior to the Closing Date,
Buyer may,
upon prior written notice to Seller, assign its right to purchase
the Shares to
one or more of its wholly owned Subsidiaries for the purpose of
carrying out the
transactions contemplated hereby; provided that no such assignment
shall relieve
Buyer of its obligations hereunder.
Section
2.2. Purchase Price. At Closing, Buyer shall pay the Purchase
Price in immediately available funds by wire transfer to an account
or accounts
that have been designated by Seller to Buyer at least five Business
Days prior
to the Closing.
Section
2.3. Estimated Purchase Price Adjustment.
(a) At
least five Business Days prior to the Closing Date, Seller
shall cause the Company to deliver to Buyer a statement, in
substantially the
form of Section 2.3(a) of the Disclosure Schedule (which sets forth
a
calculation of Cash, Indebtedness and Working Capital, determined
as if the
Closing had occurred on October 28, 2006), setting forth the
Company's
reasonable, good faith estimate of (i) the amount of Cash as of the
Effective
Time on the Closing Date (the "Estimated Cash"), (ii) the amount of
Indebtedness
as of the Effective Time on the Closing Date (the "Estimated Debt")
and (iii)
the amount of Working Capital as of the Effective
12
<PAGE>
Time on the Closing Date (the "Estimated Working Capital") and, in
each case,
the basis for the calculation thereof.
(b) The
purchase price paid by the Buyer at Closing shall be increased
by
(i) the Estimated Cash, and (ii) if the Estimated Working Capital
minus the
Benchmark is positive, by the amount of such excess. The purchase
price paid by
the Buyer at Closing shall be decreased by (A) Estimated Debt, and
(B) if the
Benchmark minus the Estimated Working Capital is positive, by the
amount of such
excess. The "Benchmark" shall be $37,000,000.
Section
2.4. Post-Closing Purchase Price Adjustment.
(a) Within
sixty days after the Closing Date, Buyer shall prepare
and deliver to Seller a statement (the "Closing Adjustment
Statement"), setting
forth Buyer's calculation of (i) the amount of Cash as of the
Effective Time on
the Closing Date ("Closing Cash"), (ii) the amount of Indebtedness
as of the
Effective Time on the Closing Date ("Closing Debt") and (iii) the
Working
Capital as of the Effective Time on the Closing Date ("Closing
Working
Capital"). The (i) Closing Adjustment Statement shall be prepared
in accordance
with Section 2.3(a) of the Disclosure Schedule and otherwise in
accordance with
GAAP and (ii) the net book value of the Inventory shall be computed
based upon
the quantities of Inventory on hand as of the Closing Date as
determined through
a physical inventory conducted by Buyer within five days of such
date. Seller or
its representatives may observe such physical inventory.
(b) If
Seller reasonably disagrees with the calculation of Closing
Cash,
Closing Debt or Closing Working Capital set forth in the Closing
Adjustment
Statement (on the basis of mathematical errors, failure to adhere
to the
requirements of Section 2.3(a) of the Disclosure Schedule or
failure to
otherwise adhere to GAAP), Seller may deliver to Buyer a written
notice of such
objection no later than thirty days after the date on which Buyer
delivered the
Closing Adjustment Statement to Seller, which notice shall specify
the nature of
each dispute and the basis therefor (an "Objection"). Failure by
Seller to
deliver an Objection within such thirty-day period will be deemed
to be Seller's
acceptance of the Closing Adjustment Statement as the Final Closing
Adjustment
Statement. The Parties shall attempt in good faith to reach
agreement resolving
all disputes set forth in the Objection within thirty days after
its delivery.
If the Parties are unable to resolve any or all such disputes
within such
thirty-day period, the Parties shall, promptly after the expiration
of such
period, submit for resolution all unresolved disputes to the
Cleveland, Ohio
office of PricewaterhouseCoopers (or if the Cleveland, Ohio office
of
PricewaterhouseCoopers cannot or is unwilling to serve in such
capacity, a
nationally recognized, independent public accounting firm selected
by mutual
agreement of Seller and Buyer, or if they cannot agree, selected by
mutual
agreement of the independent public accounting firms regularly used
by Seller
and Buyer in the conduct of their respective businesses) (the
"Arbitrator") as
an arbiter for resolution. In selecting the Arbitrator in
accordance with the
preceding sentence for purposes of this Agreement, the Parties
hereby waive any
conflict or potential conflict arising from any services performed
by such firm
for the Company Group, Seller, Buyer or any of their respective
Affiliates.
