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<SEC-DOCUMENT>0000912057-95-008227.txt : 19951003
<SEC-HEADER>0000912057-95-008227.hdr.sgml : 19951003
ACCESSION NUMBER: 0000912057-95-008227
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 17
CONFORMED PERIOD OF REPORT: 19950702
FILED AS OF DATE: 19950929
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MAGNETEK INC
CENTRAL INDEX KEY: 0000751085
STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621]
IRS NUMBER: 953917584
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10233
FILM NUMBER: 95577839
BUSINESS ADDRESS:
STREET 1: 26 CENTURY BOULEVARD
STREET 2: P O BOX 290159
CITY: NASHVILLE
STATE: TN
ZIP: 37229-0159
BUSINESS PHONE: 6153165100
MAIL ADDRESS:
STREET 1: 26 CENTURY BOULEVARD
STREET 2: P O BOX 290159
CITY: NASHVILLE
STATE: TN
ZIP: 37229-0159
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<DESCRIPTION>10-K405
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 2, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10233
__________________
MAGNETEK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3917584
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26 CENTURY BOULEVARD
P.O. BOX 290159
NASHVILLE, TENNESSEE 37229-0159
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 316-5100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
Common Stock, $.01 par value New York Stock Exchange
8% Convertible Subordinated Notes Due 2001 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (based on the closing price of such stock, as reported by the
New York Stock Exchange, on September 15, 1995) was $304,457,416.
The number of shares outstanding of the Registrant's Common Stock, as
of September 15, 1995, was 24,684,017 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the MagneTek, Inc. 1995 Annual Report to Shareholders for
the year ended July 2, 1995 are incorporated by reference into Part II of this
Form 10-K. With the exception of those portions which are expressly
incorporated by reference in the Annual Report on Form 10-K, the MagneTek, Inc.
1995 Annual Report to Shareholders is not deemed filed as part of this Report.
Portions of the MagneTek, Inc. definitive Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the close of
the fiscal year ended July 2, 1995 are incorporated by reference into Part III
hereof.
<PAGE>
MAGNETEK, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JULY 2, 1995(1)
PAGE
----
ITEM 1. BUSINESS.. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ITEM 2. PROPERTIES.. . . . . . . . . . . . . . . . . . . . . . . . . . .6
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . .8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . .10
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . .11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . .11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . . .11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . .11
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . .12
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . .14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . .14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . .14
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . .15
- --------------------
(1) The Company uses a 52-53 week fiscal year which ends on the Sunday nearest
June 30. Accordingly, the Company's 1995 fiscal year ended on July 2, 1995
and contained 52 weeks. For clarity of presentation, all periods are
presented and discussed as if each fiscal year ended on June 30. The year
ended July 3, 1994 contained 53 weeks and the year ended June 27, 1993
contained 52 weeks.
ii
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
The electrical equipment industry is characterized by diversity of
markets, global competition and relatively high barriers to entry due to
intensive capital requirements and required access to market channels. From its
inception in 1984, MagneTek pursued a growth strategy designed to achieve the
size necessary to compete with domestic and foreign electrical equipment
manufacturers. During the late 1980s and early 1990s the Company grew rapidly,
primarily through acquisitions of electrical equipment businesses supplemented
by internal growth. While this growth enabled the Company to achieve a
significant share of several electrical product and service markets, and enhance
efforts to reduce manufacturing costs through economies of scale and vertical
integration, the use of debt to finance the majority of the acquisitions left
the Company with a relatively high degree of financial leverage in its balance
sheet.
During the fiscal year ended June 30, 1994, MagneTek's Board of
Directors approved a plan to focus the Company's resources on fewer product
lines and reduce debt. The restructuring program approved by the Board included
the sale of certain businesses comprised primarily of the Company's utility,
military, controls and custom motor segments (See Note 2 of Notes to
Consolidated Financial Statements). As of June 30, 1995, the Company has sold
its military, controls and custom motor businesses in a series of transactions,
as well as certain product lines of its utility business. Subsequent to fiscal
1995 year end, the Company sold its medium power transformer business, which
represented most of the remainder of the utility business. The Company is
continuing the process of disposing of certain minor remaining operations slated
for divestiture.
The Company operates in two business segments: Ballasts and
Transformers, including lighting products (magnetic and electronic lighting
ballasts), power supplies and small transformer products; and Motors and
Controls, which includes fractional and integral horsepower electric motors,
medium voltage generators and variable speed electronic drives.
BALLASTS AND TRANSFORMERS SEGMENT
GENERAL. The Ballasts and Transformers segment accounted for 57%
of the Company's net revenues in fiscal 1995. This segment manufactures a broad
range of equipment in the United States and Europe within two general product
categories: Lighting products, including fluorescent (both magnetic and
electronic) and high intensity discharge ("HID") ballasts; and Transformer
products, inclusive of electronic power supplies, various small component and
specialty transformers, and dry type distribution transformers. The Company's
European operations, concentrated primarily in magnetic lighting ballasts and
electronic power supplies, accounted for 24% of the segment's total net sales in
fiscal 1995. One customer, Lithonia Lighting, a lighting fixture OEM, accounted
for 9% of the segment's total net sales in fiscal 1995.
LIGHTING PRODUCTS. During fiscal 1995, sales of Lighting products
represented 80% of the segment's total net sales. The Company is an industry
leader, measured by market share, in magnetic fluorescent ballasts both
domestically and in Europe, and in electronic flourescent ballasts domestically.
Sales of magnetic ballasts (including HID) accounted for 42% (35% in the U.S.
and 7% in Europe) of the segment's total net sales in fiscal 1995.
1
<PAGE>
Magnetic ballasts are typically used in standard fluorescent lighting fixtures
in office, commercial and residential applications, and in various types of
specialty lighting applications, including both indoor and outdoor displays and
signs. High intensity discharge (HID) ballasts are utilized in lighting
fixtures in industrial and municipal applications, such as street lighting,
outside security and parking lot lighting, factory and warehouse indoor
illumination and sports lighting. Electronic solid state fluorescent ballasts
afford savings over standard magnetic ballasts through reduced energy
consumption, but have higher initial costs. Sales of electronic ballasts,
primarily in the U.S., accounted for 32% of the segment's total net sales in
fiscal 1995. The Company anticipates a continued shift in demand toward
electronic ballasts from magnetic products, as end users focus on long term cost
efficiency and the cost of electronic ballasts declines.
In the U.S., approximately 61% of the Company's fluorescent and
HID ballasts are sold through MagneTek's direct sales force to OEMs with the
balance sold through independent manufacturers' representatives to more than
4,000 independent electrical distributors nationwide. In Europe, sales are made
through a combination of the Company's direct sales force and sales agents,
primarily to OEMs.
TRANSFORMER PRODUCTS. Sales of Transformer products in fiscal
1995 accounted for 20% of the segment's total net sales. Sales of Transformer
products in Europe, primarily electronic power supplies which are custom
designed for use in electronic business machines, computers and industrial
equipment, accounted for 11% of the segment's net sales in fiscal 1995. The
Company also manufactures dry type distribution transformers used primarily in
building applications as well as various component and specialty transformers.
Marketing of the Company's various Transformer products is done through a direct
sales force and independent manufacturers' representatives directly to OEMs and
(in the U.S.) through independent electrical distributors.
BACKLOG. The Company's backlog in the Ballasts and Transformers
segment as of June 30, 1995, was $126.5 million compared to $98.6 million as of
the end of fiscal 1994. The increase in the backlog resulted from increased
levels of demand for electronic ballasts. Backlog in electronic ballasts was
$36.4 million as of June 30, 1995 compared to $15.1 million as of June 30, 1994.
Backlog represents purchase orders received by the Company which are subject
to cancellation.
COMPETITION. The principal competitors of the Company in Lighting
products in the U.S. are Advance Transformer Company (a division of North
American Phillips Corp.), Electronic Ballast Technology (an affiliate of North
American Phillips Corp.), Valmont Industries and Motorola, and in Europe,
Schwabe, Helvar and Zumtobel. Competitors in Transformer products are Advance
Transformer Company and Astec. Certain of the Company's competitors in the
Ballasts and Transformers segment have substantially greater resources than the
Company. The Company competes principally on the basis of customer service and
engineering capabilities, quality and price.
MOTORS AND CONTROLS SEGMENT
GENERAL. The Motors and Controls segment, which accounted for 43%
of net sales in fiscal 1995, manufactures equipment in two general product
categories: Motors and Generators, including fractional and integral horsepower
electric motors and medium voltage generators and Drives and Systems, including
electronic adjustable speed
2
<PAGE>
drives and drive systems. The Company's European operations are not significant
to the segment, representing less than 3% of the segment's total net sales in
fiscal 1995. One customer, Caterpillar, Inc., accounted for 13% of the segment's
total net sales in fiscal 1995.
MOTOR AND GENERATOR PRODUCTS. During fiscal 1995, sales of Motor
and Generator products represented 84% of the segment's total net sales. The
Company's electric motors, most of which use AC power, range in size from 1/8 to
500 horsepower. Motors ranging in size from 1/8 to 5 horsepower (dependent on
frame size) are designated fractional horsepower ("FHP") motors. FHP motors are
used both in residential applications, primarily in appliances such as room air
conditioners, dehumidifiers and ventilators, as well as pool and spa pumps, and
in commercial applications such as heating, ventilating and air conditioning
("HVAC"), food service and agribusiness. AC motors ranging in size from 1 to
500 horsepower, designated integral horsepower ("IHP") motors, are used
primarily in commercial HVAC, mining, petrochemical and commercial laundry
applications. The Company also manufactures DC motors, ranging in size from 1/6
to 3 horsepower, used in variable speed applications such as conveyors, material
handling and packaging equipment, exercise equipment and machine tools.
Approximately 66% of the Company's motors are sold to OEMs primarily through the
Company's direct sales force. The remaining motors are marketed through a
network of approximately 2,600 distributors, primarily for the purpose of
replacement.
Generators manufactured by the Company range in size from 50
kilowatt ("KW") to 2,250 KW. Over 90% of generator sales are to Caterpillar,
Inc., which manufactures and sells engine generator units for prime and standby
power applications.
DRIVES AND SYSTEMS PRODUCTS. Sales of Drives and Systems products
accounted for 16% of the segment's total net sales for fiscal 1995. The
Company's electronic adjustable speed drives and drive systems adjust and
control the speed and output of electric motors. They are used in applications
involving HVAC, paper converting, wire drawing, elevators, machine
tools and material handling equipment. Drives and drive systems are sold
primarily to OEMs and end users through a specialized engineering oriented sales
force as well as through electrical distributors.
BACKLOG. The Company's backlog in the Motors and Controls
segment as of June 30, 1995 was $97.5 million compared to $71.1 million at the
end of fiscal 1994. Increased backlog was primarily in the area of commercial
fractional motors and drives products.
COMPETITION. The principal competitors of the Company in Motor
and Generator products are Emerson Electric Company, General Electric Company,
Franklin Electric Company, Baldor Electric Company, A.O. Smith and Onan. The
principal competitors in Drives and Systems are Emerson Electric Company, Allen
Bradley and Eaton Corporation. Certain of these competitors have substantially
greater resources than the Company. The Company competes principally on the
basis of customer service and engineering capabilities, quality and price.
INTERNATIONAL OPERATIONS
The Company conducts the majority of its international activities
in Europe. European operations include ballast and power supply production in
Germany and Italy and motor manufacturing in the United Kingdom and Hungary. The
Company's international
3
<PAGE>
sales, including sales from domestic operations, during fiscal 1995 accounted
for 20% of the Company's total net sales.
SUPPLIERS AND RAW MATERIALS
The Company manufactures many of the materials and components used
in its products, including ballast and motor laminations and capacitors. The
Company also draws its own magnet wire primarily for products in the Ballasts
and Transformers segment.
Virtually all materials and components purchased by the Company
are available from multiple suppliers. During fiscal 1995, approximately 61% of
the Company's cost of sales was for the purchase of direct materials.
Production requirements are heavily dependent on steel, copper and aluminum, as
well as certain electronic components. The Company generally negotiates prices
with steel vendors on an annual basis. The Company purchases copper for the
Ballasts and Transformers segment primarily in rod form for drawing its own
magnet wire and for the Motors and Controls segment in the form of finished
magnet wire. The Company seeks to mitigate its exposure to fluctuations in
copper prices through short-term hedging programs as well as through forward
contract arrangements with magnet wire suppliers. The Company purchases its
aluminum requirements based upon the spot prices at delivery.
RESEARCH AND DEVELOPMENT
Research and development activities are conducted by the
respective operating divisions and are directed toward enhancement of existing
products and development of new products. Advanced technologies are being
developed in four main development centers and future development is sponsored
by the Company and conducted by leading Universities. Total research and
development expenditures were approximately $23.6 million, $17.5 million and
$17.4 million, respectively, for the 1995, 1994 and 1993 fiscal years.
TRADEMARKS AND PATENTS
The Company holds numerous patents which, although of value, are
not considered by management to be essential to the Company's business. The
Company believes that it holds all the patent, trademark and other intellectual
property rights necessary to conduct its business.
4
<PAGE>
EMPLOYEES
At the end of fiscal 1995, the Company had approximately 2,100
salaried employees and approximately 12,600 hourly employees, of whom
approximately 6,100 were covered by collective bargaining agreements with
various unions. The Company believes that its relationships with its employees
are favorable.
ENVIRONMENTAL MATTERS
GENERAL. The Company has from time to time discovered
contamination by hazardous substances at certain of its facilities. In response
to such a discovery, the Company conducts remediation activities to bring the
facility into compliance with applicable laws and regulations. Except as
described below, the Company's remediation activities for fiscal 1995 did not
entail material expenditures, and its remediation activities for fiscal 1996 are
not expected to entail material expenditures. Future discoveries of
contaminated areas could entail material expenditures, depending upon the extent
and nature of the contamination.
CENTURY ELECTRIC (MCMINNVILLE, TENNESSEE). Prior to its purchase
by the Company in 1986, Century Electric, Inc. ("Century Electric") acquired a
business from Gould Inc. ("Gould") in May 1983 which included a leasehold
interest in a fractional horsepower electric motor manufacturing facility
located in McMinnville, Tennessee. In connection with this acquisition, Gould
agreed to indemnify Century Electric from and against liabilities and expenses
arising out of the handling and cleanup of hazardous waste, including but not
limited to cleaning up any PCBs at the McMinnville facility (the "1983
Indemnity"). Investigation revealed the presence of PCBs in portions of the
soil and in the groundwater underlying the facility and in certain offsite soil.
Century Electric has kept the Tennessee Department of Environment and
Conservation, Division of Superfund, apprised of test results from the
investigation. The McMinnville plant has been listed as a Tennessee Superfund
Site, a report on that site has been presented to the Tennessee legislature, and
community officials and plant employees have been notified of the presence of
PCBs as above described. In July 1993, Gould submitted to the State of
Tennessee a Feasibility Study recommending a cleanup of certain onsite soil with
an estimated cost of $4.7 million. This estimate does not include ancillary
costs of onsite cleanup, which are expected to be significant. Based upon
currently available information, the aggregate costs for cleanup of certain
onsite soil, including ancillary costs of onsite cleanup, are not expected to
exceed $15 million. Subsequent to June 30, 1994, Gould contracted for certain
onsite cleanup. In August and October 1994, Gould requested that the Company
bear an unspecified portion of these costs, and the Company declined. Gould, at
its own expense, arranged for the onsite cleanup to be performed during the
period from September 1994 through January 1995. Gould also conducted
preliminary investigation and cleanup of certain offsite contamination. The
cost of any further investigation and cleanup of offsite contamination cannot
presently be determined. The Company believes that the costs for further onsite
cleanup, including ancillary costs of onsite cleanup, and the costs for any
further offsite cleanup, are covered by the 1983 Indemnity. While the Company
believes that Gould will continue to perform under its indemnity obligations,
Gould's failure to perform such obligations could have a material adverse effect
on the Company.
OFFSITE LOCATIONS. The Company has been identified by the United
States Environmental Protection Agency and certain state agencies as a
potentially responsible party for cleanup costs associated with alleged past
waste disposal practices at several offsite locations. Due, in part, to the
existence of indemnification from the former owners
5
<PAGE>
of certain acquired businesses for cleanup costs at certain of these sites, and
except as described below, the Company's estimated share in liability (if any)
at the offsite facilities is not expected to be material. It is possible that
the Company will be named as a potentially responsible party in the future with
respect to other sites.
CROWN INDUSTRIES SITE (PIKE COUNTY, PENNSYLVANIA). In March 1992,
the Company was informed by the Pennsylvania Department of Environmental
Resources ("DER") that its Universal Manufacturing division is one of a number
of potentially responsible parties with respect to a planned environmental
investigation and cleanup at the Crown Industries site in Pike County,
Pennsylvania. The DER has provided a non-binding preliminary allocation of
liability in connection with the site that assigned the Company a 30 percent
share. The aggregate expense of cleaning up the site is not currently known,
but some preliminary indications suggest a range of $5 million to $15 million.
To date, the DER has sought reimbursement of approximately $500,000 in the
aggregate from the Company and the other potentially responsible parties. In
connection with the February 1986 acquisition of Universal Manufacturing, the
Company and the seller, Farley Northwest Industries, Inc. (the predecessor to
Fruit of the Loom, Inc., hereinafter collectively with such successor referred
to as "FOL") executed an environmental agreement. The Company has concluded
that at least 90 percent of any liability it may incur relating to this site is
covered by the indemnification provisions of its environmental agreement with
FOL, and FOL has acknowledged such indemnity and is currently defending its own
and the Company's interest in this site.
FOL's failure to perform its obligations with respect to the Crown
Industries site under the environmental agreement could have a material adverse
effect on the Company.
INDEMNIFICATION OBLIGATIONS FROM RESTRUCTURING. In selling
certain business operations, the Company from time to time has agreed, subject
to various conditions and limitations, to indemnify buyers with respect to
environmental liabilities associated with the acquired operations. The
Company's indemnification obligations pursuant to such agreements did not entail
material expenditures for fiscal 1995, and its indemnification obligations for
fiscal 1996 are not expected to entail material expenditures. Future
expenditures pursuant to such agreements could be material, depending upon the
nature of asserted claims subject to indemnification.
ITEM 2. PROPERTIES.
The Company's headquarters and each of its principal facilities
for the continuing operations of the Company are listed below, each of which is
owned by the Company unless indicated as being leased.
<TABLE>
<CAPTION>
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- -------------
<S> <C> <C> <C>
Altavista, Virginia -- 108,000 Motor manufacturing
Blytheville, Arkansas 1998 plus options 114,000 Ballast manufacturing
to 2008
Bridgeport, Connecticut 1999 100,000 Capacitor manufacturing
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- -------------
<S> <C> <C> <C>
Gainsborough Lincolnshire, -- 44,000 Motor manufacturing
England
Gallman, Mississippi 1999 plus options 130,000 Wire mill
to 2073
Goodland, Indiana -- 75,000 Component transformer
manufacturing
Huntington, Indiana -- 211,000 Converter, power supply and
specialty ballast
manufacturing
Huntington, Indiana -- 54,000 Technology center
Huntsville, Alabama -- 75,000 Electronic ballast
manufacturing
Juarez, Mexico Various 220,000 Motor manufacturing
LaVergne, Tennessee 1999 188,000 Distribution center
Lexington, Tennessee -- 449,000 Motor and generator
manufacturing
Mainaschaff, Germany -- 60,331 Administrative and
ballast, ignition coil
and transformer
manufacturing
Mainaschaff, Germany Various 209,257 Ballast, ignition coil
and transformer
manufacturing
Matamoros, Mexico Various 320,000 Ballast, wiring harness
and transformer
manufacturing
McMinnville, Tennessee Options to 2021 275,000 Motor manufacturing
Mendenhall, Mississippi 1997 251,600 Fluorescent ballast
assembly and
distribution center
Milan, Italy -- 53,000 Ballast manufacturing
Nashville, Tennessee 2005 60,000 Corporate headquarters
New Berlin, Wisconsin 2008 122,400 Drives and systems
manufacturing
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- -------------
<S> <C> <C> <C>
Owosso, Michigan -- 198,000 Motor manufacturing
Ripley, Tennessee -- 84,000 Motor manufacturing
St. Louis, Missouri 2000 plus option 51,000 Administration,
to 2005 marketing and
accounting personnel
Terranuova Bracciolini, -- 149,000 Power supply
Italy manufacturing
</TABLE>
The Company believes its facilities are in satisfactory condition
and are adequate for its present operations.
ITEM 3. LEGAL PROCEEDINGS.
PENSION MATTERS. Primarily in 1985, the Company entered into
agreements with Executive Life Insurance Company ("ELIC") under which ELIC
assumed accrued pension obligations under certain defined benefit retirement
plans (collectively, the "Plan") pursuant to an annuity purchase agreement. The
Plan paid approximately $25.3 million to ELIC under these agreements. In April
1991, the California Insurance Commissioner (the "Commissioner") was named
conservator of ELIC and the Los Angeles Superior Court issued orders providing
that ELIC would pay 70% of the monthly payments due to the Company's retirees
under the ELIC annuity contract.
Under the terms of a plan of rehabilitation, which includes an
enhancement agreement between the Commissioner and the National Organization of
Life and Health Guaranty Associations ("NOLHGA") to augment the benefits paid to
ELIC policyholders, individual annuitants with account values up to $100,000
will receive 100% of their benefits, resulting in the payment by the
rehabilitated ELIC and NOLHGA of substantially all of the required payments to
the Company's employees who are covered under the ELIC annuities. The
rehabilitation plan provides for reimbursement from the rehabilitated ELIC and
from NOLHGA to the Company of shortfall payments the Company had been providing
from April 1991 to September 1993. The Company received reimbursement for a
portion of such shortfall payments during fiscal year 1995, and has reflected
the reimbursement of the remainder of such shortfall payments in other assets in
its consolidated financial statements.
Effective on July 22, 1992, the Company entered into agreements
settling all claims with respect to two complaints filed by the Department of
Labor and by a labor union against various defendants including the Company.
The settlement agreements required the Company, among other things, to provide
back-up insurance coverage in the form of an annuity purchased from an approved
insurance company equal to 30% of the obligation to existing retirees. The
Company also agreed to purchase additional coverage in the event payments from
third parties to annuitants fall below 70% of the required amount. If annuity
benefits under the back-up annuity are not needed to provide full benefit
payments to covered annuitants, the proceeds will be remitted to the Company on
an annual basis. On July 31, 1992, the Company purchased such an annuity from
8
<PAGE>
Metropolitan Life Insurance Company for approximately $9.8 million. Such
annuity will only be used for retiree benefits in the event the combined
payments by the rehabilitated ELIC and NOLHGA fall below 100% of the required
benefits.
The Company does not expect that the above transactions will have
a material effect on the Company. However, should ELIC (or its successor)
and/or NOLHGA fail to make required annuity payments in the future, such
transactions could have a material adverse effect upon the Company.
OTHER LITIGATION. Four substantially identical actions were filed
in 1993 against the Company and certain of its directors and officers. The four
actions were subsequently consolidated in a single amended complaint. The suit
purported to be a class action on behalf of purchasers of the Company's common
stock from October 22, 1992 through August 6, 1993. The complaint asserted
claims under the federal securities laws, and alleged that the Company
artificially inflated the price of its common stock during the class period by
failing to disclose adverse developments in the Company's business. The
complaint did not specify the amount of damages sought. In July 1994, counsel
for the Company defendants and the plaintiffs reached an agreement in principle
to settle the litigation. The Court in April 1995 granted final approval of the
settlement and dismissed the plaintiffs' claims with prejudice. The
Consolidated Statement of Income for the year ended June 30, 1994 reflected a
pretax charge of $2.65 million representing costs to the Company including legal
fees associated with the settlement.
