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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): September 19, 1996
WESTINGHOUSE AIR BRAKE COMPANY
(Exact name of registrant as specified in its charter)
Commission file number 1-13782
DELAWARE 1-13782 25-1615902
(State or other jurisdiction (Commission (IRS Employer
of Incorporation File Number) Identification No.)
1001 Air Brake Avenue
Wilmerding, Pennsylvania 15148
(Address of principal executive offices)
Registrant's telephone number, including area code: (412) 825-1000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 19, 1996, Westinghouse Air Brake Company,
("WABCO" or the "Company"), through two of its wholly-owned direct
subsidiaries, W & P Holding Corp. ("W & P") and Westinghouse Railway Holdings
(Canada) Inc. ("Westinghouse Canada"), acquired from Mark IV Industries Inc.
certain businesses and operations in the United States, Canada, the United
Kingdom and The Netherlands. The two-part transaction involved two purchase
agreements, each executed and delivered on September 19, 1996, and each
containing an agreement by WABCO to guaranty and act as surety for the
obligations of its purchasing subsidiary thereunder. In one agreement, W & P
purchased from Mark IV Industries, Inc. and Mark IV PLC all of the issued and
outstanding capital stock of Vapor Corp., an Illinois corporation, Mark IV
Transportation Products Corp., a Delaware corporation, Vapor Netherlands B.V.,
a Netherlands corporation, and Vapor U.K. Limited, a United Kingdom corporation
(collectively, the "Vapor Companies"), and in the other agreement Westinghouse
Canada purchased from Mark IV Industries Limited all of the issued and
outstanding capital stock of Vapor Canada Inc., a Canadian corporation ("Vapor
Canada"; Vapor Canada and the Vapor Companies are hereinafter collectively
referred to as the "Vapor Group").
The assets of the Vapor Group consist of real property located
in Niles, Illinois (333,000 square feet), and in Montreal, Quebec, Canada
(106,000 square feet), as well as manufacturing and office equipment,
inventory, contracts and intellectual property. The Vapor Group had
approximately 650 employees in September, 1996. Prior to WABCO's acquisition
thereof, such assets had been used in the manufacture and sale of, among other
things, door control operating systems and accessories for buses and rail cars,
vehicle to wayside communications equipment for use in connection with the
monitoring of mass transit systems and electrical, HVAC and thermal products
for use in mass transit vehicles, locomotives and industrial markets. It is
presently anticipated that the acquired assets will continue in those same
uses.
The aggregate purchase price for the Vapor Group was cash in
the amount of approximately $63,000,000. Pursuant to an earn-out provision,
the purchase price will be increased by $1.00 for every $3.50 of net sales of
the Vapor Group in excess of $145,000,000 during the period from August 1, 1996
to February 28, 1998, such increased amount to be capped at $2,000,000. The
purchase price was arrived at by negotiation among the parties. To obtain the
necessary funds for the acquisition, the Company entered into an amendment and
restatement of its credit agreement with The Chase Manhattan Bank, as successor
to Chemical Bank, The Chase Manhattan Bank Delaware, as successor to Chemical
Bank Delaware, The Bank of New York and the other financial institutions named
therein.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Item 7(a) Financial Statements
Coopers Coopers & Lybrand L.L.P.
&Lybrand
a professional sevices firm
VAPOR COMPANIES
COMBINED FINANCIAL STATEMENTS
AS OF THE LAST DAY OF FEBRUARY 1996 AND 1995,
AND FOR THE THREE YEAR PERIOD ENDED
FEBRUARY 29, 1996
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COOPERS COOPERS & LYBRAND L.L.P.
&LYBRAND
a professional sevices firm
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE MANAGEMENT OF THE
VAPOR COMPANIES
We have audited the accompanying combined balance sheets of the Vapor Companies
(or the "Group", as defined in Note 1) as of the last day of February, 1996 and
1995, and the related combined statements of income and net equity, and cash
flows for each of the three years in the period ended February 29, 1996. These
financial statements are the responsibility of the Group's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Vapor Companies
as of the last day of February, 1996 and 1995, and the combined results of
their operations and their cash flows for each of the three years in the period
ended February 29, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Rochester, New York
April 17, 1996
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VAPOR COMPANIES
COMBINED BALANCE SHEETS
LAST DAY OF FEBRUARY 1996 AND 1995
(Dollars in Thousands)
ASSETS 1996 1995
---- ----
Current Assets:
Cash $ 622 $ 828
Accounts receivable, net 17,513 17,150
Inventories 14,324 10,110
Current deferred tax asset 1,399 1,596
Other current assets 2,387 2,773
------- -------
Total current assets 36,245 32,457
Property, plant and equipment, net 20,132 20,939
Cost in excess of net assets acquired 9,768 10,049
Non-current deferred tax asset 1,379 1,556
Other non-current assets 86 -
------- -------
TOTAL ASSETS $67,610 $65,001
======= =======
LIABILITIES & NET EQUITY
Current Liabilities:
Accounts payable $ 5,030 $ 3,356
Compensation related liabilities 2,088 2,031
Accrued warranties and other expenses 3,724 5,660
------- -------
Total current liabilities 10,842 11,047
Post-retirement liabilities 1,200 1,200
Net equity 55,568 52,754
------- -------
TOTAL LIABILITIES
& NET EQUITY $67,610 $65,001
======= =======
The accompanying notes are an integral part of these financial statements.
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VAPOR COMPANIES
COMBINED STATEMENTS OF INCOME AND NET EQUITY
YEARS ENDED THE LAST DAY OF FEBRUARY 1996, 1995 and 1994
(Dollars in Thousands)
1996 1995 1994
---- ---- ----
Net sales $64,977 $68,046 $66,595
------- ------- -------
Operating costs:
Cost of products sold 42,451 47,626 46,363
Selling and administration 10,653 10,146 11,007
Research and development 1,388 1,890 1,803
Depreciation and amortization 2,056 2,044 1,990
------- ------- -------
Total operating costs 56,548 61,706 61,163
------- ------- -------
Operating income 8,429 6,340 5,432
Provision for income taxes (3,347) (2,441) (2,088)
------- ------- -------
NET INCOME 5,082 3,899 3,344
Net equity at the beginning
of the year 52,754 49,894 46,933
Cash transfers to parent, net (2,268) (1,039) (383)
------- ------- -------
Net equity at the end of the year $55,568 $52,754 $49,894
======= ======= =======
The accompanying notes are an integral part of these financial statements.
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VAPOR COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED THE LAST DAY OF FEBRUARY 1996, 1995 AND 1994
(Dollars in Thousands)
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 5,082 $ 3,899 $ 3,344
Items not affecting cash:
Depreciation and amortization 2,056 2,044 1,990
Deferred income tax (benefit) 374 301 (297)
------- ------- -------
Net cash provided by earnings 7,512 6,244 5,037
Changes in assets and liabilities
Accounts receivable (363) (4,239) (490)
Inventories (4,214) 1,650 (2,772)
Other assets 300 (398) (930)
Accounts payable 1,674 (2,330) 2,082
Other liabilities (1,879) 720 (902)
------- ------- -------
Net cash provided
by operating activities 3,030 1,647 2,025
------- ------- -------
Cash flows for investing activities,
to purchase equipment (968) (634) (2,000)
------- ------- -------
Net cash transferred from (to) parent (2,268) (1,039) (383)
------- ------- -------
Net decrease in cash (206) (26) (358)
Cash at the beginning of the year 828 854 1,212
------- ------- -------
Cash at the end of the year $ 622 $ 828 $ 854
======= ======= =======
The accompanying notes are an integral part of these financial statements.
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
1. THE VAPOR COMPANIES AND THEIR SIGNIFICANT ACCOUNTING POLICIES
Mark IV Industries, Inc. ("Mark IV" or the "Parent") is the direct owner of all
the issued and outstanding capital stock of Mark IV Transportation Products
Corp. ("Mark IV Transportation"), Vapor Corp. ("Vapor") and Mark IV Netherlands
B.V. ("Mark IV Netherlands"). Mark IV is also the indirect owner of all the
issued and outstanding capital stock of Vapor Canada Inc. ("Vapor Canada") and
Vapor UK Limited ("Vapor UK"). Mark IV Transportation, through its Vapor
Division and in combination with Vapor Canada, Vapor UK, Vapor and Mark IV
Netherlands, (collectively referred to as the "Vapor Companies" or the "Group")
is engaged in the manufacture and sale of, among other things, door control
operating systems and accessories for buses and rail cars, vehicle to wayside
communications equipment for use in connection with the monitoring of mass
transit systems and electrical, HVAC and thermal products for use in mass
transit vehicles, locomotives and industrial markets.
The combined financial statements include the accounts of the Vapor Companies,
as well as the Group's land and manufacturing facility in Montreal, Quebec, as
discussed in Note 4 to these combined financial statements. All significant
inter-Group transactions have been eliminated. These combined financial
statements have been prepared in conformity with generally accepted accounting
principles, which requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of such
financial statements, and the reported amounts of revenues and expenses during
the reporting periods. It should be recognized that the actual results could
differ from those estimates. The Group's significant accounting policies are
as follows.
Inventories
Inventories are stated at the lower of cost or market, with cost determined on
the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are presented at cost, net of accumulated
depreciation. The cost of property, plant and equipment retired or otherwise
disposed of, and the accumulated depreciation thereon, are eliminated from the
asset and related accumulated depreciation accounts, and any resulting gain or
loss is reflected in income The Group provides for depreciation of plant and
equipment primarily on the straight-line method to amortize the cost of such
plant and equipment over its useful life.
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired ("goodwill") is presented net of
accumulated amortization. Management continually evaluates the existence of
goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected, undiscounted net cash flows of the related business unit.
Goodwill is amortized on the straight-line method over a 40 year period.
Sales and Income Recognition
Sales are recorded when the product is shipped and title is passed to the
customer. Sales on long-term contracts are recognized under the percentage-
of-completion method of accounting, and are measured on the units of delivery
basis. The percentage-of-completion method gives effect to the most recent
contract value and estimates of costs to completion. When appropriate,
contract prices are adjusted for increased scope and other changes ordered or
caused by the customer.
Income Taxes
Mark IV adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109), in fiscal 1994. The adoption of
this standard changed Mark IV's method of accounting for income taxes from the
deferred method to the liability method. Mark IV adopted SFAS No. 109
retroactively by restating prior years' financial statements for all years
which included the operations of the Vapor Companies. The Group's provisions
for income taxes have been calculated on the separate return basis.
Postretirement Benefits
The Group adopted Statement of Financial Accounting Standards No. 106,
Employers Accounting for Postretirement Benefits Other Than Pensions (SFAS No.
106), effective as of February 28, 1993. SFAS No. 106 required the estimated
present-value of the Groups's liability for its commitments to provide health
and life insurance benefits to its retirees to be included in the balance
sheet. The related expense is required to be recognized on the accrual method
over the remaining years of the employees' active service, up to the dates of
the individual's eligibility to retire and begin receiving the benefit.
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
Research and Development Costs
Research and development costs are expensed as incurred. Incentives received
from the Canadian government related directly to research and development costs
incurred in Canada are netted against the related costs. The amount of such
incentives amounted to approximately $504,000; $628,000; and $426,000 in fiscal
1996, 1995 and 1994, respectively.
Foreign Currency
The assets and liabilities of the Group's foreign operations are translated at
year-end exchange rates, and resulting gains and losses are included as a part
of net equity. Foreign currency transactions are included in income as
realized and amounted to gains (losses) of approximately $(91,000); $211,000;
and $478,000 in fiscal 1996, 1995 and 1994, respectively.
Mark IV enters into foreign currency forward contracts as a hedge for certain
existing or anticipated business transactions that are denominated in various
foreign currencies. Since such transactions are based upon Mark IV's
consolidated currency exposure, including operations other than those of the
Group, all related gains or losses on such hedge transactions have been
excluded from the Group's financial statements, and any underlying balance
sheet exposure remains the responsibility of Mark IV.
Cash
Cash consists of balances in the accounts of the Group's foreign operating
units. All other cash balances are transferred to the Parent as they arise.
2. ACCOUNTS RECEIVABLE ALLOWANCES AND CONTINGENCY
Accounts receivable are reflected net of allowances for doubtful accounts of
$515,000 and $362,000 as of the last day of February, 1996 and 1995,
respectively.
Accounts receivable include an amount of approximately $750,000 which is past
due from a customer and may not be collected in full. The customer is
experiencing cash-flow/financing difficulties and pursuing alternative
financing sources to enable it to continue its operations. The Group is
presently shipping product to this customer only on a cash-on-delivery basis.
Management of the Group anticipates that a substantial portion of the $750,000
will ultimately be received; however, the allowance for doubtful accounts
identified above includes an amount of $250,000 which was added to provide for
the possible loss of some portion of this receivable.
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
3. INVENTORIES
Inventories consist of the following as of the last day of February, 1996 and
1995 (dollars in thousands):
1996 1995
---- ----
Purchased materials and parts $ 11,237 $ 7,694
Contracts in process and sub-assemblies 4,795 4,114
Finished goods 892 1,402
-------- --------
Total inventories 16,924 13,210
Less progress billings 2,600 3,100
-------- --------
Net inventories $ 14,324 $ 10,110
======== ========
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and consist of the following
as of the last day of February, 1996 and 1995 (dollars in thousands):
1996 1995
---- ----
Land and improvements $ 5,563 $ 5,563
Buildings and improvements 9,150 9,147
Machinery and equipment 11,282 10,317
-------- --------
Total property, plant and equipment 25,995 25,027
Less accumulated depreciation 5,863 4,088
-------- --------
Property, plant and equipment, net $ 20,132 $ 20,939
======== ========
The Group's land and manufacturing facility in Montreal, Quebec have been
rented from a separate indirect subsidiary of Mark IV up through February 29,
1996. Subsequent to that date, the land and building were transferred to the
Vapor Companies, with "payment" made through the inter-company account.
Therefore, the transaction has been accounted for as if it had occurred as of
March 1, 1993. The accompanying combined balance sheets include the related
net asset value of the land and building. The income statements for each of
the three fiscal years in the period ended February 29, 1996 exclude the rental
expense paid, and reflect depreciation expense on the building as if it had
been owned during that period.
Depreciation expense was Sl,775,000; $1,763,000; and $1,709,000 in fiscal
1996, 1995 and 1994, respectively.
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29. 1996
5. COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is presented net of accumulated
amortization of $1,294,000 and $1,013,000 as of the last day of February 1996
and 1995, respectively. Amortization expense was approximately $281,000 in
each of fiscal 1996, 1995 and 1994.
6. INCOME TAXES
Operating income and the related provision for income taxes for fiscal 1996,
1995 and 1994 consists of the following (dollars in thousands):
1996 1995 1994
---- ---- ----
Operating income:
United States $8,296 $2,759 $1,746
Foreign 133 3,581 3,686
------ ------ ------
Total operating income $8,429 $6,340 $5,432
====== ====== ======
Provision for income taxes:
Currently payable
United States $2,838 $1,216 $ 968
Foreign 135 924 1,417
------ ------ ------
Total currently payable 2,973 2,140 2,385
------ ------ ------
Deferred
United States 441 (48) (203)
Foreign (67) 349 (94)
------ ------ ------
Total deferred (benefit) 374 301 (297)
------ ------ ------
Total provision for taxes $3,347 $2,441 $2,088
====== ====== ======
The provision for income taxes for fiscal 1996, 1995, and 1994 differs from the
amount computed using the United States statutory income tax rate as follows
(dollars in thousands):
1996 1995 1994
---- ---- ----
Expected tax at United States
statutory income tax rate $2,938 $2,219 $1,901
Permanent differences 125 126 107
State and local income taxes 289 102 67
Tax credits (25) (25) (20)
Foreign tax rate differences 20 19 33
------ ------ ------
Total provision for taxes $3,347 $2,441 $2,088
====== ====== ======
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
The tax effects of the Group's temporary differences which give rise to
deferred tax assets (liabilities) consist of the following at the last day of
February, 1996 and 1995 (dollars in thousands):
1996 1995
---- ----
Current:
Accounts receivable $ 172 $ 96
Inventories (479) (497)
Compensation related 420 420
Other items 1,286 1,577
------- -------
Net current deferred tax assets $ 1,399 $ 1,596
======= =======
Non-current:
Fixed and intangible assets $ 1,379 $ 1,556
------- -------
Net non-current deferred tax assets $ 1,379 $ 1,556
======= =======
The undistributed earnings of the Group's foreign subsidiaries have been
reinvested in each country, and are not expected to be remitted back to Mark
IV.
7. PENSION AND RETIREMENT SAVINGS PLANS
The Group's U.S. employees participate in a defined-benefit pension plan which
is funded and administered by Mark IV. Such plan provides retirement benefits
based upon the employees' age, earnings and years of service. The Group
recognized an expense for the estimated service cost of such plan of
approximately $571,000; $537,000; and $485,000 in fiscal 1996, 1995 and 1994,
respectively. The plan is a part of Mark IV's Master Defined Benefit Plan, and
the funded position and responsibility for benefit payments to retirees remains
with Mark IV.
The Group's employees in Canada participate in a defined benefit pension plan
which is funded and administered by the Vapor Canada operating unit of the
Group. The Group recognized an expense for this defined-benefit plan of
approximately $138,000; $112,000; and $108,000 in fiscal 1996, 1995 and 1994,
respectively. The plan had gross assets of approximately $3,429,000 as of
February 29, 1996 and related liabilities of approximately $3,343,000 as of
that same date. The net asset position of this plan has been included in the
Group's combined balance sheet as of February 29. 1996.
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
8. POST-RETIREMENT BENEFITS
The Group currently provides health and life insurance benefits to a number of
existing retirees from its U.S. operations. Contributions currently required
to be paid by the retirees towards the cost of such plans range from 30% to
60%. The Group also has a number of active employees who might receive such
benefits upon their retirement. The related plan includes provisions which
allow management of the Group to increase the cost to participants, or
otherwise modify or terminate such benefits as determined to be appropriate.
The following table sets forth the liability for the cost of these benefits
included in the combined balance sheets as of the last day of February, 1996
and 1995 (dollars in thousands):
1996 1995
---- ----
Accumulated post-retirement benefit obligation:
Retirees and beneficiaries receiving benefits $ 448 $ 433
Active employees, fully eligible for benefits 477 456
Active employees, not fully eligible for benefits 382 311
------ ------
Total accumulated benefit obligation 1,307 1,200
Unrecognized net loss (107) -
------ ------
Post-retirement benefit liability recognized
in the combined balance sheet $1,200 $1,200
====== ======
The Group's post-retirement benefit expense on the accrual method for fiscal
1996, 1995 and 1994 includes the following components (dollars in thousands):
1996 1995 1994
---- ---- ----
Service cost-benefits earned
during the period $ 20 $ 25 $ 30
Interest cost on the APBO 100 90 80
---- ---- ----
Total expense $120 $115 $110
==== ==== ====
The APBO was calculated using a discount rate of 7.50% at February 29, 1996,
and 8.75% at February 28, 1995. The change in the discount rate did not have a
significant effect on the expense determination for fiscal 1996 and 1995, and
is not expected to have a significant effect for fiscal 1997. The APBO
determinations assume an initial health care cost trend rate of approximately
8.0%, trending down rateably to an ultimate rate of 4.5%. A one-percentage-
point increase in such trend rate would not have a significant effect on the
APBO or the Group's annual expense.
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
9. LEGAL MATTERS
The Group is involved in various legal matters. In the opinion of management,
the ultimate cost to resolve these matters will not have a material adverse
effect on the Group's financial position, results of operations or cash flows.
10. FOREIGN OPERATIONS
The Group's foreign operations are located primarily in Canada, and to a lesser
extent in Europe. Information concerning the Group's operations by geographic
area for fiscal 1996, 1995 and 1994 is as follows (dollars in thousands):
1996 1995 1994
---- ---- ----
NET SALES TO CUSTOMERS
United States $ 52,755 $ 47,930 $ 44,641
Foreign 12,222 20,116 21,954
-------- -------- --------
Total net sales
to customers $ 64,977 $ 68,046 $ 66,595
======== ======== ========
OPERATING INCOME
United States $ 8,296 $ 2,759 $ 1,746
Foreign 133 3,581 3,686
-------- -------- --------
Total operating
income $ 8,429 $ 6,340 $ 5,432
======== ======== ========
IDENTIFIABLE ASSETS
United States $ 52,963 $ 55,292 $ 51,135
Foreign 14,647 9,709 12,617
-------- -------- --------
Total identifiable
assets $ 67,610 $ 65,001 $ 63,752
======== ======== ========
The net sales to customers reflect the sales of the Group's operating units in
each geographic area to unaffiliated customers. Export sales from the United
States to unaffiliated customers were $15,172,000; $8,981,000; and $5,453,000
in fiscal 1996, 1995, and 1994, respectively.
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VAPOR COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
11. RELATED PARTY TRANSACTIONS
Mark IV provides or coordinates treasury, tax, audit, legal, medical and risk
insurance, and benefits administration services to the various operating units
of the Group. Insurance, legal, audit and direct employee benefits related
costs are allocated directly to the Group. An allocation of Mark IV's costs
for tax, treasury and other administrative work performed is not made, as they
are not believed to be significant. All inter-company accounts with Mark IV,
and other affiliates outside of the Vapor Companies, have been included as a
part of net equity.
12. CONDITIONAL GRANT
In February 1996, Vapor Canada, together with Sensotech Ltd. ("Sensotech"),
entered into a cooperation and project funding agreement with the Canada -
Israel Industrial Research and Development Foundation for a maximum sum of
$600,000 to be allocated $280,000 to Vapor Canada and $320,000 to Sensotech.
As of February 29, 1996, Vapor Canada had received $80,000 of this amount, and
recorded it as a deferred credit in the accompanying combined balance sheet.
The parties are jointly and severally obligated to repay the funding at a rate
of 2.5% of gross sales derived from the project (as defined), up to a maximum
of 100% of the funding received. However, if no orders are received, there is
no obligation to return the funds to Sensotech.
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Item 7(b) Pro Forma Condensed Consolidated Financial Information
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The following Pro Forma Condensed Consolidated Financial Statements are based
on the historical financial statements of Westinghouse Air Brake Company
("WABCO" or the "Company"), and the "Vapor Group," adjusted to give effect to
the acquisition of the Vapor Group by the Company. The Pro Forma Condensed
Consolidated Statement of Operations for the year ended December 31, 1995 and
for the six months ended June 30, 1996 assume that the acquisition had occurred
on January 1, 1995. The unaudited Pro Forma Condensed Consolidated Balance
Sheet gives effect to the acquisition of the Vapor Group by the Company as if
it had occurred on June 30, 1996.
The pro forma financial information reflects the purchase method of accounting
for the acquisition of the Vapor Group, and accordingly is based on estimated
purchase accounting adjustments that are subject to further revision depending
upon completion of any appraisals or other studies of the fair value of Vapor's
assets and liabilities.
The pro forma financial information reflects certain assumptions described
above and in Notes to Pro Forma Condensed Consolidated Financial Statements
below. The pro forma financial information does not purport to present what the
Company's results of operations would actually have been if the acquisition of
the Vapor Group had occurred on the assumed date, as specified above, or to
project the Company's financial condition or results of operations for any
future period.
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WESTINGHOUSE AIR BRAKE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Purchase Vapor Acquisition
Historical Historical Agreement Acquisition Pro Forma Pro Forma
Company Vapor (1) Adjustments Adjusted Adjustments As Adjusted
------- --------- ----------- -------- ----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,196 $ 1,563 $(1,563)(2) $ - $ 1,000 (11) $ 4,196
Accounts receivable 56,684 17,632 (541)(3) 17,091 (25) 73,750
Inventories 49,915 14,058 - 14,058 2,018 (5,6) 65,991
Other current assets 4,912 220 - 220 150 (11) 5,282
-------- ------- ------- ------- -------- --------
Total current assets 114,707 33,473 (2,104) 31,369 3,143 149,219
Property, Plant and Equipment, net 73,671 19,743 - 19,743 - 93,414
OTHER ASSETS:
Cost in Excess of Net Assets Acquired 51,442 9,619 - 9,619 27,292 (11) 78,734
- - - - (9,619)(7)
Other Intangibles 27,069 - - - - 27,069
Deferred taxes - 788 - 788 3,288 (10) 3,288
- - - - (788)(7)
Other noncurrent assets 13,849 2,113 - 2,113 (1,200)(5) 14,762
-------- ------- ------- ------- -------- --------
Total other assets 92,360 12,520 - 12,520 18,973 123,853
TOTAL ASSETS $280,738 $65,736 $(2,104) $63,632 $ 22,116 $366,486
======== ======= ======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 19,668 $ 4,457 $ - $ 4,457 $ - $ 24,125
Other current liabilities 41,809 6,322 (660)(4) 5,662 9,840 (8,9) 57,311
-------- ------- ------- ------- -------- --------
Total current liabilities 61,477 10,779 (660) 10,119 9,840 81,436
Long-term debt 293,590 - - - 65,000 (11) 358,590
Deferred income taxes 3,314 - - - - 3,314
Other long-term liabilities 16,041 789 - 789 - 16,830
-------- ------- ------- ------- -------- --------
Total liabilities 374,422 11,568 (660) 10,908 74,840 460,170
Shareholders' equity (93,684) 54,168 (1,444) 52,724 (52,724) (93,684)
-------- ------- ------- ------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $280,738 $65,736 $(2,104) $63,632 $ 22,116 $366,486
======== ======= ======= ======= ======== ========
The accompanying notes are an integral part of this statement.
19
WESTINGHOUSE AIR BRAKE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Acquisition
Historical Historical Pro Forma Pro Forma
Company Vapor (12) Adjustments As Adjusted
------- ---------- ----------- -----------
Net sales $424,959 $64,977 $ - $489,936
Cost of sales 278,901 42,451 - 321,352
-------- ------- -------- --------
Gross profit 146,058 22,526 - 168,584
Selling, general and engineering expenses 56,756 14,097 1,500 (13) 72,353
-------- ------- -------- --------
Income from operations 89,302 8,429 (1,500) 96,231
OTHER INCOME AND EXPENSES:
Interest expense 24,857 - 4,550 (14) 29,407
Interest expense to affiliates 6,141 - - 6,141
Other (income) expense, net (205) - - (205)
-------- ------- -------- --------
Income before income taxes and extraordinary item 58,509 8,429 (6,050) 60,888
INCOME TAXES 23,402 3,347 (15) (2,420)(16) 24,329
-------- ------- -------- --------
Income before extraordinary item 35,107 5,082 (3,630) 36,559
EXTRAORDINARY ITEM, net of taxes (1,382) - - (1,382)
-------- ------- -------- --------
NET INCOME $ 33,725 $ 5,082 $(3,630) $ 35,177
======== ======= ======= ========
INCOME PER COMMON SHARE:
Income before extraordinary item $ 1.32 $ 1.37
Extraordinary item $ (0.05) $ (0.05)
-------- --------
Net income $ 1.27 $ 1.32
======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 26,639 26,639
======== ========
The accompanying notes are an integral part of this statement.
