Document:

Exhibit 10.4

 

EXECUTION COPY

 

STOCK AND

ASSET PURCHASE AGREEMENT

 

dated as of

 

May 17, 2002

 

by and among

 

U.S.

INDUSTRIES, INC.,

 

ELJER

PLUMBINGWARE, INC.,

 

SELKIRK,

INC.,

 

SELKIRK

CANADA U.S.A., INC.,

 

SELKIRK

CANADA, INC.,

 

SELKIRK

ACQUISITION PARTNERS, L.P.

 

and

 

TINICUM CAPITAL PARTNERS, L.P.

 

 

 

TABLE OF

CONTENTS

 

	

  ARTICLE 1

  
	

  DEFINITIONS

  
	

   

  
	

  SECTION 1.01. Definitions

  
	

   

  
	

  ARTICLE 2

  
	

  PURCHASE AND SALE

  
	

   

  
	

  SECTION

  2.01. Purchase and Sale of Shares; Sale and Transfer of Assets

  
	

  SECTION 2.02. Retained

  Assets

  
	

  SECTION 2.03. Assumed

  Liabilities

  
	

  SECTION 2.04. Retained

  Liabilities

  
	

  SECTION 2.05. Purchase

  Price

  
	

  SECTION 2.06. Closing

  
	

  SECTION 2.07. Final

  Net Worth Statement

  
	

  SECTION 2.08. Adjustment

  of Purchase Price

  
	

   

  
	

  ARTICLE 3

  
	

  REPRESENTATIONS

  AND WARRANTIES OF SELLERS

  
	

   

  
	

  SECTION 3.01. Corporate

  Existence and Power

  
	

  SECTION 3.02. Corporate

  Authorization

  
	

  SECTION 3.03. Governmental

  Authorization

  
	

  SECTION 3.04. Noncontravention

  
	

  SECTION 3.05. Sufficiency

  of Assets

  
	

  SECTION 3.06. Capitalization

  
	

  SECTION 3.07. Financial

  Statements

  
	

  SECTION 3.08. Absence

  of Certain Changes

  
	

  SECTION 3.09. No

  Undisclosed Liabilities

  
	

  SECTION 3.10. Material

  Contracts

  
	

  SECTION 3.11. Litigation

  
	

  SECTION 3.12. Compliance

  with Laws, Court Orders and Permits

  
	

  SECTION 3.13. Real

  Property

  
	

  SECTION 3.14. Intellectual

  Property

  
	

  SECTION 3.15. Finder’s

  Fees

  
	

  SECTION 3.16. Employees

  
	

  SECTION 3.17. Employee

  Benefit Plans

  
	

  SECTION 3.18. Environmental

  Matters

  
	

  SECTION 3.19. Labor

  Matters

  

 

 

	

  SECTION 3.20. Tax

  Matters

  
	

  SECTION 3.21. Inventory

  
	

  SECTION 3.22. Accounts

  Receivable

  
	

  SECTION

  3.23. Ownership of Shares; Title to Acquired Assets

  
	

  SECTION 3.24. Insurance

  
	

  SECTION 3.25. Transactions

  with Affiliates

  
	

  SECTION 3.26. Product

  Liability

  
	

  SECTION 3.27. Customers

  
	

  SECTION 3.28. Suppliers

  
	

  SECTION 3.29. Absence

  of Certain Practices

  
	

   

  
	

  ARTICLE 4

  
	

  REPRESENTATIONS

  AND WARRANTIES OF BUYER

  
	

   

  
	

  SECTION 4.01. Existence

  
	

  SECTION 4.02. Authorization

  
	

  SECTION 4.03. Governmental

  Authorization

  
	

  SECTION 4.04. Noncontravention

  
	

  SECTION 4.05. Financing

  
	

  SECTION 4.06. Litigation

  
	

  SECTION 4.07. Finders’

  Fees

  
	

  SECTION 4.08. Investment

  Canada

  
	

  SECTION 4.09. No

  Other Representations

  
	

  SECTION 4.10. Purchase

  for Investment

  
	

  SECTION 4.11. Excise

  Tax Act

  
	

   

  
	

  ARTICLE 5

  
	

  COVENANTS

  OF SELLERS

  
	

   

  
	

  SECTION 5.01. Conduct

  of the Business

  
	

  SECTION 5.02. Access

  to Information

  
	

  SECTION 5.03. Financing

  
	

  SECTION 5.04. Non-solicitation

  of Employees

  
	

  SECTION 5.05. Covenant

  Not to Compete

  
	

  SECTION

  5.06. Remittance of Accounts Receivable

  
	

  SECTION

  5.07. Notification of Certain Tax Matters

  
	

  SECTION 5.08. Estoppel

  Certificates

  
	

  SECTION 5.09. Exclusivity

  
	

  SECTION 5.10. Canadian

  Tax Certificate

  
	

  SECTION 5.11. Collection

  of Tax Claims

  
	

  SECTION 5.12. Disclosure

  Supplements

  

ii

 

	

  ARTICLE 6

  
	

  COVENANT OF BUYER

  
	

   

  
	

  SECTION 6.01. Trademarks;

  Tradenames

  
	

  SECTION 6.02. Tax

  Covenants

  
	

   

  
	

  ARTICLE 7

  
	

  COVENANTS OF BUYER AND

  SELLERS

  
	

   

  
	

  SECTION

  7.01. Commercially Reasonable Efforts

  
	

  SECTION 7.02. Public

  Announcements

  
	

  SECTION 7.03. Notices

  of Certain Events

  
	

  SECTION

  7.04. Certain Tax Refunds; Amended Returns; Transfer and Other Taxes

  
	

  SECTION

  7.05. Section 116 Certificate; Canadian Tax Election

  
	

  SECTION 7.06. Further

  Assurances

  
	

  SECTION

  7.07. Transfers Not Effected as of Closing

  
	

  SECTION

  7.08. Pro-ration Relating to Real Estate Taxes and Other Matters

  
	

  SECTION 7.09. Access

  
	

  SECTION

  7.10. Certain Post-Closing Assistance

  
	

  SECTION 7.11. Treasury

  Matters

  
	

  SECTION 7.12. Insurance

  Policies

  
	

  SECTION 7.13. 1400

  California Avenue, Brockville, Ontario Owned Real  Property

  
	

   

  
	

  ARTICLE 8

  
	

  EMPLOYEE

  BENEFITS AND LABOR AGREEMENTS

  
	

   

  
	

  SECTION

  8.01. Employee and Employee Benefit Matters

  
	

  SECTION

  8.02. Collective Bargaining Agreements

  
	

   

  
	

  ARTICLE 9

  
	

  CONDITIONS

  TO CLOSING

  
	

   

  
	

  SECTION

  9.01. Conditions to Obligations of Buyer and Sellers

  
	

  SECTION

  9.02. Conditions to Obligation of Buyer

  
	

  SECTION

  9.03. Conditions to Obligation of Sellers

  

 

iii

 

	

   

  
	

  ARTICLE 10

  
	

  SURVIVAL; INDEMNIFICATION

  
	

   

  
	

  SECTION 10.01. Survival

  
	

  SECTION 10.02. Indemnification

  
	

  SECTION 10.03. Procedures

  
	

  SECTION

  10.04. Additional Procedures Relating to Environmental Matters

  
	

  SECTION 10.05. Calculation

  of Damages

  
	

  SECTION 10.06. Dispute

  Resolutions

  
	

  SECTION 10.07. Effect

  of Investigation

  
	

  SECTION 10.08. Assignment

  of Claims

  
	

  SECTION 10.09. Exclusivity

  
	

  SECTION

  10.10. Tax Treatment of Indemnification Payments

  
	

   

  
	

  ARTICLE 11

  
	

   

  
	

  SECTION 11.01. Grounds

  for Termination

  
	

  SECTION 11.02. Effect

  of Termination

  
	

   

  
	

  ARTICLE 12

  
	

  MISCELLANEOUS

  
	

   

  
	

  SECTION 12.01. Notices

  
	

  SECTION 12.02. Amendments

  and Waivers

  
	

  SECTION 12.03. Expenses

  
	

  SECTION 12.04. Successors

  and Assigns

  
	

  SECTION 12.05. Governing

  Law

  
	

  SECTION 12.06. Jurisdiction

  
	

  SECTION 12.07. WAIVER

  OF JURY TRIAL

  
	

  SECTION

  12.08. Counterparts; Third Party Beneficiaries

  
	

  SECTION 12.09. Entire

  Agreement

  
	

  SECTION 12.10. Captions

  
	

  SECTION 12.11. Severability

  
	

  SECTION 12.12. Specific

  Performance

  
	

  SECTION 12.13. Time

  of the Essence

  
	

  SECTION 12.14. English

  Language

  
	

  SECTION 12.15. Guarantees

  
	

  SECTION 12.16. Bulk

  Sales

  
	

   

  
	

  Appendix A - Actuarial

  Assumptions for Selkirk Pension Transfer

  

 

iv

 

	

  Exhibit A

  	

   

  	

  -

  	

   

  	

  Dallas Sublease

  
	

  Exhibit B

  	

   

  	

  -

  	

   

  	

  Escrow Agreement

  
	

  Exhibit C

  	

   

  	

  -

  	

   

  	

  Bill of Sale

  
	

  Exhibit D

  	

   

  	

  -

  	

   

  	

  Lease Assignments

  
	

  Exhibit E

  	

   

  	

  -

  	

   

  	

  Transition Services Agreement

  
	

  Exhibit F

  	

   

  	

  -

  	

   

  	

  Form of Survey

  
	

  Exhibit G

  	

   

  	

  -

  	

   

  	

  Certificate of Now-Foreign Status

  
	

  Exhibit H

  	

   

  	

  -

  	

   

  	

  Assumption Agreement

  
	

  Exhibit I

  	

   

  	

  -

  	

   

  	

  PLL Policy

  

 

v

 

STOCK AND

ASSET PURCHASE AGREEMENT

 

                AGREEMENT, dated

as of May 17, 2002, by and among Eljer Plumbingware, Inc., a Delaware

corporation (“Eljer”), Selkirk,

Inc., a Delaware corporation (“Selkirk”),

Selkirk Canada U.S.A., Inc., a Delaware corporation (“Selkirk Canada USA”) and Selkirk Canada,

Inc., a Canadian corporation (“Selkirk Canada”,

and together with Eljer, Selkirk, and Selkirk Canada USA, “Sellers” and each, a “Seller”), Selkirk Acquisition Partners,

L.P., a Delaware limited partnership (“Buyer”)

and, with respect to Section 12.15 only, Tinicum Capital Partners, L.P. (“Tinicum”) and with respect to Sections

5.04, 5.05, 5.09, 8.01(c), 8.01(d) and 12.15 only, U.S. Industries, Inc., a

Delaware corporation (“USI”).

 

W I T N E S

S E T H :

 

                WHEREAS, Eljer,

through its directly and indirectly held Subsidiaries, Selkirk, Selkirk Europe,

Selkirk Canada USA, Selkirk Canada, SuperVent Products Inc., an Ontario

corporation (“SuperVent”), and

Industrias Selkirk de Mexico S.A. de C.V., a Mexican corporation (“Industrias”), conducts the business of

manufacturing and distributing components for commercial and residential

heating, ventilation and air conditioning systems;

 

                WHEREAS, Buyer and

Sellers have approved, and deem it advisable to consummate the purchase of the

Acquired Assets and the Shares (each as defined herein) by Buyer, which

purchase is to be effected by the sale by Sellers of all the Acquired Assets

and the Shares to Buyer, subject only, in the case of the Acquired Assets, to

those liabilities expressly assumed by Buyer herein, and otherwise upon the

terms and subject to the conditions set forth herein;

 

                WHEREAS, Buyer

contemplates that it will assign its rights under this Agreement with respect

to the Canadian Shares and the Acquired Assets to be transferred by Selkirk

Canada to a wholly owned unlimited liability company organized under the laws

of Nova Scotia;

 

                WHEREAS, Buyer

contemplates that it will assign its rights under this Agreement with respect

to the Acquired Assets to be transferred by the U.S. Sellers to a wholly owned

limited liability company organized under the laws of Delaware;

 

                WHEREAS,

Buyer contemplates that it will assign its rights under this Agreement with

respect to the Mexican Shares to a wholly owned corporation or limited

liability company organized under the laws of Mexico; and

 

 

NOW THEREFORE, in

consideration of the mutual covenants and agreements set forth in this

Agreement, and for other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, the parties hereto agree as

follows:

ARTICLE 1

DEFINITIONS

SECTION 1.01.  Definitions.  (a) The following terms, as used herein,

have the following meanings:

“Affiliate” means, with respect to any Person, any other Person

directly or indirectly controlling, controlled by, or under common control with

such Person; provided that

SuperVent and Industrias shall not be considered an Affiliate of Sellers.

“Agreement” means this Stock and Asset Purchase Agreement.

“Balance Sheet Date” means November 24, 2001.

“Business” means, collectively, the Transferred Business, the

SuperVent Business and the Mexican Business or, if the context so requires, any

of them.

“Business Day”means any day other than a Saturday, Sunday or a

day on which banks in New York City are authorized or obligated by applicable

law or executive order to close or are otherwise generally closed.

“Canadian Shares” means all outstanding

capital stock of SuperVent.

“Closing Date” means the date on which the Closing occurs.

“Code” means the United States Internal Revenue Code of 1986,

as amended.

“Company” means each of the Sellers, SuperVent and Industrias;

and collectively, the Sellers, SuperVent and Industrias shall be referred to as

the Companies.

“Confidentiality Agreement” means the Confidentiality Agreement

between Buyer and USI dated on or about July 2001.

 

2

 

“Dallas Property” means the real property used in the Business

and located at 14801 Quorum Drive, Dallas, Texas 75240.

“Dallas Sublease” means the sublease in the form attached

hereto as Exhibit A with respect to the Dallas Property.

“Environmental Laws” means any and all federal, state, local

and foreign statutes, laws, regulations and rules, in each case as in effect on

the date hereof or as subsequently adopted or amended, that have as their

principal purpose the protection of the environment or of human health or that

relate to the handling, storage, use or exposure to Hazardous Substances,

wastes or materials.

“Environmental Liabilities” means any Damages or obligations

arising out of the ownership or operation of the Business or the ownership,

operation or condition of the Real Property, to the extent based upon (i) a

violation of or liability under any Environmental Law, (ii) a failure to

obtain, maintain or comply with any Environmental Permit, directive, order or

notice of violation under, or any requirement of, any Environmental Law, (iii)

a Release of any Hazardous Substance at, on or under any Real Property, or any

environmental investigation, remediation, removal, clean-up or monitoring

required under Environmental Laws or required by a Governmental Authority at,

on or under any Real Property, or (iv) the use, generation, storage,

transportation, treatment, sale or other off-site disposal of Hazardous

Substances generated by or otherwise used in the Business.

“Environmental Permits” means all permits, licenses,

franchises, certificates, approvals and other similar authorizations of

Governmental Authorities relating to or required by Environmental Law and

relating to the Business.

“Equipment” means all machinery, fixtures, furniture, supplies,

accessories, materials, equipment, parts, automobiles, trucks, vehicles,

tooling, tools, molds, office equipment, furnishings and other similar items of

personal property.

“ERISA” means the Employee Retirement Income Security Act of

1974, as amended and the rules and regulations promulgated thereunder.

“Escrow Agent” means an agent selected by Sellers to act as

escrow agent under the Escrow Agreement who is reasonably satisfactory to

Buyer.

“European Business” means the business, as conducted by Eljer

Industries Limited, Selkirk Manufacturing France S.A.R.L., Selkirk S.r.l.,

Selkirk Schornsteintechnik GmbH and Gelre Bvoux BV and each of their subsidiaries

on

 

3

 

the Closing Date or prior

thereto, including during any such time that such companies were Affiliates of

Sellers.

“Foreign Antitrust Laws” means all foreign statutes, rules,

regulations, orders, decrees, administrative and judicial doctrines and other

laws that are designed or intended to regulate competition or investment or to

prohibit, restrict or regulate actions having the purpose or effect of

monopolization or restraint of trade.

“Foreign Company” means each of Industrias, Selkirk Canada and

SuperVent; and collectively, Industrias, Selkirk Canada and SuperVent shall be

referred to as the Foreign Companies.

“Governmental Authority” means any international,

multinational, national, federal, regional, state, provincial, municipal or

foreign court or other governmental or regulatory authority, administrative

body or government, department, board, body, tribunal, instrumentality or

commission of competent jurisdiction.

“GUST”  means the

statutes referenced in IRS Announcement 2001-104.

“Hazardous Substance” means any pollutant, contaminant or any

toxic, radioactive or otherwise hazardous substance, as such terms are

regulated by, defined in, or identified pursuant to, any Environmental Law

including, without limitation, asbestos, polychlorinated biphenyls and

petroleum and petroleum products.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements

Act of 1976, as amended.

“Intellectual Property” means any and all patents and

industrial designs, copyrights, trademarks, service marks, trade names,

Internet domain names, designs, logos, slogans, and general intangibles of like

nature, together with goodwill, registrations and applications relating to the

foregoing; computer programs, including any and all software implementations of

algorithms, models and methodologies whether in source code or object code

form, databases and compilations, including any and all data and collections of

data, all documentation, including user manuals and training materials, related

to any of the foregoing and the content and information contained on any Web

site; and confidential information, technology, know-how, inventions,

processes, formulae, algorithms, models and methodologies (such confidential

items, collectively “Trade Secrets”)

and any licenses to use any of the foregoing, or any other

 

4

 

 

similar type of intellectual

property right, in each case, as primarily used or held for use for the benefit

of the Business as currently conducted.

“Inventory” means all inventory, finished goods,

work-in-process, goods-in-transit, raw materials, ingredients and packaging

materials.

“Knowledge of Buyer” or words of similar import shall mean

actual knowledge, after due inquiry, of the individuals set forth in Schedule

1.01(a) attached hereto.

“Knowledge of Sellers” or words of similar import shall mean

actual knowledge, after due inquiry, of the individuals set forth in Schedule

1.01(b) attached hereto.

“Known Pre-Closing Environmental Liabilities” means the

Environmental Liabilities associated with the matters listed on Schedule

1.01(c) hereto.

“Liabilities” means all debts, liabilities, claims, demands,

expenses, commitments and obligations (whether accrued or not, known or unknown,

disclosed or undisclosed, fixed or contingent, asserted or unasserted,

liquidated or unliquidated).

“Lien” means, with respect to any property or asset, any

mortgage, lien, pledge, charge, security interest, encumbrance, hypothecation,

claim, lease, sublease, license, occupancy agreement, adverse interest,

easement, encroachment, title defect, title retention agreement, voting trust

agreement, option, right of first refusal or other restriction or limitation of

any nature whatsoever in respect of such property or asset.

“Material Adverse Effect” means a material adverse effect on

the business, results of operations or financial condition of the Business,

taken as whole.

“Mexican Business” means the business, as conducted by

Industrias on the Closing Date, of manufacturing and distributing components

for commercial and residential heating, ventilation and air conditioning

systems, as described further in the Confidential Information Memorandum dated

May, 2001, provided to Buyer by Deutsche Banc Alex Brown and Credit Suisse

First Boston.

“Mexican Shares” means all outstanding

capital stock of Industrias.

 

5

 

“1934 Act” means the Securities Exchange Act of 1934, as

amended, and the rules and regulations promulgated thereunder.

“Permitted Liens” means (i) Liens, if any, that do not

materially detract from the value of the property subject thereto or materially

interfere with the manner in which it is currently being used by the Business,

(ii) taxes and general and special assessments not yet due and payable or being

contested in good faith, mechanic’s, laborer’s, materialmen’s, repairmen’s and

other similar liens not yet due and payable or being contested in good faith

and for which appropriate reserves, if necessary, have been established on the

books and records of the Companies, (iii) Senior Debt Liens (other than on or

after the Closing) and (iv) other Liens set forth on Schedule 1.01(d).

“Permits” means licenses, permits, approvals, franchises,

registrations, waivers, exemptions, consents, authorizations, qualifications

under or from any federal, state, local or foreign laws or Governmental

Authorities.

“Person” means an individual, corporation, partnership, limited

liability company, association, trust or other entity or organization,

including a government or political subdivision or an agency or instrumentality

thereof.

“Post-Closing Environmental Liabilities” means any

Environmental Liabilities to the extent arising out of the ownership, operation

or condition of the Business or the Real Property at any time after the Closing

Date.

“Pre-Closing Environmental Liabilities” means any Environmental

Liabilities to the extent arising out of the ownership, operation or condition

of any of the Business or the Real Property on or at any time prior to the

Closing Date.

“Real Property” means the Leased Real Property and the Owned

Real Property.

“Release” means any release, spill, emission, leaking, pumping,

pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,

leaching or migration of Hazardous Substances not permitted by prevailing and

applicable Environmental Laws or Environmental Permits, in or into air, soil,

water, groundwater or other media.

“Remedial

Action” means any response action, removal action, remedial

action, closure, corrective action, regulatory permitting, monitoring program,

risk assessment, deed restriction, sampling program, investigation or other

activity required, allowed by or consistent with any Environmental Law or Governmental

Authority to clean up, remove, remediate, treat, abate or otherwise address any

Hazardous Substances or requirement of Environmental Law and shall include by

 

6

 

way of example and not

limitation, (i) obtaining any Environmental Permits necessary to conduct any

such work; (ii) preparing and implementing any plans or studies for such work,

(iii) use of consultants, attorneys, contractors and other professionals to

manage, investigate or otherwise address any matter regarding Hazardous

Substance(s); (iv) obtaining a written notice from a Governmental Authority

with jurisdiction over the site in question or any portion thereof under

Environmental Laws that no material additional work is required by such

Governmental Authority; and (v) any other activities required under

Environmental Laws to address Hazardous Substances at the site in question or

any portion thereof which exceed standards or criteria applicable to the Real

Property or site at issue given its use at the time of Closing.

“Seller Group” means, with respect to federal income Taxes, the

affiliated group of corporations (as defined in Section 1504(a) of the Code) of

which any of the Sellers is a member and, with respect to state income or franchise

Taxes, the consolidated, combined or unitary group of which any Seller or any

Affiliate of any Seller is a member prior to the Closing.

“Selkirk Europe” means Selkirk Europe U.S.A. Inc., a Delaware

corporation.

“Senior Debt Liens” means the Liens created under any of the

collateral or ancillary documents related to the Amendment, Restatement,

General Provisions and Intercreditor Agreement dated as of August 15, 2001

among USI, USI Global Corp., USI American Holdings, Inc., USI Atlantic Corp.,

Rexair Holdings, Inc., Rexair, Inc., the other subsidiaries of USI party

thereto, Wilmington Trust Company and David A. Vanaskey, as Collateral Trustees

(the “Collateral Trustees”), Bank

of America, N.A., as Debt Coordinator, USI Agent, Rexair Agent and Rexair Collateral

Agent, and the lenders party thereto, as amended from time to time, for the

benefit of the secured parties named therein, including without limitation the

Amended and Restated Pledge and Security Agreement dated as of August 15, 2001

among USI and its subsidiaries party thereto and the Collateral Trustees and

the Amended and Restated Collateral Trust Agreement dated as of August 15, 2001

among USI and its subsidiaries party thereto and the Collateral Trustees, in

each case as amended from time to time.

 

“Shares” means the Canadian Shares and the Mexican Shares.

“Subsidiary”, or in the plural, “Subsidiaries” means, with respect to any Person, any

corporation,  limited liability

company or other organization, whether incorporated or unincorporated, of which

(a) 50% or more of the securities or other interests having by their terms

ordinary voting power to elect a majority of the board of directors or others

performing similar functions with respect to such corporation or other

organization is directly or indirectly owned or controlled by

 

7

 

such Person or by any one or

more of its Subsidiaries, or by such Person and one or more of its Subsidiaries

or (b) such Person or any other Subsidiary of such Person is a general partner

(excluding any such partnership where such Person or any Subsidiary of such

Person does not have 50% or more of the voting interests in such partnership).

“SuperVent Business” means the business, as conducted by

SuperVent on the Closing Date, of manufacturing and distributing components for

commercial and residential heating, ventilation and air conditioning systems,

as described further in the Confidential Information Memorandum dated May,

2001, provided to Buyer by Deutsche Banc Alex Brown and Credit Suisse First

Boston.

“Tax” means any tax, duty, fee, assessment, dues or similar

charge of any nature whatsoever imposed by any government or taxing authority,

domestic or foreign, including, without limitation, any gross or net income,

gross or net receipts, minimum, sales, use, ad valorem, good and services,

value added, stamp, transfer, franchise, withholding, payroll, employment,

employment insurance, employer health, excise, occupation, premium or property

tax, together with any interest, penalty, addition to tax, duty, fee,

assessment, due, charge or additional amount imposed with respect thereto.

“Tax Asset” means any net operating loss, net capital loss,

investment tax credit, foreign tax credit, charitable deduction or any other

credit or tax attribute that could be carried forward or back to reduce Taxes

(including, without limitation, deductions and credits related to alternative

minimum Taxes) and losses or deductions deferred by the Code or other

applicable law.

“Transferred Business” means the business, as conducted by the

Companies (other than SuperVent and Industrias) on the Closing Date, of

manufacturing and distributing components for commercial and residential

heating, ventilation and air conditioning systems, as described further in the

Confidential Information Memorandum dated May, 2001, provided to Buyer by

Deutsche Banc Alex Brown and Credit Suisse First Boston.

“U.S. Seller” means each of Eljer, Selkirk and Selkirk Canada

USA; and collectively, Eljer, Selkirk and Selkirk Canada USA shall be referred

to as the U.S. Sellers.

Each of the following terms

is defined in the Section set forth opposite such term:

 

	

  Term

  	

   

  	

  Section

  
	

  Accounting Principles

  	

   

  	

  2.07(a) 

  
	

  Accounts Receivable

  	

   

  	

  2.01(b)(vi)

  

 

8

 

	

  Term

  	

   

  	

  Section

  
	

  ACP

  	

   

  	

  2.02(xiii)

  
	

  Acquired Assets

  	

   

  	

  2.01(b)

  
	

  Act

  	

   

  	

  7.05(a)

  
	

  Adjusted Purchase Price

  	

   

  	

  2.05(a)

  
	

  Administrative Costs

  	

   

  	

  7.12(c)

  
	

  Allocations

  	

   

  	

  2.05(c)

  
	

  Allocation Statement

  	

   

  	

  2.05(c)

  
	

  Alternate Firm

  	

   

  	

  2.07(a)

  
	

  Apportioned Obligations

  	

   

  	

  7.08(a)

  
	

  Assumed Liabilities

  	

   

  	

  2.03

  
	

  Assumption Agreement

  	

   

  	

  9.03(d)

  
	

  Assumptions

  	

   

  	

  8.01(d)(ii)

  
	

  Audited Balance Sheet

  	

   

  	

  3.07(b)

  
	

  Auditor

  	

   

  	

  2.07(a)

  
	

  Benefit Arrangements

  	

   

  	

  3.17(a)(iii)

  
	

  Bill of Sale

  	

   

  	

  9.02(c)

  
	

  Business Insurance Policies

  	

   

  	

  2.02(x)

  
	

  Business-Specific Plans

  	

   

  	

  8.01(b)

  
	

  Buyer

  	

   

  	

  Preamble

  
	

  Buyer Obligations

  	

   

  	

  12.15(a)

  
	

  Buyer Tax Act

  	

   

  	

  10.02(a)

  
	

  Canadian Buyer

  	

   

  	

  4.11

  
	

  CBAs

  	

   

  	

  8.02(a)

  
	

  Claim

  	

   

  	

  10.03(a)

  
	

  Closing

  	

   

  	

  2.06

  
	

  Closing Net Worth

  	

   

  	

  2.07(a)

  
	

  COBRA

  	

   

  	

  8.01(a)

  
	

  Compliance Matters

  	

   

  	

  10.02(b)

  
	

  Contracts

  	

   

  	

  2.01(b)(v)

  
	

  CSA

  	

   

  	

  3.12(c)

  
	

  Damages

  	

   

  	

  10.02(a)

  
	

  Deeds

  	

   

  	

  9.02(e)

  
	

  Determination Date

  	

   

  	

  2.07(a)

  
	

  Disclosure Schedule

  	

   

  	

  lead-in to

  
	

   

  	

   

  	

  Article 3

  
	

  DOL

  	

   

  	

  3.03

  
	

  E&Y

  	

   

  	

  2.07(a)

  
	

  Eljer

  	

   

  	

  Preamble

  
	

  Employees

  	

   

  	

  3.17(a)(i)

  
	

  Employee Benefit Plans

  	

   

  	

  3.17(a)(ii)

  
	

  Environmental Cap

  	

   

  	

  10.02(b)

  
	

  ERISA Affiliate

  	

   

  	

  3.17(a)(ii)

  

 

9

 

 

	

  Term

  	

   

  	

  Section

  
	

  Escrow Amount

  	

   

  	

  2.05(a)

  
	

  Escrow Agreement

  	

   

  	

  2.05(a)

  
	

  Estimated Final Net Worth

  	

   

  	

  2.05(b)

  
	

  Extraordinary Employee Claims

  	

   

  	

  Preamble to

  
	

   

  	

   

  	

  8.01(e)

  
	

  FASB Reports

  	

   

  	

  3.17(d)

  
	

  Final Net Worth

  	

   

  	

  2.08(a)

  
	

  First Anniversary

  	

   

  	

  10.02(b)

  
	

  FMLA

  	

   

  	

  3.17(g)

  
	

  Foreign Employee Benefit Plan

  	

   

  	

  3.17(h)

  
	

  Former Employees

  	

   

  	

  3.17(a)(i)

  
	

  GAAP

  	

   

  	

  2.07(a)

  
	

  General Allocation

  	

   

  	

  2.05(c)

  
	

  HIPAA

  	

   

  	

  3.17(g)

  
	

  Indemnified Party

  	

   

  	

  10.03(a)

  
	

  Indemnifying Party

  	

   

  	

  10.03(a)

  
	

  Industrias

  	

   

  	

  Preamble

  
	

  Initial Transfer Amount

  	

   

  	

  8.01(d)(ii)

  
	

  Intellectual Property Instruments

  	

   

  	

  9.02(d)

  
	

  IRS

  	

   

  	

  3.03

  
	

  Lease Assignments

  	

   

  	

  9.02(h)

  
	

  Leases

  	

   

  	

  3.13(b)

  
	

  Leased Real Property

  	

   

  	

  3.13(b)

  
	

  License Agreements

  	

   

  	

  3.10(a)(i)

  
	

  Master Trusts

  	

   

  	

  3.17(b)

  
	

  Material Contracts

  	

   

  	

  3.10(a)

  
	

  New 401(k) Trust

  	

   

  	

  8.01(c)

  
	

  New Pension Plan

  	

   

  	

  8.01(d)(i)

  
	

  New Pension Trust

  	

   

  	

  8.01(d)(i)

  
	

  Objection Notice

  	

   

  	

  2.07(b)

  
	

  Off-Site Disposal Matter

  	

   

  	

  10.02(b)

  
	

  Owned Real Property

  	

   

  	

  3.13(a)

  
	

  PBO

  	

   

  	

  8.01(d)(ii)

  
	

  Pension Plans

  	

   

  	

  3.17(a)(ii)

  
	

  PLL Policy

  	

   

  	

  10.02(b)

  
	

  Potential Contributor

  	

   

  	

  10.08

  
	

  Preliminary Balance Sheet

  	

   

  	

  3.07(a)

  
	

  Pre-Closing Insurance

  	

   

  	

  7.12(b)

  
	

  Pre-Closing Insurance Claims

  	

   

  	

  7.12(d)

  
	

  Pre-Closing Sellers Insurance Payments

  	

   

  	

  7.12(e)

  
	

  Pre-Closing Tax Period

  	

   

  	

  7.08(a)

  
	

  Post-Closing Tax Period

  	

   

  	

  7.08(a)

  

 

10

 

 

	

  Term

  	

   

  	

  Section

  
	

  Proprietary Software

  	

   

  	

  3.14(b)

  
	

  Purchase Price

  	

   

  	

  2.05(a)

  
	

  Real Estate Matters

  	

   

  	

  10.02(b)

  
	

  Recalls

  	

   

  	

  3.26(b)

  
	

  Remittance Date

  	

   

  	

  7.05(b)

  
	

  Retained Assets

  	

   

  	

  2.02

  
	

  Retained Liabilities

  	

   

  	

  2.04

  
	

  Selkirk

  	

   

  	

  Preamble

  
	

  Selkirk Canada

  	

   

  	

  Preamble

  
	

  Selkirk Canada USA

  	

   

  	

  Preamble

  
	

  Seller

  	

   

  	

  Preamble

  
	

  Seller Names

  	

   

  	

  6.01

  
	

  Seller Obligations

  	

   

  	

  12.15(b)

  
	

  Sellers

  	

   

  	

  Preamble

  
	

  Sellers’ Indemnity

  	

   

  	

  10.02(b)

  
	

  Software

  	

   

  	

  3.14(b)

  
	

  Subsidiary Securities

  	

   

  	

  3.06(b)

  
	

  SuperVent

  	

   

  	

  Preamble

  
	

  Surveyor

  	

   

  	

  9.02(k)

  
	

  Target Net Worth

  	

   

  	

  2.05(b)

  
	

  Tax Benefit

  	

   

  	

  10.06

  
	

  Tax Returns

  	

   

  	

  3.20

  
	

  Tenth Anniversary

  	

   

  	

  10.02(b)

  
	

  Termination Date

  	

   

  	

  11.01(b)

  
	

  Third Party Claim

  	

   

  	

  10.03(b)

  
	

  Tinicum

  	

   

  	

  Preamble

  
	

  Tinicum Guaranty

  	

   

  	

  12.15(a)

  
	

  Title Company

  	

   

  	

  9.02(j)

  
	

  Title Insurance Policies

  	

   

  	

  9.02(j)

  
	

  Title Policy

  	

   

  	

  9.02(j)

  
	

  Total Transfer Amount

  	

   

  	

  8.01(d)(iv)

  
	

  Transfer 401(k) Plan

  	

   

  	

  8.01(c)

  
	

  Transfer Pension Plan

  	

   

  	

  8.01(d)(i)

  
	

  Transition Services Agreement

  	

   

  	

  9.02(i)

  
	

  True-Up Amount

  	

   

  	

  8.01(d)(iv)

  
	

  UL

  	

   

  	

  3.12(c)

  
	

  Unrelated Accounting Firm

  	

   

  	

  2.07(c)

  
	

  USI

  	

   

  	

  Preamble

  
	

  USI Guaranty

  	

   

  	

  12.15(b)

  
	

  WARN

  	

   

  	

  3.19(c)

  
	

  Warranty Breach

  	

   

  	

  10.02(a)

  
	

  Welfare Plans

  	

   

  	

  3.17(a)(ii)

  

 

11

 

 

	

  Term

  	

   

  	

  Section

  
	

  Withheld Amount

  	

   

  	

  7.05(b)

  

 

ARTICLE 2

PURCHASE AND SALE

SECTION 2.01.  Purchase

and Sale of  Shares; Sale and Transfer

of Assets. (a) Upon the

terms and subject to the conditions of this Agreement, (i) Selkirk Canada USA

agrees to sell, assign, transfer and convey, and Buyer agrees, either directly

or indirectly through a direct or indirect wholly owned Subsidiary, to purchase

from Selkirk Canada USA, all right, title and interest in and to the Canadian

Shares set forth on Schedule 3.23 at the Closing, free and clear of all Liens

and (ii) Selkirk Canada USA and Eljer agree to sell, assign, transfer and

convey, and Buyer agrees, either directly or indirectly through a direct or

indirect wholly owned Subsidiary to purchase from Selkirk Canada USA and Eljer,

all right, title and interest in and to the Mexican Shares set forth on

Schedule 3.23 at the Closing, free and clear of all Liens.