The Company was one of numerous defendants in a suit filed in 1993
by multiple plaintiffs claiming damages for personal injuries allegedly
resulting from exposure to emissions allegedly generated by the defendants'
manufacturing facilities in or near Brownsville, Texas. The plaintiffs did not
specify the damages sought nor the particular emissions they contended
implicated the Company. The Company settled the case with the plaintiffs in
June 1995. The Consolidated Statement of Income for the year ended June 30,
1995 reflects a pretax charge of $1 million representing costs to the Company
including legal fees associated with the settlement.
The Company is a party to a number of product liability lawsuits,
many of which involve fires allegedly caused by defective ballasts. All of
these cases are being defended by the Company's insurers, and management
believes that its insurers will bear all legal costs and liability, except for
applicable deductibles, and that none of these proceedings individually or in
the aggregate will have a material adverse effect on the Company. In addition,
the Company is frequently named in asbestos-related lawsuits which do not
involve material amounts individually or in the aggregate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the stockholders of the Company
during the quarter ended July 2, 1995.
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The following table sets forth the high and low sales prices of
the Company's Common Stock during each quarter of fiscal 1994 and 1995:
<TABLE>
<CAPTION>
QUARTER ENDING HIGH LOW
-------------------------------------------------
<S> <C> <C>
September 30, 1994 14-7/8 12-5/8
December 31, 1994 15-1/8 12-3/8
March 31, 1995 14-7/8 12-5/8
June 30, 1995 16-1/2 12-3/8
September 30, 1993 19-3/8 12-1/2
December 31, 1993 15-1/2 12-1/4
March 31, 1994 16-3/4 13-1/8
June 30, 1994 15-1/8 13-1/8
</TABLE>
The Company's Common Stock is traded on the New York Stock
Exchange under the ticker symbol "MAG." As of the date of this Annual Report,
there were approximately 360 record holders of its Common Stock. No cash
dividends have been paid on the Common Stock.
The Company has not paid any cash dividends on its Common Stock
and does not anticipate paying cash dividends in the near future. The ability
of the Company to pay dividends on its Common Stock is restricted by provisions
in the Company's loan agreements. Under the Company's 1995 bank loan agreement,
the Company may not declare or pay any dividend or make any distribution with
respect to its capital stock (i) unless no event of default exists or would
result from such declaration and payment, and (ii) the ratio of the Company and
certain subsidiary's Funded Debt to Capitalization (as such terms are defined in
the bank loan agreement) is not more than 0.55 to 1.00. Under the Indenture
relating to the Company's 10-3/4% Senior Subordinated Debentures due 1998, the
Company may not declare or pay any dividend or make any distribution with
respect to its Common Stock (other than through the issuance of Qualified
Capital Stock (as defined in the 10-3/4% Indenture and which includes Common
Stock)), unless after giving effect to such dividend or distribution, (i) the
Company is in compliance with the covenants contained in the 10-3/4% Indenture
and (ii) the aggregate amount of all Restricted Payments (as defined in the 10-
3/4% Indenture) declared or made after September 30, 1991 would not exceed
(a) 50% of the aggregate Consolidated Net Income (as defined in the 10-3/4%
Indenture) of the Company subsequent to September 30, 1991 minus 100% of the
amount of any write-downs, write-offs, other negative revaluations and other
negative extraordinary charges not otherwise reflected in such Consolidated Net
Income, plus (b) the aggregate Net Proceeds (as defined in the 10-3/4%
Indenture) to the Company from the sale of Qualified Capital Stock subsequent to
September 30, 1991 (excluding any such Net Proceeds from the sale of Qualified
Capital Stock by a Company subsidiary and excluding Qualified Capital Stock paid
as a dividend on, or issued upon or in exchange for other Capital Stock (as
defined in the 10-3/4% Indenture) or as a payment of interest on indebtedness of
the Company), plus (c) $25 million.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by Part II, items 5, 6, 7 and 8, except
for information regarding the Company's dividend policy and related matters,
which is provided in response to Item 5, above, is hereby incorporated by
reference to the Financial Statements and the Report of Ernst & Young LLP,
Independent Auditors of the Company's 1995 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
current executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Andrew G. Galef 62 Chairman of the Board of Directors and
Chief Executive Officer
Antonio Canova 53 Executive Vice President
Brian R. Dundon 49 Executive Vice President
Ronald W. Mathewson 58 Executive Vice President
David P. Reiland 41 Executive Vice President and
Chief Financial Officer
Alexander Levran, Ph.D. 45 Senior Vice President, Technology
John E. Steiner 51 Senior Vice President, Strategic
Planning and Business Development
John P. Colling, Jr. 39 Vice President and Treasurer
Thomas R. Kmak 45 Vice President and Controller
Samuel A. Miley 38 Vice President, General Counsel and
Secretary
Robert W. Murray 56 Vice President, Communications and
Investor Relations
Dennis L. Hatfield 47 Assistant Vice President, Facilities
and Environmental Affairs
</TABLE>
Mr. Galef has been the Chairman of the Board of Directors since
July 1984 and Chief Executive Officer of the Company since September 1993. He
also is the Chairman of the Nominating Committee. He has been President of The
Spectrum Group, Inc. ("Spectrum"), a private investment and management firm,
since its incorporation in California in 1978 and Chairman and Chief Executive
Officer since 1987. Prior to the formation of Spectrum, Mr. Galef was engaged
in providing professional interim management services to companies with serious
operating and financial problems. Mr. Galef is presently a director of Warnaco,
Inc., a diversified apparel manufacturer, and its parent, The Warnaco Group,
Inc., and was formerly Chairman of Aviall, Inc., a company providing aircraft
engine refurbishment and related products and services, and Exide Corporation, a
manufacturer of automotive and industrial batteries. Mr. Galef was the Chairman
of Gran Tree Corporation when, during the 1990 fiscal year, it filed a voluntary
petition for reorganization under Federal bankruptcy law. Mr. Galef also serves
as chairman or a director of other privately held companies.
12
<PAGE>
Mr. Canova has been Executive Vice President of the Company since
October 1993 and serves as president of MagneTek's Power Electronics Group. He
has served as managing director of MagneTek S.p.A. in Italy since March 1991.
He held the same position with Plessey S.p.A. from 1988 until March 1991 when
Plessey S.p.A. was acquired by the Company. From 1969 to 1988, Mr. Canova
served as general manager of Plessey S.p.A.
Mr. Dundon serves as president of MagneTek's Motors and Controls
Group. He has been Executive Vice President since July 1993 and served as
Executive Vice President of the Company's Motors and Controls business from
November 1986 when Century Electric, Inc. was acquired by the Company until July
1993. Prior to the acquisition Mr. Dundon had been with Century Electric since
1971, serving in various capacities.
Mr. Mathewson, who serves as president of MagneTek's Lighting
Products Group, joined the Company in June 1994 as Executive Vice President.
For more than five years prior to joining the Company, Mr. Mathewson served in
various executive officer positions with Manville Corporation, a diversified
holding company, and its subsidiary Schuller International, a fiberglass
manufacturing company. Prior to that Mr. Mathewson was with General Electric
for twenty-seven years, including six years in general management positions in
its lamp business.
Mr. Reiland has been Executive Vice President since July 1993 and
Chief Financial Officer of the Company since July 1988. Mr. Reiland was also a
Senior Vice President of the Company from July 1989 until July 1993. He was
Controller of the Company from August 1986 to October 1993, and was Vice
President, Finance from July 1987 to July 1989. Prior to joining the Company,
Mr. Reiland was an Audit Manager with Arthur Andersen & Co. where he served in
various capacities since 1980.
Dr. Levran joined the Company in July 1993 as Vice President,
Technology. From 1991 to June 1993, Dr. Levran was employed by EPE
Technologies, Inc., a subsidiary of Groupe Schneider, as Vice President of
Engineering and Technology with worldwide engineering responsibilities. From
1981 to 1991, he held various engineering management positions with Teledyne
Inet, a subsidiary of Teledyne, Inc., most recently as Vice President of
Engineering. Dr. Levran received his Ph.D. in electrical engineering from the
Polytechnic Institute of New York in 1981.
Mr. Steiner joined the Company in September 1987 and since July
1994 has been the Vice President, Strategic Planning and Business Development.
He has also served as vice president of the Company's Drives and Magnetics
business since November 1993, as vice president and general manager of the
Company's Drive Systems business from October 1990 to November 1993 and as vice
president, marketing of the Company's Systems and Technology business from
September 1987 to October 1990. Prior to joining the Company in 1987,
Mr. Steiner had been with Westinghouse Electric Corporation, an electrical
products manufacturing company, where he served in various capacities since
1967.
Mr. Colling has been Vice President of the Company since July
1990, Treasurer of the Company since June 1989 and was assistant treasurer of
the Company from July 1987 to June 1989. Prior to that, Mr. Colling was the
assistant treasurer of Century Electric, where he served in various capacities
since August 1981.
13
<PAGE>
Mr. Kmak has been Vice President of the Company since October
1993, Controller since November 1994 and Operations Controller from October 1993
to November 1994. Mr. Kmak was the vice president, finance of the Company's
Motors and Controls business from November 1986 when Century Electric was
acquired by the Company until July 1992 and served as vice president,
operational finance of the Company's Motors and Controls business from July 1992
until October 1993. Prior to the acquisition Mr. Kmak had been with Century
Electric since 1976, serving in various capacities.
Mr. Miley joined the Company in February 1990 as Vice President,
General Counsel and Secretary. Prior to that time, he was an attorney with the
law firms of Sheppard, Mullin, Richter & Hampton in Los Angeles, California
(March 1986 to January 1990) and Sidley & Austin in Chicago, Illinois (May 1982
to March 1986).
Mr. Murray joined the Company in April 1987 and currently serves
as the Vice President, Communications and Investor Relations. From 1976 until
April 1987 he held various positions with Whittaker Corporation, a diversified
aerospace manufacturing company, most recently as Vice President, Corporate
Communications.
Mr. Hatfield joined the Company in August 1992 as Assistant Vice
President, Facilities and Environmental Affairs. Prior to that he was a
principal in the industrial environmental consulting firms of Patterson Schafer,
Inc. (February 1989 to December 1990) and Schafer Environmental Associates, Inc.
(March 1991 to July 1992). From July 1985 to February 1989, Mr. Hatfield served
as Director of Environmental Affairs of the Specialty Chemicals Group at Morton
Thiokol, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Part III, Items 10, 11, 12 and 13,
is hereby incorporated by reference to the Company's definitive Proxy Statement
to be mailed to Stockholders in September 1995, except for information regarding
the Executive Officers of the Company, which is provided in response to Item 10,
above.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Index to Consolidated Financial Statements, Consolidated
Financial Statement Schedules and Exhibits:
Annual
Report To
Form 10-K Stockholders
Page Page
--------- ---------------
1. Consolidated Financial Statements
Consolidated Statements of Income 19
for Years Ended June 30, 1995, 1994
and 1993
Consolidated Balance Sheets at June 20
30, 1995 and 1994
Consolidated Statements of 22
Stockholders' Equity for Years
ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash 23
Flows for Years Ended June 30,
1995, 1994 and 1993
Notes to Consolidated Financial 24
Statements
Report of Ernst & Young LLP, 40
Independent Auditors
2. Consolidated Financial Statement
Schedules
Report of Ernst & Young, LLP, S-1
Independent Auditors
II -- Valuation and Qualifying S-2
Accounts
All other schedules have been omitted since the required information
is not present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
Consolidated Financial Statements and related notes.
3. Exhibit Index E-1 - E-6
15
<PAGE>
The following exhibits are filed as part of this Annual Report
Form 10-K, or are incorporated herein by reference. Where an exhibit is
incorporated by reference, the number which precedes the description of the
exhibit indicates the documents to which the cross-reference is made.
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
------- ----------------------
3.1 (1) Restated Certificate of Incorporation of the Company, as
filed with the Delaware Secretary of State on November 21,
1989.
3.2 (2) By-laws of the Company, as amended and restated.
4.1 (3) Indenture between MagneTek, Inc. and The Bank of New York,
as Trustee, dated as of September 15, 1991 for $75,000,000
in principal amount of 8% Convertible Subordinated Notes due
2001 including form of Note.
4.2 (4) Form of Indenture between MagneTek, Inc. and Union Bank, as
Trustee, dated as of November 15, 1991 for $125,000,000
Senior Subordinated Debentures Due 1998 including form of
Debenture.
4.3 (5) Specimen Common Stock Certificate.
4.4 (6) Form of Indemnification and Release Agreements entered into
between the Company, MagTek Partners and Champlain
Associates as of January 30, 1991.
10.1 (7) Registration Rights Agreement dated as of April 29, 1991
among the Company, Andrew G. Galef, Frank Perna, Jr. and the
other entities named therein.
10.2 (8) Executive Management Agreement dated as of July 1, 1994, by
and between the Company and The Spectrum Group, Inc.
10.3 (9) Lease on Mendenhall, Mississippi facility of Universal
Manufacturing.
10.4 (9) Lease on Gallman, Mississippi facility of Universal
Manufacturing.
10.5 (9) Lease on Bridgeport, Connecticut facility of Universal
Manufacturing.
10.6 (10) Lease on McMinnville, Tennessee facility of Century
Electric.
10.7 (11) Security Agreement dated March 1, 1993 between the
Industrial Development Board of the City of Huntsville (the
"Huntsville IDB") and the Company ("Huntsville Security
Agreement").
10.8 (11) Equipment Lease Agreement of even date with the Huntsville
Security Agreement among the parties thereto.
10.9 (9) Environmental Agreement among the Company, Universal
Manufacturing Corporation and Farley Northwest Industries,
Inc., as amended.
16
<PAGE>
10.10 (9) Letter Agreement dated as of January 9, 1986, between the
Company and Farley Northwest Industries, Inc., pursuant to
Stock Purchase Agreement.
10.11 (9) Tax Agreement dated as of February 12, 1986, between the
Company and Farley Northwest Industries, Inc.
10.12 (9) Agreement dated as of January 9, 1986, between the Company
and Farley/Northwest Industries, Inc. relating to the Totowa
facility.
10.13 (12) 1987 Stock Option Plan of MagneTek, Inc. ("1987 Plan").
10.14 (7) Amendments No. 1 and 2 to 1987 Plan.
10.15 (13) Amendments No. 3 and 4 to 1987 Plan.
10.16 (14) Second Amended and Restated 1989 Incentive Stock
Compensation Plan of MagneTek, Inc.
10.17 (15) Standard Terms and Conditions Relating to Non-Qualified
Stock Options, revised as of October 23, 1991, pertaining to
the 1987 Plan and the 1989 Plan.
10.18 (12) Senior Executive Medical Expense Reimbursement Plan for the
Company.
10.19 (16) Stock Purchase Agreement dated as of January 9, 1986,
between the Company and Farley/Northwest Industries, Inc.,
with list of omitted exhibits and schedules.
10.20 (16) Stock Purchase Agreement dated as of June 20, 1986, between
the Company and Better Coil and Transformer Corporation,
with list of omitted exhibits.
10.21 (17) Purchase Agreement dated as of October 22, 1986, by and
among the Company, Century and certain Securityholders.
10.22 (18) Purchase Agreement dated as of December 15, 1986, between
the Company and all the remaining Securityholders of
Century.
10.23 (18) Asset Purchase Agreement dated as of December 30, 1986,
between the Company and Universal Electric.
10.24 (18) Agreement for the Sale of Stock dated as of December 30,
1986, between the Company and Cooper.
10.25 (19) Lease of St. Louis, Missouri administration, marketing and
engineering personnel facility dated January 1, 1988.
10.26 (19) Lease of Matamoros, Mexico fluorescent ballast manufacturing
facility dated January 1, 1988.
17
<PAGE>
10.27 (20) Lease and Agreement between the City of Blytheville,
Arkansas and the Company, dated as of November 1, 1988.
10.28 (7) First Supplemental Lease and Agreement between City of
Blytheville, Arkansas and the Company dated as of
December 1, 1989, for the Blytheville, Arkansas facility.
10.29 (21) Lease of facility in New Berlin, Wisconsin.
10.30 (7) Third Modification of Lease dated as of December 31, 1990,
for the New Berlin, Wisconsin facility.
10.31 (22) Fourth Modification of Lease dated as of February 12, 1993
for the New Berlin, Wisconsin facility.
10.32 (23) Amendment to Equipment Lease Agreement dated as of August 1,
1993 between The Industrial Development Board of the City of
Huntsville (the "Huntsville IDB") and the Company.
10.33 (23) First Supplemental Security Agreement dated as of August 1,
1993 by and between the Huntsville IDB and The CIT
Group/Equipment Financing, Inc. ("CIT").
10.34 (23) Second Amendment to Equipment Lease Agreement dated as of
October 1, 1993 between the Huntsville IDB and the Company.
10.35 (23) Second Supplemental Security Agreement dated as of
October 1, 1993 by and between the Huntsville IDB and CIT.
10.36 (2) Lease on Nashville, Tennessee headquarters facility dated
as of June 30, 1995.
10.37 (22) First Amendment dated August 28, 1991 and Second Amendment
dated February 5, 1993 to Lease on Lavergne, Tennessee
facility.
10.38 (7) 1991 Director Incentive Compensation Plan of the Company.
10.39 (8) First Amendment to the 1991 Director Incentive Compensation
Plan of the Company.
10.40 (13) 1991 Discretionary Director Incentive Compensation Plan of
the Company.
10.41 (24) Lease Agreement dated as of November 1, 1988 between the
Huntsville IDB and Burnett-Nickelson Investments ("Lease
Agreement") as to which the Registrant succeeded to the
lessee's obligations.
10.42 (25) First, Second and Third Amendments to Lease Agreement.
10.43 (22) Fourth Amendment to Lease Agreement.
18
<PAGE>
10.44 (25) Indenture dated as of November 1, 1988 relating to First
Mortgage Industrial Revenue Bonds (Burnett-Nickelson Project
Series 1988) between Huntsville IDB and First Alabama Bank,
as Trustee, relating to the Huntsville facility (the
"Indenture").
10.45 (25) First, Second and Third Supplemental Indentures to the
Indenture.
10.46 (22) Fourth Supplemental Indenture to the Indenture.
10.47 (25) Bond Guaranty Agreement between MagneTek, Inc., as Guarantor
and First Alabama Bank dated as of February 1, 1993 relating
to the Lease Agreement.
10.48 (22) Restricted Stock Agreement pursuant to 1989 Plan entered
into between Ronald W. Mathewson and the Company as of July
27, 1994.
10.49 (26) Lease of Lavergne, Tennessee facility.
10.50 (27) Severance and General Release Agreement dated as of
April 21, 1995 by and between the Company and C. Ore Davis.
10.51 (27) Credit Agreement dated as of March 31, 1995 between the
Company, Lenders, NationsBank of Texas, N.A., CIBC Inc., The
First National Bank of Chicago and LTCB Trust Company.
10.52 (27) Amendment dated as of January 25, 1995 to the Executive
Management Agreement between the Company and The Spectrum
Group, Inc.
10.53 (2) Asset Purchase Agreement dated as of May 27, 1994, between
the Company and The Louis Allis Company.
10.54 (2) Asset Purchase Agreement dated as of June 17, 1994, among
the Company, MagneTek Controls, Inc. and Controls
Acquisition Corporation.
10.55 (2) Asset Purchase Agreement dated as of October 31, 1994, among
the Company, MagneTek National Electric Coil, Inc. and Rail
Products International, Inc.
10.56 (2) Asset Purchase Agreement dated as of November 8, 1994,
between the Company and MAS Acquiring Corp.
10.57 (2) Purchase and Sale Agreement dated November 18, 1994, by and
among the Company, MagneTek Tempe, Inc., MagneTek
Deutschland Holding GmbH and PTS, Inc.
10.58 (2) Asset Purchase Agreement dated as of March 6, 1995, by and
between the Company and GN Acquisition Partners, L.P.
10.59 (2) Asset Purchase Agreement dated as of March 13, 1995, among
the Company, MagneTek National Electric Coil, Inc. and 800
King Avenue Acquisition Corp.
10.60 (2) Asset Purchase Agreement dated as of May 31, 1995, between
MagneTek National Electric Coil, Inc. and The Guardian
Resin Corporation.
19
<PAGE>
10.61 (2) Agreement of Sale dated as of June 23, 1995, between General
Signal Corporation and the Company.
10.62 (2) Asset and Stock Purchase Agreement dated as of September 14,
1995, among the Company, MagneTek National Electric Coil,
Inc. and National Electric Coil Company, L.P.
13 (2) 1995 Annual Report to Stockholders (pp. 15-40).
21 (2) Subsidiaries of the Company.
23 (2) Consent of Ernst & Young LLP, Independent Auditors.
27 (2) Financial Data Schedule.
___________________
(1) Previously filed with the Registration Statement on Form S-3 filed
on August 1, 1991, Commission File No. 33-41854.
(2) Filed herewith.
(3) Previously filed with Form 10-Q for quarter ended September 30,
1991.
(4) Previously filed with Amendment No. 1 to Registration Statement
filed on November 8, 1991, Commission File NO. 43-43856.
(5) Previously filed with Amendment No. 1 to Registration Statement
filed on May 10, 1989.
(6) Previously filed with Form 8-K dated January 30, 1991.
(7) Previously filed with Form 10-K for Fiscal Year ended June 30, 1991.
(8) Previously filed with Form 10-Q for quarter ended March 31, 1994.
(9) Previously filed with Amendment No. 1 to Registration Statement
filed on February 14, 1986.
(10) Previously filed with Post-Effective Amendment No. 1 to Registration
Statement, filed on August 3, 1987.
(11) Previously filed with Form 10-Q for quarter ended March 31, 1993.
(12) Previously filed with Form 10-K for Fiscal Year ended June 30, 1987.
(13) Previously filed with Form 10-K for Fiscal Year ended June 30, 1992.
(14) Previously filed with Form 10-Q for quarter ended December 31, 1994.
(15) Previously filed with Form 10-Q for quarter ended December 31, 1991.
(16) Previously filed with Form 10-K for Fiscal Year ended June 30, 1986.
20
<PAGE>
(17) Previously filed with Form 10-Q for quarter ended September 30,
1986.
(18) Previously filed with Form 8-K dated December 30, 1986.
(19) Previously filed with Form 10-K for Fiscal Year ended July 3, 1988.
(20) Previously filed with the Registration Statement filed on
April 18, 1989.
(21) Previously filed with the Registration Statement filed on May 3,
1985.
(22) Previously filed with Form 10-K for Fiscal Year ended July 3, 1994.
(23) Previously filed with Form 10-Q for quarter ended September 30,
1993.
(24) Previously filed with Form 8-K dated January 5, 1990.
(25) Previously filed with Form 10-K for fiscal year ended June 27, 1993.
(26) Previously filed with Form 10-K for Fiscal Year ended July 2, 1989.
(27) Previously filed with Form 10-Q for quarter ended March 31, 1995.
(b) Reports on Form 8-K:
The Company filed no Reports on Form 8-K during the last
quarter of the 1995 fiscal year.
(c) Refer to (a) 3 above.
(d) Refer to (a) 2 above.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the
City of Nashville, State of Tennessee, on the 26th day of September, 1995.