20
WESTINGHOUSE AIR BRAKE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Acquisition
Historical Historical Pro Forma Pro Forma
Company Vapor (12) Adjustments As Adjusted
------- ---------- ----------- -----------
Net sales $214,866 $36,500 $ - $251,366
Cost of sales 142,700 25,552 - 168,252
-------- ------- ------- --------
Gross profit 72,166 10,948 - 83,114
Selling, general and engineering expenses 32,958 7,752 580 (13) 41,290
-------- ------- ------- --------
Income from operations 39,208 3,196 (580) 41,824
OTHER INCOME AND EXPENSES:
Interest expense 11,886 - 2,275 (14) 14,161
Interest expense to affiliates 808 - - 808
Other (income) expense, net (73) - - (73)
-------- ------- ------- --------
Income before income taxes 26,587 3,196 (2,855) 26,928
INCOME TAXES 10,635 1,278 (15) (1,142)(16) 10,771
-------- ------- ------- --------
NET INCOME $ 15,952 $ 1,918 $(1,713) $16,157
======== ======= ======= =======
INCOME PER COMMON SHARE $ 0.56 $ 0.57
======== =======
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 28,446 28,446
======== =======
The accompanying notes are an integral part of this statement.
21
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The pro forma adjustments to the condensed consolidated balance sheet are as
follows:
1. The historical accounts of the Vapor Group are as of August 31, 1996.
2. To eliminate cash which was retained by the seller.
3. To eliminate certain trade receivables and related reserves that were
retained by the seller.
4. To eliminate certain compensation related accruals that were retained by
the seller.
5. To adjust inventory carrying values to conform with WABCO's accounting
policies.
6. To increase reserves for excess and slow moving inventory to conform with
WABCO's accounting policies.
7. To eliminate historical Vapor goodwill and taxes.
8. To adjust warranty reserves to conform with WABCO's accounting policies.
9. To record reserves for estimated costs associated with restructuring,
staffing reductions and other costs to integrate the acquired operations.
10. To record deferred taxes on related reserves and other purchase
accounting timing differences.
11. To record the borrowing of $65 million and the simultaneous acquisition
of the Vapor Group. Pending completion of a formal appraisal, the
components of the purchase price have been allocated as follows:
Purchase Price $63,850
Current Assets 33,362
Property, Plant and Equipment 19,743
Other noncurrent assets 4,201
Intangibles, including goodwill 27,292
Current Liabilities 19,959
Noncurrent Liabilities 789
22
The pro forma adjustments to the condensed consolidated statements of
operations are as follows:
12. The historical results of the Vapor Group are for the twelve months ended
February 29, 1996. The historical results of the Vapor Group are for the
six months ended August 31, 1996.
13. To reflect the amortization of acquired intangibles, including goodwill,
over their estimated average lives of thirty years and certain adjustments
to selling, general and engineering expenses:
Year ended Six months ended
December 31, June 30,
1995 1996
---- ----
(In Thousands)
Amortization of goodwill and other intangibles $ 910 $ 455
Accrued cost of employee benefit programs, including ESOP 590 125
------- -----
$ 1,500 $ 580
======= =====
The ESOP expense is based on actual market price for WABCO stock and could
increase or decrease as the market price changes.
14. To reflect incremental interest expense (interest rate of 7%) on debt
incurred to finance the Vapor acquisition.
15. To record income tax expense on Vapor's historical results at the
Company's effective tax rate of 40%.
16. To record income tax effect of the pro forma adjustments at the Company's
effective tax rate of 40%.
Item 7(c) Exhibits
(c) The exhibits identified below are filed herewith as a
part of this Report. The Company agrees to furnish to the Commission upon
request a copy of any omitted schedule (or other similar attachment) to the
agreements identified below.
Exhibit No. Description
- ----------- -----------
2.01 Purchase Agreement dated as of September 19, 1996 by
and among Mark IV Industries Inc., Mark IV PLC and
W & P Holding Corp.
2.02 Purchase Agreement dated as of September 19, 1996 by
and between Mark IV Industries Limited and
Westinghouse Railway Holdings (Canada) Inc.
23
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WESTINGHOUSE AIR BRAKE COMPANY
Dated: October 3, 1996 By /s/ ROBERT J. BROOKS
---------------------------------
Robert J. Brooks
Vice President and
Chief Financial Officer
24
INDEX TO EXHIBITS
Exhibits:
- ---------
2.01 Purchase Agreement dated as of September 19, 1996 by and among Mark IV Industries Inc.,
Mark IV PLC and W & P Holding Corp.
2.02 Purchase Agreement dated as of September 19, 1996 by and between Mark IV Industries Limited
and Westinghouse Railway Holdings (Canada) Inc.
1
Exhibit 2.01
SEPTEMBER 19, 1996
PURCHASE AGREEMENT
AMONG
MARK IV INDUSTRIES, INC.,
MARK IV PLC
AND
W & P HOLDING CORPORATION
DATED AS OF: SEPTEMBER 19, 1996
2
TABLE OF CONTENTS
ARTICLE 1.
SALE OF THE VAPOR BUSINESS . . . . . . 3
--------------------------
1 .01 Sale of the Vapor Company Shares . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------------------------
1 .02 Sale of Subsidiary Interests in the
-----------------------------------
Transportation Products Group . . . . . . . . . . . . . . . . . . . . . . . . . 3
-----------------------------
1 .03 "Mark IV" Tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-------------------
ARTICLE 2.
PURCHASE PRICE . . . . . . . . . 4
--------------
2 .01 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------
2 .02 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------------
2 .03 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------------------------
2 .04 Definitions Relating to Net Worth Purchase Price Adjustment . . . . . . . . . . 6
-----------------------------------------------------------
2 .05 Cash Flow Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------
2 .06 Net Worth Adjustment to Purchase Price . . . . . . . . . . . . . . . . . . . . . 7
--------------------------------------
2 .07 Calculation of Closing Net Worth . . . . . . . . . . . . . . . . . . . . . . . . 11
--------------------------------
2 .08 Earnout Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------------
ARTICLE 3.
CLOSING . . . . . . . . . . . 12
-------
3 .01 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------------------
3 .02 Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--------------------
3 .03 Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-------------------
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
- -----------------------------------------
4.01 Organization of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
----------------------
4.02 Organization of the Vapor Companies . . . . . . . . . . . . . . . . . . . . . . . 17
-----------------------------------
4.03 Authorization by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-----------------------
4.04 Ownership of Vapor Company Equity Interests . . . . . . . . . . . . . . . . . . . 18
-------------------------------------------
4.05 Options or Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-----------------------
4.06 Certificates of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . 19
-----------------------------------------
4.07 Binding Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------
4.08 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------
4.09 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------------
4.10 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------------------
4.11 Title to Personal Property; Encumbrances; Etc. . . . . . . . . . . . . . . . . . . 24
----------------------------------------------
4.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-------------
4.13 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
------
4.14 Patents, Trademarks, Trade Names, Etc. . . . . . . . . . . . . . . . . . . . . . . 27
--------------------------------------
4.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------
-1-
3
4.16 Banks and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-----------------
4.17 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
----------------------
4.18 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
----------------------
4.19 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------------------
4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
---------
4.21 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
-------------------------
4.22 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-----------
4.23 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
---------------
4.24 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-----------------------
4.25 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-------------------
4.26 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
-------------------
4.27 Product Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
------------------
4.28 Potential Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . 45
-------------------------------
4.29 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
----------
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER . . . 45
---------------------------------------
5.01 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
------------
5.02 Authorization by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
----------------------
5.03 Binding Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
------------------
5.04 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
------------
5.05 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
----------
5.06 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
----------------------
5.07 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
-----------------------
5.08 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
-------------------
ARTICLE 6.
COVENANTS OF SELLER . . . . . . . . 49
-------------------
6.01 Termination of Accruals Under Defined
-------------------------------------
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-------------
6.02 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
---------------
ARTICLE 7.
COVENANTS OF BUYER . . . . . . . . 51
------------------
7.01 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
-----------------
7.02 Executive Severance Arrangement . . . . . . . . . . . . . . . . . . . . . . . . 52
-------------------------------
7.03 Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
------------------
7.04 Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
-------------
ARTICLE 8.
ADDITIONAL COVENANTS OF BUYER AND SELLER . . . 53
----------------------------------------
8.01 Substitute Guarantees and Letters of Credit . . . . . . . . . . . . . . . . . . 53
-------------------------------------------
8.02 Access After the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 54
-----------------------------
8.03 Record Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
----------------
8.04 Insurance Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
------------------
-2-
4
8.05 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
-----------
8.06 Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
-----------
8.07 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
---------------
8.08 Transfer of 401(k) Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . 61
------------------------------
8.09 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
--------------------
8.10 Post-Closing Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
------------------------
8.11 Benefits Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-----------------
8.12 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .
--------------------------
ARTICLE 9
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS . . . . . . 66
---------------------------------------------
9.01 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . 66
---------------------------
9.02 Statements as Representations . . . . . . . . . . . . . . . . . . . . . . . . . 67
-----------------------------
9.03 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
-------------------------
9.04 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
------------------------
9.05 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 72
-----------------------------
9.06 Termination of Indemnification Obligations . . . . . . . . . . . . . . . . . . . 73
------------------------------------------
9.07 Litigation Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
----------------------
9.08 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
-------------------
ARTICLE 10.
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
- ------------------------
10.01 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
---------
10.02 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
--------------------------
10.03 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
--------------------
10.04 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
-------
10.05 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
----------
10.06 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . 78
------------------------------
10.07 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
------------
10.08 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
-----------
10.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
--------
10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
----------------
10.11 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
-------------
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
------------
-3-
5
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made as of this
19th day of September, 1996, by and among Mark IV Industries, Inc., a Delaware
corporation, with offices at One Towne Centre, 501 John James Audubon Parkway,
Amherst, New York ("Mark IV"); Mark IV PLC, a United Kingdom corporation ("Mark
IV PLC") (Mark IV and Mark IV PLC being hereinafter referred to collectively as
"Seller" unless otherwise noted); and W & P Holding Corporation, a Delaware
corporation, with offices at 200 West Ninth Street Plaza, Suite 207,
Wilmington, Delaware ("Buyer"). Buyer is a wholly owned direct subsidiary of
Westinghouse Air Brake Company, a Delaware corporation ("WABCO"). As provided
on the signature page hereto, WABCO is guarantying and acting as surety for the
obligations of Buyer under this Agreement.
RECITALS:
General
Mark IV is the direct owner of all the issued and outstanding
capital stock of Mark IV Transportation Products Corp., a Delaware corporation
("Mark IV Transportation
-1-
6
Products"), Vapor Corp., an Illinois corporation ("Vapor"), Mark IV Netherlands
B.V., a Netherlands corporation ("Mark IV Netherlands"), and Mark IV PLC is the
direct owner of all the issued and outstanding capital stock of Vapor UK
Limited, a United Kingdom corporation ("Vapor UK") (collectively, the "Vapor
Companies", and individually a "Vapor Company"). Mark IV is the indirect owner
of all the issued and outstanding capital stock of Vapor Canada Inc., a Canadian
corporation ("Vapor Canada") (Vapor Canada, together with the Vapor Companies,
shall collectively be known as the "Vapor Group", and may individually be
referred to as a "Vapor Group Member"). Mark IV Transportation Products,
through its Vapor Division and in combination with Vapor Canada, Vapor UK,
Vapor and Mark IV Netherlands, is engaged in the manufacture and sale of, among
other things, door control operating systems and accessories for buses and rail
cars, vehicle to wayside communications equipment for use in connection with the
monitor of mass transit systems and electrical, HVAC and thermal products for
use in mass transit vehicles, locomotives and industrial markets (hereinafter
the "Vapor Group Business"). The business conducted by the Vapor Companies shall
be referred to as the "Vapor Business".
Mark IV Transportation Products and Mark IV Industries Canada
Inc., an indirect wholly-owned subsidiary of Mark IV and an indirect parent
corporation of Vapor Canada (collectively, "Mark IV Canada"), acquired the
companies and businesses now
-2-
7
comprising the Vapor Group Business through (a) the purchase by Mark IV
Transportation Products of substantially all of the assets of Vapor Corporation
and Vapor of Pennsylvania, Inc. from Brunswick Corporation, pursuant to an Asset
Purchase Agreement dated as of December 21, 1990 and certain documents and
instruments relating thereto, and (b) the purchase by Mark IV Canada of all of
the outstanding capital stock of Vapor Canada from Brunswick Corporation and
Vapor Corporation pursuant to a Stock Purchase Agreement dated as of December
21, 1990 and certain documents and instruments relating thereto. The
acquisitions described in this paragraph are referred to in this Agreement as
the "Mark IV Acquisition."
Seller desires to sell the Vapor Business and Buyer desires to
purchase the Vapor Business on the terms and conditions set forth herein.
CONSIDERATION:
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements hereinafter set forth, Seller and Buyer hereby agree
as follows:
ARTICLE 1.
-3-
8
SALE OF THE VAPOR BUSINESS
1.01 Sale of the Vapor Company Shares. Subject to the
terms and conditions of this Agreement, at the Closing (as defined in Section
3.01 hereof) Seller will sell, transfer, convey and assign to Buyer and Buyer
will purchase, acquire and accept from Seller, all Seller's right, title and
interest in and to the following:
(a) four hundred (400) shares of capital stock of Mark
IV Netherlands (the "Mark IV Netherlands Shares");
(b) ten (10) shares of common stock, without par value,
of Vapor (the "Vapor Shares");
(c) one thousand (1,000) shares of common stock, par
value $.10 per share, of Mark IV Transportation Products (the "Mark IV
Transportation Products Shares"); and
(d) two (2) shares of capital stock of Vapor UK (the
"Vapor UK Shares").
For purposes of this Agreement, the Mark IV Netherlands
Shares, the Vapor Shares, the Mark IV Transportation Products Shares and the
Vapor UK Shares are hereinafter collectively referred to as the "Vapor Shares".
1.02 Sale of Subsidiary Interests in the Transportation
Products Group. Subject to the terms and conditions of this Agreement, at the
Closing, Seller will take such action as may be reasonably necessary to cause
Mark IV Industries Limited to sell,
-4-
9
transfer, convey and assign to Westinghouse Railway Holdings (Canada) Inc., an
affiliate of Buyer, all of the issued and outstanding capital stock of Vapor
Canada pursuant to the terms of an agreement in substantially the form of
Exhibit "A" attached hereto.
For purposes of this Agreement, the agreement identified in
this Section 1.02 is hereinafter referred to as the "Other Vapor Purchase
Agreement."
1.03 "Mark IV" Tradename. Mark IV hereby grants to Buyer
the right to utilize the "Mark IV" tradename, trademark and logo worldwide for
a period of six (6) months following the Closing Date or until the existing
supply of letterhead, packaging and other materials containing the same runs
out, whichever is the earlier to occur; provided, however, that any product
literature containing the "Mark IV" tradename, trademark or logo may be used
until new materials have been printed and are available for use. Buyer shall
use its best efforts to cause the certificate of incorporation of Mark IV
Transportation Products to be amended to remove any reference to the name "Mark
IV" within thirty (30) days after the Closing Date.
ARTICLE 2.
-5-
10
PURCHASE PRICE
2.01 Purchase Price. The aggregate purchase price to be
paid by Buyer to Seller for the Vapor Shares and the assets being conveyed
pursuant to the Other Vapor Purchase Agreement shall be equal to Sixty-three
Million Dollars ($63,000,000), as adjusted by Sections 2.05 and 2.06 hereof
(the "Purchase Price").
2.02 Payment of Purchase Price. At the Closing, Buyer
shall pay the Purchase Price to Seller by wire transfer of immediately
available funds to an account specified by Seller in writing.
2.03 Allocation of Purchase Price. (a) The Purchase Price
shall be allocated among the Vapor Shares and the assets being conveyed pursuant
to the Other Vapor Purchase Agreement as set forth on Schedule 2.03(a) attached
hereto. If the Purchase Price is increased pursuant to the provisions of
Section 2.08, such additional amount shall be allocated solely to the Mark IV
Transportation Products Shares in such manner as shall be agreed by Buyer and
Seller. Buyer and Seller agree that they will file their federal, state and
local income tax returns and such other forms as may be required pursuant to
Section 1060 of the Internal Revenue Code of 1986, as amended (hereinafter the
"Code") on the basis of such allocation.
(b) With respect to the acquisition of the Vapor Shares
pursuant to this Agreement, Buyer and Seller shall jointly
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make a timely election under Section 338(h)(10) of the Code (and any
corresponding elections under any state or local tax laws) (such elections being
hereinafter collectively referred to as the "338(h)(10) Election"). Seller and
Buyer shall cooperate with each other and take any and all action reasonably
necessary or appropriate (including filing such forms, returns, elections,
schedules and other documents as may reasonably be required) to effect and
preserve a timely 338(h)(10) Election in accordance with Section 338 of the Code
and the applicable regulations thereunder as promptly as practicable following
the Closing Date but in no event later than the date which is the latest date
for making any such election. Thereafter, Buyer and Seller shall report the
sale of the Vapor Shares pursuant to this Agreement in a manner which is
consistent with the 338(h)(10) Election and shall take no position contrary
thereto or inconsistent therewith in any tax returns in any discussion with or
proceeding before any taxing authority or otherwise.
2.04 Definitions Relating to Net Worth Purchase Price
Adjustment.
(a) "Closing Balance Sheet" means a statement, prepared
by Seller in accordance with the provisions of
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Section 2.07, and delivered to Buyer in accordance with the provisions of
Section 2.07 hereof and containing a written statement, in balance sheet format,
of the Net Worth of the Vapor Group determined as of August 31, 1996;
(b) "Net Worth" means the net worth of the Vapor Group
calculated in a manner which is consistent with the manner and accounting
methodologies in which the net worth of the Vapor Group was determined on the
balance sheet as of November 30, 1995 (the "November 30, 1995 Balance Sheet"),
a copy of which is attached hereto as Schedule 2.04(b);
(c) "Closing Net Worth" means the Net Worth of the Vapor
Group on the Closing Balance Sheet; and
(d) "November 30, 1995 Net Worth" means the Net Worth of
the Vapor Group on the November 30, 1995 Balance Sheet.
2.05 Cash Flow Adjustment. On the Closing Date, Seller
shall deliver to Buyer statements of daily cash flow for the period commencing
September 1, 1996 to the Closing Date, which statements shall be subject to
review and audit by Buyer and its representatives within 10 days after the
Closing. Subject to subsequent adjustment based upon such review, (i) if the
cash balance of the Vapor Group Business increased during the period from and
after August 31, 1996 to the Closing, then Seller shall remit to Buyer the
amount of such increase on the Closing Date and (ii) if the cash balance of the
Vapor Group Business decreased during such period, Buyer shall remit to Seller
the amount of such decrease on the Closing Date. Any disagreement
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between the parties of any adjustment pursuant to this Section 2.05 shall be
referred to the respective independent auditors of Buyer and Seller for
resolution.
2.06 Net Worth Adjustment to Purchase Price.
If the Closing Net Worth as calculated pursuant to the
provisions of Section 2.07 exceeds the November 30, 1995 Net Worth, the
Purchase Price shall be increased dollar-for-dollar up to a maximum adjustment
of Two Million Dollars ($2,000,000.00). If the Closing Net Worth shall be less
than the November 30, 1995 Net Worth then the Purchase Price shall be reduced
dollar for dollar.
2.07 Calculation of Closing Net Worth.
(a) On the Closing Date, Seller shall deliver to Buyer the
Closing Balance Sheet.
(b) The Closing Balance Sheet shall be subject to
verification and examination by Buyer and, in order to facilitate such
verification and examination, Seller shall, at such reasonable times and places
as may be requested by Buyer, deliver copies of all supporting documents to
Buyer and its representatives and provide to Buyer and its representatives the
right to examine or take copies of any work papers (other than
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proprietary work papers) used by Seller in the preparation of the Closing
Balance Sheet.
(c) Buyer shall have a period of thirty (30) days after
the Closing Date to present in writing to Seller any objections Buyer may have
to the accuracy of the Closing Balance Sheet, which objections shall be set
forth in reasonable detail. If no objections are raised within such thirty
(30) day period, the Closing Balance Sheet shall be deemed to be accepted and
approved by Buyer.
(d) If Buyer shall disagree as to the accuracy of the
Closing Net Worth as contained in the Closing Balance Sheet, Buyer shall
present to Seller written notice within the thirty (30) day period described in
Section 2.07(c) specifying such disagreement. Following receipt of such notice
by Seller, Buyer and Seller shall use their best efforts to promptly resolve
the matter or matters in disagreement. If Seller and Buyer resolve the matter
or matters in disagreement, Seller and Buyer shall either confirm or revise the
original Closing Balance Sheet as contained in the confirmed or revised
Closing Balance Sheet and shall be final and binding upon the parties hereto
and any amounts required to be paid by Section 2.06 hereof shall be paid by
Seller or Buyer, as the case may be, at a Supplemental Closing held at the same
place as is provided in Section 3.01 hereof, ten (10) business days following
the date on which Buyer and Seller are able to resolve their disagreement with
respect to the
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Closing Balance Sheet or at such other place and at such other
time and date as may be mutually agreed upon in writing by Buyer and Seller.
(e) If Seller and Buyer are unable to resolve the matter
or matters in disagreement within ninety (90) days following Seller's receipt
of written notice from Buyer of Buyer's disagreement with the accuracy of the
Closing Balance Sheet, then such disagreement or disagreements shall be
referred for resolution to a nationally recognized firm of independent
certified public accountants that is mutually agreeable to Buyer and Seller
(the "Independent Accountants"). The Independent Accountants shall be directed
to furnish written notice to Seller and Buyer of their resolution of any such
disagreements referred to them as soon as practicable but in no event later
than twenty (20) days following the referral of such dispute to the Independent
Accountants. The Closing Balance Sheet as determined by the Independent
Accountants shall be final and binding upon the parties and any amounts
required to be paid by Section 2.06 hereof shall be paid by Seller or Buyer, as
the case may be, at a Supplemental Closing held at the same place as is
provided in Section 3.01 hereof, ten (10) days following resolution of such
disagreement by the Independent Accountants and sending of the
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written notice as contemplated herein or at such other place and at such other
time and date as may be mutually agreed upon in writing by Buyer and Seller.
(f) If any disagreement as to the accuracy of the Closing
Balance Sheet shall involve amounts the net effect of which, in the aggregate,
would not affect the Closing Net Worth by more than One Hundred Fifty Thousand
Dollars ($150,000.00), all such amounts remaining in dispute shall be
disregarded.
(g) Notwithstanding anything to the contrary in this
Section 2.07, during the period that the determination of the Closing Net Worth
shall remain in dispute, neither party shall be required to pay to the other
party the amount that would otherwise be payable hereunder if no such
disagreement were to exist.
(h) During and with respect to the audit and reviews
referred to in this Section 2.07, Seller and Buyer shall: (i) fully cooperate
with all reasonable requests of Seller, Buyer and the Independent Accountants,
as the case be; (ii) upon reasonable request make available to Seller, Buyer
and the Independent Accountants, all work papers, (excluding proprietary
programs and information of Seller and Buyer) supporting schedules, documents
and other information (including access to all appropriate knowledgeable
personnel of Seller) upon which the Closing Balance Sheet is prepared; and
(iii) promptly provide the Independent Accountants with such management
representation letters (in
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customary form) executed by appropriate personnel of Seller and Buyer as
applicable, as may reasonably be requested with respect to the preparation of
the Closing Balance Sheet.
(i) With the exception of the fees, expenses and
disbursements of the Independent Accountants, all fees and expenses of Seller
relating to the matters described in this Section 2.07 shall be borne by Seller
and all fees and expenses of Buyer relating to the matters described in this
Section 2.07 shall be borne by Buyer. The fees, expenses and disbursements of
the Independent Accountants shall be shared equally by the parties hereto.
2.08. Earnout Payment. If net sales of the Vapor Group (as
determined by Buyer in accordance with generally accepted accounting principles
consistently applied) during the period from August 1, 1996 to February 28, 1998
exceed $145,000,000 (the "Net Sales Floor") then the Purchase Price shall be
increased by the amount equal to the ratio of 1:3.5 (i.e., $1.00 for every
$3.50) with respect to net sales exceeding $145,000,000 up to an aggregate level
of $152,000,000 (the "Net Sales Ceiling"), provided, however, that the Purchase
Price shall not be increased by more than $2,000,000 pursuant to this Section
2.08. In connection therewith, Buyer shall provide Seller with
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quarterly reports of net sales throughout such period and a final report at the
end of such period. Buyer shall grant Seller reasonable access for review and
audit of any such reports. In addition, in the event that a product line of the
Vapor Group existing at Closing is sold or discontinued during such period, the
forecasted sales with respect thereto shall reduce the Net Sales Floor and the
Net Sales Ceiling dollar- for-dollar. Any dispute between the parties with
respect to the amount of the payment, if any, required by this Section 2.08
shall be referred to the independent public auditors of Buyer and Seller for
resolution. Buyer shall deliver the amount of any increase due pursuant to this
Section 2.08 in cash to Seller not later than April 30, 1998.
ARTICLE 3.
CLOSING
3.01 Time and Place of Closing. The closing of the sale
and purchase of the Vapor Shares as contemplated by this Agreement (the
"Closing") shall take place at the offices of Lippes, Silverstein, Mathias &
Wexler LLP, 700 Guaranty Building, 28 Church Street, Buffalo, New York on
September 19, 1996 or on such other date as the parties may agree.
