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STOCK PURCHASE AGREEMENT

Purchase and Sale Agreement

STOCK PURCHASE AGREEMENT | Document Parties: LATROBE STEEL COMPANY | Mintz Levin Cohn Ferris Glovsky and Popeo, PC | One Financial | TIMKEN ALLOY STEEL EUROPE LIMITED | Timken Company | Toolrock Acquisition LLC | Toolrock Holding, Inc | Watermill Group You are currently viewing:
This Purchase and Sale Agreement involves

LATROBE STEEL COMPANY | Mintz Levin Cohn Ferris Glovsky and Popeo, PC | One Financial | TIMKEN ALLOY STEEL EUROPE LIMITED | Timken Company | Toolrock Acquisition LLC | Toolrock Holding, Inc | Watermill Group

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Title: STOCK PURCHASE AGREEMENT
Governing Law: New York     Date: 12/8/2006
Industry: Misc. Fabricated Products     Law Firm: Jones Day;Mintz Levin     Sector: Basic Materials

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Exhibit 10.1

Execution Version

STOCK PURCHASE AGREEMENT

by and among

THE TIMKEN COMPANY,

LATROBE STEEL COMPANY,

TIMKEN ALLOY STEEL EUROPE LIMITED,

TOOLROCK HOLDING, INC.

and

TOOLROCK ACQUISITION LLC

Dated as of December 8, 2006

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

ARTICLE I DEFINITIONS

 

 

1

 

ARTICLE II THE ACQUISITION AND THE PURCHASE AND SALE OF THE SHEFFIELD ASSETS AND THE ICX
                 ASSETS

 

 

15

 

2.1 Sale and Purchase of Shares and the ICX Assets

 

 

15

 

2.2 [Reserved.]

 

 

15

 

2.3 [Reserved.]

 

 

15

 

2.4 [Reserved.]

 

 

15

 

2.5 [Reserved.]

 

 

15

 

2.6 Delivery of Shares, ICX Bill of Sale and Purchase Price

 

 

15

 

2.7 [Reserved.]

 

 

15

 

2.8 [Reserved.]

 

 

15

 

2.9 Purchase of Sheffield Assets

 

 

15

 

2.10 Purchase Price Adjustment

 

 

20

 

2.11 Offset

 

 

21

 

2.12 Withholding Rights

 

 

21

 

ARTICLE III CLOSING AND DELIVERIES

 

 

22

 

3.1 Closing

 

 

22

 

3.2 Further Assurances

 

 

22

 

3.3 Transfer Taxes

 

 

22

 

3.4 Deliveries by Timken

 

 

22

 

3.5 Deliveries by Buyer

 

 

24

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TIMKEN

 

 

25

 

4.1 Organization and Standing

 

 

25

 

4.2 Authorization; Power

 

 

25

 

4.3 Organizational Documents

 

 

26

 

4.4 Capitalization

 

 

26

 

4.5 Title

 

 

27

 

4.6 Subsidiaries and Investments

 

 

27

 

4.7 Delivery; No Conflict; Consents

 

 

27

 

4.8 Financial Statements

 

 

28

 

4.9 Tax Matters

 

 

29

 



- i -

 

 

 

 

 

 

 

 

4.10 Personal Property Assets

 

 

30

 

4.11 Contracts

 

 

31

 

4.12 Real Property

 

 

33

 

4.13 Personal Property Leases

 

 

35

 

4.14 Absence of Undisclosed Liabilities

 

 

35

 

4.15 Absence of Changes

 

 

35

 

4.16 Employment Matters

 

 

38

 

4.17 Employee Benefits

 

 

39

 

4.18 Litigation and Disputes

 

 

42

 

4.19 Transactions with Affiliates

 

 

43

 

4.20 Compliance with Laws; Permits

 

 

43

 

4.21 Environmental Matters

 

 

44

 

4.22 Insurance

 

 

45

 

4.23 Bank Accounts; Powers of Attorney

 

 

45

 

4.24 Customers and Suppliers

 

 

46

 

4.25 Intellectual Property

 

 

46

 

4.26 Inventory

 

 

47

 

4.27 Books and Records

 

 

47

 

4.28 Certain Business Practices

 

 

47

 

4.29 [Reserved.]

 

 

47

 

4.30 No Brokers

 

 

48

 

4.31 Accounts and Notes Receivable

 

 

48

 

4.32 Accounts and Notes Payable

 

 

48

 

ARTICLE V REPRESENTATIONS AND WARRANTIES OF TIMKEN ALLOY

 

 

48

 

5.1 Organization and Standing

 

 

48

 

5.2 Authorization; Power

 

 

48

 

5.3 Organizational Documents

 

 

49

 

5.4 Title

 

 

49

 

5.5 Delivery; No Conflict; Consents

 

 

49

 

5.6 Employment Matters

 

 

49

 

5.7 Contracts

 

 

51

 

5.8 Litigation and Disputes

 

 

51

 

5.9 Customers and Suppliers

 

 

52

 



- ii -

 

 

 

 

 

 

 

 

5.10 Inventory

 

 

52

 

5.11 Tax Matters

 

 

52

 

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER

 

 

53

 

6.1 Investment Intent

 

 

53

 

6.2 Organization and Standing; Power

 

 

53

 

6.3 Authorization, Validity and Effect; Consents

 

 

53

 

6.4 Legal Proceedings

 

 

53

 

6.5 No Brokers

 

 

53

 

6.6 Buyer’s Debt Financing

 

 

54

 

6.7 Buyer’s Equity Financing

 

 

54

 

6.8 Solvency

 

 

54

 

6.9 No Other Representations and Warranties

 

 

54

 

6.10 HSR Act

 

 

54

 

ARTICLE VII COVENANTS AND AGREEMENTS

 

 

54

 

7.1 Interim Operations of the Company and Timken Alloy

 

 

54

 

7.2 Access to Information; Delivery of Financial Statements

 

 

58

 

7.3 Cooperation; HSR Act Filings; Other Approvals, Filings and Consents

 

 

59

 

7.4 Publicity

 

 

60

 

7.5 Notice of Certain Events

 

 

60

 

7.6 Tax Matters

 

 

61

 

7.7 No Solicitation of Other Proposals

 

 

65

 

7.8 Timken Brand

 

 

66

 

7.9 Employee Arrangements

 

 

67

 

7.10 Litigation Cooperation

 

 

69

 

7.11 Buyer Financing

 

 

70

 

7.12 Affiliate Obligations

 

 

70

 

7.13 Certain Indebtedness

 

 

70

 

7.14 Cooperation

 

 

70

 

7.15 No Further Financial Obligations

 

 

71

 

7.16 Sheetz Station Agreement

 

 

71

 

7.17 TADB Employees

 

 

71

 

7.18 Certain Transactions

 

 

72

 

7.19 Subsequent Merger

 

 

73

 



- iii -

 

 

 

 

 

 

 

 

ARTICLE VIII CONDITIONS TO CLOSING

 

 

73

 

8.1 Conditions to Obligations of Timken and Buyer

 

 

73

 

8.2 Additional Conditions to Obligation of Timken

 

 

73

 

8.3 Additional Conditions to Obligation of Buyer

 

 

74

 

ARTICLE IX INDEMNIFICATION AND SURVIVAL

 

 

75

 

9.1 Certain Definitions

 

 

75

 

9.2 Indemnification

 

 

76

 

9.3 Limitations

 

 

79

 

9.4 Assertion of Claims

 

 

82

 

9.5 Defense of Third Party Claims

 

 

82

 

9.6 Exclusive Remedy

 

 

83

 

9.7 Survival of Representations, Warranties and Covenants

 

 

84

 

9.8 Environmental Claims

 

 

84

 

9.9 Insurance

 

 

85

 

ARTICLE X TERMINATION OF AGREEMENT

 

 

85

 

10.1 Termination

 

 

85

 

10.2 Effect of Termination

 

 

86

 

ARTICLE XI MISCELLANEOUS AND GENERAL

 

 

86

 

11.1 Expenses

 

 

86

 

11.2 Successors and Assigns

 

 

87

 

11.3 Notices

 

 

87

 

11.4 Complete Agreement

 

 

88

 

11.5 Captions; References

 

 

88

 

11.6 Amendment

 

 

88

 

11.7 Waiver

 

 

88

 

11.8 Governing Law

 

 

88

 

11.9 Severability

 

 

88

 

11.10 Mutual Drafting

 

 

89

 

11.11 Consent to Jurisdiction and Service of Process

 

 

89

 

11.12 Counterparts

 

 

89

 

11.13 Specific Performance

 

 

89

 

11.14 Waiver of Jury Trial

 

 

89

 



- iv -

 

 

INDEX OF DEFINED TERMS

2006 Bonus Amount , 74

Acquisition , 1
Acquisition Proposal , 1, 68
Acquisition Sub , 1
Actions , 1
Additional Sheffield Information , 2
Affiliate , 2
Agreement , 1, 2
Antitrust Laws , 2, 62
Assumed Plan, 2, 70
Back-Up Letter of Credit , 73
Bank Accounts , 2, 48
Business Day , 2
Buyer , 1, 2
Buyer Book Value Determination , 2, 18
Buyer Event of Indemnification , 2, 81
Buyer Indemnified Persons , 2, 78
Buyer Indemnifying Persons, 81
Buyer Pension Plan , 3, 69
Buyer Tax Act , 3, 80
Buyer’s Knowledge , 2
Buyer’s Welfare Plans , 3, 71
CBA , 3, 70
CERCLA , 3, 5
Closing , 3, 24
Closing Date , 3, 24
Closing Working Capital Statement , 3, 22
COBRA Coverage , 3, 43
Code , 3
Company , 1, 3
Company Assets , 3, 33
Company Employee Plans , 3, 42
Company IP , 3
Company Purchase Price, 3
Company Representatives , 3, 68
Confidentiality Agreement , 3, 60
Consents , 4
Consolidated Tax Returns , 4, 63
Contracts , 4, 33
Control , 4
Copyrights , 4
Current Assets , 4
Current Liabilities , 4
Data , 4, 49
Debt Commitment Letters , 4, 56
Deductible Amount , 4, 82
Deferred Closing , 4
Deferred Closing , 17
Deferred Closing Book Value , 4
Deferred Closing Date , 4
Disclosure Schedule , 5
Effective Date , 5, 24
Employee Plans , 5, 42
Environment , 5
Environmental Laws , 5
Environmental Permit , 5
Environmental Subcap , 5, 83
Equity Commitment Letters , 5, 56
ERISA , 5
ERISA Affiliate , 5
Estimated Deferred Closing Book Value , 18
Estimated Working Capital , 6, 22
Event of Indemnification , 6, 78
Excluded Representations , 6, 82
Final Book Value , 6, 18
Final Working Capital , 6, 23
Financial Statements , 6, 30
GAAP , 6
General Enforceability Exceptions , 6, 35
Governmental Authority , 6
Guarantees , 6, 73
Hazardous Substance , 6
HSR Act , 6
ICX Asset Purchase Price, 6
ICX Asset Sale , 6
ICX Assets , 7
ICX Bill of Sale , 7, 26
ICX Lease , 7
Income Tax Returns , 7, 64
Indebtedness , 7
Indemnified Persons , 7, 78
Indemnifying Person , 7, 78
Independent Auditor , 7, 22
Intellectual Property , 7
Interim Balance Sheet , 7, 30
Interim Balance Sheet Date , 7, 37
Interim Financial Statements , 7, 30
Investments , 7
IRS , 8, 14
KeyBanc Capital Markets , 8, 50
Knowledge , 8
Latrobe Hourly Plan , 8, 70
Latrobe VIP , 8, 70
Laws , 8
Leased Personal Property , 8, 37
Leased Real Property , 8
Lenders , 8
Letters of Credit , 8, 73
Liability , 8
License Agreement , 8, 34
Lien , 8

- v -

 

 

Losses , 8, 78
Major Customer , 9
Major Supplier , 9
Material Adverse Effect , 9
Mezzanine Commitment Letter, 56
Names , 9, 69
Non-Competition Agreement , 9, 26
Non-Union Employees , 9
Notice of Claim , 9, 84
OH&R , 9
Option , 9
Orders , 9
Outside Date , 88
Owned Real Property , 9
Patents , 9
Permits , 10
Permitted Liens , 10
Person , 10
Personal Property Leases , 10, 37
Pre-Closing Financial Statements, 10, 61
Pre-Closing Workers Compensation Claims , 75
Prior Actions , 11, 45
Product Liability Subcap , 11, 83
Purchase Price, 11
Real Property , 11
Real Property Leases , 11, 35
Reimbursement Cap , 75
Related Agreements , 11
Release , 11
Release and Waiver Agreement , 11, 26
Required Consents , 11, 25
Retiring Non-Union Employees , 11, 69
Section 338 Allocation , 67
Section 338 Forms , 67
Section 338(h)(10) Election , 67
Seller Welfare Plans , 11, 71
Senior Debt Commitment Letter, 11, 56
Service Contracts , 12, 35
Shares , 1, 12
Sheetz Station Agreement , 12
Sheffield Asset Purchase Agreement , 12, 21
Sheffield Assets, 12
Sheffield Consignment Agreements, 12
Sheffield Information , 12
Sheffield Inventory, 12
Sheffield Lease , 12
Sheffield Purchase Orders, 12
Sheffield Purchase Price, 12
Sheffield Shortfall Amount, 12, 18
Sheffield Transaction, 12, 63
Software , 13
Straddle Period , 13, 64
Straddle Period Tax Returns , 13, 64
Subsidiaries , 13
Subsidiary Shares , 13, 29
Supply Agreements , 13, 26
Surplus Employees, 13
Survey , 13
Survival Date , 13, 86
TADB Employees , 13, 52
Tax Adjustment , 13, 68
Tax or Taxes , 13
Tax Proceeding , 14, 66
Tax Returns , 14
Termination Costs, 14
Third Party Claim , 14, 85
Timken , 1, 14
Timken Indemnified Persons , 15
Timken Alloy , 1, 14
Timken Alloy Agreements , 14, 51
Timken Alloy Distribution Business , 14
Timken Cap , 14, 83
Timken Event of Indemnification , 14, 79
Timken Indemnified Persons, 78
Timken Indemnifying Persons , 15, 79
Title Commitment , 15
Title Company , 15
Title Policy , 15
Top Customer , 15
Top Supplier , 15
Trade Secrets , 15
Trademarks , 15
Transactions Costs , 15
Transfer Date , 15
Transfer Regulations, 16
Transfer Taxes , 16, 24
Transferring Employees, 16, 74
Transition Services Agreement , 16, 26
Union Employees , 16
VAT, 16, 20
VAT Records , 16, 20
WARN Act , 16
Working Capital , 16
Working Capital Target, 16