(c)
Promptly, but no later than thirty days after its acceptance of
its appointment as Arbitrator, the Arbitrator shall determine,
based solely on
presentations by Buyer and Seller and not by independent review,
those items in
dispute on the Closing Adjustment Statement and
13
<PAGE>
shall render a written report to Buyer and Seller as to the
resolution of each
dispute and the resulting calculation of Closing Cash, Closing Debt
and/or
Closing Working Capital, as applicable. In resolving any disputed
item, the
Arbitrator (i) shall not assign a value to such item greater than
the greatest
value for such item claimed by either Party or less than the
smallest value for
such item claimed by either Party; (ii) shall rule only on the
objections raised
by the Parties, accepting all other aspects of the Closing
Adjustment Statement;
and (iii) shall have no right, authority or discretion to employ
any accounting
standard or principles except for those provided for herein. The
Arbitrator will
have exclusive jurisdiction over, and resort to the Arbitrator as
provided in
this Section 2.4(c) will be the sole recourse and remedy of, the
Parties against
one another or any other Person with respect to any disputes
arising out of or
relating to Closing Cash, Closing Debt or Closing Working Capital.
The
Arbitrator's determination will be conclusive and binding on the
Parties and
will be enforceable in a court of competent jurisdiction.
(d) Each
Party shall cooperate with and make available to the other
Party
and its representatives all records, and shall permit access to its
facilities
and personnel, as reasonably required in connection with the
preparation and
analysis of the Closing Adjustment Statement and the resolution of
any disputes
with respect thereto.
(e) The
fees and expenses of the Arbitrator shall be borne by each
Party
in the proportion that the aggregate dollar amount of items
submitted to the
Arbitrator that are unsuccessfully disputed by such Party bears to
the aggregate
dollar amount of all items submitted to the Arbitrator.
(f) As
used herein, the term "Final Closing Adjustment Statement"
means
(i) the Closing Adjustment Statement if Seller does not deliver an
Objection in
accordance with Section 2.4(b); (ii) if Seller timely gives an
Objection and all
of the disputed items are resolved by agreement of the Parties, the
Closing
Adjustment Statement, as amended, if necessary, to reflect such
resolution of
all disputes; or (iii) if any disputed items are submitted to the
Arbitrator for
resolution, the Closing Adjustment Statement, as amended, if
necessary, to
reflect any resolution of any disputes by agreement of the Parties
and the
resolution of all other disputes by the Arbitrator.
(g) If (i)
Closing Working Capital plus Closing Cash is less than (ii)
Estimated Working Capital plus Estimated Cash, Seller shall pay
Buyer, as an
adjustment to the Purchase Price, the amount of such deficit. If
(A) Closing
Working Capital plus Closing Cash is greater than (B) Estimated
Working Capital
plus Estimated Cash, Buyer shall pay Seller, as an adjustment to
the Purchase
Price, the amount of such excess. If (i) Closing Debt is greater
than (ii)
Estimated Debt, Seller shall pay Buyer, as an adjustment to the
Purchase Price,
the amount of such excess. If (A) Closing Debt is less than (B)
Estimated Debt,
Buyer shall pay Seller, as an adjustment to the Purchase Price, the
amount of
such deficit.
(h) The
net amount of any payment required to be made under this
Section
2.4 shall (i) be made by wire transfer of immediately available
funds no later
than five Business Days after the date on which the Closing
Adjustment Statement
becomes the Final Closing Adjustment Statement as provided in this
Section 2.4
and (ii) shall bear interest at a rate equal to 8% per annum from
the Closing
Date to the date of payment.
14
<PAGE>
Section
2.5. Closing. Unless this Agreement shall have been terminated
pursuant to Article X and subject to the satisfaction or, when
permissible,
waiver of the conditions set forth in Article VII, the closing of
the
transactions contemplated by this Agreement, other than the
Reorganization, (the
"Closing") shall take place (a) at the offices of Kirkland &
Ellis LLP, 153 East
53rd Street, New York, New York 10022, as soon as possible but in
no event later
than the third Business Day after the date on which the last of the
conditions
set forth in Article VII (other than any such conditions which by
their terms
are not capable of being satisfied until the Closing Date) is
satisfied or, when
permissible, waived or (b) at such other time and/or place as the
Parties may
mutually agree in writing. The Closing shall be effective as of
12:01 a.m. on
the Closing Date (the "Effective Time").