3.02 Deliveries by Seller. At the Closing, Seller will
deliver to Buyer (unless previously delivered):
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(a) stock certificates evidencing all of the Vapor
Shares, duly endorsed for transfer to Buyer or accompanied by duly executed
stock powers providing for the transfer of the Vapor Shares to Buyer;
(b) the corporate minute books and stock ledgers of each
of the Vapor Companies;
(c) the written resignation of the officers and directors
of each of the Vapor Companies;
(d) a release by Chase Manhattan Bank releasing the Mark IV
Transportation Products Shares from any lien under, or pledge contemplated by,
the terms of the Credit Agreement between Seller and Chase Manhattan Bank;
(e) all consents and approvals from any parties to any
contracts or other agreements with Seller or any of the Vapor Companies as more
particularly set forth in Schedule 4.18 attached hereto;
(f) all consents, approvals, authorizations, filings and
registrations required to be obtained or made by Seller under applicable law in
connection with the transactions contemplated by this Agreement;
(g) a duly executed Other Vapor Purchase Agreement;
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(h) a duly executed assignment agreement (the "Flexible
Assignment Agreement") in the form of Exhibit "B" attached hereto assigning the
account receivable of Flexible Corporation as described in the Closing Balance
Sheet;
(i) a certificate of the Secretary or an Assistant Secretary
of Seller, dated the Closing Date, setting forth resolutions of the Board of
Directors of Seller authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, certifying that
such resolutions were duly adopted and have not been rescinded or amended as of
the Closing Date, and certifying that approval by Seller's shareholders is not
required, or has been obtained, in connection with this Agreement or the
transactions contemplated hereby;
(j) a written opinion, dated the Closing Date, from counsel
for Seller in a form reasonably acceptable to Buyer; (k) a duly executed
technology sublicense agreement relating to the use of certain licensed
technology and licensed patents; and
(l) all other documents, instruments and writings
reasonably requested by Buyer in connection with the consummation of the
transactions contemplated by this Agreement.
3.03 Deliveries by Buyer. At the Closing, Buyer will
deliver to Seller (unless previously delivered):
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(a) an amount equal to the Purchase Price, by wire
transfer of immediately available funds to such account or accounts as may be
designated by Seller in writing;
(b) all consents, approvals, authorizations, filings and
registrations required to be obtained or made by Buyer under applicable law in
connection with the transactions contemplated by this Agreement;
(c) all consents and approvals from any parties to any
contracts or other agreements with Buyer as more particularly set forth in
Schedule 5.06 attached hereto;
(d) the duly executed Other Vapor Purchase Agreement;
(e) the duly executed Flexible Assignment Agreement;
(f) a certificate of the Secretary or Assistant Secretary of
Buyer, dated the Closing Date setting forth the resolutions of the Board of
Directors of Buyer authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby and certifying that
such resolutions were duly adopted and have not been rescinded or amended as of
the Closing Date; and
(g) all other documents, instruments and writings reasonably
requested by Seller in connection with the consummation of the transactions
contemplated by this Agreement.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows as
of the Closing Date:
4.01 Organization of Seller. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to
carry on its business as presently conducted.
Seller is qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the failure of Seller to
be so qualified would have a Material Adverse Effect. As used in this
Agreement, a "Material Adverse Effect" with respect to the Vapor Companies or
the Vapor Business means an event, circumstance or condition which: (i) if
quantifiable, would result in a cost, liability or other expense or diminution
in value of more than $50,000 or (ii) if not quantifiable, would otherwise have
a material adverse effect on the assets, business or financial condition of the
Vapor Companies and the Vapor Business taken as a whole.
4.02 Organization of the Vapor Companies. Each Vapor
Company is a corporation, duly incorporated, validly existing and in good
standing under the laws of the jurisdiction in which it
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was incorporated and has the corporate power and authority to carry on its
business as presently conducted. Each Vapor Company is qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the failure of such Vapor Company to be so qualified would have a Material
Adverse Effect.
4.03 Authorization by Seller. Seller has full corporate
power and authority to enter into, execute and deliver this Agreement and each
of the other documents and instruments to be executed and delivered by Seller
pursuant to this Agreement and to carry into effect the transactions
contemplated hereunder and thereunder. The execution, delivery and performance
of this Agreement and each of the other documents and instruments to be executed
and delivered by Seller pursuant to this Agreement and the consummation of the
transactions contemplated hereunder and thereunder have been duly authorized by
all necessary corporate action on the part of Seller. No other corporate act or
proceeding on the part of Seller or Seller's shareholders is necessary to
authorize the execution and delivery of this Agreement and each of the other
documents and instruments to be executed and delivered by Seller pursuant to
this Agreement, or
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the consummation by Seller of the transactions contemplated hereby and thereby.
4.04 Ownership of Vapor Company Equity Interests. (a)
Schedule 4.04(a) attached hereto contains a statement of: (i) the total number,
class and par value of each class of capital stock which each Vapor Company is
authorized to issue; and (ii) the total number, class and par value of each
class of capital stock of each Vapor Company which is issued and outstanding
together with the identity of the owner (or owners) of all the issued and
outstanding shares of each class of capital stock of each such Vapor Company;
(b) Except as otherwise set forth in Schedule 4.04(b)
attached hereto, Seller is the owner of and has good and marketable title to
all the issued and outstanding capital stock of each of the Vapor Companies,
free and clear of all material liens, claims, encumbrances or other
restrictions or limitations of any kind or nature affecting Seller's ability to
transfer title to all of the issued and outstanding shares of capital stock and
other equity interests of the Vapor Companies to Buyer.
4.05 Options or Other Rights. There is no existing
subscription, option, warrant, call, commitment or other agreement entitling
any third party to and there are no convertible or exchangeable securities of
Seller or any of the Vapor Companies outstanding which, upon conversion or
exchange would require the issuance of any additional shares of capital stock
or other equity interests in or indebtedness of any of the Vapor Companies or
any other securities convertible into or exchangeable for shares of capital
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stock or other equity interests in any of the Vapor Companies. None of the
Vapor Companies is a party to any agreement which would require such Vapor
Company to repurchase, redeem or otherwise acquire any of the issued and
outstanding shares of capital stock or other equity interests of such Vapor
Company.
4.06 Certificates of Incorporation and By-Laws. With
respect to each Vapor Company, Seller has heretofore delivered to Buyer, true
and complete copies of the Certificate of Incorporation (or any other
substantially equivalent documentation which has been filed, in connection with
the organization of any such Vapor Company, with the governmental authorities
of the jurisdiction in which any of such Vapor Company has been incorporated or
organized) (such Certificate of Incorporation or substantially equivalent
documentation being hereinafter referred to as "Incorporation Documents") and
the By-Laws (or any other substantially equivalent documentation regulating the
internal affairs of such Vapor Company) (such By-Laws or substantially
equivalent documentation being hereinafter referred to as the "By-Laws") as the
same are in effect on and as
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of the date hereof, including all amendments and restatements thereto. In
addition, Seller has heretofore made the minute books of each Vapor Company
available to Buyer for inspection by Buyer and its representatives.
4.07 Binding Agreements. This Agreement constitutes and,
when executed and delivered on the Closing Date, each of the other documents to
be executed and delivered by Seller to Buyer will constitute, valid and binding
obligations of Seller enforceable against Seller in accordance with their
respective terms, except that: (a) such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditor's rights; and (b) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding there for may be brought.
4.08 No Violation. Except as set forth in Schedule 4.08
attached hereto, neither the execution and delivery of this Agreement nor the
consummation by Seller of the transactions contemplated hereby will: (a)
violate any statute or law, or any rule or regulation of any governmental
authority; or (b) violate any order, writ, injunction or decree of any court or
governmental agency which is applicable to the Vapor Shares or the business or
the assets of any Vapor Company; or (c) violate or conflict with or constitute
a default under (or an event
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which, with notice or lapse of time, or both, would constitute a default under),
or will result in the termination of, or accelerate the performance required by,
or result in the creation of any material lien, security interest, charge or
encumbrance upon any of the Vapor Shares or the material assets of any of the
Vapor Companies under any term or provision of: (i) the Incorporation Documents
and By- Laws of Seller or the Incorporation Documents and By-Laws of any of the
Vapor Companies; or (ii) any material lease, contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character:
(A) to which Seller or any of the Vapor Companies is a party; or (B) by which
any of the Vapor Companies or any of their material assets or properties may be
bound except in each case, for violations which individually or in the aggregate
would not materially hinder or impair the consummation of the transactions
contemplated hereby.
4.09 Financial Statements. Seller has heretofore
delivered to Buyer the November 30, 1995 Balance Sheet. The November 30, 1995
Balance Sheet fairly presents the assets and liabilities of the Vapor Group at
November 30, 1995 and, except as set forth on Schedule 4.09 attached hereto,
has been prepared on a basis which is consistent with the manner in which the
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audited balance sheets of the Vapor Group dated as of February 28, 1995 and
February 29, 1996 (as previously delivered by Seller to Buyer) were prepared.
To Seller's knowledge, no Vapor Company has any obligation or liability
(contingent or liquidated) that is note the subject of a representation or
warranty made in this Agreement that would reasonably be expected to have a
Material Adverse Effect except (i) as reflected in the Closing Balance Sheet
or (ii) as described in the disclosure schedules delivered herewith.
4.10 Absence of Certain Changes. Except as and to the
extent set forth in Schedule 4.10 attached hereto, from November 30, 1995
through the date hereof and through the Closing Date, no Vapor Company has or
will have:
(a) (i) amended its Incorporation Documents or its
By-Laws; or (ii) merged with or into or consolidated with any other person,
firm, corporation or other entity; or (iii) subdivided or reclassified any
shares of its capital stock or any of its other outstanding equity interests;
(b) issued, sold, purchased or redeemed or issued options
or rights to subscribe to, or entered into any contracts or commitments to
issue, sell, purchase or redeem any shares of its capital stock or other equity
interests or any securities convertible into or exchangeable for any of its
shares of capital stock or other equity interests;
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(c) declared or paid any dividends or declared or made
any distributions of any kind (other than cash distributions) to its
stockholders or other owners of any of its outstanding equity interests or made
any direct or indirect redemption, retirement, purchase or other acquisition of
any shares of its capital stock or other equity interests except for cash
receipts remitted to Seller in connection with the ordinary cash management
practices of Seller;
(d) entered into or amended any written employment
agreement with any officer, director or general manager of any of the Vapor
Companies; entered into or amended any agreement with any labor union or
association representing any employee or entered into or amended in any
material respect, any employee benefit plan or arrangement relating to any
employees of any of the Vapor Companies, except in each case increases or
changes in benefits of not more than four percent (4%) occurring in the
ordinary course of business in accordance with the customary practices of such
Vapor Company or as otherwise set forth in Schedule 4.10(d) attached hereto;
(e) suffered any material adverse change in its financial
condition, assets, liabilities or business other than
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changes which individually or in the aggregate would not have a Material Adverse
Effect;
(f) sold, transferred or otherwise disposed of any of its
material assets, properties, or rights other than in the ordinary course of the
conduct of its business or canceled any claims which are material to its
business except for those claims which individually or in the aggregate would
not have a Material Adverse Effect;
(g) disposed of or permitted to lapse any material
patent, patent application, trademark, trademark registration, trademark
application, assumed name, service mark, trade name or copyright application,
copyright registration or license which would have a Material Adverse Effect or
disposed of or permitted to lapse any agreement under which it has any material
right or license except for dispositions or lapses of any of the foregoing
which individually or in the aggregate would not have a Material Adverse
Effect;
(h) made any single capital expenditure in excess of
Fifty Thousand Dollars ($50,000.00) or made any commitment to make capital
expenditures in excess of Fifty Thousand Dollars ($50,000.00), except for
commitments to make such capital expenditures which have been made in the
ordinary course of the business of such Vapor Company;
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(i) made any material change in any method of accounting
or accounting practice or policy or in its manner of keeping its books,
accounts or records;
(j) made any material changes in its warranty policies;
(k) granted any general increase in excess of four
percent (4%) in the compensation or benefits of any of its officers or
employees other than in the ordinary course of business, consistent with past
practices (including any such increase pursuant to any bonus, pension, profit
sharing, severance or other plan or commitment or periodic performance
reviews);
(l) made any loan or advance to any of its officers,
directors or employees other than advances of expenses made in the ordinary
course of its business and cash receipts remitted to Seller in accordance with
the regular cash management policies of Seller and the Vapor Companies; and
(m) to the knowledge of Seller, agreed, whether in
writing or otherwise, to take any of the actions set forth in this Section
4.10.
4.11 Title to Personal Property; Encumbrances; Etc.
Except as set forth in Schedule 4.11 attached hereto, each Vapor
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Company has good and marketable title to the material personal property which it
purports to own and, on the Closing Date, will have good and valid title to the
material personal property which it purports to own in each case, free and clear
of any liens, charges or encumbrances (collectively, "Liens") except for Liens
which individually or in the aggregate are included as liabilities on the
November 30, 1995 Balance Sheet or Liens which do not materially impair or
detract from the value of any of the material assets of any of the Vapor
Companies.
4.12 Real Property. (a) Schedule 4.12(a) hereto contains
a list of the address of each parcel of real property used by the Vapor
Companies (hereinafter the "Real Property") and includes a statement of: (i)
the approximate square footage of each such parcel of Real Property; (ii)
whether such Real Property is owned or leased; (iii) in the case of any Real
Property which is owned by any of the Vapor Companies, the identity of the
Vapor Company that is the owner of such Real Property; and (iv) in the case of
any Real Property which is leased by any of the Vapor Companies, the identity
of the lessee and the lessor of such Real Property.
(b) Except as otherwise set forth in Schedule 4.12(b)
attached hereto, each Vapor Company that is identified in Schedule 4.12(a) as
the owner of any Real Property has good and marketable title to the Real
Property which the Vapor Company is identified as the owner of, free and clear
of all Liens except
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for (i) Liens for taxes, assessments and other governmental charges relating to
the ownership of such Real Property which are not yet due and payable or due but
not delinquent or being contested in good faith by appropriate proceedings; (ii)
Liens which individually or in the aggregate are listed as liabilities on the
November 30, 1995 Financial Statement or the Closing Balance Sheet; and (iii)
Liens or minor title defects, if any, which do not materially impair or detract
from the value of any of the Real Property (collectively, "Permitted
Encumbrances").
(c) With respect to each parcel of Real Property which is
identified in Schedule 4.12(a) as being leased by a Vapor Company, the Vapor
Company that is identified in Schedule 4.12(a) as the lessee of such Real
Property has a valid and enforceable leasehold interest in such Real Property
and, except as otherwise set forth in Schedule 4.12(c) attached hereto, there
are no material defaults which have occurred under the terms of any lease of
any Real Property used by any of the Vapor Companies with respect to the
obligations of the Vapor Company which is identified in Schedule 4.12(a) as the
lessee of any such Real Property or, to the knowledge of Seller, with respect
to the obligations of the lessor of such Real Property other than any defaults
which would not, individually or in the aggregate, have
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a Material Adverse Effect. Prior to the date hereof, Seller has delivered to
Buyer copies of each lease of any Real Property used by any of the Vapor
Companies.
(d) Except as otherwise set forth in Schedule 4.12(d)
attached hereto, to the knowledge of Seller, the use, occupancy and ownership
(or leasing) by any Vapor Company of any buildings, structures or other
improvements located at any Real Property which is identified (in Schedule
4.12(a) attached hereto) as being owned (or leased) by any Vapor Company, does
not violate any zoning ordinances or any other codes or regulations except for
Permitted Encumbrances or such violations, if any, which, either individually
or in the aggregate, would not have a Material Adverse Effect.
(e) Except as otherwise set forth in Schedule 4.12(e)
attached hereto, none of the Real Property which is used by any of the Vapor
Companies is subject to any pending or, to the knowledge of Seller, threatened
condemnation proceeding by any public or quasi-public agency or other,
authority which has or would have a material adverse effect on the right or
ability of the Vapor Company that (as described in Schedule 4.12(a) attached
hereto) is the owner or lessee of any such Real Property, to continue to
conduct its business in the ordinary course.
(f) Except as otherwise set forth in Schedule 4.12(f)
attached hereto, to the knowledge of Seller, all of the Real Property which is
used by any Vapor Company is benefited by all
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easements or other rights (including utility service) necessary for the Vapor
Company which is identified (in Schedule 4.12(a) attached hereto) as the owner
or lessee of such Real Property, to continue to conduct its business at such
Real Property in the ordinary course.
4.13 Leases. Schedule 4.13 attached hereto contains a
list of each lease relating to any personal property used by any of the Vapor
Companies in the conduct of its business which provides for annual lease
payments in excess of Twenty-Five Thousand Dollars ($25,000.00) whose term is
in excess of one year and which is not cancelable upon 30 or fewer days' notice
without any liability, penalty or premium (other than nominal cancellation fee
or charge) (the "Leases"). Prior to the date hereof, Seller has delivered to
Buyer copies of the Leases including all amendments thereof and all
modifications thereto. Except as set forth in Schedule 4.13 attached hereto,
no Vapor Company is in default under the terms of any of the Leases with
respect to the obligations of any of such Vapor Companies or other than any
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect.
4.14 Patents, Trademarks, Trade Names, Etc. To the
knowledge of Seller, each Vapor Company owns (or possesses
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adequate licenses or other rights to use), free and clear of any claims of
others all Patents and Trademarks (as defined below), proprietary rights,
processes, formulas and other technical know how necessary to carry on its
business as currently conducted, and Schedule 4.14 attached hereto contains a
list and a general description of all material patents, trademarks, trademark
registrations, trade names, assumed names, copyrights, copyright registrations
and applications therefor, presently owned, held or used by any of the Vapor
Companies or with respect to which any of the Vapor Companies owns or holds any
license (hereinafter collectively the "Patents and Trademarks"). Except as set
forth in Schedule 4.14, Seller has not and, to the knowledge of Seller, none of
the Vapor Companies has, received any written notice that the use by Seller or
any of the Vapor Companies of the Patents and Trademarks is unlawful or
infringes upon the rights of any person, firm, corporation or other entity. To
the knowledge of Seller there is no infringement of any Patents and Trademarks
by any third party or any loss, cancellation, termination or expiration of any
Patents and Trademarks, except for losses, cancellations, terminations or
expirations of any Patents and Trademarks which individually or in the aggregate
would not have a Material Adverse Effect. Schedule 4.14 lists all licenses and
other rights which have been granted by any Vapor Company for the use of, and
all encumbrances on, any
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Patents and Trademarks or other intellectual property of any Vapor Company.
4.15 Litigation. Except as set forth in Schedule 4.15
attached hereto, there are no actions, suits or written claims (including
without limitation, product liability claims or claims that any of the Vapor
Companies has breached or otherwise failed to perform its obligations under any
product or service warranties described in Section 4.27 hereof) or legal,
administrative, equitable or arbitration proceedings or outstanding orders,
judgments, injunctions, awards or decrees of any court, any governmental or
regulatory body or any arbitration tribunal pending or, to Seller's knowledge,
threatened against or involving Seller or any of the Vapor Companies which: (a)
seek to prevent the consummation of the transactions contemplated by this
Agreement; or (b) relate to the business of any of the Vapor Companies and
which would have a Material Adverse Effect.
4.16 Banks and Brokers. Schedule 4.16 attached hereto sets
forth the name of each bank, trust company, securities or other broker or other
financial institution: (a) with which Seller has any account, lock box, safe
deposit box or vault for the exclusive purpose of providing or maintaining
banking or other financial services to any of the Vapor Companies; and (b)
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with which any of the Vapor Companies has any account, lock box, safe
deposit box or vault.
4.17 Employee Benefit Plans. (a) Except for any
individual employment, consulting or severance contracts disclosed in Schedule
4.21 attached hereto, Schedule 4.17(a) attached hereto sets forth a list, and
for oral arrangements, a general description, for each Vapor Company, of:
(i) each personnel practice (hereinafter the "Personnel
Practices") including, without limitation, vacation policies, holiday pay
policies, severance pay policies, sick or personal pay policies, incentive
bonus programs, bereavement pay programs, company car policies, service award
policies, tuition refund policies, relocation assistance policies and patent
award policies;
(ii) each plan, fund or program constituting an "employee
welfare plan" (hereinafter the "Employee Welfare Plans") within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, basic and supplemental life
insurance, health insurance (including medical, dental and hospitalization),
accidental death and dismemberment insurance, business travel and accident
insurance, short and long term disability insurance programs; and
(iii) each "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (the "Employee Pension Plans")
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including, without limitation, pension, profit sharing, and 401(k) retirement
plans; which is: (w) maintained, assumed or contributed to by Seller for the
benefit of any employee of any of the Vapor Companies; or (x) maintained,
assumed or contributed to by any Vapor Company for the benefit of its employees
(individually a "Plan" and collectively, the "Plans").
(b) Except as otherwise set forth in Schedule 4.17(b)
attached hereto, Seller has previously delivered to Buyer: (i) complete copies
of all plan documents which set forth the terms of each of the Plans and where
applicable, complete copies of any related trusts; (ii) a general description
of any of the Plans with respect to which no formal plan document has been
adopted; (iii) where applicable, the most recent Form 5500, as filed with the
Internal Revenue Service ("IRS") together with all attachments thereto,
relating to the Plans; (iv) where applicable, the most recent IRS determination
letter with respect to each Plan; and (v) all current written communications to
employees relating to the Plans.
(c) Except as otherwise set forth in Schedule 4.17(c)
attached hereto, to the knowledge of Seller, each of the Plans which is
intended to conform to the requirements of the Code and
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ERISA is in material compliance with the applicable requirements of the Code and
ERISA. To the knowledge of Seller (i) there is no liability, contingent or
otherwise, relating to any Plan that would have a Material Adverse Effect, (ii)
there are no actions, suits, arbitrations, or proceedings pending against any
Plan, against the assets of any of the trusts under any Plan or the plan sponsor
or the plan administrator, or against any fiduciary of any Plan with respect to
the operation of such plans which would have a Material Adverse Effect (other
than routine benefit claims), and (iii) no facts exist that would form the basis
for any such action, suit, arbitration, or proceeding described in clause (ii)
above. To the knowledge of Seller, each Plan intended to conform to the
requirements of the Code and or ERISA has been administered in all material
respects, in substantial compliance with the applicable requirements of the Code
and ERISA and, to the knowledge of Seller, nothing has occurred with respect to
the operation of any such Plan which would cause the loss of any qualification
or exemption pertaining thereto.
(d) Except as set forth in Schedule 4.17(d) attached
hereto: (i) to the knowledge of Seller, there has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any of the Plans; (ii) to the knowledge of Seller,
neither Seller nor any of the Vapor Companies have incurred, directly or
indirectly, any liability under Title IV of ERISA (other than, in the case of
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Seller, liability for premium payments to the Pension Benefit Guaranty
Corporation arising in the ordinary course) which would have a Material Adverse
Effect; (iii) to the knowledge of Seller for the four (4) years prior to
February 28, 1995 and since February 28, 1995, no reportable event (within the
meaning of Section 4043 of ERISA) has occurred or, is expected to occur with
respect to any of the Plans which are subject to Title IV of ERISA except for
plan mergers which have occurred with respect to certain of the Employee
Pension Plans within the meaning of Section 3(2) of ERISA, which mergers have
not had any material adverse effect on the ability of such Employee Pension
Plans to pay to employees of the Vapor Companies that are participants in such
Employee Pension Plans, the amount that employees of the Vapor Companies have
accrued under such Employee Pension Plans; (iv) none of the Plans has incurred
an accumulated funding deficiency (within the meaning of Section 302 of ERISA
or Section 412 of the Code), whether or not waived, as of the most recently
ended plan year of such Plan; (v) none of the assets of Seller or any of the
Vapor Companies is the subject of any lien arising under Section 302(f) of
ERISA or Section 412(n) of the Code; (vi) neither Seller nor any of the Vapor
Companies have been required to post any security under Section 307 of ERISA or
Section 401(a)
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(29) of the Code; and (vii) none of the Plans is a multiemployer plan (within
the meaning of Sections 3(37) or 4001(a) (3) of ERISA) or a single employer
pension plan (within the meaning of Section 4001(a) (15) of ERISA) for which
Seller or any of the Vapor Companies could incur liability under Sections 4063
or 4064 of ERISA.
(e) Neither Seller nor any Vapor Company has any
contract, plan, or commitment, whether legally binding or not, to create any
additional Plans or to modify any existing Plan except for such amendments, if
any, that may be required by ERISA or any other applicable law.
(f) With respect to any period for which any contribution
or other payment to or in respect of any Plan has accrued but is not yet due or
owing, each Vapor Company has made due and sufficient current accruals for such
contributions and other payments in accordance with generally accepted
accounting principles, and such current accruals through the end of such Vapor
Company's most recent fiscal year are duly and fully provided for in the
financial statements of such entity for the period then ended.
4.18 Consents and Approvals. Except for consents listed
in Schedule 4.18 attached hereto and for the filing of pre-merger notification
documentation under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR Act"), and the expiration of all applicable waiting periods
thereunder,
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no permit, consent, approval or authorization of, or declaration, filing or
registration with, any governmental agency or authority or any other person,
firm or corporation is necessary or required to be obtained in connection with
the execution and delivery by Seller of this Agreement or the consummation by
Seller of the transactions contemplated hereby except where the failure to
obtain any such permit, consent, approval or authorization or where the failure
to make any such declaration, filing or registration would not have a Material
Adverse Effect. Schedule 4.18 attached hereto also contains a list of all
material consents, approvals, authorizations, declarations, filings, or
registrations which, to the knowledge of Seller, are required to be obtained by
the Vapor Companies from any governmental agency or authority in connection with
the conduct of their respective businesses.
4.19 Environmental Protection. (a) Except as set forth in
Schedule 4.19(a) attached hereto, to the knowledge of Seller, each Vapor
Company has obtained all permits, licenses and other authorizations which: (i)
are required to be obtained by any such Vapor Company under all federal, state,
local and foreign laws relating to pollution or protection of the environment,
(hereinafter referred to as "Environmental Laws"), including,
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without limitation, laws relating to emissions, discharges, releases or
threatened releases into the environment (including, without limitation, ambient
air, surface water, ground water or land) of any substances identified in any
such Environmental Laws (such substances being hereinafter referred to as
"Regulated Materials"); and (ii) relate to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
Regulated Materials, except for those permits, licenses or other authorizations
the absence of which will not have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.19(b) attached
hereto, to the knowledge of Seller, each Vapor Company (and each property
owned, leased or operated by any of the Vapor Companies) is in compliance
with: (i) all terms and conditions of all permits, licenses and authorizations
required under the terms of any Environmental Laws; (ii) all other,
limitations, restrictions, conditions, standards, prohibitions, requirements
and obligations contained in any of the Environmental Laws as applicable to
such Vapor Company; and (iii) all plans, orders, decrees, judgments,
injunctions, notices or demand letters applicable to such Vapor Company and
issued, entered, promulgated or approved under any of the Environmental Laws,
except for such non-compliance which would not have a Material Adverse Effect.