- vi -

 

 

INDEX OF SCHEDULES

 

 

 

 

Schedule 1.19

 

Buyer’s Knowledge

Schedule 1.79

 

Indebtedness

Schedule 1.90

 

List of Knowledge Individuals

Schedule 1.95

 

Leased Real Property

Schedule 1.113

 

Owned Real Property

Schedule 1.142

 

Sheffield Consignment Agreements

Schedule 3.4(i)

 

Consents

Schedule 6.6

 

Debt Commitment Letters

Schedule 6.7

 

Equity Commitment Letters

Schedule 7.1

 

Interim Operations

Schedule 7.2(b)

 

Customer, Supplier and Licensor Contacts

Schedule 7.9(b)(i)

 

Assumed Plans

Schedule 7.12

 

Affiliate Obligations

Schedule 7.13

 

Certain Indebtedness

Schedule 7.15

 

Guarantees and Letters of Credit

Schedule 9.1(d)

 

Losses

Schedule 9.2(a)(vii)

 

Identified Litigation

Schedule 9.2(a)(viii)

 

Known Environmental Matters



- vii -

 

 

INDEX OF DISCLOSURE SCHEDULE

Disclosure Schedule Sections :

 

 

 

 

Section 4.1

 

Organization and Standing

Section 4.3

 

Directors and Officers

Section 4.4(a)

 

Capitalization

Section 4.4(c)

 

Capitalization

Section 4.6

 

Subsidiaries and Investments

Section 4.7(a)

 

No Conflict

Section 4.7(b)

 

Consents

Section 4.8(d)

 

Working Capital Example

Section 4.9

 

Tax Matters

Section 4.10

 

Personal Property Assets

Section 4.11

 

Contracts

Section 4.12(a)

 

Real Property

Section 4.12(d)

 

Real Property

Section 4.12(g)

 

Real Property

Section 4.12(h)

 

Real Property

Section 4.12(i)

 

Real Property

Section 4.12(k)

 

Real Property

Section 4.13

 

Personal Property Leases

Section 4.14

 

Absence of Undisclosed Liabilities

Section 4.15

 

Absence of Changes

Section 4.16

 

Employment Matters

Section 4.17(a)

 

Employee Benefits

Section 4.17(b)

 

Employee Benefits

Section 4.17(d)

 

Employee Benefits

Section 4.17(e)

 

Employee Benefits

Section 4.18

 

Litigation and Disputes

Section 4.19

 

Transactions with Affiliates

Section 4.20

 

Compliance with Laws; Permits

Section 4.21

 

Environmental Matters

Section 4.22

 

Insurance

Section 4.23

 

Bank Accounts; Powers of Attorney

Section 4.24

 

Customers and Suppliers

Section 4.25(a)

 

Intellectual Property

Section 4.25(b)

 

Intellectual Property

Section 4.25(d)

 

Data

Section 4.26

 

Inventory

Section 4.31

 

Accounts and Notes Receivable

Section 5.3

 

Organizational Documents of Timken Alloy

Section 5.5(a)

 

Delivery; No Conflicts; Consents of Timken Alloy

Section 5.5(b)

 

Delivery; No Conflicts; Consents of Timken Alloy

Section 5.6

 

Employment Matters

Section 5.7

 

Contracts

Section 5.8

 

Litigation and Disputes

Section 5.9

 

Customers and Suppliers of Timken Alloy

Section 6.3

 

Authorization; Validity and Effect; Consents



 

 

 

INDEX OF EXHIBITS

 

 

 

 

Exhibit A

 

[Reserved]

Exhibit B

 

Form of Opinion of Jones Day

Exhibit C-1

 

Form of Supply Agreement re: Aerospace Material

Exhibit C-2

 

Form of Supply Agreement re: Steel Material and Conversion

Exhibit C-3

 

Form of Supply Agreement re: Rolling Mill Services

Exhibit D

 

Form of Transition Services Agreement

Exhibit E

 

Form of Non-Competition Agreement

Exhibit F

 

Form of Release and Waiver Agreement

Exhibit G

 

Title Commitments

Exhibit H

 

Surveys

Exhibit I

 

Form of Sheffield Lease

Exhibit J

 

Form of Sheffield Asset Purchase Agreement

Exhibit K

 

ICX Bill of Sale

Exhibit L

 

[Reserved]

Exhibit M

 

Form of Subordination Agreement



 

 

 

STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT (this " Agreement "), dated as of December 8, 2006, is by and among The Timken Company, an Ohio corporation (" Timken "), Latrobe Steel Company, a Pennsylvania corporation (the " Company "), Timken Alloy Steel Europe Limited, a corporation organized under the Laws of England and Wales (" Timken Alloy "), Toolrock Acquisition LLC, a Pennsylvania limited liability company (" Acquisition Sub " ), and Toolrock Holding, Inc., a Delaware corporation (" Buyer ").

RECITALS:

     A. Timken is the beneficial and record owner of all the issued and outstanding shares (the " Shares ") of common stock, without par value, of the Company.

     B. The Shares represent all of the issued and outstanding capital stock of the Company.

     C. Timken desires to sell to Acquisition Sub, and Acquisition Sub desires to purchase from Timken, all of the Shares upon the terms set forth in this Agreement (such purchase and sale of the Shares, the " Acquisition ").

     D. In connection with the Acquisition, Acquisition Sub desires to acquire certain assets from Timken and Timken Alloy on the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the mutual promises and subject to the terms and conditions herein contained, and for other good and valuable consideration had and received, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Timken, the Company, Timken Alloy, Acquisition Sub and the Buyer hereby agree as follows:

ARTICLE I

DEFINITIONS

     For purposes of this Agreement:

      1.1 " 2006 Bonus Amount " has the meaning set forth in Section 7.18(c).

      1.2 " Acquisition " has the meaning set forth in the recitals to this Agreement.

      1.3 " Acquisition Proposal " has the meaning set forth in Section 7.7(a).

      1.4 " Acquisition Sub " has the meaning set forth in the preamble to this Agreement.

      1.5 " Actions " means action, suit, or legal, administrative, arbitral or alternative dispute resolution proceeding or investigation by or before any Governmental Authority.

      1.6 " Additional Sheffield Information " means information regarding (i) what pension provision Buyer anticipates putting into place for the Transferring Employees and (ii) any measures Buyer anticipates taking in relation to the Transferring Employees or any of them.

 

 

 

      1.7 " Affiliate " means, with respect to any Person, any Person which directly or indirectly Controls, is Controlled by or is under common Control with such Person.

      1.8 " Agreement " has the meaning set forth in the preamble to this Agreement.

      1.9 " Antitrust Laws " has the meaning set forth in Section 7.3(c).

      1.10 " Assumed Plan " has the meaning set forth in Section 7.9(b)(i).

      1.11 " Back-Up Letter of Credit " has the meaning set forth in Section 7.15.

      1.12 " Bank Accounts " has the meaning set forth in Section 4.23.

      1.13 " Business Day " means any day other than a Saturday, Sunday or other day that is a statutory holiday under the federal Laws of the United States.

      1.14 " Buyer " has the meaning set forth in the preamble to this Agreement.

      1.15 " Buyer Book Value Determination " has the meaning set forth in Section 2.9(b) .

      1.16 " Buyer Event of Indemnification " has the meaning set forth in Section 9.2(b).

      1.17 " Buyer Indemnified Persons " has the meaning set forth in Section 9.1(b)(i).

      1.18 " Buyer Indemnifying Persons " has the meaning set forth in Section 9.2(b).

      1.19 " Buyer’s Knowledge " means the actual knowledge after reasonable inquiry of those individuals set forth in Schedule 1.19 .

      1.20 " Buyer Pension Plan " has the meaning set forth in Section 7.9(a)(i).

      1.21 " Buyer Tax Act " has the meaning set forth in Section 9.2(a)(iv).

      1.22 " Buyer’s Welfare Plans " has the meaning set forth in Section 7.9(b)(ii).

      1.23 " CBA " has the meaning set forth in Section 7.9(a)(ii).

      1.24 " CERCLA " means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601, et seq .

      1.25 " Closing " has the meaning set forth in Section 3.1 .

      1.26 " Closing Date " has the meaning set forth in Section 3.1 .

      1.27 " Closing Working Capital Statement " has the meaning set forth in Section 2.10(b) .

      1.28 " COBRA Coverage " has the meaning set forth in Section 4.17(d) .

- 2 -

 

 

      1.29 " Code " means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

      1.30 " Company " has the meaning set forth in the preamble to this Agreement.

      1.31 " Company Assets " has the meaning set forth in Section 4.10.

      1.32 " Company Employee Plans " has the meaning set forth in Section 4.17(a).

      1.33 " Company IP " means any Intellectual Property owned by the Company or its Subsidiaries.

      1.34 " Company Purchase Price " means $189,834,860.66, as may be adjusted pursuant to Section 2.10 .

      1.35 " Company Representatives " has the meaning set forth in Section 7.7(a) .

      1.36 " Confidentiality Agreement " has the meaning set forth in Section 7.2(a) .

      1.37 " Consents " means any consent, approval, authorization, qualification, waiver or notification of a Governmental Authority or any other Person.

      1.38 " Consolidated Tax Returns " has the meaning set forth in Section 7.6(a)(i) .

      1.39 " Contracts " has the meaning set forth in Section 4.11 .

      1.40 " Control " (including the phrases "Controlled by" and "under common Control with"), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

      1.41 " Copyrights " means all copyrights (including any registrations, applications and renewals for any of the foregoing) and other rights in original works of authorship fixed in any tangible medium of expression.

      1.42 " Current Assets " means the current assets of the Company and its Subsidiaries as of the Effective Date determined in accordance with GAAP applied on a consistent basis and in a manner consistent with the calculation of Current Assets (including the categories thereof) set forth in Section 4.8(d) of the Disclosure Schedule.

      1.43 " Current Liabilities " means the current liabilities of the Company and its Subsidiaries as of the Effective Date determined in accordance with GAAP applied on a consistent basis and in a manner consistent with the calculation of Current Liabilities (including the categories thereof) set forth in Section 4.8(d) of the Disclosure Schedule.

      1.44 " Data " has the meaning set forth in Section 4.25(d).

- 3 -

 

 

      1.45 " Debt Commitment Letters " has the meaning set forth in Section 6.6.

      1.46 " Deductible Amount " has the meaning set forth in Section 9.3(a)(i).

      1.47 " Deferred Closing " has the meaning set forth in Section 2.9(a).

      1.48 " Deferred Closing Book Value " means the book value (net of any applicable lower of cost or market value reserve) of the Sheffield Inventory as of the Deferred Closing Date prepared in a manner consistent with the determination of the book value of the Sheffield Inventory at October 31, 2006.

      1.49 " Deferred Closing Date " means January 31, 2007 or such other date as the parties mutually agree upon; provided , however , that the Deferred Closing Date shall not occur (i) while the consultation period pursuant to Section 7.17 is ongoing or (ii) if the Closing has not occurred.

      1.50 " Disclosure Schedule " means the disclosure schedule dated the date hereof and delivered concurrently with the execution and delivery of this Agreement.

      1.51 " Effective Date " has the meaning set forth in Section 3.1 .

      1.52 " Employee Plans " has the meaning set forth in Section 4.17(a) .

      1.53 " Environment " means soil, ground water, surface water, stream sediments and ambient air.

      1.54 " Environmental Laws " means the Comprehensive Environmental Response, Compensation and Liability Act (" CERCLA "), 42 U.S.C. §9601, et seq ., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. §§11001 et seq ., the Resource Conservation and Recovery Act, 42 U.S.C. §§6901, et seq ., the Clean Water Act 33 U.S.C. §§1251 et seq ., the Clean Air Act, 42 U.S.C. §§7401 et seq ., Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq ., the federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§136 et seq ., and all other federal, state, local or foreign Laws pertaining to the environment or health and safety with respect to exposure to Hazardous Substances, including but not limited to, those relating to emissions, discharges, or releases of any Hazardous Substance, into the environment or otherwise relating to the manufacture, processing, use, treatment, storage, disposal or transportation of Hazardous Substances.

      1.55 " Environmental Permit " means a Permit required pursuant to any Environmental Laws in connection with the conduct of the business of the Company and its Subsidiaries.