MagneTek, Inc.
(Registrant)
/S/ ANDREW G.GALEF
--------------------------------------------
Andrew G. Galef
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ANDREW G. GALEF Chairman of the Board, September 26, 1996
- ------------------------------ Chief Executive Officer
Andrew G. Galef and Director (Principal
Executive Officer)
/s/ DAVID P. REILAND Chief Financial Officer September 26, 1996
- ------------------------------ (Principal Financial
David P. Reiland Officer)
/s/ THOMAS R. KMAK Vice President and September 26, 1996
- ------------------------------ Controller (Principal
Thomas R. Kmak Accounting Officer)
/s/ DEWAIN K. CROSS Director September 26, 1996
- ------------------------------
Dewain K. Cross
/s/ PAUL J. KOFMEHL Director September 26, 1996
- ------------------------------
Paul J. Kofmehl
/s/ A. CARL KOTCHIAN Director September 26, 1996
- ------------------------------
A. Carl Kotchian
/s/ CROCKER NEVIN Director September 26, 1996
- ------------------------------
Crocker Nevin
/s/ KENNETH A. RUCK Director September 26, 1996
- ------------------------------
Kenneth A. Ruck
/s/ MARGUERITE W. SALLEE Director September 26, 1996
- ------------------------------
Marguerite W. Sallee
22
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated finanacial statements of MagneTek, Inc. as of
June 30, 1995 and 1994, and for each of the three years in the period ended June
30, 1995, and have issued our report thereon dated August 14, 1995 (incorporated
by reference elsewhere in this Annual Report on Form 10-K). Our audits also
included the financial statement schedule listed in Item 14(a) of this Annual
Report on Form 10-K. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
St. Louis, Missouri ERNST & YOUNG LLP
August 14, 1995
S-1
<PAGE>
<TABLE>
<CAPTION>
Schedule II
MAGNETEK INC.
VALUATION AND QUALIFYING ACCOUNTS
Years ended June 30, 1993, 1994 and 1995
(amounts in thousands)
Balance at Additions Deductions Balance
beginning charged to from at end
June 30, 1993 of year earnings Allowance Other(a) of year
------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful
receivables $3,963 $3,070 $(3,294) $247 $3,986
June 30, 1994
-------------
Allowance for
doubtful
receivables $3,986 $2,878 $(2,980) $861 $4,745
June 30, 1995
-------------
Allowance for
doubtful
receivables $4,745 $4,099 $(4,249) $(174) $4,421
<FN>
(a) Represents primarily opening allowances for doubtful accounts balances of
acquired companies and Foreign Translation Adjustments.
</TABLE>
S-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>2
<DESCRIPTION>EXHIBIT 3.2
<TEXT>
<PAGE>
BY-LAWS
OF
MAGNETEK, INC.
<PAGE>
BY-LAWS
OF
MAGNETEK, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I - OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1 Registered Office. . . . . . . . . . . . . . . . . . . . 1
Section 2 Other Offices. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . 1
Section 1 Place of Meetings . . . . . . . . . . . . . . . . . . . 1
Section 2 Annual Meeting of Stockholders. . . . . . . . . . . . . 1
Section 3 Quorum; Adjourned Meetings and
Notice Thereof . . . . . . . . . . . . . . 2
Section 4 Voting. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5 Proxies . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 6 Special Meetings. . . . . . . . . . . . . . . . . . . . 3
Section 7 Notice of Stockholders' Meetings. . . . . . . . . . . . 4
Section 8 Maintenance and Inspection
of Stockholder List. . . . . . . . . . . . 4
Section 9 Stockholder Action by Written
Consent Without a Meeting. . . . . . . . . 5
Section 10 Advance Notice of Stockholder
Proposals and Stockholder
Nominations. . . . . . . . . . . . . . . . 6
ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1 Number and Qualification of Directors . . . . . . . . . 10
Section 2 Vacancies . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3 Powers. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4 Place of Directors' Meetings. . . . . . . . . . . . . . 12
Section 5 Regular Meetings. . . . . . . . . . . . . . . . . . . . 12
Section 6 Special Meetings. . . . . . . . . . . . . . . . . . . . 12
Section 7 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . 13
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Section 8 Action Without Meeting. . . . . . . . . . . . . . . . . 13
Section 9 Telephonic Meetings . . . . . . . . . . . . . . . . . . 14
Section 10 Committees of Directors . . . . . . . . . . . . . . . . 14
Section 11 Minutes of Committee Meetings . . . . . . . . . . . . . 15
Section 12 Compensation of Directors . . . . . . . . . . . . . . . 15
Section 13 Indemnification . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV - OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 1 Officers. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2 Election of Officers. . . . . . . . . . . . . . . . . . 21
Section 3 Subordinate Officers. . . . . . . . . . . . . . . . . . 22
Section 4 Compensation of Officers. . . . . . . . . . . . . . . . 22
Section 5 Term of Office; Removal
and Vacancies. . . . . . . . . . . . . . . 22
Section 6 Chairman of the Board . . . . . . . . . . . . . . . . . 22
Section 7 President . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8 Vice President. . . . . . . . . . . . . . . . . . . . . 23
Section 9 Secretary . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10 Assistant Secretaries . . . . . . . . . . . . . . . . . 24
Section 11 Treasurer . . . . . . . . . . . . . . . . . . . . . . . 25
Section 12 Assistant Treasurer . . . . . . . . . . . . . . . . . . 25
Section 13 Vacancy of President's Office . . . . . . . . . . . . . 26
ARTICLE V - CERTIFICATES OF STOCK. . . . . . . . . . . . . . . . . . . . 26
Section 1 Certificates. . . . . . . . . . . . . . . . . . . . . . 26
Section 2 Signatures on Certificates. . . . . . . . . . . . . . . 26
Section 3 Statement of Stock Rights,
Preferences and Privileges . . . . . . . . 27
Section 4 Lost Certificates . . . . . . . . . . . . . . . . . . . 28
Section 5 Transfers of Stock. . . . . . . . . . . . . . . . . . . 28
Section 6 Fixing Record Date. . . . . . . . . . . . . . . . . . . 29
Section 7 Registered Stockholders . . . . . . . . . . . . . . . . 29
ARTICLE VI - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . 30
Section 1 Dividends . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2 Payment of Dividends; Directors'
Duties . . . . . . . . . . . . . . . . . . 30
Section 3 Checks. . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 30
Section 5 Corporate Seal. . . . . . . . . . . . . . . . . . . . . 31
Section 6 Manner of Giving Notice . . . . . . . . . . . . . . . . 31
Section 7 Waiver of Notice. . . . . . . . . . . . . . . . . . . . 33
Section 8 Annual Statement. . . . . . . . . . . . . . . . . . . . 33
Section 9 Exemption from Section 203,
Delaware G.C.L . . . . . . . . . . . . . . 34
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ARTICLE VII - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 1 Amendments by Directors
or Stockholders. . . . . . . . . . . . . . 33
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BY-LAWS
OF
MAGNETEK, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the City
of Dover, County of Kent, State of Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall be held at
any place within or outside the State of Delaware designated by the Board of
Directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING STOCKHOLDERS. The annual meeting of
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting
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directors shall be elected and any other proper business may be transacted.
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A majority of
the stock issued and outstanding and entitled to vote at any meeting of
stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these By-
Laws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum and the votes present may continue to
transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
voting stock represented in person or by proxy may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote thereat.
Section 4. VOTING. When a quorum is present at any meeting, the vote of
the holders of majority of the stock having
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voting power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the statutes, or the Certificate of Incorporation, or these By-
Laws, a different vote is required in which case such express provision shall
govern and control the decision of such question.
Section 5. PROXIES. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof. All elections shall be had and all
questions decided by a plurality vote.
Section 6 SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or the Secretary at the request in writing of a majority of the
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Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which notice shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. The written notice of any meeting shall be given
to each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
Section 8 MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST. The officer who
has charge of the stock ledger of the corporation shall prepare and make, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares
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registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise provided in the Certificate of Incorporation, any action
required to be taken at any annual or special meeting of stockholders of the
corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken and bearing the dates of signature of the stockholders who signed the
consent or consents, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be delivered to the corporation by delivery to
its registered office in the state of Delaware, or the corporation's principal
place of
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business, or an officer or agent of the corporation having custody of the book
or books in which proceedings of meetings of the stockholders are recorded.
Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. All consents properly
delivered in accordance with this section shall be deemed to be recorded when so
delivered. No written consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the earliest dated consent
delivered to the corporation as required by this section, written consents
signed by the holders of a sufficient number of shares to take such corporate
action are so recorded. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Any action taken pursuant to
such written consent or consents of the stockholders shall have the same force
and effect as if taken by the stockholders at a meeting thereof.
Section 10. ADVANCE NOTICE OF STOCKHOLDER PROPOSALS AND STOCKHOLDER
NOMINATIONS. (a) At any meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who complies with the notice procedures set forth in this Section
10(a). Only such business shall be conducted at a special
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meeting of stockholders as shall have been brought before the meeting pursuant
to the corporation's notice of meeting, as provided by Section 6 of this Article
II. Nominations of persons for election to the Board of Directors may be made
at a special meeting of stockholders at which directors are to be elected
pursuant to the corporation's notice of meeting, in accordance with clause (b)
of this Section 10. For business to be properly brought before any annual
meeting of the stockholders by a stockholder, it must be a proper matter for
stockholder action and the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation. For such notice to be timely in
respect of an annual meeting, it must be delivered to the Secretary at the
principal executive office of the corporation not later than the close of
business on the 120th day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such anniversary
date, notice by the stockholder to be timely must be so delivered not later than
the close of business on the 120th day prior to such annual meeting or, if
later, the close of business on the 10th day following the date on which public
announcement of the date of such meeting is first made by the corporation. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (1) a brief description of the
business desired to be brought before the meeting and the reasons for
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conducting such business at the meeting, (2) the name and address, as they
appear on the corporation's books, of the stockholder proposing such business,
(3) the class and number of shares of the corporation that are beneficially
owned by the stockholder, and (4) any material interest of the stockholder in
such business. In addition, the stockholder making such proposal shall promptly
provide any other information reasonably requested by the corporation.
Notwithstanding anything in these By-laws to the contrary, no business shall be
conducted at any meeting of the stockholders except in accordance with the
procedures set forth in this Section 10(a). The Chairman of any such meeting
shall direct that any business not properly brought before the meeting shall not
be considered.
(b) Nominations for the election of directors may be made by the Board of
Directors or a committee thereof, or by any stockholder entitled to vote in the
election of directors; provided, however, that a stockholder may nominate a
person for election as a director at a meeting only if written notice of such
stockholder's intent to make such nomination has been timely given to the
Secretary of the corporation. Such notice shall be timely as to an annual
meeting if it complies with clause (a) of this Section 10, and shall be timely
as to a special meeting if it is received by the Secretary at the principal
executive office of the corporation not later than the close of business on the
120th day prior to the date of the special meeting or, if later,
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<PAGE>
the close of business on the 10th day following the first public announcement of
the date of such meeting. Each such notice shall set forth (1) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated, (2) a representation that the stockholder is a
holder of record of stock of the corporation entitled to vote at such a meeting
and intends to appear in person or by proxy at the meeting and nominate the
person or persons specified in the notice, (3) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder, (4) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the United
States Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, by the Board of Directors, and (5) the consent of each
nominee to serve as a director of the corporation if so elected. In addition,
the stockholder making such nomination shall promptly provide any other
information reasonably requested by the corporation. No person shall be
eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth in this Section 10(b). The Chairman of
any meeting of stockholders shall direct that any nomination not made in
accordance with these procedures be disregarded. For purposes of
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this Section 10, "public announcement" shall mean disclosure in a press release
reported by the Dow Jones New Service, Associated Press or comparable national
news service or in a document publicly filed by the corporation with the
Securities and Exchange Commission.
ARTICLE III
DIRECTORS
Section 1. NUMBER AND QUALIFICATION OF DIRECTORS. The Board of Directors
shall consist of not less than five or more than nine persons and the specific
number of directors shall be as fixed by resolution of the Board of Directors
from time to time. The directors need not be stockholders. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified; provided, however, that unless otherwise
restricted by the Certificate of Incorporation or by law, any director or the
entire Board of Directors may be removed, either with or without cause, from the
Board of Directors at any meeting of stockholders by a majority of the stock
represented and entitled to vote thereat.
Section 2 VACANCIES. Vacancies on the Board of Directors by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created
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directorships may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner displaced.
If there are no directors in office, then an election of directors may be held
in the manner provided by statute. If, at the time of filling any vacancy or
newly created directorship, the directors then in office shall constitute less
than a majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
Section 3 POWERS. The property and business of the corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
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Section 4. PLACE OF DIRECTORS' MEETINGS. The directors may hold their
meetings and have one or more offices, and keep the books of the corporation
outside of the State of Delaware.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board.
Section 6. SPECIAL MEETINGS. (a) Special meetings of the Board of
Directors (or of any Committee of the Board of Directors) shall be held whenever
called by (i): a majority of the authorized number of Directors, or (ii) the
Chairman of the Board (or, in the case of a special meeting of a Committee of
the Board of Directors, the Chairman of such Committee).
(b) Except as otherwise provided by law or by these By-Laws, written
notice of the time and place of each such special meeting shall be given to each
Director (or, in the case of a special meeting of a Committee of the Board of
Directors, each Director who sits on such Committee): (i) by first class mail,
postage prepaid, addressed to him or her at his or her address as it is shown
upon the records of the corporation, at least five days before the date of such
meeting, or (ii) by personal delivery, telecopy, electronic mail (if the
Director and the corporation are then connected for electronic mail
transmission), or orally in person or by telephone, in each case
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if received by the Director at least twenty-four (24) hours prior to the time of
the holding of the meeting.
Section 7. QUORUM. At all meetings of the Board of Directors a majority
of the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these By-Laws. If a
quorum shall not be present at any meeting of the Board of Directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
If only one director is authorized, such sole director shall constitute a
quorum.
Section 8. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
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Section 9. TELEPHONIC MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such a
meeting.
Section 10. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation,
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and may authorize the seal of the corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the By-Laws of the corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 11. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 12. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the
Certificate of Incorporation or by these By-Laws, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as a director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving
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compensation therefor. Members of special or standing committees may be given
compensation for serving on such committees.
Section 13. INDEMNIFICATION. (a) The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with
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respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no such indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper.
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(c) To the extent that a director, officer, employee or agent of the
corporation shall be successful on the merits or otherwise in defense, of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (a) and (b). Such determination shall be
made (1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding, if authorized by the Board of Directors,
may be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall
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ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Section. Such expenses incurred by other
employees or agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by this
Section 13 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any by-
law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(g) The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Section 13.
19
<PAGE>
(h) For the purposes of this Section 13, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be in
the
20
<PAGE>
interest of the partcipants and beneficiaries of an employee beieft plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation."
ARTICLE IV
OFFICERS
Section 1. OFFICER. The officers of this corporation shall be chosen by
the Board of Directors and shall include a President, a Secretary, and a
Treasurer. The corporation may also have at the discretion of the Board of
Directors such other officers as are desired, including a Chairman of the Board,
one or more Vice Presidents, one or more Assistant Secretaries and Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 hereof. In the event there are two or more Vice
Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person, unless the
Certificate of Incorporation of these By-Laws otherwise provide.
Section 2. ELECTION OF OFFICERS. The Board of Directors, at its first
meeting after each annual meeting of stockholders, shall choose the officers of
the corporation.
21
<PAGE>
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all officers and
agents of the corporation shall be fixed by the Board of Directors.
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of the
corporation shall hold office until their successors are chosen and qualify in
their stead. Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by these
By-Laws. If so designated by the Board of Directors, the chairman of the Board
may in addition be the Chief Executive
22
<PAGE>
Officer of the corporation and have such powers and duties prescribed by the
Board of Directors.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business and
officers of the corporation and, if so designated by the Board of Directors, be
the Chief Executive Officer of the corporation. He shall preside at all
meetings of the stockholders and, in the absence of the Chairman of the Board,
or if there be none, at all meetings of the Board of Directors. He shall be an
ex-officio member of all committees and shall have the general powers and duties
of management usually vested in the office of President and, if so designated,
Chief Executive Officer of the corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or these By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President,
the Vice Presidents in order of their rank as fixed by the Board of Directors,
or if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall have such other duties as
23
<PAGE>
from time to time may be prescribed for them, respectively, by the Board of
Directors.
Section 9. SECRETARY. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. He shall keep
in safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 10. ASSISTANT SECRETARIES. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries in the order determined by the Board
of Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and
24
<PAGE>
have such other powers as the Board of Directors may from time to time
prescribe.
Section 11. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 12. ASSISTANT TREASURER. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, or if there be no
25
<PAGE>
such determination, the Assistant Treasurer designated by the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Section 13. VACANCY OF PRESIDENT'S OFFICE. Wherever an action is
required, by these By-Laws or otherwise, to be taken by the President of the
corporation and such office is vacant, such action may, to the extent permitted
under the General Corporation Law of the State of Delaware, be taken by the
Chairman of the Board or by any Executive Vice President.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. CERTIFICATES. Every holder of stock of the corporation shall
be entitled to have a certificate signed by, or in the name of the corporation
by, the Chairman or Vice Chairman of the Board of Directors, or the President or
a Vice President, and by the Secretary or Assistant Secretary, or the Treasurer
or an Assistant Treasurer of the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.
Section 2. SIGNATURES ON CERTIFICATES. Any or all of the signatures on
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose
26
<PAGE>
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES AND PRIVILEGES. If the
corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the power, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
27
<PAGE>
Section 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. TRANSFERS OF STOCK. Upon surrender to the corporation, or the
transfer agent of the corporation, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation, subject to the terms of the
agreement under which such shares were purchased if the corporation is a party
thereto, to issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
28
<PAGE>
Section 6. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim or interest in such share on the part of any other person, whether or not
it shall have express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
29
<PAGE>
ARTICLE VI
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before payment of any
dividend there may be set aside out of any funds of the corporation available
for dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 3. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
30
<PAGE>
Section 5. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 6. MANNER OF GIVING NOTICE. (a) In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the close of business on the next day preceding the day on
which notice is given, or if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held. A determination of
stockholders or record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing
31
<PAGE>
without a meeting, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by statute, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by statute, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
32
<PAGE>
(c) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment or any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purposes of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall not be more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 7. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the statutes or of the Certificate of Incorporation or
of these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
Section 8. ANNUAL STATEMENT. The Board of Directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
33
<PAGE>
Section 9. EXEMPTION FROM SECTION 203, DELAWARE G.C.L. The corporation
expressly elects not to be governed by Section 203 of the General Corporation
Law of Delaware. This Section of the By-Laws shall not be further amended by
the Board of Directors of the corporation.
ARTICLE VII
AMENDMENTS
Section 1. AMENDMENTS BY DIRECTORS OR STOCKHOLDERS. These By-Laws may be
altered, amended or repealed or new By-Laws may be adopted by the stockholders
or by the Board of Directors, when such power is conferred upon the Board of
Directors by the Certificate of Incorporation, at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal By-Laws is conferred
upon the Board of Directors by the Certificate of Incorporation it shall not
divest or limit the power of the stockholders to adopt, amend or repeal By-Laws.
34
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>3
<DESCRIPTION>EXHIBIT 10.36
<TEXT>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AGREEMENT OF LEASE
between
WILLS CORROON CORPORATION OF TENNESSEE,
as Landlord
and
MAGNETEK, INC.