(b)   Upon the terms and subject to the

conditions of this Agreement, Sellers agree to sell, convey, assign, transfer

and deliver, or cause to be sold, conveyed, assigned, transferred and

delivered, to Buyer or one or more direct or indirect wholly owned Subsidiaries

of Buyer, as Buyer may elect at its sole discretion, and Buyer and/or such

direct or indirect wholly owned Subsidiary(ies) of Buyer, as Buyer may elect at

its sole discretion, shall purchase, acquire and accept from Sellers and their

respective Affiliates, all right, title and interest in and to all assets,

properties and rights of Sellers and their respective Affiliates primarily used

in or primarily related to the Transferred Business as the same shall exist on

the Closing Date, excluding the Retained Assets (as defined in Section 2.02)

(collectively, the “Acquired Assets”),

including, without limitation, the following:

 

(i) All Equipment;

(ii) All Inventory;

(iii) All Owned Real Property;

(iv) All Intellectual Property;

(v) All rights in and to all

written and oral distribution agreements, agency agreements, license

agreements, written leases for personal property or any parcel of Leased Real

Property (other than the Dallas Property), broker agreements, confidentiality

agreements (under which any Seller has provided information to or received

information from

 

12

 

 

a

third party in respect of the Transferred Business), all purchase orders for

the sale or purchase of goods and services, or both, and all other contracts

and other agreements of whatever nature (whether written or oral)

(collectively,

the “Contracts”);

(vi) All accounts, notes and loans receivable, advances,

letters of credit and other rights to receive payments (collectively, “Accounts Receivable”);

(vii) Except to the extent primarily relating to or

arising out of a Retained Liability or Retained Asset, all rights, privileges,

claims, demands, refunds, indemnification agreements in favor of any Seller

with, and indemnification and similar rights against, third parties,

manufacturer’s warranties and all claims under such warranties (to the extent

transferable), offsets and other similar claims;

(viii) All sales and business records, files, books

of account, customer and supplier lists, product specifications, product

formulations, drawings, correspondence, engineering, maintenance, operating and

production records, advertising and promotional materials, cost and pricing

information, business plans, quality control records and manuals, blueprints,

research and development files, personnel records, files related to litigation

assumed by Buyer pursuant to Section 2.03, credit records of customers and

other related books and records, manuals and other materials (in any form or

medium); provided that, to the

extent any of the above comprise documents that are referred to in Section

2.02(vii)(B), Buyer shall only be entitled to acquire copies thereof;

(ix) All goodwill associated with the Transferred Business; 

(x) All transferable Permits; 

(xi) All prepaid expenses;

(xii) All security deposits, earnest deposits and

all other forms of deposit or security placed with or by Sellers for the

performance of a Contract which otherwise constitutes a portion of the Acquired

Assets; and

(xiii) All UPC codes used on products sold in the

Transferred Business.

SECTION 2.02.  Retained

Assets.  Notwithstanding Section 2.01, all right,

title and interest of Sellers and their respective Affiliates in the following

 

13

 

properties, assets and

rights shall be excluded from the Acquired Assets and not sold or assigned to

Buyer (collectively, the “Retained Assets”):

(i) All cash and cash equivalents of the Transferred Business;

(ii) All non-assignable or non-transferable Permits

of the Transferred Business (to the extent the parties are unable to obtain the

required consent to the assignment of any such Permit);

(iii) All claims by Sellers under this Agreement,

the Escrow Agreement or the Transition Services Agreement;

(iv) All assets or rights of Sellers not primarily

used in the Transferred Business;

(v) The following marks and names: U.S. Industries

Inc., USI or any derivative thereof;

(vi) To the extent attributable to any time or

period ending on or prior to the Closing Date and to the extent not an asset

included in the calculation of Final Net Worth, the right to receive any

workers’ compensation rebate, surplus or credit (excluding any rebates,

surpluses or credits relating to worker’s compensation claims that are Assumed

Liabilities pursuant to this Agreement), and any refund of Tax in respect of

the Transferred Business, including, without limitation, income tax, provincial

sales tax and goods and services tax;

(vii) All books, records, files and papers, whether

in hard copy or computer format, (A) prepared in connection with this Agreement

or the transactions contemplated hereby or (B) primarily relating to Retained

Liabilities and all minute books and corporate records of Sellers other than

those primarily used in the Transferred Business;

(viii) To the extent primarily relating to or

primarily arising out of a Retained Liability or Retained Asset, all rights,

privileges, claims, demands, refunds and indemnification agreements in favor of

any Seller with, and indemnification and similar rights against, third parties,

manufacturer’s warranties and all claims under such warranties, offsets and

other claims, including claims for insurance payments;

(ix) Subject to Section

7.12, all insurance policies maintained by any Seller or USI  that insure the Transferred Business or any

of its property, plant, equipment, officers, directors, employees or agents

against

 

14

 

any

Liability, loss, damage or loss profits for any reason or purpose (the “Business Insurance Policies”) and all

recoveries or rights to the same;

 

(x)   The

capital stock of all Subsidiaries of Sellers (other than SuperVent and Industrias);

(xi)

All rights under the Lease relating to the Dallas Property;

(xii) All assets and contracts the benefits of which

the Transition Services Agreement expressly or by implication envisages will be

made available by Sellers or their respective Affiliates to Buyer and its

Affiliates following the Closing Date; and

(xiii) All products and intellectual property of any

kind presently or at any time in the past owned (in whole or in part) by the

Companies, any of their respective Affiliates, or any of their respective

predecessor or successor corporations, related in any way to the manufacture,

sale, or specification of asbestos or any asbestos-containing product (“ACP”).

SECTION 2.03.  Assumed

Liabilities.  (a) Upon the terms and subject to the conditions of this

Agreement, Buyer or one or more direct or indirect wholly owned Subsidiaries of

Buyer, as Buyer may elect in its sole discretion, shall, effective at the time

of the Closing, assume and thereafter pay, perform, satisfy and fully discharge

when due all Liabilities of Sellers and their respective Affiliates of any

kind, character or description (whether known or unknown, accrued, absolute,

contingent or otherwise) relating to or arising out of the conduct of the

Transferred Business or the ownership or operation of real property used in the

Transferred Business which is part of the Acquired Assets (current or

previously), except for the Retained Liabilities (the “Assumed Liabilities”), including without

limitation, the following:

(i) All Liabilities to the extent reflected in the

calculation of Final Net Worth and all Liabilities incurred by the Transferred

Business after the Closing Date to the extent not satisfied prior to the

Closing Date;

(ii) Subject to Section 7.07, any and all

Liabilities arising under or out of Contracts;

(iii) Except as provided in Article 8, all

liabilities and obligations relating to employee benefits or compensation

arrangements existing on or prior to the Closing Date with respect to any

Employee; and

(iv) All Liabilities

relating to or arising out of the Acquired Assets.

 

15

 

(b) Nothing contained in

this Section 2.03 or in any instrument of assumption executed by Buyer or one

or more wholly owned Subsidiaries of Buyer at the Closing shall release or

relieve Sellers from their representations, warranties, covenants and

agreements contained in this Agreement or any certificate, schedule,

instrument, agreement or document executed pursuant hereto or in connection

herewith, including, without limitation, the obligations of Sellers to

indemnify Buyer in accordance with the provisions of Article 10 hereof.

SECTION 2.04.  Retained

Liabilities. 

Notwithstanding Section 2.03 or any provision in this Agreement or any

other writing to the contrary, Buyer is assuming only the Assumed Liabilities

and is not assuming any other liability or obligation of Sellers or any of

their respective Affiliates of whatever nature, whether presently in existence

or arising hereafter.  All such other

liabilities and obligations of Sellers and their respective Affiliates, as well

as all Liabilities of SuperVent and Industrias that are of the kind and nature

described in this Section 2.04, (other than clause (iii) thereof), shall be

retained by and remain obligations and liabilities of Sellers and their

respective Affiliates (all such liabilities and obligations not being assumed

being herein referred to as the

“Retained Liabilities”). 

Notwithstanding any provision in this Agreement, including without limitation

Section 2.03, or any other writing to the contrary, Retained Liabilities

include:

(i) All Liabilities relating to the Retained Assets;

(ii) All Liabilities relating to any fees and

expenses of any Seller or any Affiliate of Seller incurred in connection with

this Agreement, including any fees or expenses of Deutsche Banc Alex Brown and

Credit Suisse First Boston;

(iii) To the extent not included as a Liability or

otherwise provided for in the calculation of 

Final Net Worth, all Liabilities of the Transferred Business for Taxes

attributable to any period (or portion thereof) ending on or prior to the

Closing Date, including all Taxes arising out of the Transferred Business or

any of the Acquired Assets, including any ad

valorem (subject to Section 7.05(c)), real or personal or intangible

property, sales, personal, social security, goods and services (subject to

Section 7.05(c)) or other Taxes which are not due or assessed until after

Closing but which are attributable to any period (or portion thereof) ending on

or prior to the Closing Date;

(iv) To the extent not

included as a Liability or otherwise provided for in the calculation of Final

Net Worth, all Liabilities with respect to the funding of any checks, wire

transfers or other transfer orders

 

16

 

which are outstanding as of

the close of business on the day prior to the Closing Date in accordance with

the provisions of Section 7.11;

 

(v)     All Liabilities relating to workers

compensation claims with a date of occurrence prior to the date of Closing in

the State of Ohio;

 

(vi) All Liabilities

relating to general liability (including product liability), automobile and

workers compensation claims with a date of occurrence after April 1, 1989 and

prior to October 1, 1998;

 

(vii)   Subject to the provisions of Section 7.12,

all Liabilities relating to general liability (including product liability),

automobile and workers compensation claims with a date of occurrence (x) on or

before April 1, 1989 or (y) on or after October 1, 1998, in each case to the

extent, and only to the extent, such claims are covered, and payment with

respect thereto is made by the applicable insurer, under a Business Insurance

Policy or any successor policy or program;

 

(viii)    All

Liabilities relating to the manufacture, distribution or sale of any ACP by or

on behalf of the Business, any Company or any Affiliate of any Company or any

predecessor entity of the foregoing, including any claims for asbestos-related

injuries or claims relating in any way to the design, use, manufacture, sale or

specification of asbestos or any ACP that are dismissed (whether such dismissal

is on summary judgment, voluntary or otherwise);

 

(ix)    All Liabilities arising in connection with

(x) the litigation matter currently pending in Olsted County, Minnesota and

filed under the name French v. American Standard, Metalbestos Products et al,

(y) the litigation matter currently pending in Oswego County, New York and

filed under the name Puglia v. Selkirk, et al and (z) the litigation

matter currently pending in Hennepin County, Minnesota and filed under the name

Andrew and Joyce Dorn v. Metalbestos Products, et.al;

 

(x)   Subject to the requirements and limitations

set forth in Section 10.02(b), the Known Pre-Closing Environmental Liabilities;

 

(xi) All Liabilities of the

Transferred Business, SuperVent or Industrias to any Seller or any Affiliate of

any Seller;

 

(xii) All Liabilities for

post-retirement welfare benefits for Former Employees who are not listed on

Schedule 8.01(e);

 

(xiii) Extraordinary

Employee Claims;

 

17

 

 

(xiv) All Liabilities

relating to the European Business and the divestiture thereof; and

 

(xv) All other Liabilities

to the extent relating to or arising out of the operations or businesses of

Sellers and their Affiliates other than the Transferred Business or the

Acquired Assets.

 

SECTION 2.05.  Purchase

Price.  (a) The

total purchase price for the Acquired Assets and the Shares is $40 million

(such amount as adjusted in accordance with Section 2.05(b) and Section 2.08,

the “Purchase Price”).  The Purchase Price, as such amount may be

adjusted prior to the Closing in accordance with Section 2.05(b) below (the “Adjusted Purchase Price”), shall be paid to

Sellers as provided in Article 9, less $1 million in cash (the “Escrow Amount”), which shall be held in

escrow pursuant to the terms and subject to the conditions of the escrow

agreement to be entered into by Sellers, Buyer and the Escrow Agent at the

Closing, substantially in the form attached hereto as Exhibit B (the “Escrow Agreement”).

(b) Not less than two

Business Days prior to the scheduled Closing, Sellers will deliver to Buyer a

preliminary statement of final net worth prepared in good faith by Sellers

setting forth Sellers’ estimate of the Final Net Worth (as defined in Section

2.08) for the Business as of the Closing (the “Estimated Final Net Worth”). 

If the Estimated Final Net Worth is less than $52,425,000 (the

“Target Net Worth”), then such shortfall shall be deducted from

the Purchase Price at Closing.

(c) The Purchase Price shall

be allocated among the Acquired Assets to be sold by Selkirk and Selkirk Canada

and the Canadian Shares and the Mexican Shares in accordance with Schedule

2.05(c), as adjusted pursuant to Section 2.08(c) (the “General Allocation”).  As soon as practicable after the Closing,

Buyer shall deliver to Sellers a statement (the”Allocation Statement”), allocating the Purchase Price (plus

Assumed Liabilities, to the extent properly taken into account under Section

1060 of the Code) and consistent with the General Allocation, among the

Acquired Assets, the Canadian Shares and the Mexican Shares in accordance with

Section 1060 of the Code.  If within 20

days after the delivery of the Allocation Statement, Sellers notify Buyer in

writing that Sellers object to the allocation set forth in the Allocation

Statement, Buyer and Sellers shall use commercially reasonable efforts to

resolve such dispute within 20 days. If, during such period, Buyer and Sellers

are unable to resolve such dispute, the disputed items shall be promptly

referred to the Unrelated Accounting Firm. Upon resolution of the disputed

items, the allocation reflected on the Allocation Statement shall be adjusted

to reflect such resolution. The parties acknowledge and agree that Sellers

shall bear the percentage of the fees and expenses of the

 

18

 

Unrelated Accounting Firm

that equals the difference between the sum of all differences between Sellers’

calculation of a disputed item and the Unrelated Accounting Firm’s final

determination of such disputed item, divided by the sum of all differences

between Sellers’ calculation of a disputed item and Buyer’s calculation of a

disputed item.  Buyer shall bear the

percentage of the fees and expenses of the Unrelated Accounting Firm that

equals the difference between the sum of all differences between Buyer’s

calculation of a disputed item and the Unrelated Accounting Firm’s final

determination of such disputed item, divided by the sum of all differences

between Buyer’s calculation of a disputed item and Sellers’ calculation of a

disputed item.  Sellers and Buyer agree

to (i) be bound, and to cause their Affiliates to be bound, by the General

Allocation and the Allocation Statement (together, the “Allocations”), as adjusted pursuant to

Section 2.08(c) and (ii) act, and to cause its Affiliates to act, in accordance

with the Allocations, as adjusted pursuant to Section 2.08(c), in the

preparation, filing and audit of any Tax Return (including, without limitation,

the filing of any forms, information returns, reports or statements with any

Tax Return for the taxable year that includes the Closing Date) and for all Tax

and accounting purposes.

SECTION 2.06. 

Closing.  The closing (the “Closing”) of the purchase and sale of the Acquired Assets and

the Shares hereunder shall take place at the offices of Davis Polk &

Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible, but in

no event later than two Business Days, after satisfaction or waiver (subject to

applicable law) of the conditions set forth in Article 9 (other than the

conditions that by their terms shall be or must necessarily be satisfied at the

Closing).  The parties agree to use

their reasonable best efforts to satisfy the conditions set forth in Article 9

such that the Closing may occur no later than 30 days after the date hereof.  At the Closing, the Parties shall deliver

all funds, documents and instruments required to be delivered pursuant to

Article 9.

SECTION 2.07.  Final Net

Worth Statement.  (a) As promptly as practicable, but no later than 90 days after

the Closing Date, Sellers will cause to be prepared and delivered to Buyer a

combined balance sheet of the Business (the “Closing

Balance Sheet”) as of the close of business on the Closing Date (the

“Determination Date”), and a

statement of final net worth as of the Determination Date setting forth

Sellers’ calculation of Closing Net Worth as of the Determination Date (the “Statement of Final Net Worth”).  Ernst & Young LLP (“E&Y”) will audit the Statement of Final

Net Worth, and will render a special purpose report thereon; provided, however, that should E&Y be

unable or unwilling to provide the report described above, Sellers shall

promptly engage another independent public accounting firm of national

reputation (the “Alternate Firm”)

to provide such report.  E&Y or the

Alternate Firm, as the case may be, shall hereinafter be referred to as the “Auditor”. 

Sellers shall be responsible for the fees and expenses of the

Auditor.  The Closing Balance Sheet

shall (i) fairly

 

19

 

present the combined

financial position of the Business as at the close of business on the

Determination Date in accordance with generally accepted accounting principles

applied on a consistent basis with those used in the preparation of the

Preliminary Balance Sheet (“GAAP”),

with only such exceptions as are consistent with those disclosed in Schedule

3.07 and applying the Accounting Principles set forth in Schedule 2.07(a) (the

“Accounting Principles”) and (ii)

include line items consistent with those in the Preliminary Balance Sheet.  “Closing

Net Worth” shall be derived from the Closing Balance Sheet based on

the methodology described in Schedule 2.07(b) and include only the carrying

value of Acquired Assets and Assumed Liabilities, the assets of SuperVent and

the Liabilities of SuperVent and the assets of Industrias and the Liabilities

of Industrias.

 

(b) If Buyer disagrees with

Sellers’ Statement of Final Net Worth delivered pursuant to Section 2.07(a)

Buyer may, within 30 days after delivery of the documents referred to in

Section 2.07(a), deliver a notice (the “Objection

Notice”) to Sellers disagreeing with such calculation and setting

forth Buyer’s calculation of such amount. 

Any such notice of disagreement shall specify those items or amounts as

to which Buyer disagrees, and Buyer shall be deemed to have agreed with all other

items and amounts and calculations contained in the Statement of Final Net

Worth delivered pursuant to Section 2.07(a).

(c) If an Objection Notice

shall be duly delivered pursuant to Section 2.07(b), Sellers and Buyer shall,

during the 30 days following such delivery, use their commercially reasonable

efforts to reach agreement on the disputed items or amounts in order to

determine, as may be required, the amount of Closing Net Worth.  If, during such period, Buyer and Sellers

are unable to reach such agreement, any unresolved disputed items shall be

promptly referred to an independent accounting firm jointly selected by Buyer

and Sellers with whom none of the parties have a material relationship (the “Unrelated Accounting Firm”).  The parties agree that KPMG LLP shall serve

as the Unrelated Accounting Firm, provided

that, at the time any services hereunder are required, it meets the standard

set forth in the immediately preceding sentence.  The Unrelated Accounting Firm shall be directed to render a written

report only on the unresolved disputed issues with respect to the Statement of

Final Net Worth and Closing Net Worth as promptly as practicable and to resolve

only those issues of dispute set forth in the Objection Notice.  Sellers and Buyer shall use their

commercially reasonable efforts to agree on the procedures to be followed by

the Unrelated Accounting Firm (including procedures with regard to presentation

of evidence) within thirty (30) days following such referral to the Unrelated

Accounting Firm.  If Sellers and Buyer

are unable to agree upon procedures at the end of the such thirty (30) day

period, the Unrelated Accounting Firm shall establish such procedures giving

due regard to the intention of Sellers and Buyer

 

20

 

to resolve disputes as

quickly, efficiently and inexpensively as possible, which procedures may be,

but not need be, those proposed by either Sellers or Buyer.  Each of Sellers, on the one hand, and Buyer,

on the other hand, shall then submit evidence in support of its position on

each item in dispute as well as the procedures to be followed by the Unrelated

Accounting Firm, and the Unrelated Accounting Firm shall decide the dispute in

accordance therewith.  In reaching a

decision on each item in dispute, the Unrelated Accounting Firm’s decision is

expressly limited to the selection of either Sellers’ or  Buyer’s position on each such disputed

item.   Upon final resolution of all

disputed issues, the Unrelated Accounting Firm shall issue a report showing the

calculation of the Closing Net Worth of the Business based on the Closing

Balance Sheet used to derive Sellers’ Statement of Final Net Worth as amended

by the determinations of the Unrelated Accounting Firm pursuant to this Section

2.07(c).  The resolution of the dispute

by the Unrelated Accounting Firm shall be final and binding on the parties.

Sellers shall bear the

percentage of the fees and expenses of the Unrelated Accounting Firm that

equals the difference between Sellers’ calculation of the Closing Net Worth and

the Final Net Worth divided by the difference between Sellers’ calculation and

Buyer’s calculation of the Closing Net Worth. 

Buyer shall bear the percentage of the expenses of the Unrelated

Accounting Firm that equals the difference between the Final Net Worth and

Buyer’s calculation of Closing Net Worth divided by the difference between

Sellers’ calculation and Buyer’s calculation of Closing Net Worth.

(d) Buyer and Sellers agree

that they will, and agree to cause their respective independent accountants and

Affiliates to, cooperate and assist in the preparation of the Statement of

Final Net Worth and the calculation of the Closing Net Worth and in the conduct

of the audits and reviews referred to in this Section 2.07, including, without

limitation, the making available to the extent necessary all books, records,

work papers and personnel, including the execution of customary release or

indemnification letters required by the Auditor in connection with the

foregoing.

SECTION 2.08.  Adjustment

of Purchase Price.  (a) If Estimated Final Net Worth or Target Net Worth (whichever

is less), exceeds Final Net Worth, Sellers, and subject to any distributions to

be made by the Escrow Agent in accordance with the Escrow Agreement, shall pay

to Buyer, as an adjustment to the Purchase Price, in the manner and with

interest as provided in Section 2.08(b), the amount of the excess of Estimated

Final Net Worth or Target Net Worth (whichever is less) over Final Net Worth.  If Final Net Worth exceeds Estimated Final

Net Worth or Target Net Worth (whichever is less), Buyer shall pay to Sellers,

in the manner and with interest as provided in Section 2.08(b), the amount of

the excess of Final Net Worth over Estimated Final Net Worth or Target Net

Worth (whichever is less).  “Final Net Worth” means the Closing Net

Worth  as shown

 

21

 

in Sellers’ calculation

delivered pursuant to Section 2.07(a), if no Objection Notice is duly delivered

pursuant to Section 2.07(a); or if such Objection Notice is delivered, as

agreed by Buyer and Sellers pursuant to Section 2.07(c) or in the absence of

such agreement, as shown in the Unrelated Accounting Firm’s calculation

delivered pursuant to Section 2.07(c); provided

that in no event shall Final Net Worth be less than Buyer’s calculation of

Closing Net Worth delivered pursuant to Section 2.07(b) or more than Sellers’

calculation of Closing Net Worth delivered pursuant to Section 2.07(a).

(b) Any payment pursuant to

Section 2.07(a) shall be made at a mutually convenient time and place, within 5

Business Days after the Final Net Worth has been determined, by delivery by, as

applicable, Buyer to Sellers or by either (i) Sellers or (ii) the Escrow Agent,

in accordance with the terms and provisions of the Escrow Agreement, to Buyer,

of a certified or official bank check payable in immediately available funds in

U.S. dollars to the other party or by causing such payments to be credited to

such account of such other party as may be designated by such other party.  The amount of any payment to be made

pursuant to this Section 2.08 shall bear interest from and including the

Closing Date to, but excluding, the date of payment at a rate per annum equal

to the rate of interest publicly announced by Bank of America in San Francisco

from time to time as its “reference rate” during the period from the Closing

Date to the date of payment. Such interest shall be payable at the same time as

the payment to which it relates and shall be calculated daily on the basis of a

year of 365 days and the actual number of days elapsed.

(c) If an adjustment is made

with respect to the Purchase Price pursuant to this Section, the Allocations

shall be adjusted in accordance with the Code and any other applicable state,

local or foreign tax law and as mutually agreed by Buyer and Sellers.  In the event that an agreement is not

reached within 20 days after the later of (i) the determination of Final Net

Worth and (ii) the final determination of the Allocation, any disputed items

shall be referred to the Unrelated Accounting Firm to resolve the disputed

items.  Upon resolution of the disputed

items, the Allocations shall be adjusted to reflect such resolution. The

parties acknowledge and agree that Sellers shall bear the percentage of the

fees and expenses of the Unrelated Accounting Firm that equals the difference

between the sum of all differences between Sellers’ calculation of a disputed

item and the Unrelated Accounting Firm’s final determination of such disputed

item, divided by the sum of all differences between Sellers’ calculation of a

disputed item and Buyer’s calculation of a disputed item.  Buyer shall bear the percentage of the fees

and expenses of the Unrelated Accounting Firm that equals the difference

between the sum of all differences between Buyer’s calculation of a disputed

item and the Unrelated Accounting Firm’s final determination of such disputed

item, divided by the sum of all differences between Buyer’s calculation of a

disputed item and Sellers’ calculation of a disputed item.  Buyer and Sellers agree to file any

 

22

 

additional information

return required to be filed pursuant to the Code and any state, local or

foreign Tax law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLERS

Except as specifically set

forth in the disclosure schedule prepared and signed by Sellers and delivered

to Buyer simultaneously with the execution hereof (the “Disclosure Schedule”), each Seller, jointly

and severally, represents and warrants to Buyer that all of the statements

contained in this Article 3 are true and complete as of the date of this

Agreement and as of the Closing Date. 

The parties acknowledge and agree that (i) the Disclosure Schedules may

include certain items and information solely for informational purposes for the

convenience of Buyer and (ii) the disclosure by Sellers of any matter in the

Disclosure Schedules shall not be deemed to constitute an acknowledgment by

Sellers that the matter is required to be disclosed by the terms of this

Agreement or that the matter is material. 

If any item or information is disclosed in the Disclosure Schedule in

response to a section in this Agreement in such a way as to make its relevance

to the disclosure required by another section in this Agreement reasonably

apparent, the matter shall be deemed to have been disclosed with regard to both

sections, notwithstanding the omission of an appropriate cross-reference.  In the event of any inconsistency between

statements in the body of this Agreement and statements in the Disclosure

Schedule (excluding exceptions expressly set forth in the Disclosure Schedule

with respect to a specifically identified representation or warranty), the

statements in the body of this Agreement shall control.

 

SECTION 3.01.  Corporate

Existence and Power.  Each U.S. Seller is a corporation duly incorporated, validly

existing and in good standing under the laws of its jurisdiction of

incorporation and each Foreign Company is a corporation duly incorporated and

validly existing under the laws of its jurisdiction of incorporation.  Each Company has all corporate powers and

all Permits required to carry on its business as now conducted, except for those

Permits, the absence of which, individually or in the aggregate, would not be

material to the Business.  Each U.S.

Seller is duly qualified to do business as a foreign corporation and is in good

standing in each jurisdiction where such qualification is necessary and each

Foreign Company is duly qualified to do business as a foreign corporation in

each jurisdiction where such qualification is necessary, except, in all cases,

those jurisdictions where such failure, individually or in the aggregate, would

not be material to the Business.

SECTION 3.02.  Corporate

Authorization.  The execution, delivery and performance by each Seller of this

Agreement and, as of the Closing, the Escrow

 

23

 

Agreement, the Transition Services Agreement (if applicable), and the

consummation of the transactions contemplated hereby and thereby (if

applicable) by such Seller are within the corporate powers of such Seller and

have been duly authorized by all necessary corporate action on the part of such

Seller and such Seller’s shareholders. 

This Agreement has been, and as of the Closing, the Transition Services

Agreement (if applicable) and the Escrow Agreement will be, duly executed and

delivered by each Seller, and, assuming the due authorization, execution and

delivery by Buyer, this Agreement constitutes, and, as of the Closing, the

Transition Services Agreement (if applicable) and the Escrow Agreement will

constitute, a valid and binding agreement of such Seller, enforceable against

such Seller in accordance with its terms, except as (i) the enforceability

hereof or thereof may be limited by bankruptcy, insolvency, moratorium or other

similar applicable laws affecting the enforcement of creditors’ rights

generally, and (ii) the availability of equitable remedies may be limited by

equitable principles of general applicability.