      1.56 " Environmental Subcap " has the meaning set forth in Section 9.3(a)(iii) .

      1.57 " Equity Commitment Letters " has the meaning set forth in Section 6.7 .

      1.58 " ERISA " means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

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      1.59 " ERISA Affiliate " means any organization that is a member of a controlled group of organizations, within the meaning of Sections 414(b), (c), (m), (n) or (o) of the Code, with the Company or which would be considered to be a single employer with the Company pursuant to Section 4001(b) of ERISA.

      1.60 " Estimated Book Value " has the meaning set forth in Section 2.9(a).

      1.61 " Estimated Working Capital " has the meaning set forth in Section 2.10(a).

      1.62 " Event of Indemnification " has the meaning set forth in Section 9.1(a).

      1.63 " Excluded Representations " has the meaning set forth in Section 9.3(a)(i).

      1.64 " Final Book Value " has the meaning set forth in Section 2.9(b).

      1.65 " Final Working Capital " has the meaning set forth in Section 2.10(b).

      1.66 " Financial Statements " has the meaning set forth in Section 4.8(a).

      1.67 " GAAP " means United States generally accepted accounting principles.

      1.68 " General Enforceability Exceptions " has the meaning set forth in Section 4.11 .

      1.69 " Governmental Authority " means any government or political subdivision, whether federal, state, local or foreign, or any board, bureau, agency or instrumentality of such government or political subdivision, or any federal, state, local or foreign court, or any arbitrator or mediator, governmental or private.

      1.70 " Guarantees " has the meaning set forth in Section 7.15 .

      1.71 " Hazardous Substance " means any substance or material which is (i) identified in Section 101(14) of CERCLA, 42 U.S.C. § 9601(14) and as set forth in Title 40, Code of Federal Regulations, Part 302, as may be amended from time to time, (ii) determined to be hazardous, toxic, a pollutant or a contaminant under any Environmental Law, (iii) petroleum and petroleum products and distillates, (iv) asbestos, (v) radon, and (vi) polychlorinated biphenyls.

      1.72 " HSR Act " means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

      1.73 " ICX Asset Sale " means the sale of the ICX Assets by Timken to Acquisition Sub as contemplated by Section 2.1 .

      1.74 " ICX Asset Purchase Price " means $21,154,812.34.

      1.75 " ICX Assets " means all of the assets subject to the ICX Lease, including, without limitation, all of the equipment and personal property described in Schedule A of the ICX Bill of Sale, free and clear of all Liens.

      1.76 " ICX Bill of Sale " has the meaning set forth in Section 3.4(w) .

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      1.77 " ICX Lease " means that certain Lease Agreement dated as of July 11, 2003, by and between ICX Corporation, as lessor and Timken, as lessee to be terminated by Timken at its expense prior to Closing.

      1.78 " Income Tax Returns " has the meaning set forth in Section 7.6(a)(i) .

      1.79 " Indebtedness " means, as of any date without duplication, (i) all indebtedness for borrowed money of the Company and its Subsidiaries (including principal, accrued interest, prepayment penalties and any other fees, expenses and other amounts payable as a result of the prepayment or discharge of any such obligation, if any), including, but not limited to, under the agreements set forth in Schedule 1.79 , (ii) obligations of the Company and its Subsidiaries in respect of capitalized leases required to be recorded as such on a balance sheet prepared in accordance with GAAP, including, but not limited to, the ICX Lease, (iii) all indebtedness or obligations secured by a Lien on any assets of the Company or its Subsidiaries and (iv) guarantees of obligations of any other Person.

      1.80 " Indemnified Persons " have the meanings set forth in Section 9.1(b).

      1.81 " Indemnifying Person " has the meaning set forth in Section 9.1(c).

      1.82 " Independent Auditor " has the meaning set forth in Section 2.10(b).

      1.83 " Intellectual Property " means any and all Patents, Trademarks, Copyrights, Trade Secrets, Software, right of publicity, domain names and URLs.

      1.84 " Interim Balance Sheet " has the meaning set forth in Section 4.8(a)(i).

      1.85 " Interim Balance Sheet Date " has the meaning set forth in Section 4.14.

      1.86 " Interim Financial Statements " has the meaning set forth in Section 4.8(a)(i).

      1.87 " Investments " means any equity interest, directly or indirectly, in any other Person in excess of 5% of the total equity ownership of such Person.

      1.88 " IRS " has the meaning set forth in Section 1.163 .

      1.89 " KeyBanc Capital Markets " has the meaning set forth in Section 4.30 .

      1.90 " Knowledge " or the phrase "to the Knowledge of the Company or Timken" and similar terms and phrases used to refer to the knowledge of the Company or Timken means the actual knowledge after reasonable inquiry (unless otherwise set forth in Schedule 1.89 ) of those individuals set forth in Schedule 1.89 .

      1.91 " Latrobe Hourly Plan " has the meaning set forth in Section 7.9(a)(ii) .

      1.92 " Latrobe VIP " has the meaning set forth in Section 7.9(a)(iii) .

      1.93 " Laws " means any law, statute, code, rule, ordinance, regulation, Order, writ, injunction, decree or other legally enforceable requirement of any Governmental Authority.

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      1.94 " Leased Personal Property " has the meaning set forth in Section 4.13 .

      1.95 " Leased Real Property " means the real property leased by the Company or its Subsidiaries as set forth in Schedule 1.94 along with all buildings, structures and material improvements which are a part thereof and included in the lease related thereto.

      1.96 " Lenders " means a syndicate of lending institutions organized and lead by the lead lender listed on Schedule 6.6 hereto.

      1.97 " Letters of Credit " has the meaning set forth in Section 7.15 .

      1.98 " Liability " means liabilities or obligations of any nature whatsoever, due or to become due, known or unknown, accrued, absolute, contingent or otherwise.

      1.99 " License Agreement " has the meaning set forth in Section 4.11(f) .

      1.100 " Lien " means and includes security interests, mortgages, Options, liens, pledges, guarantees, charges, easements, reservations, restrictions, rights of way, options, rights of first refusal and all other encumbrances, whether or not relating to the extension of credit or the borrowing of money.

      1.101 " Losses " has the meaning set forth in Section 9.1(d) .

      1.102 " Major Customer " means any Person who has purchased at least $100,000 of products or services from the Company or its Subsidiaries, or at least £53,000 of products or services from Timken Alloy with respect to the Timken Alloy Distribution Business, as applicable, either (i) in the fiscal year ended December 31, 2005, or (ii) in the current fiscal year (on an annualized basis).

      1.103 " Major Supplier " means any Person who has supplied at least $100,000 of products or services to the Company or its Subsidiaries, or at least £53,000 of products or services to Timken Alloy with respect to the Timken Alloy Distribution Business, as applicable, either (i) in the fiscal year ended December 31, 2005, or (ii) in the current fiscal year (on an annualized basis).

      1.104 " Material Adverse Effect " means any effect that is materially adverse to the business, financial condition or results of the operation of the Company and its Subsidiaries taken as a whole, other than any effect resulting from (i) general economic conditions or developments or changes therein, (ii) conditions in the industries in which the Company and its Subsidiaries operate and developments or changes therein, (iii) the announcement of this Agreement or the transactions contemplated hereby, (iv) any changes in any Laws or any accounting regulations or principles, (v) any acts of God, war or terrorism, or (vi) any actions taken or omitted to be taken by or at the written request or with the written consent of Buyer.

      1.105 " Names " has the meaning set forth in Section 7.8(c) .

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      1.106 " Non-Competition Agreement " has the meaning set forth in Section 3.4(p) .

      1.107 " Non-Union Employees " means the employees of the Company and its Subsidiaries who are not Union Employees whose employment shall continue as of the Closing.

      1.108 " Notice of Claim " has the meaning set forth in Section 9.4(a) .

      1.109 " OH&R " means OH&R Special Steels Company, a Delaware corporation.

      1.110 " Option " means any option, warrant, call, convertible or exchangeable security, subscription, preemptive right or voting trust or agreement, any agreement restricting sale or transfer, or other agreement or right of a similar nature.

      1.111 " Orders " means any order, judgment, ruling, injunction, award, decree or writ entered by or with any Governmental Authority.

      1.112 " Outside Date " has the meaning set forth in Section 10.1(b) .

      1.113 " Owned Real Property " means the real property owned in fee by the Company or its Subsidiaries as set forth in Schedule 1.113 along with all appurtenances thereto and buildings, structures and improvements located thereon or a part thereof.

      1.114 " Patents " means patents, including any registrations, patents based on applications that are continuations, continuations-in-part, divisionals, reexamination, reissues, renewals of any of the foregoing and applications and patents granted on applications that claim the benefit of priority to any of the foregoing.

      1.115 " Permits " means any license, permit, authorization, grant, approval, franchise, waiver, Consent, qualification or similar document or authority issued or granted by any Governmental Authority.

      1.116 " Permitted Liens " means (i) statutory Liens for Taxes, assessments and other governmental charges which are not yet due and payable, (ii) statutory or common law Liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented, (iii) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance, old age pension or other social security programs mandated under applicable Laws (provided that the foregoing shall not constitute a Permitted Lien with respect to the Owned Real Property or Leased Real Property), (iv) statutory or common law Liens in favor of carriers, warehousemen, mechanics, workmen, repairmen and materialmen to secure claims for labor, materials or supplies and other like Liens (provided that the foregoing shall not constitute a Permitted Lien with respect to the Owned Real Property or Leased Real Property) for matters which are not yet due and payable or are due but not delinquent or are being contested in good faith by appropriate proceedings and provided bonds have been posted, (v) restrictions on transfer of securities imposed by applicable state and federal securities Laws, (vi) Liens that arise under zoning, land use and other similar Laws, (vii) other imperfections of title but only to the extent disclosed in the Title Commitments listed on Exhibit G attached hereto or shown on the Surveys listed on Exhibit H attached hereto, and to the extent no Title Commitment or Survey has been obtained for any Real Property, such liens or other imperfections of title or

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encumbrances and easements, covenants, rights of way or other restrictions or encumbrances which do not materially affect the marketability of the property subject thereto and do not materially impair the use of the property subject thereto as presently used, (viii) any Liens affecting any Real Property caused by Buyer, its consultants or agents and (ix) the Sheetz Station Agreement.

      1.117 " Person " means any individual, sole proprietorship, partnership, corporation, limited liability company, joint venture, unincorporated society or association, trust or other entity or Governmental Authority.

      1.118 " Personal Property Leases " has the meaning set forth in Section 4.13 .

      1.119 " Pre-Closing Financial Statements " has the meaning set forth in Section 7.2(c) .

      1.120 " Pre-Closing Workers Compensation Claims " has the meaning set forth in Section 7.18(d) .

      1.121 " Prior Actions " has the meaning set forth in Section 4.18(b) .

      1.122 " Product Liability Subcap " has the meaning set forth in Section 9.3(a)(iii) .

      1.123 " Purchase Price " means, collectively, the Company Purchase Price, the Sheffield Purchase Price and the ICX Asset Purchase Price.

      1.124 " Real Property " means the Owned Real Property and the Leased Real Property.

      1.125 " Real Property Leases " has the meaning set forth in Section 4.12(a) .

      1.126 " Reimbursement Cap " has the meaning set forth in Section 7.18(d) .

      1.127 " Related Agreements " means the Supply Agreements, the Transition Services Agreement, the Non-Competition Agreement, the Release and Waiver Agreement, the ICX Bill of Sale and the certificates delivered pursuant to Sections 3.4(e) , 3.4(f) , 3.4(l) , 3.5(c) and 3.5(d) .

      1.128 " Release " means any spillage, leaking, pumping , pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment of any Hazardous Substances (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Substances).

      1.129 " Release and Waiver Agreement " has the meaning set forth in Section 3.4(q) .

      1.130 " Required Consents " has the meaning set forth in Section 3.4(i) .

      1.131 " Retiring Non-Union Employees " has the meaning set forth in Section 7.9(a)(i) .

      1.132 " Section 338 Allocation " has the meaning set forth in Section 7.6(f)(iii).

      1.133 " Section 338 Forms " has the meaning set forth in Section 7.6(f)(ii).

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      1.134 " Section 338(h)(10) Election " has the meaning set forth in Section 7.6(f)(i).

      1.135 " Seller Welfare Plans " has the meaning set forth in Section 7.9(b)(ii).

      1.136 " Senior Debt Commitment Letter " has the meaning set forth in Section 6.6.

      1.137 " Service Contracts " has the meaning set forth in Section 4.12(a).

      1.138 " Shares " has the meaning set forth in the recitals of this Agreement.

      1.139 " Sheetz Station Agreement " means the Agreement of Sale between the Company and Lawruk-Astleford Partnership, dated November 10, 2004, as amended as of January 28, 2005 and January 10, 2006.

      1.140 " Sheffield Asset Purchase Agreement " has the meaning set forth in Section 2.9(i)(i) .

      1.141 " Sheffield Assets " means all Sheffield Purchase Orders, Sheffield Consignment Agreements, Sheffield Inventory and goodwill of the Timken Alloy Distribution Business.

      1.142 " Sheffield Consignment Agreements " means the Contracts set forth in Schedule 1.142 .

      1.143 " Sheffield Information " means information regarding (i) the current functions Buyer anticipates will continue at the facility subject to the Sheffield Lease after the Deferred Closing Date, and (ii) the number (and, to the extent possible, identity) of the employees Buyer will need to carry on such functions.

      1.144 " Sheffield Inventory " means all of the inventory held by Timken Alloy (other than the inventory owned by the Company) with respect to the Timken Alloy Distribution Business, including any inventory held by customers thereof on a consignment basis.