(c) Except as set forth in Schedule 4.19(c) attached
hereto, neither Seller nor any of the Vapor Companies has
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received any notice that any past or present conditions, circumstances,
activities, practices, incidents or actions of any Vapor Company relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Regulated Material or relating to any emission,
discharge, release or threatened release into the environment of any Regulated
Material: (i) may interfere with or prevent compliance or continued compliance
by any of the Vapor Companies with any of the Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder; (ii) may give rise
to any common law or legal liability; or (iii) may otherwise form the basis of
any claim, action, demand, suit, proceeding, hearing, study or investigation,
unless the alleged violation or noncompliance with any Environmental Laws which
forms the basis of any notice described above in this Section 4.19(c), if
uncured or unsettled, would not reasonably be expected to have a Material
Adverse Effect.
(d) Except as set forth in Schedule 4.19(d) attached
hereto, there is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice or demand letter, notice of violation, investigation or
proceeding pending or to the
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knowledge of Seller, threatened against any Vapor Company relating in any way to
any violation of any of the Environmental Laws or any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
(e) To the knowledge of Seller, there has been no release
of any hazardous or toxic materials, pollutants or contaminants in, on or
affecting any properties owned, leased or operated by any Vapor Company.
Except as set forth on Schedule 4.19(e), no underground storage tanks are
located at any property now owned or leased by any Vapor Company, or at any
other property now operated by any Vapor Company. To the knowledge of Seller,
all above-ground storage tanks located on any property now owned, leased or
operated by each Vapor Company have been used and maintained in compliance with
all applicable legal requirements, and no leakage or spillage has occurred with
respect to any such storage tank which would have a Material Adverse Effect.
(f) Schedule 4.19(f) lists all environmental assessments,
investigations, surveys, sample results, reports of releases, notices of
violation, and administrative orders or judicial proceedings relating to
environmental compliance and conditions, from the records of each Vapor
Company.
(g) To the knowledge of Seller, no property now or
previously owned, operated or leased by any Vapor Company is
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listed or is proposed for listing on the National Priorities List pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended ("CERCLA"), or the Comprehensive Environmental Response, Compensation
and Liability Information System List ("CERCLIS") or on any similar state or
foreign list of sites requiring investigation or cleanup; and no lien has been
filed against either the personal or real property of any Vapor Company under
any Environmental Law, regulation promulgated thereunder or order issued with
respect thereto.
4.20 Insurance. Schedule 4.20 attached hereto contains a
general description (including the amount of any applicable deductibles) of all
policies of fire, liability, workmen's compensation and other forms of
insurance owned or held by Seller or any Vapor Company and issued with respect
to or covering risks associated with the assets, properties or business of each
Vapor Company. To the knowledge of Seller, all such policies are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid, and no notice of cancellation or
termination has been received by Seller or by any Vapor Company with respect to
any such policy. To the knowledge of Seller, such policies are valid,
outstanding and enforceable policies; will remain in full force and effect
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through the respective dates set forth in Schedule 4.20 without the payment of
additional premiums; and will not, with respect to all periods up to and
including the Closing Date, in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement except to the extent
set forth in Schedule 4.20.
4.21 Contracts and Commitments. (a) Except for leases
required to be disclosed pursuant to Sections 4.12 and 4.13 hereof, Plans
required to be disclosed pursuant to Section 4.17(a) hereof, insurance policies
required to be disclosed by Section 4.20 hereof and the Other Vapor Purchase
Agreement, Schedule 4.21(a) attached hereto contains a list of each written
contract, subcontract, agreement, commitment, option, note, bond, mortgage,
indenture, deed of trust, guarantee, franchise or license which: (i) (A)
requires payments in excess of One Hundred Thousand Dollars ($100,000.00) per
year; (B) contains the terms and conditions: (I) upon which any person is
employed as an officer, general manager, or consultant; or (II) upon which any
severance or other termination payments are payable; (C) provides preferential
rights to purchase any material quantity of any assets; (D) limits the freedom
of any party to engage in any business in any geographic area; (E) contains any
"change in control" provision which would be breached by the consummation of
the transactions contemplated by this Agreement; or (F) contains the terms of
any guaranty of the payment or performance of any
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liabilities or obligations the cost of the payment or performance of which
liabilities or obligations exceeds, in the aggregate, an amount equal to One
Hundred Thousand Dollars ($100,000); (G) is a joint venture or partnership
agreement or similar arrangement; or (H) to which any officer or director of any
Vapor Company, or a member of any such person's immediate family, is a party or
(I) which evidences indebtedness of any Vapor Company, and (ii) (A) Seller is a
party to and relates exclusively to the Vapor Business (hereinafter individually
referred to as a "Seller Contract" and collectively as the "Seller Contracts");
or (B) any Vapor Company is a party to or the beneficiary of (hereinafter
individually referred to as a "Vapor Company Contract" and collectively as the
"Vapor Company Contracts"). Prior to the date hereof Seller has delivered or
otherwise made available to Buyer copies of the Seller Contracts and the Vapor
Company Contracts including all amendments thereof and modifications thereto.
(b) Except as set forth in Schedule 4.21(b) attached
hereto, to the knowledge of Seller, each of the Seller Contracts and the Vapor
Company Contracts are valid, binding and in full force and effect and
enforceable in accordance with its terms except to the extent that: (i) such
enforcement may be subject to
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bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors rights; and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought;
(c) Except as set forth in Schedule 4.21(c) attached
hereto, Seller is not in default with respect to any of its obligations under
any of the Seller Contracts which, individually or in the aggregate, would
have a Material Adverse Effect, and, to the knowledge of Seller, there is no
basis for any claim that any other parties to any of the Seller Contracts is in
default with respect to its obligations under such Seller Contracts; and
(d) Except as set forth in Schedule 4.21(d) attached
hereto, to the knowledge of Seller, none of the Vapor Companies is in material
default with respect to the obligations of any Vapor Company under any of the
Vapor Company Contracts which, individually or in the aggregate, would have a
Material Adverse Effect, and, to the knowledge of Seller, there is no basis for
any claim that any other party to any of the Vapor Company Contracts is in
material default with respect to its obligations under such Vapor Company
Contracts.
4.22 Tax Matters. (a) Except as set forth in Schedule
4.22 attached hereto, Seller and each of the Vapor Companies has filed or
caused to be filed with the appropriate
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governmental agencies all Tax Returns (as hereinafter defined) required to be
filed prior to the date hereof with respect to the Vapor Companies and their
respective operations and assets for all periods ending on or prior to the date
hereof. In addition, except as otherwise set forth in Schedule 4.22 attached
hereto, Seller has paid, or caused to be paid in full, all Taxes shown to be due
on such Tax Returns for such periods, except for such Taxes the nonpayment of
which would not have a Material Adverse Effect. There are no liens with respect
to Taxes upon any of the material assets of any of the Vapor Companies.
(b) For the purposes of this Agreement: (i) "Taxes" shall
mean all taxes, charges, fees, levies or other assessments, including, without
limitation, income, excise, property, sales and franchise taxes (including any
interest, penalties or additions attributable to or imposed on or with respect
to any such assessment) imposed by the United States or any other jurisdiction,
and any state, province, county, local or other government, taxing authority, or
subdivision thereof; (ii) "Income Taxes: shall mean all taxes (including any
interest, penalties or additions attributable or imposed on or with respect to
such taxes) imposed by the United States or any other jurisdiction or by any
state, province, county, local or other
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government, taxing authority or subdivision thereof, solely with
respect to any income of Seller or any of the Vapor Companies excluding,
specifically, any sales taxes, transfer taxes, real or personal property taxes;
and (iii) "Tax Return" shall mean any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any governmental entity or other authority in
connection with the determination, assessment or collection of any Taxes
(whether or not such Taxes are imposed on Seller) or the administration of any
laws, regulations or administrative requirements relating to any Taxes.
4.23 Labor Relations. Schedule 4.23 attached hereto
contains a list of each contract or other agreement between Seller or any Vapor
Company and any labor union or other association representing any employees of
any Vapor Company (each such contract being hereinafter referred to as a
"Labor Agreement"). Prior to the date hereof, Seller has delivered to Buyer
true and complete copies of each Labor Agreement listed in Schedule 4.23
attached hereto. In addition, except to the extent set forth in Schedule 4.23
attached hereto: (a) there is no unfair labor practice charge, or complaint or
other action against any of the Vapor Companies pending or, to the knowledge of
Seller, threatened before the National Labor Relations Board or any other U.S.
or foreign governmental authority or agency, and none of the Vapor Companies is
subject to any order to
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bargain by the National Labor Relations Board; (b) there is no, and during the
past three years there has been no labor strike or work stoppage actually
pending or, to the knowledge of Seller, threatened against or affecting any of
the Vapor Companies; (c) no question concerning representation is pending or to
Seller's knowledge is threatened respecting employees of any of the Vapor
Companies; and (d) no written grievance which might have a Material Adverse
Effect is pending.
4.24 Customers and Suppliers. Except as set forth on
Schedule 4.24 attached hereto, none of the Vapor Companies is engaged in any
dispute with any customer or supplier of any of the Vapor Companies except for
disputes between customers or suppliers of any of the Vapor Companies which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
4.25 Compliance with Law. Except for matters pertaining
to the Plans which are provided for in Section 4.17 and matters pertaining to
Environmental Laws which are provided for in Section 4.19, the operations of
each of the Vapor Companies are and have been, conducted in accordance with all
applicable laws, regulations and other requirements of all U.S. and foreign
national governmental authorities, and of all states,
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municipalities and other political subdivisions and agencies thereof, having
jurisdiction over or the business of the Vapor Companies, including, without
limitation, all such laws, regulations and requirements relating to employment
of unauthorized aliens, antitrust, consumer protection, currency exchange, equal
opportunity, health, occupational safety, pension and securities, except for
deviations from such laws arising from the operations of the Vapor Companies
which, individually or in the aggregate would not have a Material Adverse
Effect. Except as set forth in Schedule 4.25 attached hereto, to the knowledge
of Seller, none of the Vapor Companies has received any written notification of
any asserted failure by Seller or any of the Vapor Companies to comply with any
such laws, rules or regulations.
4.26 Brokers and Finders. Except as set forth in Schedule
4.26 attached hereto, neither Seller nor any Vapor Company, nor any of the
officers, directors or employees thereof, as the case may be, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement.
4.27 Product Warranties. The standard product or service
warranties, indemnifications and guarantees which each of the Vapor Companies
extends to its customers in the ordinary course of the conduct of their
respective businesses, copies of
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which have been delivered to Buyer, are identified in Schedule 4.27 attached
hereto. Schedule 4.27 also contains a general description of any product or
service warranties, indemnifications or guarantees extended by any of the Vapor
Companies to any material customer, the terms of which are materially different
from the standard product or service warranties, indemnifications or guarantees
otherwise described in Schedule 4.27 attached hereto. No material warranties,
indemnifications or guarantees are now in effect or outstanding with respect to
products or services manufactured, produced or performed by any of the Vapor
Companies in the ordinary course of conduct of their respective businesses,
except for warranties implied by law and warranties, indemnifications and
guarantees of the types identified in Schedule 4.27 attached hereto.
4.28 Potential Conflicts of Interest. Except as set forth
in Schedule 4.28 attached hereto, no contract, agreement or arrangement
(excluding employment agreements and rights arising under any of the Plans)
providing for the purchase or sale of any goods or services or relating to any
interest in any property, whether real or personal, or tangible or intangible,
which is used by or relates to any of the Vapor Companies exists between: (a)
Seller and any of the Vapor Companies; (b) Seller and any
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officers or directors of any of the Vapor Companies; or (c) between any of the
Vapor Companies and any officers or directors of any of the Vapor Companies.
Except as set forth in Schedule 4.28 attached hereto, none of the officers or
directors of Seller and none of the stockholders, officers or directors of any
of the Vapor Companies has any cause of action or other claim whatsoever against
any of the Vapor Companies.
4.29 Disclosure. Disclosure of any fact or information in
any Schedule required by this Article 4 shall be deemed for purposes of this
Agreement to be disclosure on any other Schedule required by any Section of
this Agreement on which such item could have been listed pursuant to this
Agreement.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.01 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, and has the
corporate power and authority to carry on its business as presently conducted.
5.02 Authorization by Buyer. Buyer has full corporate
power and authority to enter into, execute and deliver this Agreement and each
of the other documents and instruments to be executed and delivered by Buyer
pursuant to this Agreement and to
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carry into effect the transactions contemplated hereunder and thereunder. At
Closing, the execution and delivery of this Agreement and each of the other
documents and instruments to be executed and delivered by Buyer pursuant to this
Agreement and the consummation of the transactions contemplated hereunder and
thereunder will have been duly authorized by all necessary corporate action on
the part of Buyer. At Closing, no other corporate act or proceeding on the part
of Buyer or its stockholders is necessary to authorize the execution and
delivery of this Agreement and each of the other documents and instruments to be
executed and delivered by Buyer pursuant to this Agreement or the consummation
of the transactions contemplated hereby and thereby.
5.03 Binding Agreements. This Agreement constitutes, and,
when executed and delivered on the Closing Date, each of the other documents
and instruments to be executed and delivered by Buyer to Seller will constitute
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with its terms except that: (a) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect affecting the enforcement of creditors' rights generally; and, (b)
the remedy of specific performance and
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injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
5.04 No Violation. Neither the execution and delivery of
this Agreement, nor the consummation by Buyer of the transactions contemplated
hereby will: (a) to the knowledge of Buyer, violate any statute or law, or any
rule or regulation of any governmental authority; (b) violate any order, writ,
injunction or decree of any court or governmental authority; or (c) violate or
conflict with or constitute a default under (or an event which, with notice or
lapse of time, or both, would constitute a default under) or will result in
the termination of, or accelerate the performance required by, or result in the
creation of any material lien, security interest, charge or encumbrance upon
any of the material assets of Buyer under any term or provision of: (i) the
Articles of Incorporation or By-Laws of Buyer; or (ii) any material lease,
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or by which Buyer or any of its
assets or properties may be bound or affected.
5.05 Litigation. There are no actions, suits or claims or
legal, administrative, equitable or arbitration proceedings or outstanding
orders, judgments, injunctions, awards or decrees of any court, any
governmental or regulatory body or arbitration tribunal pending, or to the
knowledge of Buyer, threatened
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against or involving Buyer which: (a) seek to prevent the consummation of the
transactions contemplated by this Agreement; or (b) relate to the business or
operations of Buyer and which, if adversely decided, would prevent Buyer from
meeting its obligations hereunder.
5.06 Consents and Approvals. Except for consents listed
in Schedule 5.06 attached hereto and for the filing of pre-merger notification
documentation under the HSR Act and the expiration of all applicable waiting
periods thereunder, no permit, consent, approval or authorization of, or
declaration, filing or registration with, any governmental agency or authority
or any other person, firm or corporation is necessary or required to be
obtained in connection with the execution and delivery by Buyer of this
Agreement or the consummation by Buyer of the transactions contemplated hereby.
5.07 Purchase for Investment. Buyer is purchasing the
Vapor Shares for investment and not for resale or distribution and Buyer will
not sell, transfer, offer for sale, pledge, hypothecate or otherwise dispose of
any of the Vapor Company shares in violation of any applicable securities laws
or regulations.
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5.08 Brokers and Finders. Except as set forth in Schedule
5.08, neither Buyer, nor any of its officers, directors or employees, as the
case may be, has employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finders fees in connection with the
transactions contemplated by this Agreement.
ARTICLE 6.
COVENANTS OF SELLER
6.01 Termination of Accruals Under Defined Benefit Plans.
Buyer acknowledges that Seller has amended the terms of the master defined
benefit pension plan maintained by Seller and known as the Mark IV Industries,
Inc. and Subsidiaries Employees Retirement Income Fund (hereinafter the "Master
Defined Benefit Plan"): (a) to provide that participants therein who are
employees of any of the Vapor Companies immediately prior to the Closing Date
("Vapor Participants") shall cease to accrue benefits thereunder; and (b) to
provide that Vapor Participants shall be fully vested (i.e., one hundred
percent vested) in their accrued benefits under the Master Defined Benefit
Plan. Buyer also acknowledges that, after the Closing Date, Seller shall take
such actions (including, without limitation, the delivery of any notices
required under ERISA and the Code and the timely filing of all required filings
with any government agency), which are
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necessary or reasonably required to effectuate the intent of this Section 6.01.
6.02 Non-Competition. As a part of the inducement to
Buyer to enter into this Agreement, Seller hereby agrees that for a period of
five (5) years (the "Covenant Term") from the date hereof, Seller shall not,
nor shall any division of Seller or any corporation in which Seller directly or
indirectly owns more than twenty-five percent (25%) of the total number of
outstanding shares entitled to vote, or their successors and assigns
(hereinafter referred to as "Seller's Affiliates") without the prior express
written consent of Buyer, own, manage, operate, participate in or control,
directly or indirectly, any business, firm or corporation which is engaged
anywhere in the world in the manufacture or sale of any products which are the
same as or similar to, or which compete with, products manufactured or sold by
any Vapor Company prior to the Closing Date (hereinafter the "Competing
Products"), except in the case of products specifically described on Schedule
6.02 hereto. Notwithstanding the foregoing, nothing herein shall be deemed to
limit or otherwise restrict the rights of any division, subsidiary or affiliate
of Seller, including, without limitation, the Luminator Aircraft and Luminator
Mass Transit Divisions of Luminator
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Holding, LLC, Automatic/Eagle Holding, LLC, the IVHS and F-P Displays Divisions
of Mark IV Industries Limited, IVHS, Inc., F-P Displays, Inc., and Interstate
Highway Sign Corp., from continuing, after the Closing Date, to conduct its
business in the same manner as such business was conducted prior to the Closing
Date (including the sale of Competing Products if sold prior to the Closing
Date) or from engaging, after the Closing Date, in the manufacture and sale of
any Competing Products specifically identified on Schedule 6.02, nor shall this
provision be binding upon the successors and assigns of the foregoing entities,
provided that the same are not affiliates of Seller. Ownership or purchase by
Seller at or after the time of Closing, of less than ten percent (10%) of the
issued and outstanding capital stock of any enterprise engaged in the production
or sale of Competing Products, the securities of which are listed on a national
securities exchange or included in the national list of over-the-counter
securities shall not be deemed a violation of this Section 6.02. In addition,
Seller shall not be deemed to be in violation of this Section 6.02 in the event
that, following the Closing Date, Seller or any division or subsidiary of Seller
acquires substantially all the assets of any person, firm or corporation or a
majority of the issued and outstanding capital stock of any corporation and,
following such acquisition, less than ten percent (10%) of the annual sales of
any such acquired company is attributable to sales of Competing
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Products. Upon breach by Seller of any provision of this Section 6.02, Buyer
shall be entitled to injunctive relief, both preliminarily and permanently,
since the remedy at law would be inadequate and insufficient. Additionally,
Buyer will be entitled to all such other legal and equitable remedies as may be
available to it. In the event any of the provisions of this Section 6.02 are
determined by a court of competent jurisdiction to be contrary to any
applicable statute, law or rule, or for any reason to be unenforceable as
written, such court may modify any of such provisions so as to permit
enforcement thereof as thus modified.
ARTICLE 7.
COVENANTS OF BUYER
7.01 Employee Benefits. After the Closing Buyer will
endeavor to provide to employees of the Vapor Companies reasonable employment
benefits as determined in accordance with Buyer's business judgment and
employment policies.
7.02 Executive Severance Arrangement. Schedule 7.02 lists
certain individuals who have severance agreements with Mark IV. Such
agreements extend for two years after the Closing Date
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(the "Severance Period"). Buyer shall make any payments due under such
agreements resulting from actions taken by Buyer during the Severance Period.
Thereafter, such individuals will be entitled only to such severance benefits as
are provided under Buyer's employment policies as then in effect.
Notwithstanding anything herein to the contrary, Mark IV shall make any payments
due under the severance agreement with David Kerr arising during the first year
of the Severance Period. Buyer shall make any payments thereafter due under the
Kerr severance agreement resulting from actions taken by Buyer.
7.03 Insurance Coverage. Buyer acknowledges that the
insurance coverage which Seller maintains with respect to the Vapor Companies
including, without limitation, general liability, product liability, auto
liability, property, commercial umbrella, excess umbrella, aircraft products,
fiduciary liability, crime liability and workers compensation insurance
coverage is maintained by Seller under policies with respect to which Seller is
the named insured and the Vapor Companies are additional insureds. Buyer
acknowledges that effective as of the Closing Date, Seller intends to remove
the Vapor Companies from the insurance coverage provided by such insurance
policies to the extent that such insurance coverage relates to and the business
and assets of each of the Vapor Companies with respect to any periods arising
at any time on or after the Closing Date. Accordingly, Buyer acknowledges that
insurance protection may not
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be available to Buyer under any insurance policies maintained by Seller with
respect to any injury, loss or damage which Buyer, any of the Vapor Companies,
or any third party may suffer as a result of any event, occurrence or
circumstance existing or occurring with respect to any of the Vapor Companies at
any time on or after the Closing Date.
7.04 Investigation. Buyer acknowledges that, except for
the representations and warranties of Seller contained in or made pursuant to
Article 4 hereof, or in any certificate, document or instrument delivered
pursuant to this Agreement, neither Seller nor any of its officers, employees,
agents, stockholders, affiliates, consultants, investment bankers, legal
advisors or other representatives shall: (a) be deemed to have made any
representations, warranties or assurances of any kind; and (b) have any
liability or obligation to Buyer in respect of any statement or assurance made
to Buyer in connection with the transactions contemplated herein, including,
without limitation, statements set forth in a Confidential Offering Memorandum
dated November, 1995 and provided to Buyer or any written or oral statements
made by any employee or representative of Seller or any of the Vapor Companies
in connection with any presentations made with respect to the Vapor Business.
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ARTICLE 8.
ADDITIONAL COVENANTS OF BUYER AND SELLER
8.01 Substitute Guarantees and Letters of Credit. Buyer
shall use reasonable best efforts to obtain substitute guarantees, letters of
credit, performance bonds, surety bonds and similar arrangements with respect
to the Vapor Business listed on Schedule 8.01 as promptly as practicable after
the Closing Date and in any event within 60 days thereafter. During such
period (not to exceed 60 days after the Closing Date) Seller shall cause all
such outstanding arrangements with respect to the Vapor Business or any Vapor
Company to be maintained. Buyer shall indemnify and hold Seller and any
affiliate company of Seller harmless for any losses or liabilities arising
under such continued arrangements after the Closing.
8.02 Access After the Closing Date. Seller agrees with
Buyer that, on and after the Closing Date, each, upon reasonable advance notice
from the other (which notice shall include specific reference to the material
requested and the purpose therefor) and with the consent of the other party
(which consent shall not be unreasonably withheld), will permit the other and
their respective representatives (including their counsel and auditors), during
normal business hours to have access to and examine and make copies of all
books and records of the other
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which pertain to the business and assets of any of the Vapor Companies
including, but not limited to, correspondence, memoranda, books of account,
payroll records, computer records, insurance policies and the like. All actual
costs incurred in connection with locating, preparing, collecting and
photocopying any such material shall be borne by the party requesting the same.
8.03 Record Retention. For a period consistent with each
party's respective customary practice of record retention, or, in the case of
books or records with respect to which there is an applicable statute of
limitations, for a period until the expiration of such statute of limitations
(or any later date to which such statute of limitations may have been extended
in a particular instance by written agreement with a regulatory authority or by
judicial or administrative order), Buyer and Seller each agree to maintain all
material books or records existing at Closing and pertaining to the business or
assets of any of the Vapor Companies.
8.04 Insurance Recovery. To the extent that Buyer may be
able to claim recovery under any insurance policies maintained by Seller with
respect to the Vapor Business for any claims relating to the Vapor Business,
Seller will cooperate with Buyer
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and take such action as Buyer may reasonably request to facilitate Buyer's
efforts to obtain such recovery.
8.05 Tax Matters. (a) For purposes of this Section 8.05,
"Effective Date" means August 31, 1996. Seller shall be responsible for
filing, or causing to be filed, within the time and in the manner prescribed
by law, all consolidated, combined or unitary Tax Returns with respect to any
Income Taxes payable by Seller and each of the Vapor Companies for all taxable
periods of Seller and each of the Vapor Companies ending on or before the
Effective Date. Following the Effective Date, Seller will pay or cause to be
paid in full all Income Taxes attributable to the Vapor Companies and their
respective operations and assets and either (i) shown to be due on such Tax
Returns, or (ii) otherwise due or claimed to be due from them by any taxing
authority for all periods up to and including the Effective Date. Seller shall
also be responsible for filing, or causing to be filed, within the time and in
the manner prescribed by law, all consolidated, combined or unitary Tax Returns
which are required to be filed (after taking into consideration any available
extensions for the filing of such Tax Returns) prior to the Effective Date with
respect to any Taxes (other than Income Taxes) payable by Seller and any of the
Vapor Companies with respect to any periods ending prior to the Effective
Date. Seller will pay or cause to be paid in full all Taxes (other than Income
Taxes) attributable to the Vapor Companies and their respective operations and
assets
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that were required to be paid on or before the Effective Date. With
respect to Taxes (other than Income Taxes) attributable to the Vapor Companies
and their respective operations and assets prior to the Effective Date that are
first due and payable after the Effective Date, (i) Seller shall pay such Taxes
if they were not accrued as liabilities on the Closing Balance Sheet, and (ii)
Buyer shall pay such Taxes if they were accrued as liabilities on the Closing
Balance Sheet. Any transfer taxes payable in connection with the transactions
contemplated hereby will be paid by Buyer or Seller in accordance with
customary practice. Seller shall provide Buyer a copy of any Tax Return
relating to Income Taxes which is described above in this subparagraph and
which is required to be signed by Buyer or any of the Vapor Companies not later
than ten (10) days prior to the due date (including extensions) for filing such
Tax Return.
(b) Buyer shall be responsible for filing, or causing to
be filed, within the time and in the manner prescribed by law, all
consolidated, combined or unitary Tax Returns relating to any Taxes' (other
than Income Taxes) payable by any of the Vapor Companies, in each case, for all
taxable periods beginning on or before the Effective Date to the extent that
such Tax Returns are not required to be filed by Seller and any of the Vapor
Companies
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pursuant to the provision of Section 8.05(a) above. The liability
for Taxes shown to be due on such returns shall be determined as provided in
Section 8.05(a) above. Buyer shall be responsible for filing all Tax Returns
required to be filed by Buyer or by or on behalf of the each of the Vapor
Companies in connection with the business, operations and assets of each of the
Vapor Companies, after the Effective Date.