 

SECTION 3.03.  Governmental

Authorization.  The execution, delivery and performance by each Seller of this

Agreement and, as of the Closing, the Transition Services Agreement (if

applicable), the Escrow Agreement and the consummation of the transactions

contemplated hereby and thereby (if applicable) require no Seller, SuperVent,

Industrias or any Affiliate of any Seller to obtain any consent, approval,

Permit or order of, give any notice to, take any action by or in respect of, or

make any filing with, any Governmental Authority other than (i) compliance with

any applicable requirements of the HSR Act and, to the extent specifically

identified in Schedule 3.03(i), the requirements of any Foreign Antitrust Laws,

and (ii) to the extent identified on Schedule 3.03(ii), filings with the

Pension Benefit Guaranty Corporation, the Internal Revenue Service (“IRS”), the Department of Labor (“DOL”), any applicable provincial Department

or Ministry of Labour and any other similar Governmental Authority with respect

to the transfer of assets and liabilities of Employee Benefit Plans or Foreign

Employee Benefit Plans pursuant to this Agreement, and (iii) such consents,

approvals, Permits or orders, notices, actions or filings which the failure to

obtain, give, take or make, as the case may be, have not had, and would not

reasonably be expected to have, individually or in the aggregate, (x) a

Material Adverse Effect, or (y) an adverse effect on the ability of any Seller

to consummate any of the transactions contemplated hereby or by the Transition

Services Agreement (if applicable) or the Escrow Agreement.

SECTION 3.04.  Noncontravention.  The execution, delivery and performance by

each Seller of this Agreement and, as of the Closing, the Escrow Agreement, the

Transition Services Agreement (if applicable), and the consummation of the

transactions contemplated hereby and thereby (if applicable) by such Seller do

not and will not (i) violate any provision of the certificate or articles of

incorporation, bylaws or other organizational documents of such Seller,

 

24

 

(ii) assuming compliance

with the matters referred to in clauses (i) and (ii) of Section 3.03, violate

any applicable law, rule, regulation, judgment, injunction, order or decree, or

agreement with or condition imposed by any Governmental Authority except for

any such violations which would not reasonably be expected to have,

individually or in the aggregate, a Material Adverse Effect, (iii) except as

disclosed in Schedule 3.04, require any material approval or consent or other

material action by any Person under, constitute a material breach or default

under (or with notice, lapse of time, or both would result in such a material

breach or default), or give rise to any right of termination, cancellation,

material amendment or acceleration of any right or obligation under or to a

loss of any benefit relating to the Business to which any Company is entitled

under any provision of any Contract or other instrument binding upon any

Company, (iv) result in the creation or imposition of any Lien on any Acquired

Asset or the Shares, except for any Permitted Liens, or (v) result in a breach

or violation of any of the terms or conditions of, constitute a default under,

or otherwise cause an impairment or a revocation of, any material Permit

utilized in the operation of the Business.

SECTION 3.05.  Sufficiency

of Assets.  The

Acquired Assets, the assets of SuperVent and the assets of Industrias, in

conjunction with the rights, goods and services granted, transferred or to be

performed or made available by Sellers and their Affiliates pursuant to the

Transition Services Agreement, constitute all of the property and assets which are

necessary for the conduct of the Business as it is presently being conducted

and are sufficient to provide Buyer with the means and capability to conduct

the Business as it is presently being conducted.

SECTION 3.06.  Capitalization.  (a) The authorized, issued and outstanding

capital stock of SuperVent and Industrias on the date hereof is set forth in

Schedule 3.06.

(b) All outstanding shares

of capital stock of each of SuperVent and Industrias have been duly authorized

and validly issued and are fully paid and non-assessable.  Except as set forth in this Section 3.06 or

on Schedule 3.06, there are no outstanding (i) shares of capital stock or

equity securities of SuperVent or Industrias, (ii) securities of SuperVent or

Industrias convertible into or exchangeable for shares of capital stock or

equity securities of SuperVent or Industrias 

or (iii) options or other rights to acquire from SuperVent or

Industrias, or other obligation of SuperVent or Industrias to issue, any

capital stock, equity securities or securities convertible into or exchangeable

for capital stock or equity securities of SuperVent or Industrias, respectively

(the items in clauses 3.06(b)(i), 3.06(b)(ii) and 3.06(b)(iii) being referred

to collectively as the “Subsidiary Securities”).  There are no outstanding obligations of

SuperVent or Industrias to repurchase, redeem or otherwise acquire any

Subsidiary Securities.  There are no

voting trusts or proxies with respect to any Subsidiary Securities.

 

25

 

SECTION 3.07.  Financial

Statements.  (a)

Each of the unaudited combined balance sheet of the Business dated as of

November 24, 2001 (the “Preliminary Balance

Sheet”), and the related unaudited combined statement of operations

and cash flows of the Business for the two months ended November 24, 2001, each

as set forth in Schedule 3.07(a), has been prepared in accordance with GAAP and

the Accounting Principles (with only such exceptions as are disclosed in

Schedule 3.07) and present fairly, in all material respects, the combined

financial condition of the Business as at November 24, 2001 and the combined

results of operations and cash flows of the Business for the two month period

ended November 24, 2001.

(b) Each of the audited

combined balance sheet of the Business dated as of  September 30, 2001 (the “Audited

Balance Sheet”) and the related audited combined statement of

operations and cash flows of the Business for the twelve months ended September

30, 2001, each as set forth in Schedule 3.07(b), has been prepared in

accordance with GAAP and the Accounting Principles (with only such exceptions

as are disclosed in Schedule 3.07) and present fairly, in all material

respects, the combined financial condition of the Business as at September 30,

2001 and the combined results of operations and cash flows of the Business for

the twelve month period ended September 30, 2001.

(c) Each of the unaudited

combined balance sheets of the Business as of September 30, 1999 and 2000, and

the related unaudited combined statements of operations, changes in invested

capital, and cash flows for the years then ended, each as set forth on Schedule

3.07(c) present fairly the combined financial position of the Business at

September 30, 1999 and 2000 and the combined results of operations, changes in

invested capital and cash flows of the Business for the years then ended, in

conformity with GAAP and the Accounting Principles (with only such exceptions

as are disclosed in Schedule 3.07).

SECTION 3.08.  Absence

of Certain Changes.  Except as disclosed in Schedule 3.08, since the Balance Sheet

Date, the Companies have conducted the Business in the ordinary course

consistent with past practice and there has not been:

(a) any change in the

business, operations, financial condition, assets or Liabilities of the

Business, individually or in the aggregate, which has had, or would reasonably

be expected to constitute or result in, a Material Adverse Effect;

(b) any action taken which

would violate the provisions of Section 5.01 of this Agreement assuming such

restrictions had been applicable as of the Balance Sheet Date.

 

26

 

SECTION 3.09.  No

Undisclosed Liabilities.  There are no Liabilities of 

the Business, other than:

(a) Liabilities reflected on

the Preliminary Balance Sheet (including to the extent reserved therefor

therein) or disclosed in the notes thereto;

(b) Liabilities disclosed in Schedule 3.09;

(c) Liabilities incurred

since the Balance Sheet Date which: (i) resulted from transactions in the

ordinary course of business consistent with past practice and are of a nature,

type and magnitude consistent with the Liabilities reflected on the Preliminary

Balance Sheet, (ii) were incurred in accordance with the terms of this Agreement

and (iii) do not and will not materially impair the ability of any Seller to

perform any of such Seller’s obligations under this Agreement; and

 

(d) Other undisclosed

Liabilities which, individually or in the aggregate, are not material to the

Business, taken as a whole.

SECTION 3.10.  Material

Contracts.  (a)

Schedule 3.10(a) contains a correct and complete list of all Contracts and

other agreements with respect to the Business to which any Company is a party

and which are of the following types (collectively, the “Material Contracts”):

(i) all agreements granting or obtaining any right

to use or practice any rights under any Intellectual Property, to which any

Company is a party or otherwise bound, as licensee or licensor thereunder,

including, without limitation, license agreements, settlement agreements and

covenants not to sue but excluding those agreements relating to commercially

available “off-the-shelf” or other standard products (collectively, the “License Agreements”).

(ii) all Contracts for the purchase of any

materials, supplies, equipment, merchandise or services that involve an annual

expenditure by a Company of more than $100,000 for any one Contract;

(iii) all leases for personal property under which a

Company is either lessor or lessee that involve annual payments or receipts of

more than $100,000 for any one Contract and all Leases;

(iv) all Contracts,

mortgages, indentures, notes, installment obligations and other instruments

relating to indebtedness of the Business to which a Company is a party or by

which it or its properties are bound, except any such agreement (A) with annual

payments by a Company not exceeding $100,000 for any one Contract, (B) which

may be prepaid with

 

27

 

not more than 60 days notice

without the payment of a penalty or (C) entered into subsequent to the date of

this Agreement as permitted by Section 5.01;

 

(v) all distributor,

representative and agency Contracts that involve an annual payment by a Company

of more than $100,000 for any one Contract;

 

(vi) all government

Contracts and all other agreements with customers that involve an annual

payment to or by any Company of more than $100,000 for any one Contract;

 

(vii) all employment,

consulting, termination or severance Contracts, collective bargaining

agreements, or pension, profit-sharing, incentive compensation, deferred

compensation, stock purchase, stock option, stock appreciation right, group

insurance, termination pay, severance pay, or retirement plans, arrangements or

Contracts relating to or with any Employee or Former Employee;

 

(viii) all Contracts under which any Company has

agreed to indemnify or guarantee the obligations of any Person (except

Contracts with customers of the Business entered into in the ordinary course of

business) or to share Tax liability with any Person with liability which would

reasonably be likely to exceed $100,000;

(ix) all Contracts limiting the freedom of any

Company to engage in any line of business or in any geographic area, for any

length of time, to solicit employees or otherwise to conduct its business as

presently conducted;

(x) all Contracts not otherwise required to be

disclosed by this Section 3.10 which (A) require more than 90 days’ notice to

terminate and, if such notice is not provided, (B) would require payment by a

Company of a penalty in excess of $100,000;

(xi) all Contracts relating to the acquisition by

the Business of any operating business or the equity interests of any Person

entered into since January 1, 1998, or any joint venture arrangement; and

(xii) all Contracts for the disposition of assets

other than sale of Inventory in the ordinary course of business.

 

28

 

(b) Sellers have made

available to Buyer true, complete and correct copies of all Material Contracts

listed on Schedule 3.10(a), including all amendments, supplements and

modifications to each Contract listed on Schedule 3.10(a).  Except as disclosed in Schedule 3.10(b), (i)

each of the Material Contracts is in full force and effect, (ii) each Material

Contract is a legal, valid and binding obligation of the Company party thereto,

enforceable against such Company party thereto in accordance with its terms,

and, to the Knowledge of Sellers, each Material Contract is a valid and binding

obligation of the third party which is a party thereto, enforceable against

such third party in accordance with its terms, (iii) no Company is, and to the

Knowledge of Sellers no other party to a Material Contract is in any material

respect, in default under or in violation of, and no event has occurred which,

with the passage of time or giving of notice or both, would result in any

Company, or to the Knowledge of Sellers, any other party to any Material

Contract, being in any material respect in default under or in violation of,

any of the terms of any of the Material Contracts, or which would permit the

termination, modification or acceleration of performance of the obligations of

any Company, or any third party which is a party thereto, and (iv) except as

disclosed in Section 3.04, no Material Contract requires the consent of any

other party thereto in connection with any of the transactions contemplated by

this Agreement.

SECTION 3.11.  Litigation.  Except as disclosed on Schedule 3.11, there

is no action, suit, investigation, arbitration, claim or proceeding pending

against, or to Knowledge of Sellers, threatened in writing against or

affecting, the Business, the Companies or any of the Acquired Assets, the

assets of SuperVent or the assets of Industrias before or by any court or

arbitrator or any Governmental Authority, or which in any manner challenges or

seeks to prevent, enjoin, alter or materially delay any of the transactions

contemplated by this Agreement and, to the Knowledge of Sellers, there is no

basis for any such action, suit, investigation, arbitration, claim or

proceeding.  Except as set forth in

Schedule 3.11, Sellers are insured, subject to the deductible specified in each

Business Insurance Policy, against each such action, suit, investigation,

arbitration, claim and proceeding. Sellers have notified the insurer party to

the applicable Business Insurance Policy, and have not received any written

notice from such insurer indicating a full or partial denial of coverage, with

respect to each such action, suit, investigation, arbitration, claim and

proceeding.  No Company is subject to

any verdict, judgment, order or decree which may have a material adverse effect

on the ability of the Business to be conducted as currently conducted in any

area for any period of time, or any Company to conduct any line of business,

for any period of time, or an adverse effect on the ability of any Seller to

consummate any of the transactions contemplated hereby.

SECTION 3.12.  Compliance with Laws, Court Orders and Permits.  (a) Since January 1, 1998, the Companies

have complied, and will continue to

 

29

 

comply, in a timely manner

and in all material respects with all laws, rules and regulations, ordinances,

judgments, decrees, orders, writs and injunctions of all United States federal,

state, local and foreign governments and agencies thereof applicable to the

Business, the Companies,  any of the

Acquired Assets, the assets of SuperVent or the assets of Industrias.

(b) Schedule 3.12(b) sets

forth a list of all Permits necessary to conduct the Business in the manner it

is presently conducted (excluding immaterial Permits the failure of which to

have do not significantly affect the use or normal operation of the Business or

any of the Acquired Assets, the assets of SuperVent or the assets of

Industrias) or otherwise material to the Business, and each such Permit has

been duly obtained and is in full force and effect.  The Business is not in material violation of the terms of any

Permit (excluding immaterial Permits the failure of which to have do not

significantly affect the use or normal operation of the Business or any of the

Acquired Assets) and, to the Knowledge of Sellers, no violation has been

alleged by any Governmental Authority, and no proceeding is pending or, to the

Knowledge of Sellers, threatened, to revoke or materially limit any such Permit

and, to the Knowledge of Sellers, there is no basis for any such allegation or

proceeding.

(c) All Acquired Assets,

assets of SuperVent and assets of Industrias which constitute inventory and all

products sold or distributed by or on behalf of the Business since January 1,

1997 that require or carry the label, certification or approval of Underwriters

Laboratories (“UL”), the Canadian

Standards Association (“CSA”) or

any other similar organization, have been properly and validly certified or

approved.  Since January 1, 1997, all

manufacturing standards applied, testing procedures used, and product

specifications disclosed in the Business fully comply in all material respects

with all requirements established by UL, CSA and with pertinent federal, state

or local building codes or regulations.

SECTION 3.13.  Real

Property.

(a) Schedule 3.13(a) sets

forth a true, correct and complete list of all of the owned real property that

is used or held for use in the operation or conduct of the Business (the “Owned Real Property”), including the

address of each parcel of Owned Real Property, the entity which owns such Owned

Real Property and the current primary use (or uses) of such Owned Real

Property.  The Companies have and shall

have as of the Closing Date, good, valid and marketable fee simple title to

each parcel of Owned Real Property and to all buildings, structures and other

improvements thereon and all fixtures thereto, in each case, free and clear of

any Liens other than Permitted Liens.

(b) Schedule 3.13(b) sets

forth a true, correct and complete list of all of the leased real property that

is used or held for use in the operation or conduct of

 

30

 

the Business (collectively,

the “Leased Real Property”),

including the address at each Leased Real Property, the tenant and landlord

thereunder, and the current primary use (or uses) of such Leased Real

Property.  Sellers have made available

to Buyer true, correct and complete copies of all such leases, including all

amendments, modifications, supplements and renewals thereof relating to such

Leased Real Property (the “Leases”).  Except as set forth in Schedule 3.13(b),

each of the Leases grants Seller or the applicable Company the exclusive right

to use and occupy the premises demised pursuant to the Lease for such Leased

Real Property subject to the terms of the applicable lease.

(c) Except as set forth on

Schedule 3.13(c), no Company has assigned its interests under any of the

Leases, sublet or licensed any interest in any premises demised thereunder, or

otherwise pledged or encumbered its interest therein.  A Company has, and shall have as of the Closing Date, good and

valid leasehold title to the Leased Real Property, free and clear of any Liens

except Permitted Liens or Liens, if any, granted to any Person by the lessor of

such Leased Real Property .

(d) Except as set forth in

Schedule 3.13(d), if required by applicable law, all certificates of occupancy,

and Permits with respect to the buildings, structures and improvements on any

of the Owned Real Property and the occupancy and use thereof have been obtained

and are in full force and effect, and to the Knowledge of Sellers there is no

pending threat of modification, suspension or cancellation of any of the same

which has had, or would reasonably be expected to have, a Material Adverse

Effect.

(e) Except as set forth in

Schedule 3.13(e), no Seller or Affiliate of any Seller, SuperVent or Industrias

has received written notice of any condemnation, expropriation or other

proceedings in eminent domain pending, proposed or threatened with respect to

any of the Owned Real Property.

(f) Except as set forth on

Schedule 3.13(f), the Leased Real Property and the Owned Real Property together

constitute all real property used or held for use in the operation or conduct

of the Business.

SECTION 3.14.  Intellectual

Property.  (a)

Schedule 3.14(a) sets forth, for all Intellectual Property owned by any

Company, a complete and accurate list, of all U.S., state and foreign: (i)

patents and patent applications; (ii) trademark and service mark registrations

(including Internet domain name registrations), trademark and service mark

applications and material unregistered trademarks and service marks; and (iii)

copyright registrations, copyright applications and material unregistered

copyrights. A Company or its Affiliates owns all right, title and interest in

the Intellectual Property listed on Schedule 3.14(a) free and clear of

 

31

 

all Liens, except those

arising under the License Agreements. 

One or more of the Companies (or their Affiliates) are currently listed

in the records of the appropriate U.S., State or foreign agency as the owner of

record for each application and registration listed on Schedule 3.14(a).

(b) Schedule 3.14(b) lists

all material computer software (other than commercially available

“off-the-shelf” or other standard products) (“Software”),

which is licensed, leased or otherwise used in or by the Business, and all

Software owned by any Company (“Proprietary

Software”), and identifies which such Software is owned, licensed,

leased, or otherwise used, as the case may be.

(c) Except as set forth in Schedule 3.14(c):

(i) a Company possess adequate licenses or other

legal rights to use all Intellectual Property that it does not own;

(ii) any Intellectual Property owned by or, to the

Knowledge of Sellers, used by any of the Companies has been duly maintained, is

valid and subsisting, in full force and effect and has not been cancelled,

expired or abandoned;

(iii) no Company has received written notice with

respect to the Business from any third party regarding any actual or potential

infringement by any Company of any intellectual property of such third party

and, to the Knowledge of Sellers, there is no basis for such a claim against

any Company;

(iv) no Company has received written notice from any

third party regarding any assertion or claim challenging the validity of any

Intellectual Property owned or used in the Business of any Company and, to the

Knowledge of Sellers, there is no basis for such a claim against any Company;

(v) no Company has licensed or sublicensed its

rights in any Intellectual Property, or received or been granted any such

rights, other than pursuant to the License Agreements;

(vi) to the Knowledge of Sellers, no third party is

misappropriating, infringing, diluting or violating any Intellectual Property

owned by any Company;

(vii) the Companies take all

reasonable measures to protect the confidentiality of their Trade Secrets

including requiring third parties having access thereto to execute written

nondisclosure agreements.  No

 

32

 

Trade

Secret relating to the Business has been disclosed or authorized to be

disclosed to any third party other than pursuant to a written nondisclosure

agreement that adequately protects the appropriate proprietary interests in and

to such Trade Secrets of the Business;

(viii) the consummation of the transactions

contemplated hereby will not result in the loss or impairment of any rights

with respect to the Intellectual Property listed in Schedule 3.14(a) or

Schedule 3.14(b) or the License Agreements listed in Schedule 3.10(a), nor will

such consummation require the consent of any third party in respect of any

Intellectual Property; and

(ix) all Proprietary Software set forth in Schedule

3.14(b), was either developed (a) by employees of the Business within the scope

of their employment; (b) by independent contractors working in the United

States for companies in the United States as “works-made-for-hire,” as that

term is defined under Section 101 of the United States Copyright Act, 17 U.S.C.

§ 101, pursuant to written agreement; or (c) by third parties who have assigned

all of their rights therein to a Company pursuant to written agreement.   No former or present employees, officers or

directors of the Business retain any rights of ownership or use of the

Proprietary Software, and no employees or third parties who have developed or

participated in the development of the Proprietary Software have any claims to

any moral rights therein.

SECTION 3.15.  Finder’s

Fees.  Except for

Deutsche Banc Alex Brown and Credit Suisse First Boston, whose fees will be

paid by Sellers, there is no investment banker, broker, finder, financial

advisor or other intermediary which is or might be entitled to any fee,

commission or compensation from, or which has been retained by or is authorized

to act on behalf of, any Seller or any Affiliate or any Seller in connection

with any of  the transactions contemplated

by this Agreement.

SECTION 3.16.  Employees.  Except as set forth in Schedule 3.16, all

Employees who are principally employed in connection with the Business are

employed by a Company.

SECTION 3.17.  Employee

Benefit Plans.

(a) Definitions.

(i) All current employees

principally employed in connection with the Business, including any such

employees on approved leaves of absence (whether family leave, maternity or

parental leave, workers’

 

33

 

compensation, short-term

disability, medical leave or otherwise) shall be referred to herein as the “Employees” and the term “Employee” shall mean any of the

Employees.  All individuals whose last

employment with any Seller was in the Business shall be referred to herein as

the “Former Employees” and the term

“Former Employee” shall mean any

of the Former Employees.

 

(ii) The term “Employee Benefit Plans” shall mean each and

every “employee benefit plan” as defined in Section 3(3) of ERISA in which

Employees or Former Employees participate, excluding any Foreign Employee

Benefit Plans (as defined below); maintained or contributed to by a Seller or

any Affiliate of any Seller, or any Person whose employees are treated as

employed by a single employer including a Seller or any Affiliate of any Seller

under Section 4001 of ERISA or Section 414 of the Code (an “ERISA Affiliate”), or any predecessor or in

which a Seller or any Affiliate of any Seller or ERISA Affiliate or any

predecessor participates or participated and which provides benefits to

Employees or Former Employees or with respect to which Seller or any Affiliate

of any Seller or Buyer may have any liability, which shall include (a) any such

plans that are “employee welfare benefit plans”, as defined in Section 3(1) of

ERISA, including, but not limited to, retiree medical and life insurance plans

(“Welfare Plans”) and (b) any such

plans that are “employee pension benefit plans” as defined in Section 3(2) of

ERISA or to which any Seller or any Affiliate of any Seller contributes or may

become liable to contribute (“Pension Plans”).

 

(iii) The term “Benefit Arrangement” shall mean any life,

medical and health insurance (or other commitment providing for insurance

coverage including without limitation any self-insured arrangements),

post-retirement insurance and hospitalization, physical examinations for

officers, savings, bonus, stock option, stock purchase, stock appreciation

right, deferred compensation, incentive compensation, holiday, vacation,

termination, severance pay, sick pay, sick leave, disability, tuition refund,

service award, company car, car allowance, scholarship, relocation, patent

award, fringe benefit contract, plan, arrangement or agreement, or like

contracts, plans, arrangements or agreements contained in a collective

bargaining agreement, individual employment, consulting or termination

contracts, plans, agreements or arrangements or severance contracts, plans,

arrangements or agreements and any other policies or practices of any Seller or

any Affiliate of any Seller or any ERISA Affiliate providing employee or

executive compensation or benefits to Employees or Former Employees, other than

Employee Benefit Plans and Foreign Employee Benefit Plans.

 

34

 

(b) Schedule 3.17(b) lists

all Employee Benefit Plans, Foreign Employee Benefit Plans and all Benefit

Arrangements.  Such Schedule 3.17(b)

also indicates whether any Pension Plans listed thereon participate in trusts

sponsored by entities other than any Seller or any Affiliate of any Seller for

investment of plan assets (the “Master Trusts”).  With respect to each Employee Benefit Plan,

Foreign Employee Benefit Plan and Benefit Arrangement, Sellers have delivered

or made available to Buyer, as applicable, copies of any:  (i) plans or programs and related trust

documents and amendments thereto; (ii) if applicable, the summary plan

descriptions and the most recent annual report (Form 5500 Series); (iii) the

most recent actuarial valuation; and (iv) if applicable, the most recent

determination letter received from the IRS. 

All required reports with respect to each Employee Benefit Plan and

Foreign Employee Benefit Plan have been properly filed with the appropriate

Governmental Authorities in all material respects including the payment in full

of any late fees, interest and penalties, if and to the extent applicable.

 

(c) Except as shown on

Schedule 3.17(c), (i) each Seller and each Affiliate of any Seller is in

compliance in all material respects with the terms of each Employee Benefit

Plan or Benefit Arrangement and each Employee Benefit Plan or Benefit

Arrangement has been maintained in all material respects in accordance with the

requirements prescribed by all applicable statutes, orders or governmental

rules or regulations including where applicable, without limitation, ERISA and

the Code; (ii) each Pension Plan intended to qualify under Section 401(a) of

the Code has received a favorable determination letter from the IRS with

respect to such qualification and the Pension Plan’s compliance with the

requirements of the Tax Reform Act of 1986 and GUST, or has submitted a request

for such a determination within the applicable remedial amendment period; its

related trust has been determined to be exempt from taxation under Section

501(a) of the Code; and nothing has occurred since the date of such letter that

would adversely affect such qualification or exemption; and (iii) there are no

actions or proceedings (other than routine claims for benefits) pending or, to

the Knowledge of Sellers, threatened, with respect to any such Employee Benefit

Plan or Benefit Arrangement or against the assets of any such Employee Benefit

Plan or any fiduciary to any such Employee Benefit Plan or Benefit Arrangement

with respect to such plans or arrangements for which Buyer, any Seller or any

Affiliate of any Seller would have any Liability.

(d) Except as shown on

Schedule 3.17(d) or as required by Section 4980B of the Code, no Employee

Benefit Plan or Benefit Arrangement provides medical or death benefits with

respect to Employees beyond their retirement or other termination of

employment.  Any continuation coverage

provided under any Welfare Plans is in material compliance with Section 4980B

of the Code and is at

 

35

 

the expense of the

participant or beneficiary.  Copies of

the most recent reports (the “FASB Reports”)

regarding post-retirement benefits under Employee Benefit Plans prepared in

accordance with the applicable Financial Accounting Standards Board Statement

have been made available to Buyer. 

Sellers and their Affiliates may amend or terminate any such Employee

Benefit Plan or Benefit Arrangement at any time without incurring any liability

thereunder.

 

(e) All contributions

required to be made under the terms of any Employee Benefit Plan or Benefit

Arrangement have been timely made.  No

Pension Plan has an “accumulated funding deficiency” (whether or not waived)

within the meaning of Section 412 of the Code or Section 302 of ERISA.  No Seller or Affiliate of any Seller has

provided, or is required to provide, security to any Pension Plan.

(f) Except as set forth on

Schedule 3.17(f), neither the execution of this Agreement nor the consummation

of the transactions contemplated hereby will (x) entitle any Employees to any

increase in severance pay upon any termination of employment prior to or after

the date hereof, (y) accelerate the time of payment or vesting or trigger any

payment or funding (through a grantor trust or otherwise) of compensation or

benefits under, increase the amount payable or trigger any other material

obligation pursuant to, any of the Employee Benefit Plans or Benefit

Arrangements or (z) result in any payments under any Employee Benefit Plan or

Benefit Arrangement or any other agreement, program, policy or other

arrangement by or to which any Seller or any Affiliate of any Seller is a

party, is bound or is otherwise liable, by its terms or in effect that would

constitute an “excess parachute payment” within the meaning of Section 280G of

the Code. Each change in control provision contained in any Employee Benefit

Plan, Benefit Arrangement or Foreign Employee Benefit Plan is separately

identified in Schedule 3.17(f).

(g) No transaction has

occurred with respect to any Employee Benefit Plan or Benefit Arrangement that,

assuming the taxable period of such transaction expired as of the date hereof,

could subject the Buyer to a tax or penalty imposed by either Section 4975 of

the Code or Section 502(i) of ERISA in an amount which would be material.  Sellers and Sellers’ Affiliates have

complied in all material respects with (i) the health care continuation

requirements of COBRA, (ii) the Family Medical Leave Act of 1993, as amended (“FMLA”), (iii) the Health Insurance

Portability and Accountability Act of 1996, as amended (“HIPAA”), (iv) the Women’s Health and

Cancer Rights Act of 1998, (v) the Newborns’ and Mothers’ Health Protection Act

of 1996, and (vi) any similar provisions of state law applicable to the

Employees and Former Employees.  The

Transferred Business has no unsatisfied obligations to any Employees or

qualified beneficiaries pursuant to COBRA, FMLA or HIPAA.

 

36

 

(h) Each Foreign Employee

Benefit Plan (as defined below) has been maintained in substantial compliance

with its terms and with the requirements of any and all applicable laws and has

been maintained, where required, in good standing with applicable regulatory

entities.  Except as indicated on Schedule

3.17(h), (A) no Seller or Affiliate of any Seller has incurred any obligations

in connection with the termination of or withdrawal from any Foreign Employee

Benefit Plan, (B) has any unfunded liability (on a going concern or solvency

basis) with respect to benefits under any such Foreign Employee Benefit Plan

and (C) all employer and employee contributions to each Foreign Employee

Benefit Plan required to be made under applicable law or the terms of such plan

have been timely made, or accrued, in accordance with normal accounting

practices in that jurisdiction.  No

commitments to improve or amend any Foreign Employee Benefit Plan to increase

benefits has been made except as required by applicable law.  There have been no improper withdrawals or

transfers of assets of any Foreign Employee Benefit Plan and no Company has

breached any fiduciary obligation with respect to the administration or

investment of any Foreign Employee Benefit Plan.  The level of insurance reserves under each insured Foreign

Employee Benefit Plan is sufficient to provide for all incurred but unreported

material claims.  Since August 1, 1990,

there has been no assertion or notice of a claim for indemnification arising

under Section 27.10 of the CBA as currently in effect between SuperVent

Products Inc. and United Steelworkers of America Local 16506 - Warehouse or the

identical provision of the prior CBAs with such bargaining unit.  “Foreign

Employee Benefit Plan” means (A) any plan, fund or other similar

program established or maintained outside the United States of America by any

Seller or any Affiliate of any Seller primarily for the benefit of Employees or

Former Employees residing outside of the United States of America which plan,

fund or other similar program provides retirement income for such Employees or

Former Employees, results in a deferral of income for such Employees in

contemplation of retirement or provides payments to be made to such Employees

upon termination of employment, and which plan is not subject to ERISA or the

Code, and (B) any plan, fund or other similar program established or maintained

in a jurisdiction outside the United States of America by any Seller or any

Affiliate of any Seller primarily for the benefit of Employees or Former

Employees residing outside of the United States of America which plan, fund or

similar program is not described in clause (A) above including, but not limited

to, any plan, fund or other similar program established or maintained in a

jurisdiction outside the United States of America by any Seller or any

Affiliate of any Seller providing benefits comparable to those provided under

Welfare Plans, including, but not limited to, severance benefits or termination

indemnities.

SECTION 3.18.  Environmental

Matters. 