      1.145 " Sheffield Lease " means that certain Lease Agreement by and between Timken Alloy and Toolrock U.K., Inc., relating to the lease of the premises located at Newhall Road, Sheffield.

      1.146 " Sheffield Purchase Orders " means all purchase orders to which Timken Alloy is a party and which relate to the Timken Alloy Distribution Business (i) open as of the date hereof and (ii) open as of the Deferred Closing Date.

      1.147 " Sheffield Purchase Price " means $4,010,327, as may be adjusted pursuant to Section 2.9 .

      1.148 " Sheffield Shortfall Amount " has the meaning set forth in Section 2.9(a) .

      1.149 " Sheffield Transaction " shall have the meaning set forth in Section 7.5(a) .

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      1.150 " Software " means any and all (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) electronic databases and other electronic data compilations, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, and (iv) other documentation, including user manuals and training materials, relating to any of the foregoing.

      1.151 " Straddle Period " has the meaning set forth in Section 7.6(a)(ii) .

      1.152 " Straddle Period Tax Returns " has the meaning set forth in Section 7.6(a)(ii) .

      1.153 " Subsidiaries " of any Person means any other Person of which at least a majority of the outstanding shares or other equity interests having ordinary voting power for the election of directors or comparable managers of such other Person are at the time owned, directly or indirectly, by such first Person, by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

      1.154 " Subsidiary Shares " has the meaning set forth in Section 4.6(b) .

      1.155 " Supply Agreements " has the meaning set forth in Section 3.4(n) .

      1.156 " Surplus Employees " means the Transferring Employees identified as "Surplus Employees" pursuant to Section 7.17 .

      1.157 " Survey " means an ALTA survey with respect to each of the Real Property (to the extent applicable), prepared by a licensed surveyor in the jurisdiction in which such Real Property is located.

      1.158 " Survival Date " has the meaning set forth in Section 9.7.

      1.159 " TADB Employees " has the meaning set forth in Section 5.6(a).

      1.160 " Tax Adjustment " has the meaning set forth in Section 7.6(f)(iv).

      1.161 " Tax or Taxes " means all taxes of any kind payable to any federal, state, local or foreign taxing authority or other Governmental Authority, including but not limited to those on or measured by or referred to as income, franchise, profits, gross receipts, capital ad valorem, custom duties, alternative or add-on minimum taxes, estimated, environmental, disability, registration, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes, and interest, penalties and additions to tax imposed with respect thereto.

      1.162 " Tax Proceeding " has the meaning set forth in Section 7.6(c) .

      1.163 " Tax Returns " means any and all returns, declarations, reports, claims for refunds and information returns or statements relating to Taxes, including all schedules or attachments thereto and including any amendment thereof, required to be filed with the Internal Revenue

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Service (the " IRS ") or any other governmental or taxing authority or agency, domestic or foreign, including consolidated, combined and unitary tax returns.

      1.164 " Termination Costs " means, in respect of the Surplus Employees or any other employee who is not a Transferring Employee but whose contract of employment has effect by virtue of the Transfer Regulations as if made between the Buyer or an Affiliate thereof and any such employee, the cost of their salaries and benefits from the Deferred Closing to the date on which their employment with the Buyer or an Affiliate thereof actually terminates (provided in respect of the Surplus Employees that this shall not be any more than one month from the Deferred Closing and in respect of any other employee that this shall be not more than one month from the date on which the Buyer becomes aware of the application of the Transfer Regulations to such employee), and any payments in lieu of their contractual notice, any statutory redundancy payment due and any contractual or customary enhanced redundancy payment which is legally required to be paid to them.

      1.165 " Third Party Claim " has the meaning set forth in Section 9.5.

      1.166 " Timken " has the meaning set forth in the preamble to this Agreement.

      1.167 " Timken Alloy " has the meaning set forth in the preamble of this Agreement.

      1.168 " Timken Alloy Agreements " has the meaning set forth in Section 5.2.

      1.169 " Timken Alloy Distribution Business " means the sale and distribution (but not finishing) of finished high speed steel and aerospace products as carried out by Timken Alloy at its Sheffield location.

      1.170 " Timken Cap " has the meaning set forth in Section 9.3(a)(iii) .

      1.171 " Timken Event of Indemnification " has the meaning set forth in Section 9.2(a) .

      1.172 " Timken Indemnified Persons " has the meaning set forth in Section 9.1(b)(ii) .

      1.173 " Timken Indemnifying Persons " has the meaning set forth in Section 9.2(a) .

      1.174 " Title Commitment " means a commitment of the Title Company to issue a Title Policy.

      1.175 " Title Company " means Chicago Title Insurance Company or such other title company as may be selected by Buyer.

      1.176 " Title Policy " means the ALTA Owner’s Policy of Title Insurance (or such other comparable form of title insurance policy as is available in the jurisdiction in which the Property is located) issued by the Title Company and in the form of the Title Commitment, and containing such non-imputation and such other endorsements reasonably required by Buyer.

      1.177 " Top Customer " means one of the twenty-five (25) largest customers of the Company or its Subsidiaries based on the aggregate amount of products or services purchased

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from the Company or its Subsidiaries during the fiscal year ended December 31, 2005 and the fiscal year ending December 31, 2006 (through November 30, 2006), on a combined basis.

      1.178 " Top Supplier " means one of the twenty-five (25) largest suppliers of the Company or its Subsidiaries based on the aggregate amount of products or services purchased by the Company or its Subsidiaries during the fiscal year ended December 31, 2005 and the fiscal year ending December 31, 2006 (through November 30, 2006), on a combined basis.

      1.179 " Trade Secrets " means trade secrets and other confidential information, know-how, proprietary technology, processes, formulae, algorithms, models, user interfaces, customer, supplier and user lists, databases, pricing and marketing information and inventions that derive independent economic value from not being generally known or readily ascertainable by others.

      1.180 " Trademarks " means trademarks, service marks, trade names, logos and slogans including any registrations and applications for any of the foregoing and all goodwill related to the foregoing.

      1.181 " Transactions Costs " means all fees, costs and expenses of outside professionals incurred by Timken, Timken Alloy, the Company or its Subsidiaries in connection with this Agreement and the transactions contemplated hereby including, without limitation, legal, accounting and investment banking fees.

      1.182 " Transfer Date " has the meaning set forth in Section 7.9(a)(ii) .

      1.183 " Transfer Regulations " means the Transfer of Undertakings (Protection of Employment) Regulations 2006.

      1.184 " Transfer Taxes " has the meaning set forth in Section 3.3.

      1.185 " Transferring Employees " has the meaning set forth in Section 7.17.

      1.186 " Transition Services Agreement " has the meaning set forth in Section 3.4(o).

      1.187 " Union Employees " means the employees of the Company and OH&R who are covered by any collective bargaining agreement and whose employment shall continue after the Closing.

      1.188 " VAT " has the meaning set forth in Section 2.9(g) .

      1.189 " VAT Records " has the meaning set forth in Section 2.9(h) .

      1.190 " WARN Act " means The Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et seq .

      1.191 " Working Capital " means Current Assets less Current Liabilities.

      1.192 " Working Capital Target " means $100,000,000.

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ARTICLE II

THE ACQUISITION AND
THE PURCHASE AND SALE OF THE SHEFFIELD ASSETS AND THE ICX ASSETS

      2.1 Sale and Purchase of Shares and the ICX Assets . Subject to the terms and conditions of this Agreement, at the Closing, Timken shall sell, assign, transfer and deliver the Shares and the ICX Assets to Acquisition Sub, and Acquisition Sub shall purchase, acquire and accept the Shares and the ICX Assets, free and clear of all Liens, other than such Liens as may be created by Buyer or Acquisition Sub.

      2.2 [Reserved.]

      2.3 [Reserved.]

      2.4 [Reserved.]

      2.5 [Reserved.]

      2.6 Delivery of Shares, ICX Bill of Sale and Purchase Price . Subject to the terms and conditions set forth in this Agreement, at the Closing (i) Timken shall deliver to Acquisition Sub a certificate or certificates representing all of the Shares, duly endorsed in blank for transfer or together with stock powers duly executed in blank, and Buyer or Acquisition Sub shall pay or cause to be paid to Timken by wire transfer of immediately available funds an aggregate amount in cash equal to the Company Purchase Price (as adjusted pursuant to Section 2.10(a) to reflect the Estimated Working Capital) and the Sheffield Purchase Price to an account or accounts designated by Timken at least two (2) Business Days prior to the Closing, and (ii) Timken shall deliver to Acquisition Sub the ICX Bill of Sale duly executed on behalf of Timken free and clear of all Liens, and Buyer or Acquisition Sub shall pay or cause to be paid to Timken by wire transfer of immediately available funds an aggregate amount in cash equal to the ICX Asset Purchase Price to an account or accounts designated by Timken at least two (2) Business Days prior to the Closing.

      2.7 [Reserved.]

      2.8 [Reserved.]

      2.9 Purchase of Sheffield Assets .

          (a) Subject to the terms and conditions set forth in this Agreement, on the Deferred Closing Date, Timken Alloy shall sell, transfer, convey, assign and deliver to the Company or a designee of Buyer, and the Company or such designee shall purchase and accept from Timken Alloy, the Sheffield Assets and the Timken Alloy Distribution Business as a going concern (the " Deferred Closing " ). If the Estimated Deferred Closing Book Value is less than $4,010,327, then Timken shall pay, or cause Timken Alloy to pay, on the Deferred Closing Date, to the Company or a designee of Buyer by wire transfer of immediately available

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funds, an amount in cash equal to such shortfall (" Sheffield Shortfall Amount " ), to an account or accounts designated by the Company or Buyer at least one (1) Business Day prior to the Deferred Closing Date. At least three (3) but no more than five (5) Business Days prior to the Deferred Closing Date, Timken shall cause to be prepared and delivered to Buyer a certificate setting forth in reasonable detail its good faith reasonable estimate of the Deferred Closing Book Value (the " Estimated Deferred Closing Book Value " ). The Estimated Deferred Closing Book Value shall be subject to review by Buyer, and Timken and Buyer will cooperate and negotiate in good faith to resolve any dispute regarding the Estimated Deferred Closing Book Value; provided that if any item of dispute regarding the Estimated Deferred Closing Book Value is not resolved by agreement in writing between Timken and Buyer prior to the Deferred Closing Date, then Timken’s reasonable estimate for such disputed item together with the resolved disputed items and the undisputed items contained in the Estimated Deferred Closing Book Value shall be deemed the Estimated Deferred Closing Book Value for purposes of determining any payment due to the Company at the Deferred Closing pursuant to this Section 2.9(a) .

          (b) Within thirty (30) days following the Deferred Closing Date, Buyer, at its option, shall be entitled to prepare and deliver to Timken its determination of the Deferred Closing Book Value (the " Buyer Book Value Determination "). Within fifteen (15) days following receipt by Timken of the Buyer Book Value Determination, Timken shall deliver written notice to Buyer containing a reasonably detailed description of any dispute it has with respect to the content of the Buyer Book Value Determination. If Timken does not notify Buyer of a dispute with respect to the Buyer Book Value Determination within such fifteen (15) day period, the Buyer Book Value Determination will be final, conclusive and binding on the parties. In the event of such notification of a dispute, Buyer and Timken shall negotiate in good faith to resolve such dispute. If Buyer and Timken, notwithstanding such good faith effort, fail to resolve such dispute within ten (10) days after Timken provides Buyer with written notice of its objections, then Buyer and Timken jointly shall engage the Independent Auditor to determine the Deferred Closing Book Value, which determination shall be final, conclusive and binding on the parties. If the Deferred Closing Book Value as set forth in the Buyer Book Value Determination (if Timken does not object within the applicable time period), the Deferred Closing Book Value as determined by the Independent Auditor or the Deferred Closing Book Value as mutually agreed upon by the Buyer and Timken pursuant to this Section 2.9(b) (as the case may be, the " Final Book Value "), is less than the Estimated Deferred Closing Book Value, Timken shall pay, or cause Timken Alloy to pay, to the Company, or a designee of the Buyer, by wire transfer of immediately available funds, an amount in cash equal to the Estimated Deferred Closing Book Value less the Final Book Value. If the Final Book Value exceeds the Estimated Deferred Closing Book Value, then the Company shall pay to Timken an amount equal to such excess up to but not exceeding the Sheffield Shortfall Amount. For purposes of complying with the terms set forth in this Section 2.9 , each party shall cooperate with and make available to the other parties and their respective representatives all information, records, data and working papers, and shall permit access to its facilities and personnel, as may be reasonably required in connection with the preparation and analysis of the Final Book Value and the resolution of any disputes hereunder.

          (c) Upon the terms and subject to the conditions set forth in this Agreement, at the Deferred Closing, the Company or a designee of the Buyer shall assume the obligations

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for future performance arising after the Deferred Closing Date under the Sheffield Purchase Orders and the Sheffield Consignment Agreements, it being understood that none of the Company, the Buyer or its designee shall assume, and do not hereby agree to pay, discharge or perform, any Losses relating in any manner to or arising from any beach or default of Timken Alloy of any Sheffield Purchase Order or Sheffield Consignment Agreement occurring on or prior to the Deferred Closing Date regardless of whether Timken or Timken Alloy discloses such breach or default pursuant to this Agreement or otherwise.