Section
2.6. Closing Deliveries.
(a) At or
prior to the Closing, Seller will deliver or cause to be
delivered to Buyer the following:
(i) stock
powers endorsed in blank necessary to transfer the certificates
representing the
Shares to Buyer and originals of all certificated securities
representing the
equity interests in the Company;
(ii)
resignations or terminations of the executive officers, directors
and
managers of the
Company Group from their status as executive officers,
directors and
managers effective as of the Closing (other than those Persons
identified by
Buyer prior to Closing with respect to whom such resignation or
termination is
not required);
(iii) the
certificates referred to in Sections 7.3(a) and 7.3(b);
(iv) a
non-foreign affidavit, dated as of the Closing Date, in form
and
substance
required under the Treasury Regulations issued pursuant to
Section
1445 of the
Code, stating that Seller is not a "foreign person" as defined
in
Section 1445 of
the Code;
(v) a
Seller Release, dated as of the Closing Date, in substantially
the
form attached
hereto as Exhibit A, duly executed by Seller;
(vi) a
lease, between ATC (HBP) and Argo-Tech Corporation (OEM) in
substantially
the form attached hereto as Exhibit B, with such amendments as
are in form and
substance reasonably acceptable to Buyer, for the lease of
space in
Cleveland, Ohio, duly executed by the parties thereto;
(vii) a
lease, between ATC Costa Mesa and the owner of the Costa Mesa
Property in
substantially the form attached hereto as Exhibit B, with such
amendments,
including with respect to economic terms, as are in form and
substance
reasonably acceptable to Buyer, for the lease of space in Costa
Mesa,
California, duly executed by the parties thereto; and
(viii) all
other documents required to be delivered by Seller to Buyer at
the Closing
pursuant to this Agreement.
15
<PAGE>
(b) At the
Closing, Buyer will deliver or cause to be delivered to Seller
the following:
(i) the
Purchase Price in immediately available funds to the account as
provided in
Section 2.2;
(ii) the
certificates referred to in Sections 7.2(a) and 7.2(b); and
(iii) all
other documents required to be delivered by Buyer to Seller at
the Closing
pursuant to this Agreement.
Section
2.7. Satisfaction of Conditions. All conditions to the
obligations
of Seller and Buyer to proceed with the Closing under this
Agreement will be
deemed to have been fully and completely satisfied or waived for
purposes of
Article VII upon the Closing.
Section
2.8. Transfer Taxes. All applicable Transfer Taxes (including
any
stock Transfer Taxes due as a result of the sale of the Shares and
Transfer
Taxes, if any, imposed upon the transfer of real and personal
property) payable
in connection with this Agreement, the transactions, other than
the
Reorganization, contemplated by this Agreement or the documents
giving effect to
such transactions will be paid by Buyer. Notwithstanding anything
to the
contrary herein, Seller shall be liable for all Transfer Taxes due
or payable as
a result of or in connection with the Reorganization.
Section
2.9. Reorganization Taxes.
(a) As
soon as practicable after the date hereof, and in any event at
least ten Business Days prior to the Closing Date, the Company
shall deliver to
Buyer and Seller a statement of the Estimated Reorganization Taxes.
Buyer and
Seller shall use their reasonable best efforts to agree on the
amount of the
Reorganization Taxes, or on as many elements thereof as are
possible, prior to
the Closing Date. Buyer, Seller and the Company shall cooperate,
and shall cause
their respective accountants to cooperate, in the determination of
the
Reorganization Taxes. If Buyer and Seller are not able to agree on
the amount of
the Reorganization Taxes, or on any element thereof, prior to
Closing, then the
amount of the Estimated Reorganization Taxes (or the element
thereof) for
purposes of Closing shall be the amount initially proposed by the
Company.
(b) At the
Closing, the Purchase Price shall be increased or decreased, as
applicable, by the amount of the Estimated Reorganization
Taxes;
(c) If
Buyer and Seller have agreed on the amount of the
Reorganization
Taxes prior to Closing, then the agreed amount shall be the amount
of Estimated
Reorganization Taxes and also the amount of Reorganization Taxes.
If there are
unagreed items at Closing, then within 10 days after the Closing
Date, Seller
shall prepare and deliver to Buyer a statement (the "Proposed
Reorganization
Taxes Statement"), containing Seller's computation of the
Reorganization Taxes.
(d) If
Buyer reasonably disagrees with the Proposed Reorganization
Taxes
Statement, then Buyer may deliver to Seller an Objection no later
than thirty
days after the date
16
<PAGE>
on which Seller delivered the Proposed Reorganization Taxes
Statement to Buyer;
provided, however, that if Seller has not provided to Buyer prior
to the Closing
such appraisals and business valuations reasonably satisfactory to
Buyer with
respect to the value of any material Excluded Asset, then Buyer may
deliver to
Seller an Objection no later than ten days after Buyer has
received, at Seller's
cost, such appraisals and business valuations. Failure by Buyer to
deliver an
Objection within such thirty-day period will be deemed to be
Buyer's acceptance
of the Proposed Reorganization Taxes Statement as the Final
Reorganization Taxes
Statement. The Parties shall attempt in good faith to reach
agreement resolving
all disputes set forth in the Objection within thirty days after
its delivery.
If the Parties are unable to resolve any or all such disputes
within such
thirty-day period, then the Parties shall, promptly after the
expiration of such
period, submit all unresolved disputes to the Arbitrator as an
arbiter for
resolution.