Except as disclosed on Schedule 3.18 and except as to matters that have

not had, and would not reasonably be

 

37

 

expected to have,

individually or in the aggregate, a Material Adverse Effect, to Knowledge of

Sellers:

(a) no written notice, claim, request for

information, order, complaint or penalty has been received by any Company and

there are no judicial, administrative or other actions, suits or proceedings

pending or threatened which allege a violation of or a liability under any

Environmental Law, in each case relating to the Business and arising out of any

Environmental Law or relating to the Release or presence of any Hazardous

Substances;

(b)  each

Company, with respect to the Business, is in material compliance with

applicable Environmental Laws and to the Knowledge of Sellers there are no

facts or circumstances that would materially increase the cost of maintaining

such compliance in the future;

(c)  the

Companies have all material Environmental Permits necessary for the operation

of the Business to comply with all applicable Environmental Laws; each Company,

with respect to the Business, is in compliance with the terms of its respective

Environmental Permits and there are no proceedings pending or threatened to

revoke such Environmental Permits;

(d)  no

Company has with respect to the Business filed any notice with any Governmental

Authority under any Environmental Law reporting a Release or threatened Release

of any Hazardous Substance; and

(e)  there

has been no Release or threatened Release of a Hazardous Substance and no

Hazardous Substance has been identified in soil or groundwater at levels not in

compliance with applicable Environmental Law at (i) the Real Property, (ii) any

property formerly owned or operated by any Company with respect to the

Business, or (iii) any other location as a result of the operation of the

Business or with respect to which any Company has assumed or retained liability

contractually or by operation of law.

Sellers further represent

and warrant that the Asset Purchase Agreement, dated as of March 25, 1999, by

and among GSW Inc., Selkirk and Selkirk Canada, and the Lease, dated as of

April 6, 1999, by and between GSW Inc. and SuperVent, are the only two

agreements, whether written or oral, between GSW Inc. and its Affiliates, on

the one hand, and SuperVent, Sellers and their Affiliates, on the other hand,

with respect to environmental matters at the real property located in Nobel,

Ontario that is leased by SuperVent.

 

38

 

Except as set forth in this

Section 3.18, no other representations or warranties are made in or relating to

this Agreement with respect to any matters arising under or relating to any

Environmental Law or any Hazardous Substance.

SECTION 3.19.  Labor

Matters.  (a)

Except as set forth on Schedule 3.19, (i) there are no collective bargaining

agreements, or agreed upon work rules or practices in effect relating to

Employees or any other contract or commitment to any labor union or association

representing any Employee, (ii) no labor union or association or collective

bargaining agent represents or claims to represent any Employee, (iii) there is

no organizational effort currently being made or, to the Knowledge of Sellers,

threatened to organize any Employees, nor was there any within the past two

years, (iv) there has been no strike, slow-down, work stoppage, lockout,

arbitration or other material work-related dispute involving any Employee, and

no such action is now pending or affecting the Business, nor, to the Knowledge

of Sellers, is any such action threatened, (v) no Seller or Affiliate of any

Seller has received notice of the intent of any national, federal, state, local

or foreign agency responsible for the enforcement of labor or employment laws

to conduct an investigation with respect to or relating to the Business, and,

to the Knowledge of Sellers, no such investigation is in progress, (vi) to the

Knowledge of Sellers, no proceeding against any Seller or any Affiliate of any

Seller relating to the Business, or controversy or dispute between any Seller

or any Affiliate of any Seller and any Employee or Former Employee, or any

applicant for employment in the Business, has been filed or, to the Knowledge

of Sellers, threatened, relating to the alleged violation of any legal

requirement pertaining to labor relations or employment matters, including any

charge, complaint or petition filed by an Employee or Former Employee or

applicant for employment in the Business or labor organization or labor union

with the National Labor Relations Board, the Equal Employment Opportunity

Commission, DOL, the Ontario Human Rights Commission, the Ontario Labour

Relations Board or any other Governmental Authority, and (vii) there are no

material written personnel policies, rules or procedures applicable to

Employees, other than those set forth in Schedule 3.19, true and correct copies

of which have heretofore been delivered or made available to the Buyer.  Each Company is, and has at all times been,

in compliance in all material respects with the terms and requirements of, and

is not currently in default in any material respect under,  any collective bargaining agreement or other

labor union contract covering any Employees or Former Employees and has not and

is not engaged in any unfair labor practices as defined in the National Labor

Relations Act or other applicable law, ordinance or regulation.

(b) Except as set forth in

Schedule 3.19(b), there is no action, suit, investigation, arbitration, claim

or proceeding pending against, or to the Knowledge of Sellers, threatened in

writing against any Company arising out of claims under federal, state or

provincial laws of any jurisdiction made or brought

 

39

 

by Employees or Former

Employees for harassment, employment discrimination of any nature or similar

adverse employment action and wrongful acts and, to the Knowledge of Sellers,

there is no basis for any such action, suit, investigation, arbitration, claim

or proceeding.

(c) Except as set forth on

Schedule 3.19(c), no Company has incurred any liability or obligation under the

Worker Adjustment and Retraining Notification Act (“WARN Act”) or similar state or foreign Laws, including with

respect to the provision of any notice of any plant closing or mass layoff

taking place up to and including the Closing Date, which remains unpaid or

unsatisfied or which has not been accrued. 

Except as set forth on Schedule 3.19(c), no Employee or Former Employee

has experienced or suffered an “employment loss” (as defined in the WARN Act)

in the past 6 months nor has any Company laid off more than 10% of its

employees at any single site of employment in any 90-day period during the last

12 months.

 

SECTION 3.20.  Tax

Matters. Except as set forth on Schedule 3.20, (i)

each Company has filed, caused to be filed or had filed on its behalf in a

timely manner, all material federal, state, local and foreign returns, reports,

statements and forms required to be filed by it under the Code or applicable

state, local or foreign Tax laws (“Tax

Returns”), and such Tax Returns are true, complete and correct in

all material respects; (ii) each Company has paid (or the Seller Group of which

such entity is or was a member has paid) all Taxes required to be paid by or in

respect of it, except for Taxes that are being contested in good faith by

appropriate proceedings and for which adequate reserves have been established

on the balance sheets of the Companies in accordance with GAAP; (iii) there is

no outstanding agreement, waiver or consent providing for an extension of the

statutory period of limitations with respect to any Taxes or Tax Returns of any

Company, and no power of attorney granted by any Company or any Affiliate of

any Seller with respect to any Tax matter relating to the Business, the

Companies or the Acquired Assets, is currently in force; (iv) there are no Tax

Liens (except for statutory Liens for Taxes not yet due) on any of the Shares,

the Acquired Assets, the assets of SuperVent or the assets of Industrias and,

there is no action, suit, proceeding, investigation, audit or claim now pending

against any Company or any Affiliate of any Company with respect to any Tax, or

with respect to which any Company would be severally liable under Treasury

Regulation Section 1.1502-6 or any comparable state, local or foreign Tax

provisions; (v) each Company has complied with all applicable laws, rules and

regulations relating to the payment and withholding of Taxes, and is not liable

for any such Taxes or for failure to comply with such laws, rules and

regulations, (vi) no Company is a party to or is otherwise bound by any

agreement or understanding providing for the allocation or sharing of Taxes or

has any obligation or liability under any such agreement or understanding to

which it was once a party or

 

40

 

otherwise bound; (vii) no

property relating to the Business or the Acquired Assets of any Seller

organized in the United States is “tax-exempt use property” within the meaning

of Section 168(h) of the Code or property that Buyer will be required to treat

as being owned by another Person pursuant to Section 168(f)(8) of the Internal

Revenue Code of 1954, as amended and in effect immediately prior to the

enactment of the Tax Reform Act of 1986; (viii) with respect to SuperVent and

Industrias, no jurisdiction in which it does not file a Tax Return has made a

claim that such entity is required to file a Tax Return for such jurisdiction;

(ix) no audit or other administrative proceeding by a taxing authority has

formally been commenced or is presently pending with regard to any Taxes or Tax

Return of any Company and no notice has been received that such an audit or

administrative proceeding is pending or threatened; and (x) there are no

circumstances existing which could result in the application of Section 78,

Section 79, or Sections 80 to 80.04 of the Income

Tax Act (Canada) or any equivalent provincial provision to

SuperVent; (xi) SuperVent has not claimed any reserve under any provision of

the Income Tax Act (Canada) or

any equivalent provision, if such amount could be included in the income of

SuperVent for any period ending after the Closing Date, (xii) SuperVent has not

acquired property (whether tangible or intangible) from, or disposed of property

(whether tangible or intangible) to, received payment for services from, or

made payment for services to, any Person with whom it does not deal at arm’s

length (as that term is construed under the Income

Tax Act (Canada)) for proceeds less than the fair market value

thereof, or for proceeds greater than the fair market value thereof, nor does

SuperVent have any outstanding loans or indebtedness incurred by directors ,

former directors, officers, shareholders, and/or employees of SuperVent or any

Person not dealing at arm’s length (as that term is construed under the Income Tax Act (Canada)) with any of the

foregoing; (xiii) there are no circumstances existing which could result in the

application of Section 17 of the Income Tax

Act (Canada) or any equivalent provincial provision applicable to

SuperVent.  Schedule 3.20 contains a

list of any federal income Tax audits that were concluded by the IRS or any

foreign Tax authority with respect to Taxes of any Company within three years

of the date of this Agreement. None of the Acquired Assets sold by any Company

that is a “foreign person” within the meaning of Section 1445(b)(2) of the Code

owns any interest that constitutes a “United States real property interest”

within the meaning of Section 897(c) of the Code.  Selkirk Canada is a resident in Canada for the purposes of the

Income Tax Act (Canada).  Selkirk Canada

is a registrant for the purposes of Part IX of the Excise Tax Act (Canada).

SECTION 3.21. 

Inventory.  The values at which the Inventory is shown

on the Preliminary Balance Sheet have been, and the Inventory to the extent

reflected in the calculation of Final Net Worth will be, determined in

accordance with the normal valuation policy of the Companies, and in accordance

with GAAP and the Accounting Principles, each consistently applied throughout

the periods covered by the financial statements set forth in Section 3.07 and

through the Closing Date.

 

41

 

The present quantities of

all Inventory are reasonable in the present circumstances of the Business, and

the quantities of Inventory as of the Closing Date will be reasonable in the

then current circumstances of the Business.

SECTION 3.22.  Accounts

Receivable. 

Except as set forth in Schedule 3.22, the Accounts Receivable reflected

on the Preliminary Balance Sheet result from bona fide transactions with third

parties in the ordinary course of business and are reflected on the Preliminary

Balance Sheet consistent with past practice, and none of such accounts

receivable or other debts is currently subject to any counterclaim or set-off

except to the extent of any established reserves.  The Accounts Receivable to the extent reflected in the

calculation of Final Net Worth will result from bona fide transactions with

third parties in the ordinary course of business and will be reflected in the

calculation of  Final Net Worth

consistent with past practice, and none of such accounts receivable or other

debts will be subject to any counterclaim or set-off except to the extent of

any established reserves.

SECTION 3.23.  Ownership

of Shares; Title to Acquired Assets.   (a) Selkirk Canada USA is the registered

and beneficial owner of the Canadian Shares set forth on Schedule 3.23, free

and clear of any Lien and will transfer and deliver to Buyer at the Closing ,

in compliance with all applicable corporations and securities laws, valid title

to the Canadian Shares as set forth on Schedule 3.23, free and clear of any

Lien other than those created by Buyer or an Affiliate of Buyer. Upon

consummation of the transactions contemplated hereby, Buyer will have acquired

valid title in or to, or a valid leasehold interest in, each of the Acquired

Assets, free and clear of any Liens, Retained Liabilities and other interests, other

than Permitted Liens.

(b)  Selkirk Canada USA and Eljer are the

registered and beneficial owners of the Mexican Shares set forth on Schedule

3.23, free and clear of any Lien and will transfer and deliver to Buyer at the

Closing, in compliance with all applicable corporations and securities laws,

valid title to the Mexican Shares as set forth on Schedule 3.23, free and clear

of any Lien other than those created by Buyer or an Affiliate of Buyer.

SECTION 3.24.  Insurance.  (a) Schedule 3.24(a) contains a complete and

correct description of all Business Insurance Policies owned or held by any

Seller or any Affiliate of any Seller for the policy period beginning in 1998

through the date hereof. The coverage provided under such insurance policies is

reasonable in scope and amount in light of (i) the risks attendant to the

operations and activities of the Business and (ii) industry practice. As of

date of this Agreement, with respect to the Business, (i) to the Knowledge of

Sellers there has been no incurrence or incident that would reasonably be

expected to give rise to a claim for insurance by any Company or any Affiliate

of any Company under any insurance policy that has not been reported to the

primary carrier (and, if

 

42

 

applicable, excess carrier)

issuing any such policy and (ii) no claims submitted under a Business Insurance

Policy are in dispute and no insurer under a Business Insurance Policy has

asserted that any event or circumstance is not a covered claim under such

Business Insurance Policy.  No coverage

limits under any Business Insurance Policy have been exhausted or materially

reduced.

(b) Sellers and their

Affiliates have paid all premiums due, and have otherwise performed in all

material respects all of their respective obligations, under the Business

Insurance Policies.  Each Business

Insurance Policy is in full force and effect and, to the Knowledge of Sellers,

is a valid and binding obligation of each insurance carrier thereof,

enforceable in accordance with its terms, and no Seller or Affiliate of any

Seller has received any written notice of cancellation or any other written

notice that any Business Insurance Policy is no longer in full force and effect

or will not be renewed or that the issuer of any such policy is not willing or

able to perform its obligations thereunder.

SECTION 3.25.  Transactions

with Affiliates.  Schedule 3.25 sets forth a complete and correct list as of the

date hereof of all Contracts, arrangements and transactions relating to the

Business between any employee, officer or director of any Company or any of

their relatives, on the one hand, and any Seller or any Affiliate of any

Seller, on the other hand.

SECTION 3.26.  Product

Liability.  (a)

Except as set forth on Schedule 3.26, there are not presently pending, or, to

the Knowledge of Sellers, threatened, and since January 1, 1999, there were at

no time pending, any civil, criminal or administrative actions, proceedings,

suits, demands, claims, hearings, notices of violation, investigations or

demand letters, based on any legal or equitable theory of recovery

whatsoever,  relating to any alleged

defect in design, manufacture, materials or workmanship, including any failure

to warn or alleged breach of express or implied warranty, representation or

condition involving liability equal to or greater than $25,000 individually or

$200,000 in the aggregate relating to any product designed, manufactured,

distributed or sold by or on behalf of the Business.

(b) Except as set forth in

Schedule 3.26(b), since December 1, 1996, there have not been any product

recalls or post-sale warnings (collectively, “Recalls”),

by any Seller or any Affiliate of any Seller relating to any product designed,

manufactured, serviced, distributed, leased or sold by or on behalf of the

Business.

 

SECTION 3.27.  Customers.  Sellers have provided to Buyer the names and

addresses of the ten largest customers of the Business (based on the dollar

volume of purchases during the 12 months ended the Balance Sheet Date).  Except as disclosed in Schedule 3.27 no

Company has received any written notice nor has

 

43

 

any valid reason to believe

that any such customer has ceased, nor will cease, to use it products, equipment,

goods or services, or has substantially reduced, nor will substantially reduce,

the use of such products, equipment, goods or services at any time.

SECTION 3.28.  Suppliers.  Sellers have provided to Buyer the names and

address of the ten largest suppliers of the Business (based on the dollar

volume of purchases of goods or services for the Business by the Companies

during the 12 months ended the Balance Sheet Date).  Except as disclosed in Schedule 3.28 no Company has received any

written notice or has any valid reason to believe that any such supplier will

not sell raw material, supplies, merchandise and other goods to the Business at

any time after the Closing Date on terms and conditions substantially similar

to those currently in effect, subject only to general and customary price

increases.

SECTION 3.29.  Absence

of Certain Practices.  No Company or Affiliate of any Company or any director officer,

or employee of any such Person, has, in connection with the operation of the

Business, (i) paid, offered or promised to pay, or authorized the payment,

directly or indirectly, through any other Person or firm, any monies or

anything of value to any Person or firm employed by or acting for or on behalf

of any Person, whether private or governmental, or any government official or

employee of any political party or candidate for political office, in each case

for the purpose of illegally inducing or rewarding any action by any official

favorable to any Company or Affiliate of any Company in connection with the

Business, or (ii) taken any other act that, if taken by a Person subject to

United States law, would violate Section 30A of the Securities and Exchange Act

of 1934.  No Company or Affiliate of any

Company, or any director, officer or employee of any such Person, or any Person

acting on behalf of any of the foregoing, has, in connection with the operation

of the Business, accepted or received any unlawful contributions, payments,

gifts or expenditures.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers as of the

date hereof and as of the Closing Date that:

SECTION 4.01. 

Existence.  Buyer is a limited partnership duly formed,

validly existing and in good standing under the laws of its jurisdiction of

formation and has all the powers of a limited partnership.

 

44

 

SECTION 4.02.  Authorization.  The execution, delivery and performance by

Buyer of this Agreement and, as of the Closing, the Escrow Agreement and the

Transition Services Agreement, and the consummation of the transactions

contemplated hereby and thereby are within the partnership powers of Buyer and

have been duly authorized by all necessary partnership action on the part of

Buyer. This Agreement has been, and as of the Closing, each of the Escrow

Agreement and the Transition Services Agreement will be, duly executed and

delivered by Buyer, and assuming the due authorization, execution and delivery

by each Seller that is a party thereto (as applicable), this Agreement

constitutes, and each of the Escrow Agreement and the Transition Services

Agreement will constitute, a valid and binding obligation of Buyer, enforceable

against Buyer in accordance with its terms, except as (i) the enforceability

hereof or thereof may be limited by bankruptcy, insolvency, moratorium or other

similar applicable laws affecting the enforcement of creditors’ rights

generally, and (ii) the availability of equitable remedies may be limited by

equitable principles of general applicability.

SECTION 4.03.  Governmental

Authorization.  The execution, delivery and performance by Buyer of this

Agreement, and as of the Closing, the Escrow Agreement and the Transition

Services Agreement, and the consummation of the transactions contemplated

hereby and thereby does not require Buyer to obtain any consent, approval,

Permit or order of, give any notice to take any action by or in respect of, or

make any filing with, any Governmental Authority other than (i) compliance with

any applicable requirements of the HSR Act and, to the extent specifically

identified in Schedule 4.03, the requirements of any Foreign Antitrust Laws,

(ii) filings with the Pension Benefit Guaranty Corporation, IRS, DOL and any

other similar Governmental Authority with respect to the transfer of assets and

liabilities of Employee Benefit Plans and Foreign Employee Benefit Plans

pursuant to this Agreement, which are identified on Schedule 4.03, (iii) in

respect of the business and assets of Industrias, obtaining a Maquiladora

Program Authorization from the Mexican Ministry of Economy, and (iv) except for

any failures to obtain any such consent, approval, Permit or order, to give any

such notice, to take any such action or to make any such filing which,

individually or in the aggregate, have not had, and would not reasonably be

expected to have, a material adverse effect on the ability of Buyer to

consummate any of the transactions contemplated hereby or thereby.

SECTION 4.04.  Noncontravention.  The execution, delivery and performance by Buyer

of this Agreement and, as of the Closing, the Escrow Agreement and the

Transition Services Agreement, and the consummation of the transactions

contemplated hereby and thereby do not and will not (i) violate the partnership

agreement of Buyer or any other organizational document of Buyer, (ii) assuming

compliance with the matters referred to in clauses (i) and (ii) of Section

4.03, violate any applicable law, rule, regulation, judgment, injunction,

order, decree, or agreement with or condition imposed by any Governmental

 

45

 

Authority, except for any

such violations which would not reasonably be expected to have, individually or

in the aggregate, a material adverse effect on the ability of Buyer to consummate

any of the transactions contemplated hereby or thereby, (iii) require any

material approval or consent or other material action by any Person under,

constitute a material breach or default under (or with notice, lapse of time,

or both would result in such a breach or default), or give rise to any right of

termination, cancellation or acceleration of any right or obligation of Buyer

or to a loss of any benefit to which Buyer is entitled under any provision of

any agreement or other instrument binding upon Buyer or (iv) result in the

creation or imposition of any material Lien on any asset of Buyer.

SECTION 4.05. 

Financing.  Buyer has, or will have at the Closing, the

financial capacity to perform all of the obligations under this Agreement and

the closing documents to be executed hereunder.

SECTION 4.06.  Litigation.  There is no action, suit, investigation or

proceeding pending against, or to the Knowledge of Buyer, threatened in writing

against or affecting, Buyer before any court or arbitrator or any Governmental

Authority which in any manner challenges or seeks to prevent, enjoin, alter or

materially delay the transactions contemplated by this Agreement.

SECTION 4.07.  Finders’

Fees.  There is

no investment banker, broker, finder, financial advisor or other intermediary

which is entitled to any fee, commission or compensation from, or which has

been retained by or is authorized to act on behalf of Buyer or any Affiliate of

Buyer who might be entitled to any fee or commission from Sellers or any of their

Affiliates upon consummation of the transactions contemplated by this

Agreement.

SECTION 4.08. Investment Canada.  Buyer is a WTO investor within the meaning

of the Investment Canada Act.

SECTION 4.09.  No Other

Representations.  Buyer acknowledges that Sellers make no representation or warranty

with respect to the Acquired Assets, the Shares, the Business or its operations

other than those set forth in Article 3 of this Agreement.  Buyer agrees to accept the Acquired Assets,

the Shares and the Business in the condition they are in on the date hereof

(and on the Closing Date assuming no adverse effect to their condition occurs

other than normal wear and tear during such period) based upon its own

inspection, examination and determination with respect thereto as to all

matters, and without reliance upon any express or implied representations or

warranties of any nature made by or on behalf of or imputed to Sellers, except

as expressly set forth in this Agreement.

SECTION 4.10.  Purchase

for Investment.  Buyer is purchasing the Shares for investment for its own account

and not with a view to, or for sale in

 

46

 

connection with, any

distribution thereof and will not sell such Shares in violation of applicable federal,

state or foreign securities laws.  Buyer

(either alone or together with its advisors) has sufficient knowledge and

experience in financial and business matters so as to be capable of evaluating

the merits and risks of its investment in the Shares and is capable of bearing

the economic risks of such investment.

SECTION 4.11.  Excise

Tax Act. 

Buyer or Buyer’s wholly owned Subsidiary that will purchase the Acquired

Assets from Selkirk Canada (“Canadian Buyer”)

is, or will on the Closing Date be, registered for purposes of Part IX of the Excise Tax Act (Canada) and, to the

knowledge of Buyer, is acquiring under this Agreement ownership, possession or

use of all or substantially all of the property that can reasonably be regarded

as being necessary for Canadian Buyer to be capable of carrying on the portion

of the Business conducted by Selkirk Canada as a business.

 

ARTICLE 5

COVENANTS OF SELLERS

Sellers

agree that:

SECTION 5.01.  Conduct

of the Business.  From the date hereof until the Closing Date, except as

contemplated by this Agreement, Sellers shall and shall cause SuperVent and

Industrias to (A) operate the Business only in the ordinary course of business

consistent with past practice and use commercially reasonable efforts to keep

available the services of its present officers and key employees, and to

preserve the goodwill and business relationships with customers, suppliers,

third parties, affiliates, employees and others having business relationships

with or utilizing the services of the Business and (B) maintain the Inventory

and Equipment of the Business at levels consistent with that required in the

operation of the Business in the ordinary course consistent with past

practice.  Without limiting the generality

of the foregoing, from the date hereof until the Closing Date, except as

disclosed in Schedule 5.01, with respect to the Business, the Companies will

not, and will cause their respective Affiliates, Industrias and SuperVent not

to:

(a) make any material change

in the conduct of the Business or enter into any transaction or commitment

involving in excess of $175,000 individually, or $5,000,000 in the aggregate,

binding on the Business, SuperVent, Industrias or relating to any of the

Acquired Assets;

 

47

 

(b) subject to any Lien

(except for Permitted Liens) any of the Acquired Assets or any of the assets of

SuperVent or Industrias or subject the Shares to any Lien;

(c) sell, transfer or

otherwise dispose of any of the Acquired Assets or any of the assets of

SuperVent or Industrias except for Inventory sold or the collection of Accounts

Receivable in the ordinary course of Business, or acquire any assets or rights

which would be included in the Acquired Assets, the assets of SuperVent, the

assets of Industrias or the Business, except in the ordinary course of business

consistent with past practice;

(d) permit the Business

to:  incur or assume any long-term

Liabilities or, except for current Liabilities for trade or business

obligations incurred in connection with the purchase of goods or services in

the ordinary course of business consistent with past practice, incur or assume

any material short-term Liabilities; assume, guarantee, endorse or otherwise

become liable or responsible (whether directly, contingently or otherwise) for

the obligations (absolute, accrued, contingent or otherwise) of any Person; or

make any loans, advances or capital contributions to, or investments in, any

Person;

(e) amend in any respect or

terminate any Material Contract, or make or enter into any new contract or

lease, in each case with respect to the Business, SuperVent, Industrias or the

Acquired Assets, except in the ordinary course of business consistent with past

practice;

(f) permit the Business to

engage in any transaction with any employee, officer or director of any Seller

or any Affiliate of any Seller outside the ordinary course of business

consistent with past practice;

(g) fail to keep in full

force and effect present insurance policies or other comparable insurance

coverages with respect to the Business, the assets of SuperVent, the assets of

Industrias or the Acquired Assets;

(h) materially change any of

the accounting principles used by the Business unless required by GAAP or

applicable law;

(i) transfer or grant any

rights or licenses under, or enter into any settlement regarding the breach or

infringement of, any Intellectual Property, or modify any existing rights with

respect thereto or enter into any licensing or similar agreements or

arrangements, except in the ordinary course of business consistent with past

practice;

 

48

 

(j) make any increase in the

rate of compensation, commission, bonus or other direct or indirect

remuneration payable, or pay or agree or orally promise to pay, conditionally

or otherwise, any bonus, incentive, retention or other compensation,

retirement, welfare, fringe or severance benefit or vacation pay, to or in

respect of any Employee, except (i) as required under any Employee Benefit

Plans, Foreign Employee Benefit Plans or Benefit Arrangements in effect as of

the date hereof, (ii) in the ordinary course of business consistent with past

practice or (iii) as required by applicable law;

(k) adopt, enter into, or

amend in any material respect any employment, collective bargaining, bonus,

profit-sharing, compensation, stock option, pension, retirement, vacation,

severance, deferred compensation or other plan, agreement, trust, fund or

arrangement for the benefit of any Employee or Former Employee (whether or not

legally binding) or enter into or amend in any material respect any existing

consulting agreement or arrangement except as required by applicable law or

except in the ordinary course of business consistent with past practice; provided, however, that such exceptions

shall not apply to the Business-Specific Plans;

(l) settle or agree to

settle any litigation, action or proceeding relating to the Business other than

(x) the pending subrogation claim involving a fire loss by Robert Pointer and

(y) settlements of any case involving amounts not in excess of $5,000, in each

case, subject to the requirements of the applicable Business Insurance Policy;

(m) make any material change

in the selling, distribution, advertising, terms of sale or collection

practices (including any practices, programs or allowances involving rebates or

discounts) for the Business from those planned or budgeted, or enter into any

practices, programs or long-term allowances (including any practices, programs

or allowances including rebates or discounts) not previously used during the

past twelve months;

(n) amend its certificate of

incorporation, by-laws or other organizational documents in a manner that

adversely affects any of the transactions contemplated hereby;

(o) declare, set aside or

pay any dividends on, or make any other distributions (except, in each case,

for dividend or distributions solely in cash), in respect of the capital stock

of or other equity interests in any Seller, Industrias or SuperVent;

 

49

 

(p) with regard to SuperVent

or Industrias, change any method of accounting or other practice with regard to

the calculation of its Tax liability, including, without limitation, the making

of any election with regard to Taxes;

(q) fail to obtain or renew

any Permit that is materially necessary for the operation of the Business;

(r) permit any Business

Insurance Policy to be cancelled or terminated or any of the coverage

thereunder to lapse;

(s)

waive, cancel or compromise any material right or claim of any Company in

respect of the Business, the Acquired Assets or the assets of Industrias or the

assets of SuperVent; and

(t) take, or agree in

writing or otherwise to take, any of the foregoing actions.

SECTION 5.02.  Access to

Information. 

From the date hereof until the Closing Date, Sellers will and will cause

SuperVent and Industrias to (i) give Buyer, its counsel, financial advisors,

auditors and other authorized representatives reasonable access to the offices,

employees, agents, representatives, properties, facilities, books and records

of the Business, (ii) furnish to Buyer, its counsel, financial advisors,

auditors and other authorized representatives such financial and operating data

and other information relating to the Business as such Persons may reasonably

request, and (iii) instruct the employees, counsel and financial advisors of

the Companies to cooperate with Buyer in its reasonable investigation of the

Business and (iv) permit Buyer and its authorized representatives to contact

customers of the Business; provided

that any such contact is initiated only at the direction, and in the presence,

of Sellers.  Any investigation pursuant

to this Section 5.02 shall be conducted in such manner as not to interfere

unreasonably with the conduct of the Business. 

Notwithstanding the foregoing, Buyer shall not have access to personnel

records of any Employee relating to individual performance or evaluation

records, medical histories or other information which in Sellers’ good faith

opinion is sensitive or the disclosure of which could subject any Seller or any

Affiliate of any Seller to risk of Liability.

SECTION 5.03. 

Financing.  (a) Sellers agree that, prior to the Closing

Date, Buyer’s lenders shall, upon reasonable notice and so long as such access

does not unreasonably interfere with the business operations of the Business,

through its authorized officers, employees, agents and representatives, have

reasonable access during normal business hours to all of the properties of the

Business for the purposes of permitting Buyer’s lenders (or a third party

service provider selected by Buyer’s lenders) to conduct a physical inventory

of the Inventory.  The cost of

 

50

 

any such physical inventory

shall be the responsibility of Buyer or Buyer’s lenders.

(b) In connection with the

transactions contemplated by this Agreement, Sellers agree to provide

commercially reasonable assistance to Buyer and Buyer’s lenders regarding, and

will cause their officers, employees, counsel and accountants to execute and

deliver agreements and instruments reasonably required for, the financing in

respect of the transactions contemplated by this Agreement.  Sellers will provide Buyer all reasonably

necessary cooperation in connection with the arrangement of any financing to be

consummated contemporaneous with or at or after the Closing in respect of the

transactions contemplated by this Agreement, including, without limitation, the

execution and delivery of documentation in connection with the release of any

Liens on any of the Acquired Assets, Shares, assets of SuperVent or assets of

Industrias, or other requested certificates, documents or financial information

as may be reasonably requested by Buyer or its lenders in connection with such

financing.

SECTION 5.04.  Non-solicitation

of Employees.  (a) From and after the date hereof until the second anniversary

of the Closing Date, USI and Sellers and their respective majority-owned

Subsidiaries shall not without the prior written approval of Buyer, directly or

indirectly solicit, encourage, entice or induce any person who is an Employee

at the date hereof or who becomes an Employee after the date hereof but prior

to the Closing Date, to terminate his or her employment with the Business, or

hire or employ any person who is an Employee at the date hereof or who becomes

an Employee after the date hereof but prior to the Closing Date; provided, however, that the foregoing

shall not apply to persons who are hired as a result of the use of a general

solicitation (such as an advertisement) not specifically directed to any of the

Employees.

(b) If it is ever held by

any court of competent jurisdiction that the restrictions placed on any party

to this Agreement by this Section 5.04 are too onerous and are not necessary

for the protection of the other party or parties hereto, each party to this

Agreement agrees that any court of competent jurisdiction may impose lesser

restrictions which such court may consider to be necessary or appropriate to

properly protect the other party or parties hereto.