          (d) To the extent that the Sheffield Purchase Orders and the Sheffield Consignment Agreements are capable of assignment, Timken Alloy shall, at the Deferred Closing, assign to the Company or a designee of the Buyer the benefit (subject to the burden) of the Sheffield Purchase Orders and the Sheffield Consignment Agreements. In so far as the benefit (subject to the burden) of any of the Sheffield Purchase Orders or the Sheffield Consignment Agreements cannot be assigned by Timken Alloy to the Company at the Deferred Closing without the agreement or consent of a third party or a Governmental Authority, Timken Alloy will use its commercially reasonable efforts to obtain such agreements or consents prior to the Deferred Closing, and if such agreements or consents cannot be obtained prior to the Deferred Closing:

               (i) Timken Alloy shall use its commercially reasonable efforts (with the cooperation of the Company) to procure that such Sheffield Purchase Orders and Sheffield Consignment Agreements are novated or assigned within 30 days after the Deferred Closing;

               (ii) unless and until any such contracts shall be novated or assigned or completed, Timken Alloy shall continue its corporate existence and shall hold the benefit of such contract upon trust for the Company, or a designee of the Buyer, absolutely and shall either account to the Company, or a designee of the Buyer, or pay to the credit of a specially designated trust bank account maintained separately from all other accounts of Timken Alloy and account to the Company, or a designee of the Buyer, as soon as reasonably practicable thereafter, for any sums or other benefits received by Timken Alloy in relation thereto and the Company, or a designee of the Buyer, shall indemnify Timken Alloy against all Losses which may be incurred or suffered by Timken Alloy arising out of or in connection with any post-Deferred Closing obligations under such Sheffield Purchase Orders and Sheffield Consignment Agreements (other than such as may be suffered or incurred by reason of any existing breach of contract by Timken Alloy) provided that the Company, or a designee of the Buyer, shall have the right to perform, in place of Timken Alloy, any such contract as sub-contractor, agent, licensee or sub-licensee (as the case may be) to the extent that such performance may be permitted by any such contract; and

               (iii) unless and until any such Sheffield Purchase Orders and Sheffield Consignment Agreements shall be novated or assigned, Timken Alloy shall (so far as it lawfully may so do and provided it is reasonable so to do) act under the direction of the Company, or a designee of the Buyer, in all matters relating to such orders and contracts for so long as Timken Alloy is required and authorized so to do by the Company, or a designee of the Buyer.

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          (e) Except as expressly provided in Sections 2.9(c) and (g) and subject to the indemnification provisions set forth in Sections 2.9(d)(ii) and 9.2(b) of this Agreement, neither the Buyer, nor any Person designated by the Buyer to whom any of the Sheffield Assets shall be transferred, nor the Company, shall have any liability or obligation whatsoever for any Liability of Timken Alloy, all of which will be retained by Timken Alloy.

          (f) Timken shall, or shall cause Timken Alloy to, from time to time after the Deferred Closing at the request of Buyer, without further consideration, execute and deliver further instruments of transfer and assignment and other documents or certificates and take such other action as Buyer or its designee may reasonably request to more effectively transfer, convey and assign to Buyer or its designee the Sheffield Assets and all rights thereto.

          (g) The parties intend that article 5 of the United Kingdom Value Added Tax (Special Provisions) Order 1995 shall apply to the sale of the Sheffield Assets and the Timken Alloy Distribution Business and agree to use all reasonable endeavors to secure that the sale is treated as neither a supply of goods nor a supply of services under that article. If, nevertheless, any United Kingdom value added tax (" VAT ") is payable on the sale of the Sheffield Assets under this Agreement and HM Revenue & Customs have so confirmed in writing after full disclosure of all material facts, the Company or the Buyer or its designee shall pay to Timken Alloy the amount of that VAT (together with any interest and penalties thereon) within thirty (30) days following receipt of a valid VAT invoice from Timken Alloy. If the Company or Buyer or its designee pays Timken Alloy an amount in respect of VAT under this Section 2.9(g) and HM Revenue & Customs rule in writing that all or part of it was not properly chargeable, Timken Alloy shall repay the amount or relevant part of it to the Company or Buyer or its designee. Timken Alloy shall make the repayment promptly after the ruling, unless it has already accounted to HM Revenue & Customs for the VAT. In that case, Timken Alloy shall apply for a refund of the VAT, use reasonable endeavors to obtain it as speedily as practicable, and pay to the Company or Buyer or its designee the amount of the refund and any interest when and to the extent received from HM Revenue & Customs.

          (h) Notwithstanding any other provision of this Agreement, Timken Alloy and the Buyer or its designee intend that Timken Alloy should retain the records referred to in section 49 of United Kingdom Value Added Tax Act 1994 (" VAT Records ") and accordingly (i) Timken Alloy shall immediately following the Deferred Closing make a request to HM Revenue & Customs for a direction that the VAT Records be preserved by Timken Alloy; (ii) Timken Alloy shall promptly following the Deferred Closing notify the Buyer or its designee of the result of that request and, if HM Revenue & Customs do not grant it, shall deliver the VAT Records to the Buyer or its designee as soon as reasonably practicable; and (iii) Timken Alloy shall preserve the VAT Records in the United Kingdom for such period as may be required by law, so long as it preserves the VAT Records, permit the Buyer or its designee reasonable access to them to inspect or make copies (at the Buyer or designee’s cost) of them and not at any time cease to preserve the VAT Records without giving the Buyer or its designee a reasonable opportunity to inspect and remove such of them as the Buyer or its designee wishes.

          (i) At the Deferred Closing, Timken and Timken Alloy shall deliver or cause to be delivered to Buyer or its designee the following items:

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               (i)  Sheffield Asset Purchase Agreement . An asset purchase agreement substantially in the form attached hereto as Exhibit J , pursuant to which Timken Alloy will convey the Sheffield Assets to the Company or a designee of the Buyer at the Deferred Closing (the " Sheffield Asset Purchase Agreement "), duly executed by Timken Alloy.

               (ii)  Articles of Incorporation . The Articles of Incorporation or equivalent organizational document, if any, of Timken Alloy certified as of the most recent practicable date by the relevant jurisdiction of organization.

               (iii)  Good Standing Certificates . A Certificate (or equivalent certification, if any) of the Secretary of State (or comparable Governmental Authority) of the jurisdiction of organization as to the good standing as of the most recent practicable date of Timken Alloy in such jurisdiction.

               (iv)  Secretary’s Certificate . A certificate of the Secretary of Timken, given by him or her on behalf of Timken and not in his or her individual capacity, certifying as to (i) the bylaws or code of regulations (or comparable organizational document) of Timken Alloy, (ii) the incumbency of Timken Alloy officers authorized to execute this Agreement and each other document to be executed and delivered by Timken Alloy at the Deferred Closing and (iii) true and correct copies of resolutions of the Board of Directors of Timken Alloy authorizing and approving the execution, delivery and performance of this Agreement and the transactions contemplated hereby, and the acts of the officers of Timken Alloy in carrying out the terms and provisions hereof.

               (v)  Officer’s Certificate . A certificate from an executive officer of Timken Alloy, given by him or her on behalf of Timken Alloy and not in his or her individual capacity, to the effect that the conditions set forth in Sections 8.3(b)(i) and 8.3(b)(ii) have been satisfied.

               (vi)  Sheffield Lease . An executed counterpart by Timken Alloy of the Sheffield Lease effective as of the Deferred Closing Date, in substantially the form attached hereto as Exhibit I .

               (vii)  Sheffield Shortfall Amount . The Sheffield Shortfall Amount, if any.

          (i) At the Deferred Closing, Buyer shall deliver or cause to be delivered to Timken the following items:

               (i)  Sheffield Asset Purchase Agreement . An executed counterpart of the Sheffield Asset Purchase Agreement.

               (ii)  Sheffield Lease . An executed counterpart of the Sheffield Lease.

      2.10 Purchase Price Adjustment .

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          (a) At least three (3) but no more than five (5) Business Days prior to the Closing, Timken shall cause to be prepared and delivered to Buyer a certificate setting forth in reasonable detail its good faith reasonable estimate of the Working Capital as of the Closing prepared in a manner consistent with the Working Capital example set forth in Section 4.8(d) of the Disclosure Schedule (" Estimated Working Capital "). If the Working Capital Target exceeds the Estimated Working Capital, the Purchase Price shall be reduced by an amount equal to the amount by which the Working Capital Target exceeds the Estimated Working Capital. If the Estimated Working Capital exceeds the Working Capital Target, the Purchase Price shall be increased by an amount equal to the amount by which the Estimated Working Capital exceeds the Working Capital Target. The Estimated Working Capital shall be subject to review by Buyer, and Timken and Buyer will cooperate and negotiate in good faith to resolve any dispute regarding the Estimated Working Capital; provided that if any item of dispute regarding the Estimated Working Capital is not resolved by agreement in writing between Timken and Buyer prior to the Closing Date, then Timken’s reasonable estimate for such disputed item together with the resolved disputed items and the undisputed items contained in the Estimated Working Capital shall be deemed the Estimated Working Capital for purposes of this Section 2.10 .

          (b) Within sixty (60) days following the Closing Date, Buyer shall cause to be prepared and delivered to Timken a working capital statement (the " Closing Working Capital Statement ") setting forth the Working Capital as of the Closing prepared in a manner consistent with the Working Capital example set forth in Section 4.8(d) of the Disclosure Schedule. Within forty-five (45) days following receipt by Timken of the Closing Working Capital Statement, Timken shall deliver written notice to Buyer containing a reasonably detailed description of any dispute it has with respect to the content of the Closing Working Capital Statement; provided , however , that Timken may not dispute the accounting principles and adjustments used in preparing the Closing Working Capital Statement if they are consistent with the Working Capital example set forth in Section 4.8(d) of the Disclosure Schedule. If Timken does not notify Buyer of a dispute with respect to the Closing Working Capital Statement within such forty-five (45) day period, the Closing Working Capital Statement will be final, conclusive and binding on the parties. In the event of such notification of a dispute, Buyer and Timken shall negotiate in good faith to resolve such dispute. If Buyer and Timken, notwithstanding such good faith effort, fail to resolve such dispute within thirty (30) days after Timken provides Buyer with written notice of its objections, then Buyer and Timken jointly shall engage the firm of PricewaterhouseCoopers LLP to resolve such dispute, and if PricewaterhouseCoopers LLP is unwilling or unable to serve in such capacity, then Buyer and Timken jointly shall engage the firm of Deloitte & Touche LLP, and if Deloitte & Touche LLP is unwilling or unable to serve in such capacity, Timken and Buyer shall select, within ten (10) days after notification that Deloitte & Touche LLP is unwilling or unable to serve in such capacity, a mutually acceptable nationally recognized independent accounting firm to resolve such dispute (any such firm serving in such capacity pursuant to this sentence is referred to herein as the " Independent Auditor "). As promptly as practicable thereafter, Buyer and Timken shall each prepare and submit a presentation to the Independent Auditor. As soon as practicable thereafter, but in no event later than thirty (30) days after such presentation, Buyer and Timken shall cause the Independent Auditor to choose one of the parties positions as to each disputed item based solely upon the presentation by Buyer and Timken and any additional information requested by the Independent Auditor. The parties shall share equally the fees and

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expenses of the Independent Auditor. All determinations made by the Independent Auditor will be final, conclusive and binding on the parties, absent manifest error or fraud. The scope of the Independent Auditor’s review of any dispute between Timken and Buyer regarding the Closing Working Capital Statement shall be limited solely to the resolution of Timken’s objections set forth in Timken’s notice of objection and Timken shall have no right to change, revise or otherwise modify the Closing Working Capital Statement except as agreed to by Buyer or as required by the Independent Auditor. For purposes hereof, " Final Working Capital " shall equal (i) the Working Capital set forth in the Closing Working Capital Statement delivered by Buyer, if Timken does not timely deliver a notice of objection in accordance with the provisions hereof (or agrees that it does not object to the Closing Working Capital Statement), (ii) the Working Capital as mutually agreed upon by Buyer and Timken upon the resolution of any dispute regarding Working Capital pursuant hereto or (iii) the Working Capital as determined by the Independent Auditor, if the Independent Auditor is engaged pursuant to this Section 2.10(b) .

          (c) For purposes of complying with the terms set forth in this Section 2.10 , each party shall cooperate with and make available to the other parties and their respective representatives all information, records, data and working papers, and shall permit access to its facilities and personnel, as may be reasonably required in connection with the preparation and analysis of the Final Working Capital and the resolution of any disputes thereunder.

          (d) If the Final Working Capital (as finally determined pursuant to Section 2.10(b) ) is less than the Estimated Working Capital, Timken shall pay or cause to be paid to Buyer or Acquisition Sub an amount in cash equal to the amount by which the Estimated Working Capital exceeds the Final Working Capital, by wire transfer of immediately available funds to an account designated in writing by Buyer to Timken. Such payment is to be made within five (5) Business Days of the date on which the Final Working Capital is finally determined pursuant to Section 2.10(b) .

          (e) If the Final Working Capital (as finally determined pursuant to Section 2.10(b) ) is greater than the Estimated Working Capital, then the Purchase Price will be adjusted upward by the amount of such excess and Buyer and the Company, jointly and severally, shall pay or cause to be paid an amount in cash equal to such excess, by bank wire transfer of immediately available funds, to an account designated in writing by Timken to Buyer. Such payment is to be made within five (5) Business Days from the date on which the Final Working Capital is finally determined pursuant to Section 2.10(b) .