as Tenant
____________________
Dated as of
June 30, 1995
____________________
Premises:
Fifth and Sixth Floors (North Plaza and atrium bridge area)
Willis Corroon Plaza
26 Century Boulevard
Nashville, Tennessee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INDEX OF DEFINED TERMS
SECTION IN
DEFINITION WHICH DEFINED
- ---------- -------------
Additional Rent ................................................. 4.01
Allotted Kilowatt Hours ......................................... 6.01
Alteration ...................................................... 8.01
Auditorium ...................................................... 7.02
Bankruptcy Code ................................................. 14.01
Base Operating Expenses ......................................... 1.01
Base Rent ....................................................... 1.01, 4.02
Base Taxes ...................................................... 1.01
Broker .......................................................... 1.01
Building ........................................................ 1.01
Building Rentable Area .......................................... 1.01
Building Rules .................................................. 16.01
Building Services ............................................... 5.01
Building Systems ................................................ 8.01
Business Days ................................................... 25.09
Business Hours .................................................. 25.09
Commencement Date ............................................... 2.02
Common Areas .................................................... 2.01
Conference Center ............................................... 7.02
Consent ......................................................... 25.08
Date of this Lease .............................................. 1.01
Electrical Allowance ............................................ 6.01
Environmental Activity .......................................... 10.02
Excess Kilowatt Hours ........................................... 6.01
Expiration Date ................................................. 1.01, 2.02
Facility ........................................................ 7.02
First-Class Office Buildings .................................... 3.01
Food Facility ................................................... 7.02
Food Facility Provider .......................................... 7.02
Force Majeure ................................................... 23.05
Garage .......................................................... 24.01
Gross Rent ...................................................... 4.01
Hazardous Materials ............................................. 10.02
Holidays ........................................................ 25.09
Land ............................................................ 1.01
Landlord ........................................................ Introduction,
23.02
Landlord Services ............................................... 7.01
Landlord's Address for Notices .................................. 4.03
Landlord's Agents ............................................... 9.02
Landlord's Statement ............................................ 5.01
Lease ........................................................... Introduction
Legal Requirements .............................................. 10.01
Monument ........................................................ 16.03
Net Consideration ............................................... 12.02
<PAGE>
SECTION IN
DEFINITION WHICH DEFINED
- ---------- -------------
Net Operating Losses ............................................ 7.02
New Tenant ...................................................... 21.02
Operating Expenses .............................................. 5.01
Ordinary Equipment .............................................. 6.01
Original Tenant ................................................. 16.03
Partnership Tenant .............................................. 23.03
Payment Dates ................................................... 5.03
PCBs ............................................................ 10.02
Premises ........................................................ 1.01
Project ......................................................... 19.01
Punch List Items ................................................ 2.03
Qualified Alteration ............................................ 8.01
Real Estate Taxes ............................................... 5.01
Related Corporation ............................................. 12.01
Rent Commencement Date .......................................... 1.01
Senior Interest Holder .......................................... 13.02
Signage Rules ................................................... 16.02
Signs ........................................................... 16.02
Stipulated Rate ................................................. 4.03
Strip ........................................................... 16.03
Subordinated Mortgage ........................................... 13.01
Successor Landlord .............................................. 13.02
Superior Leases ................................................. 13.01
Superior Lessor ................................................. 13.01
Superior Mortgagee .............................................. 13.01
Superior Mortgages .............................................. 13.01
Tax Protest Request ............................................. 5.03
Tax Year ........................................................ 5.01
Tenant .......................................................... Introduction
Tenant Parties .................................................. 9.02
Tenant Share .................................................... 1.01
Tenant's Basic Cost ............................................. 12.02
Tenant's Estimated Operating Payment ............................ 5.02
Tenant's Operating Payment ...................................... 5.02
Tenant's Property ............................................... 8.02
Tenant's Share .................................................. 5.01
Tenant's Tax Payment ............................................ 5.03
Term ............................................................ 2.02
Termination Notice .............................................. 26.01
Third Party Approvers ........................................... 16.02
Transfer Notice ................................................. 12.02
Transferee ...................................................... 23.02
WCCT ............................................................ 7.02
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 -- BASIC LEASE INFORMATION AND DEFINITIONS ...................... 1
1.01. Basic Lease Information ...................................... 1
1.02 Other Definitions ............................................ 2
ARTICLE 2 -- PREMISES; TERM ............................................... 2
2.01 Demise ....................................................... 2
2.01 Term ......................................................... 3
2.03 Delivery of Premises ......................................... 3
ARTICLE 3 -- USE .......................................................... 3
3.01 Use .......................................................... 3
3.02 Permits ...................................................... 3
ARTICLE 4 -- RENT ......................................................... 3
4.01 Gross Rent ................................................... 3
4.02 Base Rent .................................................... 3
4.03 Manner of Payment ............................................ 4
4.04 Occupancy Tax ................................................ 5
ARTICLE 5 -- ESCALATIONS .................................................. 5
5.03 Tenant's Tax Payment ......................................... 7
5.04 Records ...................................................... 8
5.05 Landlord's Statements ........................................ 8
5.06 Survival ..................................................... 8
ARTICLE 6 -- TENANT ELECTRICITY ........................................... 8
6.01 Tenant Electricity ........................................... 8
6.02 Termination of Service ....................................... 10
6.03 Electric Fixtures ............................................ 11
i
<PAGE>
PAGE
----
ARTICLE 7 -- LANDLORD COVENANTS ........................................... 11
7.01 Standard of Operation, Landlord Services ..................... 11
7.02 Conference Center, Auditorium and Cafeteria .................. 12
7.03 Access ....................................................... 13
7.04 Cleaning ..................................................... 13
7.05 Service Interruption ......................................... 13
ARTICLE 8 -- ALTERATIONS .................................................. 13
8.01 Alterations .................................................. 13
8.02 Tenant's Property ............................................ 14
8.03 Effect of Landlord's Approval ................................ 14
8.04 Survival ..................................................... 14
ARTICLE 9 -- REPAIRS ...................................................... 14
9.01 Repairs by Landlord .......................................... 14
9.02 Repairs by Tenant ............................................ 15
9.03 Changes in Facilities ........................................ 15
9.04 Landlord Access .............................................. 15
ARTICLE 10 -- COMPLIANCE WITH LAWS ........................................ 15
10.01 Compliance with Laws by Tenant ............................... 15
10.02 Environmental ................................................ 16
10.03 Right to Contest ............................................. 16
10.04 Compliance with Laws by Landlord ............................. 17
ARTICLE 11 -- RIGHT TO PERFORM TENANT COVENANTS ........................... 17
11.01 Right to Perform Tenant Covenants ............................ 17
ARTICLE 12 -- ASSIGNMENT AND SUBLETTING ................................... 17
12.01 Assignment; Etc. ............................................. 17
12.02 Assignment and Subletting Procedures ......................... 18
ii
<PAGE>
PAGE
----
12.03 Additional Assignment and Subleasing Conditions .............. 20
ARTICLE 13 -- SUBORDINATION ............................................... 21
13.01 Subordination ................................................ 21
13.02 Attornment ................................................... 22
13.03 Right to Cure ................................................ 22
ARTICLE 14 -- CONDITIONS OF LIMITATION .................................... 23
14.01 Default ...................................................... 23
14.02 Intentional Default .......................................... 24
14.03 Re-entry by Landlord ......................................... 24
14.04 Damages ...................................................... 24
14.05 Right to Injunction .......................................... 25
14.06 Other Remedies ............................................... 25
14.07 Certain Waivers .............................................. 25
14.08 No Waiver .................................................... 25
14.09 Attorneys' Fees .............................................. 25
ARTICLE 15 -- QUIET ENJOYMENT ............................................. 26
15.01 Quiet Enjoyment .............................................. 26
ARTICLE 16 -- RULES OF THE BUILDING ....................................... 26
16.01 Building Rules ............................................... 26
16.02 Signs ........................................................ 26
16.03 Monument ..................................................... 27
16.04 Use of Building Name ......................................... 27
ARTICLE 17 -- INSURANCE ................................................... 28
17.01 Compliance with Insurance Standards .......................... 28
17.02 Landlord Insurance ........................................... 28
17.03 Tenant Insurance ............................................. 28
iii
<PAGE>
PAGE
----
17.04 Waiver of Subrogation ........................................ 29
17.05 Policy Requirements .......................................... 29
ARTICLE 18 -- NONLIABILITY AND INDEMNIFICATION ............................ 30
18.01 Exculpation .................................................. 30
18.02 Indemnity .................................................... 30
18.03 Limitation of Landlord's Personal Liability .................. 31
ARTICLE 19 -- CONDEMNATION ................................................ 31
19.01 Condemnation ................................................. 31
ARTICLE 20 -- CASUALTY .................................................... 32
20.01 Casualty ..................................................... 32
20.02 Tenant Right to Terminate .................................... 32
20.03 Landlord Right to Terminate .................................. 33
20.04 Disclaimer ................................................... 33
20.05 Tenant Default ............................................... 33
ARTICLE 21 -- SURRENDER ................................................... 33
21.01 Surrender .................................................... 33
21.02 Holding Over ................................................. 34
ARTICLE 22 - ESTOPPEL CERTIFICATES ........................................ 34
22.01 Estoppal Certiflcates ........................................ 34
ARTICLE 23 -- PARTIES BOUND ............................................... 35
23.01 Successors and Assigns ....................................... 35
23.02 Landlord for Time Being ...................................... 35
23.03 Partnership Tenant ........................................... 35
23.04 No Offer ..................................................... 36
23.05 Inability to Perform ......................................... 36
ARTICLE 24 -- PARKING ..................................................... 36
iv
<PAGE>
PAGE
----
24.01 Parking ...................................................... 36
ARTICLE 25 -- MISCELLANEOUS PROVISIONS .................................... 37
25.01 Waiver of Counterclaims and Jury Trial ....................... 37
25.02 Notices ...................................................... 37
25.03 Severability ................................................. 37
25.04 Mercer, Amendments ........................................... 37
25.05 No Joint Venture ............................................. 38
25.06 Broker ....................................................... 38
25.07 Applicable Law ............................................... 38
25.08 Consents and Approvals ....................................... 38
25.09 Business Hours ............................................... 38
25.10 Exhibits ..................................................... 38
25.11 Memorandum ................................................... 38
ARTICLE 26 -- LEASE TERMINATION OPTION .................................... 39
26.01 Lease Termination Option ..................................... 39
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AGREEMENT OF LEASE
This AGREEMENT OF LEASE, dated as of June 30, 1995 (this
"LEASE"), is entered into between WILLIS CORROON CORPORATION OF TENNESSEE,
a Tennessee corporation, having an address c/o Willis Corroon Corporation,
26 Century Boulevard, Nashville, Tennessee 37214 ("LANDLORD"), as landlord,
and MAGNETEK, INC., having an address at Willis Corroon Plaza, 26 Century
Boulevard, Nashville, Tennessee 37214 ("TENANT"), as tenant.
W I T N E S S E T H:
Landlord and Tenant agree as follows:
ARTICLE 1 -- BASIC LEASE INFORMATION AND DEFINITIONS
1.01. BASIC LEASE INFORMATION. The following sets forth the
basic data with respect to this Lease and constitutes the definitions of such
terms where used throughout this Lease. Any conflicts between this Section
1.01 and the other provisions of this Lease shall be resolved in favor of
such other provisions.
DEFINED TERM BASIC INFORMATION AND DEFINITION
- ------------ --------------------------------
DATE OF THIS LEASE June 30, 1995
LANDLORD Willis Corroon Corporation of Tennessee, a
Tennessee corporation
LANDLORD'S ADDRESS c/o Willis Corroon Corporation
FOR NOTICES Real Estate and Facilities Planning
P.O. Box 305026
Nashville, Tennessee 37230-5026
Attention: Ms. JoAnne C. Mathis
with a copy to:
Shearman & Sterling
153 East 53rd Street
New York, New York 10022
Attention: Real Estate Group Notices
9150/10-BJW
TENANT MagneTek, Inc.
TENANT'S ADDRESS MagneTek, Inc.
FOR NOTICES 26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Mr. David A. Reiland
LAND The land more particularly described on
EXHIBIT "A" attached hereto.
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BUILDING The building located on the Land and known as
Willis Corroon Plaza, having the street address
at 26 Century Boulevard, Nashville, Tennessee
37214, and all appurtenances to and improvements
to the Building, including the Garage and all paved
areas and driveways.
BUILDING RENTABLE AREA Approximately 433,307 rentable square feet.
PREMISES The rentable area shown crosshatched on
EXHIBIT "B" hereto located on the fifth and
sixth floors of the North Plaza and the atrium
bridge area of the Building (including conference
rooms 5S001, 5S003, 5S004 and 5S006 on the fifth
floor bridge and conference rooms 6S001 and 6S004
on the sixth floor bridge).
PREMISES RENTABLE AREA Approximately 60,321 rentable square feet.
TERM The period beginning on the Commencement Date
and expiring on the Expiration Date.
COMMENCEMENT DATE As defined in SECTION 2.02.
RENT COMMENCEMENT DATE September 1, 1995
EXPIRATION DATE August 31, 2005, unless sooner terminated in
accordance with the terms and conditions of
this Lease.
BASE RENT $1,025,457.00 per annum (that is, $17.00 per
rentable square foot per annum, or $85,454.75
per month), subject to escalation in accordance
with SECTION 4.02.
BASE OPERATING EXPENSES Operating Expenses paid or incurred for the
calendar year 1996.
BASE TAXES Real Estate Taxes payable for the Tax Year
commencing January 1, 1996 and ending
December 31, 1996.
TENANT'S SHARE 14%, determined as set forth in SECTION 5.01
hereof.
BROKER Cushman & Wakefield of Georgia, Inc., representing
Landlord.
1.02 OTHER DEFINITIONS. Set forth immediately preceding the
table of contents to this Lease, is an index of certain defined terms used in
this Lease. Such terms shall have the respective meanings specified in the
sections of this Lease set forth after such terms; PROVIDED, HOWEVER, that
the failure to list on said index any term used in this Lease shall not
affect in any way the use of a defined term in this Lease.
ARTICLE 2 -- PREMISES; TERM
2.01 DEMISE. Landlord hereby leases to Tenant, and Tenant
hereby hires from Landlord, subject to the covenants and agreements contained
in this Lease, the Premises. Landlord and Tenant agree that (a) the rentable
area of the Premises equals the Premises Rentable Area and (b) the total
rentable area of the Building equals the Building Rentable Area. Tenant
shall have, as an appurtenance to the Premises, the nonexclusive right to
use, and permit its
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invitees to use, in common with others, the common areas of the Land and the
Building (including access driveways and walkways, the Garage and the
Building lobby), and if the portion of the Premises on any floor includes
less than the entire floor, the common toilets, corridors and elevator lobby
on such floor (collectively, the "COMMON AREAS"), but such rights shall
always be subject to the rights of Landlord pursuant to SECTION 9.03 and to
the Building Rules.
2.02 TERM. The term of this Lease (the "TERM") shall
commence on July 1, 1995 (the "COMMENCEMENT DATE"), and subject to ARTICLE 26
hereof, shall end, unless sooner terminated as herein provided, on August 31,
2005 (the "EXPIRATION DATE").
2.03 DELIVERY OF PREMISES. Tenant presently is in occupancy
of the Premises and is familiar with the condition of every part thereof.
Tenant agrees that, except as expressly provided herein, (a) it enters into
this Lease without any representations, warranties or promises by Landlord,
its agents, representatives, employees. servants or any other person in
respect of the Building or the Premises, (b) no rights. easements or licenses
are acquired by Tenant by implication or otherwise and (c) Tenant will accept
the Premises on the Commencement Date "AS IS" in the condition existing on
such date, and such acceptance by Tenant shall be deemed to be a
representation by Tenant that the Premises are in the condition agreed to by
Landlord and Tenant for commencement of the Term hereof. Landlord shall have
no obligation to do any work in order to make the Premises suitable and ready
for occupancy and use by Tenant, such work (if any) to be performed by Tenant
subject to compliance with the terms and conditions of this Lease.
ARTICLE 3 -- USE
3.01 USE. The Premises shall be used and occupied by Tenant
(and its permitted assignees and subtenants) solely as general,
administrative and executive offices (including such ancillary uses in
connection therewith as shall be reasonably required and as are consistent
with other first-class office buildings located in Nashville, Tennessee
("FIRST-CLASS OFFICE BUILDINGS")) and for no other purpose (including in such
prohibition the purposes prohibited under the Building Rules). The Premises
shall not be used for any purpose which is inconsistent with the first-class
character of the Building, creates excessive elevator use, exceeds the floor
loads for which the Building was designed, materially impairs or interferes
with any of the Building operations or the proper and economic operation of
the Building Systems or the proper and economic cleaning or other servicing
of the Building (other than to a de minimis extent), interferes with the use
of the other areas of the Building by any other tenants or occupants, or
impairs the appearance of the Building.
3.02 PERMITS. Tenant shall, at its sole cost and expense,
obtain and maintain all governmental licenses or permits required for the
proper and lawful conduct of any permitted Alterations and for the conduct of
Tenant's business in the Premises and shall submit the same to Landlord for
inspection. Tenant shall at all times comply with the terms and conditions
of each such license or permit. In no event shall Tenant's failure to
procure or maintain such license or permit relieve Tenant from its
obligations under this Lease.
ARTICLE 4 -- RENT
4.01 GROSS RENT. The "GROSS RENT" shall consist of (a) Base
Rent as defined and adjusted pursuant to SECTION 4.02 and (b) additional rent
("ADDITIONAL RENT") consisting of all other sums of money that shall become
due from and payable by Tenant to Landlord hereunder.
4.02 BASE RENT. (a) As used herein, "BASE RENT" means the
amount set forth in Section 1.01, as such amount shall be increased as of
September 1, 1996 and on each anniversary
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thereof during the term of this Lease (a "CPI ADJUSTMENT DATE"), by an amount
equal to fifty percent (50%) of the product of (i) the Base Rent in effect on
the CPI Adjustment Date (i.e., the Base Rent as previously adjusted pursuant
to this SECTION 4.02) and (ii) a fraction (A) the numerator of which is the
difference (but never less than zero) between the Index (as hereinafter
defined) for the month immediately preceding the month in which the CPI
Adjustment Date occurs and the Index for the month immediately preceding the
month in which the Commencement Date occurs and (B) the denominator of which
shall be the Index for the month immediately preceding the month in which the
Commencement Date occurs; PROVIDED, HOWEVER, that for purposes of determining
Base Rent in any September through August period, Base Rent for the period
commencing September 1, 1996 shall not exceed 102.5% of Base Rent for the
previous 12 month period, and the maximum Base Rent for any subsequent
September through August fiscal period shall not exceed 102.5% of the maximum
Base Rent for the immediately preceding September through August fiscal
period. Notwithstanding the foregoing, in no event shall the Base Rent (as
previously adjusted pursuant to this SECTION 4.02) be decreased at any time
based upon the operation of the foregoing adjustment provisions. For
purposes of this Lease, "INDEX" shall mean the "All-Items" consumer price
index for All Urban Consumers (CPI-U) in the Nashville, Tennessee
metropolitan area, determined by the Bureau of Labor Statistics of the United
States Department of Labor (1982-1984=100), or if such index is discontinued,
the most comparable index (reflecting changes in costs of housing, energy and
services) published by any other Federal, New York State or New York City
governmental authority.
(b) Tenant shall pay Base Rent in twelve (12) equal monthly
installments in advance on the first day of each calendar month during the
Term commencing on the Rent Commencement Date (appropriately prorated in the
case of the first installment if the Rent Commencement Date is not the first
day of the month) and on the first day of each calendar month thereafter.
4.03 MANNER OF PAYMENT. (a) Tenant shall pay the Base Rent
and Additional Rent by unendorsed check, subject to collection, payable to
Landlord at the address set forth in Section 1.01 as Landlord's Address for
Notices, or at such other place as Landlord shall designate by notice to
Tenant. At the request of Landlord, Tenant shall make all future payments of
Base Rent and/or Additional Rent by wire transfer of immediately available
federal funds to the account of Landlord at the office of the bank set forth
in the request to Tenant.
(b) Tenant covenants to pay all Gross Rent as the same shall
become due and payable under this Lease at the times and in the manner
provided herein without notice or demand and without set off, abatement,
deduction or counterclaim, except as expressly provided in this Lease.
Landlord shall have the same rights for default in the payment of Additional
Rent as for default in the payment of Base Rent hereunder. If Tenant shall
fail to pay any installment of Base Rent or Additional Rent for five (5)
Business Days after the date such amounts are due, (i) Tenant shall pay
interest thereon from the date when such amount became due and payable to the
date of Landlord's receipt thereof at a rate per annum (the "STIPULATED
RATE") equal to the lesser of (A) two percentage points (2%) above the rate
from time to time announced by Citibank, N.A. as its "base rate" to be in
effect at its principal office in New York, New York or (B) the maximum rate
permitted by applicable law; provided that if Tenant shall fail to pay any
installment of Base Rent or Additional Rent when due two (2) times during any
period of twelve (12) consecutive months during the Term, then, thereafter,
if Tenant shall fail to pay any installment of Base Rent or Additional Rent
when due, Tenant shall pay interest thereon from the date when such Base Rent
or Additional Rent became due and payable to the date of Landlord's receipt
thereof at the Stipulated Rate; and (ii) Tenant shall pay to Landlord a late
charge equal to six percent (6%) of the amount that is then overdue to
compensate Landlord for the administrative expenses incurred.
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(c) No payment by Tenant or receipt or acceptance by
Landlord of a lesser amount than the correct Base Rent or Additional Rent
shall be deemed to be other than a payment on account, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment be deemed an accord and satisfaction, and Landlord may accept such
check or payment without prejudice to Landlord's right to recover the balance
or to pursue any other remedy in this Lease or at law provided.
4.04 OCCUPANCY TAX. Tenant shall pay to Landlord upon demand
any occupancy tax or tax in lieu thereof related to Tenant's occupancy of the
Premises if the same shall become payable by Landlord in the first instance
or is at any time required to be paid by Landlord.
ARTICLE 5 -- ESCALATIONS
5.01 DEFINITIONS. As used in this Lease:
(a) "LANDLORD'S STATEMENT" means a statement furnished by
Landlord to Tenant containing a computation of any Additional Rent due
pursuant to the provisions of this Article.
(b) "CERTAIN EXPENSES" means, without duplication, all costs
and expenses (and taxes thereon, if any) paid or incurred by or on behalf of
Landlord with respect to the ownership, operation, cleaning, repair, safety,
management, administration, security and maintenance of the Land and the
Building or with respect to the provision of services to tenants (all of the
foregoing. collectively, being "BUILDING SERVICES"), including and excluding
the items described on EXHIBIT "E" hereto. If during all or part of any
calendar year, Landlord shall not incur any particular Operating Expense or
furnish any particular item of Building Services (the cost of which would
otherwise constitute an Operating Expense) due to the fact that (i) any
portion of the Building is not occupied or leased, (ii) an item of Building
Services is not required or desired by the tenant of any portion of the
Building, (iii) any tenant of the Building is itself obtaining and providing
a particular item of Building Services or is itself incurring the expense
that would constitute an Operating Expense, or (iv) for any similar reason,
then, for the purposes of computing Operating Expenses, the cost of Operating
Expenses for such period shall be deemed to be increased by an amount equal
to the additional costs and expenses which would reasonably have been
incurred during such period by Landlord if it had at its own expense
furnished such items of Building Services or incurred such Operating Expenses
and the Building had been 100% leased and occupied.
(c) "REAL ESTATE TAXES" means all real estate, ad valorem
and personal properly taxes, assessments (special or otherwise), sewer and
water rents, rates and charges, transit taxes or fees, county taxes and any
other governmental levies, impositions or charges of any nature, whether
general, special, ordinary, extraordinary, foreseen or unforeseen, which may,
be or become payable by Landlord with respect to, or be assessed, levied or
imposed upon, all or any part of the Building (excluding all personal
property of tenants). If due to a future change in the method of taxation
any franchise, income (other than an income tax which is applicable to other
parties in addition to owners of real property), gross receipts, profit or
other tax shall be levied against Landlord in substitution in whole or in
part for, or in lieu of, or in lieu of an increase in, or in addition to (but
only to the extent the same are levied only against owners of interests in
real property), any tax which would otherwise constitute a Real Estate Tax,
or a tax or excise shall be imposed upon or measured by rents, such
franchise, income, profit or other tax, or tax or excise imposed upon or
measured by rents, shall be deemed to be a Real Estate Tax for the purposes
hereof. If any assessment is due and payable over time, Landlord shall elect
to pay the same in installments over the longest period permitted by law
without incurring a penalty,
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and each such installment and the interest thereon, if applicable, shall be
deemed to be a Real Estate Tax for the purposes hereof.
(d) "TAX YEAR" means each period of twelve (12) months
commencing on January 1st of each year, or such other period of twelve (12)
months as hereafter may be adopted as the fiscal year for real estate tax
purposes in the County of Davidson, Tennessee, that includes any part of the
Term, with appropriate adjustment in the event of any change in such fiscal
year.
(e) "TENANT'S SHARE" means, for any period, and for purposes
of Section 1.01 has been calculated based upon, a fraction whose numerator is
the number of square feet of rentable area in the Premises and whose
denominator is the number of square feet of rentable area of the Building.
5.02 TENANT'S OPERATING PAYMENT. (a) If the Operating
Expenses for any calendar year during the Term shall exceed Base Operating
Expenses, Tenant shall pay as Additional Rent a sum ("TENANT'S OPERATING
PAYMENT") equal to Tenant's Share of such excess; PROVIDED, HOWEVER, that for
purposes of determining Operating Expenses in any year and Tenant's Operating
Payment as a result thereof, the Operating Expenses for the 1997 calendar
year shall not exceed 105% of Base Operating Expenses, and the maximum
Operating Expenses for any subsequent calendar year shall not exceed 105% of
the maximum Operating Expenses for the immediately preceding year. If the
Commencement Date or Expiration Date shall occur on a date other than
January 1 or December 31, respectively, Tenant's Operating Payment shall be
appropriately prorated for such years.
(b) Prior to the beginning of each calendar year during the
Term (other than for the calendar year 1996). Landlord shall present to
Tenant an estimate in reasonable detail of (i) Operating Expenses for such
calendar year and (ii) Tenant's Operating Payment for such calendar year
("TENANT'S ESTIMATED OPERATING PAYMENT"), which estimate shall be based on
actual expenses for the prior calendar year and reasonably anticipated
changes therein for the current calendar year. Tenant shall pay Tenant's
Estimated Operating Payment for each calendar year in twelve (12) equal
monthly installments in advance commencing on January 1. 1997 and on the
first day of each calendar month thereafter. Tenant's Estimated Operating
Payment for any calendar year, and Tenant's monthly installments may be
adjusted from time to time during such calendar year, by notice from Landlord
to Tenant. Within fifteen (15) Business Days after Tenant's Estimated
Operating is adjusted, Tenant shall pay to Landlord an amount equal to the
product of (A) the increase in the monthly installment of Tenant's Estimated
Operating Payment and (B) the number of months that have elapsed in such
calendar year prior to the adjustment of Tenant's Estimated Operating
Payment. In the event that Tenant's Estimated Operating Payment with respect
to any calendar year during the Term shall not have been established in
accordance with this SUBSECTION (B) prior to the beginning of the applicable
calendar year, then Tenant's Estimated Operating Payment for such year shall
be deemed to be equal to the most recent Tenant's Estimated Operating Payment
for the immediately preceding calendar year. Until such time as Landlord
shall have delivered to Tenant Landlord's Statement for calendar year 1996,
Tenant's Estimated Operating Payment for calendar year 1997 shall be based
upon Landlord's reasonable estimate of (i) Operating Expenses for calendar
year 1996 and (ii) Operating Expenses for calendar year 1997. After delivery
of Landlord's Statement, Tenant's Estimated Operating Payment shall be
adjusted to reflect actual expenses for calendar year 1996. If Tenant's
Estimated Operating Payment prior to the adjustment thereof to reflect actual
expenses for calendar year 1996 exceeds Tenant's Estimated Operating Payment,
as so adjusted. Landlord shall credit such excess against the next due
installment(s) of Base Rent and Additional Rent. If Tenant's Estimated
Operating Payment prior to the adjustment thereof to reflect actual expenses
for calendar year 1996 is less than Tenant's Estimated Operating Payment, as
so adjusted.