SECTION 5.05.  Covenant

Not to Compete.  (a) USI and Sellers agree that they shall not, and shall cause

their majority-owned Subsidiaries not to, 

at any time within the five-year period immediately following the

Closing, directly or indirectly engage in, or have any ownership interest in,

any firm, corporation, partnership, proprietorship or other business entity

that engages in a business that competes with the Business; provided, however, that it shall not be a

violation of this Section 5.05 to (i) own, directly or indirectly, solely for

investment purposes, securities of any Person that are traded on a national

securities exchange or the

 

51

 

NASDAQ Stock Market (or a

recognized securities exchange outside the U.S.), if Sellers, USI and their

respective majority-owned Subsidiaries do not, directly or indirectly,

collectively own more than 5% or more of any class of securities of such

Person, (ii) directly or indirectly acquire, be acquired by or merge with any

Person, if less than 10% of the sales revenues of such Person for its most

recently completed fiscal year were derived from products that compete with any

products sold by the Business or under development with respect to the

Business, and provided further that Sellers, or USI, as the case may be, shall

use commercially reasonable efforts to divest themselves or to cause their

respective majority-owned Subsidiaries to divest themselves of the competing

portion of such business within 12 months after such acquisition or merger, or

(iii) continue operating existing lines of business, other than the Business,

consistent with past practice.

(b) From and after the

Closing Date, Sellers and USI shall, and will use their reasonable best efforts

to cause their Affiliates to, keep secret and retain in confidence, and shall

not use for the benefit of themselves or others except in connection with the

provision of services to Buyer and its Affiliates under the Transition Services

Agreement, all confidential documents and information concerning the Business,

unless compelled to disclose such documents or information by court order,

subpoena or other legal process, in which case Sellers or USI, as the case may

be, must, if possible, give Buyer written notice as soon as possible upon

receipt of the subpoena or court order, prior to such disclosure so that Buyer

may seek a protective order or other appropriate remedy or, in its sole discretion,

waive compliance with the terms of this Section 5.05.  Sellers agree not to oppose, and to cause their respective

Affiliates not to oppose, any action by Buyer to obtain a protective order or

other appropriate remedy.  If no such

protective order or other remedy is obtained or Buyer waives compliance with

the terms of this Section 5.05, Sellers will furnish only that portion of the

applicable documents and/or information which they are advised by counsel is

legally required and will exercise their reasonable best efforts to obtain

reliable assurance that confidential treatment will be accorded such documents

and/or information.

(c) USI and each Seller

acknowledges that the covenants contained in this Section 5.05 were a material

and necessary inducement for Buyer to agree to the transactions contemplated

hereby, and that violation of any covenants contained in this Section 5.05 will

cause irreparable and continuing damage to Buyer, that Buyer shall be entitled

to injunctive or other equitable relief from any court of competent

jurisdiction restraining any further violation of such covenants and that such

injunctive relief shall be cumulative and in addition to any other rights or

remedies to which Buyer may be entitled. 

Moreover, Sellers hereby waive, in any action for specific performance

of this Section 5.05, the defense of adequacy of a remedy at law and any

requirement for the securing or posting of any bond in connection with any such

remedy.

 

52

 

(d) If it is ever held by

any court of competent jurisdiction that the restrictions placed on any party

to this Agreement by this Section 5.05 are too onerous and are not necessary

for the protection of the other party or parties hereto, each party to this

Agreement agrees that any court of competent jurisdiction may impose lesser

restrictions which such court may consider to be necessary or appropriate to

properly protect the other party or parties hereto.

SECTION 5.06.  Remittance

of Accounts Receivable. (a) Sellers and their

Affiliates agree that from and after the Closing Date, Buyer shall have the

right and authority to collect for its own account all Accounts Receivable that

are included in the Acquired Assets and to endorse with the name of any Seller

any checks or drafts received with respect to any such Account Receivable.  Sellers also agree that they shall (i) as

promptly as possible after the Closing Date, transfer to Buyer each lockbox and

depository account used primarily in the Business, so long as such transfer is

permitted by the bank servicing such lock box or maintaining such depository

account and (ii) promptly deliver or cause to be promptly delivered to Buyer

any cash or other property received directly or indirectly by any Seller or any

of its Affiliates with respect to any such Accounts Receivable, including any

amounts collected as interest.

(b)   The foregoing notwithstanding, Buyer and

Sellers agree that any amounts received with respect to the Business in the

lockbox and depository accounts of Sellers through the Closing Date shall be

retained by Sellers notwithstanding that, consistent with past practices, such

collections may not be credited to Sellers or their Affiliates until after the

Closing Date.  Any Accounts Receivable

and any other assets relating to such amounts retained by Sellers shall not be

included in the calculation of Final Net Worth.

SECTION 5.07.  Notification

of Certain Tax Matters.  Sellers shall deliver to Buyer copies of (i) all audit reports,

letter rulings, technical advice memoranda and similar documents issued by a

Governmental Authority relating to Taxes due from or with respect to SuperVent

or Industrias and (ii) any closing agreement entered into by or on behalf of

SuperVent or Industrias with any taxing authority, which come into the

possession of any Seller or any Affiliate of any Seller after the date hereof.

SECTION 5.08.  Estoppel

Certificates.  Sellers shall use, at no additional cost to Sellers, their

commercially  reasonable efforts to

obtain and deliver to Buyer an estoppel certificate from the landlord (or

sublandlord) under each Lease (a) certifying (i) that such Lease is in full

force and effect and has not been assigned, modified, supplemented or amended

in any way, (ii) that, to the relevant landlord’s knowledge, there are no

defaults by any party under such Lease nor any event or condition that, with

the giving of notice or the passage of time, or both,

 

53

 

would constitute a default

thereunder by any party, (iii) that no rent, or additional rent, other than for

the current month, has been paid in advance other than last month’s rent (or

confirmation of any additional rent paid to such landlord), (iv) the current

rent under such Lease and (v) the term, commencement and expiration of such

Lease, including any renewal periods, or (b) in form and substance required by

such Lease.

SECTION 5.09.  Exclusivity.  Recognizing that Buyer’s investigations of

the Business, and the negotiation and drafting of this Agreement and related

documents and instruments to be executed by Buyer in connection herewith, have

to date required and will continue to require Buyer to expend significant time,

effort and money, and to induce Buyer to execute and deliver this Agreement and

proceed with the transactions contemplated hereby, no Company, USI or any

director, officer, partner, employee, representative, advisor, or agent of any

such Person will encourage any offers from, solicit, encourage, initiate,

respond to (other than by a bare statement, without further detail or

explanation, that such Person is not permitted to respond) or continue any

discussions with, engage in discussions or negotiations with or provide any

information to, or enter into any agreements or understandings with, any

Person, other than Buyer, its Affiliates and their respective representatives

and agents, concerning any merger, consolidation, issuance or sale or exchange

of shares of capital stock of any Company, transfer or disposition of any Acquired

Assets, assets of Industrias or assets of SuperVent (other than Inventory in

the ordinary course of business consistent with past practice) or similar

transaction involving or affecting the ownership of any Company, the Business

or any of the Acquired Assets, assets of Industrias or assets of SuperVent.

SECTION 5.10.  Canadian

Tax Certificate.  Selkirk Canada shall apply for, and deliver to, Buyer on or

before the Closing Date a clearance certificate pursuant to subsection 6(1) of

the Retail Sales Tax Act (Ontario).  Sellers agree to indemnify and hold Buyer

harmless in respect of any and all loss, liability, cost, charge, fine,

penalties or assessment which Buyer may incur as a result of any failure to

deliver such a certificate.

SECTION 5.11.  Collection

of Tax Claims.  Following the Closing, Sellers shall use commercially reasonable

efforts to timely take all actions necessary or appropriate in order to enable

them to collect from any taxing authority any amounts to the extent reflected

as assets in the calculation of Final Net Worth and, upon receipt of any such

amounts, shall pay them to Buyer.

SECTION 5.12.  Disclosure

Supplements.  On the Closing Date, Sellers shall supplement or amend the

Disclosure Schedule with respect to any matter, condition or occurrence

hereafter arising which, if existing at, or occurring prior to or on, the date

of this Agreement, would have been required to be set forth or

 

54

 

described in the Disclosure Schedule. 

No supplement or amendment shall be deemed to cure any breach of any

representation or warranty made in this Agreement or have any effect on Buyer’s

indemnification rights provided for in Article 10 hereof, or have any

effect  for the purpose of determining

the satisfaction of the conditions set forth in Article 9 hereof or the

compliance by Sellers with any covenant set forth herein.

 

ARTICLE 6

COVENANT OF BUYER

Buyer

agrees that:

SECTION 6.01.  Trademarks;

Tradenames. 

After the Closing, Buyer shall not, and shall not permit its Affiliates

to, use the names “USI” or “U.S. Industries, Inc.” or any derivative thereof

(the “Seller Names”).  Buyer shall, no later than six months after

the Closing Date, destroy all business cards, signs, displays and other

materials forming part of the Acquired Assets, assets of Industrias or assets

of SuperVent that contain the Seller Names. 

Notwithstanding the foregoing, for a period of six months after the

Closing Date, Buyer and its Affiliates may continue to use the Seller Names on

any inventory, stationery, packaging or labeling inventory, promotional

materials or manuals of the Business existing as of the Closing Date so long as

Buyer destroys all remaining materials forming part of the Acquired Assets,

assets or Industrias or assets of SuperVent at the end of such period.

SECTION 6.02.  Tax

Covenants. 

Buyer covenants that it will not cause or permit SuperVent, Industrias

or any Affiliate of Buyer (i) to take any action on the Closing Date other than

in the ordinary course of business that could give rise to any Tax liability or

reduce any Tax Asset of the Seller Group, Industrias or SuperVent or give rise

to any loss of the Seller or the Seller Group under this Agreement, (ii) to

make any election or deemed election under Section 338 of the Code, or (iii) to

make or change any Tax election or amend any Tax Return that results in any

increased Tax liability or reduction of any Tax Asset of SuperVent, Industrias,

Sellers or the Seller Group in respect of any tax period (or portion thereof)

ending on or prior to the Closing Date.

ARTICLE 7

COVENANTS OF BUYER AND SELLERS

Buyer

and Sellers agree that:

SECTION 7.01.  Commercially

Reasonable Efforts.

 

55

 

(a) Subject to the terms and

conditions of this Agreement, Buyer and Sellers will use commercially

reasonable efforts to take, or cause to be taken, all actions and to do, or

cause to be done, and cooperate with each other to do, all things necessary or

desirable under applicable laws and regulations to consummate the transactions

contemplated by this Agreement as promptly as practicable.

(b) Sellers and Buyer shall

cooperate with one another in determining whether any action by or in respect

of, or filing with, any Governmental Authority is required, or any actions,

consents, approvals or waivers are required to be obtained from any third

parties, in connection with the consummation of the transactions contemplated

by this Agreement.  Sellers and Buyer

agree to take all commercially reasonable actions necessary, but without the

payment of money (other than customary filing fees) to obtain any requisite

actions, approvals, authorizations, consents, orders, licenses, permits,

qualifications, exemptions or waivers by any third party or Governmental

Authority.  If required, each party

shall as promptly as possible, but in any event within the date limitations set

forth by the applicable laws, in cooperation with the other, but at its own

expense, file any reports or notifications or furnish information and pay any

fees that may be required to be paid by it under applicable law including

filings under Foreign Antitrust Laws.

(c) Sellers will use

commercially reasonable efforts to cooperate with Buyer in order for Buyer to

be able to obtain any and all non-assignable or nontransferable Permits that

are required to own and operate the Acquired Assets, the assets of SuperVent

and the assets of Industrias as they are presently being owned and operated.

(d) Prior to Closing, each

party shall promptly consult with other parties hereto with respect to, provide

any necessary information with respect to, and provide other parties (or their

respective counsel) with copies of, all filings made by such party with any

Governmental Authority or any information supplied by such party to a

Governmental Authority in connection with this Agreement and the transactions

contemplated hereby.  Each party hereto

shall promptly provide the other parties with copies of any written communication

received by such party from any Governmental Authority regarding this Agreement

or any of the transactions contemplated hereby.

SECTION 7.02.  Public

Announcements.  No Seller or Buyer will issue, or permit any of its Affiliates

(including SuperVent or Industrias, to the extent SuperVent or Industrias is a

direct or indirect Subsidiary of Buyer or any Seller) to issue, any press

release or otherwise make any public statement with respect to this Agreement

or the transactions contemplated hereby without the prior written

 

56

 

consent of the other (which

consent shall not be unreasonably withheld), except as may be required by

applicable law or stock exchange regulation; nor may Buyer contact any

customers or suppliers of the Business in connection with the transactions

contemplated hereunder except as expressly permitted by the provisions of

Section 5.02.  Notwithstanding anything

in this Section 7.02 to the contrary, Sellers and Buyer will, to the extent

practicable, consult with each other before issuing, and provide each other the

opportunity to review and comment upon, any such press release or other public

statement with respect to this Agreement and the transactions contemplated

hereby if required by applicable law or stock exchange regulation.  Buyer agrees that Sellers may deliver a copy

of this Agreement to the holders of the Senior Debt Liens and any other Persons

reasonably required by such holders.

SECTION 7.03.  Notices

of Certain Events.  From the date hereof until the Closing Date, Sellers and Buyer

shall promptly after becoming aware of the following, notify the other of:

(a) any notice or other

communication from any Person alleging that the consent of such Person is or

may be required in connection with any of the transactions contemplated by this

Agreement;

(b) any notice or other

communication from any Governmental Authority in connection with any of the

transactions contemplated by this Agreement; and

(c) any actions, suits,

claims, investigations or proceedings commenced relating to any Company, Buyer

or the Business that, if pending on the date of this Agreement, would have been

required to have been disclosed pursuant to Section 3.12, 3.13, 3.18 or 4.06.

SECTION 7.04.  Certain

Tax Refunds; Amended Returns; Transfer and Other Taxes.  (a) Except to the extent set forth in the

calculation of Final Net Worth as an asset, any refunds of Taxes of SuperVent

or Industrias or attributable to Taxes paid by SuperVent, Industrias, any

Seller or any Affiliate of a Seller with respect to any tax period (or portion

thereof) ending on or prior to the Closing Date shall be for the account of

Sellers, and Buyer shall pay or cause to be paid to Sellers within 20 days of

receipt any such refunds received by Buyer, any Affiliate of Buyer, Industrias

or SuperVent.  If Sellers so request and

at Sellers’ expense, Buyer shall cause SuperVent or Industrias, as the case may

be, to file for and obtain any refund or credit to which Sellers are entitled

under this Section 7.04(a); provided

that as a result of the filling of any such request there could not arise a Tax

Liability of SuperVent or Industrias, as the case may be, for which Buyer would

be indemnified pursuant to this Agreement. 

Buyer shall permit Sellers to control the prosecution of any such refund

claim and, where deemed appropriate

 

57

 

by Sellers, shall cause SuperVent and Industrias to authorize by

appropriate powers of attorney such Persons reasonably satisfactory to Buyer as

Sellers shall designate to represent SuperVent or Industrias, as the case may

be, with respect to such refund claim, provided that Buyer may participate in

such proceeding at its own expense. 

Notwithstanding the foregoing, Sellers may not settle or otherwise

resolve any refund claim that could affect the Tax liability of Buyer,

Industrias or SuperVent for any Tax period (or portion thereof) beginning after

the Closing Date without Buyer’s consent. Notwithstanding anything in this

Agreement to the contrary, Sellers shall not be permitted to file a refund

claim or amend a SuperVent Tax Return or an Industrias Tax Return in order to

carry back any losses generated by SuperVent or Industrias after the Closing to

a period ending on or prior to the Closing Date.

 

(b) For any tax periods

ending on or prior to the Closing Date, Sellers shall be responsible for

preparing any amended Tax Returns which are required to be filed by SuperVent

or Industrias as a result of examination adjustments, as finally determined by

the applicable state, local or foreign taxing authorities.  Any required amended Tax Returns resulting

from such examination adjustments, as finally determined, shall be furnished to

SuperVent or Industrias, as the case may be, for approval (which approval shall

not to be unreasonably withheld) and, if necessary, signature and filing at

least 30 days prior to the due date for filing such Tax Returns.  Without Buyer’s consent (which consent shall

not to be unreasonably withheld), Sellers shall not otherwise file any amended

Tax Returns with respect to SuperVent or Industrias for any period that ends on

or prior to the Closing Date that could reasonably be expected to affect the

Tax liability of Buyer, Industrias or SuperVent for periods ending after the

Closing Date. Nothing in this Agreement shall require Sellers to amend any Tax

Return other than as set forth above.

(c) All transfer,

documentary, stamp, sales, use, registration and other such Taxes (including

all applicable real estate transfer Taxes) and related fees incurred in

connection with any of the transactions contemplated by this Agreement shall be

borne equally between Buyer, on the one hand, and Sellers, on the other hand

regardless of who is legally obligated to pay any such Tax; provided that, the foregoing notwithstanding,

any GST or ad valorem taxes payable in connection with any of the transactions

contemplated by this Agreement pursuant to Canadian law, which are refundable

to Buyer under Canadian law shall be paid by Buyer.  Each Seller and Buyer shall prepare and file any Tax Return

required to be filed by it in connection with any of the transactions

contemplated by this Agreement (regardless of whether any Tax is required to be

paid in connection with such filing), and all of the parties shall cooperate with

each other in the preparation, execution and filing of such Tax Returns.  Buyer shall use commercially reasonable

efforts to secure the full

 

58

 

amount of any tax refund

payable under Canadian law in connection with the transaction contemplated by

this Agreement.

(d) Mexican Customs Duties.  If required, Buyer and Sellers will, and

Buyer will cause Industrias after the Closing to, cooperate in good faith to

prepare and execute any and all customs documents required to legally allow

Buyer to own and operate the Acquired Assets to be transferred by Industrias as

presently owned by Industrias in Mexico, in accordance with applicable Mexican

Law and to file a virtual exportation manifest to allow Buyer to own such

Acquired Assets under a Maquiladora Authorization Program at the Closing.  Buyer shall be responsible for any customs

Tax relating to periods from and after the Closing.

(e) For any taxable period

of SuperVent or Industrias which (i) ends on or prior to the Closing Date or

(ii) includes (but does not end on) the Closing Date, Buyer shall (or shall

cause SuperVent or Industrias, as the case may be, to) timely prepare and file

with or deliver to the appropriate authorities all Tax Returns required to be filed

or delivered by SuperVent or Industrias, as the case may be; provided that Sellers agree that they

shall be responsible for all costs incurred in connection with the preparation

of all Tax Returns prepared in respect of the period described in clause (i)

above.  Sellers shall pay all Taxes due

with respect to any Tax Returns prepared for the period described in clause (i)

above and Buyer, subject to the payment obligations of Sellers in the following

sentence shall pay (or cause SuperVent or Industrias, as the case may be, to

pay) all Taxes due with respect to all Tax Returns prepared for the period

described in clause (ii) above.  At

least 30 days prior to the due date (including extensions) of any such Tax

Return, Buyer shall submit to Selkirk Canada USA for review and approval any

such Tax Returns, together with (1) any schedules, statements, and (to the

extent requested by the Sellers) supporting documentation, and (2) a statement

showing the amount due on such Tax Returns attributable to the portion of the

relevant taxable period ending on the Closing Date, which amount shall be paid

by Sellers, calculated (A) using the same method as described in Section

7.08(a), if such Taxes are of a type described therein, or (B) for all other

types of Taxes, on the basis that the relevant taxable period ended as of the

close of business on the Closing Date. 

If Selkirk Canada USA, within 10 business days after delivery of such

Tax Returns, notifies Buyer in writing that it objects to any items in such Tax

Returns, the disputed items shall be resolved (within reasonable time, taking

into account the deadline for filing such Tax Return) by a nationally

recognized independent accounting firm chosen and mutually acceptable to both

Buyer and Selkirk Canada USA.  Upon resolution

of all such items, the relevant Tax Return shall be adjusted to reflect such

resolution and shall be binding upon the parties without further

adjustment.  The costs, fees and

expenses of such accounting firm shall be borne equally by Buyer and Sellers.

 

59

 

SECTION 7.05. Section 116 Certificate; Canadian Tax Election.  (a) Sellers agree to deliver to Buyer at the

Closing Date, a certificate issued pursuant to section 116 of the Income Tax Act (Canada) (the “Act”) in respect of the sale of the

Canadian Shares containing a “certificate limit” at least equal to that portion

of the Purchase Price allocated to the Canadian Shares in accordance with the

General Allocation.

(b)  If Sellers fail to deliver to Buyer, at the

Closing Date, the certificate under section 116 of the Act referred to in (a)

above, an amount equal to the amount of tax (the “Withheld Amount”) for which Buyer may be liable under section

116 of the Act by reason of Sellers’ failure to so deliver such a certificate

may be withheld from the Purchase Price. If Sellers subsequently deliver to

Buyer the certificate under section 116 of the Act referred to in (a) above, on

or before the date that is 30 days after the end of the month in which the

Closing Date occurred, Buyer shall pay to Sellers forthwith upon the delivery

of such certificate by Sellers to Buyer an amount equal to the Withheld Amount

by certified cheque or bank draft. If Sellers fail to deliver to Buyer the

certificate under section 116 of the Act referred to in (a) above, on or before

the date that is 30 days after the end of the month in which the Closing Date

occurred (the “Remittance Date”),

Buyer shall, on the Remittance Date, pay to the Receiver General for Canada an

amount equal to the Withheld Amount and the amount so paid by Buyer shall be

considered for all purposes to be a payment made by Buyer to Sellers on account

of the Purchase Price.

(c) Selkirk Canada and

Canadian Buyer shall jointly execute an election under Section 167 of the Excise Tax Act (Canada) in the form

prescribed for such purposes along with any documentation necessary or

desirable in order to effect Selkirk Canada’s transfer of Acquired Assets to

Canadian Buyer without payment of any GST. 

On or prior to the Closing Date, Buyer shall provide Selkirk Canada with

Canadian Buyer’s registration number under Part IX of the Excise Tax Act (Canada).  Buyer shall cause Canadian Buyer to file the

election forms referred to above, along with any documentation necessary or

desirable to give effect to such, with the Canada Customs and Revenue Agency

together with Canadian Buyer’s GST return for the reporting period in which the

transactions contemplated herein are consummated.  Notwithstanding the foregoing, if the GST Election referred to

above is not applicable, Buyer shall or shall cause Canadian Buyer to pay to

Selkirk Canada, the applicable GST.

(d) Buyer shall cause

Canadian Buyer to agree, and Selkirk Canada agrees, to elect jointly in the

prescribed form under section 22 of the Income

Tax Act (Canada) as to the sale of the Accounts Receivable forming

part of the Acquired Assets transferred by Selkirk Canada to Canadian Buyer and

described in section 22 of the Income Tax

Act (Canada) and to designate in such election the face value of

such Accounts Receivable and an amount equal to the portion of the

 

60

 

Purchase Price allocated to

such assets pursuant to Schedule 2.05(c), as adjusted pursuant to Section

2.08(c) as the consideration paid by Canadian Buyer therefor. Selkirk Canada

and Buyer shall, or shall cause Canadian Buyer to, file such election with the

Canada Customs and Revenue Agency forthwith after execution thereof, and, in

any event, with the respective income Tax Returns for the year of sale to make

such election.

(e) If applicable, Selkirk

Canada shall and Buyer shall cause Canadian Buyer to file an election under

Section 20(24) of the Income Tax Act

(Canada) and the corresponding sections of any applicable provincial statute

and any regulations under such statutes in a manner consistent with the

allocation of the Acquired Assets transferred by Selkirk Canada to Canadian

Buyer under Schedule 2.05(c), as adjusted pursuant to Section 2.08(c).  The parties hereto further agree to make

jointly the necessary elections and execute and file, within the prescribed

time, election forms and any other documents required to give effect to the

foregoing.

SECTION 7.06.  Further

Assurances.  At

any time after the Closing Date, Sellers and Buyer shall promptly execute,

acknowledge and deliver any other assurances, documents, instruments or

conveyances reasonably requested by Sellers or Buyer, as the case may be, or

necessary for Sellers or Buyer, as the case may be, to satisfy their respective

obligations hereunder or obtain the benefits contemplated hereby.

SECTION 7.07.  Transfers

Not Effected as of Closing.  Nothing herein shall be deemed to require the conveyance,

assignment or transfer of any Acquired Asset that by its terms or by operation

of applicable law cannot be freely conveyed, assigned, transferred or

assumed.  To the extent the parties

hereto have been unable to obtain any governmental or any third party consents

or approvals required under applicable law for the transfer of any Acquired

Asset and to the extent not otherwise prohibited by the terms of any Acquired

Asset, Sellers shall continue to be bound by the terms of such applicable

Acquired Asset and Buyer shall pay, perform and discharge fully all of the obligations

(to the extent such obligations are Assumed Liabilities) of Sellers thereunder

from and after the Closing to the extent that the corresponding benefit is

received by Buyer or any of its wholly owned Subsidiaries.  Sellers shall, without consideration

therefor, pay, assign and remit to Buyer promptly all monies, rights and other

consideration received in respect of such performance.  Sellers shall exercise or exploit their

rights in respect of such Acquired Assets only as reasonably directed by Buyer

and at Buyer’s expense.  Subject to and

in accordance with Section 7.01, for not more than 180 days following the

Closing Date, each of the parties hereto shall continue to use commercially

reasonable efforts to obtain all such unobtained consents or approvals required

to be obtained by it at the earliest practicable date.  If and when any such consents or approvals

shall be obtained, then Sellers shall promptly assign their rights and

obligations thereunder to Buyer without payment of

 

61

 

consideration and Buyer

shall, without the payment of any consideration therefor, assume such rights

and obligations (to the extent such obligations are Assumed Liabilities).  The parties shall execute such good and sufficient

instruments as may be necessary to evidence such assignment and assumption.

SECTION 7.08.  Pro-ration

Relating to Real Estate Taxes and Other Matters. (a)  All real property taxes, personal property

taxes and similar ad valorem obligations levied with respect to the Acquired

Assets for a taxable period which includes (but does not end on) the Closing

Date (collectively, the “Apportioned

Obligations”) shall be apportioned between Sellers and Buyer based

on the number of days of such taxable period prior to and including the Closing

Date (with respect to any such taxable period, the “Pre-Closing Tax Period”) and the number of days of such

taxable period after the Closing Date (with respect to any such taxable period,

the “Post-Closing Tax Period”).  Seller shall be liable for the proportionate

amount of such taxes that is attributable to the Pre-Closing Tax Period, and

Buyer shall be liable for the proportionate amount of such taxes that is

attributable to the Post-Closing Tax Period.

 

(b)  Apportioned Obligations shall be timely

paid, and all applicable filings, reports and returns shall be filed, as

provided by applicable law.  The paying

party shall be entitled to reimbursement from the non-paying party in accordance

with this Section 7.08(b).  Upon payment

of any such Apportioned Obligation, the paying party shall present a statement

to the non-paying party setting forth the amount of reimbursement to which the

paying party is entitled under Section 7.08(a) together with such supporting

evidence as is reasonably necessary to calculate the amount to be

reimbursed.  The non-paying party shall

make such reimbursement promptly but in no event later than 10 days after the

presentation of such statement.  Any

payment not made within such time shall bear interest at the rate set forth in

Section 2.08(b) for each day until paid.

(c) The forgoing

notwithstanding, no party shall be entitled to reimbursement under this Section

7.08 to the extent such party has been otherwise compensated for such matter

pursuant to the Purchase Price adjustment under Section 2.08.

SECTION 7.09. 

Access.  Buyer will, on and after the Closing Date,

upon reasonable advance notice, afford Sellers and their agents reasonable

access during normal business hours to the properties, books, records,

employees and auditors of the Business to the extent reasonably necessary to

permit Sellers to determine any matter relating to their rights and obligations

hereunder or to any period ending on or before the Closing Date with respect to

the Business; provided that any such access by Sellers shall not unreasonably

interfere with the conduct of the Business by Buyer or the conduct of any other

business of Buyer. Sellers will hold, and will use their commercially

reasonable efforts to cause their

 

62

 

officers, directors,

employees, accountants, counsel, consultants, advisors and agents to hold, in

confidence, unless compelled to disclose pursuant to court order, subpoena or

other legal process, in which case Sellers must, if possible, give Buyer

written notice as soon as possible upon receipt of the subpoena or court order

prior to such disclosure, all confidential documents and information concerning

the Business provided to them pursuant to this Section 7.09.

SECTION 7.10.  Certain

Post-Closing Assistance.

(a) Buyer agrees to cause,

after Closing, the appropriate personnel of the Business at no costs or expense

to Sellers, to prepare all customary accounting, environmental, employment,

benefits-related and similar (but, not with respect to Taxes or Tax Returns)

reports for Sellers with respect to the Business for periods up to the Closing

Date which are reasonably requested by Sellers.  Sellers agree to provide Buyer, at no costs or expense to Buyer,

with information in the possession and control of Sellers in respect of

accounting, environmental, employment, benefits-related and similar (but, not

with respect to Taxes or Tax Returns) reports for Buyer after the Closing Date

to the extent reasonably requested by Buyer.

(b) Sellers and Buyer shall

reasonably cooperate, and shall cause their respective Affiliates, officers,

employees, agents, auditors and representatives to cooperate, in preparing and

filing all returns, reports and forms relating to Taxes, including maintaining

and making available to each other all records necessary in connection with

Taxes and in resolving all disputes and audits with respect to all taxable

periods relating to Taxes.  Each of the

Sellers and Buyer recognize that Sellers and their Affiliates will need access,

from time to time, after the Closing Date, to certain accounting and Tax

records and information that Buyer or its Affiliates may have to the extent

that such records and information pertain to events occurring on or prior to

the Closing Date with respect to the Business; therefore, Buyer agrees, and

agrees to cause its Affiliates, (i) to use their reasonable best efforts to

retain and maintain properly such records until the expiration of the

applicable statutes of limitation (giving effect to any extensions thereof),

and thereafter not to dispose of such records without first offering them to

the applicable Seller, and (ii) to allow Sellers and their agents and

representatives (and agents or representatives of any of the Sellers’

Affiliates), at times and dates mutually acceptable to the parties, to inspect,

review and make copies of such records as Sellers reasonably deem necessary or

appropriate from time to time, such activities to be conducted during normal

business hours, and (iii) at no costs or expense to Sellers, to prepare or

cause to be prepared, in accordance with past practice and on a timely basis,

the information required by Sellers to file their Tax Returns in accordance

with past practice.

SECTION 7.11.  Treasury

Matters. 

(a)   Sellers shall be obligated

to fund all checks, wire transfers or other transfer orders which (A) are

outstanding as of

 

63

 

the close of business on the

day prior to the Closing Date and (B) are presented for payment on and after

the Closing Date, except to the extent included as a Liability or otherwise

provided for in the calculation of Final Net Worth.  Sellers agree to cause the funding of such checks, wire transfers

or other transfer orders in accordance with past practices.

(b) Buyer and each Seller

hereby agrees that, on the Closing Date, 

it will not, and shall cause its respective Affiliates (including

SuperVent or Industrias, to the extent SuperVent or Industrias is a direct or indirect

Subsidiary of Buyer or any Seller) not to, issue any checks, wire transfers or

other transfer orders with respect to the Business.

SECTION 7.12.  Insurance

Policies. 