(e)
Promptly, but no later than thirty days after its acceptance of
its
appointment as Arbitrator, the Arbitrator shall determine, based
solely on
presentations by Buyer and Seller and not by independent review,
those items in
dispute on the Proposed Reorganization Taxes Statement and shall
render a
written report to Buyer and Seller as to the resolution of each
dispute and the
resulting calculation of the Reorganization Taxes. In resolving any
disputed
item, the Arbitrator (i) shall not assign a value to such item
greater than the
greatest value for such item claimed by either Party or less than
the smallest
value for such item claimed by either Party; and (ii) shall rule
only on the
objections raised by the Parties, accepting all other aspects of
the Proposed
Reorganization Taxes Statement. The Arbitrator will have exclusive
jurisdiction
over, and resort to the Arbitrator as provided in this Section
2.9(e) will be
the sole recourse and remedy of, the Parties against one another
with respect to
any disputes arising out of or relating to Reorganization Taxes
(other than as
provided in Section 9.1(iv)). In particular, Reorganization Taxes
shall be
excluded from the computation of Estimated Working Capital and
Closing Working
Capital pursuant to Sections 2.3 and 2.4. The Arbitrator's
determination will be
conclusive and binding on the Parties and will be enforceable in a
court of
competent jurisdiction.
(f) Each
Party shall cooperate with and make available to the other
Party
and its representatives all records, and shall permit access to its
facilities
and personnel, as reasonably required in connection with the
preparation and
analysis of the Proposed Reorganization Taxes Statement and the
resolution of
any disputes with respect thereto.
(g) The
fees and expenses of the Arbitrator shall be borne by each
Party
in the proportion that the aggregate dollar amount of items
submitted to the
Arbitrator that are unsuccessfully disputed by such Party bears to
the aggregate
dollar amount of all items submitted to the Arbitrator.
(h) As
used herein, the term "Final Reorganization Taxes Statement"
means:
(i) the Proposed Reorganization Taxes Statement, if Buyer does not
deliver an
Objection in accordance with Section 2.9(d); (ii) if Buyer timely
gives an
Objection and all of the disputed items are resolved by agreement
of the
Parties, the Proposed Reorganization Taxes Statement, as amended,
if necessary,
to reflect such resolution of all disputes; or (iii) if any
disputed items are
submitted to the Arbitrator for resolution, the Proposed
Reorganization Taxes
Statement, as amended, if necessary, to reflect any resolution of
any disputes
by agreement of the Parties and the resolution of all other
disputes by the
Arbitrator.
17
<PAGE>
(i) If the
amount of the Reorganization Taxes, as reflected on the Final
Reorganization Taxes Statement, exceeds the amount of the
Estimated
Reorganization Taxes, then the Purchase Price shall be decreased by
the amount
of such excess and Seller shall pay to Buyer an amount equal to
such excess. If
the amount of the Reorganization Taxes, as reflected on the Final
Reorganization
Taxes Statement, is less than the amount of the Estimated
Reorganization Taxes,
then the Purchase Price shall be increased by the amount of such
shortfall and
Buyer shall pay to Seller an amount equal to such shortfall. The
amount of any
payment required to be made under this Section 2.9(i) shall (i) be
made by wire
transfer of immediately available funds no later than five Business
Days after
the date on which the Reorganization Taxes are finally determined
as provided in
this Section 2.9 and (ii) shall bear interest at a rate equal to 8%
per annum
from the Closing Date to the date of payment.
Article III.
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY GROUP
Seller
represents and warrants to Buyer as of the date hereof and as
of
the Closing Date, except as set forth in the Disclosure Schedule,
as follows:
Section
3.1. Organization of the Company and the Company Group. The
Company is a corporation, validly existing and in good standing
under the laws
of Delaware, and the Company has all requisite corporate power and
authority to
carry on its business as it is currently conducted and to own,
lease and operate
its properties where such properties are now owned, leased or
operated. Each
other member of the Company Group (i) is duly organized, validly
existing and in
good standing under the laws of the jurisdiction of its
organization and (ii)
has all requisite organizational power and authority to carry on
its respective
business as it is currently conducted and to own, lease and operate
its
respective properties where such properties are now owned, leased
or operated,
except in all cases where any failures of the representations in
this sentence
to be true would not, individually or in the aggregate, have a
material and
adverse effect on the Company Group. Each member of the Company
Group is duly
qualified or licensed to do business and is in good standing in
each
jurisdiction in which the property owned, leased or operated by it
or the nature
of the business conducted by it makes such qualification or license
necessary,
except in such jurisdictions where the failure to be so duly
qualified or
licensed or in good standing would not have a Material Adverse
Effect on the
Company Group. Section 3.1 of the Disclosure Schedule lists the
jurisdictions in
which any member of the Company Group is qualified or licensed to
do business as
a foreign Person.