      2.11 Offset . Any payment to which Timken or Buyer becomes entitled to pursuant to this Agreement shall be subject to offset by Buyer or Timken, respectively, with respect to any finally determined liquidated amount payable by either Timken or Buyer, respectively, pursuant to this Agreement.

      2.12 Withholding Rights . Buyer and the Company (or its respective agents) shall be entitled to deduct and withhold from any amounts otherwise payable pursuant to this Agreement such amounts as are required to be deducted and withheld with respect to the making of such payments under the provisions of any applicable Tax Laws. Any such withheld amounts shall be

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treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

ARTICLE III

CLOSING AND DELIVERIES

      3.1 Closing . The closing of the transactions contemplated hereby (other than the transactions contemplated by the Deferred Closing) (the " Closing ") shall take place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, MA 02111, at 10:00 a.m., local time, on December 8, 2006 (the " Closing Date "). All proceedings to be taken and all documents to be executed and delivered by all parties at the Closing shall be deemed to have been taken and executed simultaneously and no proceedings shall be deemed to have been taken nor documents executed or delivered until all have been taken, executed and delivered. For Tax and accounting purposes, including Section 2.10 hereof, the Closing shall be deemed to have occurred as of 11:59 p.m. on November 30, 2006 (the " Effective Date "), such that the net economic benefits of the operation of the business of the Company and its Subsidiaries shall accrue to the Buyer and Acquisition Sub from and after December 1, 2006.

      3.2 Further Assurances . Timken shall, from time to time after the Closing at the request of Buyer, without further consideration, execute and deliver further instruments of transfer and assignment and other documents and take such other action as Buyer may reasonably request to more effectively transfer and assign to, and vest in, Buyer, or its designee, the Shares and the ICX Assets and all rights thereto.

      3.3 Transfer Taxes . All sales, transfer and similar Taxes (other than UK value added tax which shall be dealt with in accordance with Section 2.9(g) ), and all fees and duties, if any, incurred on the sale and transfer of the Real Property, the ICX Assets and the Sheffield Assets pursuant to this Agreement (" Transfer Taxes ") shall be paid by Timken, and Timken will file all necessary Tax Returns and other documentation with respect to such Transfer Taxes. Each party shall use reasonable efforts to obtain any available exemption from, or recovery or refund with respect to, any assessment of such Transfer Taxes, and to cooperate with the other party in providing any information or documentation that may be necessary to obtain such exemption or recovery.

      3.4 Deliveries by Timken . At the Closing, Timken and the Company, as applicable, shall deliver or cause to be delivered to Buyer the following items:

          (a) Stock Certificates . All certificates representing the Shares accompanied by duly executed stock powers in proper form for transfer and the outstanding shares of OH&R.

          (b) [Reserved.]

          (c) Articles of Incorporation . The Articles of Incorporation or equivalent organizational document, if any, of the Company and its Subsidiaries certified as of the most recent practicable date by the Secretary of State of the Commonwealth of Pennsylvania, or the relevant jurisdiction of organization.

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          (d) Good Standing Certificates . A Certificate (or equivalent certification, if any) of the Secretary of State (or comparable Governmental Authority) of the of state or jurisdiction of organization as to the good standing as of the most recent practicable date of the Company and its Subsidiaries in such state or jurisdiction and a certificate of good standing as of the most recent practicable date from the appropriate Governmental Authority in each state in the United States or foreign country where the Company and its Subsidiaries are qualified to do business, including, but not limited to, each state in which Real Property is located.

          (e) Secretary’s Certificate . A certificate of the Secretary of Timken, given by him or her on behalf of Timken and not in his or her individual capacity, certifying as to (i) the bylaws or code of regulations, as applicable, of the Company, its Subsidiaries and Timken, (ii) the incumbency of the Company and Timken officers authorized to execute this Agreement and each other document to be executed and delivered by Timken or the Company at the Closing, (iii) true and correct copies of resolutions of the Board of Directors of Timken and the Company authorizing and approving the execution, delivery and performance of this Agreement and the transactions contemplated hereby, and the acts of the officers of the Company and Timken in carrying out the terms and provisions hereof, and (iv) authorization and existence of the Company and its Subsidiaries as required by the Title Company in order to issue the Title Policies.

          (f) Officer’s Certificate . A certificate from an executive officer of Timken, given by him or her on behalf of Timken and not in his or her individual capacity, to the effect that the conditions set forth in Sections 8.3(a)(i) and (ii) have been satisfied.

          (g) [Reserved.]

          (h) Legal Opinion . A legal opinion, dated the Closing Date, of Jones Day, special counsel to Timken, in substantially the form attached hereto as Exhibit B .

          (i) Consents . All Consents or other actions required listed on Schedule 3.4(i) , in form and substance reasonably satisfactory to Buyer (the " Required Consents ").

          (j) Corporate Minute Books and Stock Records . The original corporate minute books and stock records of the Company and its Subsidiaries.

          (k) [Reserved.]

          (l) Affidavit Concerning Certain Withholding Tax Obligations . An affidavit that Timken is not a "foreign person" or a "disregarded entity" within the meaning of Section 1445 of the Code, in form and substance reasonably satisfactory to Buyer.

          (m) Banking Account Signatories . Documentation removing the previously authorized Persons of the Company, its Subsidiaries and Timken, as applicable, from access to Bank Accounts, and appointing such Persons as signatories for the Bank Accounts effective immediately after the Closing as requested by Buyer.

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          (n) Supply Agreements . An executed counterpart by Timken of the Supply Agreements entered into between the Company and Timken or one of its Affiliates effective as of the Closing Date, substantially in the form attached hereto as Exhibits C-1 , C-2 and C-3 (the " Supply Agreements ").

          (o) Transition Services Agreement . An executed counterpart by Timken and Timken Alloy of the Transition Services Agreement entered into between the Company and Timken effective as of the Closing Date, substantially in the form attached hereto as Exhibit D (the " Transition Services Agreement ").

          (p) Non-Competition Agreement . An executed Non-Competition Agreement from Timken in favor of Buyer and its Subsidiaries effective as of the Closing Date, substantially in the form attached hereto as Exhibit E (the " Non-Competition Agreement ").

          (q) Release and Waiver . Timken shall enter into a Release and Waiver Agreement in favor of the Company and Buyer effective as of the Closing Date, substantially in the form attached hereto as Exhibit F (the " Release and Waiver Agreement ").

          (r) [Reserved.]

          (s) [Reserved.]

          (t) Resignations of Officers and Directors . The resignations of the officers and directors of the Company and its Subsidiaries, effective as of the Closing.

          (u) [Reserved.]

          (v) Affidavit of Title/Gap Indemnity . An affidavit of title for each Owned Property, duly executed and delivered by the Company with respect to liens, non-imputation, gap indemnity, parties-in-possession and other title matters in form reasonably satisfactory to the Title Company in order for it to issue the Title Policies.

          (w) ICX Bill of Sale . An executed counterpart by Timken of the a bill of sale conveying the ICX Assets to Acquisition Sub, free and clear of all Liens, in substantially the form attached hereto as Exhibit K (the " ICX Bill of Sale ").

          (x) ICX Payoff Letter . A payoff letter, dated no more than two (2) Business Days prior to the Closing Date, in form and substance reasonably satisfactory to Buyer, from ICX Corporation providing evidence of the payoff and full satisfaction, at Timken’s expense, of the ICX Lease, and the discharge of all Liens related thereto, together with UCC-3 termination statements, as applicable.

      3.5 Deliveries by Buyer . At the Closing, Buyer or the Company shall deliver or cause to be delivered to Timken the following items:

          (a) Purchase Price . The Purchase Price, paid by wire transfer of immediately available funds in accordance with Section 2.6 .

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          (b) [Reserved.]

          (c) Secretary’s Certificate . A certificate of the Secretary of Buyer, given by him or her on behalf of Buyer and not in his or her individual capacity, certifying as to (i) the bylaws of Buyer and Acquisition Sub, (ii) the incumbency of the Buyer and Acquisition Sub officers authorized to execute this Agreement and each other document to be executed and delivered by Buyer and Acquisition Sub at the Closing, and (iii) true and correct copies of resolutions of the Board of Directors of Buyer and Acquisition Sub authorizing and approving the execution, delivery and performance of this Agreement and the transactions contemplated hereby, and the acts of the officers of Buyer and Acquisition Sub in carrying out the terms and provisions hereof.

          (d) Officer’s Certificate . A certificate from an executive officer of Buyer, given by him or her on behalf of Buyer and not in his or her individual capacity, to the effect that the conditions set forth in Sections 8.2(a)(i) and (ii) have been satisfied.

          (e) Supply Agreements . An executed counterpart by the Company of the Supply Agreements.

          (f) Transition Services Agreement . An executed counterpart by the Company of the Transition Services Agreement.

          (g) [Reserved.]

          (h) ICX Bill of Sale . An executed counterpart by Acquisition Sub of the ICX Bill of Sale.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF TIMKEN

     Timken hereby represents and warrants to Buyer and Acquisition Sub (i) as of the Closing Date and (ii) in the case of Sections 4.2 , 4.7 and 4.18 , as of the Deferred Closing Date, as follows:

      4.1 Organization and Standing . Each of the Company and Timken is duly organized, validly existing and in good standing under the Laws of their respective jurisdictions of organization. OH&R is duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each of the Company and OH&R is duly qualified to do business in the states of the United States that are listed in Section 4.1 of the Disclosure Schedule, which are all of the jurisdictions in which the character of the properties owned or leased by it or in which the conduct of its business requires it to be so qualified, except where the failure to be so qualified and in good standing would not have a Material Adverse Effect.

      4.2 Authorization; Power . Each of Timken and the Company has all requisite corporate power and authority to enter into and perform its obligations under this Agreement and the Related Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby and, with respect to the Company, to own, lease and operate its properties

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and assets and to carry on its business as now being conducted. The execution and delivery of this Agreement and the Related Agreements to which it is a party by each of Timken and the Company, as applicable, and the performance by each of them of their respective obligations hereunder and thereunder have been duly authorized by all necessary corporate action on the part of such party and no other corporate or shareholder proceedings or actions are necessary to authorize and consummate this Agreement, the Related Agreements or the transactions contemplated hereby or thereby. This Agreement has been, and each of the Related Agreements to which it is a party will be, when delivered to Buyer, duly executed and delivered by each of Timken and the Company, as applicable, and, assuming due authorization, execution and delivery by the Buyer or its Subsidiaries, a legal, valid and binding agreement of each of Timken and the Company, as applicable, enforceable against each of them in accordance with its terms.

      4.3 Organizational Documents . Each of the Company, its Subsidiaries and Timken has delivered or made available through the Intralinks data room dedicated to the transactions contemplated by this Agreement to Buyer a complete and correct copy of its certificate of incorporation and bylaws or other equivalent organizational documents, as amended or restated to the date hereof. Such certificates of incorporation and bylaws or other equivalent organizational documents of the Company, its Subsidiaries and Timken are in full force and effect. None of the Company, its Subsidiaries or Timken is in violation of any of the provisions of its respective certificate of incorporation or bylaws or other equivalent organizational documents. Section 4.3 of the Disclosure Schedule sets forth a true and complete list of the names and titles of the directors and officers of the Company.

      4.4 Capitalization .

          (a) The authorized capital stock of the Company consists solely of 100 shares of common stock, without par value, of which 100 shares are issued and outstanding and are owned beneficially and of record solely by Timken. All of the Shares have been duly and validly issued and are fully paid and nonassessable. The Shares have not been issued in violation of, and are not subject to, any Options. The Shares represent the only issued and outstanding shares of capital stock of the Company. There are no agreements, commitments, pre-emptive or similar rights created by statute, the certificate of incorporation or bylaws of the Company to which the Company is a party or the Shares are bound, or Contracts relating to the issuance, sale or transfer of any equity securities or other securities of the Company. All Shares were issued in compliance with applicable federal and state securities Laws. Except as set forth on Section 4.4(a) of the Disclosure Schedule, there are no shares of capital stock of the Company issued, reserved for issuance or outstanding. Except as described in Section 4.4(a) of the Disclosure Schedule, there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock (or options to acquire any such shares) or other security or equity interest of the Company, and there are no stock-appreciation rights, security-based performance units, "phantom" stock or other similar security rights or other agreements, arrangements or commitments of a similar nature (contingent or otherwise) pursuant to which any Person is or may be entitled to receive any payment or other value based on the financial performance, stock price performance or other value of the Company or assets thereof or calculated in accordance therewith.

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          (b) There are no outstanding securities, Options, commitments, agreements, arrangements or undertakings of any kind (contingent or otherwise) to which Timken or Company is a party or by which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other securities of the Company or obligating the Company to issue, grant, extend or enter into any such security, Option, commitment, agreement, arrangement or undertaking.

          (c) Except as set forth in Section 4.4(c) of the Disclosure Schedule, (i) there are no restrictions on the transfer of shares of capital stock of the Company other than those imposed by relevant federal and state securities Laws and (ii) there are no voting trusts, proxies or other agreements, commitments or understandings of any character to which the Company or Timken or, to the Knowledge of the Company or Timken, any other Person, is a party or by which any of them is bound with respect to the issuance, holding, acquisition, voting or disposition of any             shares of capital stock or other security or equity interest of the Company.

      4.5 Title .

          (a) Timken (i) is the record and beneficial owner of all of the Shares, (ii) has full power, right and authority, and any approval required by Law, to make and enter into this Agreement and to sell, assign, transfer and deliver the Shares to Buyer, and (iii) has valid title to all of the Shares free and clear of all Liens (other than Liens, if any, which shall be released at the Closing).