(a)  General.  The parties acknowledge and agree that

Sellers shall be solely liable and responsible for the satisfaction and payment

of all Liabilities relating to general liability (including product liability),

automobile and workers compensation claims relating to or arising out of the

conduct of the Business with a date of occurrence after April 1, 1989 and

before October 1, 1998 (“Seller Claims”),

including, but limited to, to the extent that such Liabilities are not

otherwise covered and paid for by the applicable insurer under a Business

Insurance Policy or any successor policy or program; provided, further, that

all letters or credit required to be posted by USI and Sellers pursuant to, and

all deductibles and self insured retention portion payments due by USI and

Sellers under, the Business Insurance Policies or any successor policy or

program with respect to any Seller Claims shall be the sole responsibility and

liability of Sellers.  The parties

acknowledge and agree that Buyer shall be solely liable and responsible for the

satisfaction and payment of all Liabilities relating to general liability

(including product liability), automobile and workers compensation claims

relating to or arising out of the conduct of the Business with a date of

occurrence on or prior to April 1, 1989 and on or after October 1, 1998 (“Buyer Claims”), including, but limited to,

to the extent that such Liabilities are not otherwise covered and paid for by

the applicable insurer under a Business Insurance Policy or any successor

policy or program; provided, further, that all letters of credit, to the extent

allocable to the Business, required to be posted by USI and Sellers pursuant

to, and all deductibles and self insured retention portion payments due by USI

and Sellers under, the Business Insurance Policies or any successor policy or

program with respect to any Buyer Claims shall be the sole responsibility and

liability of Buyer.

 

(b) Post-Closing

Insurance.  At the Closing, except

as otherwise provided in the Transition Services Agreement, Buyer shall have in

place policies or programs that insure workers’ compensation, the Acquired

Assets and the Business against any loss or damage for all periods on and after

the Closing.

 

64

 

(c) Cooperation.  Sellers and Buyer agree to cooperate with

each other to make the benefits of the Business Insurance Policies, or any

successor policies or programs, to the extent they relate to any Buyer Claim

(subject in all events to the terms and conditions of the available Business

Insurance Policies and the determinations of the insurer thereunder).  Sellers shall not be liable, and Buyer shall

hold Sellers harmless, in connection with any adverse determination by an

insurer in respect of any Buyer Claims.

(d) Administrative Costs.  In addition to, and without limiting the effect

of Section 7.12(a), Buyer shall reimburse Sellers for the amount of any

applicable administrative or processing fees or other costs and expenses paid

by Sellers to a third party relating to Buyer Claims and the processing thereof

(“Administrative Costs”), promptly

upon receipt of reasonable documentation or invoices relating thereto.  In the alternative, upon delivery to Buyer

of such reasonable documentation or invoices, Sellers shall be permitted to

deduct such Administrative Costs from the amounts payable to Buyer under

Section 7.12(e).

(e) Processing of Claims;

Reimbursement of Pre-Closing Insurance Claims.  Sellers or its agents shall, after the Closing, process claims

and other settlement charges other than Administrative Costs (defined above) relating

to the Buyer Claims in the ordinary course of business consistent with past

practice in accordance with the provisions of the Business Insurance

Policies.  In the event that (i) the

Sellers receive any proceeds under any Business Insurance Policy with respect

to a Buyer Claim and (ii) an amount relating to such Buyer Claim has been paid

by Buyer to a third party, then Sellers shall, subject to Section 7.12(d)

hereof, promptly after receipt of reasonable documentation of such payment, pay

or reimburse Buyer, with respect to the amount so paid by Buyer, the amount of

proceeds received by Sellers under such Business Insurance Policy.

(f) Reimbursement of

Sellers.  Buyer and Sellers

acknowledge that at and after the Closing, Sellers or their Affiliates will

maintain the Business Insurance Policies in effect on the date hereof (or any

successor policy or program) and any required letters of credit supporting such

Business Insurance Policies.  As a

result, Sellers or such Affiliates  may

make payments in respect of all such foregoing liabilities (“Pre-Closing Sellers Insurance Payments”).

Without limiting the effect of Section 7.12(a), Buyer agrees that in the event

Sellers or their Affiliates make any Pre-Closing Sellers Insurance Payments,

with respect to Buyer Claims, Buyer shall reimburse Sellers or such Affiliate

(or shall cause Sellers or such Affiliate to be reimbursed) for its

proportional amount thereof, within 30 days of demand accompanied by reasonable

documentation of such payment.

 

65

 

(g) Settlement.  The parties shall cooperate, and cause their

respective Affiliates to cooperate, with the applicable insurance carrier or

carriers in the defense or prosecution of any Buyer Claim. Subject to the provisions

of the applicable Business Insurance Policy, Sellers acknowledge and agree that

they shall not agree to the settlement of any Buyer Claim without the prior

written consent of Buyer (not to be unreasonably withheld).

(h) Access.  Buyer will and will cause its Affiliates, on

and after the Closing Date, to afford Sellers and their agents reasonable

access during normal business hours to their properties, books, records,

employees and auditors to the extent reasonably necessary to permit Sellers to

comply with this Section 7.12(h); provided,

that any such access by Sellers and their agents shall not unreasonably

interfere with the conduct of the Business by Buyer or the conduct of any other

business of Buyer.

SECTION 7.13.  1400 California Avenue,

Brockville, Ontario Owned Real Property.  Prior to Closing, Sellers and Buyer shall use their commercially

reasonable efforts, without any obligation to make any payment to obtain such

waiver, to cause The Corporation of the City of Brockville (“Brockville”) to execute an agreement (the “Brockville Waiver”) whereby Brockville

waives, on a knowing and informed basis, the right of first refusal contained

in that certain Deed of Land dated October 9, 1980 and registered October 22,

1980 as Instrument No. 120313 in the Land Registry Office of the Registry

Division of the County of Leeds with respect to the property known as 1400

California Avenue, Brockville, Ontario, Canada.  The parties shall jointly participate in the negotiations with

Brookville to obtain the Brookville Waiver. 

Sellers and Buyer shall also use their commercially reasonable efforts

to request Brockville to terminate such right of first refusal, but obtaining

any such termination by the parties shall not in any way be a condition to or

otherwise delay Closing.  If, prior to

Closing, Brockville refuses to execute and deliver the Brockville Waiver,

Sellers and Buyer agree to discuss in good faith alternate structures,

including, without limitation, the sale of the shares of stock of Selkirk

Canada, Inc. at an agreed upon allocation of purchase price for tax purposes,

in order to effect the transactions contemplated hereby.

ARTICLE 8

EMPLOYEE BENEFITS AND LABOR AGREEMENTS

SECTION 8.01.  Employee

and Employee Benefit Matters.

(a) Employment of

Employees at Closing.  As of the

date hereof, Sellers have provided Buyer with a preliminary list of Employees,

including, with respect to each Employee whose annual salary is in excess of

$50,000, each such employee’s job/position/title, salary or grade level, and target

bonus.  Sellers agree

 

66

 

to provide Buyer with an

update to such list of Employees each month prior to the Closing, based upon

new hires and departures of Employees as of the date of such update.  Prior to the Closing Date, Buyer shall make

an offer of employment to each Employee, such employment to be effective as of

the Closing Date.  Such offer shall be,

with respect to Employees of the Transferred Business not covered by a

collective bargaining agreement, in comparable positions and at substantially

equivalent salary or wage rates as those with Sellers as of the Closing Date,

and with respect to those Employees of the Transferred Business covered by a

collective bargaining agreement, in accordance with Section 8.02 below.

Notwithstanding the previous provisions of this Section 8.01(a), any offer of

employment by Buyer to a management group member of the Transferred Business

may be on such terms and conditions as are agreed in writing between Buyer and

the management group member as of the date hereof.  Buyer hereby agrees to indemnify Sellers from any and all

termination and/or severance Liability incurred with respect to Employees

(including, without limitation, any liability related to or arising out of the

Worker Adjustment and Retraining Notification Act, the continuation coverage

rules of Section 4980B of the Code and part 6 of Subtitle B of Title I of ERISA

(“COBRA”), and any similar state,

province, local or foreign laws with respect to the Employees). Prior to the

Closing Date, Sellers shall amend the Selkirk Standard Procedures Termination

Guidelines policy and Severance Benefits policy (collectively, the “Severance Policies”) to expressly provide

that the sale of the Business contemplated hereby does not give rise to an

involuntary termination of employment and that no Employee who is covered by

the Severance Policies shall be eligible to receive severance pay or other

benefits based solely on the sale of the Business.  Sellers shall promptly notify such Employees of the amendment in

a manner which is consistent with the past practices of the Transferred

Business.

(b) Post-Closing Employee

Benefits; Assumption of Certain Benefit Arrangements.  As of the Closing Date and for a period of

twelve months thereafter, Buyer shall provide the Employees with employee

benefit plans and benefit arrangements which are substantially similar in the

aggregate to those provided to such employees under the Employee Benefit Plans,

Foreign Employee Benefit Plans and Benefit Arrangements immediately prior to

the Closing Date; provided, however,

that Buyer shall not be obligated to provide any stock option plan or other

equity participation for the Employees and shall not be obligated to make any

matching contributions in stock under the New 401(k) Trust (as defined in

paragraph (c) below) and shall be permitted to make commercially reasonable

changes in insurance carriers, co-pays, deductibles and participant and

employer contribution levels while maintaining the availability of employee

benefits of the type provided to the Employees immediately prior to the Closing

Date.  Without limiting the generality

of the foregoing, Buyer shall honor and assume the vacation or other paid time

off for each Employee which has been accrued but

 

67

 

remains unused as of the

Closing Date, solely to the extent the accrual for such vacation or other paid

time off was reflected in the calculation of Final Net Worth. As of the Closing

Date, Buyer shall assume those Employee Benefit Plans, Benefit Arrangements and

Foreign Employee Benefit Plans maintained exclusively in connection with the

Business and set forth on Schedule 8.01(b) (the “Business-Specific Plans”).

 

(c) Transfer of Assets of

401(k) Plan.  The Employees

participating in the USI Retirement Savings and Investment Plan (the “Transfer 401(k) Plan”) shall cease to

accrue any further benefits under the Transfer 401(k) Plan as of the Closing

Date.  Sellers shall take all actions

that are necessary and appropriate to cause the employer matching contributions

that have been credited to the Employees’ and Former Employees’ employer

matching accounts under the Transfer 401(k) Plan immediately prior to the

Closing Date to be fully vested, effective as of the Closing Date.  After the Closing Date, Sellers shall cause

the assets related to the Employees and Former Employees participating in the

Transfer 401(k) Plan held in a Master Trust to be transferred to a successor

trust or trusts or other funding medium established by Buyer (the “New 401(k) Trust”).  Buyer will use reasonable best efforts to

establish the New 401(k) Trust as soon as practicable after the Closing Date

and to deliver to Sellers the representation referred to in clause (ii) below

within 30 days of the Closing Date and Sellers shall use reasonable best

efforts to deliver to Buyer the representation referred to in clause (iii)

below.  Such transfer shall occur as

soon as reasonably practicable following receipt by USI of (i) notification

from Buyer that the applicable New 401(k) Trust has been established, (ii) a

representation of Buyer with appropriate indemnities that the forms of the

documents constituting such New 401(k) Trust are in substantial compliance with

the requirements for qualification and exemption from United States federal

income taxation under Sections 401(a) and 501(a) respectively, of the Code and

a representation from Buyer that the New 401(k) Trust will be timely submitted

to the IRS for a favorable determination letter and that the Buyer will make

such plan amendments as are requested by the IRS, and (iii) a similar

representation from USI  with respect to

the qualified status of the Transfer 401(k) Plan with appropriate indemnities,

and (iv) at least thirty (30) days have elapsed after the filing of any

required Form 5310 with respect to the transfer of assets of the Transfer

401(k) Plan.  Subject to Section

401(a)(12) of the Code, the amount of assets transferred from any trust in

which a Transfer 401(k) Plan is invested prior to the Closing Date shall be in

kind in an aggregate amount equal to the aggregate fair market value of the

assets in the Transferred 401(k) Plan relating to Employees and Former

Employees on the date of transfer. 

Sellers shall cause the service provider to the Transfer 401(k) Plan to

provide Buyer such service provider’s records of the names and addresses of

Former Employees participating in the Transfer 401(k) Plan.  In addition, Sellers and Buyer agree to use

commercially reasonable

 

68

 

efforts to transfer

comparable Foreign Employee Benefit Plans, if any, or transfer the assets and

liabilities of such plans relating to the Employees and Former Employees to

Buyer in substantially the same manner and based upon substantially the same

principles as provided above.

(d) Transfer of Assets of

Defined Benefit Plan. (i)  Buyer

shall have in effect on the Closing Date or as soon as practicable thereafter a

defined benefit plan intended to be qualified pursuant to Section 401(a) of the

Code (the “New Pension Plan”) and

a related trust exempt from tax under Section 501(a) of the Code (the “New Pension Trust”) for the benefit of

Employees and Former Employees who were covered by the Transfer Pension Plan

(as defined below) as of the Closing Date. 

The New Pension Plan shall contain terms and conditions (to the extent

applicable to such Employees and Former Employees) that are substantially

similar in all material respects to those contained in the USI Master Pension

Plan  (the “Transfer Pension Plan”) (formerly the Bath and Plumbing

Products Pension Plan) for a period of two years following the Closing Date.

Each Employee with an accrued benefit in the Transfer Pension Plan immediately

prior to the Closing Date shall become a participant in the New Pension Plan

effective as of the Closing Date. 

Employees shall receive credit for all service with Sellers and its

Affiliates for purposes of eligibility, vesting and benefit accruals (including

eligibility for early retirement) under the New Pension Plan to the extent that

such service was taken into account under the Transfer Pension Plan.  As of the Closing Date, Sellers shall cause

Employees to cease further accrual of benefits under the Transfer Pension Plan.

(ii)  (A) 

On the Closing Date, Sellers shall cause the Initial Transfer Amount (as

defined below) of the assets related to the Employees and Former Employees

participating in the Transfer Pension Plan, as calculated below, to be

transferred to the New Pension Trust; provided,

however, that no such transfer shall be made unless and until Buyer

delivers to Sellers the representation referred to in clause (iii)(B)

below.  In connection herewith, Sellers

shall direct the trustee of the trust under the Transfer Pension Plan to

transfer from the trust under the Transfer Pension Plan to the New Pension

Trust cash in an amount equal to the sum of (A) 90% of the “projected benefit

obligation” (within the meaning of FAS 87) (“PBO”),

of the Employees and Former Employees as of December 31, 2001, and (B) an

amount of surplus assets sufficient to result in zero pension expense for the

Business for the twelve-month period ending on the Closing Date, based on the

principles specified below (the “Initial

Transfer Amount”).  The

Initial Transfer Amount shall be calculated applying the following assumptions

(the “Assumptions”):

 

*                             A discount rate of 7.50%;

*                             A rate of

return on assets of 9.50%; and

 

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*                             all other

assumptions as set forth on Appendix A (which are intended to be identical to

those used by USI to compute their September 30, 2001 year-end FAS 87 and FAS

132 disclosure and are derived from the Hewitt Associates Actuarial Report

dated 10/1/2001 for the U.S. Industries, Inc. 

Bath and Plumbing Products Pension Plan (“Hewitt Report”), a copy of

which report has been delivered to Buyer; provided, however, that the maximum

IRS benefit and pay limits shall be those in effect as of the Closing Date and

projected in a similar manner as in the computation of year-end FAS 87/ 132

disclosure, and that the “actual market value,” and not “market-related value”

approach shall be used).

 

The Initial Transfer Amount

shall be calculated using census data as of December 31, 2001 projected through

the Closing Date taking into account all Transfer Pension Plan amendments and

benefit changes negotiated and agreed to at any time prior to the Closing Date

and shall be adjusted for applicable benefit payments and plan expenses in accordance

with past practices; provided,

however, that if the Initial Transfer Amount occurs after the Closing Date, the

Initial Transfer Amount shall be adjusted for the actual investment rate of

return of the Transfer Pension Plan from the Closing Date through but not

including the date of actual transfer.

(iii)  Such transfer shall be contingent upon

receipt by Sellers of (A) notification from Buyer that the applicable New

Pension Trust has been established, (B) a representation from Buyer that the

forms of the documents constituting such New Pension Trust are in substantial

compliance with the requirements for qualification and exemption from United

States federal income taxation under Section 401(a) and 501(a) respectively, of

the Code and a representation from Buyer that the New Pension Trust will be

timely submitted to the IRS for a favorable determination letter and that the

Buyer will make such plan amendments as are requested by the IRS, and (C) a

similar representation regarding the qualified status of the Transfer Pension

Plan from counsel to Sellers or favorable determination letter with respect to

the Transfer Pension Plan, and (D) at least thirty (30) days have elapsed after

the filing of any required Form 5310 with respect to the transfer of assets of

the Transfer Pension Plan.  Sellers and

Buyer agree to use their reasonable best efforts to file any required Form 5310

on or prior to the date hereof or as soon as practicable thereafter.  Sellers shall transfer amounts pursuant to

this Section 8.01(d) in cash, unless Buyer and Sellers otherwise mutually

agree.  Sellers agree that the transfer

of the Initial Transfer Amount shall be made on the first month-end after the

requirements of this paragraph (iii) are satisfied, if such transfer does not

occur on the Closing Date.

 

70

 

(iv)  As soon as practicable after the Closing

Date, Sellers shall cause a second transfer to be made to the New Pension Plan,

in cash, of the “True-Up Amount”.  The True-Up Amount shall be equal to the sum

of (A) the PBO of the Employees and Former Employees projected through the

Closing Date calculated applying the Assumptions plus (B) an amount of surplus

assets sufficient to result in a zero pension expense for the Business operated

by Buyer for the 12 month period following the Closing Date calculated applying

the Assumptions, adjusted for the actual investment rate of return of the

Transfer Pension Plan from the Closing Date through but not including the date

of transfer on the difference between the Initial Transfer Amount and the

True-Up Amount (the “Total Transfer Amount”)

minus the sum of (C) the Initial Transfer Amount and (D) distributions, if any,

under the Transfer Pension Plan for benefits paid with respect to Employees and

Former Employees from the Closing Date through the date of transfer.  Sellers shall provide Buyer with the Total

Transfer Amount figure no later than 21 days following the Closing Date.  If the Total Transfer Amount cannot be

mutually agreed to by the actuaries for Sellers and Buyer, a third actuary

chosen by Sellers’ actuary and Buyer’s actuary, whose expenses shall be shared

equally by Sellers and Buyer, shall be retained and its determination of the

Total Transfer Amount shall be binding on the parties.

(v)  Notwithstanding any other provisions in this

Section 8.01(d), the amount of assets to be transferred pursuant to this

Section 8.01(d) shall be no less than the amount required by Section 414(l) of

the Code.  If the Transfer Pension Plan

is legally prohibited from transferring the full Total Transfer Amount (or any

earnings thereon, whether positive or negative, as calculated hereunder) to the

New Pension Trust, USI shall take all actions necessary (including, without

limitation, using USI corporate funds) to deposit into the New Pension Trust an

amount equal to the difference between (x) the maximum amount to be legally

transferred from the Transfer Pension Trust to the New Pension Plan and (y) the

full Total Transfer Amount.  At the time

of transfer of the Initial Transfer Amount, but in no event prior thereto, the

New Pension Trust shall assume the liabilities for all accrued benefits under

the Transfer Pension Plan in respect of the Employees and Former Employees and

Sellers and their affiliates and the Transfer Pension Plan shall be relieved of

such liabilities.

(e) Notwithstanding anything

to the contrary contained herein, Buyer shall not assume the following

Liabilities: (i) Liabilities for workers compensation claims relating to the

Employees or Former Employees with a date of incurrence on or after April 1,

1989 and prior to October 1, 1998; (ii) post-retirement welfare benefit

Liabilities other than the Liabilities for the Former Employees listed on

Schedule 8.01(e) and (iii) U.S. defined benefit pension plan Liabilities

(including supplemental and excess plan Liabilities) other than pursuant to

Section 8.01(d); (“Extraordinary Employee

Claims”), irrespective of when the claim is made or brought.

 

71

 

(f)

           Cooperation; Government

Communications.  Sellers shall

cooperate with Buyer in order to implement the undertakings contained in this

Section 8.01.  Sellers and Buyer agree

to provide each other with such records and information as the other may

reasonably request in order to carry out its respective obligations under this

Section 8.01.  During the period

following the Closing and prior to the transfer of Assets of the Transfer

401(k) Plan and Transfer Pension Plan to the New 401(k) Trust and New Pension

Trust, respectively, pursuant to Section 8.01(c) and 8.01(d), Sellers shall

promptly forward to Buyer any correspondence or written communications received

from IRS, the Pension Benefit Guaranty Corporation or DOL with respect to the

Transfer 401(k) Plan or the Transfer Pension Plan.  Further, Sellers and Buyer agree that each party shall use its

best efforts to confer with the other party prior to communicating with the

IRS, the Pension Benefit Guaranty Corporation or the DOL and shall promptly provide

to the other party copies of all communications and correspondence sent to such

entities.

(g) Sellers shall be

responsible for and, on the Closing Date, shall pay the Employees the deal

bonuses payable as a result of the consummation of the purchase and sale

transactions hereunder to which they are entitled on the Closing Date or at any

time thereafter.

SECTION 8.02.  Collective

Bargaining Agreements.  (a) Buyer or a Subsidiary of Buyer shall assume and continue in

full force and effect the collective bargaining agreements identified in

Schedule 3.19(a) (collectively, the “CBAs”)

effective as of the Closing.  The

employee benefits offered under the CBAs shall be as set forth in the CBAs; provided however that Buyer or a

Subsidiary of Buyer may substitute insurance carriers or providers to

administer and/or deliver the benefits provided therein where the CBA so

permits.

 

(b) Buyer or the Subsidiary

of Buyer continuing the CBAs shall have sole responsibility for all obligations

and liabilities arising under the CBAs.

ARTICLE 9

CONDITIONS TO CLOSING

SECTION 9.01.  Conditions

to Obligations of Buyer and Sellers.  The obligations of Buyer and Sellers to

consummate the Closing are subject to the satisfaction (or waiver by Buyer and

Sellers (subject to applicable law)) of the following conditions:

 

72

 

(a) Any applicable waiting

period under the HSR Act or any Foreign Antitrust Laws relating to the

transactions contemplated hereby shall have expired or been terminated.

(b) Any Permits that are

required to own and operate the Acquired Assets as they are presently being

owned and operated, the absence of which, individually or in the aggregate,

would reasonably be likely to have a Material Adverse Effect on the Business,

shall have been obtained by Buyer or its permitted assigns.

(c) No provision of any

applicable law or regulation and no judgment, injunction, order or decree shall

prohibit the consummation of the Closing.

(d) There shall not be

pending any material litigation brought by a Governmental Authority of

competent jurisdiction seeking to prohibit the consummation of the Closing.

(e) Each of Sellers and

Buyer shall have received evidence reasonably satisfactory to it that the

Senior Debt Liens listed on Schedule 9.01(e) have been released by the holders

thereof and SuperVent and Industrias have 

been released from all guarantee obligations relating to the Senior Debt

in form and substance reasonably satisfactory to such parties.

(f) The Escrow Agent shall

have duly executed and delivered the Escrow Agreement to Buyer and Sellers.

(g) Evidence of binding the

PLL Policy, as defined under Section 10.02(b) hereof, shall be provided to

Sellers and Buyer.

SECTION 9.02.  Conditions

to Obligation of Buyer.  The obligation of Buyer to consummate the Closing is subject to

the satisfaction (or waiver by Buyer (subject to applicable law)) of the

following further conditions:

(a) (i) Sellers shall have

performed in all material respects all of their obligations hereunder required

to be performed by them on or prior to the Closing Date, and (ii) the

representations and warranties of Sellers contained in this Agreement and in

any certificate or other writing delivered by Sellers pursuant hereto shall be

true disregarding all qualifications and exceptions contained therein relating

to materiality or Material Adverse Effect, at and as of the Closing Date, as if

made at and as of such date (except that representations and warranties that

are made as of a specific date need be so true and correct only as of such

date), with only such exceptions (A) that have not had, and as would not in the

aggregate reasonably be expected to have, a Material Adverse Effect or (B) are

 

73

 

actions taken after the date

hereof as are permitted by clauses (a) - (t) of  Section 5.01.

(b) Each Seller shall have

delivered to Buyer a certificate executed by a duly authorized officer thereof

to the effect that the conditions set forth in Sections 9.02(a)(i) and

9.02(a)(ii) shall have been satisfied. 

No exceptions taken in such certificate will modify any Sellers’

representations, warranties, covenants or arrangements made or deemed to be

made hereunder or have any effect for purposes of Buyer’s closing conditions or

indemnity rights under this Agreement.

(c) Each Seller shall have

duly executed and delivered to Buyer or a direct or indirect wholly-owned

Subsidiary of Buyer that will purchase Acquired Assets from such Seller, a bill

of sale and assignment substantially in the form of Exhibit C attached hereto

or which otherwise complies with the laws (including Tax laws) applicable to

any of the Acquired Assets as consequence of their location or ownership and is

substantially similar to the form attached hereto as Exhibit C (the “Bill of Sale”), which shall provide for the

sale, transfer, assignment, conveyance and delivery of the Acquired Assets

(other than the Owned Real Property, the Leased Real Property and the

trademarks, copyrights, patents and Internet domain names that are Acquired

Assets) to Buyer or such wholly-owned Subsidiary of Buyer.

(d) The appropriate Sellers

shall have duly executed and delivered to Buyer all customary instruments of

assignment or transfer, in form suitable for recording in the appropriate

office or bureau (collectively, the “Intellectual

Property Instruments”), requested by Buyer in order to effect the

transfer of the trademarks, copyrights, patents and Internet domain names that

are Acquired Assets.

(e) The appropriate Seller

shall have duly executed and delivered to Buyer (i) a bargain and sale deed

with covenants against grantor’s acts or special warranty deed with respect to

each parcel of Owned Real Property that is an Acquired Asset (except for Owned

Real Property in Ontario, Canada) and (ii) a transfer/deed of land without

warranty for the Owned Real Property in Ontario, Canada, in each case, in the

customary form for the state, province or country in which such Owned Real

Property is located (collectively, the “Deeds”),

together with any reasonably necessary transfer declarations or other filings.

(f)   Sellers shall deliver to Buyer (i)

certificates for the Canadian Shares duly endorsed or accompanied by stock

powers duly endorsed in blank, with any required transfer stamps affixed

thereto, or by other transfer forms, as applicable, (ii) evidence of

registration in the stock register book of SuperVent of the transfer of the

Canadian Shares to Buyer, or any if its direct or indirect wholly owned

 

74

 

Subsidiaries, and (iii) a

certified copy of the resolutions, if any, 

required by applicable law of the articles of incorporation of SuperVent

to be adopted in order to effect the transfer of the Canadian Shares to Buyer,

and such resolutions shall be in full force and effect and unamended as of

Closing.

(g) Sellers shall deliver to

Buyer (i) certificates for the Mexican Shares duly endorsed or accompanied by

stock powers duly endorsed in blank, with any required transfer stamps affixed

thereto, or by other transfer forms, as applicable, (ii) evidence of

registration in the stock register book of Industrias of the transfer of the

Mexican Shares to Buyer, or any if its direct or indirect wholly owned

Subsidiaries, and (iii) a certified copy of the shareholders’ resolutions,

required by applicable law to be adopted in order to effect the transfer of the

Mexican Shares to Buyer, or any of its direct or indirect wholly-owned

Subsidiaries, and such resolutions shall be in full force and effect and

unamended as of Closing.

 

(h) The appropriate Seller

shall have duly executed and delivered to Buyer, or a direct or indirect wholly

owned Subsidiary of Buyer, an assignment and assumption of lease in the form

attached hereto as Exhibit D or which otherwise complies with the laws

(including Tax laws) applicable to any of the Acquired Assets as consequence of

their location or ownership and is substantially similar to the form attached

hereto as Exhibit D (collectively, the “Lease

Assignments”), together with any necessary transfer declarations or

other filings, with respect to each Lease that is an Acquired Asset.

(i) The appropriate Sellers

shall have duly executed and delivered to Buyer a transition services agreement

in the form attached hereto as Exhibit E (the “Transition Services Agreement”).

 

(j) Buyer shall have

obtained, at Buyer’s expense, from a nationally recognized title insurance

company (the “Title Company”)

chosen by Buyer, in its sole discretion, a fee owner’s title insurance policy,

together with endorsements reasonably requested by Buyer (each a “Title Policy”, collectively, the “Title Insurance Policies”) with respect to

each parcel of Owned Real Property in form and substance satisfactory to Buyer

in an amount determined by Buyer, insuring Buyer and issued as of the Closing

Date by the Title Company, showing Buyer to have fee simple title to the Owned

Real Property, in each case subject only to Permitted Liens.  Sellers shall deliver to the Title Company

any instruments, affidavits or indemnities in form and substance reasonably

satisfactory to Sellers as reasonably requested by the Title Company in

connection with the issuance and delivery of the Title Insurance Policies.

(k) Provided Buyer shall

have ordered a survey (or updated survey, as the case may be) within 3 Business

Days of the date of this Agreement, Buyer shall have obtained, at Buyer’

expense, at least 2 Business Days prior to the

 

75

 

Closing, a survey of each

parcel of Owned Real Property, dated no earlier than the date of this

Agreement, prepared by the same surveyor engaged by Sellers to perform the most

recent survey of the Owned Real Property or, if such same surveyor is unable or

unwilling to perform the survey called for by this paragraph (k), a certified

or registered surveyor (the “Surveyor”)

reasonably acceptable to Buyer, in each case subject only to Permitted Liens

and certified to Buyer, the Title Company, any lender and as otherwise is

necessary or desirable in connection with the contemplated transaction and

complying with the then current Minimum Standard Detail Requirements for

ALTA/ACSM Land Title Surveys. The Surveyor shall certify each survey in the

form annexed hereto as Exhibit F attached hereto or in the form required by any

lender providing financing in connection with the transactions contemplated

hereby.

 

(l) Each Seller that is not

a “foreign person” within the meaning of Section 1445(b)(2) of the Code shall

have duly executed and delivered to Buyer a valid certificate of non-foreign

status substantially in the form of Exhibit G.

(m) Notwithstanding Section

7.07 or anything else to the contrary in this Agreement, Sellers shall have

obtained and delivered to Buyer, in form and substance satisfactory to Buyer,

the consents of the third parties listed on Schedule 9.02(m) attached hereto.

(n) Sellers shall have duly

executed and delivered to Buyer the Escrow Agreement.

(o) Sellers shall have

caused their appropriate Affiliate to duly execute and deliver to Buyer the

Dallas Sublease.

(p) Buyer shall have

received a written opinion of Davis Polk & Wardwell, counsel to Sellers,

dated as of the Closing Date, in form and substance satisfactory to Buyer,

covering matters that are customary for opinions of legal counsel for the

seller in transactions similar to the transactions contemplated hereby.

(q) No provision of any

applicable law or regulation and no judgment, injunction, order or decree shall

restrict Buyer’s control of the Acquired Assets or the Business.

(r) There shall not be

pending any material litigation brought by a Governmental Authority of

competent jurisdiction seeking to (i) restrict Buyer’s control of the Acquired

Assets or the Business or (ii) require Buyer to divest any asset or business in

connection with the acquisition of the Acquired Assets or the Business.

 

76

 

(s) All consents required

under the Leases specified on Schedule 9.02(s) shall have been obtained.

(t)    SuperVent and Industrias shall have no

cash or cash equivalents in its control or possession (other than de minimis

amounts thereof).

(u) Sellers shall have

delivered to Buyer evidence, in form and substance reasonably satisfactory to

Buyer, that (i) one or more of the Companies is currently listed in the records

of the appropriate U.S., state or foreign agency, or domain name registry, as

applicable, as the sole owner or owners of record for each application and

registration listed in Schedule 3.14(a), or (ii) complete, accurate and sufficient

assignment or name change documents have been filed with the appropriate U.S.,

state or foreign agency, or domain name registry or registrar, as applicable,

to ensure that one or more of the Companies is listed as the sole owner or

owners of record for each application and registration listed on Schedule

3.14(a).

(v)   All intercompany accounts between Sellers

and their respective Affiliates, on the one hand, and SuperVent and Industrias,

on the other hand, shall have been settled (except for intercompany accounts

arising from bona fide sales transactions for the provision of goods and

services) in a manner in which neither SuperVent nor Industrias is reasonably

expected to realize a significant amount of taxable income and Sellers shall

have delivered evidence to Buyer of such settlement as Buyer may reasonably

request.