Section
3.2. Noncontravention. Neither the execution and delivery of
this
Agreement by Seller, nor the consummation by the Company Group of
the
transactions contemplated hereby or the performance by the Company
Group of the
transactions contemplated hereby and by the Transaction Documents
will (i)
violate, conflict with or result in a breach or default under any
provision of
the certificate of incorporation or bylaws, or other organizational
documents,
of any member of the Company Group, (ii) except as set forth in
Section 3.2 of
the Disclosure Schedule, violate, conflict, result in a breach of
or default
under, give rise to any notification or Consent requirement or any
right of
termination, cancellation, payment or acceleration under or result
in the
creation of any Lien (other than Permitted Liens) upon any of the
properties or
assets of any member of the Company Group under any Material
Contract, or (iii)
subject to the Consents of Governmental Authorities described in
Section 3.5,
18
<PAGE>
violate any Law to which any member of the Company Group is
subject, except, in
the case of clauses (ii) and (iii), for such matters which would
not have a
Material Adverse Effect on the Company Group.
Section
3.3. Title to Shares. As of the date hereof, Seller holds of
record and owns beneficially the Shares set forth as owned by it in
Section 3.3
of the Disclosure Schedule which Shares constitute (as of the date
hereof) 100%
of the issued and outstanding capital stock of the Company, free
and clear of
any and all Liens, except for any restrictions on sales of
securities under
applicable securities Laws. As of the Closing Date, Seller will
hold of record
and own beneficially all issued and outstanding Shares, which
Shares will
constitute 100% of the issued and outstanding capital stock of the
Company, free
and clear of any and all Liens, except for any restrictions on
sales of
securities under applicable securities Laws All of the Shares have
been duly
authorized and validly issued and are fully paid and nonassessable.
Except as
set forth in Section 3.3 of the Disclosure Schedule, neither Seller
nor any
member of the Company Group is a party to any convertible
securities, calls,
preemptive rights, options, warrants, purchase rights or other
contracts,
agreements or commitments (other than this Agreement) that would
require Seller
to sell, transfer or otherwise dispose of the Shares held by it.
Except for this
Agreement and as set forth in Section 3.3 of the Disclosure
Schedule, Seller is
not a party to any voting trust, proxy or other agreement or
understanding with
respect to the voting of the Shares held by it.
Section
3.4. Subsidiaries of the Company; Capitalization
(a)
Section 3.4(a) of the Disclosure Schedule sets forth for each of
the
Company's Subsidiaries (i) its name and jurisdiction of
organization, (ii) its
form of organization and (iii) the percentage of capital stock,
membership
interests or units held by the Company, directly or indirectly, in
such
Subsidiary. The Company is the sole beneficial and record owner of
the
outstanding shares of capital stock or other interests in the
Company's
Subsidiaries, free and clear of all Liens, except for (i) any
restrictions on
sales of securities under applicable securities Laws or (ii) any
Liens falling
within clause (b) of the definition of Permitted Liens. All of the
issued and
outstanding shares of capital stock or other equity interests of
the Company's
Subsidiaries have been duly authorized, validly issued and are
fully paid and
nonassessable. There are no outstanding Rights, warrants,
conversion rights or
similar agreements, commitments or understandings for the purchase
or
acquisition from any of the Company's Subsidiaries of any shares of
capital
stock or other equity interests of such Subsidiary. Except as
disclosed on
Section 3.4(a) of the Disclosure Schedule, neither the Company nor
any of its
Subsidiaries owns or has any right to acquire, directly or
indirectly, any
outstanding capital stock of, or other equity interests in, any
Person.
(b) Except
as disclosed on Section 3.4(b) of the Disclosure Schedule, (i)
the Company Group has no Subsidiaries and does not, directly or
indirectly, own
any interest in any other Person, foreign or domestic (whether
through
acquisition of an equity interest or otherwise) in any other Person
other than a
member of the Company Group, (ii) there are no stockholder
agreements, voting
trusts, proxies or other agreements with respect to the purchase,
sale or voting
of the capital stock or stock rights of any member of the Company
Group, and
(iii) there is no existing Right or contract to which any member of
the Company
Group is a party requiring, and there are no Rights or convertible
securities of
a member of the Company Group outstanding which upon conversion or
exchange
would require, the issuance of any shares of capital stock or other
equity
interests in any member of the Company Group or other securities
convertible
into
19
<PAGE>
shares of capital stock or other equity interests of the Company or
any
Subsidiary, and there are no outstanding or authorized equity
appreciation,
phantom unit, profit participation or similar rights of the Company
or any
Subsidiary in any member of the Company Group. Except as set forth
on in Section
3.4(b) of the Disclosure Schedule, no outstanding securities of the
Company
other than shares of its common stock have any right to vote on
matters as to
which the shareholders of the Company have a right to vote. Except
as disclosed
on Section 3.4(b) of the Disclosure Schedule, there are no
restrictions on the
transfer of the Shares or any equity securities of any member of
the Company
Group other than those imposed by applicable state and federal
securities Laws.
Except as disclosed on Section 3.4(b) of the Disclosure Schedule,
no holder of
any security of any member of the Company Group is entitled to
preemptive or
similar statutory or contractual rights, either arising pursuant to
any
agreement or instrument to which such member of the Company Group
is a party, or
which are otherwise binding upon such member of the Company
Group.