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Tenant shall pay to Landlord, within fifteen (15) Business Days of demand
therefor, an amount equal to such difference.
(c) As soon as reasonably practicable after the end of each
calendar year during any part of the Term, Landlord shall deliver to Tenant a
Landlord's Statement showing the Operating Expenses for such calendar year,
computed on an accrual basis and comparing Tenant's Estimated Operating
Payment with Tenant's Operating Payment. If Tenant's Estimated Operating
Payment exceeds Tenant's Operating Payment for such calendar year, Landlord
shall credit the amount of such excess against the installment(s) of Base
Rent and Additional Rent next due or, if neither Base Rent nor Additional
Rent is to thereafter become due, Landlord shall pay Tenant within fifteen
(15) Business Days after the rendering of such statement the amount of such
excess. If Tenant's Operating Payment exceeds Tenant's Estimated Operating
Payment for such calendar year, Tenant shall pay to Landlord, within fifteen
(15) Business Days of receipt of the statement, an amount equal to such
difference.
5.03 TENANT'S TAX PAYMENT. (a) If Real Estate Taxes payable
during any Tax Year shall exceed Base Taxes, Tenant shall pay as Additional
Rent for such Tax Year a sum ("TENANT'S TAX PAYMENT") equal to Tenant's Share
of such excess. If the Commencement Date or the Expiration Date shall occur
on a date other than January 1 or December 31, respectively, Tenant's Tax
Payment shall be appropriately prorated.
(b) When Real Estate Taxes payable during a Tax Year have
been determined, Landlord shall deliver to Tenant a Landlord's Statement,
accompanied by copies of the relevant tax bills, setting forth Tenant's Tax
Payment for such Tax Year and the dates on which Landlord is obligated under
law to pay the Real Estate Taxes in respect of such Tax Year (the "PAYMENT
DATES"), with the percentage of the Real Estate Taxes payable on each Payment
Date. Subject to the next succeeding sentence, Tenant shall pay to Landlord
fifteen (15) days before each Payment Date the same percentage of Tenant's
Tax Payment payable in such Tax Year as the percentage of Real Estate Taxes
for such Tax Year payable by Landlord on such Payment Date. In no event
shall Tenant be obligated to make any payment of Tenant's Tax Payment sooner
than ten (10) days after receipt by Tenant of the relevant Landlord's
Statement.
(c) If there shall be any increase or decrease in or refund
of Real Estate Taxes paid or payable during any Tax Year, whether during or
after such Tax Year, Landlord shall furnish to Tenant a revised Landlord's
Statement for such Tax Year, and Tenant's Tax Payment for such Tax Year shall
be adjusted. The amount of any overpayment by Tenant reflected in such
Landlord's Statement shall be credited against succeeding installments of
Base Rent and Additional Rent next due or, if neither Base Rent nor
Additional Rent is to thereafter become due, Landlord shall pay Tenant within
fifteen (15) Business Days after the rendering of such statement the amount
of such overpayment. The amount of any underpayment reflected in such
Landlord's Statement shall be paid by Tenant within thirty (30) days after
receipt of such Landlord's Statement.
(d) For purposes of this Lease, the amount of any decrease
in or refund of Real Estate Taxes paid or payable during any Tax Year shall
be reduced by the sum (without duplication of such amount having previously
been billed and paid for by Tenant) of (i) all costs and expenses, including
counsel fees, incurred by Landlord in connection with such decrease
(including, without limitation, costs and expenses related to any application
or proceeding brought by or on behalf of Landlord) and (ii) all such costs
and expenses incurred by Landlord in connection with efforts to reduce Real
Estate Taxes for any other Tax Years (whether or not any reduction was
actually obtained) not theretofore recovered through tax refunds for such
other Tax Years or otherwise. Nothing herein contained shall obligate
Landlord to bring any application or proceeding seeking a reduction in Real
Estate Taxes or assessed valuation. Tenant, for itself and
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its immediate and remote subtenants and successors in interest hereunder,
hereby waives, to the fullest extent permitted by applicable law, any right
Tenant may now or in the future have to protest or contest any Real Estate
Taxes or to bring any application or proceeding seeking a reduction in Real
Estate Taxes or assessed valuation or otherwise challenging the determination
thereof; PROVIDED, HOWEVER, that if Tenant, together with every other tenant
in the Building that is leasing at least 20,000 rentable square feet of space
in the Building shall submit a request (the "TAX PROTEST REQUEST") to
Landlord to protest or contest any Real Estate Taxes, which Tax Protest
Request shall provide that the tenants making the Tax Protest Request have
agreed to pay all costs and expenses of a nature described in clause (i)
above in connection with such protest or contest then, provided that (A) such
Tax Protest Request is submitted no later than thirty (30) days after the
date of delivery of the applicable Landlord's Statement described in SECTION
5.03(B) above and in any event prior to the date that is fifteen (15) days
prior to the last date that such protest or contest may be filed, and (B)
Landlord shall not state in writing, within fifteen (15) days after receipt
of the Tax Protest Request, that Landlord refuses to engage in such protest
or contest for valid business reasons, Landlord shall protest or contest the
applicable Real Estate Taxes, and Tenant shall pay to Landlord the costs and
expenses described in CLAUSE (I) above in connection with such protest or
contest within fifteen (15) Business Days after demand by Landlord (with the
right of reimbursement against the other tenants that signed the Tax Protest
Request to the extent set forth in said Tax Protest Request) and Tenant shall
be bound by the results of such protest or contest.
5.04 RECORDS. Landlord shall maintain in an orderly manner
all of its records pertaining to Tenant's Operating Payment and Tenant's Tax
Payment for a period of three (3) years after the completion of each calendar
year, or Tax Year, as the case may be. Upon reasonable prior written request
from Tenant, such records shall be available to Tenant or its representatives
for purposes of review during Landlord's regular business hours at the
offices of Landlord. In connection with any examination by Tenant of
Landlord's records. Tenant agrees to treat, and to instruct its employees,
accountants and agents to treat, all information as confidential and not
disclose it to any other person and to confirm and, if requested, cause its
employees, accountants and agents to confirm such agreement in a separate
written agreement if requested by Landlord.
5.05 LANDLORD'S STATEMENTS. Landlord's failure to render a
Landlord's Statement as provided in this ARTICLE 5 shall not prejudice
Landlord's right to thereafter render such a statement with respect to such
calendar year or Tax Year or any calendar year or Tax Year thereafter. Each
Landlord's Statement so delivered shall be conclusive and binding upon Tenant
unless Tenant notifies Landlord within ninety (90) days after receipt thereof
that it disputes the correctness of such Landlord's Statement. specifying to
the extent then practical the particular respects in which the same is
claimed to be incorrect. Notwithstanding any such dispute, Tenant shall pay
Additional Rent in accordance with such Landlord's Statement, without
prejudice to Tenant's position.
5.06 SURVIVAL. The obligations of Landlord and Tenant under
this ARTICLE 5 shall survive the expiration or sooner termination of this
Lease.
ARTICLE 6 -- TENANT ELECTRICITY
6.01 TENANT ELECTRICITY. (a) Subject to the provisions of
this Article, Landlord shall furnish to Tenant electric energy on a "rent
inclusion" basis through feeders, risers, wiring and other electrical
facilities presently installed in the Building for Tenant's reasonable use of
normal office equipment such as typewriters, lamps, personal computers and
other low energy-consuming office machines and equipment ("ORDINARY
EQUIPMENT"); provided that the amount of
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electrical energy being furnished on a "rent inclusion" basis shall not
exceed the Electric Allowance (as defined below).
(b) Landlord may install a submeter or submeters in the
Premises to monitor separately Tenant's connected load for electric energy in
the Premises. Landlord may, in the alternative, at Landlord's option, from
time to time cause an electrical engineer or utility consultant selected by
Landlord to make a survey of the electric lighting and power load to
determine the connected load in the Premises. Such determinations shall take
into account, among other things, any special electrical requirements of
Tenant and use by Tenant of electrical energy at times other than during
ordinary business hours (as hereinafter defined). The findings of the
engineer or consultant shall be binding upon the parties, subject to
adjustment as provided in SECTION 6.01(C) below.
(c) In the event Tenant shall dispute any findings under
this Article of the engineer or consultant designated by Landlord, Tenant
may, within thirty (30) days of receiving notice of such findings, designate
by notice to Landlord an independent electrical engineer or utility
consultant to make, at Tenant's sole cost and expense, another determination
of the connected load. If the electrical engineer or utility consultant
selected by Tenant shall determine that such connected load is less than as
determined by Landlord's engineer or consultant and the two are unable to
adjust such difference within twenty (20) days after the determination made
by Tenant's engineer or consultant is delivered to Landlord, Landlord and
Tenant shall meet to resolve such dispute. Pending a final determination
pursuant to such arbitration, however, Tenant shall pay to Landlord for any
Excess Kilowatt Hours (as defined below) based on the determination of
Landlord's engineer or consultants; and, if it is determined that Tenant has
overpaid, Landlord shall reimburse Tenant for any overpayment at the
conclusion of such arbitration. In any such arbitration, the arbitrator to
be appointed shall be an electrical engineer having at least five (5) years
experience in similar matters in Nashville, Tennessee. If Tenant shall not
dispute the findings as provided in this SECTION 6.01, the determination by
Landlord's engineer or consultants shall be deemed final and conclusive.
(d) The cost of the installation of submeter(s) or the
making of the survey shall be borne by Landlord, unless it is determined that
there are Excess Kilowatt Hours at the Premises, in which event Tenant shall
pay the reasonable cost thereof within fifteen (15) Business Days after
demand by Landlord.
(e) After installation of submeter(s) or the making of such
survey as set forth in this SECTION 6.01, Tenant shall pay Landlord for the
cost of the Excess Kilowatt Hours, if any, in the Premises during each
calendar month. The cost of the Excess Kilowatt Hours shall be computed by
multiplying the Excess Kilowatt Hours in the Premises during such calendar
month by the average cost per kilowatt hour for all electricity purchased by
Landlord for use within the Building during such period. Landlord shall
furnish bills once a month to Tenant in respect of the Excess Kilowatt Hours,
if any, in the Premises. Such bills shall set forth Landlord's average cost
per kilowatt hour for the calendar month to which such bill relates and the
number of Excess Kilowatt Hours during said calendar month and shall be
payable to Landlord as Additional Rent within fifteen (15) Business Days of
receipt by Tenant thereof. There shall be no separate charge to Tenant for
connected load in the Premises of electrical energy up to the Allotted
Kilowatt Hours (as defined below) in each calendar month, and such allowance
shall be referred to as the "ELECTRICAL ALLOWANCE". "ALLOTTED KILOWATT HOURS"
for the Premises demised by this Lease for any calendar month shall mean a
number of kilowatt hours necessary to operate for Ordinary Equipment during
ordinary business hours (i.e., 45 hours per week) with Landlord providing an
average connected load of 4-1/2 watts of electricity for all purposes per
Rentable Square Foot; and "EXCESS KILOWATT HOURS" for the Premises for any
calendar month shall mean the excess of
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the total number of kilowatt hours of electric power in the Premises during
such calendar month over the Allotted Kilowatt Hours for the Premises for
such calendar month.
(f) Tenant's use of electrical energy shall never exceed the
capacity of the then existing feeders to the Building or the risers or wiring
installations therein as properly allocable to the Premises based on rentable
square foot area of the Premises and at no time shall Tenant's electrical
demand load in the Premises exceed that for which the Premises have been
designed. Without the prior consent of Landlord, Tenant shall not perform or
permit any Alteration (as defined in SECTION 8.01) to wiring installations or
other electrical facilities in or serving the Premises or make any additions
to the electrical fixtures, business machines or electrical office equipment
or appliances in the Premises (other than Ordinary Equipment). Upon
Landlord's consent to expand the electrical capacity of the Premises, which
consent shall not be unreasonably withheld if, in Landlord's judgment, the
same will not (i) create a hazardous condition, (ii) entail excessive repairs
or expense to Landlord, (iii) interfere with or disturb other tenants other
than to a DE MINIMIS extent, (iv) preclude other tenants from proportionately
expanding their electrical capacity or (v) violate any Legal Requirement or
the provisions of any insurance policy with respect to the Premises or the
Building, Landlord shall provide and install additional risers required to
supply Tenant's electrical requirements and all other equipment necessary in
connection therewith and the cost thereof shall be paid by Tenant within
fifteen (15) Business Days after being billed therefor. Landlord may require
Tenant to furnish to Landlord such security as Landlord shall reasonably deem
necessary to assure payment for any such work prior to Landlord commencing
the same.
(g) Landlord shall have no liability to Tenant for any loss,
damage or expense sustained or incurred by reason of any change, failure,
inadequacy, unsuitability or defect in the supply or character of the
electrical energy furnished to the Premises or if the quantity or character
of the electrical energy is no longer available or suitable for Tenant's
requirements, except for any actual damage suffered by Tenant by reason of
any such failure, inadequacy or defect caused by the gross negligence or
willful misconduct of Landlord or Landlord's agents, and then only after
actual notice of such failure, inadequacy or defect. In such event, Tenant,
and those claiming by or through Tenant, waive, to the fullest extent
permitted by applicable law, any consequential damages resulting therefrom.
Tenant shall be responsible for any repair, maintenance or replacement of any
electrical panel board and all wires and wiring located within and serving
the Premises, all at Tenant's expense; PROVIDED, that Landlord shall perform
any repairs to such panelboard or wiring to the extent same may, in
Landlord's reasonable judgment, impact upon Building electrical systems.
Tenant shall pay Landlord's reasonable charges for such repairs within
fifteen (15) Business Days after demand by Landlord.
6.02 TERMINATION OF SERVICE. (a) Landlord reserves the
right to terminate the furnishing of electrical energy at any time, upon
thirty (30) days' prior notice to Tenant; PROVIDED, HOWEVER, that (i) such
termination date shall be extended, to the extent not prohibited by the
public utility or other supplier of the same, for such period of time as
shall reasonably be necessary for Tenant to make arrangements for and obtain
electric service directly from the public utility company serving the
Building, and (ii) Landlord shall not terminate the furnishing of electrical
energy to Tenant unless Landlord terminates the furnishing of electrical
energy to all other tenants in the Building (excluding Willis Corroon
Corporation of Tennessee and its affiliates). If Landlord shall discontinue
furnishing electrical energy, (A) Tenant shall arrange to obtain same
directly from the public utility company furnishing electrical energy to the
Building, (B) Landlord shall permit the existing feeders, risers, wiring and
other electrical facilities serving the Premises to be used by Tenant, to the
extent available, suitable and safe, (C) from and after the effective date of
such discontinuance. Landlord shall not be obligated to furnish electrical
energy to Tenant, (D) this Lease shall otherwise remain in full force and
effect and such discontinuance shall be without liability of Landlord to
Tenant therefor and (E) if Landlord shall
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discontinue furnishing electrical energy as a result of any (1) requirement
by the public utility or other entity supplying the same, (2) Legal
Requirement or (3) Insurance Requirement. Landlord shall, at Tenant's
expense, install and maintain at locations in the Building selected by
Landlord any necessary electrical metering equipment, panel boards, feeders,
risers, wiring and other conductors and equipment to enable Tenant to obtain
electrical energy directly from the public utility supplying the same.
(b) Landlord reserves the right to elect that electricity be
furnished (i) by Landlord on a submetering basis or (ii) by the public
utility on a direct metering basis. In the event that Landlord elects CLAUSE
(I), then Landlord shall, at Landlord's expense, install and maintain at
locations in the Building selected by Landlord any necessary electrical
metering equipment, panel boards, feeders, risers, wiring and other
conductors and equipment to enable Tenant to measure Tenant's connected load
for electrical energy. In the event that Landlord elects CLAUSE (II), then
the provisions of SECTION 6.02(A) shall apply except that, so long as
Landlord shall not be required to make such election by any entity or
requirement described in SECTION 6.02(A)(E)(1), (2) OR (3), Landlord shall
have the obligation under SECTION 6.02(A)(E) to make the installation and
perform the maintenance of the matters and items described therein, at
Landlord's expense without inclusion of such expense in Operating Expenses.
(c) In the event Landlord elects to terminate the furnishing
of electrical energy in accordance with this Section 6.02, the annual Base
Rent shall be reduced by the annual value of the Electrical Allowance and
there shall be excluded from Base Operating Expenses and Operating Expenses
the cost of electricity furnished to tenants (including Tenant) as reasonably
determined by Landlord.
6.03 ELECTRIC FIXTURES. Landlord or its designee shall
furnish and install all replacement lighting, tubes, lamps, starters, bulbs
and ballasts required in the Premises and Tenant shall pay to Landlord or its
designee within thirty (30) days after demand therefor the then established
reasonable charges therefor.
ARTICLE 7 -- LANDLORD COVENANTS
7.01 STANDARD OF OPERATION, LANDLORD SERVICES. Landlord
shall operate and maintain the Building in a manner consistent with the
standards of other First-Class Office Buildings, and, subject to curtailment
as required by Legal Requirements, shall furnish to Tenant commencing on the
date Tenant occupies the Premises for the conduct of its business with the
following services ("LANDLORD SERVICES"):
(a) reasonably adequate supplies of (i) cold domestic water
and (ii) hot water to the core lavatories on the floors on which the
Premises are located, in either case, for ordinary lavatory, cleaning
and drinking use;
(b) heat, ventilation and air conditioning on Business Days
(as defined in SECTION 25.09) during Business Hours (as defined in
SECTION 25.09) as may be required for comfortable occupancy of the
Premises in accordance with the specifications set forth in EXHIBIT "D"
attached hereto; and upon written request by Tenant received by
Landlord prior to 12:00 noon on the Business Day for which such
service is requested (or if such service is requested for a day other
than a Business Day then prior to 3:00 P.M. on the Business Day
immediately preceding the day for which such service is requested),
Landlord shall furnish air conditioning and heating at times other
than the times specified above, in which event Tenant shall pay to
Landlord Landlord's then established reasonable charge for furnishing
such over-time services within fifteen (15) Business Days after demand
therefor;
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(c) cleaning service for the Premises (except any portion
thereof used for preparing and dispensing of food or beverages (other
than pantries), including, without limitation, flues and related
equipment, or as computer areas) in accordance with the specifications
previously delivered to Tenant or such commercially reasonable cleaning
specifications as Landlord may adopt for general application to tenants
of the Building;
(d) (i) nonexclusive passenger elevator service to the Premises
on a 24-hour, 365/366-day year basis, (ii) freight elevator service to
the Premises and access to the Building's loading dock(s), in each case
on a reservation basis upon at least 48 hours prior notice, subject to
availability, PROVIDED, HOWEVER, that (A) use during Business Hours
shall be subject to cancellation based upon Landlord's needs for the
maintenance, use, operation or repair of the Building, and (B) Tenant
shall pay to Landlord then established reasonable charge (based upon
Landlord's actual out-of-pocket cost therefor) for supplying such
freight elevator and loading dock service within fifteen (15) Business
Days after demand therefor; and
(e) in the event that Landlord shall provide a Building
directory in the lobby of the building, Landlord shall provide to Tenant
listings proportionate to the size of the Premises.
7.02 CONFERENCE CENTER, AUDITORIUM AND CAFETERIA. (a) Subject
to Section 7.02(b) hereof, Tenant shall have non-exclusive use of:
(i) the Conference Center located on the colonnade level of the
Building (the "CONFERENCE CENTER") and the Auditorium located on the
level below the colonnade level of the Building (the "Auditorium", the
Conference Center and the Auditorium, each a "FACILITY"); PROVIDED,
HOWEVER, that (A) Tenant's use and access to each Facility shall be
subject to the Building Rules (including PART III of EXHIBIT "C"
hereto), and (B) Tenant shall pay to Landlord within fifteen (15)
Business Days after Landlord's demand therefor Landlord's then
established charge for the use of such Facility (which charge Landlord
agrees shall be the amount Landlord charges to clients of Landlord for
such use); and
(ii) a food service facility, which presently is a cafeteria
located on the colonnade level of the Building, but in the future may
be a larger or smaller facility, the scope, size and service to be
determined solely in the judgment and discretion of Landlord so long
as the same does not merely consist of vending machines (the "FOOD
FACILITY"); PROVIDED, HOWEVER, that (A) Tenant and Tenant's employees
shall be charged the then current prices for food and beverages in the
Food Facility, which prices shall not exceed the prices charged to
other patrons of the Food Facility (including Landlord and Landlord's
employees) and (B) Tenant shall pay to Landlord Tenant's Share of
Landlord's net operating losses ("NET OPERATING LOSSES") for the
operation of the Food Facility provided that Tenant's Share of Net
Operating Losses shall not exceed $5,000 per year (as the same may be
adjusted by changes in the Index (as defined and in the manner described
in SECTION 4.02 hereof)). Contemporaneously with Landlord's delivery of
Landlord's Statement pursuant to SECTION 5.02(C) hereof, Landlord shall
deliver to Tenant a reasonably detailed statement of Landlord's Net
Operating Losses for the previous calendar year and Tenant shall pay to
Landlord Tenant's Share of the Net Operating Losses (subject to the cap
described above) within fifteen (15) Business Days of receipt thereof.
(b) Notwithstanding anything to the contrary set forth
in SECTION 7.02(A) hereof, (i) Landlord shall have the right to
terminate Tenant's rights under SECTION 7.02(A) with respect to any or
both Facilities (it being agreed that this SECTION 7.02(B)(I)
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shall not apply to the Food Facility but SECTION 7.02(B)(II) shall apply
to the Food Facility) at any time, in its sole judgment and discretion,
and (ii) in the event of a sale or transfer by WCCT of the Land or the
Building or of its interest as Landlord under this Lease, and in
connection therewith WCCT (or its affiliate or any other person) (any
of the foregoing being a "FOOD FACILITY PROVIDER") shall retain a
leasehold interest in all or any portion of the Building, including
the Food Facility, then at the election of the new Landlord and provided
that the Food Facility Provider shall agree to make available a Food
Facility upon the same terms as set forth in SECTION 7.02(A)(II) hereof,
Landlord's obligation under SECTION 7.02(A)(II) shall be terminated
and Tenant, at the request of Landlord, shall execute an agreement
confirming such termination.
7.03 ACCESS. Subject to the terms and conditions of this
Lease and to security measures with withheld by Landlord on a Building-wide
base, Landlord shall provide Tenant with reasonable access to the Premises on
a 24-hour, 365/366-day year basis.
7.04 CLEANING. (a) Landlord's cleaning contractor and its
employees shall have access to the Premises, and the use of Tenant's light,
power and water therein, at all times, except that such access shall not be
made in a manner which would unreasonably interfere with the operation of
Tenant's business.