(w) Brockville shall have

executed and delivered to each of Buyer and Sellers the Brockville Waiver, in a

form reasonably acceptable to Buyer.

SECTION 9.03.  Conditions

to Obligation of Sellers.  The obligation of Sellers to consummate the Closing is subject to

the satisfaction (or waiver by Seller (subject to applicable law)) of the

following further conditions:

(a) (i) Buyer shall have

performed in all material respects all of its obligations hereunder required to

be performed by it at or prior to the Closing Date and (ii) the representations

and warranties of Buyer contained in this Agreement and in any certificate or

other writing delivered by Buyer pursuant hereto shall be true and correct,

disregarding all qualifications and exceptions contained therein relating to

materiality or material adverse affect, in all material respects at and as of

the Closing Date, as if made and as of such date, except that the

representations and warranties that are made as of a specific date need be so

true and correct only as of such date.

 

77

 

(b) Buyer shall have

delivered to Sellers a certificate executed by a duly authorized officer

thereof to the effect that the conditions set forth in Sections 9.03(a)(i) and

9.03(a)(ii) have been satisfied.

(c) Buyer shall have

delivered to Sellers, the Adjusted Purchase Price (less the Escrow Amount) in

immediately available funds by wire transfer to an account of Sellers with a

bank designated by Sellers, by notice to Buyer, which notice shall be delivered

not later than two Business Days prior to the Closing Date (or if not so

designated, then by certified or official bank check payable in immediately

available funds to the order of Sellers in such amount); provided, however, that the amount of

funds to be delivered shall be reduced to the extent that Buyer is required to

withhold any portion of the Purchase Price in respect of Taxes in any

jurisdiction.

(d) Buyer and each of its

direct or indirect wholly-owned Subsidiaries that will purchase Acquired Assets

hereunder shall have duly executed and delivered to the relevant Seller the

assumption agreement substantially in the form of Exhibit H attached hereto or which

otherwise complies with the laws (including Tax laws) applicable to any of the

Acquired Assets as consequence of their location or ownership and is

substantially similar to the form attached hereto as Exhibit H (the “Assumption Agreement”), which shall provide

for the assumption of the Assumed Liabilities (other than Assumed Liabilities

relating to the Leases) by Buyer or such wholly-owned Subsidiary of Buyer.

(e) Buyer or a wholly-owned

Subsidiary of Buyer shall have duly executed and delivered to Sellers each of

the Lease Assignments and, if a wholly-owned Subsidiary of Buyer will be the

assignee under any such Lease Assignment, such Lease Assignment shall, at the

request of Sellers, be accompanied by an unconditional guaranty of Buyer, in

form and substance reasonably satisfactory to the lessor of the relevant lease,

of such wholly-owned Subsidiaries obligations under the relevant lease.

(f) Buyer shall have duly

executed and delivered to Sellers the Transition Services Agreement.

(g) Buyer shall have duly

executed and delivered to Sellers the Escrow Agreement.

(h) Buyer shall have

delivered to the Escrow Agent the Escrow Amount in immediately available

same-day funds by wire transfer to an account of the Escrow Agent designated by

the Escrow Agent in the Escrow Agreement.

 

78

 

(i) Buyer or a direct or

indirect wholly-owned Subsidiary of Buyer shall have duly executed and

delivered to Sellers the Dallas Sublease.

ARTICLE 10

SURVIVAL;  INDEMNIFICATION

SECTION 10.01. 

Survival.  The representations and warranties of the

parties hereto contained in this Agreement or in any certificate or other

writing delivered pursuant hereto or in connection herewith shall survive the

Closing until the earlier of (x) the date on which the financial statements of

the Business for the first full fiscal year of the Business following the

Closing Date have been audited and (y) March 30, 2004; provided that (i) the representations and

warranties contained in Sections 3.23 and 4.09 shall survive indefinitely and

(ii) the representations and warranties contained in Sections 3.17 and 3.20

shall survive until their applicable statutes of limitations have expired.  The covenants and agreements of the parties

contained in this Agreement shall survive the Closing until such time as such

covenants or agreements shall terminate or expire in accordance with their

respective terms.  Notwithstanding the

preceding sentence, any covenant, agreement, representation or warranty in

respect of which indemnity may be sought under this Agreement shall survive the

time at which it would otherwise terminate pursuant to the preceding sentence

with respect to the specific claim, if notice of the inaccuracy or breach

thereof giving rise to such right of indemnity with a reasonably detailed

description thereof shall have been given to the party against whom such

indemnity may be sought prior to such time.

SECTION 10.02.  Indemnification.  (a) Subject to the other provisions of this

Article 10, Sellers jointly and severally hereby indemnify Buyer and its

Affiliates and their respective officers, directors, managers, employees,

agents, advisors and representatives, against and agree to hold each of them

harmless from any and all damage, loss, liability and expense (including,

without limitation, reasonable expenses of investigation or remediation, any

reasonable consulting or engineering fees in connection with any investigation

or remediation and reasonable attorneys’ fees and expenses in connection with

any action, suit or proceeding) (“Damages”)

incurred or suffered by Buyer or any of its Affiliates or any of their

respective officers, directors, managers, employees, agents, advisors or

representatives arising out of (i) any misrepresentation or breach of warranty

(each such misrepresentation and breach of warranty a “Warranty Breach”), (ii) any breach of

covenant or agreement made or to be performed by Sellers pursuant to this

Agreement, (iii) any Retained Liability, or (iv) except to the extent reflected

in the calculation of Final Net Worth, any Liability for Taxes of SuperVent and

Industrias for any tax period (or portion thereof) ending on or prior to the

Closing Date; provided that with

respect to indemnification by Sellers for any Warranty Breach pursuant to this

Section 10.02(a), (1) Sellers shall not be

 

79

 

liable unless the aggregate

amount of Damages with respect to such Warranty Breaches exceeds 1% of the

Purchase Price and then only to the extent of such excess, (2) Sellers shall

not be liable for any single claim that results in Damages of $10,000 or less

(and such claims shall not be aggregated for the purposes of clauses (1) or (3)

of this subsection), in the absence of fraud on the part of any of the Sellers,

Sellers’ maximum liability for all such Warranty Breaches shall not exceed 25%

of the Purchase Price; provided further that,

notwithstanding Section 10.02(a)(iv), Sellers shall not be liable for Taxes of

SuperVent or Industrias (A) attributable solely to any action not in the

ordinary course of business taken on the Closing Date by or at the direction of

Buyer (other than any such action expressly required by applicable law or

expressly required or permitted by this Agreement) or (B) attributable to any

Tax election, change in Tax election or amended Tax Return made by or at the

direction of Buyer after the Closing Date, actions described in clauses (A) or

(B)  being referred to as a “Buyer Tax Act”. Notwithstanding the above,

Section 10.02(b) shall govern all indemnification claims for all Pre-Closing

Environmental Liabilities or environmental matters, whether a Warranty Breach

or otherwise.  For the purpose of (x)

determining whether any Warranty Breach has occurred with respect to a claim

for indemnification or (y) measuring Damages with respect to any Warranty

Breach of Sellers’ representations and warranties contained in Article 3, such

representations and warranties shall be deemed to have been made without any

materiality or Material Adverse Effect qualifications contained therein.

(b) Sellers and Buyer shall

purchase an Environmental Pollution Legal Liability Insurance Policy from

Liberty Mutual Insurance Company in form and substance substantially similar to

the form insurance policy (including the exhibits, schedules and attachments to

such form insurance policy attached hereto as Exhibit I and that provides

coverage with respect to Pre-Closing Environmental Liabilities other than Known

Pre-Closing Environmental Liabilities at a total premium cost of no more than

$165,000 with a ten year term, $10,000,000 per claim/$10,000,000 aggregate

limits and $250,000 per incident deductible (the “PLL Policy”).  Sellers

and Buyer shall share, equally, the cost of the PLL Policy premium, which shall

have been paid and the Policy bound as of Closing.  The PLL Policy shall name Sellers, Tinicum Capital Partners,

L.P., Selkirk Acquisition Partners, L.P., U.S. Industries, Inc., other

assignees of Buyer purchasing substantially all of the Acquired Assets and any entity

or entities providing to Buyer and its Affiliates financing for the

transactions contemplated by this Agreement or related to the Business as

insureds and, except to name any additional insureds as contemplated by the

foregoing, no other changes shall be made to the PLL Policy.   Sellers hereby indemnify Buyer and its

Affiliates and their respective officers, directors, managers, employees,

agents, advisors and representatives, against and agree to hold each of them

harmless from any and all Pre-Closing Environmental Liabilities incurred or

suffered by Buyer or its Affiliates or their respective officers, directors,

managers, employees, agents,

 

80

 

advisors or representatives as follows (“Sellers’ Indemnity”): (i) for Known Pre-Closing Environmental

Liabilities, Sellers shall be responsible for 100% of all Remedial Action costs

and shall use commercially reasonable efforts to complete the required Remedial

Action before the Closing Date, and in any event, as promptly as possible

thereafter; (ii) for all Pre-Closing Environmental Liabilities associated with

the presence or potential presence of Hazardous Substances in soil, water or

groundwater (“Real Estate Matters”),

Seller shall indemnify Buyer (A) with respect to 80% of the aggregate amount of

Damages for which written notice of the Real Estate Matter for which

indemnification is sought by Buyer is provided to Sellers on or prior to the

first anniversary of the Closing Date (“First

Anniversary”), (B) with respect to 60% of the aggregate amount of

Damages for which written notice of the Real Estate Matter for which

indemnification is sought by Buyer is provided to Sellers after the first

anniversary of the Closing Date and on or prior to the third anniversary of the

Closing Date, (C) with respect to 40% of the aggregate amount of Damages for

which written notice of the Real Estate Matter for which indemnification is

sought by Buyer is provided to Sellers after the third anniversary of the

Closing Date and on or prior to the tenth anniversary of the Closing Date, (D)

Sellers shall have no liability for any Real Estate Matter for which written

notice of Buyer’s request for indemnification is provided to Sellers following

the tenth anniversary of the Closing Date (“Tenth

Anniversary”), and (E) notwithstanding the foregoing terms of this

Section 10.02 (b)(ii), Sellers’ Indemnity shall apply to 80% of the aggregate

amount of Damages arising out of the Real Estate Matters specifically

associated with the presence of Hazardous Substances arising from the former

Maintenance Area Shop sink at the Logan, Ohio property, from Closing until the

Tenth Anniversary;  (iii) for all

Pre-Closing Environmental Liabilities associated with the compliance of the

Business with applicable Environmental Law (“Compliance

Matter”) or the off-site disposal of Hazardous Substances by the

Business (“Off-Site Disposal Matter”),

Seller shall indemnify Buyer to the extent arising out of a Third Party Claim

(as defined below); provided that

Sellers’ Indemnity shall apply only (A) with respect to 80% of the aggregate

amount of Damages arising out of a Compliance Matter or Off-Site Disposal

Matter for which written notice of the related Third Party Claim for which

indemnification is sought by Buyer under this subsection 10.02(b) is provided

to Sellers on or prior to the first anniversary of the Closing Date, (B) with

respect to 60% of the aggregate amount of Damages arising out of a Compliance

Matter or Off-Site Disposal Matter for which written notice of the related

Third Party Claim for which indemnification is sought by Buyer under this

subsection 10.02(b) is provided to Sellers after the first anniversary of the

Closing Date and on or prior to the third anniversary of the Closing Date and

(C) with respect to 40% of the aggregate amount of Damages arising out of a

Compliance Matter or Off-Site Disposal Matter for which written notice of the

related Third Party Claim for which indemnification is sought by Buyer under

this subsection 10.02(b) is provided to Sellers after the third anniversary of

the Closing Date and

 

81

 

on or prior to the

fifth  anniversary of the Closing Date,

and (D) Sellers shall have no liability for any Damages relating to any Compliance

Matter or Off-Site Disposal Matter for which written notice of a Third Party

Claim with a sufficiently detailed description to identify the matter as a

Compliance Matter or Off-Site Disposal Matter has not been provided to Sellers

on or prior to the fifth anniversary of the Closing; (iv) Sellers’ aggregate

maximum liability for all Pre-Closing Environmental Liabilities including, but

not limited to, all Remedial Action costs associated with Known Pre-Closing

Environmental Liabilities, Real Estate Matters, Compliance Matters, Off-Site

Disposal Matters or in achieving any PLL Policy deductible, but not including

Sellers’ share of the cost of the PPL Policy premium, shall not exceed $1.25

million (the “Environmental Cap”);

provided that nothing herein

shall limit any remedy of Buyer for fraud with respect to the representations

set forth in Section 3.18.

(c) Subject to the other

provisions of this Article 10, Buyer hereby indemnifies Sellers and their

Affiliates and their respective officers, directors, managers, employees,

agents, advisors and representatives, against and agrees to hold each of them

harmless from any and all Damages incurred or suffered by Sellers or any of

their Affiliates or any of their respective officers, directors, managers, employees,

agents, advisors or representatives, arising out of (i) any Warranty Breach by

Buyer, (ii) any breach of covenant or agreement made or to be performed by

Buyer pursuant to this Agreement, (iii) any Assumed Liability or (iv) any

liability for Taxes of SuperVent or Industrias (1) for any tax period (or

portion thereof) beginning after the Closing Date or (2) attributable to a

Buyer Tax Act; provided that with

respect to indemnification by Buyer for any Warranty Breach pursuant to this

Section 10.02(c), (1) Buyer shall not be liable unless the aggregate amount of

Damages with respect to such Warranty Breaches exceeds 1% of the Purchase Price

and then only to the extent of such excess, (2) Buyer shall not be liable for

any single claim that results in Damages of $10,000 or less (and such claims

shall not be aggregated for the purposes of clause (1) above) and (3) Buyer’s

aggregate maximum liability for all such Warranty Breaches shall not exceed 25%

of the Purchase Price.  For the purpose

of (x)  determining whether any Warranty

Breach has occurred with respect to a claim for indemnification or (y)

measuring Damages with respect to any Warranty Breach of Buyer’s

representations and warranties contained in Article 4, such representations and

warranties shall be deemed to have been made without any materiality or

material adverse effect qualifications contained therein.

(d) Without regard to any

limitation on indemnification set forth in Section 10.02(c) hereof, subject to

the other provisions of this Article 10, Buyer hereby indemnifies Sellers,

their Affiliates and their respective officers, directors, managers, employees,

agents, advisors and representatives, against and agrees to hold each of them

harmless from any and all Damages incurred or suffered by

 

82

 

Sellers or their Affiliates to the extent arising out of (i)  a Post-Closing Environmental Liability and

(ii) the portion of any Pre-Closing Environmental Liability for which Sellers

are not responsible or which exceed the Environmental Cap pursuant to the terms

of Section 10.02(b).

 

SECTION

10.03.  Procedures.  (a) Subject to the provisions of Section

10.04, the party seeking indemnification under Section 10.02 (the “Indemnified Party”) agrees to give reasonably

prompt written notice to the party against whom indemnity is sought (the “Indemnifying Party”) of the assertion of

any claim, or the commencement of any suit, action or proceeding (“Claim”) in respect of which indemnity may

be sought under Section 10.02 and will provide the Indemnifying Party such

information with respect thereto that the Indemnifying Party may reasonably

request.  The parties hereby acknowledge

and agree that except with respect to matters arising under Section 10.02(b),

the failure by any Indemnified Party to give notice as provided herein shall

not relieve the Indemnifying Party of its indemnification obligation under this

Agreement except to the extent that such Indemnifying Party is prejudiced as a

result of such failure to give notice.

 

(b) Subject to Section

10.04, the Indemnifying Party shall be entitled to participate in the defense

of, investigation of, corrective action or any Remedial Action required to be

undertaken in response to, any Claim asserted by a third party, including any

Governmental Authority (“Third Party Claim”)

and, subject to the limitations set forth in this Section or Section 10.04,

shall be entitled to control and appoint lead counsel for such defense, in each

case at its expense subject to the deductible and maximum liability (as and if

applicable) described in Section 10.02.

(c) If the Indemnifying

Party shall assume the control and cost of the defense of any Third Party Claim

in accordance with the provisions of this Section or Section 10.04,  (i) the Indemnifying Party shall obtain the

prior written consent of the Indemnified Party (which shall not be unreasonably

withheld) before entering into any settlement of such Third Party Claim if the

settlement does not provide for the unconditional written release of the

Indemnified Party from any and all liabilities and obligations with respect to

such Third Party Claim or if the settlement imposes any form of relief other

than monetary against the Indemnified Party and (ii) the Indemnified Party

shall be entitled to participate in the defense of such Third Party Claim and

to employ separate counsel of its choice for such purpose.  The fees and expenses of such separate

counsel shall be paid by the Indemnified Party.  In the event that the Indemnified Party shall in good faith

determine that the Indemnified Party may have available to it one or more

defenses or counterclaims that are inconsistent with one or more of those that

may be available to the Indemnifying Party in respect of such claim or any

litigation relating thereto, the Indemnified Party shall have the right to

retain separate legal

 

83

 

counsel and participate in

the defense, settlement, negotiations or litigation relating to any such claim

at the sole cost of the Indemnifying Party, provided

that if the Indemnified Party does so participate, the Indemnified Party shall

not settle such claim or litigation without the written consent of the

Indemnifying Party, such consent not to be unreasonably withheld.

(d) Each party shall

cooperate, and cause their respective Affiliates to cooperate, in the defense

or prosecution of any Third Party Claim (including any counterclaims filed by

Sellers or Buyer) and shall provide access to properties and individuals as reasonably

requested and furnish or cause to be furnished records, information and

testimony, and attend such conferences, discovery proceedings, hearings, trials

or appeals, as may be reasonably requested in connection therewith.  This cooperation shall be provided without

cost or expense of the other party other than reimbursement of out-of-pocket

travel or similar expenses subject to the provisions of Section 10.02.

(e) Each Indemnified Party

shall use commercially reasonable efforts to collect any amounts available

under insurance coverage, or from any other Person alleged to be responsible,

for any Damages payable under Section 10.02.

SECTION 10.04.  Additional

Procedures Relating to Environmental Matters.  (a) Each party agrees that it shall not, and

shall use its best efforts to ensure that each of its Affiliates shall not,

directly or indirectly, communicate orally or in writing with any Governmental

Authority relating to any actual or potential Environmental Liabilities for

which the other party may be responsible under this Agreement; provided that in the event Buyer or any

Seller believes in good faith that such communication is required by any law,

Buyer or such Seller shall notify its indemnitor in advance of making any such

communication and shall give such other party a reasonable period of time to

either make such communication itself or to provide (i) a written opinion of

independent counsel that such communication is not legally mandated and (ii)

indemnification for the failure to so communicate to the extent allowed under

Section 10.02(b).

(b) Each party agrees that

it will not, and agrees to use its best efforts to ensure that its Affiliates

do not, voluntarily or by discretionary action, accelerate the timing, or

increase the cost, of any obligations of the other party under this Article 10,

however, the conduct of Phase I or Phase II Environmental Assessments as part

of a sale of any Real Property or sale of the Business shall not be construed

as a violation of this Section 10.05(b).

(c) Each party’s obligations

to indemnify for any Environmental Liability pursuant to this Article 10 or to

conduct any Remedial Action shall be deemed satisfied so long as the remedy (i)

complies with applicable Environmental Laws, (ii) would reasonably be expected

to be acceptable to

 

84

 

applicable Governmental Authorities (although no approval by such

Governmental Authority is necessary unless required by applicable Environmental

Law) and (iii) is commercially reasonable and cost-effective; provided that this Section 10.04(c) shall

not be construed as a waiver by either party of any requirement that the party

undertaking investigative or corrective action first obtain the approval of

Governmental Authorities having jurisdiction over such matters.

 

(d) With respect to any

Pre-Closing Environmental Liability for which Buyer or any of its Affiliates

seeks any indemnification pursuant to Section 10.02(b), the party bearing 50%

or more of the cost pursuant to Section 10.02(b) shall be entitled to control

and appoint lead counsel or consultants for such defense, investigation or

remedial action, and the other party or its Affiliate, shall be entitled to

participate in the defense thereof, for each case at its own expense.

SECTION 10.05.  Calculation of

Damages.  (a) The amount of any Damages

payable under Section 10.02 or Section 10.04 by the Indemnifying Party shall be

net of any amounts recovered or recoverable by the Indemnified Party under

applicable insurance policies, from any other third party with indemnification

obligations or from any other Person alleged to be responsible therefor.  If the Indemnified Party receives any

amounts under applicable insurance policies, from any other third party with

indemnification obligations or from any other Person alleged to be responsible

for any Damages, subsequent to an indemnification payment by the Indemnifying

Party, then such Indemnified Party shall promptly reimburse the Indemnifying

Party for any payment made or expense incurred by such Indemnifying Party in

connection with providing such indemnification payment up to the amount

received by the Indemnified Party, net of any expenses incurred by such

Indemnified Party in collecting such amount.

(b) The Indemnifying Party shall

not be liable under Section 10.02 for any 

(i) Damages relating to any matter to the extent that (A) to the extent

there is an amount included in the calculation of Final Net Worth as a specific

liability or reserve relating to such matter or (B) the Indemnified Party had

otherwise been compensated for such matter pursuant to the Purchase Price

adjustment under Section 2.08 or (ii) consequential or punitive Damages (except

to the extent such Damages are awarded to a third party).

SECTION 10.06. Dispute Resolutions.  If the parties cannot resolve any claim for

indemnification within 30 days after the notification of such claim pursuant to

Article 10, excluding any Third Party Claim, the parties agree to settle such

claim by arbitration in accordance with the then-prevailing Commercial

Arbitration Rules of the American Arbitration Association, as modified herein.

The place of arbitration shall be New York, New York.  There shall be three neutral and impartial arbitrators and each

arbitrator shall be a duly admitted and

 

85

 

practicing attorney with at least 10 years experience as an attorney in

the field of commercial law.  Sellers,

on the one hand, and Buyer, on the other hand, shall each appoint one arbitrator

within 15 days after the commencement of the arbitration and the two

arbitrators selected shall select the third arbitrator within 15 days of their

appointment.  The arbitrators shall

permit and facilitate such pre-hearing discovery and exchange of documents and

information to which the parties in writing agree or that the arbitrators

determine is relevant to the dispute between the parties and is appropriate

taking into account the needs of the parties and desirability of making

discovery expeditious and cost-effective. 

Any discovery permitted hereunder shall be completed within 45 days from

the date on which the respondent(s) communicates its or their answer(s) to the

claimant(s). The arbitration shall be governed by the United States Arbitration

Act, 9 U.S.C. §§ 1-16.  Judgment upon

the award of the arbitrators may be entered in any court of competent

jurisdiction.  The decision of the

arbitrators, which shall include a decision regarding which of the parties is

the prevailing party, shall be binding and nonappealable.  The costs of such arbitration, including

fees and expenses of the arbitrators, shall be borne by the non-prevailing

party.

 

SECTION 10.07.  Effect of

Investigation.  The right to indemnification, payment of Damages or for other

remedies based on any representation, warranty, covenant or obligation of

Sellers or Buyer contained in or made pursuant to this Agreement shall not be

affected by any investigation conducted with respect to, or any knowledge

acquired (or capable of being acquired) at any time, whether before or after

the execution and delivery of this Agreement or the date the Closing occurs,

with respect to the accuracy or inaccuracy of or compliance with, any such

representation, warranty, covenant or obligation.  The waiver of any condition to the obligation of Buyer or Sellers

to consummate the Closing, where such condition is based on the accuracy of any

representation or warranty, or on the performance of or compliance with any

covenant or obligation, shall not affect the right to indemnification, payment

of Damages or other remedy based on such representation, warranty, covenant or

obligation.

SECTION 10.08.  Assignment

of Claims.  If

the Indemnified Party receives any payment from an Indemnifying Party in

respect of any Damages pursuant to Section 10.02 and the Indemnified Party

could have recovered all or a part of such Damages from a third party (a “Potential Contributor”) based on the

underlying Claim asserted against the Indemnifying Party, the Indemnified Party

shall assign such of its rights to proceed against the Potential Contributor as

are necessary to permit the Indemnifying Party to recover from the Potential

Contributor the amount of such payment.

SECTION 10.09.  Exclusivity. After the

Closing, Article 10 will provide the exclusive remedy for any

misrepresentation, breach of warranty, covenant or other agreement (other than

those contained in Sections 2.01, 2.08 and 7.10 and Articles

 

86

 

5 and 8) or other claim

arising out of this Agreement and, Buyer and its Affiliates agree not to

initiate or commence any action in any court against Sellers for any

misrepresentation, breach of warranty, covenant or other agreement (other than

those contained in Sections 2.01, 2.08 and 7.10 and Articles 5 and 8) or other

claim arising out of this Agreement. 

Buyer and its Affiliates hereby further agree that they will not assert

in any matter before any court or in any arbitration any tort claim (other than

a claim for fraud) regarding a misrepresentation, breach of warranty, covenant

or other agreement (other than those contained in Sections 2.01, 2.08 and 7.10

and Articles 5 and 8) under this Agreement.

SECTION 10.10.  Tax

Treatment of Indemnification Payments.  Any indemnification payment made pursuant to

this Article 10 shall be treated as an adjustment to the Purchase Price for Tax

purposes.

ARTICLE 11

TERMINATION

SECTION 11.01.  Grounds

for Termination.  This Agreement may be terminated at any time prior to the

Closing:

(a) by mutual written agreement of Sellers and Buyer;

(b) by either Sellers or

Buyer if the Closing shall not have been consummated on or before July 31, 2002

(the “Termination Date”); provided, however,

that the terminating party may not exercise this right if it is in breach of

its obligations under this Agreement;

(c) by either Sellers or

Buyer if consummation of the transactions contemplated hereby would violate any

nonappealable final order, decree or judgment of any court or Governmental

Authority having competent jurisdiction, or any Governmental Authority shall

have adopted any applicable state, federal or foreign law permanently

restraining, enjoining or otherwise prohibiting the transactions contemplated

hereby.

The party desiring to

terminate this Agreement pursuant to clauses 11.01(b) or 11.01(c) shall give

notice of such termination to the other party. 

If this Agreement is terminated as provided herein:

(i) upon written request

therefor, Buyer will redeliver to Sellers all documents, work papers and other

material of Sellers relating to the transactions contemplated hereby, whether

obtained before or after the execution hereof; and

 

87

 

(ii) all filings, applications and other submissions

made shall, to the extent practicable, be withdrawn from the agency or other

person to which made.

SECTION 11.02.  Effect of

Termination.  If

this Agreement is terminated as permitted by Section 11.01, such termination

shall be without liability of either party (or any stockholder, director,

officer, employee, agent, consultant or representative of such party) to the

other party to this Agreement; provided

that if such termination shall result from the willful (i) failure of either

Buyer or Sellers to fulfill a condition to the performance of the obligations

of the other party, (ii) failure to perform a covenant of this Agreement or

(iii) breach by either Buyer or Sellers hereto of any representation or

warranty contained herein, such party shall be fully liable for any and all

Damages incurred or suffered by the other party as a result of such failure or

breach.  The provisions of Section 11.02

and Article 12 shall survive any termination hereof pursuant to Section 11.01.

ARTICLE 12

MISCELLANEOUS

SECTION 12.01. 

Notices.  All notices, requests and other

communications to any party hereunder shall be in writing (including facsimile

transmission) and shall be given (i) by personal delivery to the appropriate

address as set forth below (or at such other address for the party as shall

have been previously specified in writing to the other party), (ii) by reliable

overnight courier service (with confirmation) to the appropriate address as set

forth below (or at such other address for the party as shall have been

previously specified in writing to the other party), or (iii) by facsimile

transmission (with confirmation) to the appropriate facsimile number set forth

below (or at such other facsimile number for the party as shall have been

previously specified in writing to the other party) with follow-up copy by

reliable overnight courier service the next Business Day:

if

to Buyer, to:

Tinicum Capital Partners,

L.P. 

800 Third Avenue 

New York, New York 10022 

Attention: Eric M. Ruttenberg 

Fax: (212) 750-9358

 

88

 

 

with

a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP 

Four Times Square 

New York, NY, USA 10036-6522

Attention:  Paul T. Schnell and Richard

J. Grossman 

Fax:  (917) 777-2322 and (917) 777-2116

 

if

to Sellers, to:

c/o U.S. Industries, Inc. 

101 Wood Avenue South 

P.O. Box 169 

Iselin, NJ 08830-0169 

Attention: General Counsel 

Fax: (732) 767-2208

with

a copy to:

Davis Polk & Wardwell 

450 Lexington Avenue 

New York, New York  10017 

Attention:  John A. Bick 

Fax:  (212) 450-3800

and

a copy to:

Edwards & Angell LLP 

51 John F. Kennedy Parkway 

Short Hills, NJ 07078-2701 

Attention:  Eric J. Nemeth 

Fax:  973-376-3380

All such notices, requests

and other communications shall be deemed received on the date of receipt by the

recipient thereof if received prior to 5 p.m. in the place of receipt and such

day is a Business Day in the place of receipt. Otherwise, any such notice,

request or communication shall be deemed not to have been received until the

next succeeding Business Day in the place of receipt.

 

89

 

SECTION 12.02.  Amendments

and Waivers.  (a)

Any provision of this Agreement may be amended or waived if, but only if, such

amendment or waiver is in writing and is signed, in the case of an amendment,

by all of the parties hereto, or in the case of a waiver, by the party against

whom the waiver is to be effective.

(b) No failure or delay by

any party in exercising any right, power or privilege hereunder shall operate

as a waiver thereof nor shall any single or partial exercise thereof preclude

any other or further exercise thereof or the exercise of any other right, power

or privilege. The rights and remedies herein provided shall be cumulative and

not exclusive of any rights or remedies provided by law.

SECTION 12.03. 

Expenses.  Except as otherwise expressly provided for

in this Agreement, all costs and expenses incurred in connection with this

Agreement shall be paid by the party incurring such cost or expense.

SECTION 12.04.  Successors and Assigns.  The provisions of this Agreement shall be

binding upon and inure to the benefit of the parties hereto and their

respective successors and permitted assigns; provided that Sellers and Buyer,

respectively, may not assign, delegate or otherwise transfer any of its rights

or obligations under this Agreement without the consent of the other party,

except that Buyer may assign its rights and delegate its duties under this

Agreement in whole or in part to any entity or entities, or any assignee of

such entity or entities, providing financing for the transactions contemplated

by this Agreement or to any entity or entities providing to Buyer and its

Affiliates financing related to the Business, or to one or more of its wholly

owned Subsidiaries on the condition that any such assignee accepts, in writing,

all rights, conditions and obligations imposed or inuring to Buyer under

Article 10, but no such assignment shall relieve Buyer of its obligations

hereunder.  Furthermore, if, at any time

after the Closing, Buyer asks Sellers to consent to the assignment of its

rights and the delegation of its duties under this Agreement to the purchaser

of all or substantially all of the assets of the Business, Sellers may not

unreasonably withhold such consent, provided such purchaser is credit-worthy

and agrees to be bound by the terms of this Agreement.

SECTION 12.05.  Governing

Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN

ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES

OF CONFLICTS OR CHOICE OF LAWS OR ANY OTHER LAW THAT WOULD MAKE THE LAWS OF ANY

OTHER  JURISDICTION OTHER THAN THE

STATE OF NEW YORK APPLICABLE HERETO.