(c) So long as no lien or attachment arises with respect
to any Vapor Company or any assets of any Vapor Company, Seller shall have full
control and ultimate discretion over all actions to be taken or decisions to be
made in the course of any audit or examination, or any subsequent proceedings,
including settlement or other dispositions thereof: (i) with respect to any
Taxes due and payable by Seller or any of the Vapor Companies for any period
ending on or prior to the Effective Date; and (ii) with respect to any Taxes
which are payable in connection with any Tax Returns which Seller and the Vapor
Companies are required to file pursuant to the provisions of Section 8.06(a)
above. Seller shall reimburse Buyer and each Vapor Company for all reasonable
out-of-pocket costs incurred by Buyer and each Vapor Company in connection with
the taking of any action which Seller requests Buyer or such Vapor Company to
take in the course of such audit, examination or subsequent proceeding. If any
taxing authority shall take any action which may give rise to a claim by any
such taxing authority that: (w) any Vapor Company has not
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filed any Tax Return relating to Income Taxes which is required with respect to
any period ending on or before the Effective Date; or (x) any Vapor Company has
not paid in full or owes any Taxes for any period ending on or before the
Effective Date, then Buyer shall promptly notify Seller thereof in writing;
provided, however, that any failure to notify Seller shall not release Seller
from its obligation to file such Tax Returns or pay such Taxes as stated in this
Section to the extent Seller would not be prejudiced thereby.
(d) If, in response to any claim which is made by any
taxing authority to the effect that any of the Vapor Companies owes any
additional Taxes for any period ending on or before the Effective Date, Seller
pays any amount to such taxing authority, Buyer shall, upon the written request
of Seller, file (or take such action as may be necessary to cause any Vapor
Company identified by Seller to file) a claim for refund with the appropriate
taxing authorities with respect to any Taxes for any such period. Seller will
provide Buyer or any of the Vapor Companies identified by Seller as the
appropriate party for making a claim for any such refund, with such information
as may be reasonably necessary to enable Buyer or any of the Vapor Companies
identified by Seller, as the case may be, to file a
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claim for refund. Buyer and each of the Vapor Companies shall, at the sole cost
of Seller (including all reasonable out-of-pocket costs incurred by Buyer and
each of the Vapor Companies) promptly take all actions as may be reasonably
requested by Seller to obtain such refund. Buyer acknowledges and agrees that
any and all refunds of any Taxes paid or payable by Seller or by any of the
Vapor Companies in connection with the operations of Seller and the Vapor
Companies prior to the Effective Date shall be the property of Seller and such
refunds, including any interest thereon actually received by Buyer, net of any
additional Income Taxes imposed on Buyer or any of the Vapor Companies for any
period occurring after the Effective Date and which are attributable to the
receipt of such refunds shall be paid by Buyer to Seller promptly after such
refund is either received or credited against such liability of Buyer or any of
the Vapor Companies for Taxes. Buyer agrees that neither Buyer nor any of the
Vapor Companies have any right to carry back any loss incurred by any of the
Vapor Companies after the Effective Date to any period prior to the Effective
Date.
(e) To the extent that Buyer receives a tax refund as a
result of a deduction or credit relating back to the period prior to the
Closing, Buyer will pay over to Seller the net amount realized by Buyer with
respect thereto within 30 days of such receipt. To the extent that Seller
receives a tax refund as a result of a deduction or credit relating to the
period after
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the Closing, Seller will pay over to Buyer the net amount received by Seller
with respect thereto within 30 days of such receipt.
(f) Each party hereto shall provide the other party with
such assistance as may reasonably be requested by such party in connection with
the preparation of any Tax Return or claim for refund, any audit or other
examination by any taxing authority or any judicial or administrative
proceedings relating to the liability of any of the Vapor Companies for any
Taxes attributable to any period ending on or before the Effective Date.
8.06 Tax Refunds. Seller shall be entitled to any tax
refund received by Buyer or any of the Vapor Companies which is attributable to
any Income Taxes payable by Seller or any of the Vapor Companies with respect
to any period ending on or prior to the Effective Date and any tax refund
received by Buyer or any of the Vapor Companies with respect to any Taxes
(other than Income Taxes) payable for any periods ending prior to the Effective
Date to the extent that the due date (including extensions thereof) for the
filing of the Tax Return with respect to such Taxes (other than Income Taxes)
and the payment of such Taxes (other than Income Taxes) occurs prior to the
Effective Date, but only
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to the extent that such refund is not reflected in the Closing Balance Sheet.
Buyer agrees to notify Seller upon receipt of, and forthwith deliver to Seller
duly endorsed in the name of Seller, any tax refund check or other evidence of
payment in respect of any such tax refund, which refund check or other evidence
of payment shall not be deposited into any bank account for collection and
pending delivery to Seller shall be held by Buyer or the Vapor Company to whom
such refund was paid, as the case may be, in trust pending delivery to Seller;
provided, however, that the amount of any additional liability imposed on Buyer
or any of the Vapor Companies for Taxes that are attributable to any such tax
refund is simultaneously paid by Seller to Buyer.
8.07 Confidentiality. Each party hereto will hold and
will cause its directors, officers, employees, agents, consultants and advisors
to hold in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, all documents and information concerning the other party furnished to
it by such other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been: (a) previously lawfully known by the
party to which it was furnished, (b) in the public domain through no fault of
such party, or (c) later lawfully acquired from other sources by the party to
which
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it was furnished), and each party will not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors in connection with this
Agreement. If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except to the extent such
information comes into the public domain through no fault of the party required
to hold it in confidence, and in any event such information shall not be used
to the detriment of, or in relation to any investment in, the other party and
all such documents (including copies thereof and software) shall be returned to
the other party immediately upon the written request of such other party.
8.08 Transfer of 401(k) Plan Assets. (a) Certain
employees of the Vapor Companies have accumulated funds for their retirement in
an account which is maintained for the benefit of such Vapor Company employees
under the terms of Seller's Master 401(k) Plan. The assets of the Master
401(k) Plan are held under the terms of a master trust agreement, dated as of
January 1, 1987, between Mark IV and Marine Midland Bank, N.A. (the "Master
Trust").
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(b) As soon as practicable following the Closing, Seller
shall take such action as may reasonably be necessary to amend the Master
401(k) Plan to provide that each Vapor Company employee who is a participant in
the Master 401(k) Plan shall be 100% vested in his accrued benefit, if any,
determined as of the Closing Date under the terms of the Master 401(k) Plan.
(c) As soon as practicable following the Closing Date,
Buyer shall take such action as may be reasonably necessary to provide for the
transfer of the accrued benefit of each employee of any Vapor Company under the
terms of the Master 401(k) Plan to the New 401(k) Plan. In connection with
such transfer, Buyer shall take such action as may reasonably be necessary or
which may be required by applicable law, including, but not limited to, the
adoption of amendments to the New 401(k) Plan to accommodate such transfer.
(d) As soon as practicable following the Closing Date,
Seller shall deliver to Buyer, a statement of the amount of the accrued benefit
under the terms of the Master 401(k) Plan of each employee of each Vapor
Company.
(e) As soon as practicable following the Closing Date and
the delivery by Buyer to Seller of a copy of the New 401(k) Plan, a copy of any
amendment to such plan adopted pursuant to Section 8.08(c) hereof, a copy of
the trust established pursuant to the terms of the New 401(k) Plan, a copy of
the most recent IRS determination letter for the New 401(k) Plan and such other
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documentation establishing to the reasonable satisfaction of Seller's counsel
that the New 401(k) Plan, as amended, continues to conform to all applicable
requirements established for qualification of retirement plans under Section
401(a) of the Code, and that the trust established pursuant to the terms of the
New 401(k) plan conforms to all applicable requirements under Section 501(a) of
the Code and the regulations thereunder, but in no event prior to the
expiration of thirty (30) days following the filing of any notices of transfer
and assumption required under Section 6058(b) of the Code, Seller shall direct
the trustee of the Master Trust holding the assets of the Master 401(k) Plan to
transfer to the trust established under the terms of the New 401(k) Plan, an
amount, in cash, equal to the aggregate value of the accounts established
under the terms of the Master 401(k) Plan for all employees of the Vapor
Companies. For purposes of calculating the amount to be transferred to the
trust established under the terms of the New 401(k) Plan pursuant to the
preceding sentence, the value of such accounts shall be determined as of the
valuation date immediately preceding the Closing Date, plus or minus, as the
case may be, the net earnings or losses of such trust attributable to the
employees of the Vapor Companies for the period from the valuation date
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immediately preceding the Closing Date to the valuation date immediately
preceding the date of such transfer, plus any contributions which are required
to be made in respect of such employees which were not yet paid to the trustee
of the Master Trust.
(f) In connection with the transfer contemplated by this
Section 8.08, Seller and Buyer shall cooperate with each other and make all
appropriate filings required under the Code or the regulations thereunder in
connection with such transfers.
8.09 Public Announcements. Prior to Closing, Buyer and
Seller will consult with each other before issuing any press releases or
otherwise making any public statements with respect to this Agreement or the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to such consultation, except as may be required by
law.
8.10 Post-Closing Cooperation. After the Closing, without
further consideration: (a) Seller shall take all such further actions and
execute, acknowledge and deliver all such further consents and other documents
as Buyer may reasonably request to facilitate or effect the transactions
contemplated by this Agreement; and (b) Buyer shall, and shall cause each of
the Vapor Companies, to take all such further actions and execute, acknowledge
and deliver all such further consents and other documents as Seller may
reasonably request in order to facilitate the transactions contemplated by this
Agreement.
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8.11 Benefits Coverage. For a period of up to 60 days
after Closing, at Buyer's option Seller will continue to provide medical and
dental benefits coverage to Vapor employees, and Buyer shall deposit with Seller
$150,000 at Closing, from which Buyer shall reimburse Seller for all costs
incurred by Seller in connection with the provision of such benefits pursuant to
Seller's practices and procedures with respect to such medical and dental
benefit plans (including, without limitation, costs relating to claims coverage,
claims administration, stop-loss insurance, and utilization review). Buyer
shall make an additional deposit of $150,000 immediately prior to November 1,
1996 in the event that Buyer requests that Seller continue to provide such
coverage. Seller shall return any unused deposit amounts to Buyer promptly
after the expiration of such 60 day period.
8.12 Brokers' and Finders' Fees. All fees and commissions
referred to in Section 4.26 hereof will be paid by Seller and will not be
charged to any Vapor Group Member after August 31, 1996.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
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9.01 Survival of Representations. The representations and
warranties made by Seller pursuant to Sections 4.04 and 4.05 hereof shall
survive for a period of ten (10) years following the Closing Date, and the
representations and warranties made by Seller pursuant to Section 4.22 hereof
shall survive for a period equal to the applicable statute of limitations with
respect to any taxes referred to therein. The representations and warranties
contained in Sections 4.07, 4.08, 4.11, 4.12, 4.19 and 4.25 hereof shall
survive for a period of two (2) years after the Closing Date. All other
representations and warranties contained in Articles 4 and 5 hereof shall
survive for a period of three (3) years after the Closing Date.
As used herein, the term "Title Warranties" means the
representations and warranties made by (i) Seller pursuant to Sections 4.04 and
4.05 of this Agreement and (ii) Mark IV Canada (made pursuant to Sections 4.04
and 4.05 of the Other Vapor Purchase Agreement. As used herein, the term "Tax
Warranties" means the representations and warranties made by (i) Seller
pursuant to Section 4.22 of this Agreement and (ii) Mark IV Canada pursuant to
Section 4.22 of the Other Vapor Purchase Agreement.
9.02 Statements as Representations. All statements
contained in any Schedule delivered pursuant to Articles 4 and 5
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hereof shall be deemed representations and warranties within the meaning of
Section 9.01 hereof.
9.03 Indemnification by Seller. Subject to the terms and
conditions of this Section, Seller hereby agrees to indemnify, defend and hold
harmless Buyer and any parent, subsidiary or affiliate companies of Buyer,
including, without limitation, each of the Vapor Group Members (hereinafter the
"Buyer Group"), from and against all demands, claims, actions or causes of
action, assessments, payments, losses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and reasonable
attorneys' fees and expenses (collectively "Damages") asserted against,
resulting to, imposed upon or incurred by Buyer Group or any member thereof, by
reason of or resulting from: (a) any liabilities of Seller arising from
operations other than the Vapor Group Business; (b) any breach of any of the
Title Warranties; (c) claims made or asserted against any of the Vapor Group
Members or Buyer by the Internal Revenue Service or any other federal, state,
local or foreign taxing authority arising from (i) any breach of the Tax
Warranties, (ii) the breach by Seller or Mark IV Canada of any of their
respective covenants under Section 8.05(a) of this Agreement or Section 8.05(a)
of the Other Vapor Purchase
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Agreement concerning income taxes or sales and use taxes pertaining to the
operations of the Vapor Group Business prior to the Closing Date or (iii) any
liability with respect to any consolidated return including Seller or Mark IV
Industries Limited; (d) a breach of any representation or warranty of Seller or
Mark IV Industries Limited (other than the Title Warranties and the Tax
Warranties) contained in or made pursuant to this Agreement or the Other Vapor
Purchase Agreement; (e) any breach or non-performance of any covenant to be
performed by Seller or Mark IV Industries Limited under this Agreement, the
Other Vapor Purchase Agreement or any related document; (f) any claims for
injuries to persons or property arising out of the use of any of the products of
any Vapor Group Member in finished goods or sold prior to the Closing; (g) all
Damages relating to (i) former employees of any Vapor Group Member (including
without limitation post-retirement benefits) or (ii) disability, workers'
compensation or medical leave benefits for any current employee of any Vapor
Group Member who is not actively at work on the Closing Date; provided, however,
that in the event a current employee of a Vapor Company not actively at work as
of the Closing Date shall return to work after the Closing Date, Buyer shall be
responsible for all disability, workers' compensation or medical leave benefits
for such individual incurred after his or her return to active employment and
Seller shall not indemnify Buyer for any such amounts; (h) claims or actions
asserted by any
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third party with respect to events or occurrences relating to or involving any
Vapor Group Member prior to the Closing Date, whether such claims or actions are
asserted prior to or after the Closing Date and regardless of whether such
claims or actions are the subject of a representation or warranty being made by
Seller; provided, however, (A) that if such claim or action is also the subject
of a representation or warranty, Buyer's claim for indemnification must be
asserted within the applicable periods specified in Section 9.01 hereof, and (B)
only claims or actions which would have a Material Adverse Effect shall be
covered by this clause 9.03(h); or (i) Damages arising from any environmental
condition or remediation to the extent the claims relating thereto (A) become
known within five (5) years of the Closing Date and (B) relate to non compliance
by any Vapor Group Member prior to Closing Date with any environmental law,
regulation, order, decree or the like as in effect on the Closing Date. For
purposes of this Agreement, the claims described in Section 9.03(a) through and
including 9.03(i) and Section 9.04(a), (b) and (c) shall be referred to
individually as a "Claim" and collectively as "Claims".
Seller's obligation to indemnify Buyer Group as set forth in
the preceding paragraph shall be limited to the Damages
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(as defined above) arising from Claims (as defined above) and shall exclude
Damages which may arise as a result of any reorganization, other legal
restructuring of Buyer or Buyer Group or post-closing changes in benefits by
Buyer, and in no event shall any such reorganization, restructuring or benefits
changes be deemed to increase the liability of Seller beyond the actual Damages
arising from any Claims; provided, however, that the foregoing exclusion for
Damages in connection with benefits coverage shall not apply to Damages
resulting from or arising in connection with statements, commitments, or
representations made by or on behalf of Seller.
Seller's obligation to indemnify and hold Buyer harmless from
and against any Damages incurred as a result of Claims described in Sections
9.03(a), (b), (c) and (f) through (j) hereof shall apply with respect to the
full amount of any and all Damages incurred by Buyer and Buyer Group as a
result of such Claims.
With respect to Damages incurred by Buyer or any member of
Buyer Group and arising from any Claim or Claims described in Sections 9.03(d)
and (h) hereof, Seller shall have no liability or obligation to indemnify and
hold Buyer or any member of Buyer Group harmless from any Damages incurred by
Buyer or any member of Buyer Group except to the extent that the aggregate
amount of the Damages incurred by Buyer and Buyer Group arising from any such
Claim or from all Claims described solely in Sections
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11.03(d) and (e) hereof, exceeds Two Hundred Fifty Thousand Dollars
($250,000.00) (the "Buyer Deductible") and then, only to the extent that the
amount of such Damages exceeds the Buyer Deductible. To the extent that a
representation or warranty is qualified so as to apply only to matters which
would have a Material Adverse Effect and such Material Adverse Effect is
quantifiable, then (i) such representation or warranty will not be actionable
until the Damages relating thereto exceed $50,000, (ii) if the total Damages
relating to such representation or warranty are less than $50,000, such amount
shall not count towards the satisfaction of the Buyer Deductible, and (iii) if
the total Damages relating to such representation or warranty exceed $50,000,
the full amount of such Damages (from the first dollar) shall count towards the
satisfaction of the Buyer Deductible.
Buyer will notify Seller as promptly as practicable with
respect to each amount of Damages being counted by Buyer towards the Buyer
Deductible and will provide Seller with an annual statement of such sums.
Notwithstanding anything to the contrary contained in this
Section 9.03, Seller shall have no obligation to indemnify Buyer or Buyer Group
with respect to any Damages incurred as a
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result of Claims described in Sections 9.03(d) hereof to the extent that the
aggregate amount of the Damages incurred by Buyer or Buyer Group with respect to
the Claims described solely in Sections 9.03(d) hereof exceeds an amount equal
to the Purchase Price.
9.04 Indemnification by Buyer. Buyer hereby agrees to
indemnify, defend and hold harmless Seller and any parent, subsidiary or
affiliate companies of Seller (the "Seller Group") from any Damages arising by
reason of or resulting from: (a) any claim made against Seller or any member of
the Seller Group relating to the business, assets or operations of any Vapor
Group Member after the Closing Date other than claims which result from any
breach by Seller of its representations and warranties; (b) any breach of any
representation or warranty of Buyer contained in or made pursuant to this
Agreement or under the terms of the Other Vapor Purchase Agreement; and (c) any
breach or non-performance of any covenant to be performed by Buyer under this
Agreement, the Other Vapor Purchase Agreement or any related document.
Buyer's obligation to indemnify the Seller Group as set forth
in the preceding paragraph shall be limited to the Damages (as defined above)
arising from Claims (as defined above) and shall exclude Damages which may
arise as a result of any reorganization or other legal restructuring of Seller
or the Seller Group and in no event shall be deemed to increase the
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liability of Buyer beyond the actual Damages arising from any Claims.
Buyer's obligation to indemnify and hold Seller harmless from
and against any Damages incurred as a result of Claims described in Sections
9.04(a) and (c) hereof shall apply with respect to the full amount of any and
all Damages incurred by Seller and the Seller Group as a result of such Claims.
With respect to Damages incurred by Seller or any member of
the Seller Group and arising from any claim or claims described solely in
Section 9.04(b) hereof, Buyer shall have no liability or obligation to
indemnify and hold Seller or any member of the Seller Group harmless from any
Damages incurred by Seller or any member of the Seller Group except to the
extent that the aggregate amount of the Damages incurred by Seller and the
Seller Group arising from any such Claim or Claims described solely in Section
9.04(b) hereof, exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) and
then, only to the extent that the amount of such excess exceeds Two Hundred
Fifty Thousand Dollars ($250,000.00) (the "Seller Deductible").
Seller will notify Buyer as promptly as practicable with
respect to each amount of Damages being counted by Seller
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towards the Seller Deductible and will provide Buyer with an annual statement of
such sums.
Notwithstanding anything to the contrary contained in this
Section 9.04, Buyer shall have no obligation to indemnify Seller or the Seller
Group with respect to any Damages incurred solely as a result of Claims
described in Section 9.04(b) hereof to the extent that the aggregate amount of
the Damages incurred by Seller or the Seller Group with respect to the Claims
described solely in Section 9.04(b) hereof exceeds the Purchase Price.
9.05 Conditions of Indemnification. The obligations and
liabilities of Seller under Section 9.03 hereof and the obligations and
liabilities of Buyer under Section 9.04 hereof with respect to Claims relating
to third parties shall be subject to the following terms and conditions:
(a) A party seeking indemnification under this Agreement
("Indemnified Party") will give the party required to provide such
indemnification (the "Indemnifying Party") prompt notice of any such Claim, and
thereafter the Indemnifying Party will undertake the defense thereof by
representatives chosen by it.
(b) If the Indemnifying Party, within a reasonable time
after notice of any such Claim, fails to defend such Claim, the Indemnified
Party will, upon further notice to the Indemnifying Party, have the right to
undertake the defense,
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compromise or settlement of such Claim on behalf of and for the account and risk
of the Indemnifying Party, subject to the right of the Indemnifying Party to
assume the defense of such Claim at any time prior to settlement, compromise or
final determination thereof.
(c) Anything in this Section 9.05 to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect an Indemnified Party other than as a result of
money damages or other money payments, the Indemnified Party shall have the
right, at its own cost and expense, to defend, and with the consent of the
Indemnifying Party, to compromise or settle such Claim, and (ii) the
Indemnifying Party shall not, without the written consent of the Indemnified
Party, its successors and assigns settle or compromise any Claim or consent to
the entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified Party, a
release from all liability in respect of such Claim.
9.06 Termination of Indemnification Obligations. (a) The
obligations to indemnify and hold harmless a party hereto: (i) contained in
Sections 9.03(b), (c) and (d) and 9.04(b) shall terminate when the applicable
representation or
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warranty terminates pursuant to Section 9.01; (ii) contained in Sections
9.03(a), (e), (f) and (g) and 9.04(a) and (c) shall not terminate; (iii)
contained in Section 9.03(h) shall not terminate except to the extent provided
therein with respect to certain claims; and (iv) contained in Section 9.03(i)
shall terminate five (5) years after the Closing Date; provided that, as to
clause (i) above, such obligations to indemnify and hold harmless shall not
terminate with respect to any representation or warranty with respect to which
the Indemnified Party shall have, prior to the termination of such
representation or warranty, made a specific Claim relating to a breach of such
representation or warranty by delivering written notice (stating in reasonable
detail the basis of such Claim) to the Indemnifying Party.
(b) Buyer shall have no right to be indemnified against
any breach of a representation or warranty made by Seller pursuant to this
Agreement to the extent that, on the Closing Date, Buyer had knowledge that, as
of the Closing Date, there was a material breach, violation or inaccuracy in
such representation or warranty as made by Seller pursuant to Article 4 hereof,
the existence of which material breach, violation or inaccuracy is not
disclosed in writing by Buyer to Seller on or prior to the Closing.
(c) Seller shall have no right to be indemnified against
any breach of a representation or warranty made by Buyer pursuant to this
Agreement to the extent that, on the Closing
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Date,' Seller had knowledge that, as of the Closing Date, there was a material
breach, violation or inaccuracy in such representation or warranty as made by
Buyer pursuant to Article 5 hereof, the existence of which material breach,
violation or inaccuracy is not disclosed in writing by Seller to Buyer on or
prior to the Closing.
9.07 Litigation Cooperation. (a) Seller shall cooperate
with Buyer and each of the Vapor Companies and shall cause its officers,
employees, agents, auditors and representatives to cooperate with Buyer and
each of the Vapor Companies in connection with the investigation, prosecution,
defense and settlement of any judicial or administrative proceeding or claim
which Buyer or any of the Vapor Companies has undertaken the defense of in
connection with Buyer's obligation to indemnify Seller as provided for in
Section 9.04 above; provided that Buyer shall reimburse Seller and its
officers, employees, agents, auditors and representatives for the reasonable
out-of-pocket costs and expenses incurred in providing such assistance.
(b) Buyer shall cooperate with Seller and shall cause its
officers, employees, agents, auditors and representatives to cooperate with
Seller in connection with the investigation,
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prosecution, defense and settlement of any judicial or administrative proceeding
or claim which Seller has undertaken the defense of in connection with Seller's
obligation to indemnify Buyer as provided for in Section 9.03 above provided
that Seller shall reimburse Buyer and its officers, employees, agents, auditors
and representatives for the reasonable out-of-pocket costs and expenses incurred
in providing such assistance.
9.08 Remedies Cumulative. Except as herein expressly
provided, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of
any other remedies against any other party hereto.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
10.01 Knowledge. For purposes of this Agreement, the term
"knowledge" with respect to (i) Seller means the actual knowledge of those
persons identified in Schedule 10.01 attached hereto, and (ii) Buyer means the
actual knowledge of Robert Brooks, John Meister, Alvaro Garcia-Tunon or George
Socher.
10.02 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented only by written
agreement of the parties hereto at any time with respect to any of the terms
contained herein.
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10.03 Waiver of Compliance. Any failure of Seller, on the
one hand, or Buyer, on the other, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the
Chairman, President or a Vice President of Buyer or Seller, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10.04 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given: (a) if delivered by hand when delivered; (b) if
by telex, telecopy, cable or overnight delivery when received, or (c) if by
mail, five (5) days after being mailed, certified or registered mail, with
postage prepaid:
(i) If to Seller, to:
Mark IV Industries, Inc.
One Towne Centre
501 John James Audubon Parkway
Amherst, New York 14226
Attention: John J. Byrne
with a copy to:
Gerald S. Lippes
Lippes, Silverstein, Mathias & Wexler LLP
700 Guaranty Building
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28 Church Street
Buffalo, New York 14202
or to such other person or address as Seller shall furnish to Buyer in writing.
(ii) If to Buyer, to:
W & P Holding Corporation
200 West Ninth Street Plaza
Suite 207
Wilmington, Delaware 19801
Attention: Robert J. Brooks
with a copy to:
David L. DeNinno
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, Pennsylvania 15219
or to such other person or address as Buyer shall furnish to Seller in writing.
10.05 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, except that Buyer may assign this Agreement to a subsidiary of Buyer,
provided that no such assignment of this Agreement or any of the rights or
obligations hereunder shall relieve or impair Buyer of its obligations under
this Agreement.
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10.06 Governing Law and Jurisdiction. This Agreement and the
legal relations among the parties hereto shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
its conflicts of law doctrine.