(c) The
equity capitalization of the Company, including (i) each class
of
capital stock, and (ii) the name of each holder and the number of
shares held,
is as set forth in Section 3.4(c) of the Disclosure Schedule.
Section
3.5. Government Authorizations. Except for (i) required filings
under the HSR Act, (ii) compliance with any applicable requirements
of the
Securities Act, (iii) compliance with any other applicable
securities Laws and
(iv) Consents not required to be made or given until after the
Closing, no
material Consent of, with or to any Governmental Authority is
required to be
obtained or made by Seller in connection with the execution,
delivery and
performance of this Agreement by Seller or the consummation of the
transactions
contemplated hereby, other than any such requirement that is
applicable as a
result of the specific legal or regulatory status of Buyer or as a
result of any
other facts that specifically relate to the business or activities
in which
Buyer is engaged.
Section
3.6. Financial Statements; Securities Filings.
(a) Set
forth in Section 3.6(a) of the Disclosure Schedule are correct
and
complete copies of (i) the audited consolidated balance sheets of
Argo-Tech and
its Subsidiaries as of October 29, 2005 and October 30, 2004 and
the related
consolidated statements of operations and cash flows for the fiscal
years then
ended (the "Audited Financial Statements") and (ii) the unaudited
consolidated
balance sheets of (A) Argo-Tech and its Subsidiaries as of the
Balance Sheet
Date and (B) the Company Group as of the Balance Sheet Date and
October 29,
2005, and the related consolidated statements of operations and
cash flows for
the fiscal years then ended (the "Unaudited Financial Statements"
and, together
with the Audited Financial Statements, the "Financial Statements").
Except as
set forth therein, (x) the Financial Statements present fairly and
accurately,
in all material respects, respectively, the consolidated financial
position,
statements of operations and cash flows of Argo-Tech and its
Subsidiaries and
the Company Group, as the case may be, at the respective dates set
forth therein
and for the respective periods covered thereby, (y) were prepared
in accordance
with GAAP, and (z) are consistent with the books and records of
Argo-Tech and
its Subsidiaries and the Company Group, as the case may be, in all
material
respects (which books and records are correct and complete in all
material
respects).
20
<PAGE>
(b) Except
as disclosed on Section 3.6(b) of the Disclosure Schedule,
since January 1, 2004, Argo-Tech has made all filings with the U.S.
Securities
and Exchange Commission (the "Commission") that it has been
required to make
under the Securities Act and the Securities Exchange Act and
pursuant to the
terms of the Indentures (such reports collectively, the "Public
Reports"). Each
of the Public Reports as of its date has complied with the
Securities Act or the
Securities Exchange Act, as applicable, and the rules promulgated
thereunder or
pursuant thereto in all material respects. None of the Public
Reports, as of
their respective dates, contained any untrue statement of a
material fact or
omitted to state a material fact necessary in order to make the
statements made
therein, in the light of the circumstances under which they were
made, not
misleading.
Section
3.7. Absence of Certain Changes. Since the Balance Sheet Date,
except as contemplated by or disclosed in or pursuant to this
Agreement or as
set forth in Section 3.7 of the Disclosure Schedule, each member of
the Company
Group has conducted its business only in the ordinary course, and
has not been
subject to any event or development that would, individually or in
the
aggregate, have a Material Adverse Effect. Without limiting the
generality of
the foregoing, since the Balance Sheet Date, no member of the
Company Group has
engaged in any practice, taken any action, omitted to take any
action or entered
into any transaction which, if the same had occurred between the
date hereof and
the Closing Date, would violate or breach Section 6.1(b).
Section
3.8. Tax Matters. Except as set forth in Section 3.8 of the
Disclosure Schedule, with respect to periods ending on or before
the Closing
Date:
(a) Each
member of the Company Group has duly and timely filed, or
caused
to be timely filed, with the appropriate Tax authorities all
material Tax
Returns that it was required to file, and paid or caused to be paid
all material
Taxes that it owed, whether or not shown to be due thereon. No
member of the
Company Group is currently a beneficiary of any extension of time
under which to
file any material Tax Returns. There are no Liens for Taxes on any
of the assets
of any member of the Company Group other than Permitted Liens.
(b) No
member of the Company Group has waived or requested a waiver of
any
statute of limitations in respect of material Taxes or agreed to or
requested
any extension of time with respect to a material Tax assessment or
deficiency,
which waiver or extension is still in effect.
(c) No
member of the Company Group is a party to any Tax allocation,
Tax
sharing or other similar agreement.
(d) No
member of the Company Group has any Liability for the Taxes of
any
Person, other than itself, under Section 1.1502-6 of the Treasury
Regulations
(or any similar provision of state, local or foreign law) as a
transferee or
successor, by contract or otherwise.