 

90

 

SECTION 12.06.  Jurisdiction.  Except as otherwise expressly provided in

this Agreement, the parties hereto agree that any suit, action or proceeding

seeking to enforce any provision of, or based on any matter arising out of or

in connection with, this Agreement or the transactions contemplated hereby

shall be brought in the United States District Court for the Southern District

of New York (or if such action cannot be brought therein, in any New York State

court sitting in New York City), so long as such courts shall have subject

matter jurisdiction over such suit, action or proceeding, and that any cause of

action arising out of this Agreement shall be deemed to have arisen from a

transaction of business in the State of New York. Each of the parties hereby

irrevocably consents to the jurisdiction of such courts (and of the appropriate

appellate courts therefrom) in any such suit, action or proceeding and

irrevocably waives, to the fullest extent permitted by law, any objection that

it may now or hereafter have to the laying of the venue of any such suit,

action or proceeding in any such court or that any such suit, action or

proceeding which is brought in any such court has been brought in an

inconvenient forum.  Process in any such

suit, action or proceeding may be served on any party anywhere in the world,

whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party

agrees that service of process on such party as provided in Section 12.01 shall

be deemed effective service of process on such party.

SECTION 12.07.  WAIVER OF

JURY TRIAL. 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT

TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS

AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

SECTION 12.08.  Counterparts;

Third Party Beneficiaries. 

This Agreement may be signed in any number of counterparts, each of

which shall be an original, with the same effect as if the signatures thereto

and hereto were upon the same instrument. 

This Agreement shall become effective when each party hereto shall have

received a counterpart hereof signed by the other parties hereto. No provision

of this Agreement is intended to confer upon any Person other than the parties

hereto any rights or remedies hereunder.

 

SECTION 12.09.  Entire

Agreement. 

This Agreement (including the Disclosure Schedule and Exhibits hereto),

the Escrow Agreement, the Transition Services Agreement, the Dallas Sublease

and the Confidentiality Agreement constitute the entire agreement between the

parties with respect to the subject matter of this Agreement and supersede all

prior agreements and understandings, both oral and written, between the parties

with respect to the subject matter of this Agreement. The Confidentiality

Agreement shall remain in full force and effect after the execution hereof.

 

91

 

SECTION 12.10. 

Captions.  The captions herein are included for

convenience of reference only and shall be ignored in the construction or

interpretation hereof.

SECTION 12.11.  Severability.  If any term, provision, covenant or

restriction of this Agreement is held by a court of competent jurisdiction or

other authority to be illegal, invalid, void, unenforceable or against its

regulatory policy, the remainder of the terms, provisions, covenants and

restrictions of this Agreement shall remain in full force and effect and shall

in no way be affected, impaired or invalidated.

SECTION 12.12.  Specific

Performance. 

Sellers and Buyer acknowledge and agree that in the event of any breach

of this Agreement, each non-breaching party would be irreparably and

immediately harmed and could not be made whole by monetary damages.  Therefore, Sellers and Buyer (a) hereby

waive, in any action for specific performance, the defense of adequacy of a

remedy at law and any requirement for the securing or posting of any bond in

connection with any such remedy and (b) shall be entitled, in addition to any

other remedy to which they may be entitled at law or in equity, to compel

specific performance of this Agreement.

SECTION 12.13.  Time of

the Essence. 

Time shall be of the essence of this Agreement.

SECTION 12.14.  English

Language.  The

parties confirm that it is their wish that this Agreement as well as any other

documents relating hereto including notices, are and shall be drawn up in

English only.  Les parties aux présents

confirment leur volonté que cette convention de même tous les documents, y

compris tous avis s’y rattachant, soient rédigés en anglais

seulement.

SECTION 12.15.  Guarantees.  (a) In consideration of the transactions

contemplated by this Agreement, Tinicum hereby unconditionally guaranties to

Sellers (the “Tinicum Guaranty”)

that Tinicum will duly and punctually pay and/or perform, as the case may be,

all obligations, liabilities and undertakings of Buyer under this Agreement,

including, without limitation, all obligations, liabilities and undertakings of

Buyer under Sections 2.05 and 2.08 of this Agreement (collectively, the “Buyer Obligations”). Notwithstanding the

forgoing Tinicum’s obligations under this Section 12.15 shall terminate upon

the payment of any amounts due to Sellers under Section 2.08 or upon the

determination of Final Net Worth pursuant to Section 2.07, in the event that

Final Net Worth does not exceed the lesser of Estimated Final Net Worth or

Target Net Worth.

(b) In consideration of the

transactions contemplated by this Agreement, USI hereby unconditionally

guaranties to Buyer (the “USI Guaranty”)

that USI

 

92

 

will duly and punctually pay

and/or perform, as the case may be, all obligations, liabilities and

undertakings of Sellers under this Agreement, including, without limitation,

all obligations, liabilities and undertakings of Sellers under Article 10 of

this Agreement ((collectively, the “Seller

Obligations”).

(c) The Tinicum Guaranty and

the USI Guaranty are each an absolute, unconditional and continuing guarantee

by Tinicum and USI, respectively, of the Buyer Obligations and the Seller

Obligations, respectively, each in accordance with their terms, and not of

their collectibility only.  Enforcement

of the liabilities and obligations of Tinicum and USI hereunder is in no way

conditioned upon any requirement that any party first attempt to collect or take

any action against Buyer (in the case of Tinicum) or Sellers (in the case of

USI) or any other person primarily or secondarily liable with respect to the

Buyer Obligations or the Seller Obligations or resort to any security or other

means of obtaining payment of any of the Buyer Obligations which Buyer, or the

Seller Obligations which Sellers, may now have or may acquire after the date

hereof or upon any other contingency whatsoever; provided, however, that nothing herein shall adversely

affect USI’s or Tinicum’s rights to assert any defense available to Buyer (in

the case of Tinicum) or Sellers (in the case of USI) under this Agreement or at

law.  Upon any default in the full and

punctual payment and/or performance by Buyer with respect to the Buyer Obligations

or Sellers with respect to the Seller Obligations, in each case in accordance

with their terms, the liabilities and obligations of  Tinicum (as guarantor of the Buyer Obligations)  and USI (as guarantor of the Seller

Obligations) hereunder shall, at the option of the aggrieved party, become

forthwith due and payable, without demand or notice of any nature, all of which

are hereby expressly waived by each of USI and Tinicum.  Payments hereunder may be required on any

number of occasions from Tinicum or USI until such time as the Buyer

Obligations or Seller Obligations, respectively, are paid or satisfied, as the

case may be, in full in accordance with their terms.

SECTION 12.16.  Bulk

Sales.  Buyer

hereby waives compliance with all relevant bulk sales legislation respecting

the sale of the Acquired Assets.

 

93

 

IN WITNESS WHEREOF, the parties hereto have caused

this Agreement to be duly executed by their respective authorized officers as

of the day and year first above written.

	

   

  	

  SELKIRK, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SELKIRK CANADA U.S.A., INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SELKIRK CANADA, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  ELJER PLUMBINGWARE, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SELKIRK ACQUISITION 

  PARTNERS, L.P.

  
	

   

  	

   

  
	

   

  	

  By:

  	

  Tinicum - Selkirk Inc.

  
	

   

  	

  Its:

  	

  General Partner

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  

94

 

	

   

  	

  Solely for purpose of Section 12.15 

  hereof:

  
	

   

  	

   

  	

   

  
	

   

  	

  TINICUM CAPITAL PARTNERS, 

  L.P.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  Tinicum Lantern L.L.C.

  
	

   

  	

  Its:

  	

  General Partner

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name: 

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  
	

   

  	

  Solely for purpose of Sections 5.04, 

  5.05, 5.09, 8.01(c), 8.01(d) and 12.15 

  hereof:

  
	

   

  	

   

  	

   

  
	

   

  	

  U.S. INDUSTRIES, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  

 

95Exhibit 10.3.5

 

EMPLOYMENT AGREEMENT

 

                This Agreement is

made as of the Effective Date between Cincinnati Bell Inc., an Ohio corporation

(“Employer”), and David A. Torline (“Employee”).  For purposes of this Agreement, “Effective Date” means the date

following the day which Employer distributes to its shareholders all of the

common shares of Convergys Corporation owned by Employer after the initial

public offering of Convergys Corporation common shares.

 

                Employer and

Employee agree as follows:

 

1.             Employment.  By this Agreement, Employer and Employee set

forth the terms of Employer’s employment of Employee on and after the Effective

Date.  Any prior agreements or

understandings with respect to Employee’s employment by Employer, are canceled

as of the Effective Date. 

Notwithstanding the preceding sentence, all stock options granted to

Employee prior to the Effective Date shall continue in effect in accordance

with their respective terms and shall not be modified, amended or canceled by

this Agreement.

 

2.             Term of

Agreement.  On the first anniversary

of the Effective Date and on each subsequent anniversary of the Effective Date,

the term of this Agreement automatically shall be extended for a period of one

additional year. Notwithstanding the foregoing, the term of this Agreement is

subject to termination as provided in Section 13.

 

3.             Duties.

 

                A.            Employee will serve as

Vice-President Information Technology of Employer or in such other equivalent

capacity as may be designated by the President of Employer.  Employee will report to the Chief Operating

Officer of Employer or to such other officer as the President of Employer may

direct.

 

                B.            Employee shall furnish such

managerial, executive, financial, technical, and other skills, advice, and

assistance in operating Employer and its Affiliates as Employer may reasonably

request.  For purposes of this

Agreement, “Affiliate” means each corporation which is a member of a controlled

group of corporations (within the meaning of section 1563(a) of the Internal

Revenue Code of 1986, as amended (the “Code”)) which includes Employer.

 

                C.            Employee shall also perform such

other duties, consistent with the provisions of Section 3.A., as are reasonably

assigned to Employee by the President of Employer.

 

 

D.            Employee shall devote

Employee’s entire time, attention, and energies to the business of Employer and

its Affiliates.  The words “entire time,

attention, and energies” are intended to mean that Employee shall devote

Employee’s full effort during reasonable working hours to the business of

Employer and its Affiliates and shall devote at least 40 hours per week to the

business of Employer and its Affiliates. 

Employee shall travel to such places as are necessary in the performance

of Employee’s duties.

 

4.             Compensation.

 

                A.            Employee shall receive a base salary

(the “Base Salary”) of at least $120,500 per year, payable not less frequently

than monthly, for each year during the term of this Agreement, subject to

proration for any partial year.  Such

Base Salary, and all other amounts payable under this Agreement, shall be

subject to withholding as required by law.

 

                B.            In addition to the Base Salary,

Employee shall be entitled to receive an annual bonus (the “Bonus”) for each

calendar year for which services are performed under this Agreement.  Any Bonus for a calendar year shall be

payable after the conclusion of the calendar year in accordance with Employer’s

regular bonus payment policies.  Each year,

Employee shall be given a Bonus target of not less than $40,000 subject to proration

for a partial year.

 

                C.            On at least an annual basis,

Employee shall receive a formal performance review and be considered for Base

Salary and/or Bonus target increases.

 

5.             Expenses.  All reasonable and necessary expenses

incurred by Employee in the

course of the performance of Employee’s duties to Employer shall be

reimbursable in accordance with Employer’s then current travel and expense

policies.

 

6.             Benefits.

 

                A.            While Employee remains in the employ

of Employer, Employee shall be entitled to participate in all of the various

employee benefit plans and programs, or equivalent plans and programs, which

are made available to similarly situated officers of Employer, including the

benefits set forth in Attachment A.

 

                B.            Notwithstanding anything contained

herein to the contrary, the Base Salary and Bonuses otherwise payable to

Employee shall be reduced by any benefits paid to Employee by Employer under

any disability plans made available to Employee by Employer.

 

                C.            As of the Effective Date, Employee

shall be granted options to purchase 15,000 common shares of Employer under

Employer’s 1997 Long Term Incentive Plan. 

In each year of this Agreement after 1998, Employee will be granted

stock options under Employer’s 1997 Long Term Incentive Plan or any similar

plan made available to employees of Employer.

 

2

 

7.             Confidentiality.  Employer and its Affiliates are engaged in

the telecommunications industry within the U.S.  Employee acknowledges that in the course of employment with the

Employer, Employee will be entrusted with or obtain access to information

proprietary to the Employer and its Affiliates with respect to the following (all

of which information is referred to hereinafter collectively as the

“Information”); the organization and management of Employer and its Affiliates;

the names, addresses, buying habits, and other special information regarding

past, present and potential customers, employees and suppliers of Employer and

its Affiliates; customer and supplier contracts and transactions or price lists

of Employer, its Affiliates and their suppliers; products, services, programs

and processes sold, licensed or developed by the Employer or its Affiliates;

technical data, plans and specifications, present and/or future development

projects of Employer and its Affiliates; financial and/or marketing data respecting

the conduct of the present or future phases of business of Employer and its Affiliates;

computer programs, systems and/or software; ideas, inventions, trademarks, business

information, know-how, processes, improvements, designs, redesigns, discoveries

and developments of Employer and its Affiliates; and other information considered

confidential by any of the Employer, its Affiliates or customers or suppliers

of Employer, its Affiliates.  Employee

agrees to retain the Information in absolute confidence and not to disclose the

Information to any person or organization except as required in the performance of Employee’s duties for Employer, without

the express written consent of Employer; provided that Employee’s obligation of

confidentiality shall not extend to any Information which becomes generally

available to the public other than as a result of disclosure by Employee.

 

8.             New Developments.  All ideas, inventions, discoveries,

concepts, trademarks, or other developments or improvements, whether patentable

or not, conceived by the Employee, alone or with others, at any time during the

term of Employee’s employment, whether or not during working hours or on

Employer’s premises, which are within the scope of or related to the business

operations of Employer or its Affiliates (“New Developments”), shall be and

remain the exclusive property of Employer. Employee shall do all things

reasonably necessary to ensure ownership of such New Developments by Employer,

including the execution of documents assigning and transferring to Employer,

all of Employee’s rights, title and interest in and to such New Developments,

and the execution of all documents required to enable Employer to file and

obtain patents, trademarks, and copyrights in the United States and foreign

countries on any of such New Developments.

 

3

 

9.             Surrender of

Material Upon Termination.  Employee

hereby agrees that upon cessation of Employee’s employment, for whatever reason

and whether voluntary or involuntary, Employee will immediately surrender to

Employer all of the property and other things of value in his possession or in

the possession of any person or entity under Employee’s control that are the

property of Employer or any of its Affiliates, including without any limitation

all personal notes, drawings, manuals, documents, photographs, or the like,

including copies and derivatives thereof, relating directly or indirectly to

any confidential information or materials or New Developments, or relating

directly or indirectly to the business of Employer or any of its Affiliates.

 

10.           Remedies.

 

                A.            Employer and Employee hereby

acknowledge and agree that the services rendered by Employee to Employer, the

information disclosed to Employee during and by virtue of Employee’s

employment, and Employee’s commitments and obligations to Employer and its

Affiliates herein are of a special, unique and extraordinary character, and

that the breach of any provision of this Agreement by Employee will cause

Employer irreparable injury and damage, and consequently the Employer shall be

entitled to, in addition to all other remedies available to it, injunctive and

equitable relief to prevent a breach of Sections 7, 8, 9, 11 and 12 of this

Agreement and to secure the enforcement of this Agreement.

 

                B.            Except as provided in Section 10.A.,

the parties agree to submit to final and binding arbitration any dispute, claim

or controversy, whether for breach of this Agreement or for violation of any of

Employee’s statutorily created or protected rights, arising between the parties

that either party would have been otherwise entitled to file or pursue in court

or before any administrative agency (herein “claim”), and waives all right to

sue the other party.

 

                                (i)            This agreement to arbitrate and any

resulting arbitration award are enforceable under and subject to the Federal

Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). 

If the FAA is held not to apply for any reason then Ohio Revised Code

Chapter 2711 regarding the enforceability of arbitration agreements and awards

will govern this Agreement and the arbitration award.

 

                                (ii)           (a)           All

of a party’s claims must be presented at a single arbitration hearing.  Any claim not raised at the arbitration

hearing is waived and released. The arbitration hearing will take place in

Cincinnati, Ohio.

 

                                                (b)           The arbitration process will be

governed by the Employment Dispute Resolution Rules of the American Arbitration

Association (“AAA”) except to the extent they are modified by this Agreement.

 

                                                (c)           Employee has had an opportunity to

review the AAA rules and the requirements that Employee must pay a filing fee

for which the Employer has agreed to split on an equal basis.

 

4

 

                                                (d)           The arbitrator will be selected from

a panel of arbitrators chosen by the AAA in White Plains, New York.  After the filing of a Request for

Arbitration, the AAA will send simultaneously to Employer and Employee an

identical list of names of five persons chosen from the panel. Each party will

have 10 days from the transmittal date in which to strike up to two names,

number the remaining names in order of preference and return the list to the

AAA.

 

                                                (e)           Any pre-hearing disputes will be

presented to the arbitrator for expeditious, final and binding resolution.

 

                                                (f)            The award of the arbitrator will be

in writing and will set forth each issue considered and the arbitrator’s

finding of fact and conclusions of law as to each such issue.

 

                                                (g)           The remedy and relief that may be

granted by the arbitrator to Employee are limited to lost wages, benefits,

cease and desist and affirmative relief, compensatory, liquidated and punitive

damages and reasonable attorney’s fees, and will not include reinstatement or

promotion.  If the arbitrator would have

awarded reinstatement or promotion, but for the prohibition in this Agreement,

the arbitrator may award front pay. The arbitrator may assess to either party,

or split, the arbitrator’s fee and expenses and the cost of the transcript, if

any, in accordance with the arbitrator’s determination of the merits of each

party’s position, but each party will bear any cost for its witnesses and

proof.

 

                                                (h)           Employer and Employee recognize that

a primary benefit each derives from arbitration is avoiding the delay and costs

normally associated with litigation. Therefore, neither party will be entitled

to conduct any discovery prior to the arbitration hearing except that: (i)

Employer will furnish Employee with copies of all non-privileged documents in

Employee’s personnel file; (ii) if the claim is for discharge, Employee will

furnish Employer with records of earnings and benefits relating to Employee’s

subsequent employment (including self-employment) and all documents relating to

Employee’s efforts to obtain subsequent employment; (iii) the parties will

exchange copies of all documents they intend to introduce as evidence at the

arbitration hearing at least 10 days prior to such hearing; (iv) Employee will

be allowed (at Employee’s expense) to take the depositions, for a period not to

exceed four hours each, of two representatives of Employer, and Employer will

be allowed (at its expense) to depose Employee for a period not to exceed four

hours; and (v) Employer or Employee may ask the arbitrator to grant additional

discovery to the extent permitted by AAA rules upon a showing that such

discovery is necessary.

 

5

 

                                                (i)            Nothing herein will prevent either

party from taking the deposition of any witness where the sole purpose for

taking the deposition is to use the deposition in lieu of the witness

testifying at the hearing and the witness is, in good faith, unavailable to

testify in person at the hearing due to poor health, residency and employment

more than 50 miles from the hearing site, conflicting travel plans or other

comparable reason.

 

                                                (j)            Arbitration must be requested in

writing no later than 6 months from the date of the party’s knowledge of the

matter disputed by the claim. A party’s failure to initiate arbitration within

the time limits herein will be considered a waiver and release by that party

with respect to any claim subject to arbitration under this Agreement.

 

                                                (k)           Employer and Employee consent that

judgment upon the arbitration award may be entered in any federal or state

court that has jurisdiction.

 

                                                (1)           Except as provided in Section 10.A.,

neither party will commence or pursue any litigation on any claim that is or

was subject to arbitration under this Agreement.

 

                                                (m)          All aspects of any arbitration

procedure under this Agreement, including the hearing and the record of the

proceedings, are confidential and will not be open to the public, except to the

extent the parties agree otherwise in writing, or as may be appropriate in any

subsequent proceedings between the parties, or as may otherwise be appropriate

in response to a governmental agency or legal process.

 

11.           Covenant Not to

Compete.  For purposes of this

Section 11 only, the term “Employer” shall mean, collectively, Employer and

each of its Affiliates. During the two-year period following termination of

Employee’s employment with Employer for any reason (or if this period is

unenforceable by law, then for such period as shall be enforceable) Employee

will not engage in any business offering services related to the current

business of Employer, whether as a principal, partner, joint venture, agent,

employee, salesman, consultant, director or officer, where such position would

involve Employee in any business activity in competition with Employer. This

restriction will be limited to the geographical area where Employer is then

engaged in such competing business activity or to such other geographical area

as a court shall find reasonably necessary to protect the goodwill and business

of the Employer.

 

                During the

two-year period following termination of Employee’s employment with Employer

for any reason (or if this period is unenforceable by law, then for such period

as shall be enforceable) Employee will not interfere with or adversely affect,

either directly or indirectly, Employer’s relationships with any person, firm,

association, corporation or other entity which is known by Employee to be, or

is included on any listing to which Employee had access during the course of

employment as a customer, client, supplier, consultant or employee of Employer

and that Employee will not divert or change, or attempt to divert or change,

any such relationship to the detriment of

 

6

 

Employer or to the benefit of any other person, firm, association,

corporation or other entity.

 

                During the

two-year period following termination of Employee’s employment with Employer

for any reason (or if this period is unenforceable by law, then for such period

as shall be enforceable) Employee shall not, without the prior written consent

of Employer, accept employment, as an employee, consultant, or otherwise, with

any company or entity which is a customer or supplier of Employer at any time

during the final year of Employee’s employment with Employer.

 

                Employee will not,

during or at any time within three years after the termination of Employee’s

employment with Employer, induce or seek to induce, any other employee of

Employer to terminate his or her employment relationship with Employer.

 

12.           Goodwill.  Employee will not disparage Employer or any

of its Affiliates in any way which could adversely affect the goodwill,

reputation and business relationships of Employer or any of its Affiliates with

the public generally, or with any of their customers, suppliers or employees.

Employer will not disparage Employee.

 

13.           Termination.

 

                A.            (i)            Employer

or Employee may terminate this Agreement upon Employee’s failure or inability

to perform the services required hereunder because of any physical or mental

infirmity for which Employee receives disability benefits under any disability

benefit plans made available to Employee by Employer (the “Disability Plans”),

over a period of one hundred twenty consecutive working days during any twelve

consecutive month period (a “Terminating Disability”).

 

                                (ii)           If Employer or Employee elects to

terminate this Agreement in the event of a Terminating Disability, such

termination shall be effective immediately upon the giving of written notice by

the terminating party to the other.

 

                                (iii)          Upon termination of this Agreement on

account of Terminating Disability, Employer shall pay Employee Employee’s

accrued compensation hereunder, whether Base Salary, Bonus or otherwise

(subject to offset for any amounts received pursuant to the Disability Plans),

to the date of termination.  For as long

as such Terminating Disability may exist, Employee shall continue to be an

employee of Employer for all other purposes and Employer shall provide Employee

with disability benefits and all other benefits according to the provisions of

the Disability Plans and any other Employer plans in which Employee is then

participating.

 

                                (iv)          If the parties elect not to terminate

this Agreement upon an event of a Terminating Disability and Employee returns

to active employment with Employer prior to such a termination, or if such

disability exists for less than one hundred twenty consecutive working days,

the provisions of this Agreement shall remain in full force and effect.

 

7

 

                B.            This Agreement terminates

immediately and automatically on the death of the Employee, provided, however,

that the Employee’s estate shall be paid Employee’s accrued compensation

hereunder, whether Base Salary, Bonus or otherwise, to the date of death.

 

                C.            Employer may terminate this

Agreement immediately, upon written notice to Employee, for Cause. For purposes

of this Agreement, Employer shall have “Cause” to terminate this Agreement only

if Employer’s Board of Directors determines that there has been fraud,

misappropriation or embezzlement on the part of Employee.

 

                D.            Employer may terminate this

Agreement immediately, upon written notice to Employee, for any reason other

than those set forth in Sections 13.A., B. and C.; provided, however, that

Employer shall have no right to terminate under this Section 13.D. within two

years after a Change in Control. In the event of a termination by Employer

under this Section 13.D., Employer shall, within five days after the

termination, pay Employee an amount equal to two times the sum of the annual

Base Salary rate in effect at the time of termination plus the Bonus target in

effect at the time of termination. For the remainder of the Current Term,

Employer shall continue to provide Employee with medical, dental, vision and

life insurance coverage comparable to the medical, dental, vision and life

insurance coverage in effect for Employee immediately prior to the termination;

and, to the extent that Employee would have been eligible for any post–retirement

medical, dental, vision or life insurance benefits from Employer if Employee

had continued in employment through the end of the Current Term, Employer shall

provide such post–retirement benefits to Employee after the end of the

Current Term. All stock options shall become immediately exercisable (and

Employee shall be afforded the opportunity to exercise them.)  In addition, Employee shall be entitled to

receive, as soon as practicable after termination, an amount equal to the sum

of (i) any forfeitable benefits under any qualified or nonqualified pension,

profit sharing, 401(k) or deferred compensation plan of Employer or any

Affiliate which would have vested prior to the end of the Current Term if

Employee’s employment had not terminated plus (ii) if Employee is participating

in a qualified or nonqualified defined benefit plan of Employer or any

Affiliate at the time of termination, an amount equal to the present value of

the additional vested benefits which would have accrued for Employee under such

plan if Employee’s employment had not terminated prior to the end of the

Current Term and if Employee’s annual Base Salary and Bonus target had neither

increased nor decreased after the termination. 

For purposes of this Section 13.D., “Current Term” means the two year

period beginning at the time of termination. 

For purposes of this Section 13.D. and Section 13.E., “Change in

Control” means a change in control as defined in Employer’s 1997 Long Term

Incentive Plan.

 

8

 

                E.             This Agreement shall terminate

automatically in the event that there is a Change in Control and Employee’s

employment with Employer is actually or constructively terminated by Employer

within two years after the Change in Control for any reason other than those

set forth in Sections 13.A., B. and C. For purposes of the preceding sentence,

a “constructive” termination of Employee’s employment shall be deemed to have

occurred if, without Employee’s consent, there is a material reduction in Employee’s

authority or responsibilities or if there is a reduction in Employee’s Base Salary

or Bonus target from the amount in effect immediately prior to the Change in Control

or if Employee is required by Employer to relocate from the city where Employee

is residing immediately prior to the Change in Control. In the event of a termination

under this Section 13.E., Employer shall pay Employee an amount equal to two

times the sum of the annual Base Salary rate in effect at the time of

termination plus the Bonus target in effect at the time of termination, all

stock options shall become immediately exercisable (and Employee shall be

afforded the opportunity to exercise them.) For the remainder of the Current

Term, Employer shall continue to provide Employee with medical, dental, vision

and life insurance coverage comparable to the medical, dental, vision and life

insurance coverage in effect for Employee immediately prior to the termination

and, to the extent that Employee would have been eligible for any

post-retirement medical, dental, vision or life insurance benefits from

Employer if Employee had continued in employment through the end of the Current

Term, Employer shall provide such post–retirement benefits to Employee

after the end of the Current Term. 

Employee’s accrued benefit under any nonqualified pension or deferred compensation

plan maintained by Employer or any Affiliate shall become immediately vested

and nonforfeitable and Employee also shall be entitled to receive a payment

equal to the sum of (i) any forfeitable benefits under any qualified pension or

profit sharing or 401 (k) plan maintained by Employer or any Affiliate plus

(ii) if Employee is participating in a qualified or nonqualified defined

benefit plan of Employer or any Affiliate at the time of termination, an amount

equal to the present value of the additional benefits which would have accrued

for Employee under such plan if Employee’s employment had not terminated prior

to the end of the Current Term and if Employee’s annual Base Salary and Bonus

target had neither increased nor decreased after the termination.  Finally, to the extent that Employee is

deemed to have received an excess parachute payment by reason of the Change in

Control, Employer shall pay Employee an additional sum sufficient to pay (i)

any taxes imposed under section 4999 of the Code plus (ii) any federal, state

and local taxes applicable to any taxes imposed under section 4999 of the Code.

For purposes of this Section 13.E., “Current Term” means the two year period

beginning at the time of termination.

 

                F.             Employee may resign upon 60 days’

prior written notice to Employer. In the event of a resignation under this

Section 13.F., this Agreement shall terminate and Employee shall be entitled to

receive Employee’s Base Salary through the date of termination, any Bonus

earned but not paid at the time of termination and any other vested

compensation or benefits called for under any compensation plan or program of

Employer.

 

9

 

                G.            Employee may retire (a) upon six

months’ prior written notice to Employer at any time after Employee has

attained age 55 and completed at least ten years of service with Employer and

its Affiliates or (b) on such earlier date as may be approved by the President

of Employer.  In the event of a retirement

under this Section 13.G., this Agreement shall terminate and Employee shall be

entitled to receive Employee’s Base Salary through the date of termination and

any Bonus earned but not paid at the time of termination. In addition, Employee

shall be entitled to receive any compensation or benefits made available to

retirees under Employer’s standard policies and programs, including retiree

medical and life insurance benefits, a prorated Bonus for the year of

termination, and the right to exercise options after retirement.

 

                H.            Upon termination of this Agreement

as a result of an event of termination described in this Section 13 and except

for Employer’s payment of the required payments under this Section 13

(including any Base Salary accrued through the date of termination, any Bonus

earned for the year preceding the year in which the termination occurs and any

nonforfeitable amounts payable under any employee plan), all further

compensation under this Agreement shall terminate.

 

                I.              The termination of this Agreement

shall not amend, alter or modify the rights and obligations of the parties

under Sections 7, 8, 9, 10, 11, and 12 hereof, the terms of which shall survive

the termination of this Agreement.

 

14.           Assignment.  As this is an agreement for personal

services involving a relation of confidence and a trust between Employer

and  Employee, all rights and duties of

Employee arising under this Agreement, and the Agreement itself, are

non-assignable by Employee.

 

15.           Notices.  Any notice required or permitted to be given

under this Agreement shall be sufficient, if in writing, and if delivered

personally or by certified mail to Employee at Employee’s place of residence as

then recorded on the books of Employer or to Employer at its principal office.

 

16.           Waiver.  No waiver or modification of this Agreement

or the terms contained herein shall be valid unless in writing and duly

executed by the party to be charged therewith. The waiver by any party hereto

of a breach of any provision of this Agreement by the other party shall not

operate or be construed as a waiver of any subsequent breach by such party.

 

17.           Governing Law.  This agreement shall be governed by the laws

of the State of Ohio.

 

18.           Entire Agreement.  This Agreement contains the entire agreement

of the parties with respect to Employee’s employment by Employer.  There are no other contracts, agreements or

understandings, whether oral or written, existing between them except as

contained or referred to in this Agreement.

 

10

 

19.           Severability.  In case any one or more of the provisions of

this Agreement is held to be invalid, illegal, or unenforceable in any respect,

such invalidity, illegality, or other enforceability shall not affect any other

provisions hereof, and this Agreement shall be construed as if such invalid,

illegal, or unenforceable provisions have never been contained herein.

 

20.           Successors and

Assigns.  Subject to the

requirements of Paragraph 14 above, this Agreement shall be binding upon

Employee, Employer and Employer’s successors and assigns.

 

21.           Confidentiality

of Agreement Terms.  The terms of

this Agreement shall be held in strict confidence by Employee and shall not be

disclosed by Employee to anyone other than Employee’s spouse, Employee’s legal

counsel, and Employee’s other advisors, unless required by law.  Further, except as provided in the preceding

sentence, Employee shall not reveal the existence of this Agreement or discuss

its terms with any person (including but not limited to any employee of

Employer or its Affiliates) without the express authorization of the President

of Employer.  To the extent that the

terms of this Agreement have been disclosed by Employer, in a public filing or

otherwise, the confidentiality requirements of this Section 21 shall no longer

apply to such terms.

 

                IN WITNESS

WHEREOF, the parties hereto have caused this Agreement to be duly executed as

of the day and year first above written.

 

 

	

  CINCINNATI BELL INC.

  
	

   

  
	

  By:

  	

  /s/ Richard G. Ellenberger

  
	

   

  
	

   

  
	

  DAVID A. TORLINE

  
	

   

  
	

  /s/ David A. Torline

  

 

11

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