(b) Landlord shall have the right to cause any area in the
Premises used for the storage, preparation, service or consumption of food or
beverages (including pantries to be exterminated for vermin by a reputable
extermination contractor selected by Landlord with such frequency as shall be
reasonably satisfactory to Landlord and Tenant shall pay the cost thereof
(which cost shall be commercially reasonable) to Landlord within fifteen (15)
Business Days after demand. Tenant shall pay to Landlord within fifteen (15)
Business Days after demand Landlord's then reasonably established charges for
(i) cleaning work in the Premises or the Building required because of (A)
misuse or neglect or use of portions of the Premises for special purposes
requiring greater or more difficult cleaning work than office areas, or (B)
increases in frequency or scope in any of the items of cleaning service
requested by Tenant; and (ii) cleaning work in the Premises or the Building
occasioned by after hours use of the Premises on other than an occasional
basis.
7.05 SERVICE INTERRUPTION. Subject to SECTION 18.01(B)
hereof, Landlord shall not be liable for damages to either person or property
nor shall Landlord be deemed to have evicted Tenant nor shall there be any
abatement of Gross Rent nor shall Tenant be relieved from performance of any
covenant on its part to be performed hereunder by reason of (a) failure by
Landlord to furnish Landlord Services, (b) breakdown of equipment or
machinery utilized in supplying any Landlord Services or (c) cessation of any
Building Service due to causes or circumstances beyond the boundaries of the
Land. Landlord shall use reasonable diligence to make such repairs as may be
required to machinery or equipment within the Building to provide restoration
of any Building Service and, where the cessation or interruption of such
Building Service has occurred due to circumstances or conditions beyond the
Land boundaries, to cause the same to be restored by diligent application or
request to the provider.
ARTICLE 8 -- ALTERATIONS
8.01 ALTERATIONS. (a) Tenant shall not (i) make or allow to
be made any (A) alterations in connection with Tenant's initial occupancy of
the Premises or (B) any other alterations or physical additions, including,
without limitation, fixtures, to the Premises other than normal painting,
carpeting, wallcoverings and office decorations or (ii) place safes, vaults,
filing systems, libraries or other heavy furniture or equipment within the
Premises, without in
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each such case first obtaining the consent of Landlord (any action described
in CLAUSE (I) OR (II) being herein referred to as an "ALTERATION").
(b) Landlord's consent shall not be unreasonably withheld in
the case of an Alteration (a "QUALIFIED ALTERATION") which (i) is not
structural in nature and has no effect on the Building's structure, curtain
wall or systems, including, without limitation, the mechanical, electrical,
plumbing, HVAC, fire safety, fire protection or elevator systems of the
Building (collectively, "BUILDINGS SYSTEMS"); (ii) is not visible from the
exterior of the Premises; (iii) does not result in a violation of, or require
a change in, any certificate of occupancy for the Building; (iv) does not
affect any area of the Building outside of the Premises; and (v) does not, in
Landlord's reasonable judgment, affect the value, utility or efficiency of
the Building. Landlord shall be entitled to retain independent consultants
to review the plans and specifications for and the progress of construction
of any proposed Alteration and to reimbursement from Tenant, within fifteen
(15) Business Days after request therefor, for all of the reasonable fees of
such consultants and other out-of-pocket costs incurred by Landlord in
connection with such proposed Alteration. In performing Alterations or any
other repairs or work with respect to the Premises, Tenant shall be bound by
and observe all the terms hereof and all of the Building Rules therefor
(including the rules and conditions set forth in PART IV to the Building
Rules attached hereto as EXHIBIT "C").
(c) Tenant shall indemnity and hold harmless Landlord from
and against all costs (including, without limitation, reasonable attorneys'
fees and disbursements), losses, liabilities or causes of action arising out
of or relating to any Alteration, including, without limitation, any
mechanics' or materialmen's liens asserted in connection with such Alteration.
8.02 TENANT'S PROPERTY. All Alterations shall be and remain
part of the Premises and be deemed property of Landlord except such
Alterations as are installed at the expense of Tenant and which may be
removed without material damage to the Premises (collectively, "TENANT'S
PROPERTY"). Notwithstanding anything to the contrary set forth herein, all
work stations, demountable walls and other property delivered to Tenant with
the Premises shall remain the property of Landlord and may not be removed by
Tenant. Tenant may remove Tenant's Property from the Premises during the
Term and Tenant shall repair, or shall reimburse Landlord upon demand for the
cost of repairing, any damage to the Premises or the Building occasioned by
such removal. Any structural repairs or repairs to Building Systems
necessitated by the removal of Tenant's Property shall be performed by
Landlord and Tenant shall reimburse Landlord for the cost thereof within
fifteen (15) Business Days after demand therefor.
8.03 EFFECT OF LANDLORD'S APPROVAL. Landlord's approval of
plans or specifications or consent to the making of Alterations in the
Premises shall not be deemed to be (a) an agreement or representation by
Landlord that the contemplated Alterations comply with any Legal Requirements
or the certificate of occupancy for the Building; (b) an approval of the
sufficiency, completeness or effective coordination of the proposed
Alteration, or (c) a waiver by Landlord of compliance by Tenant with any of
the other terms of this Lease.
8.04 SURVIVAL. Tenant's obligations under this ARTICLE 8
shall survive the expiration or sooner termination of this Lease.
ARTICLE 9 -- REPAIRS
9.01 REPAIRS BY LANDLORD. Landlord shall make all repairs,
interior or exterior, structural or non-structural, ordinary or
extraordinary, needed to keep the Building (including the Premises and the
Building Systems) in reasonably good order and repair, excluding, however,
repairs which Tenant is obligated to make pursuant to SECTION 9.02 or the
other terms of this
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Lease. No liability of Landlord to Tenant shall accrue under this SECTION
9.01 with respect to any repair within the Premises or to any Building System
servicing the Premises unless and until Tenant has given notice to Landlord
of the specific repair required to be made or of the failure properly to
furnish any Landlord's Services and Landlord's failure, subject to Force
Majeure, thereafter promptly to remedy the same.
9.02 REPAIRS BY TENANT. Tenant, at its expense, shall take
good care of and maintain the Premises, any Alterations and Tenant's
Property; PROVIDED, HOWEVER, that Tenant shall only be responsible for
exterior or structural repairs if the need for same arises out of (a) the
making, installation, use, operation or existence of Alterations, Tenant's
Property or other equipment by or on behalf of Tenant, (b) the moving of
Tenant's Property in or out of the Building or the Premises, (c) the
negligence of Tenant or any other occupant of the Premises or any of Tenant's
employees, contractors, agents, licensees or invitees (collectively, the
"TENANT PARTIES") or their manner of use or occupancy of the Premises or
access to or use of the Building, subject, however, in the case of fire or
other insured casualty, to the waiver set forth in SECTION 17.04, (d) any
cause or condition created by or at the instance of Tenant or any of the
Tenant Parties or (e) Tenant's compliance or noncompliance with Legal
Requirements in accordance with SECTION 10.01. Any repairs to the Building
or Building Systems shall be performed by Landlord at Tenant's expense
(including a supervisory charge, in addition to charges for general
conditions, equal to ten percent (10%) of the trade cost of such repairs),
unless Landlord elects by notice to Tenant to have Tenant perform such
repairs. In no event shall Tenant be required to make, be responsible for,
or pay for any repairs which are required as a result of the negligent act or
negligent omission or willful misconduct of Landlord or Landlord's agents,
servants, employees or contractors (collectively, "LANDLORD'S AGENTS").
9.03 CHANGES IN FACILITIES. Landlord reserves the right, at
any time and without any liability to Tenant, to make changes in or additions
to the Building. including, without limitation. any changes to the Common
Areas, as it may deem necessary or desirable provided that (a) any such
change does not deprive Tenant of access to the Premises, (b) such change
does not materially interfere with the use of the Premises and does not
affect the first-class nature of the Project and (c) Landlord uses reasonable
efforts to minimize the extent and duration of any interference with Tenant's
use and occupancy of the Premises. Landlord may install and maintain pipes,
fans, ducts, shafts, wires and conduits within or through the walls, floors
or ceilings of the Premises.
9.04 LANDLORD ACCESS. Landlord and Landlord's Agents shall
have the right, upon reasonable prior notice to Tenant (except in an
emergency, in which case Landlord shall use reasonable efforts to provide
such notice as is possible under the circumstances), to enter the Premises to
inspect, clean or perform such work as Landlord may reasonably deem necessary
or to exhibit the Premises to prospective purchasers, mortgagees or, during
the last eighteen (18) months of the Term, tenants, or for any other purpose
as Landlord may deem necessary or desirable. Landlord shall use reasonable
efforts to minimize the adverse effect on Tenant of any entry by Landlord on
the Premises for any reason. Tenant shall not be entitled to any abatement
or reduction of Gross Rent by reason of such entry.
ARTICLE 10 -- COMPLIANCE WITH LAWS
10.01 COMPLIANCE WITH LAWS BY TENANT. Tenant, at its expense,
shall comply with all laws and ordinances and all rules, orders or
regulations (present, future, ordinary, extraordinary, foreseen or
unforeseen) of any governmental authority or of any insurer (provided that
any requirement of an insurer is on an industry-wide basis) with respect to
the Building and Land (including those imposed by the Occupational Safety and
Health Administration relating to indoor air quality) (collectively, "LEGAL
REQUIREMENTS"), at any time duly issued and in force,
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affecting or related to the Premises or any part thereof; PROVIDED, HOWEVER,
that nothing contained in this SECTION 10.01 shall require Tenant to make any
structural changes unless the same (a) are necessitated by a cause or
condition which has been created by, or at the instance of, Tenant or any of
the Tenant Parties, (b) are attributable to the use, other than as permitted
by SECTION 3.01, or manner of use of the Premises or manner of conduct of
Tenant's business, including, without limitation, use as a "place of public
accommodation" as defined in the Americans with Disabilities Act, or (c) are
necessitated by reason of a breach of Tenant's obligations hereunder. Tenant
need not comply with any Legal Requirement so long as Tenant shall be
diligently contesting the validity or applicability thereof in accordance,
with SECTION 10.03. Landlord shall cooperate with Tenant in connection with
the performance of Tenant's obligations under this SECTION 10.01.
10.02 ENVIRONMENTAL. (a) Throughout the Term, Tenant shall
not undertake or permit any Environmental Activity (as defined below) to be
undertaken in the Premises, Building or on the Land by any Tenant Party other
than (i) in compliance with all applicable Legal Requirements (as defined in
SECTION 10.01), (ii) as is customary for general office tenants in
First-Class Office Buildings and (iii) in such a manner as shall avoid any
liability on the part of Landlord and shall keep the Premises, Building and
Land free from any lien imposed pursuant to any Legal Requirement in respect
of such Environmental Activity. Tenant shall take all necessary steps to
ensure that any Environmental Activity undertaken or permitted at the
Premises is undertaken in a manner as to provide prudent safeguards against
potential risks to human health or the environment. Tenant shall notify
Landlord within 24 hours of the release of any Hazardous Materials (as
hereinafter defined) from or at the Premises which could form the basis of
any claim, demand or action by any party. Landlord shall have the right from
time to time to conduct an environmental audit of the Premises and Tenant
shall cooperate in the conduct of such environmental audit. If Tenant shall
breach the covenants provided in this Section, then, in addition to any other
rights and remedies which may be available to Landlord under this Lease or
otherwise at law, Landlord may require Tenant to take all actions, or to
reimburse Landlord for the costs of any and all actions taken by Landlord, as
are necessary or reasonably appropriate to cure such breach. The obligations
of Tenant under this Section 10.02 shall survive the expiration or sooner
termination of this Lease.
(b) Landlord represents that to the best of Landlord's
knowledge, there are no Hazardous Materials present at or in the Building,
the nature, concentration or condition of which violates any Legal
Requirement.
(c) "ENVIRONMENTAL ACTIVITY" means any use, storage,
installation, existence, release, threatened release, discharge, generation,
abatement, removal, disposal, handling or transportation from, under, into or
on the Premises of any Hazardous Materials. "HAZARDOUS MATERIALS" means
(i) any "hazardous substance" as defined in Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601(14), as amended; (ii) any asbestos or asbestos-containing
materials or polychlorinated biphenyls ("PCBS") or substances or materials
containing PCBs; (iii) petroleum. crude oil or any fraction thereof, natural
gas or synthetic gas used for fuel; and (iv) any additional substances or
materials which at such time are classified or considered to be hazardous or
toxic under the laws of the State of Tennessee or any other Legal
Requirements.
10.03 RIGHT TO CONTEST. Tenant, at its expense, after notice
to Landlord, may contest, by appropriate proceedings prosecuted diligently
and in good faith, the validity or applicability of any Legal Requirement,
provided that: (a) neither Landlord nor any Senior Interest Holder nor any of
their respective officers, directors, partners, shareholders, agents or
employees shall be subject to civil or criminal penalty or to prosecution for
a crime. nor shall the Building or any part thereof be subject to being
condemned or vacated, or subject to any lien or
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encumbrance, by reason of non-compliance or otherwise by reason of such
contest: (b) before the commencement of such contest, Tenant shall furnish to
Landlord the bond of a surety company reasonably satisfactory to Landlord, in
form, substance and amount reasonably satisfactory to Landlord, and shall
indemnity Landlord against the cost of such compliance and liability
resulting from or incurred in connection with such contest or non-compliance
(including the costs and expenses in connection with such contest); (c) such
noncompliance or contest shall not constitute or result in any violation of a
Superior Mortgage or Superior Lease (each as defined in SECTION 13.01) or if
any Senior Interest Holder (as defined in SECTION 13.02) shall condition such
non-compliance or contest upon the taking of action or furnishing of security
by Landlord, such action shall be taken and such security shall be furnished
at the expense of Tenant; and (d) Tenant shall keep Landlord regularly
advised as to the status of such proceedings.
10.04 COMPLIANCE WITH LAWS BY LANDLORD. Landlord, at its
expense, shall comply with all Legal Requirements applicable to the Premises
which are not the obligation of Tenant pursuant to SECTION 10.01, but may
defer compliance so long as Landlord shall be contesting in good faith by
appropriate proceedings the validity or applicability thereof. Landlord may
also contest Legal Requirements with which Landlord is required to comply
pursuant to this SECTION 10.04.
ARTICLE 11 -- RIGHT TO PERFORM TENANT COVENANTS
11.01 RIGHT TO PERFORM TENANT COVENANTS. If Tenant shall fail
to perform any of its obligations under this Lease, Landlord may perform the
same at the expense of Tenant (a) immediately and without notice in the case
of emergency or in case such failure unreasonably interferes with the use of
space by any other tenant in the Building or with the provision of Landlord's
Services or may result in a violation of any Legal Requirement and (b) in any
other case if such failure continues after ten (10) days from the date of the
giving by Landlord to Tenant of notice of Landlord's intention so to perform
the same. Tenant shall reimburse Landlord within five (5) Business Days of
Landlord's demand therefor all reasonable costs and expenses incurred by
Landlord in performing Tenant's obligations. Tenant's obligations under this
Section shall survive the expiration or sooner termination of this Lease.
ARTICLE 12 -- ASSIGNMENT AND SUBLETTING
12.01 ASSIGNMENT; ETC. (a) Subject to SECTION 12.02, neither
this Lease nor the term and estate hereby granted, nor any part hereof or
thereof, shall be assigned, mortgaged, pledged, encumbered or otherwise
transferred, and neither the Premises nor any part thereof shall be subleased
or be encumbered in any manner by reason of any act or omission on the part
of Tenant without the prior consent of Landlord. Transfer of a controlling
interest in the stock or other ownership interests of Tenant shall be deemed
to be a transfer of this Lease excepting only where such transfers of stock
are effected through the "over-the-counter" market or through any recognized
stock exchange or in connection with a public offering of shares of Tenant.
No consent of Landlord to any assignment or other transfer of this Lease and
the term and estate hereby granted, and no consent by Landlord to any
subletting of all or any portion of the Premises, shall be construed to
relieve Tenant of its obligation to obtain such consent to any further
assignment, other transfer or subletting. In addition, neither any
assignment of this Lease nor any subletting, occupancy or use of the Premises
or any part thereof by any person other than Tenant (whether or not consented
to by Landlord), nor any collection of rent by Landlord from any person other
than Tenant, nor any application of any such rent as provided in this
Article, shall be deemed a waiver of any of the provisions of this Article or
relieve, impair, release or discharge Tenant of its obligation fully to
perform the terms of this Lease on Tenant's part to be performed, and Tenant
shall remain fully and primarily liable hereunder.
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(b) Tenant may permit any corporation or other business
entity which controls, is controlled by or is under common control (and which
at all times so remains) with Tenant (a "RELATED CORPORATION") to sublet all
or part of the Premises upon prior written notice to Landlord setting forth
the name of such Related Corporation and the providing of reasonably
satisfactory evidence to Landlord from time to time upon request that such
subtenant is a Related Corporation. Such subletting shall not vest in any
such Related Corporation any right or interest in this Lease nor shall it
discharge any of Tenant's obligations hereunder. For purposes hereof,
"control" means ownership of 100% of the voting stock of a corporate tenant
or 100% of the beneficial interests of any other tenant.
12.02 ASSIGNMENT AND SUBLETTING PROCEDURES. (a) If Tenant
intends to assign this Lease or to sublet the Premises or any part thereof,
Tenant shall give Landlord notice of such intent. Tenant's notice (the
"TRANSFER NOTICE" ) shall be accompanied by (i) a certified description of
all material terms upon which Tenant intends to assign or sublet (including,
consideration, base rent and all other financial terms, rental abatements.
allowances and other concessions and other material terms) and (ii) a
statement setting forth in reasonable detail the identity of the proposed
assignee or sublessee, the nature of its business and its proposed use of the
Premises (to the extent a proposed assignee or subtenant has been identified)
and current financial information with respect to any such proposed assignee
or subtenant. Tenant shall provide Landlord with any additional information
or documents reasonably requested (within ten (10) days after receiving
Tenant's notice) by Landlord.
(b) Landlord shall then have the option, exercisable by
notice to Tenant within thirty (30) days after receipt of such additional
information (or the date of Tenant's original notice if Landlord does not
timely request additional information) to (i) in the case of a proposed
assignment or a proposed subletting for all or substantially all of the Term,
to terminate this Lease by Tenant, in which event Tenant shall be relieved of
all further obligations hereunder (except those which pursuant to this Lease
expressly survive such termination), or (ii) permit Tenant to assign this
Lease or sublet such space, subject, however, to Landlord's prior approval of
the proposed assignee or sublessee, which approval shall not be unreasonably
withheld or delayed so long as (A) the use of the Premises by such proposed
assignee or sublessee would be permitted under SECTION 3.01, (B) the proposed
assignee or sublessee is of sound financial condition as reasonably
determined by Landlord given the obligations to be assumed by such assignee
or sublessee under this Lease, (C) the terms of such assignment or subletting
shall be no more beneficial to the assignee or subtenant than the terms set
forth in the Transfer Notice, (D) the proposed sublessee or assignee is a
reputable person or entity of good character and Landlord has been furnished
with reasonable evidence thereof, (E) neither the proposed subtenant or
assignee nor any one controlling, controlled by or under common control with
such proposed subtenant or assignee is then an occupant of any portion of the
Building or is a person with whom Landlord is then negotiating to lease space
in the Building; PROVIDED, HOWEVER, that the condition set forth in this
clause (F) shall not apply to any proposed sublease or assignment unless
there shall be available space in the Building comparable to the space
proposed to be sublet or assigned within twelve (12) months after the
anticipated effective date of the proposed sublease or assignment, (F) the
form of the proposed sublease or assignment is reasonably satisfactory to
Landlord, (G) there shall be no more than two (2) occupants of the Premises,
including Tenant, and (H) the proposed subtenant shall not be (1) entitled,
directly or indirectly, to diplomatic or sovereign immunity unless
effectively waived and shall be subject to the service of process in, and the
jurisdiction of the courts of, the State of Tennessee or (2) a charitable,
religious, union or other not-for-profit organization or any tax exempt
entity within the meaning of Section 1680)(4)(A) of the Internal Revenue Code
of 1986, as amended, or any successor or substitute statute, or rule or
regulation applicable thereto (as the same may be amended).
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(c) If the aggregate amount payable by a subtenant under a
sublease of any part of the Premises (including any sums received by Tenant
for the sale or rental of Tenant's Property, less, in the case of a sale
thereof, the then net, unamortized or undepreciated cost thereof determined
on the basis of Tenant's Federal income tax returns) shall be in excess of
Tenant's Basic Cost (as hereinafter defined) therefor, then, within ten (10)
days after the collection thereof, Tenant shall pay to Landlord, as
Additional Rent, an amount equal to fifty percent (50%) of such excess.
Tenant shall deliver to Landlord within sixty (60) days after the end of each
calendar year and within sixty (60) days after the expiration or earlier
termination of each sublease a statement specifying each sublease in effect
at any time during such calendar year or partial calendar year, the number of
square feet of rentable area deemed thereby, the term thereof and a
computation in reasonable detail showing the calculation of the amounts paid
and payable by Tenant to Landlord with respect to such sublease for the
period covered by such statement. "TENANT'S BASIC COST" for sublet space at
any time means the sum of (i) the portion of the Base Rent, Tenant's
Operating Payment and Tenant's Tax Payment which is attributable to the
sublet space for the period covered by the payment by the applicable
subtenant, plus (ii) the amount of any out-of-pocket costs reasonably
incurred by Tenant in making changes in the layout and finish of the sublet
space for the subtenant amortized on a straight-line basis over the term of
the sublease plus (iii) the amount of any customary brokerage commissions and
legal fees and disbursements paid by Tenant in connection with the sublease
amortized on a straight-line basis over the term of the sublease.
(d) Upon any assignment of this Lease pursuant to the terms
hereof, Tenant shall pay to Landlord 50% of the Net Consideration (as
hereinafter defined) received by Tenant in respect of such assignment or
otherwise from such assignee. For purposes hereof, "NET CONSIDERATION" means
all sums paid by the assignee in consideration of such assignment minus all
customary and reasonable closing expenses (including, without limitation,
customary and reasonable legal and brokerage expenses) and the amount of any
out-of-pocket allowances or other incentives to the assignee, in any case
reasonably incurred by Tenant in connection with such assignment. "Net
Consideration" shall include any sums paid for the purchase or rental of any
of Tenant's Property, less, in die case of a sale thereof, the then net,
unamortized or undepreciated cost thereof determined on the basis of Tenant's
Federal income tax returns.
(e) No assignment made pursuant to this SECTION 12.02 shall
be valid unless, within ten (10) days after the execution thereof, Tenant
shall deliver to Landlord a duplicate original instrument of assignment and
assumption, duly executed by Tenant and by the assignee and in form and
substance reasonably satisfactory to Landlord, wherein such assignee shall
assume performance of all terms of this Lease on Tenant's part to be
performed.
(f) Tenant shall, within ten (10) days after (i) the
commencement of the term of a permitted sublease, give Landlord notice of
such commencement, or (ii) the effective date of a permitted assignment, give
Landlord notice of the effectiveness of such assignment.