(e) No
member of the Company Group has distributed stock of another
Person, or has had its stock distributed by another Person, in a
transaction
that was purported or intended to be governed in whole or in part
by Code
Section 355 or Code Section 361.
21
<PAGE>
(f) Each
member of the Company Group has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts
paid or owing
to any Person.
(g) There
is no material dispute or claim concerning any Tax Liability of
any member of the Company Group claimed or raised by any taxing
authority in
writing or, to Seller's Knowledge, otherwise claimed or raised by
any taxing
authority. Section 3.8 of the Disclosure Schedule lists, as of
September 13,
2005, all federal, state, local, and foreign income or corporation
Tax Returns
filed with respect to any member of the Company Group for taxable
periods ended
on or after January 1, 2001, indicates those Tax Returns that have
been audited,
and indicates those Tax Returns that currently are the subject of
audit. Seller
has made available to Buyer correct and complete copies of all such
material
federal income and corporation Tax Returns, examination reports,
and statements
of deficiencies assessed against or agreed to by any member of the
Company Group
filed or received since January 1, 2001. The Company Group has
filed all
federal, state, local, and foreign income or corporation Tax
Returns required to
be filed with respect to any member of the Company Group since
September 13,
2005, or has timely made a request for extension of such filing.
Seller shall
cause the Company to deliver to Buyer a list of all such filings or
requests for
extension made since September 13, 2005, within ten Business Days
of the date
hereof.
(h) No
member of the Company Group will be required to include any
material item of income in, or exclude any item of deduction from,
taxable
income for any taxable period (or portion thereof) ending after the
Closing Date
as a result of any (i) change in accounting method for a taxable
period ending
on or before the Closing Date; (ii) "closing agreement" as
described in Code
Section 7121 (or similar provision of state, local or foreign Tax
law) executed
on or before the Closing Date; or (iii) installment or open
transaction
disposition made on or before the Closing Date.
(i) No
member of the Company Group has filed a consent under former
Code
Section 341(f) concerning collapsible corporations. No member of
the Company
Group has participated in any "listed transaction" within the
meaning of
Treasury Regulations Section 1.6011-4. No claim has been made in
writing by any
taxing authority that any member of the Company Group is or may be
subject to
taxation by a jurisdiction in which it does not file income Tax
Returns.
(j) To
Seller's Knowledge, no executive officer of the Company Group
has
directed any member of the Company Group to take any Prohibited
Action with
respect to the administration of any arrangement such executive
officer knew to
be subject to Section 409A of the Code. For this purpose, a
"Prohibited Action"
means an actual, affirmative action that the executive officer
believed, at the
time of such action, would cause the administration of the relevant
deferred
compensation arrangement to fail to be in good faith compliance
with Section
409A of the Code and/or its related guidance.
(k) Based
solely on the arrangements and compensation levels in effect on
the date hereof, and assuming that no employee of the Company Group
is
terminated in connection with the change of control that will occur
upon
consummation of the transactions contemplated by this Agreement,
other than
those persons who are listed on Section 3.8(k)(i) of the Disclosure
Schedule and
except as reflected on Section 3.8(k)(ii) of the Disclosure
Schedule, no
"Expected Payment" that any member of the Company Group would
otherwise deduct
for federal tax
22
<PAGE>
purposes during a taxable period commencing after the Closing will
be
non-deductible to such member of the Company Group pursuant to
Section 280G of
the Code. For purposes hereof, "Expected Payment" means a payment
to any
director, officer, employee, or agent of any member of the Company
Group that
such member of the Company Group owes or is required to provide
pursuant to an
arrangement in effect on the date hereof. Except as reflected on
Section
3.8(k)(ii) of the Disclosure Schedule, the Company is not party to
any binding
agreement in effect on the date hereof that will require the
Company to "gross
up" or otherwise reimburse any such Person for any excise Tax
imposed pursuant
to Section 4999 of the Code.
Section
3.9. Real Property.
(a) Other
than Owned Real Property that is included in the Excluded
Assets, no member of the Company Group holds any Owned Real
Property.
(b)
Section 3.9(b) of the Disclosure Schedule sets forth (i) a true
and
complete list of all licenses, agreements and leases of real
property under
which any member of the Company Group is a lessee, lessor,
sub-lessee or
sub-lessor and all amendments, extensions, renewals, guarantees,
and other
agreements with respect thereto (the "Real Property Leases") and
(ii) a true and
complete list of the addresses of all real property leased by any
member of the
Company Group. The real property leasehold or subleasehold estates
and other
rights to use or occupy real property subject to the Real Property
Leases is
hereinafter referred to as the "Leased Real Property". There are no
oral Real
Property Leases. Except as set forth in Section 3.9(b) of the
Disclosure
Schedule, (A) to Seller's Knowledge, neither any member of the
Company Group nor
any other party to any Real Property Lease is in breach or default
in any
material respect under any Real Property Lease, (B) each Real
Property Lease is
legal, valid, binding, enforceable and in full force and effect,
subject to
proper authorization and execution of such Real Property Lease by
the other
party thereto and to the Remedies Exception, (C) to Seller's
Knowledge, no event
has occurred or circumstance exists which, with the delivery of
notice, the
passage of time or both, would constitute a material breach or
default of any
Real Property Lease; (D) no security deposit or portion thereof
deposited with
respect to any Real Property Lease has been applied in respect of a
breach or
default under such Real Property Lease that has not been
redeposited in full;