10.07 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
10.08 Arbitration.
(a) Arbitration. Subject to subsection (g) below, any
controversy, dispute or claim (including without limitation a Claim pursuant to
Section 9.03 hereof) the dollar amount of which exceeds $250,000 or any
collection of controversies, disputes or claims which together exceed $700,000
(a "Dispute") between the parties arising out of or relating to this Agreement,
or the breach, termination or validity thereof, shall be finally settled by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association then obtaining. In determining whether a Dispute or
Disputes meets the individual or aggregate, as the case may be, threshold for
arbitration set forth above, the principles set forth in the last sentence of
the
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next-to-last paragraph of Section 9.03 shall apply. However, in all
events, these arbitration provisions shall govern over any conflicting rules
which may now or hereafter be contained in the AAA Rules. The arbitration
shall be held in New York, New York unless the parties mutually agree to have
the arbitration held elsewhere, and judgment upon the award made therein may be
entered by any court having jurisdiction in New York, New York; provided,
however, that nothing contained in this Section 10.08 shall be construed to
limit or preclude a party from bringing any action in any court of competent
jurisdiction for injunctive or other provisional relief to compel another party
to comply with its obligations under this Agreement during the pendency of the
arbitration proceedings. Any judgment upon the award rendered by the
Arbitration Panel (as hereinafter defined) may be entered in any court having
jurisdiction over the subject matter thereof. The Arbitration Panel shall have
the authority to grant any equitable and legal remedies that would be available
in any judicial proceeding instituted to resolve a Claim.
(b) Arbitration Panel. Any such arbitration will be
conducted before an arbitration panel, which panel shall be comprised of three
persons, one of whom shall be selected by Seller, one of whom shall be
selected by Buyer and one of whom shall be selected collectively by the Buyer-
and Seller-selected arbitrators (collectively, the "Arbitration Panel"). If
the two such arbitrators cannot agree on a third arbitrator within a
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reasonable time not exceeding 30 days from the later of the dates of their
selections by either Seller or Buyer, as the case may be, the third arbitrator
shall be appointed by the American Arbitration Association. The Arbitration
Panel shall permit such discovery as he or she shall determine is appropriate in
the circumstances, taking into account the needs of the parties and the
desirability of making discovery expeditious and cost-effective. Any such
discovery shall be limited to information directly related to the controversy or
claim in arbitration and shall be concluded within 30 days after appointment of
the Arbitration Panel.
(c) Payment of Costs. Each party will bear its own costs and
expenses in connection with any arbitration including the compensation to be
paid to the arbitrator selected by it. In addition, each party will each pay
50% of the compensation to be paid to the neutral arbitrator in any such
arbitration. The costs of transcripts will be paid by the party requesting the
same.
(d) Burden of Proof. For any Dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
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(e) Award. Upon the conclusion of any arbitration
proceedings hereunder the Arbitration Panel will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons
for any decision reached and will deliver such documents to each party to this
Agreement along with a singed copy of the award.
(f) Terms of Arbitration. The Arbitration Panel chosen
in accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
(g) Exclusive Remedy. Except as specifically otherwise
provided in this Agreement, arbitration will be the sole and exclusive monetary
remedy of the parties for any Dispute arising out of this Agreement.
10.09 Headings. The headings of the Sections and Articles of
this Agreement are inserted for convenience only and shall not constitute a
part hereof or affect in any way the meaning or interpretation of this
Agreement.
10.10 Entire Agreement. This Agreement, including the
Exhibits hereto, the Schedules hereto and the other documents and certificates
delivered pursuant to the terms hereof, sets forth the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein, and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or
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written, by any officer, employee or representative of any party hereto.
10.11 Third Parties. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation other than the
parties hereto and their successors or assigns, any rights or remedies under or
by reason of this Agreement.
10.12 Severability. The invalidity or illegality of any
provision, term, or agreement contained in or made a part of this Agreement
shall not affect the validity of the remainder of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be
affixed hereto, all as of the day and year first above written.
MARK IV INDUSTRIES, INC.
By: /s/ JOHN J. BYRNE
-------------------
Title: Vice President and
Chief Financial Officer
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MARK IV PLC
By: /s/ JOHN J. BYRNE
------------------
Title: Director
W & P HOLDING CORPORATION
By: /s/ ROBERT J. BROOKS
---------------------
Title: Vice President
GUARANTY
Westinghouse Air Brake Company hereby unconditionally
guarantees and becomes surety for the payment and performance of all
obligations of Buyer under this Agreement.
WESTINGHOUSE AIR BRAKE COMPANY
By: /s/ ROBERT J. BROOKS
----------------------
Title: Vice President
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Exhibit 2.02
PURCHASE AGREEMENT
BETWEEN
MARK IV INDUSTRIES LIMITED
AND
WESTINGHOUSE RAILWAY HOLDINGS (CANADA) INC.
AND
WESTINGHOUSE AIR BRAKE COMPANY
DATED: SEPTEMBER 19, 1996
2
TABLE OF CONTENTS
SALE OF THE VAPOR BUSINESS . . . . . . . . . . . . . . 2
ARTICLE 1.
--------------------------
1.01 Sale of the Vapor Company Shares . . . . . . . . . . . . . . . . . . . . . . 2
--------------------------------
ARTICLE 2.
PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . 3
--------------
2.01 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------
2.02 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-------------------------
2.03 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------
2.04 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------
2.05 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------
2.06 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------
2.07 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------
2.08 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------
ARTICLE 3.
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 3
-------
3.01 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------------
3.02 Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------------
3.03 Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------------------
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . 6
----------------------------------------
4.01 Organization of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
----------------------
4.02 Organization of Vapor Canada . . . . . . . . . . . . . . . . . . . . . . . . 7
----------------------------
4.03 Authorization by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-----------------------
4.04 Ownership of Vapor Canada Equity Interests . . . . . . . . . . . . . . . . . 8
------------------------------------------
4.05 Options or Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-----------------------
4.06 Certificate of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . 9
----------------------------------------
4.07 Binding Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------
4.08 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------
4.09 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--------------------
4.10 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . 12
--------------------------
4.11 Title to Personal Property; Encumbrances; Etc. . . . . . . . . . . . . . . . 15
----------------------------------------------
4.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------------
4.13 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
------
4.14 Patents, Trademarks, Trade Names, Etc. . . . . . . . . . . . . . . . . . . . 19
--------------------------------------
4.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------
4.16 Banks and Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------------
4.17 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
----------------------
4.18 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
----------------------
4.19 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------------------
4.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
----------
4.21 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . 32
--------------------------
4.22 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------
4.23 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
----------------
4.24 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
------------------------
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4.25 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--------------------
4.26 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
--------------------
4.27 Product Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
------------------
4.28 Potential Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . 39
--------------------------------
4.29 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
----------
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . 40
---------------------------------------
5.01 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
------------
5.02 Authorization by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
----------------------
5.03 Binding Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
------------------
5.04 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
------------
5.05 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
----------
5.06 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
----------------------
5.07 Purchase for Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
------------------------
5.08 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--------------------
ARTICLE 6.
COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . 43
-------------------
6.01 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
---------------------
6.02 Non-Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
----------------
ARTICLE 7.
COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . 46
------------------
7.01 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
---------------------
7.02 Executive Severance Arrangement . . . . . . . . . . . . . . . . . . . . . . . 46
-------------------------------
7.03 Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
------------------
7.04 Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
--------------
ARTICLE 8.
ADDITIONAL COVENANTS OF BUYER AND SELLER . . . . . . . . . . . . . . . . 48
----------------------------------------
8.01 Substitute Guarantees and Letters of Credit . . . . . . . . . . . . . . . . . 48
-------------------------------------------
8.02 Access After the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 49
-----------------------------
8.03 Record Retention . . . . . . . . . . . . . . . . . . . . . . . . . . 49
----------------
8.04 Insurance Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . 50
------------------
8.05 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-----------
8.06 Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
-----------
8.07 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
---------------
8.08 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
---------------------
8.09 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
--------------------
8.10 Post-Closing Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . 57
------------------------
8.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 9.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS . . . . . . . . . . . . . . . . 58
---------------------------------------------
9.02 Statements as Representations . . . . . . . . . . . . . . . . . . . . . . . . 58
-----------------------------
9.03 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 59
-------------------------
9.04 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . 59
------------------------
9.05 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
---------------------
9.06 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
---------------------
9.07 Litigation Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
----------------------
9.08 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 60
-------------------
- ii-
4
ARTICLE 10.
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . 60
------------------------
10.01 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
---------
10.02 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . 60
--------------------------
10.03 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
--------------------
10.04 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------
10.05 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
----------
10.06 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . 62
------------------------------
10.07 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
------------
10.08 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
-----------
10.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
--------
10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
----------------
10.11 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
-------------
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
------------
-iii-
5
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made as of this
19th day of September, 1996, by and between Mark IV Industries Limited, a
Canadian corporation, with offices at 6030 Ambler Drive, Mississauga, Ontario
L4W 2P1 ("Seller"); and Westinghouse Railway Holdings (Canada) Inc., an Ontario
corporation with offices at 3700 Toronto Dominion Bank Tower, Box 20, Toronto
Dominion Centre, Toronto, Ontario M5K 1N6 ("Buyer"). As provided on the
signature page hereto, Westinghouse Air Brake Company is guarantying and acting
as surety for the obligations of Buyer under this Agreement.
RECITALS:
General
Seller is the direct owner of all the issued and outstanding
capital stock of Vapor Canada Inc., a Canadian corporation ("Vapor Canada").
Mark IV Transportation Products Corp., through its Vapor Division and in
combination with Vapor Canada, Vapor UK Limited, Vapor Corp. and Mark IV
Netherlands B.V., is engaged in the manufacture and sale of, among other
things, door control operating systems and accessories for buses and rail cars,
vehicle to wayside communications equipment for use in connection with the
monitor of mass transit systems and electrical, HVAC and McCarthy thermal
products for use in mass transit vehicles, locomotives and industrial markets
(hereinafter
6
the "Vapor Group Business". The business conducted by Vapor Canada shall be
referred to as the "Vapor Canada Business".
Westinghouse Air Brake Company is the beneficial owner of all
the issued and outstanding capital stock of Buyer.
Mark IV Transportation Products Corp. and Seller, an indirect
wholly-owned subsidiary of Mark IV Industries, Inc. and a direct parent
corporation of Vapor Canada, respectively, (collectively, "Mark IV Canada"),
acquired the companies and businesses now comprising the Vapor Group Business
through (a) the purchase by Mark IV Transportation Products Corp. of
substantially all of the assets of Vapor Corporation and Vapor of Pennsylvania,
Inc. from Brunswick Corporation, Vapor Corporation, and Vapor of Pennsylvania,
Inc. pursuant to an Asset Purchase Agreement dated as of December 21, 1990 and
certain documents and instruments relating thereto, and (b) the purchase by
Seller of all of the outstanding capital stock of Vapor Canada from Brunswick
Corporation and Vapor Corporation pursuant to a Stock Purchase Agreement dated
as of December 21, 1990 and certain documents and instruments relating thereto.
The acquisitions described in this paragraph are referred to in this Agreement
as the "Mark IV Acquisition".
Simultaneously herewith Westinghouse Air Brake Company is
entering into an agreement with Mark IV Industries, Inc. (the "Other Purchase
Agreement") to buy the shares of Mark IV
- 2-
7
Netherlands B.V., Vapor Corp., Mark IV Transportation Products Corp. and Vapor
UK Limited which Purchase Agreement contemplates a closing simultaneously with
the transaction contemplated herein.
Seller desires to sell the Vapor Canada Business and Buyer
desires to purchase the Vapor Canada Business on the terms and conditions set
forth herein.
CONSIDERATION:
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements hereinafter set forth, Seller and Buyer hereby agree
as follows:
ARTICLE 1.
SALE OF THE VAPOR BUSINESS
1.01 Sale of the Vapor Company Shares. Subject to the
terms and conditions of this Agreement, at the Closing (as defined in Section
3.01 hereof) Seller will sell, transfer, convey and assign to Buyer and Buyer
will purchase, acquire and accept from Seller all Seller's rights, title and
interest in and to one thousand two hundred (1200) shares of the capital stock
of Vapor Canada (the "Vapor Canada Shares").
1.02 INTENTIONALLY DELETED
1.03 INTENTIONALLY DELETED
- 3-
8
ARTICLE 2.
PURCHASE PRICE
2.01 Purchase Price. The aggregate purchase price to be
paid by Buyer to Seller for the Vapor Canada Shares shall be equal to Six
Million, Four Hundred and Thirty Eight Thousand U.S. Dollars ($6,438,000 U.S.)
(the "Purchase Price").
2.02 Payment of Purchase Price. At the Closing, Buyer
shall pay the Purchase Price to Seller by wire transfer of immediately
available funds to an account specified by Seller in writing.
2.03 INTENTIONALLY DELETED.
2.04 INTENTIONALLY DELETED.
2.05 INTENTIONALLY DELETED.
2.06 INTENTIONALLY DELETED.
2.07 INTENTIONALLY DELETED.
2.08 INTENTIONALLY DELETED.
ARTICLE 3.
CLOSING
3.01 Time and Place of Closing. The closing of the sale
and purchase of the Vapor Canada Shares as contemplated by this Agreement (the
"Closing") shall take place at the offices of Lippes, Silverstein, Mathias &
Wexler LLP, 700 Guaranty Building,
- 4 -
9
28 Church Street, Buffalo, New York on September 19, 1996 or on such other date
as the parties may agree.
3.02 Deliveries by Seller. At the Closing, Seller will
deliver to Buyer (unless previously delivered):
(a) stock certificates evidencing all of the
Vapor Canada Shares, duly endorsed for transfer to Buyer or accompanied by duly
executed stock powers providing for the transfer of the Vapor Canada Shares to
Buyer;
(b) the corporate minute books and stock ledgers
of vapor Canada;
(c) the written resignation of the officers and
directors of Vapor Canada;
(d) all consents and approvals from any parties
to any contracts or other agreements with Seller or Vapor Canada as more
particularly set forth in Schedule 4.18 attached hereto;
(e) all consents, approvals, authorizations,
filings and registrations required to be obtained or made by Seller under
applicable law in connection with the transactions contemplated by this
Agreement;
(f) a duly executed Other Purchase Agreement;
- 5 -
10
(g) a certificate of the Secretary or an
Assistant Secretary of Seller, dated the Closing Date, setting forth
resolutions of the Board of Directors of Seller authorizing the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, certifying that such resolutions were duly adopted and
have not been rescinded or amended as of the Closing Date, and certifying that
approval by Seller's shareholders is not required, or has been obtained, in
connection with this Agreement or the transactions contemplated hereby;
(h) Vapor Canada director's consent authorizing
the transfer of the Vapor Canada Shares to Buyer; (i) a written opinion, dated
the Closing Date, from counsel for Seller in a form reasonably acceptable to
Buyer; and
(j) all other documents, instruments and writings
reasonably requested by Buyer in connection with the consummation of the
transactions contemplated by this Agreement.
3.03 Deliveries by Buyer. At the Closing, Buyer will
deliver to Seller (unless previously delivered): (a) an amount equal to the
Purchase Price, by wire transfer of immediately available funds to such account
or accounts as may be designated by Seller in writing;
- 6 -
11
(b) all consents, approvals, authorizations,
filings and registrations required to be obtained or made by Buyer under
applicable law in connection with the transactions contemplated by this
Agreement;
(c) all consents and approvals from any parties
to any contracts or other agreements with Buyer as more particularly set forth
in Schedule 5.06 attached hereto;
(d) the duly executed Other Purchase Agreement;
(e) a certificate of the Secretary or Assistant
Secretary of Buyer, dated the Closing Date setting forth the resolutions of the
Board of Directors of Buyer authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
certifying that such resolutions were duly adopted and have not been rescinded
or amended as of the Closing Date; and
(f) all other documents, instruments and writings
reasonably requested by Seller in connection with the consummation of the
transactions contemplated by this Agreement.
- 7 -
12
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.01 Organization of Seller. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of Canada
and has the corporate power and authority to carry on its business as presently
conducted.
Seller is qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the failure of Seller to
be so qualified would have a Material Adverse Effect. As used in this
Agreement, a "Material Adverse Effect" with respect to the Vapor Companies (as
defined in the Other Purchase Agreement) or the Vapor Business (as defined in
the Other Purchase Agreement) means an event, circumstance or condition which:
(i) if quantifiable, would result in a cost, liability or other expense or
diminution in value of more than $50,000 U.S. or (ii) if not quantifiable,
would otherwise have a material adverse effect on the assets, business or
financial condition of the Vapor Companies and the Vapor Business taken as a
whole.
- 8 -
13
4.02 Organization of Vapor Canada. Vapor Canada is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction in which it was incorporated and has the corporate
power and authority to carry on its business as presently conducted. Vapor
Canada is qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the failure of Vapor Canada to be so
qualified would have a Material Adverse Effect.
4.03 Authorization by Seller. Seller has ful1 power and
authority to enter into, execute and deliver this Agreement and each of the
other documents and instruments to be executed and delivered by Seller pursuant
to this Agreement and to carry into effect the transactions contemplated
hereunder and thereunder. The execution, delivery and performance of this
Agreement and each of the other documents and instruments to be executed and
delivered by Seller pursuant to this Agreement and the consummation of the
transactions contemplated hereunder and thereunder have been duly authorized by
all necessary corporate action on the part of Seller. No other corporate act
or proceeding on the part of Seller or Seller's shareholders is necessary to
authorize the execution and delivery of this Agreement and each of the other
documents and instruments to be executed and delivered by Seller pursuant to
this Agreement, or the consummation by Seller of the transactions contemplated
hereby and thereby.
- 9 -
14
4.04 Ownership of Vapor Canada Equity Interests. (a)
Schedule 4.04(a) attached hereto contains a statement of: (i) the total number,
class and par value, if any, of each class of capital stock which Vapor Canada
is authorized to issue; and (ii) the total number, class and par value, if any,
of each class of capital stock of Vapor Canada which is issued and outstanding
together with the identity of the owner (or owners) of all the issued and
outstanding shares of each class of capital stock of Vapor Canada;
(b) Except as otherwise set forth in Schedule
4.04(b) attached hereto, Seller is the owner of and has good and marketable
title to all the issued and outstanding capital stock of Vapor Canada, free and
clear of all material liens, claims, encumbrances or other restrictions or
limitations of any kind or nature affecting Seller's ability to transfer title
to all of the issued and outstanding shares of capital stock and other equity
interests of Vapor Canada to Buyer.
4.05 Options or Other Rights. There is no existing
subscription, option, warrant, call, commitment or other agreement entitling
any third party to and there are no convertible or exchangeable securities of
Seller or Vapor Canada outstanding which, upon conversion or exchange would
require the issuance of any additional shares of capital stock or other equity
interests in or indebtedness of Vapor Canada or any other securities
convertible into or exchangeable for shares of capital stock or
- 10 -
15
other equity interests in any of the Vapor Companies. Vapor Canada is not a
party to any agreement which would require Vapor Canada to repurchase, redeem
or otherwise acquire any of the issued and outstanding shares of capital stock
or other equity interests of Vapor Canada.
4.06 Certificate of Incorporation and By-Laws. With
respect to Vapor Canada, Seller has heretofore delivered to Buyer, true and
complete copies of the Certificate of Incorporation (or any other substantially
equivalent documentation which has been filed, in connection with the
organization of Vapor Canada, with the governmental authorities of the
jurisdiction in which Vapor Canada has been incorporated or organized) (such
Certificate of Incorporation or substantially equivalent documentation being
hereinafter referred to as "Incorporation Documents") and the By-Laws (or any
other substantially equivalent documentation regulating the internal affairs of
Vapor Canada) (such By-Laws or substantially equivalent documentation being
hereinafter referred to as the "By-Laws") as the same are in effect on and as
of the date hereof, including all amendments and restatements thereto. In
addition, Seller has heretofore made the minute books of Vapor Canada available
to Buyer for inspection by Buyer and its representatives.
4.07 Binding Agreements. This Agreement constitutes and,
when executed and delivered on the Closing Date, each of the other documents to
be executed and delivered by Seller to Buyer will
- 11 -
16
constitute, a valid and binding obligation of Seller enforceable against Seller
in accordance with their respective terms, except that: (a) such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of creditor's
rights; and (b) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding there for may be brought.
4.08 No Violation. Except as set forth in Schedule 4.08
attached hereto, neither the execution and delivery of this Agreement nor the
consummation by Seller of the transactions contemplated hereby will: (a)
violate any statute or law, or any rule or regulation of any governmental
authority; or (b) violate any order, writ, injunction or decree of any court or
governmental agency which is applicable to the Vapor Canada Shares or the
business or the assets of Vapor Canada; or (c) violate or conflict with or
constitute a default under (or an event which, with notice or lapse of time, or
both, would constitute a default under), or will result in the termination of,
or accelerate the performance required by, or result in in the creation of any
material lien, security interest, charge or encumbrance upon any of the Vapor
Canada Shares or the material assets of Vapor Canada under any term or
provision of: (i) the Incorporation Documents and By-Laws of Seller or the
Incorporation Documents and By-Laws of Vapor Canada; or (ii) any material
lease, contract, commitment,
- 12 -
17
understanding, arrangement, agreement or restriction of any kind or character:
(A) to which Seller or Vapor Canada is a party; or (B) by which Vapor Canada or
any of its material assets or properties may be bound except in each case, for
violations which individually or in the aggregate would not materially hinder
or impair the consummation of the transactions contemplated hereby.
4.09 Financial Statements. Seller has heretofore
delivered to Buyer the November 30, 1995 Balance Sheet. The November 30, 1995
Balance Sheet fairly presents the assets and liabilities of Vapor Canada at
November 30, 1995 and has been prepared on a basis which is consistent with the
manner in which the unaudited balance sheets of Vapor Canada dated as of
February 28, 1995 and February 29, 1996 (as previously delivered by Seller to
Buyer) were prepared. To Seller's knowledge, Vapor Canada has no obligation
or liability (contingent or liquidated) that is not the subject of a
representation or warranty made in this Agreement that would reasonably be
expected to have a Material Adverse Effect except (i) as reflected in the
Closing Balance Sheet or (ii) as described in the disclosure schedules
delivered herewith.
4.10 Absence of Certain Changes. Except as and to the
extent set forth in Schedule 4.10 attached hereto, from November
- 13 -
18
30, 1995 through the date hereof and through the Closing Date, Vapor Canada has
not nor will it have:
(a) (i) amended its Incorporation Documents or
its By-Laws; or (ii) merged with or into or consolidated with any other person,
firm, corporation or other entity; or (iii) subdivided or reclassified any
shares of its capital stock or any of its other outstanding equity interests;
(b) issued, sold, purchased or redeemed or issued
options or rights to subscribe to, or entered into any contracts or commitments
to issue, sell, purchase or redeem any shares of its capital stock or other
equity interests or any securities convertible into or exchangeable for any of
its shares of capital stock or other equity interests;
(c) declared or paid any dividends or declared or
made any distributions of any kind (other than cash distributions) to its
stockholders or other owners of any of its outstanding equity interests or made
any direct or indirect redemption, retirement, purchase or other acquisition of
any shares of its capital stock or other equity interests except for cash
receipts remitted to Seller in connection with the ordinary cash management
practices of Seller;
(d) entered into or amended any written
employment agreement with any officer, director or general manager of Vapor
- 14 -
19
Canada; entered into or amended any agreement with any labor union or
association representing any employee or entered into or amended in any
material respect, any employee benefit plan or arrangement relating to any
employees of Vapor Canada, except in each case increases or changes in benefits
of not more than four percent (4%) occurring in the ordinary course of business
in accordance with the customary practices of Vapor Canada;
(e) suffered any material adverse change in its
financial condition, assets, liabilities or business other than changes which
individually or in the aggregate would not have a Material Adverse Effect;
(f) sold, transferred or otherwise disposed of
any of its material assets, properties, or rights other than in the ordinary
course of the conduct of its business or cancelled any claims which are
material to its business except for those claims which individually or in the
aggregate would not have a Material Adverse Effect;
(g) disposed of or permitted to lapse any
material patent, patent application, trademark, trademark registration,
trademark application, assumed name, service mark, trade name or copyright
application, copyright registration or license, which would have a Material
Adverse Effect or disposed of or permitted to lapse any agreement under which
it has any material right or license except for dispositions or lapses of any
of the foregoing
- 15 -
20
which individually or in the aggregate would not have a Material Adverse
Effect;
(h) made any single capital expenditure in excess
of Fifty Thousand Dollars ($50,000.00) or made any commitment to make capital
expenditures in excess of Fifty Thousand Dollars ($50,000.00), except for
commitments to make such capital expenditures which have been made in the
ordinary course of the business of Vapor Canada;
(i) made any material change in any method of
accounting or accounting practice or policy or in its manner of keeping its
books, accounts or records;
(j) made any material changes in its warranty
policies;
(k) granted any general increase in excess of
four percent (4%) in the compensation or benefits of any of its officers or
employees other than in the ordinary course of business, consistent with past
practice (including any such increase pursuant to any bonus, pension, profit
sharing, severance or other plan or commitment or periodic performance
reviews);
(l) made any loan or advance to any of its
officers, directors or employees other than advances of expenses made in the
ordinary course of its business and cash receipts
- 16 -
21
remitted to Seller in accordance with the regular cash management policies of
Seller and Vapor Canada; and
(m) to the knowledge of Seller, agreed, whether
in writing or otherwise, to take any of the actions set forth in this Section
4.10.
4.11 Title to Personal Property; Encumbrances; Etc. Except
as set forth in Schedule 4.11 attached hereto, Vapor Canada has good and
marketable title to the material personal property which it purports to own
and, on the Closing Date, will have good and valid title to the material
personal property which it purports to own in each case, free and clear of any
liens, charges or encumbrances (collectively, "Liens") except for Liens which
individually or in the aggregate are included as liabilities on the November
30, 1995 Balance Sheet or Liens which do not materially impair or detract from
the value of any of the material assets of Vapor Canada.
4.12 Real Property (a) Schedule 4.12(a) hereto contains a
list of the address of each parcel of real property used by Vapor Canada
(hereinafter the "Real Property") and includes a statement of: (i) the
approximate square footage of each such parcel of Real Property; (ii) whether
such Real Property is owned or leased; (iii) in the case of any Real Property
which is owned by Vapor Canada, the identity of the Vapor Company that is the
owner of such Real Property; and (iv) in the case of any Real
- 17 -
22
Property which is leased by Vapor Canada, the identity of the lessee and the
lessor of such Real Property.
(b) Except as otherwise set forth in Schedule
4.12(b) attached hereto, Vapor Canada has good and marketable title to the Real
Property which Vapor Canada is identified as the owner of, free and clear of
all Liens except for (i) Liens for taxes, assessments and other governmental
charges relating to the ownership of such Real Property which are not yet due
and payable or due but not delinquent or being contested in good faith by
appropriate proceedings; (ii) Liens which individually or in the aggregate are
listed as liabilities on the November 30, 1995 Financial Statement or the
Closing Balance Sheet (as defined in the Other Purchase Agreement); and (iii)
Liens or minor title defects, if any, which do not materially impair or detract
from the value of any of the Real Property (collectively known as "Permitted
Encumbrances").