          (b) Timken has good, valid and marketable title to all of the ICX Assets free and clear of all Liens (other than Liens, if any, which shall be released at the Closing). Upon the consummation of the transactions contemplated by this Agreement in accordance with the terms hereof, Buyer shall acquire good, valid and marketable title to the ICX Assets, free and clear of all Liens.

      4.6 Subsidiaries and Investments .

          (a) Except for OH&R or as set forth in Section 4.6 of the Disclosure Schedule, the Company has no Subsidiaries or Investments.

          (b) The Company owns all of the issued and outstanding shares of capital stock or equity interests of OH&R (collectively, the " Subsidiary Shares "), free and clear of all Liens. There are no authorized or outstanding Options relating to the Subsidiary Shares or with respect to which OH&R may be obligated to issue or sell any shares of capital stock or equity interests or any other securities of OH&R. The Subsidiary Shares have been duly and validly issued and are fully paid and nonassessable.

      4.7 Delivery; No Conflict; Consents .

          (a) Except as set forth in Section 4.7(a) of the Disclosure Schedule, neither the execution and delivery of this Agreement or the Related Agreements to which it is a party by Timken or the Company, nor the consummation by Timken or the Company of the transactions contemplated hereby or thereby, nor compliance by Timken or the Company with any of the provisions hereof, will conflict with or constitute or result in the breach of, or

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constitute a default under (with or without due notice, lapse of time or both), or give rise to any right of termination, notification, amendment, cancellation or acceleration with respect to, or result in the creation or imposition of any Lien upon the Shares, the ICX Assets or any property or assets of the Company or its Subsidiaries pursuant to (i) any provision of the Company’s or its Subsidiaries’ certificate of incorporation or bylaws or equivalent organizational documents, (ii) any material Contract, note, bond, mortgage, indenture, lease or other instrument or obligation to which the Company, or Timken is a party, or by which the Company or Timken or any of its properties, assets or rights may be bound or (iii) any Law applicable to the Company or Timken or any of their respective properties, assets or rights.

          (b) Except as set forth in Section 4.7(b) of the Disclosure Schedule, no Consent of or by, or any filing with, any Governmental Authority or other Person, or under any Contract, including Real Property Leases and Personal Property Leases, is required to be obtained, filed or delivered by Timken or the Company in connection with the execution, delivery and performance by Timken or the Company of this Agreement or any of the Related Agreements to which it is a party or the consummation by Timken or the Company of the transactions contemplated hereby or thereby.

      4.8 Financial Statements .

          (a) The Company has previously delivered or made available through the Intralinks data room dedicated to the transactions contemplated by this Agreement to Buyer the following financial statements (collectively, the " Financial Statements "):

               (i) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of September 30, 2006 (the " Interim Balance Sheet ") and the related consolidated statements of income and cash flow for the nine-month period then ended, prepared by the Company (the " Interim Financial Statements "); and

               (ii) the unaudited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2005, December 31, 2004 and December 31, 2003, and the related unaudited consolidated statements of income and cash flow for the respective twelve-month periods then ended.

          (b) Except as set forth in Section 4.8(b) of the Disclosure Schedule, as of immediately prior to the Closing, the Company and its Subsidiaries shall have no outstanding Indebtedness and all Transaction Costs shall have been paid in full.

          (c) The Financial Statements were prepared in accordance with the books and records of the Company and its Subsidiaries, fairly present in all material respects the financial condition of the Company and its Subsidiaries as of the dates indicated and the results of operations of the Company and its Subsidiaries for the respective periods indicated, and have been prepared in accordance with GAAP, except for the absence of notes, any accrual for vacation benefits, and, in the case of the Interim Financial Statements, normal year-end adjustments not inconsistent with past practice.

          (d)  Section 4.8(d) of the Disclosure Schedule sets forth an example of the calculation of Working Capital as of November 30, 2006.

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      4.9 Tax Matters . Except as set forth in Section 4.9 of the Disclosure Schedule:

          (a) All federal, state, local and foreign Tax Returns required to be filed by or on behalf of the Company and its Subsidiaries have been timely filed (taking into account any extensions), and all such Tax Returns (insofar as they relate to the amount of Taxes shown as payable on such Tax Returns) are true, complete and correct in all material respects. All material Taxes shown to be due and payable on such Tax Returns (insofar as they relate to the income of the Company and its Subsidiaries) have been paid. All material Taxes with respect to which no Tax Return was required to be filed on or before the Closing Date by or on behalf of the Company or its Subsidiaries, which are due by or with respect to income or assets of the Company or its Subsidiaries for taxable periods or portions thereof ending on or before the Closing Date, have been paid or accrued and adequately disclosed and provided for on the books and records of the Company and its Subsidiaries and in the Financial Statements.

          (b) No deficiencies for any Taxes of the Company and its Subsidiaries have been proposed, asserted or assessed against the Company or its Subsidiaries that are not adequately reserved for in accordance with GAAP on the Interim Balance Sheet nor are there any pending, or to the Knowledge of the Company or Timken, threatened in writing, Tax audits or inquiries. All assessments for Taxes due and owing by or with respect to the Company and its Subsidiaries with respect to completed and settled examinations or concluded Actions since January 1, 1997, have been paid and are set forth in Section 4.9 of the Disclosure Schedule. Neither the Company nor its Subsidiaries has received any material unresolved claim from any taxing authority that the Company or its Subsidiaries may be required to file Tax Returns in any jurisdiction in which the Company or its Subsidiaries does not presently file Tax Returns.

          (c) Neither the Company nor its Subsidiaries has requested or been granted any waiver of any federal, state, local or foreign statute of limitations with respect to, or any extension of a period for the assessment of, any Tax that is currently in effect. No extension or waiver of time within which to file any Tax Return of, or applicable to, the Company or its Subsidiaries has been granted or requested which has not since expired.

          (d) Neither the Company nor its Subsidiaries is and has ever been (nor does the Company or its Subsidiaries have any Liability for unpaid Taxes because it once was) a member of an affiliated, consolidated, combined or unitary group other than a group the common parent of which is Timken, and neither the Company nor its Subsidiaries is a party to any Tax allocation or sharing Contract or is liable for the Taxes of any other party, as transferee or successor, by contract or otherwise other than any Tax sharing agreement with Timken, which shall be terminated effective as of the close of the Closing Date and have no further effect for any taxable year or period.

          (e) Section 4.9 of the Disclosure Schedule sets forth written schedules of the taxable years of the Company or its Subsidiaries for which the statutes of limitations with respect to foreign, federal and state income Taxes have not expired and with respect to foreign, federal and state income Taxes, those years for which examinations have been completed and those years for which examinations are presently being conducted.

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          (f) Neither the Company nor its Subsidiaries has made any payments, is obligated to make any payments, and is a party to any Contracts that would obligate either of them to make any payments that will not be deductible under Section 280G of the Code or Section 162(m) of the Code.

          (g) Timken is not a foreign person within the meaning of Section 1445 of the Code.

          (h) The Company and its Subsidiaries have complied in all material respects with applicable Laws relating to the payment and withholding of Taxes (including, without limitation, withholding of Taxes pursuant to Sections 1441, 1442, 3121, 3306, 3402 and 3406 of the Code or similar provisions under any foreign Laws and with respect to all applicable sales and use Taxes) and has withheld from employee wages and paid over to the proper Governmental Authorities all amounts required to be so withheld and paid over under all applicable Laws.

          (i) Neither the Company nor its Subsidiaries has made an election under former Section 341(f) of the Code.

          (j) Neither the Company nor its Subsidiaries will be required to include any material amount of income in, or exclude any material amount of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date attributable to income that accrued in a prior taxable period (or portion thereof) but was not recognized for tax purposes in such prior period as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; or (ii) closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date, except in each case to the extent reflected as a reserve for Taxes on the Financial Statements and in the Final Working Capital.

          (k) Neither the Company nor its Subsidiaries 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 Section 355 or 361 of the Code.

          (l) There are no Liens with respect to Taxes upon any of the assets or properties of the Company or its Subsidiaries, other than with respect to Taxes not yet due and payable or being contested in good faith through appropriate proceedings all of which shall remain the responsibility of Timken.

      4.10 Personal Property Assets . Except as set forth in Section 4.10 of the Disclosure Schedule, each of the Company and its Subsidiaries have good title to, or hold by valid and existing lease or license, all of the tangible personal property assets reflected as assets on the Interim Balance Sheet or acquired since the date of the Interim Balance Sheet except with respect to assets disposed of in the ordinary course of business since such date (collectively, the " Company Assets "), free and clear of all Liens, other than Permitted Liens. Except as set forth in Section 4.10 of the Disclosure Schedule, including the machinery and equipment set forth therein as being subject to planned shut-downs, all of the Company Assets and the ICX Assets are in reasonably good maintenance, operating condition and repair, normal wear and tear

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excepted. Except as set forth in Section 4.10 of the Disclosure Schedule, during the past two (2) years, there has not been any material interruption of the operations of the business of the Company due to the condition of any of the Company Assets or the ICX Assets other than planned shut-downs. The Company Assets and the ICX Assets, together with the Owned Real Property, include all tangible assets, properties and rights used in the conduct of the business of the Company and its Subsidiaries as currently conducted.

      4.11 Contracts . Section 4.11 of the Disclosure Schedule sets forth a true and complete list of all written and oral contracts, agreements, letters of intent, licenses, leases, arrangements, commitments and other instruments, and all amendments, modifications and supplements thereto (collectively, " Contracts ") (i) to which the Company and its Subsidiaries is a party or is bound which was not made in the ordinary course of business, or which was made in the ordinary course of business and is referred to below, or (ii) that relate in any manner to any of the ICX Assets and, with respect to any such oral Contract, provides a description of the terms of such Contract. Except as set forth in Section 4.11 of the Disclosure Schedule, the Company is not a party to or bound by any Contract described below:

          (a) any Contract relating to the purchase, sale or lease of products, material, supplies, equipment or services requiring payments to or from the Company (i) in an amount in excess of $100,000 or which is not terminable upon thirty (30) days or less notice without penalty (excluding purchase orders with customers or suppliers), or (ii) any Contract pursuant to which the Company has granted or received most favored nation pricing provisions or exclusive marketing or other rights relating to any product, group of products or services;

          (b) any distributorship, dealer, sales, agency, broker, representative, franchise, independent contractor, management services or similar Contract requiring payments to or from the Company in excess of $100,000 in any fiscal year or which is otherwise material to the business of the Company or which is not terminable upon thirty (30) days or less notice without penalty; or any other Contract relating to the payment of a commission or other fee calculated as or by reference to a percentage of the profits or revenues of the Company or of any business segment of the Company, in any case which is reasonably likely to result in the payment to or from the Company in excess of $100,000 in any fiscal year;

          (c) any joint venture, partnership or other similar Contract;

          (d) any collective bargaining Contract or other Contract with any labor union or representative of employees;

          (e) any employment, consulting or similar Contract, and any offer letters, letters of intent, memorandum or other documentation containing terms of employment or engagement with any current officer, employee, consultant or agent of the Company, or former officer, employee, consultant or agent of the Company with such a Contract, or provisions thereof, still in effect as of the date hereof;

          (f) any license agreement (a " License Agreement " ) involving the Company’s use of any Intellectual Property or granting another the right to use any Company

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IP, except licenses for non-exclusive, off-the-shelf Software licensed by a third-party to the Company or its Subsidiaries with an aggregate cost of less than $25,000;

          (g) any indenture, mortgage, promissory note, loan agreement, guarantee or other Contract relating to Indebtedness;

          (h) any Contract granting or permitting any Lien (other than Permitted Liens) on any of the properties, assets or rights of the Company;

          (i) any Contract relating to the issuance, sale, repurchase, redemption, transfer or voting of any capital stock or other securities of the Company;

          (j) any Contract relating to charitable or political contributions;

          (k) any Contract for capital expenditures requiring payment by the Company in excess of $100,000;

          (l) any Contract with a "disqualified individual" (as defined in Section 280G(c) of the Code), which would result in an "excess parachute payment" (as defined in Section 280G(b)(1) of the Code) being made under Section 280G of the Code as a result of the transactions contemplated hereby;

          (m) any Contract for the sale or purchase of any material assets, properties or rights, including any the assets or stock of any Person;

          (n) any Contract which restricts the Company from engaging in any aspect of its business or competing in any line of business in any geographic area;

          (o) any tax sharing Contract;

          (p) any Contract providing for indemnification of any Person;

          (q) any Contract with any Governmental Authority;

          (r) any Contract that would purport to bind the Buyer or any of its Affiliates (separate and apart from the Company or its Subsidiaries) following the Closing;

          (s) any Contract between the Company and any Affiliate, officer, director or stockholder of the Company or any Affiliate thereof; or

          (t) to the Knowledge of the Company or Timken, any material Contract which results in a loss (solely for the purposes of this Section 4.11(t) , "material" means "material to the Company and its Subsidiaries, taken as a whole"; however, the parties to this Agreement hereby acknowledge and agree that the foregoing definition of "material" shall not create any implication with respect to the interpretation of "material" for any other purposes under this Agreement).