and (E) no member of the Company Group owes any brokerage
commissions or
finder's fees with respect to any Real Property Lease, and no
member of the
Company Group has collaterally assigned or granted any other
security interest
in any Real Property Lease or any interest therein
Section
3.10. Intellectual Property.
(a)
Section 3.10(a) contains a complete and accurate list of (i) all
of
the following that are owned by any member of the Company Group:
(A) issued
patents and pending patent applications, (B) registrations and
applications for
registration of any Marks, and (C) registered copyrights, and (ii)
Non-Company
Software (other than off-the-shelf software with a total
replacement cost and/or
license fee of less than $250,000).
(b) A
member of the Company Group (i) owns all Intellectual Property
set
forth on Section 3.10(a)(i) of the Disclosure Schedule, and (ii)
subject to
clause (B) below, owns or has the right to use all Intellectual
Property that is
necessary for the operation of the business of any member of the
Company Group
as each is currently conducted, and all such Intellectual
23
<PAGE>
Property is free and clear of all Liens (other than Permitted
Liens)
(collectively, the "Company Intellectual Property"). All issuance,
renewal,
maintenance and other fees and payments that are or have become due
with respect
to Company Intellectual Property set forth on Section 3.10(a) of
the Disclosure
Schedule on or before the Closing have been timely paid by or on
behalf of the
Company Group. To Seller's Knowledge, (i) all of the Company
Intellectual
Property is valid, subsisting and in full force and effect, and
(ii) the conduct
of the business of the Company Group is not currently operated in a
manner that
infringes or misappropriates any Intellectual Property rights of
any third
parties. Except as set forth on Section 3.10(b) of the Disclosure
Schedule, (A)
there are no proceedings, claims or actions against any member of
the Company
Group that are presently pending, and, to Seller's Knowledge, no
claims or
actions have been threatened since January 1, 2002 that contest the
validity,
use, ownership or enforceability of any Company Intellectual
Property; and (B)
to Seller's Knowledge, no third party is infringing or
misappropriating any
Company Intellectual Property, which, in the case of each of
subsections (A) and
(B), if adversely determined or if such action is not redressed,
would have a
Material Adverse Effect on the Company Group.
(c) All
licenses, assignments and other contracts relating to the use
of
all Non-Company Software and the Intellectual Property material to
the operation
of the business of any member of the Company Group, as each is
currently
conducted, that is owned by third parties, are valid and in full
force and
effect. No employee or consultant of any member of the Company
Group holds any
right, title or interest in or to any Company Intellectual Property
that is
material to the business of any member of the Company Group as
currently
conducted. Each member of the Company Group has taken all
commercially
reasonable precautions to protect the proprietary nature of each
material item
of Intellectual Property, and to maintain in confidence all trade
secrets and
confidential information of the business comprising a part thereof.
No software
or other technology incorporated into any product of the Company or
any of its
Subsidiaries (excluding any third party's product) distributed or
otherwise sold
by the Company or any of its Subsidiaries constitutes Open Source
Software or a
derivative work based on any Open Source Software. The term
"off-the-shelf
software" as used above in this Section 3.10 does not include Open
Source
Software.
Section 3.11.
Environmental Matters. This Section 3.11 shall constitute
the sole representations of Seller with respect to environmental
matters,
including matters relating to Environmental Law or Hazardous
Materials.
(a) Except
as set forth on Section 3.11 of the Disclosure Schedule:
(i) within
the past three (3) years, no member of the Company Group has
violated in any
material respect any applicable Environmental Law or any
permit, license
or other authorization applicable to the Company Group
required under
Environmental Law;
(ii)
within the past three (3) years, no member of the Company Group
has
received any
written notice, complaint or claim that remains uncured,
alleging that
any member of the Company Group is in material violation of any
Environmental
Law or subject to any material Liability under any
Environmental
Law;
24
<PAGE>
(iii) no
member of the Company Group is subject to any outstanding
consent
decree,
compliance order or administrative order from or settlement
agreement
with any
Governmental Authority, in each case containing material
obligations
for a member of
the Company Group pursuant to any Environmental Law;
(iv) there
are no material Actions pending or, to Seller's Knowledge,
threatened
before any Governmental Authority against any member of the
Company
Group;
(v) (A) to
Seller's Knowledge, no asbestos or asbestos-containing material
is or has been
present at the Leased Real Pr