(c) With respect to each parcel of Real Property
which is identified in Schedule 4.12(a) as being leased by Vapor Canada, Vapor
Canada has a valid and enforceable leasehold interest in such Real Property
and, except as otherwise set forth in Schedule 4.12(c) attached hereto, there
are no material defaults which have occurred under the terms of any lease of
any Real Property used by Vapor Canada with respect to the obligations of Vapor
Canada which is identified in Schedule 4.12(a) as the lessee of any such Real
Property or, to the knowledge of Seller,
- 18 -
23
with respect to the obligations of the lessor of such Real Property other than
any defaults which would not, individually or in the aggregate, have a Material
Adverse Effect. Prior to the date hereof, Seller has delivered to Buyer copies
of each lease of any Real Property used by Vapor Canada.
(d) Except as otherwise set forth in Schedule
4.12(d) attached hereto, to the knowledge of Seller, the use, occupancy and
ownership (or leasing) by Vapor Canada of any buildings, structures or other
improvements located at any Real Property which is identified (in Schedule
4.12(a) attached hereto) as being owned (or leased) by Vapor Canada, does not
violate any zoning ordinances or any other codes or regulations except for
Permitted Encumbrances or such violations, if any, which, either individually
or in the aggregate, would not have a Material Adverse Effect.
(e) Except as otherwise set forth in Schedule
4.12(e) attached hereto, none of the Real Property which is used by Vapor
Canada is subject to any pending or, to the knowledge of Seller, threatened
condemnation proceeding by any public or quasi-public agency or other authority
which has or would have a material adverse effect on the right or ability of
Vapor Canada (as described in Schedule 4.12(a) attached hereto) as the owner or
lessee of any such Real Property, to continue to conduct its business in the
ordinary course.
(f) Except as otherwise set forth in Schedule
4.12(f) attached hereto, to the knowledge of Seller, all of the Real Property
which is used by Vapor Canada is benefited by all easements or other rights
(including utility service) necessary for Vapor Canada to continue to conduct
its business at such Real Property in the ordinary course.
4.13 Leases. Schedule 4.13 attached hereto contains a
list of each lease relating to any personal property used by Vapor Canada in
the conduct of its business which provides for annual lease payments in excess
of Twenty-Five Thousand Dollars ($25,000.00) whose term is in excess of one
year and which is not cancellable upon 30 or fewer days' notice without any
liability, penalty or premium (other than nominal cancellation fee or charge)
(the "Leases"). Prior to the date hereof, Seller has delivered to Buyer copies
of the Leases including all amendments thereof and all modifications thereto.
Except as set forth in Schedule 4.13 attached hereto, Vapor Canada is not in
default under the terms of any of the Leases other than any defaults which
would not, individually or in the aggregate, have a Material Adverse Effect.
4.14 Patents, Trademarks, Trade Names, Etc. To the
knowledge of Seller, Vapor Canada owns (or possesses adequate licenses or other
rights to use), free and clear of any claims of others all Patents and
Trademarks (as defined below), proprietary rights, processes, formulas and
other technical knowhow necessary to carry on its business as currently
conducted, and Schedule 4.14
- 19 -
24
attached hereto contains a list and a general description of all material
patents, trademarks, trademark registrations, trade names, assumed names,
copyrights, copyright registrations and applications therefor, presently owned,
held or used by Vapor Canada or with respect to which Vapor Canada owns or
holds any license (hereinafter collectively the "Patents and Trademarks").
Except as set forth in Schedule 4.14, Seller has not and, to the knowledge of
Seller, Vapor Canada has not, received any written notice that the use by
Seller or Vapor Canada of the Patents and Trademarks is unlawful or infringes
upon the rights of any person, firm, corporation or other entity. To the
knowledge of Seller there is no infringement of any Patents and Trademarks by
any third party or any loss, cancellation, termination or expiration of any
Patents and Trademarks, except for losses, cancellations, terminations or
expirations of any Patents and Trademarks which individually or in the
aggregate would not have a Material Adverse Effect. Schedule 4.14 lists all
licenses and other rights which have been granted by Vapor Canada for the use
of, and all encumbrances on, any Patents and Trademarks or other intellectual
property of Vapor Canada.
4.15 Litigation. Except as set forth in Schedule 4.15
attached hereto, there are no actions, suits or written claims (including
without limitation, product liability claims or claims that Vapor Canada has
breached or otherwise failed to perform its obligations under any product or
service warranties described in Section 4.27 hereof) or legal, administrative,
equitable or
- 20 -
25
arbitration proceedings or outstanding orders, judgments, injunctions, awards
or decrees of any court, any governmental or regulatory body or any arbitration
tribunal pending or, to Seller's knowledge, threatened against or involving
Seller or Vapor Canada which: (a) seek to prevent the consummation of the
transactions contemplated by this Agreement; or (b) relate to the business of
Vapor Canada and which, if adversely decided, would have a Material Adverse
Effect.
4.16 Banks and Brokers. Schedule 4.16 attached hereto
sets forth the name of each bank, trust company, securities or other broker or
other financial institution: (a) with which Seller has any account, lock box,
safe deposit box or vault for the exclusive purpose of providing or maintaining
banking or other financial services to Vapor Canada; and (b) with which Vapor
Canada has any account, lock box, safe deposit box or vault.
4.17 Employee Benefit Plans. (a) Except for any
individual employment, consulting or severance contracts disclosed in Schedule
4.21 attached hereto, Schedule 4.17(a) attached hereto sets forth a list, and
for oral arrangements, a general description, unless such general description
has previously been delivered pursuant to Section 4.17(b) hereof for Vapor
Canada, of:
(i) each personnel practice (hereinafter the "Personnel
Practices") including, without limitation, vacation policies, holiday pay
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26
policies, severance pay policies, sick or personal pay policies, incentive
bonus programs, bereavement pay programs, company car policies, service award
policies, tuition refund policies, relocation assistance policies and patent
award policies;
(ii) each plan, fund or program constituting an "employee
welfare plan" (hereinafter the "Employee Welfare Plans"), including, without
limitation, basic and supplemental life insurance, health insurance (including
medical, dental and hospitalization), accidental death and dismemberment
insurance, business travel and accident insurance, short and long term
disability insurance programs; and
(iii) each "employee pension plan" (the "Employee Pension
Plans") including, without limitation, pension plans, supplementary pension
plans, group registered retirement savings plans, stock purchase plans and
profit sharing plans, which is maintained assumed or contributed to by Vapor
Canada for the benefit of its employees of former employees (individually a
"Plan" and collectively, the "Plans") and there are no other Personnel
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27
Practices, Employee Welfare Plans or Employee Pension Plans for employees or
former employees of Vapor Canada. The information in Schedule 4.17(a) includes
identification of any Plans for which benefits are completely or partially
unfunded or uninsured, the general description of unwritten Plans in such
Schedule is accurate and complete in all material respects, and with respect to
the Employee Welfare Plans, the information in Schedule 4.17(a) includes the
identification of any benefit improvement that is not yet reflected in the
premium applicable to, or claim experience of, any such Plan.
(b) Except as otherwise set forth in Schedule
4.17(b) attached hereto, Seller has previously delivered to Buyer: (i) complete
copies of all Plan documents which set forth the terms of each of the Plans as
amended and currently in effect and where applicable, complete copies of all
related i= documents including trust agreements, insurance contracts,
administration agreements and investment management agreements; (ii) a general
description of any of the Plans with respect to which no formal plan document
has been adopted which general description is accurate and complete in all
material respects; (iii) the most recent and all current written communications
to employees relating to the Plans, which written communications disclose the
terms of the Plans as currently in effect; (iv) with respect to
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28
defined benefit Employee Pension Plans, complete copies of the two most recent
actuarial valuation reports for each such Plan; and (v) copies of any returns
or reports filed in respect of any Plan with any governmental authority within
the previous thirty-six (36) months.
(c) Except as otherwise set forth in Schedule
4.17(c) attached hereto, to the knowledge of Seller, each of the Plans have
been duly registered where required by, and are in good standing under, all
applicable legislation including, without limiting the generality of the
foregoing, the Income Tax Act (Canada) and the Supplemental Pension Plans Act
(Quebec). To the knowledge of Seller, all required employer contributions
under any such Plans have been made, the applicable funds have been funded in
accordance with the terms thereof, no past service funding liabilities exist
thereunder and each such Plan has been and is being administered in accordance
with its terms. To the knowledge of Seller (i) there is no liability,
contingent or otherwise, relating to any Plan or accessory insurance policy or
other related funding arrangement for any Plan, including rate adjustments,
loss sharing arrangements or other liabilities that would have a Material
Adverse Effect, (ii) there are no actions, suits, arbitrations, or proceedings
pending against any Plan, against the assets of any of the trusts under any
Plan or the Plan sponsor or the Plan administrator, or against any fiduciary of
any Plan with respect to the operation and investment of such Plans which would
have a Material Adverse Effect (other than routine
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29
benefit claims), and (iii) no facts exist that would form the basis for any
such liability, action, suit arbitration, or proceeding described in clause (i)
or (ii) above.
(d) Neither Seller nor Vapor Canada has any
contract, plan, or commitment, whether legally binding or not, to create any
additional Plans or to modify any existing Plan except for such amendments, if
any, that may be required by any other applicable law.
(e) With respect to any period for which any
contribution or other payment (including benefit payments) to or in respect of
any Plan has accrued but is not yet due or owing, Vapor Canada has made due and
sufficient current accruals for such contributions and other payments in
accordance with generally accepted accounting principles, in compliance with
CICA requirements where applicable to any particular Plan, and in compliance
with the Statement of Financial Accounting Standards No. 106 and No. 112 of the
Financial Accounting Standards Branch with respect to post-retirement and
post-employment non-pension benefit liabilities respectively, where relevant,
and such current accruals through the end of Vapor Canada's most recent fiscal
year are duly and fully provided for in the financial statements of such entity
for the period then ended;
(f) Vapor Canada is in good standing with respect
to all government-sponsored medical, welfare, workers'
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30
compensation and pension plans to which it contributes or is assessed for
contributions in respect of its employees or former employees and to the
knowledge of Seller: (i) there is no liability, contingent or otherwise,
relating to any such government sponsored plan that would have a Material
Adverse Effect, and (ii) no facts exist that would form the basis for any
liability described in clause (i) above;
(g) Each Plan is the responsibility of Vapor
Canada only and there are no Plans with respect to which Seller or any other
company participates in any way, and no employee or former employee of Vapor
Canada has any rights under any benefit plan or policy of Vapor Canada other
than under the Plans;
(h) All amounts paid by Vapor Canada under the
provisions of any pension Plan will be fully deductible for income tax
purposes;
(i) Vapor Canada has not withdrawn any surplus
assets from any pension Plan and no application for withdrawal of surplus
assets has been made or is pending with the Regie des rentes du Quebec, Revenue
Canada or any other governmental agency. In addition, Vapor Canada is
entitled, by law and pursuant to the terms of any pension Plan, to apply
surplus assets in any such Plan to offset any requisite employer contributions
thereto;
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31
(j) With respect to each Plan, appropriate
funding is in place, either through one or more accessory insurance policies,
through a trust or other mechanism, or by making an appropriate provision in
Vapor Canada's financial statements as described in Section 4.17(e);
(k) Except for death or retirement benefits under
any pension Plan or coverages required by applicable law, no Plan provides
benefits beyond retirement or other termination of employment except for
benefits whose cost is fully borne by present or past employees of Vapor Canada
or for benefits for which an appropriate present value accrual has been made in
the financial statements of Vapor Canada as described in Section 4.17(e); and
(l) Nothing has occurred which would result in
the revocation of the registration of any pension Plan under the Supplemental
Pension Plans Act (Quebec) or the Income Tax Act (Canada).
4.18 Consents and Approvals. Except for consents listed
in Schedule 4.18 attached hereto and for the filing of a notice under the
Investment Canada Act and pre-merger notification documentation under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act")
and the expiration of all applicable waiting periods thereunder, no permit,
consent, approval or authorization of, or declaration, filing or
- 27 -
32
registration with, any governmental agency or authority or any other person,
firm or corporation is necessary or required to be obtained in connection with
the execution and delivery by Seller of this Agreement or the consummation by
Seller of the transactions contemplated hereby except where the failure to
obtain any such permit, consent, approval or authorization or where the failure
to make any such declaration, filing or registration would not have a Material
Adverse Effect. Schedule 4.18 attached hereto also contains a list of all
material consents, approvals, authorizations, declarations, filings, or
registrations which, to the knowledge of Seller, are required to be obtained by
Vapor Canada from any governmental agency or authority in connection with the
conduct of their respective businesses.
4.19 Environmental Protection. (a) Except as set forth in
Schedule 4.19(a) attached hereto, to the knowledge of Seller, Vapor Canada has
obtained all permits, licenses and other authorizations which: (i) are required
to be obtained by Vapor Canada under any applicable federal, provincial,
municipal and foreign laws relating to pollution or protection of the
environment, (hereinafter referred to as "Environmental Laws"), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases into the environment (including, without limitation,
ambient air, surface water, ground water or land) of any substances identified
in any such Environmental Laws (such substances being hereinafter referred to
- 28 -
33
as "Regulated Materials"); and (ii) relate to the manufacture, processing,
distribution, treatment, storage, disposal, transport, or handling of Regulated
Materials, except for those permits, licenses or other authorizations the
absence of which will not have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.19(b)
attached hereto, to the knowledge of Seller, Vapor Canada (and each property
owned, leased or operated by Vapor Canada) is in compliance with: (i) all
terms and conditions of all permits, licenses and authorizations required
under the terms of any Environmental Laws; (ii) all other limitations,
restrictions, conditions, standards, prohibitions, requirements and obligations
contained in any of the Environmental Laws as applicable to Vapor Canada; and
(iii) all plans, orders, decrees, judgments, injunctions, notices or demand
letters applicable to Vapor Canada and issued, entered, promulgated or approved
under any of the Environmental Laws, except for such non-compliance which would
not have a Material Adverse Effect.
(c) Except as set forth in Schedule 4.19(c)
attached hereto, neither Seller nor Vapor Canada has received any notice that
any past or present conditions, circumstances, activities, practices, incidents
or actions of any Vapor Company relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Regulated Material or relating to any emission, discharge, release
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34
or threatened release into the environment of any Regulated Material: (i) may
interfere with or prevent compliance or continued compliance by any of the
Vapor Companies with any of the Environmental Laws or any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder; (ii) may give rise to any common
law or legal liability; or (iii) may otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation, unless the
alleged violation or noncompliance with any Environmental Laws which forms the
basis of any notice described above in this Section 4.19(c), if uncured or
unsettled, would not reasonably be expected to have a Material Adverse Effect.
(d) Except as set forth in Schedule 4.19(d)
attached hereto, there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or to the knowledge of Seller, threatened
against Vapor Canada relating in any way to any violation of any of the
Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder.
(e) To the knowledge of Seller, there has been
no release of any hazardous or toxic materials, pollutants or contaminants in,
on or affecting any properties owned, leased or
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35
operated by any Vapor Company. Except as set forth on Schedule 4.19(e), no
underground storage tanks are located at any property now owned or leased by
Vapor Canada, or at any other property now operated by Vapor Canada. To the
knowledge of Seller, all above-ground storage tanks located on any property now
owned, leased or operated by Vapor Canada have been used and maintained in
compliance with all applicable legal requirements, and no leakage or spillage
has occurred with respect to any such storage tank which would have a Material
Adverse Effect.
(f) Schedule 4.19(f) lists all environmental
assessments, investigations, surveys, sample results, reports of releases,
notices of violation, and administrative orders or judicial proceedings
relating to environmental compliance and conditions, from the records of Vapor
Canada.
(g) None of the Vapor Companies nor the Vapor
Business are the subject of any remedial order issued, filed or imposed
pursuant to any Environmental Law nor, to the knowledge of the Sellers or any
of the Vapor Companies, has any investigation, evaluation or other proceeding
been commenced to determine whether any such remedial order is necessary.
Except as disclosed in Schedule 4.19(a), none of the Vapor Companies has been
charged with or convicted of an of fence for non-compliance with or breach of
any Environmental Laws nor has any Vapor Company been fined or otherwise
sentenced for non-compliance with or breach of any Environmental Laws nor has
any Vapor Company settled any
- 31 -
36
prosecution short of conviction for non-compliance with or breach of any
Environmental Laws.
4.20 Insurance. Schedule 4.20 attached hereto contains a
general description (including the amount of any applicable deductibles) of all
policies of fire, liability, and other forms of insurance owned or held by
Seller or Vapor Canada and issued with respect to or covering risks associated
with the assets, properties or business of Vapor Canada. To the knowledge of
Seller, all such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the Closing Date have
been paid, and no notice of cancellation or termination has been received by
Seller or Vapor Canada with respect to any such policy. To the knowledge of
Seller, such policies are valid, outstanding and enforceable policies; will
remain in full force and effect through the respective dates set forth in
Schedule 4.20 without the payment of additional premiums; and will not, with
respect to all periods up to and including the Closing Date, in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement except to the extent set forth in Schedule 4.20.
4.21 Contracts and Commitments. (a) Except for leases
required to be disclosed pursuant to Sections 4.12 and 4.13 hereof, Plans
required to be disclosed pursuant to Section 4.17(a) hereof, insurance policies
required to be disclosed by Section 4.20 hereof and the Other Purchase
Agreement, Schedule 4.21(a)
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37
attached hereto contains a list of each written contract, subcontract,
agreement, commitment, option, note, bond, mortgage, indenture, deed of trust,
guarantee, franchise or license which: (i) (A) requires payments in excess of
One Hundred Thousand U.S. Dollars ($100,000.00 U.S.) per year; (B) contains the
terms and conditions: (I) upon which any person is employed as an officer,
general manager, or consultant; or (II) upon which any severance or other
termination payments are payable; (C) provides preferential rights to purchase
any material quantity of any assets; (D) limits the freedom of any party to
engage in any business in any geographic area; (E) contains any "change in
control" provision which would be breached by the consummation of the
transactions contemplated by this Agreement; or (F) contains the terms of any
guaranty of the payment or performance of any liabilities or obligations the
cost of the payment or performance of which liabilities or obligations exceeds,
in the aggregate, an amount equal to One Hundred Thousand U.S. Dollars
($100,000 U.S.); (G) is a joint venture or partnership agreement or similar
arrangement; or (H) to which any officer or director of Vapor Canada, or a
member of any such person's immediate family, is a party or (I) which evidences
indebtedness of Vapor Canada, and (ii) (A) Seller is a party to and relates
exclusively to the Vapor Business (hereinafter individually referred to as a
"Seller Contract" and collectively as the "Seller Contracts"); or (B) Vapor
Canada is a party to or the beneficiary of (hereinafter individually referred
to as a "Vapor Company Contract" and collectively as the "Vapor Company
Contracts"). Prior to the date
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38
hereof Seller has delivered or otherwise made available to Buyer, copies of
Seller Contracts and the Vapor Company Contracts including all amendments
thereof and modifications thereto.
(b) Except as set forth in Schedule 4.21(b)
attached hereto, to the knowledge of Seller, each of the Seller Contracts and
the Vapor Company Contracts are valid, binding and in full force and effect and
enforceable in accordance with its terms except to the extent that: (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors rights; and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefore may be
brought;
(c) Except as set forth in Schedule 4.21(c)
attached hereto, Seller is not in default with respect to any of its
obligations under any of the Seller Contracts which, individually or in the
aggregate, would have a Material Adverse Effect, and, to the knowledge of
Seller, there is no basis for any claim that any other parties to any of the
Seller Contracts is in default with respect to its obligations under such
Seller Contracts; and
(d) Except as set forth in Schedule 4.21(d)
attached hereto, to the knowledge of Seller, Vapor Canada is not
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39
in material default with respect to its obligations under any of the Vapor
Company Contracts which, individually or in the aggregate, would have a
Material Adverse Effect, and, to the knowledge of Seller, there is no basis for
any claim that any other party to any of the Vapor Company Contracts is in
material default with respect to its obligations under such Vapor Company
Contracts.
4.22 Tax Matters. (a) Except as set forth in Schedule
4.22 attached hereto, each of Seller and Vapor Canada has filed or caused to be
filed with the appropriate governmental agencies all Tax Returns (as hereinafter
defined) required to be filed prior to the date hereof with respect to Vapor
Canada and their respective operations and assets for all periods ending on or
prior to the date hereof. In addition, except as otherwise set forth in
Schedule 4.22 attached hereto, Seller has paid, or caused to be paid in full,
all Taxes shown to be due on such Tax Returns for such periods, except for such
Taxes the nonpayment of which would not have a Material Adverse Effect. There
are no liens with respect to Taxes upon any of the material assets of Vapor
Canada.
(b) For the purposes of this Agreement: (i) "Taxes" shall
mean all taxes, charges, fees, levies or other assessments, including, without
limitation, income, excise, property, sales and franchise taxes (including any
interest, penalties or additions attributable to or imposed on or with respect
to any such assessment) imposed by the United States or any other
- 35 -
40
jurisdiction, and any state, province, county, local or other government,
taxing authority, or subdivision thereof; (ii) "Income Taxes": shall mean all
taxes (including any interest, penalties or additions attributable or imposed
on or with respect to such taxes) imposed by the United States or any other
jurisdiction or by any state, province, county, local or other government,
taxing authority or subdivision thereof, solely with respect to any income of
Seller or any of the Vapor Companies excluding, specifically, any sales taxes,
transfer taxes, real or personal property taxes; and (iii) "Tax Return" shall
mean any return, report, information return or other document (including any
related or supporting information) filed or required to be filed with any
governmental entity or other authority in connection with the determination,
assessment or collection of any Taxes (whether or not such Taxes are imposed on
Seller) or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
4.23 Labor Relations. Schedule 4.23 attached hereto
contains a list of each contract or other agreement between Seller or Vapor
Canada and any labor union or other association representing any employees of
Vapor Canada (each such contract being hereinafter referred to as a "Labor
Agreement"). Prior to the date hereof, Seller has delivered to Buyer true and
complete copies of each Labor Agreement listed in Schedule 4.23 attached
hereto. In addition, except to the extent set forth in Schedule 4.23 attached
hereto: (a) there is no unfair labor practice
- 36 -
41
charge, or complaint or other action against Vapor Canada pending or, to the
knowledge of Seller, threatened before the Ontario Labour Relations Board, the
Quebec labour commissioner general or any other governmental authority or
agency, and Vapor Canada is not subject to any order to bargain by the Ontario
Labour Relations Board, the Quebec labour commissioner general or any other
governmental authority or agency; (b) there is no, and during the past three
years there has been no labor strike or work stoppage actually pending or, to
the knowledge of Seller, threatened against or affecting Vapor Canada; (c) no
question concerning representation is pending or to Seller's knowledge is
threatened respecting the employees of Vapor Canada; and (d) no written
grievance by Vapor Canada employees which might have a Material Adverse Effect
is pending.
4.24 Customers and Suppliers. Except as disclosed in
Schedule 4.24, Vapor Canada is not engaged in any dispute with any of its
customers or suppliers except for disputes with customers or suppliers which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
4.25 Compliance with Law. Except for matters pertaining
bathe Plans which are provided for in Section 4.17 and matters pertaining to
Environmental Laws which are provided for in Section 4.19, the operations of
Vapor Canada are and have been, conducted in accordance with all applicable
laws, regulations and other requirements of all U.S. and foreign national
governmental
- 37 -
42
authorities, and of all states, municipalities and other political subdivisions
and agencies thereof, having jurisdiction over or the business of Vapor Canada,
including, without limitation, all such laws, regulations and requirements
relating to employment of unauthorized aliens, competition, consumer
protection, currency exchange, equal opportunity, health, occupational safety,
pension and securities, except for deviations from, or noncompliance with, such
laws arising from the operations of Vapor Canada which, individually or in the
aggregate would not have a Material Adverse Effect. Except as set forth in
Schedule 4.25 attached hereto, to the knowledge of Seller, Vapor Canada has not
received any written notification of any asserted failure by Seller or Vapor
Canada to comply with any such laws, rules or regulations.
4.26 Brokers and Finders. Except as set forth in Schedule
4.26 attached hereto, neither Seller nor Vapor Canada, nor any of the officers,
directors or employees thereof, as the case may be, has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by this
Agreement. All such fees and commissions will be paid by Seller and will not
be charged to any Vapor Group Member after August 31, 1996.
4.27 Product Warranties. The standard product or service
warranties, indemnifications and guarantees which Vapor Canada extends to its
customers in the ordinary course of the conduct of its business, copies of
which have been delivered to Buyer, are
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43
identified in Schedule 4.27 attached hereto. Schedule 4.27 also contains a
general description of any product or service warranties, indemnifications or
guarantees extended by Vapor Canada to any material customer, the terms of
which are materially different from the standard product or service warranties,
indemnifications or guarantees otherwise described in Schedule 4.27 attached
hereto. No material warranties, indemnifications or guarantees are now in
effect or outstanding with respect to products or services manufactured,
produced or performed by Vapor Canada in the ordinary course of conduct of its
business, except for warranties implied by law and warranties, indemnifications
and guarantees of the types identified in Schedule 4.27 attached hereto.
4.28 Potential Conflicts of Interest. Except as set forth
in Schedule 4.28 attached hereto, no contract, agreement or arrangement
(excluding employment agreements and rights arising under any of the Plans)
providing for the purchase or sale of any goods or services or relating to any
interest in any property, whether real or personal, or tangible or tangible,
which is used by or relates to Vapor Canada exists between: (a) Seller and
Vapor Canada; (b) Seller and any officers or directors of Vapor Canada; or (c)
between Vapor Canada and any officers or directors of Vapor Canada. Except as
set forth in Schedule 4.28 attached hereto, none of the officers or directors
of Seller and none of the stockholders, officers or directors of Vapor Canada
has any cause of action or other claim whatsoever against Vapor Canada.
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44
4.29 Disclosure. Disclosure of any fact or information in
any Schedule required by this Article 4 shall be deemed for purposes of this
Agreement to be disclosure on any other Schedule required by any Section of
this Agreement on which such item could have been listed pursuant to this
Agreement.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.01 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Ontario, and has the
corporate power and authority to carry on its business as presently conducted.