(g) If Landlord elects to permit Tenant, pursuant to SECTION
12.02(B)(II), to assign or sublet (subject to the terms and conditions of
this SECTION 12.02), then (i) Tenant shall not enter into any assignment or
subletting without Landlord's consent in accordance with SECTION
12.02(B)(II)(A)-(H) hereof, and any request for Landlord's consent shall not
be valid unless such request shall contain all of the information required by
SECTION 12.02(A) (specifically including the information set forth in SECTION
12.02(A)(II) and the second sentence of SECTION 12.02(A) with respect to the
actual assignee or subtenant) and (ii) if Tenant does not enter into an
assignment or subletting within one hundred eighty (180) days after the date
of the Transfer Notice, then Tenant shall again comply with all of the
provisions and conditions of SECTIONS 12.02(A) and (B) before assigning this
Lease or subletting all or any part of the Premises.
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(h) If Landlord shall decline to consent to any proposed
assignment or sublease as permitted by this Lease, or if Landlord shall
exercise its option under this Section to terminate this Lease or take an
assignment or sublease of the proposed sublet premises, Tenant hereby agrees
to indemnity Landlord against any and all liability arising from any claims
that may be made against Landlord by the proposed assignee or subtenant or by
any broker, finder or other person claiming a commission or other
compensation in connection with the proposed assignment or sublease.
12.03 ADDITIONAL ASSIGNMENT AND SUBLEASING CONDITIONS. (a)
If this Lease is assigned, whether or not in violation of the terms of this
Lease, Landlord may collect rent from the assignee. If the Premises or any
part thereof is sublet or used or occupied by anybody other than Tenant,
Landlord may, after default by Tenant, collect rent from such subtenant or
occupant. In either event, Landlord may apply the net amount collected to the
rents herein reserved. The consent by Landlord to an assignment, transfer,
mortgage, pledge, encumbering or subletting pursuant to any provision of this
Lease shall not relieve Tenant or any assignee or subtenant from obtaining
the express prior consent of Landlord to any other or further assignment,
transfer. mortgage, pledge, encumbering or subletting. Tenant agrees to pay
to Landlord reasonable attorneys' fees and disbursements incurred by Landlord
in connection with any proposed assignment or subletting.
(b) No subletting shall be for a term ending later than the
day prior to the Expiration Date and any portion of a proposed term of any
sublease or any renewal or extension thereof which purports to extend beyond
such date, or the date of sooner termination of the Term, is hereby deemed to
be a nullity.
(c) If Landlord shall recover or come into possession of the
Premises before the Expiration Date, Landlord shall have the right to take
over any sublease made by Tenant and to succeed to all rights of Tenant
thereunder, Tenant hereby assigning (effective as of the date of Landlord's
succession to Tenant's estate in the Premises) such subleases as Landlord may
elect to take over. Every subletting hereunder shall be subject to the
condition that, from and after the termination of this Lease or re-entry by
Landlord hereunder or other succession by Landlord to Tenant's estate in the
Premises, the subtenant shall waive any right to surrender possession or to
terminate the sublease and, at Landlord's election, shall be bound to
Landlord for the balance of the term thereof and shall attorn to and
recognize Landlord, as its landlord, under all of the then executory terms of
such sublease, except that Landlord shall not (i) be liable for any previous
act. omission or negligence of Tenant as sublandlord, under such sublease,
(ii) be subject to any counterclaim, defense or offset theretofore accruing
to such subtenant against Tenant, (iii) be bound by any previous modification
or amendment of such sublease made without Landlord's consent or by any
previous prepayment of more than one month's rent and additional rent unless
paid as provided in the sublease, or (iv) be obligated to perform any repairs
or other work in the subleased space or the Building beyond Landlord's
obligations under this Lease. Each subtenant shall promptly execute and
deliver such instruments as Landlord may reasonably request to evidence and
confirm such attornment.
(d) Tenant shall reimburse Landlord on demand for all
reasonable costs (including all reasonable legal fees and disbursements, as
well as the costs of making investigations as to the acceptability of a
proposed assignee or subtenant) which may be incurred by Landlord in
connection with a request by Tenant that Landlord consent to any proposed
assignment or sublease.
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ARTICLE 13 -- SUBORDINATION
13.01 SUBORDINATION. (a) Provided that Tenant shall have
received a subordination. non-disturbance and attornment agreement in form
and substance that complies with the terms of this ARTICLE 13 and that is
otherwise commercially reasonable and is executed and acknowledged by each
Superior Mortgage or Superior Lessor, as applicable (each, a "NON-DISTURBANCE
AGREEMENT"), this Lease and Tenant's rights hereunder are subject and
subordinate to: (i) all present and future ground leases, operating leases,
superior leases, overriding leases and underlying leases and grants of term
of the Building or any portion thereof (collectively, including the
applicable items set forth in CLAUSE (IV) of this SUBSECTION (A), "SUPERIOR
LEASES"); (ii) all mortgages and building loan agreements, including
leasehold mortgages and spreader and consolidation agreements, which may now
or hereafter affect all or any portion of the Building or any Superior Lease
(collectively, including the applicable items set forth in CLAUSES (III) and
(IV) of this SUBSECTION (A), "SUPERIOR MORTGAGES"), whether or not a Superior
Mortgage shall also cover other lands or buildings or leases, except that a
mortgage on the Land only shall not be a Superior Mortgage so long as there
is in effect a Superior Lease which is not subordinate to such mortgage;
(iii) each advance made under any Superior Mortgage; and (iv) all renewals,
modifications, replacements, substitutions and extensions of any Superior
Lease or Superior Mortgage. Provided that Tenant shall have received a
Non-Disturbance Agreement that is executed and acknowledged by each Superior
Mortgagee or Superior Lessor, as applicable, the provisions of this
subsection shall be self-operative and no further instrument of subordination
shall be required.
(b) Tenant shall, within ten (10) days after request
therefor, execute and deliver, at its expense, any instrument, in recordable
form if requested, that Landlord, any holder of a Superior Mortgage (a
"SUPERIOR MORTGAGE ") or any lessor under a Superior Lease (a "SUPERIOR
LESSOR") may reasonably request, from time to time, to evidence and confirm
the subordination provided in SUBSECTION (A) of this SECTION 13.01 provided
Tenant shall have received a Non-Disturbance Agreement from such Superior
Mortgagee or Superior Lessor, as applicable.
(c) Any Superior Mortgagee may elect that this Lease shall
have priority over the mortgage held by such Superior Mortgagee (such
mortgage, upon such election by the applicable Superior Mortgagee, is
referred to herein as a "SUBORDINATED MORTGAGE") and, upon notification by
such Superior Mortgagee to Tenant, this Lease shall be deemed to have
priority over such Subordinated Mortgage, whether this Lease is dated prior
to or subsequent to the date of such Subordinated Mortgage and, to the extent
that such an election is made by a Superior Mortgagee, the provisions of this
Article shall not be applicable to such Subordinated Mortgage (except as
otherwise provided), but such Superior Mortgagee shall remain a Superior
Mortgagee for the purpose of all other provisions of this Lease. Tenant and
such Superior Mortgagee shall promptly, upon the notification by such
Superior Mortgagee, execute and deliver an instrument in recordable form to
evidence and confirm such priority.
(d) If, in connection with obtaining, continuing or renewing
financing for which the Building, the Land or the interest of the lessee
under any Superior Lease represents collateral, in whole or in part, the
Superior Mortgagee or proposed Superior Mortgagee (including any which may
elect that this Lease shall have priority over such Superior Mortgage) shall
request reasonable modifications of this Lease as a condition of such
financing, Tenant shall not unreasonably withhold its consent thereto,
provided that such modifications do not increase Tenant's obligation to pay
Base Rent or Additional Rent, shorten or lengthen the Term and do not
materially increase any other obligations or materially diminish any other
rights of Tenant under this Lease.
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(e) Landlord represents and warrants that, as of the date
hereof, neither the Land nor the Building is (i) subject to any Superior
Lease or (ii) encumbered by or otherwise subject to any Superior Mortgage.
13.02 ATTORNMENT. (a) If at any time any Superior Lessor or
Superior Mortgagee (each a "SENIOR INTEREST HOLDER") or any other person or
the successors or assigns of any of the foregoing (such Senior Interest
Holder and any such other person being herein collectively referred to as
"SUCCESSOR LANDLORD") shall succeed to the rights of Landlord under this
Lease, Tenant agrees, at the election and upon the request of any such
Successor Landlord, from time to time, fully and completely to attorn to and
recognize any such Successor Landlord as Tenant's landlord under this Lease
upon the then executory terms of this Lease, PROVIDED such Successor Landlord
shall agree in writing to accent Tenant's attornment pursuant to a
Non-Disturbance Agreement. The foregoing provisions of this SECTION 13.02
shall inure to the benefit of any such Successor Landlord, shall apply
notwithstanding that, as a matter of law, this Lease may terminate upon the
termination of the Superior Lease and shall be self-operative upon any such
request, and, provided that Tenant shall have received a Non-Disturbance
Agreement that is executed and acknowledged by each Superior Mortgagee or
Superior Lessor, as applicable, no further instrument shall be required to
give effect to said provisions. Upon the request of any such Successor
Landlord, Tenant shall execute and deliver, from time to time, instruments
reasonably satisfactory to any such Successor Landlord, in recordable form if
requested, to evidence and confirm the provisions of this SECTION 13.02,
acknowledging such attornment and setting forth the terms and conditions of
its tenancy, including the terms and conditions set forth in SECTION 13.02(B).
(b) Upon any attornment described in SECTION 13.02(A), this
Lease shall continue in full force and effect as a direct lease between such
Successor Landlord and Tenant upon all of the then executory terms of this
Lease except that such Successor Landlord shall not be: (i) liable for any
act or omission or negligence of any prior Landlord (other than to cure any
default of a continuing nature), (ii) subject to any counterclaim, defense or
offset which theretofore shall have accrued to Tenant against any prior
Landlord; (iii) bound by the payment of any Base Rent or Additional Rent for
more than one month in advance (unless actually received by such Successor
Landlord); (iv) bound by any modification or amendment of this Lease unless
such modification or amendment shall have been approved in writing by the
Senior Interest Holder, of which Tenant has been given notice, through or by
reason of which the Successor Landlord shall have succeeded to the rights of
Landlord under this Lease or unless the modification or amendment shall have
occurred prior to the creation of such Senior Interest, (v) obligated to
construct any improvements or to grant any credit toward the cost of any
improvements; (vi) in the event of damage to the Building by fire or other
casualty, obligated to repair the Premises or the Building or any part
thereof beyond such repair as may be reasonably accomplished from the net
proceeds of insurance actually made available to Landlord; or (vii) in the
event of partial condemnation, obligated to repair the Premises or the
Building or any part thereof beyond such repair as may be reasonably
accomplished from the net proceeds of any award actually made available to
Landlord as consequential damages allocable to the part of the Premises or
the Building not taken. Nothing contained in this SECTION 13.02 shall be
construed to impair any right otherwise exercisable by any such Successor
Landlord.
13.03 RIGHT TO CURE. Subject to the provisions of Section
18.01(b) hereof, if any act or omission by Landlord shall give Tenant the
right, immediately or after the lapse of time, to cancel or terminate this
Lease in whole or in part or to claim such cancellation or termination on the
basis of a partial or total eviction, Tenant shall not exercise any such
right until (a) it shall have given written notice of such act or omission to
each Senior Interest Holder whose name and address shall have been previously
furnished to Tenant, and (b) a reasonable period for remedying such act or
omission shall have elapsed following such notice and following the time when
such
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Superior Mortgagee or Superior Lessor shall have become entitled under such
Superior Mortgage, Subordinated Mortgage or Superior Lease, as the case may
be, to remedy the same.
ARTICLE 14 -- CONDITIONS OF LIMITATION
14.01 DEFAULT. This Lease and the term and estate hereby
granted are subject to the limitation that:
(a) if Tenant shall default in the payment of Base Rent or
Additional Rent on any date upon which the same becomes due and such default
shall continue for a period of five (5) days after Landlord shall have given
Tenant a notice specifying such default, or
(b) if any event shall occur or any contingency shall arise
whereby this Lease or the estate hereby granted or the unexpired balance of
the Term would. by operation of law or otherwise, devolve upon or pass to any
person other than Tenant except as is expressly permitted under ARTICLE 12, or
(c) if Tenant shall default in the keeping, observance or
performance of any covenant or agreement (other than a default of the
character referred to in SECTIONS 14.01(A) and/or 14.01(B)), and if such
default shall continue and shall not be cured within thirty (30) days after
Landlord shall have given to Tenant a notice specifying the same, or, in the
case of a default which for causes beyond Tenant's reasonable control, cannot
with due diligence be cured within such period of thirty (30) days, if Tenant
(i) shall not, promptly upon the giving of such notice, advise Landlord of
Tenant's intention duly to institute all steps necessary to cure such default
or (ii) shall not duly institute and thereafter diligently prosecute to
completion all steps necessary to cure the same and, in any event, cure such
default within ninety (90) days of receipt of Landlord's notice of such
default by Tenant, or
(d) if the Premises or any substantial portion thereof shall
be abandoned or become vacant for a period of twenty (20) consecutive
Business Days (except as a result and to the extent of a casualty or
condemnation), or
(e) if Tenant shall make an assignment for the benefit of
creditors or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Tenant or of all or any part of Tenant's
property or if a petition is filed by or against (with Tenant's consent)
Tenant under the United States Bankruptcy Code, 11 U.S.C. Sections 101-1330,
as amended, or any successor thereto (the "BANKRUPTCY CODE"), or if a petition
is filed against Tenant under the Bankruptcy Code without the consent of
Tenant and has not been dismissed within ninety (90) days after such filing,
or
(f) if, within ninety (90) days after the appointment of any
trustee, receiver or liquidator of Tenant or of all or any part of Tenant's
property, without the consent of Tenant, such appointment shall not have been
vacated or otherwise discharged, or if any execution or attachment shall be
issued against Tenant or any of Tenant's property pursuant to which the
Premises shall be taken or occupied or attempted to be taken or occupied,
then, in any of such cases, Landlord shall, in addition to any other remedies
available to it at law or in equity, be entitled to give to Tenant a notice
of intention to end the Term at the expiration of three (3) days from the
date of the giving of such notice, and in the event such notice is given,
this Lease and the Term and estate hereby granted shall terminate upon the
expiration of such three (3) days with the same effect as if the last of such
three (3) days were the Expiration Date, but Tenant shall remain liable for
damages as provided herein or pursuant to law.
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14.02 INTENTIONAL DEFAULT. Tenant expressly recognizes that
Tenant's due and punctual performance of all of its obligations under this
Lease throughout the Term is of importance to Landlord, and, without limiting
the foregoing provisions of SECTION 14.01, Tenant agrees that, if Tenant
shall default in the timely payment of Base Rent or Additional Rent, and such
default shall continue or be repeated for three (3) consecutive months or for
a total of four (4) months in any period of twelve (12) consecutive months,
then, notwithstanding that such defaults shall have each been cured within
the applicable period, if any, as above provided, any further similar default
shall be deemed to be deliberate and Landlord thereafter may serve the
termination notice described in SECTION 14.01 hereof upon Tenant without
affording to Tenant an opportunity to cure such further default.
14.03 RE-ENTRY BY LANDLORD. If this Lease shall terminate as
provided in SECTION 14.01, Landlord or Landlord's agents and servants may
immediately or at any time thereafter re-enter into or upon the Premises, or
any part thereof in the name of the whole, either by summary dispossess
proceedings or by any suitable action or proceeding at law, without being
liable to indictment, prosecution or damages therefor, and may repossess the
same, and may remove any persons therefrom, to the end that Landlord may
have, hold and enjoy the Premises again as and of its first estate and
interest therein. The words "re-enter" and "re-entering" as used in this
Lease are not restricted to their technical legal meanings.
14.04 DAMAGES. In the event of a termination of this Lease,
Tenant shall pay to Landlord as damages, at the election of Landlord, either:
(a) a sum which, at the time of such termination, represents
the then present value (employing a discount rate equal to the then
current rate of United States Treasury Bills or Notes, as applicable,
maturing on the Expiration Date or the next maturity date for such bills
or notes occurring after the Expiration Date) of the excess, if any of
(i) the aggregate of the Base Rent and Additional Rent which would have
been payable hereunder by Tenant, had this Lease not terminated, for the
period commencing with the day following the date of such termination
and ending with the Expiration Date over (ii) the aggregate fair rental
value of the Premises for the same period (for the purposes of this
SUBSECTION (A), the amount of Additional Rent which would have been
payable by Tenant under ARTICLE 5 shall, for each calendar year ending
after such termination, be deemed to be an amount equal to the amount of
Tenant's Operating Payment and Tenant's Tax Payment payable by Tenant
for the calendar year and Tax Year, respectively, immediately preceding
the calendar year in which such termination shall occur), or
(b) sums equal to the aggregate Gross Rent which would have
been payable by Tenant had this Lease not terminated, payable upon
the due dates therefor specified herein until the Expiration Date,
PROVIDED, HOWEVER, that if Landlord shall relet all or any part of the
Premises for all or any part of the period commencing on the day
following the date of such termination and ending on the Expiration
Date, Landlord shall credit Tenant with the net rents received by
Landlord from such reletting, such net rents to be determined by
first deducting from the gross rents as and when received by Landlord
from such reletting the expenses incurred or paid by Landlord in
terminating this Lease and re-entering the Premises and securing
possession thereof, as well as the expenses of reletting, including
altering and preparing the Premises for new tenants, brokers'
commissions, and all other expenses properly chargeable against the
Premises and the rental therefrom in connection with such reletting,
it being understood that any such reletting may be for a period equal
to or shorter or longer than said period and that Landlord shall have
no obligation to so relet the Premises; and PROVIDED FURTHER that (i) in
no event shall Tenant be entitled to receive any excess of such net
rents over the sums payable by Tenant to Landlord hereunder, (ii) in no
event shall Tenant be entitled, in any suit for the collection of
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damages pursuant to this SUBSECTION (B), to a credit in respect of any
net rents from a reletting except to the extent that such net rents are
actually received by Landlord, and (iii) if the Premises or any part
thereof should be relet in combination with other space, then proper
apportionment on a square foot rentable area basis shall be made of the
rent received from such reletting and of the expenses of reletting.
Suit or suits for the recovery of any damages payable hereunder by Tenant, or
any installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall require Landlord to postpone
suit until the date when the Term would have expired but for such termination.
14.05 RIGHT TO INJUNCTION. In the event of a breach or
threatened breach on the part of Tenant with respect to any of the covenants
or agreements on the part of or on behalf of Tenant to be kept, observed or
performed, Landlord shall also have the right to seek an injunction.
14.06 OTHER REMEDIES. (a) Landlord shall have the right,
following any breach of or default under this Lease by Tenant, to elect to
keep this Lease in full force and effect, with Tenant retaining the right to
possession of the Premises (notwithstanding the fact that Tenant may have
abandoned the Premises). In such event Landlord, besides all other rights
and remedies Landlord may have at law or equity, shall have the right to
enforce all of Landlord's rights and remedies under this Lease, including the
right to recover the installments of Gross Rent as they become due under this
Lease. Notwithstanding any such election to have this Lease remain in full
force and effect, Landlord may at any time thereafter elect to terminate
Tenant's right to possession of the Premises and thereby terminate this Lease
for any previous breach or default which remains uncured, or for any
subsequent breach or default.
(b) Nothing herein contained shall be construed as limiting
or preventing the recovery by, Landlord against Tenant of any sums or damages
to which, in addition to the damages particularly provided above, Landlord
may lawfully be entitled by reason of any default hereunder on the part of
Tenant. The specified remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies or
means of redress to which Landlord may lawfully be entitled at any time, and
Landlord may invoke any remedy allowed at law or in equity as if specific
remedies were not herein provided.
14.07 CERTAIN WAIVERS. Tenant waives and surrenders all right
and privilege which it might have under or by reason of any present or future
law to redeem the Premises or to have a continuance of this Lease for the
Term after Tenant is dispossessed or ejected therefrom by process of law.
14.08 NO WAIVER. Failure of Landlord to declare any default
immediately upon its occurrence or delay in taking any action in connection
with such default shall not waive such default but Landlord shall have the
right to declare any such default at any time thereafter. Any amounts paid
by Tenant to Landlord may be applied by Landlord, in its sole discretion, to
any items then owing by Tenant to Landlord under this Lease and receipt of a
partial payment shall not be deemed to be an accord and satisfaction or
waiver of the failure to make full payment.
14.09 ATTORNEYS' FEES. In the event Landlord places the
enforcement of this Lease, or any part thereof, or the collection of any rent
due, or to become due, hereunder, or recovery of the possession of the
Premises in the hands of an attorney, or files suit upon the same, Tenant
shall reimburse Landlord within fifteen (15) Business Days after demand
therefor for its reasonable attorneys' fees and disbursements and court costs.
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ARTICLE 15 -- QUIET ENJOYMENT
15.01 QUIET ENJOYMENT. Landlord covenants that, so long as
Tenant is not in default in the payment or performance of any of its
obligations under this Lease beyond any applicable grace period, Tenant shall
and may peaceably and quietly have, hold and enjoy the Premises. This
covenant and any and all other covenants of Landlord contained in this Lease
shall be binding upon Landlord and its successors and assigns only with
respect to breaches which occur during its and their respective ownership of
Landlord's interest.
ARTICLE 16 -- RULES OF THE BUILDING
16.01 BUILDING RULES. Tenant shall comply with, and Tenant
shall cause the Tenant Parties to comply with the rules of the Building
reasonably adopted and altered by Landlord from time to time (the "BUILDING
RULES") for the safety, care and cleanliness of the Premises and the Building
and for preservation of good order therein, all of which shall be
communicated by Landlord to Tenant and shall be thereafter carried out and
observed by Tenant and the Tenant Parties. Landlord shall not enforce or
modify the Building Rules in a manner which discriminates against Tenant.
The initial Building Rules are set forth in EXHIBIT "C". If any Building
Rule shall conflict with any provision of this Lease, such Lease provision
shall govern.
16.02 SIGNS. (a) GENERAL. No signs, numerals, letters,
notices, logos, pictures, names, advertisements or other graphics shall be
used or permitted on the exterior of, or which may be visible from outside,
the Premises, unless approved in advance of installation by (i) Landlord and
(ii) any governmental, quasi-governmental, association or other third person
or entity, having approval rights (whether pursuant to any Legal
Requirements, insurance requirements, contract or agreement or recorded
instrument) (collectively, "THIRD PARTY, APPROVERS").
(b) FULL FLOOR TENANTS. Subject to Landlord's prior written
approval and provided all Signs are in keeping with the quality, design and
style of Signs under any rules established by Landlord (in its sole judgment
and discretion) in respect of the Building ("SIGNAGE RULES"), Tenant, if the
Premises comprise an entire floor of the Building, at its sole cost and
expense, may install identification Signs anywhere in the Premises including
in the elevator lobby of the Premises, provided that such signs must not be
visible from the exterior of the Building or in the atrium of the Building.
(c) MULTI-TENANT FLOOR TENANTS. If Tenant occupies less
than the entire floor on which the Premises is located, Tenant's identifying
Signs shall be provided by Landlord, at Tenant's sole cost and expense, and
such Signs shall be comparable to Chat used by Landlord for other similar
floors in the Building and shall comply with the Signage Rules. Any
additions, deletions or modifications to such Building standard signage shall
be at Tenant's sole expense and subject to the prior written approval of
Landlord, in its sole discretion.