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Section 4.11 of the Disclosure Schedule sets forth (i) a representative active purchase order issued by a Top Customer and a representative active purchase order issued to a Top Supplier and (ii) a list as of November 13, 2006 of open purchase orders of the Company and its Subsidiaries in excess of $150,000 per order, including the dollar amount of such orders, the customers to whom such orders relate and the applicable purchase order number. The Company has delivered or made available through the Intralinks data room dedicated to the transactions contemplated by this Agreement to Buyer true and complete copies (subject to redaction of pricing information) of all written Contracts (including all amendments thereto) listed or incorporated by reference in Section 4.11 of the Disclosure Schedule. Each Contract to which the Company is a party, including, without limitation, those listed in the Disclosure Schedule, is in full force and effect and is the legal, valid and binding obligation of the Company and each other party thereto enforceable in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law) (the " General Enforceability Exceptions "), and neither the Company nor, to the Knowledge of the Company or Timken, the other party or parties thereto is or are in default thereunder and there exists no event, condition or occurrence which (with or without due notice or lapse of time, or both) would constitute such a default or alleged default by the Company or, to the Knowledge of the Company or Timken, the other party or parties thereto of any of the foregoing.

      4.12 Real Property .

          (a) Section 4.12(a) of the Disclosure Schedule sets forth a complete and accurate list of all Real Property. The Company or its Subsidiaries, as applicable, has good and marketable fee simple title to the Owned Real Property, free and clear of all Liens, and any other rights of third parties, except for Permitted Liens. Either the Company or its Subsidiaries is the owner and holder of all leasehold estates purported to be granted by each Real Property Lease. Section 4.12(a) of the Disclosure Schedule sets forth a true and complete list of (i) all leases, ground leases and subleases pursuant to which the Company or its Subsidiaries leases or subleases real property, and (ii) all leases, ground leases and subleases pursuant to which the Company or its Subsidiaries leases or subleases real property to any other Person (such leases and any amendments thereto, collectively with the leases (including any amendments thereto) described in clause (i) above, the " Real Property Leases ") and (iii) all material service contracts in effect with respect to the Real Property (collectively, the " Service Contracts "). All Real Property Leases are in full force and effect and are the legal, valid and binding obligation of the Company or its Subsidiaries and of each other party thereto and are enforceable in accordance with their respective terms, subject to the General Enforceability Exceptions. The Company is not, and to the Knowledge of the Company or Timken, the other party or parties to the Real Property Leases or Service Contracts is or are not in default thereunder and there exists no event, condition or occurrence which (with or without due notice or lapse of time, or both) would constitute such a default or alleged default by the Company or its Subsidiaries, or to the Knowledge of the Company or Timken, the other party or parties thereto of any of the foregoing. The Company has delivered or made available through the Intralinks data room dedicated to the transactions contemplated by this Agreement to Buyer true and complete copies of all Real Property Leases, including all amendments thereto.

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          (b) To the Knowledge of the Company or Timken, applicable zoning Laws permit the presently existing improvements and the conduct of the Company’s and its Subsidiaries’ business as being conducted on the Real Property. All improvements, mechanical equipment, fixtures and operating systems included in the Real Property are in such operating condition and repair (ordinary wear and tear excepted) to permit operation of such systems as currently conducted.

          (c) The Real Property is in compliance with any and all restrictions and other provisions included in any Permitted Liens on such Real Property, and to the Knowledge of the Company or Timken, there are no matters that create, or that with notice or the passage of time would create, a default under any of the documents evidencing such Permitted Liens.

          (d) Except as set forth on Section 4.12(d) of the Disclosure Schedule, on the Closing Date, there will be no Service Contracts in effect under which services are provided to the Real Property except those that may be terminated by Buyer with not more than thirty (30) days notice and without penalty.

          (e) Utilities are available to the Real Property in sufficient quantities for the present use on such Real Property, and to the Knowledge of the Company or Timken, no condition or fact exists that would result in termination or furnishing or such utilities.

          (f) The Company and Timken have no Knowledge of any pending condemnation or similar proceeding affecting the Real Property or any portion thereof, including any special assessment proceeding or any Action which would impair or result in the termination of access from the Real Property to abutting public highways, streets and roads.

          (g) Neither the Company nor its Subsidiaries has granted any leases or licenses, nor created any tenancies, affecting the Real Property, except as set forth in Section 4.12(g) of the Disclosure Schedule. There are no other parties in possession of any portion of the Real Property as trespassers.

          (h) Except as set forth in Section 4.12(h) of the Disclosure Schedule, neither the Company nor its Subsidiaries is a party to or is otherwise bound by, nor is any of its respective properties subject to, any Contract requiring it to pay any commissions or other compensation to any brokers or agents in connection with any of the Real Property, and has had no dealings with any broker or agent with respect to the Real Property upon which any such broker or agent would be entitled to a commission or other compensation.

          (i) Except as set forth in Section 4.12(i) of the Disclosure Schedule, no Person has any Contract, option or right of first refusal to purchase the Real Property or any part thereof.

          (j) The Company and Timken have no Knowledge of any pending or proposed municipal betterments for which a Lien could be imposed on the Real Property.

          (k) Except as set forth in Section 4.12(k) of the Disclosure Schedule, there exists no material default on the part of the Company, its Subsidiaries or Timken with respect to

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any Permitted Lien, other than those defaults which can be cured or discharged by the payment of money and for which an allowance for the payment thereof has been made at Closing.

      4.13 Personal Property Leases . Section 4.13 of the Disclosure Schedule sets forth a complete and accurate list of all personal property leased by the Company and its Subsidiaries for which the Company or its Subsidiaries are obligated to pay annual consideration in an amount that exceeds $50,000 for the current or a future fiscal year (the " Leased Personal Property ") and with respect to each lease covering the Leased Personal Property (collectively, the " Personal Property Leases "), (A) the name of the lessor and (B) any requirement of Consent of the lessor to assignment (including assignment by way of change of control). Each of the Company and its Subsidiaries is the owner and holder of all leasehold interests purported to be granted by each Personal Property Lease, and all Personal Property Leases are in full force and effect and are the legal, valid and binding obligation of the Company and its Subsidiaries and of each other party thereto enforceable in accordance with their respective terms, subject to the General Enforceability Exceptions, and neither the Company nor its Subsidiaries is, nor to the Knowledge of the Company or Timken, is the other party or parties thereto, in default thereunder and there exists no event, condition or occurrence which (with or without due notice or lapse of time, or both) would constitute such a default or alleged default by the Company or its Subsidiaries or, to the Knowledge of the Company or Timken, the other party or parties thereto of any of the foregoing. The Company has delivered or made available through the Intralinks data room dedicated to the transactions contemplated by this Agreement to Buyer true and complete copies all Personal Property Leases, including all amendments thereto.

      4.14 Absence of Undisclosed Liabilities . To the Knowledge of the Company or Timken, neither the Company nor its Subsidiaries have any Liabilities, except for (i) Liabilities specifically accrued or disclosed in the Interim Balance Sheet, (ii) Liabilities set forth in Section 4.14 of the Disclosure Schedule, (iii) obligations arising after the date hereof under Contracts set forth in Section 4.11 of the Disclosure Schedule or obligations arising after the date hereof under Contracts to which the Company or its Subsidiaries are parties that are not required to be so disclosed pursuant to Section 4.11 provided such Contracts not required to be disclosed pursuant to Section 4.11 were entered into in the ordinary course of business, or (iv) Liabilities incurred in the ordinary course of business and consistent with past practice since the date of the Interim Balance Sheet (the " Interim Balance Sheet Date ").

      4.15 Absence of Changes . Except as set forth in Section 4.15 of the Disclosure Schedule, since December 31, 2005, the Company and its Subsidiaries have conducted their business only in the ordinary course consistent with past practices and there has not been any change, event, development, damage or circumstance affecting the Company or its Subsidiaries which, individually or in the aggregate, has had or could reasonably be expected to have, a Material Adverse Effect. As amplification and not in limitation of the foregoing, since December 31, 2005, except as set forth in Section 4.15 of the Disclosure Schedule, there has not been:

          (a) any Lien imposed or created on any of the assets or properties of the Company or its Subsidiaries or any of the ICX Assets, other than Permitted Liens;

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          (b) any damage, destruction or loss of any of the material assets or properties of the Company or its Subsidiaries or any of the ICX Assets by fire or other casualty, whether or not covered by insurance;

          (c) any assignment, termination, modification or amendment of any Contract to which the Company or its Subsidiaries was or is a party or that relates to any of the ICX Assets, except for any termination, modification or amendment which would not, either individually or in the aggregate, be material;

          (d) any written notice to the Company or its Subsidiaries, or to the Knowledge of the Company or Timken, oral notice that any Contract to which the Company or its Subsidiaries was or is a party or that relates to any of the ICX Assets has been breached, repudiated or terminated or will be breached, repudiated or terminated;

          (e) any increase in the salary, benefit or other compensation of any employee, officer or director of the Company (or any promise to effect such and increase in the future), or any increase in or any addition to other benefits to which any such employee, officer or director may be entitled (or any promise to effect such and increase in the future), other than in the ordinary course of business;

          (f) except for (i) grants of restricted stock, deferred shares and nonqualified stock options under The Timken Company Long-Term Incentive Plan, (ii) payments under The Timken Company Intermediate Incentive Plan, and (iii) payments under The Timken Company Annual Performance Plan, any extraordinary compensation, bonus, payment or distribution to the Company or any employee, officer, director or consultant of the Company (or any promise to pay any extraordinary compensation, bonus or payment other than base salary, or regular commissions at anytime in the future);

          (g) any failure to pay or discharge when due (after the application of any applicable grace periods) any Liabilities of the Company or its Subsidiaries, except for Liabilities contested in good faith by the Company or its Subsidiaries, which are fully reflected and reserved for in the Interim Financial Statements and the Estimated Working Capital;

          (h) any change in any of the accounting principles adopted by the Company or its Subsidiaries, or any material change in the Company’s or its Subsidiaries’ accounting procedures, practices or methods with respect to applying such principles, other than as required by GAAP or by applicable Law;

          (i) any transaction or Contract (other than purchase orders in the ordinary course of business) entered into, or Liability created, assumed, guaranteed or incurred, by the Company or its Subsidiaries outside the ordinary course of business or involving an amount in excess of $100,000;

          (j) the termination of any officer of the Company;

          (k) any declaration, setting aside or payment of any dividend or other distribution of any assets of any kind whatsoever with respect to any shares of the capital stock of the Company, any direct or indirect redemption, purchase or other acquisition of any such

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shares of the capital stock of the Company by the Company or by any other Person, or any other payment or distribution to any stockholder of the Company or any Affiliate of any such stockholder by the Company;

          (l) any cancellation or forfeiture of any material debts or claims of the Company or its Subsidiaries or any waiver of any rights of material value to the Company or its Subsidiaries;

          (m) any issuance by the Company or its Subsidiaries of any shares of its capital stock or debt security or any security, right, option or warrant convertible into or exercisable or exchangeable for any shares of its capital stock or debt security;

          (n) any write-off of any accounts receivable or notes receivable of the Company or its Subsidiaries or any portion thereof in excess of $25,000 individually or $75,000 in the aggregate, or any sale, assignment or disposition of any account or note receivable (including, without limitation, by means of any factoring agreement);

          (o) any loan, advance or capital contribution to or investment in any Person by the Company or its Subsidiaries or the engagement by the Company or its Subsidiaries in any transaction with any employee, officer, director or security holder of the Company or its Subsidiaries, other than the payment of normal wages and salaries to employees in the ordinary course of business and consistent with past practice and advances to employees in the ordinary course of business for travel and similar business expenses and consistent with past practice;

          (p) any material change in the manner in which the Company or its Subsidiaries extends or receives discounts or credit from customers or suppliers;

          (q) any labor or employment dispute or negotiation or union or other organizing campaign purportedly on behalf of or involving any employee of the Company or its Subsidiaries, or any threat thereof;

          (r) the commencement of any Action by or against the Company or its Subsidiaries, or to the Knowledge of the Company or Timken, any threat thereof;

          (s) any amendment to the certificate of incorporation or by-laws or equivalent documents of the Company or its Subsidiaries;

          (t) any capital expenditure or commitment by the Company or its Subsidiaries in excess of $100,000;

          (u) any loss of a Major Customer or Major Supplier;

          (v) any agreement, understanding, authorization or proposal, whether in writing or otherwise, for the Company or its Subsidiaries to take any of the actions specified in this Section 4.15 ;

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          (w) any payment, discharge or satisfaction of any Liabilities from the Effective Date through the Closing Date, other than in the ordinary course of business consistent with past practice; or

          (x) from the date hereof, no event or circumstance has occurred which, under applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to or affecting creditors’ rights generally or under general equitable principles, renders this Agreement or any portion of this Agreement unenforceable with respect to Timken or Timken Alloy.

      4.16 Employment Matters .

          (a) Section 4.16 of the Disclosure Schedule identifies (i) all employees currently employed by the Company and its Subsidiaries and sets forth each employee’s: (A) rate of pay, (B) bonus payments, (C) job title, (D) state of employment, (E) date of hire and intended date of termination if any, (F) annual vacation and sick time allowance and (G) accrued vacation and sick time as of the Closing Date and (ii) all consultants and independent contractors currently engaged by the Company and its Subsidiaries and sets forth each consultant’s and independent contractor’s: (A) rate of pay, (B) scope of services provided, (C) state of engagement and (D) date of engagement and anticipated termination date of engagement. Except as set forth in Section 4.16 of the Disclosure Schedule, (i) there are no employment, consulting, independent contractor, severance pay, continuation pay, termination, indemnification or any other Contracts between the Company or its Subsidiaries and any current or former stockholder, officer, director, employee, consultant or independent contractor, and (ii) no such Contract will, as a result of the transactions contemplated hereby, either require any payment by the Company or its Subsidiaries or any Consent or waiver fr


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