5.02 Authorization by Buyer. Buyer has full corporate power
and authority to enter into, execute and deliver this Agreement and each of the
other documents and instruments to be executed and delivered by Buyer pursuant
to this Agreement and to carry into effect the transactions contemplated
hereunder and thereunder. At Closing, the execution and delivery of this
Agreement and each of the other documents and instruments to be executed and
delivered by Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereunder and thereunder will have been duly
authorized by all necessary corporate action on the part of Buyer. At Closing,
no other corporate act or proceeding on the part of Buyer or its
- 40 -
45
stockholders is necessary to authorize the execution and delivery of this
Agreement and each of the other documents and instruments to be executed and
delivered by Buyer pursuant to this Agreement or the consummation of the
transactions contemplated hereby and thereby.
5.03 Binding Agreements. This Agreement constitutes, and,
when executed and delivered on the Closing Date, each of the other documents
and instruments to be executed and delivered by Buyer to Seller will constitute
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with its terms except that: (a) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect affecting the enforcement of creditors' rights generally; and, (b)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
5.04 No Violation. Neither the execution and delivery of
this Agreement, nor the consummation by Buyer of the transactions contemplated
hereby will: (a) to the knowledge of Buyer, violate any statute or law, or any
rule or regulation of any governmental authority; (b) violate any order, writ,
injunction or decree of any court or governmental authority; or (c) violate or
conflict with or constitute a default under (or an event which, with notice or
lapse of time, or both, would
- 41 -
46
constitute a default under) or will result in the termination of, or accelerate
the performance required by, or result in the creation of any material lien,
security interest, charge or encumbrance upon any of the material assets of
Buyer under any term or provision of: (i) the Articles of Incorporation or
By-Laws of Buyer; or (ii) any material lease, contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character
to which Buyer is a party or by which Buyer or any of its assets or properties
may be bound or affected.
5.05 Litigation. There are no actions, suits or claims or
legal, administrative, equitable or arbitration proceedings or outstanding
orders, judgments, injunctions, awards or decrees of any court, any
governmental or regulatory body or arbitration tribunal pending, or to the
knowledge of Buyer, threatened against or involving Buyer which: (a) seek to
prevent the consummation of the transactions contemplated by this Agreement; or
(b) relate to_the business or operations of Buyer and which, if adversely
decided, would prevent Buyer from meeting its obligations hereunder.
5.06 Consents and Approvals. Except for consents listed
in Schedule 5.06 attached hereto and for the filing of a notice under the
Investment Canada Act, pre-merger notification documentation under the HSR Act
and the expiration of all applicable waiting periods thereunder, no permit,
consent, approval or authorization of, or declaration, filing or
- 42 -
47
registration with, any governmental agency or authority or any other person,
firm or corporation is necessary or required to be obtained in connection with
the execution and delivery by Buyer of this Agreement or the consummation by
Buyer of the transactions contemplated hereby.
5.07 Purchase for Investment. Buyer is purchasing the
Vapor Canada Shares for investment and not for resale or distribution and Buyer
will not sell, transfer, offer for sale, pledge, hypothecate or otherwise
dispose of any of the Vapor Company shares in violation of any applicable
securities laws or regulations.
5.08 Brokers and Finders. Except as set forth in Schedule
5.08, neither Buyer, nor any of its officers, directors or employees, as the
case may be, has employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finders fees in connection with the
transactions contemplated by this Agreement.
ARTICLE 6.
COVENANTS OF SELLER
6.01 INTENTIONALLY DELETED.
6.02 Non-Competition. As a part of the inducement to
Buyer to enter into this Agreement, Seller hereby agrees that for
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48
a period of five (5) years (the "Covenant Term") from the date hereof, Seller
shall not, nor shall any division of Seller or any corporation in which Seller
directly or indirectly owns more than twenty-five percent (25%) of the total
number of outstanding shares entitled to vote, or their successors and assigns
(hereinafter referred to as "Seller's Affiliates") without the prior express
written consent of Buyer, own, manage, operate, participate in or control,
directly or indirectly, any business, firm or corporation which is engaged
anywhere in the world in the manufacture or sale of any products which are the
same as or similar to, or which compete with, products manufactured or sold by
Vapor Canada prior to the Closing Date (hereinafter the "Competing Products"),
except in the case of products specifically described in Schedule 6.02 hereto.
Notwithstanding the foregoing, nothing herein shall be deemed to limit or
otherwise restrict the rights of any division, subsidiary or affiliate of
Seller, including, without limitation, the Luminator Aircraft and Luminator
Mass Transit Divisions of Luminator Holding, LLC, Automatic/Eagle Holding, LLC,
the IVHS and F-P Displays Divisions of Mark IV Industries Limited, IVHS, Inc.,
F-P Displays, Inc., and Interstate Highway Sign Corp., from continuing, after
the Closing Date, to conduct its business in the same manner as such business
was conducted prior to the Closing Date (including the sale of Competing
Products if sold prior to the Closing Date) or from engaging, after the Closing
Date, in the manufacture and sale of any Competing Products specifically
identified on Schedule 6.02, nor shall this provision be binding upon the
successors and
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assigns of the foregoing entities, provided that the same are not affiliates of
Seller. Ownership or purchase by Seller at or after the time of Closing, of
less than ten percent (10%) of the issued and outstanding capital stock of any
enterprise engaged in the production or sale of Competing Products, the
securities of which are listed on a national securities exchange or included in
the national list of over-the-counter securities shall not be deemed a
violation of this Section 6.02. In addition, Seller shall not be deemed to be
in violation of this Section 6.02 in the event that, following the Closing
Date, Seller or any division or subsidiary of Seller acquires substantially all
the assets of any person, firm or corporation or a majority of the issued and
outstanding capital stock of any corporation and, following such acquisition,
less than ten percent (10%) of the annual sales of any such acquired company is
attributable to sales of Competing Products. Upon breach by Seller of any
provision of this Section 6.02, Buyer shall be entitled to injunctive relief,
both preliminarily and permanently, since the remedy at law would be inadequate
and insufficient. Additionally, Buyer will be entitled to all such other legal
and equitable remedies as may be available to it. In the event any of the
provisions of this Section 6.02 are determined by a court of competent
jurisdiction to be contrary to any applicable statute, law or rule, or for any
reason to be unenforceable as written, such court may modify any of such
provisions so as to permit enforcement thereof as thus modified.
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ARTICLE 7.
COVENANTS OF BUYER
7.01 INTENTIONALLY DELETED.
7.02 Executive Severance Arrangement. Schedule 7.02 lists
certain individuals who have severance agreements with Mark IV Industries, Inc.
Such agreements extend for two years after the Closing Date (the "Severance
Period"). Buyer shall cause Vapor Canada to make any payments due under such
agreements during the Severance Period. Thereafter, such individuals will be
entitled only to such severance benefits as are provided under Buyer's
employment policies as then in effect. Notwithstanding anything herein to the
contrary, Seller shall make any payments due under the severance agreement
between David Kerr and Mark IV Industries, Inc. during the first year of the
Severance Period. Buyer shall cause Vapor Canada to make any payments
thereafter due under the severance agreement between David Kerr and Mark IV
Industries, Inc.
7.03 Insurance Coverage. Buyer acknowledges that the
insurance coverage which Seller maintains with respect to Vapor Canada
including, without limitation, general liability, product liability, auto
liability, property, commercial umbrella, excess umbrella, aircraft products,
fiduciary liability, crime liability insurance coverage is maintained by Seller
under policies with respect to which Seller is the named insured and Vapor
Canada is an additional insured. Buyer acknowledges that effective as of the
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Closing Date, Seller intends to remove Vapor Canada from the insurance coverage
provided by such insurance policies to the extent that such insurance coverage
relates to and the business and assets of Vapor Canada with respect to any
periods arising at any time on or after the Closing Date. Accordingly, Buyer
acknowledges that insurance protection may not be available to Buyer under any
insurance policies maintained by Seller with respect to any injury, loss or
damage which Buyer, Vapor Canada, or any third party may suffer as a result of
any event, occurrence or circumstance existing or occurring with respect to
Vapor Canada at any time on or after the Closing Date.
7.04 Investigation. Buyer acknowledges that, except for
the representations and warranties of Seller contained in or made pursuant to
Article 4 hereof, or in any certificate, document or instrument delivered
pursuant to this Agreement, neither Seller nor any of its officers, employees,
agents, stockholders, affiliates, consultants, investment bankers, legal
advisors or other representatives shall: (a) be deemed to have made any
representations, warranties or assurances of any kind; and (b) have any
liability or obligation to Buyer in respect of any statement or assurance made
to Buyer in connection with the transactions contemplated herein, including,
without limitation, statements set forth in a Confidential Offering Memorandum
dated November, 1995 and provided to Buyer or any written or oral statements
made by any employee or representative of Seller or
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Vapor Canada in connection with any presentations made with respect to the
Vapor Business.
ARTICLE 8.
ADDITIONAL COVENANTS OF BUYER AND SELLER
8.01 Substitute Guarantees and Letters of Credit. Buyer
shall use reasonable best efforts to obtain substitute guarantees, letters of
credit, performance bonds, surety bonds and similar arrangements with respect
to the Vapor Business listed on Schedule 9.04 as promptly as practicable after
the Closing Date and in any event within 60 days thereafter. During such period
(not to exceed 60 days after the Closing Date) Seller shall cause all such
outstanding arrangements with respect to the Vapor Business or Vapor Canada to
be maintained. Buyer shall indemnify and hold Seller and any affiliate company
of Seller harmless for any losses or liabilities arising under such continued
arrangements after the Closing.
8.02 Access After the Closing Date. Seller agrees with
Buyer that, on and after the Closing Date, each, upon reasonable advance notice
from the other (which notice shall include specific reference to the material
requested and the purpose therefor) and with the consent of the other party
(which consent shall not be unreasonably withheld), will permit the other and
their respective representatives (including their counsel and auditors), during
normal business hours to have access to and examine and make
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copies of all books and records of the other which pertain to the business and
assets of Vapor Canada including, but not limited to, correspondence,
memoranda, books of account, payroll records, computer records, insurance
policies and the like. All actual costs incurred in connection with locating,
preparing, collecting and photocopying any such material shall be borne by the
party requesting the same.
8.03 Record Retention. For a period consistent with each
party's respective customary practice of record retention, or, in the case of
books or records with respect to which there is an applicable statute of
limitations, for a period until the expiration of such statute of limitations
(or any later date to which such statute of limitations may have been extended
in a particular instance by written agreement with a regulatory authority or by
judicial or administrative order), Buyer and Seller each agree to maintain all
material books or records existing at Closing and pertaining to the business or
assets of Vapor Canada.
8.04 Insurance Recovery. To the extent that Buyer may be
able to claim recovery under any insurance policies maintained by Seller with
respect to the Vapor Business for any claims relating to the Vapor Business,
Seller will cooperate with Buyer and take such action as Buyer may reasonably
request to facilitate Buyer's efforts to obtain such recovery.
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8.05 Tax Matters. (a) For purposes of this Section 8.05,
"Effective Date" means August 31, 1996. Seller shall be responsible for
filing, or causing to be filed, within the time and in the manner prescribed by
law, all consolidated, combined or unitary Tax Returns with respect to any
Income Taxes payable by Seller and Vapor Canada for all taxable periods of
Seller and Vapor Canada ending on or before the Effective Date. Following the
Effective Date, Seller will pay or cause to be paid in full all Income Taxes
attributable to Vapor Canada and its operations and assets and either (i) shown
to be due on such Tax Returns, or (ii) otherwise due or claimed to be due from
Vapor Canada by any taxing authority for all periods up to and including the
Effective Date. Seller shall also be responsible for filing, or causing to be
filed, within the time and in the manner prescribed by law, all consolidated,
combined or unitary Tax Returns which are required to be filed (after taking
into consideration any available extensions for the filing of such Tax Returns)
prior to the Effective Date with respect to any Taxes (other than Income Taxes)
payable by Seller and Vapor Canada with respect to any periods ending prior to
the Effective Date. Seller will pay or cause to be paid in full all Taxes
(other than Income Taxes) attributable to Vapor Canada and its operations and
assets that were required to be paid on or before the Effective Date. With
respect to Taxes (other than Income Taxes) attributable to Vapor Canada and its
operations and assets prior to the Effective Date and that are first due and
payable after the Effective Date, (i) Seller shall pay such Taxes if they were
not accrued as liabilities on the
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Closing Balance Sheet, and (ii) Buyer shall pay such Taxes if they were accrued
as liabilities on the Closing Balance Sheet. Any transfer taxes payable in
connection with the transactions contemplated hereby will be paid by Buyer or
Seller in accordance with customary practice. Seller shall provide Buyer a
copy of any Tax Return relating to Income Taxes which is described above in
this subparagraph and which is required to be signed by Buyer or Vapor Canada
not later than ten (10) days prior to the due date (including extensions) for
filing such Tax Return.
(b) Buyer shall be responsible for filing, or
causing to be filed, within the time and in the manner prescribed by law, all
consolidated, combined or unitary Tax Returns relating to any Taxes (other than
Income Taxes) payable by Vapor Canada, in each case, for all taxable periods
beginning on or before the Effective Date to the extent that such Tax Returns
are not required to be filed by Seller and Vapor Canada pursuant to the
provision of Section 8.05(a) above. The liability for Taxes shown to be due on
such returns shall be determined as provided in Section 8.05 above. Buyer shall
be responsible for filing all Tax Returns required to be filed by Buyer or by
or on behalf of Vapor Canada in connection with the business, operations and
assets of Vapor Canada, after the Effective Date.
(c) So long as no lien or attachment arises with
respect to Vapor Canada or any assets of Vapor Canada, Seller shall have full
control and ultimate discretion over all actions
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56
to be taken or decisions to be made in the course of any audit or examination,
or any subsequent proceedings, including settlement or other dispositions
thereof: (i) with respect to any Taxes due and payable by Seller or Vapor
Canada for any period ending on or prior to the Effective Date; and (ii) with
respect to any Taxes which are payable in connection with any Tax Returns which
Seller and Vapor Canada are required to file pursuant to the provisions of
Section ? above. Seller shall reimburse Buyer and Vapor Canada for all
reasonable out-of-pocket costs incurred by Buyer and Vapor Canada in connection
with the taking of any action which Seller requests Buyer or Vapor Canada to
take in the course of such audit, examination or subsequent proceeding. If any
taxing authority shall take any action which may give rise to a claim by any
such taxing authority that: (w) Vapor Canada has not filed any Tax Return
relating to Income Taxes which is required with respect to any period ending on
or before the Effective Date; or (x) Vapor Canada has not paid in full or owes
any Taxes for any period ending on or before the Effective Date, then Buyer
shall promptly notify Seller thereof in writing; provided, however, that any
failure to notify Seller shall not release Seller from its obligation to file
such Tax Returns or pay such Taxes as stated in this Section to the extent
Seller would not be prejudiced thereby.
(d) If, in response to any claim which is made by
any taxing authority to the effect that Vapor Canada owes any additional Taxes
for any period ending on or before the Effective Date (including, but not
limited to, the denial of a tax credit
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57
taken by Vapor Canada for any period ending on or before the Effective Date),
Seller pays any amount to such taxing authority, Buyer shall, upon the written
request of Seller, file (or take such action as may be necessary to cause Vapor
Canada to file) a claim for refund with the appropriate taxing authorities with
respect to any Taxes for any such period. Seller will provide Buyer or Vapor
Canada with such information as may be reasonably necessary to enable Buyer or
Vapor Canada, as the case may be, to file a claim for refund. Buyer and Vapor
Canada shall, at the sole cost of Seller (including all reasonable
out-of-pocket costs incurred by Buyer and Vapor Canada) promptly take all
actions as may be reasonably requested by Seller to obtain such refund. Buyer
acknowledges and agrees that any and all refunds of any Taxes paid or payable
by Seller or by Vapor Canada in connection with the operations of Seller and
Vapor Canada prior to the Effective Date shall be the property of Seller and
such refunds, including any interest thereon actually received by Buyer, net of
any additional Income Taxes imposed on Buyer or Vapor Canada for any period
occurring after the Effective Date and which are attributable to the receipt of
such refunds shall be paid by Buyer to Seller promptly after such refund is
either received or credited against such liability of Buyer or Vapor Canada for
Taxes. Buyer agrees that neither Buyer nor Vapor Canada have any right to
carry back any loss incurred by Vapor Canada after the Effective Date to any
period prior to the Effective Date.
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(e) To the extent that Buyer receives a tax
refund as a result of a deduction or credit relating back to the period prior
to the Closing, Buyer or Vapor Canada will pay over to Seller the net amount
realized by Buyer with respect thereto within 30 days of such receipt. To the
extent that Seller receives a tax refund as a result of a deduction or credit
relating to the period after the Closing, Seller will pay over to Buyer the net
amount received by Seller with respect thereto within 30 days of such receipt.
(f) Each party hereto shall provide the other
party with such assistance as may reasonably be requested by such party in
connection with the preparation of any Tax Return or claim for refund, any
audit or other examination by any taxing authority or any judicial or
administrative proceedings relating to the liability of Vapor Canada for any
Taxes attributable to any period ending on or before the Effective Date.
8.06 Tax Refunds. Seller shall be entitled to any tax
refund received by Buyer or Vapor Canada which is attributable to any Income
Taxes payable by Seller or Vapor Canada with respect to any period ending on or
prior to the Effective Date and any tax refund received by Buyer or Vapor
Canada with respect to any Taxes (other than Income Taxes) payable for any
periods ending prior to the Effective Date to the extent that the due date
(including extensions thereof) for the filing of the Tax Return with respect to
such Taxes (other than Income Taxes) and the payment of such
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Taxes (other than Income Taxes) occurs prior to the Effective Date, but only to
the extent that such refund is not reflected in the Closing Balance Sheet.
Buyer agrees to notify Seller upon receipt of, and forthwith deliver to Seller
duly endorsed in the name of Seller, any tax refund cheque or other evidence of
payment in respect of any such tax refund, which refund cheque or other
evidence of payment shall not be deposited into any bank account for collection
and pending delivery to Seller shall be held by Buyer or Vapor Canada, in trust
pending delivery to Seller; provided, however, that the amount of any
additional liability imposed on Buyer or Vapor Canada for Taxes that are
attributable to any such tax refund is simultaneously paid by Seller to Buyer.
8.07 Confidentiality. Each party hereto will hold and
will cause its directors, officers, employees, agents, consultants and advisors
to hold in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, all documents and information concerning the other party furnished to
it by such other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been: (a) previously lawfully known by the
party to which it was furnished, (b) in the public domain through no default of
such party, or (c) later lawfully acquired from other sources by the party to
which it was furnished), and each party will not release or disclose such
information to any other person, except its auditors, attorneys,
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financial advisors, bankers and other consultants and advisors in connection
with this Agreement. If the transactions contemplated by this Agreement are
not consummated, such confidence shall be maintained except to the extent such
information comes into the public domain through no fault of the party required
to hold it in confidence, and in any event such information shall not be used
to the detriment of, or in relation to any investment in, the other party and
all such documents (including copies thereof and software) shall be returned to
the other party immediately upon the written request of such other party.
8.08 INTENTIONALLY DELETED.
8.09 Public Announcements. Prior to Closing, Buyer and
Seller will consult with each other before issuing any press releases or
otherwise making any public statements with respect to this Agreement or the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to such consultation, except as may be required by
law.
8.10 Post-Closing Cooperation. After the Closing, without
further consideration: (a) Seller shall take all such further actions and
execute, acknowledge and deliver all such further consents and other documents
as Buyer may reasonably request to facilitate or effect the transactions
contemplated by this Agreement; and (b) Buyer shall, and shall cause Vapor
Canada, to take all such further actions and execute, acknowledge and
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deliver all such further consents and other documents as Seller may reasonably
request in order to facilitate the transactions contemplated by this Agreement.
8.11 INTENTIONALLY DELETED
8.12 Brokers' and Finders' Fees. All fees and commissions
referred to in Section 4.26 hereof will be paid by Seller and will not be
charged to any Vapor Group Member after August 31, 1996.
ARTICLE 9.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
9.01 Survival of Representations. The representations and
warranties made by Seller pursuant to Sections 4.04 and 4.05 hereof shall
survive for a period of ten (10) years following the Closing Date, and the
representations and warranties made by Seller pursuant to Section 4.22 hereof
shall survive for a period equal to the applicable statute of limitations with
respect to any taxes referred to therein. The representations and warranties
contained in Sections 4.07, 4.08, 4.11, 4.12, 4.19 and 4.25 shall survive for a
period of three (3) years after the Closing Date. All other representations
and warranties contained in Articles 4 and 5 hereof shall survive for a period
of two (2) years after the Closing Date.
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As used herein, the term "Title Warranties" means the
representations and warranties made by Seller pursuant to Sections 4.04 and
4.05 of this Agreement. As used herein, the term "Tax Warranties" means the
representations and warranties made by Seller pursuant to Section 4.22 of this
Agreement.
9.02 Statements as Representations. All statements
contained in any Schedule delivered pursuant to Articles 4 and 5 hereof shall
be deemed representations and warranties within the meaning of Section 9.01,
above.
9.03 Indemnification by Seller. Seller hereby agrees to
indemnify, defend and hold harmless Buyer as provided for in Article 9 of the
Other Purchase Agreement.
9.04 Indemnification by Buyer. Buyer hereby agrees to
indemnify, defend and hold harmless Seller as provided for in Article 9 of the
Other Purchase Agreement.
9.05 INTENTIONALLY DELETED.
9.06 INTENTIONALLY DELETED.
9.07 Litigation Cooperation. (a) Seller shall
cooperate with Buyer and Vapor Canada and shall cause its officers, employees,
agents, auditors and representatives to cooperate with Buyer and Vapor Canada
in connection with the
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investigation, prosecution, defense and settlement of any judicial or
administrative proceeding or claim which Buyer or Vapor Canada has undertaken
the defense of in connection with Buyer's obligation to indemnify seller as
provided for in Article 9 of the Other Purchase Agreement; provided that Buyer
shall reimburse Seller and its officers, employees, agents, auditors and
representatives for the reasonable out-of-pocket costs and expenses incurred
in providing such assistance.
(b) Buyer shall cooperate with Seller and shall
cause its officers, employees, agents, auditors and representatives to
cooperate with Seller in connection with the investigation, prosecution,
defense and settlement of any judicial or administrative proceeding or claim
which Seller has undertaken the defense of in connection with Seller's
obligation to indemnify Buyer as provided for in Article 9 of the Other
Purchase Agreement provided that Seller shall reimburse Buyer and its officers,
employees, agents, auditors and representatives for the reasonable
out-of-pocket costs and expenses incurred in providing such assistance.
9.08 Remedies Cumulative. Except as herein expressly
provided, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of
any other remedies against any other party hereto.
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ARTICLE 10.
MISCELLANEOUS PROVISIONS
10.01 Knowledge. For purposes of this Agreement, the term
"knowledge" with respect to (i) Seller means the actual knowledge of those
persons identified in Schedule 10.01 attached hereto, and (ii) Buyer means the
actual knowledge of Robert J. Brooks.
10.02 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented only by written
agreement of the parties hereto at any time with respect to any of the terms
contained herein.
10.03 Waiver of Compliance. Any failure of Seller, on the
one hand, or Buyer, on the other, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the
Chairman, President or a Vice President of Buyer or Seller, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10.04 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given: (a) if delivered by hand when delivered; (b) if
by telex, telecopy, cable or overnight delivery when received, or (c) if by
mail, five (5)
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65
days after being mailed, certified or registered mail, with postage prepaid:
(i) If to Seller, to:
Mark IV Industries, Inc.
One Towne Centre
501 John James Audubon Parkway
Amherst, NY 14226
Attention: John J. Byrne
with a copy to:
Gerald S. Lippes, Esq.
Lippes, Silverstein, Mathias & Wexler LLP
700 Guaranty Building
28 Church Street
Buffalo, New York 14202
or to such other person or address as Seller shall furnish to Buyer in writing.
(ii) If to Buyer, to:
W&P Holding Corporation
200 West Ninth Street Plaza
Suite 207
Wilmington, Delaware 19801
Attention: Robert J. Brooks
with a copy to:
David L. DeNinno
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, Pennsylvania 15219
or to such other person or address as Buyer shall furnish to Seller in writing.
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10.05 Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties, except that Buyer may assign this Agreement to a subsidiary of
Buyer, provided that no such assignment of this Agreement or any of the rights
or obligations hereunder shall relieve or impair Buyer of its obligations under
this Agreement.
10.06 Governing Law and Jurisdiction. This Agreement
and the legal relations among the parties hereto shall be governed by and
construed in accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein.
10.07 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
10.08 Arbitration. Any controversy, dispute or
claim (including Without limitation a Claim Pursuant to Section 9.03 hereof the
dollar amount of which exceeds $250,000 U.S. or any collection of controversies,
disputes or claims which together exceed $700,000 U.S. (a "Dispute") between the
Parties arising out of or relating to this Agreement, or the breach, termination
or
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validity thereof, shall be finally settled by arbitration as Provided for in
Section 10.08 of the Other Purchase Agreement.
10.09 Headings. The headings of the Sections and
Articles of this Agreement for are inserted for convenience only and shall not
constitute a part or interpretation of this Agreement.
10.10 Entire Agreement. This Agreement, including
the Exhibits hereto, the Schedules hereto and the other documents and
certificates delivered pursuant to the terms hereof together with the Other
Purchase Agreement, sets forth the entire agreement and understandings of the
parties hereto in respect of the subject matter contained herein, and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto.
10.11 Third Parties. Except as specifically set
forth or referred to herein, nothing herein, nothing herein expressed or implied
is intended or shall be construed to confer upon or give to any person or
corporation other than the parties hereto and their successors or assigns, any
rights or remedies under or by reason of this Agreement.
10.12 Severability. The invalidity or illegality of
any provision, term, or agreement contained in or made a part of
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this Agreement shall not affect the validity of the remainder of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and their respective corporate seals to be
affixed hereto, all as of the day and year first above written.
MARK IV INDUSTRIES LIMITED
By: /s/ John J. Byrne
----------------------------
Title: Vice President
--------------------------
WESTINGHOUSE RAILWAY HOLDINGS
(CANADA) INC.
By: /s/ Robert J. Brooks
-----------------------------
Title: Secretary
---------------------------
Westinghouse Air Brake Company hereby unconditionally guarantees and becomes
surety for the payment and performance of all obligations of Buyer under this
Agreement.
WESTINGHOUSE AIR BRAKE COMPANY
By: /s/ Robert J. Brooks
------------------------------
Title: Vice President
---------------------------
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