(d) PROHIBITED SIGNS AND OTHER ITEMS. Any Signs which are
installed and that have not been individually approved by Landlord or other
person or entity having the right of approval may be removed by Landlord
without notice at the sole expense of Tenant. Subject to SECTION 16.03
hereof, Tenant may not install any Signs on the exterior or roof of the
Building or the Common Areas of the Building or the Land. Any Signs, window
coverings or blinds (even if the same are located behind Landlord approved
window coverings for the Building), or other items visible from the exterior
of the Premises or Building are subject to the prior written approval of
Landlord, in its sole discretion.
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16.03 MONUMENT. Landlord shall have no obligation to install
on the Land any monument sign (a "Monument") listing the names of tenants in
the Building on the Monument except as set forth in this SECTION 16.03. In
the event that Landlord shall erect a Monument which is not for the exclusive
use of the owner of the Land and/or Building or a tenant occupying one
hundred thousand (100,000) or more rentable square feet of space in the
Building, and MagneTek, Inc. (the "ORIGINAL TENANT") shall request to have
its name affixed to such Monument, then, provided that all Third Party
Approvers shall have approved the Monument and any conditions for such
approval shall have been complied with, Landlord shall not unreasonably
withhold its consent to such request subject to compliance with the following
terms and conditions:
(a) The right to have a name so affixed shall be determined
based upon the number of rentable square feet leased by the relevant
tenant, so that if there shall be a limited number of name
identifications (each herein referred to as a "STRIP"), then the
Original Tenant may not have the right to a Strip if the number of
tenants with more rentable square feet in the Building than the
Original Tenant shall be equal to or greater than the number of Strips
(PROVIDED, HOWEVER, that Landlord agrees to use all reasonable efforts
to ensure that there is room on the Monument for a Strip for the
Original Tenant;
(b) The design, size, location, specifications, graphics,
materials, colors, and lighting with respect to any Monument and Strip
shall be determined by Landlord in its sole discretion;
(c) Landlord shall have the right to remove, relocate,
redesign and/or reconstruct the Monument from time to time;
(d) Tenant shall reimburse Landlord, on demand from time to
time, for a pro-rata share of all costs attributable to (i) the normal
operation, maintenance and repair of the Monument and Strips, and
(ii) the construction and/or installation of the Monument or Strips.
Such pro rata share shall be a fraction, the numerator of which is
one (1), and the denominator of which is the number of tenant names or
logos on the Monument or of tenants who have requested and been approved
to have their names or logos on the Monument at the time that such cost
has been incurred, PROVIDED, HOWEVER, that Landlord may elect, in its
reasonable judgment, to require any tenant requesting its name or logo
to be added to a Monument that was constructed prior to such request (or
approval thereof) to contribute its pro rata share of the construction
cost, determined as if such tenant's name or logo were on the Monument
at the time of construction,
(e) The rights granted to the Original Tenant under this
SECTION 16.03 shall be personal to the Original Tenant, and may not
be exercised by or assigned to. any assignee or sublessee, or any other
person or entity; and
(f) Upon termination or expiration of this Lease (including
pursuant to ARTICLE 26 hereof) or upon the earlier termination of the
Original Tenant's rights under this SECTION 16.03, Landlord shall have
the right, at the Original Tenant's sole cost and expense, to
(i) permanently remove the Strip, and to repair all damage to the
Monument resulting from such removal or (ii) in the case where the
Original Tenant shall have the sole remaining name or logo on the
Monument to permanently remove the Monument, and to repair all damage
resulting therefrom.
16.04 USE OF BUILDING NAME. Notwithstanding anything set
forth in this Lease, Landlord shall have the right to name or refer to the
Building, in Landlord's sole judgment and discretion, and Landlord shall have
the right to use such name or reference to the Building or the
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address of the Building in its sole discretion, including on any ground floor
signage, and Landlord shall not be required to include Tenant's name in
connection with the marketing, operation, or other identification of the
Building; PROVIDED, HOWEVER, that (a) upon the sale of the Land and Building
by WCCT, the signs in front of the Building and in the atrium of the Building
referring to the Building as "WILLIS CORROON PLAZA" shall be removed and (b)
the Building shall not be named for any tenant or other corporate entity.
ARTICLE 17 -- INSURANCE
17.01 COMPLIANCE WITH INSURANCE STANDARDS. Tenant shall not
occupy or use the Premises, or permit any portion of the Premises to be
occupied or used, for any business or purpose which is unlawful, disreputable
or deemed to be hazardous on account of fire or other hazards. Landlord
shall not be liable for the acts or omissions of other tenants or parties
which are in violation of the provisions of this Section.
17.02 LANDLORD INSURANCE. (a) Landlord shall obtain and keep
in full force and effect insurance against loss or damage by fire and other,
casualty to the Building, excluding any Alterations of Tenant and Tenant's
Property, as may be insurable under then available standard forms of
"all-risk" insurance policies, in an amount at least equal to eighty percent
(80%) of the replacement value thereof with such commercially reasonable
deductible(s) as may be determined by Landlord in its reasonable discretion.
Tenant shall notify Landlord of the completion of any such alterations and of
the cost thereof, and shall maintain adequate records with respect to such
Alterations to facilitate the adjustment of any insurance claims with respect
thereto. Tenant shall cooperate with Landlord and Landlord's insurance
companies in the adjustment of any claims for any damage to the Building or
such Alterations.
(b) Landlord shall have the right to satisfy its obligations
under SUBSECTION (A) of this SECTION 17.02 by means of any so-called blanket
policy or policies of insurance covering the Building and other properties of
Landlord or its affiliates.
17.03 TENANT INSURANCE. (a) Tenant, at Tenant's sole cost
and expense, shall obtain and keep in full force and effect insurance against
loss or damage by fire and other casualty to all existing improvements to the
Premises (i.e., all improvements to the Premises in excess of the Building
shell) (the "EXISTING IMPROVEMENTS"), Alterations and Tenant's Property under
then available standard forms of "all-risk" insurance policies, in an amount
equal to one hundred percent (100%) of the replacement value thereof, with
such commerciallv reasonable deductible(s) as may be determined bv Tenant in
its reasonable discretion.
(b) Tenant, at Tenant's sole cost and expense, shall obtain
and maintain in full force and effect throughout the term a commercial
general liability insurance policy (ISO form or equivalent) insuring Tenant
and naming Landlord at Landlord's request, any Senior Interest Holder and any
managing agent of Landlord as additional insured(s), against any liability
for bodily injury, death or property damage occurring on or about the
Premises, with limits of liability of not less than $5,000,000 with respect
to bodily injury and property damage arising from any one occurrence and
$5,000,000 from the aggregate of all occurrences within each policy year with
such commercially reasonable deductible as may be reasonably agreed to by
Landlord and Tenant. Such policy shall include a provision that such
aggregate limit shall apply separately at the Premises and that such insurer
will provide notice to Landlord if the available portion of such aggregate is
reduced to less than $5,000,000 by either payment of claims or the
establishment of reserves for claims. Tenant agrees that if the aggregate
limit applying to the Premises is reduced by the payment of a claim or
establishment of a reserve Tenant shall take immediate commercially
reasonable steps to have the required aggregate limit restored by endorsement
to the existing policy or the purchase of an additional insurance policy.
Such policy
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shall also include a provision that no act or omission of Tenant shall affect
or limit the obligations of the insurance company in respect of any
additional insured.
(c) Tenant shall not carry separate or additional insurance
with respect to the risks covered by the insurance required by this ARTICLE
17, concurrent in form or contributing in the event of any loss or damage
with any insurance required to be obtained by Tenant under this Lease. Tenant
may carry any insurance coverage required of it hereunder pursuant to blanket
policies of insurance so long as the coverage afforded Landlord and the other
named insured thereunder shall not be less than the coverage which would be
provided by direct policies.
17.04 WAIVER OF SUBROGATION. The parties hereto (a) shall use
all reasonable efforts to procure an appropriate clause in, or endorsement
on, any all-risk insurance covering the Premises, the Building and personal
property, fixtures and equipment located thereon or therein, pursuant to
which the insurance companies issuing same waive subrogation or consent to a
waiver of right of recovery, and (b) subject to obtaining such clause or
endorsement of waiver of subrogation or consent to a waiver of right of
recovery, hereby agree not to make any claim against or seek to recover from
the other for any loss or damage to its property or the property of others
resulting from fire or other hazards covered by such fire and extended
coverage insurance; PROVIDED, HOWEVER, that the release, discharge,
exoneration and covenant not to sue herein contained shall be limited by and
coextensive with the terms and provisions of the waiver of subrogation clause
or endorsement or clause or endorsement consenting to a waiver of right of
recovery. If the payment of an additional premium is required for the
inclusion of such waiver of subrogation or consent to waiver provision, each
party shall advise the other of the amount of any such additional premiums
and the other party at its own election may, but shall not be obligated to,
pay the same. If such other party shall not elect to pay such additional
premium, the first party shall not be required to obtain such waiver of
subrogation or consent to waiver provision. Tenant acknowledges that
Landlord shall not carry insurance (i) on, and shall not be responsible for
damage to, Tenant's Property, and (ii) against, or be responsible for any
loss suffered by Tenant due to, interruption of Tenant's business.
17.05 POLICY REQUIREMENTS. The insurance required to be
obtained by Tenant under this Article: (a) shall be issued by an insurance
company of recognized reputability licensed to do business in the State of
Tennessee, which is rated A-/X or better by Best's Key Rating Guide. and (b)
shall be primary and not be concurrent in form or contributing with any other
coverage which Tenant or Landlord may carry, and (c) shall name Landlord and
each Senior Interest Holder as an additional insured on Tenant's commercial
general liability insurance policy. Neither the issuance of any insurance
policy required under this Lease, nor the minimum limits specified herein
with respect to Tenant's insurance coverage, shall be deemed to limit or
restrict in any way Tenant's liability arising under this Lease. The dollar
amounts set forth in this Article shall be subject to review by Landlord and
each Senior Interest Holder from time to time during the term and may be
increased by Landlord in accordance with the requirements generally imposed
by landlords from time to time at First-Class Office Buildings. With respect
to each insurance policy required to be obtained by Tenant under this
Article, within ten (10) days after written request from Landlord, Tenant
shall deliver to Landlord satisfactory evidence that such insurance is in
effect and satisfies the requirements of this Article, together with evidence
of payment of all applicable premiums. Each insurancer) policy required to
be carried hereunder by or on behalf of Tenant shall provide (and any,
certificate evidencing the existence of each such insurance policy shall
certify) that such insurance policy shall not be cancelled or modified unless
Landlord shall have received thirty (30) days' prior written notice of such
cancellation or modification. Landlord shall have the right to require
Tenant to cause to be delivered a copy (certified by Tenant as a true,
correct and complete copy) of any required policy and shall not be limited to
accepting a certificate of insurance.
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ARTICLE 18 -- NONLIABILITY AND INDEMNIFICATION
18.01 EXCULPATION. (a) Neither Landlord nor any Senior
Interest Holder, nor any of their agents, officers, directors, shareholders,
partners or principals (disclosed or undisclosed) shall be liable to Tenant
and the Tenant Parties in connection with any injury to Tenant or to any
other person or for any damage to, or loss (by theft or otherwise) of, any of
Tenant's Property or of the property of Tenant or any other person arising
from or in connection with the use by Tenant or such other person of the
Premises or the Project, irrespective of the cause of such injury, damage or
loss, it being understood that no property, other than such as might normally
be brought upon or kept in the Premises as incidental to the reasonable use
of the Premises for the purposes herein permitted will be brought upon or be
kept in the Premises. Any employee to whom any property shall be entrusted
by or on behalf of Tenant shall be deemed to be acting as Tenant's agent with
respect to such property and neither Landlord nor any Senior Interest Holder
nor their respective agents shall be liable for any loss of or damage to any
such property by theft or otherwise. No representation, guaranty or warranty
is made that the communications or security systems, devices or procedures of
the Building will be effective to prevent injury to Tenant or any other
person or damage to, or loss (by theft or otherwise) of, any of the property
of Tenant or the property of any other person, and Landlord reserves the
right to discontinue or modify), at any time such communications or security
systems or procedures without liability to Tenant.
(b) Notwithstanding anything to the contrary contained in
this Lease, if due to (i) the breach by Landlord of any of its obligations
under this Lease (other than by reason of Force Majeure), (ii) the negligent
acts or omissions or wilful misconduct of Landlord or any of Landlord's
employees, agents, contractors or representatives, (iii) the exercise by
Landlord of its rights of access to the Premises pursuant to this Lease, or
(iv) the failure, stoppage, interruption or suspension in the furnishing of
any Landlord Services (other than by reason of Force Majeure), (A) the
Premises or any portion thereof shall be rendered untenantable or
inaccessible (the Premises or any such portion so affected being referred to
herein as the "AFFECTED PORTION"), for a period of fifteen (15) consecutive
Business Days, and (B) Tenant shall not have been using or occupying such
Affected Portion for the conduct of its business during such period, then the
Base Rent and Additional Rent payable with respect to such Affected Portion
shall be abated in the proportion that such Affected Portion bears to the
total rentable area of the Premises on a per diem basis for each day
commencing on the date that the same became an Affected Portion and
terminating on the earlier to occur of (I) the date that such Affected
Portion shall become tenantable and accessible and Tenant's ability to
conduct its business therein shall no longer be materially impaired or (II)
the date Tenant commences to use such Affected Portion for the conduct of its
business.
18.02 INDEMNITY. To the fullest extent permined by applicable
law, Tenant hereby agrees to indemnity and hold harmless Landlord, each
Senior Interest Holder and any managing agent of Landlord, and their
respective agents, officers, directors, shareholders, partners and
principals, from and against any and all claims, losses, actions, damages,
liabilities and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) that arise out of or in connection with
(a) the possession, use, occupancy, management, repair, maintenance or
control of the Premises, or any portion thereof, or the business conducted by
Tenant in the Premises, or (b) any willful or negligent act or omission of
Tenant or anyone for whom Tenant is responsible, or (c) any, default, breach,
violation or nonperformance of this Lease by Tenant or any subtenant of
Tenant or any officer, employee. agent or contractor of Tenant or any
subtenant of Tenant, or (d) any Environmental Activity by Tenant or anyone
for whom Tenant is responsible at the Building, or (e) any injury or death to
individuals or damage to property sustained (i) on or about the Land or the
Building by any Tenant Parties, or (ii) on or about the Premises; PROVIDED,
HOWEVER, that nothing contained in this Section shall obligate
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Tenant to indemnity Landlord from any claim, loss, damage, liability or
expense resulting from the negligence or willful misconduct of Landlord or
Landlord's Agents. Tenant shall, at its own cost and expense, upon notice
thereof from Landlord defend any and all actions, suits and proceedings which
may be brought against any one or more of the aforesaid parties with respect
to the foregoing or in which any one or more of the aforesaid parties may be
impleaded. Tenant shall pay, satisfy and discharge any and all final money
judgments which may be recovered against Landlord in connection with the
foregoing. The commercial general liability insurance policy required by
SECTION 17.03(B) hereof shall also cover Tenant for liability assumed by
contract, specifically including CLAUSE (E) of this SECTION 18.02. The
obligations of Tenant under this SECTION 18.02 shall survive the expiration
or sooner termination of this Lease.
18.03 LIMITATION OF LANDLORD'S PERSONAL LIABILITY. Tenant
shall look solely to Landlord's interest in the Building (and the proceeds of
any voluntary or involuntary sale or other transfer thereof but only for a
maximum period of three (3) months after such sale or transfer) for the
recovery of any judgment against Landlord, and if Landlord is a partnership,
its partners, whether general or limited, or if Landlord is a corporation,
its directors, officers or shareholders. shall never be personally liable for
any such judgment; PROVIDED, HOWEVER, that even if due to any such negligence
of Landlord, Landlord's Agents or any Senior Interest Holder or its agents or
breach by Landlord of its obligations under this Lease, Tenant waives, to the
full extent permitted by applicable law, any claim for consequential damages
in connection therewith. Landlord and any Senior Interest Holder and their
respective agents shall not be liable, to the extent of Tenant's insurance
coverage, for any loss or damage to any person or property even if due to the
negligence of Landlord or any Senior Interest Holder or their agents.
ARTICLE 19 -- CONDEMNATION
19.01 CONDEMNATION. (a) If the whole of the Land and
Building (the "PROJECT") shall be acquired or condemned for any public or
quasi-public use or purpose for a period in excess of four (4) months, this
Lease and the Term shall end as of the date of the vesting of title with the
same effect as if said date were the Expiration Date. If the whole of the
Land and Building shall be so acquired or condemned for a period of less than
four (4) months, then this Lease and the Term shall continue in force and
effect but from and after the date of the temporary vesting of title, Gross
Rent shall be abated for such period. If only a part of the Land and
Building shall be so acquired or condemned, then:
(i) except as hereinafter provided in this paragraph, this
Lease and the Term shall continue in force and effect but, if a part
of the Premises is included in the part of the Project so acquired or
condemned, then from and after the date of the vesting of title, Gross
Rent shall be reduced in the proportion which the area of the part of
the Premises so acquired or condemned bears to the total area of the
Premises immediately prior to such acquisition or condemnation; and
(ii) if the part of the Project so acquired or condemned shall
be of such scope that (A) the untaken part of the Project (whether or
not the Premises are affected by the taking) would in Landlord's
reasonable judgment be uneconomic to operate and (B) leases (including
this Lease, pursuant to this CLAUSE (II)) of tenants (other than
Landlord and its affiliates) occupying at least fifty percent (50%) of
the rentable area of the Building are terminated in connection with such
taking, Landlord, at Landlord's option, may give to Tenant, within
thirty (30) days next following the date upon which Landlord shall
have received notice of vesting of title, a five (5) days' notice of
termination of this Lease; and
(iii) if the part of the Project so acquired or condemned shall
contain more than thirty percent (30%) or more of the rentable area of
the Premises included under this
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Lease as of the date of such acquisition or condemnation which, as of
immediately prior to such acquisition or condemnation, Tenant was
occupying or intending within one year to occupy, or if, by reason of
such acquisition or condemnation, Tenant no longer has reasonable means
of access to the Premises or the Premises are no longer reasonably
suitable for the conduct of Tenant's business therein, Tenant, at
Tenant's option, may give to Landlord within thirty (30) days next
following the date upon which Tenant shall have received notice of
vesting of title, a five (5) days' notice of termination of this Lease.
If any such five (5) days' notice of termination is given, then this Lease
and the Term shall come to an end and expire upon the expiration of said five
(5) days with the same effect as if the date of expiration of said five (5)
days was the Expiration Date. If a part of the Project shall be so acquired
or condemned and this Lease and the Term shall not be terminated pursuant to
the foregoing provisions of this SECTION 19.01, Landlord shall restore the
part of the Premises and the common and service areas of the Building not so
acquired or condemned to a condition befitting First-Class Office Buildings.
In the event of any termination of this Lease pursuant to this paragraph, the
Gross Rent shall be prorated and adjusted as of such termination date.
(b) In the event of any such acquisition or condemnation of
all or any part of the Project, Landlord shall be entitled to receive the
entire award for any such acquisition or condemnation, Tenant shall liave no
claim against Landlord or the condemning authority for the value of any
unexpired portion of the Term, and Tenant hereby expressly assigns to
Landlord all of its right in and to any such award. Nothing contained in
this SUBSECTION (B) shall be deemed to prevent Tenant from making a claim in
any condemnation proceedings for moving expenses, interruption of its
business and the then value of any furniture, furnishings and fixtures
installed by Tenant, provided that such award shall not reduce the amount of
the award otherwise payable to Landlord.
ARTICLE 20 -- CASUALTY
20.01 CASUALTY. If (a) the Premises or any part thereof shall
be damaged or rendered untenantable by fire or other insured casualty, (b)
Tenant gives notice of such damage or destruction to Landlord and (c) this
Lease is not to be terminated pursuant to this ARTICLE 20, Landlord shall
proceed with the repair of such damage with reasonable diligence after the
collection of the insurance proceeds attributable to such damage, but (i)
only to the extent of available insurance proceeds and (ii) Landlord shall
only be required to deliver the Premises in its shell condition (with
Building Systems stubbed to the perimeter). Except as provided in SECTION
20.05, the rent shall be equitably abated to the extent that all or any part
of the Premises shall have been rendered untenantable, from the date of the
damage to the date that is the earlier of (A) the date Tenant occupies any
portion of the damaged portion of the Premises and (B) the date that Landlord
delivers the Premises in the condition described in clause (ii) above;
PROVIDED, HOWEVER, that if Tenant reoccupies a portion of the Premises during
the period of repair, the rent allocable to such reoccupied portion, based
upon the proportion which the reoccupied portion of the Premises bears to the
total area of the Premises, shall be payable by Tenant from the date of such
occupancy.
20.02 TENANT RIGHT TO TERMINATE. If the Premises shall be
totally damaged or rendered wholly untenantable by fire or other casualty,
Landlord has not terminated this Lease pursuant to SECTION 20.03 and Landlord
has not substantially completed repairing the Premises within nine (9) months
from the date of such damage or destruction and such additional time after
such date (but in no event to exceed six (6) months), if any, as shall equal
the aggregate period Landlord may have been delayed by Force Majeure or
adjustment of insurance, Tenant may serve notice on Landlord of its intention
to terminate this Lease and if within thirty (30) days thereafter
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Landlord shall not have substantially completed the required repairs, this
Lease shall terminate on the expiration of such thirty (30) day period as if
such termination date were the Expiration Date.
20.03 LANDLORD RIGHT TO TERMINATE. If the Premises shall be
totally damaged or rendered wholly untenantable by fire or other casualty or
if the Building shall be so damaged by fire or other casualty that
substantial alteration or reconstruction of the Building shall, in Landlord's
sole opinion, be required (whether or not the Premises shall have been
damaged by such fire or other casualty) or the insurance proceeds available
to Landlord, in Landlord's sole opinion, shall not be reasonably sufficient
to repair the damage, then in any such event Landlord may, at its option,
terminate this Lease by giving Tenant thirty (30) days' notice of such
termination at any time within one hundred twenty (120) davs after the date
of such fire or other casualty. If such notice of termination shall be
given, this Lease shall terminate as of the date provided in such notice
(whether or not the Term shall have commenced) with the same effect as if
that date were the Expiration Date. If at any time prior to the giving of
the notice of termination or the commencement of repairs pursuant to SECTION
20.01, there shall be a Successor Landlord (as hereinafter defined), such
Successor Landlord shall have a further period of sixty), (60) days from the
date of its taking possession or from the expiration of the one hundred
twenty (120) day period established above, whichever is earlier, to terminate
this Lease by thirty (30) days' notice to Tenant, in which event this Lease
shall terminate as of the date provided in such notice (whether or not the
Term shall have commenced) with the same effect as if that date were the
Expiration Date.
20.04 DISCLAIMER. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
occasioned by damage by fire or other casualty or the repair thereof.
Landlord will not carry insurance of any kind on Tenant's Property, the
Existing Improvements. the Alterations made by or on behalf of Tenant in the
Premises, and notwithstanding anything to the contrary in this ARTICLE 20,
Landlord shall not be obligated to repair any damage to Tenant's Property or
to said Improvements or to replace the same.
20.05 TENANT DEFAULT. Notwithstanding any of the foregoing
provisions of this ARTICLE 20, if, by reason of some action or inaction on
the part of Tenant or any of the Tenant Parties, either (a) Landlord or the
Senior Interest Holders shall be unable to collect all of the insurance
proceeds (including rent insurance proceeds) applicable to damage or
destruction of the Premises or the Building by fire or other casualty or (b)
the premises or the Building shall be damaged or destroyed or rendered
completely or partially untenantable on account of fire or other casualty
then, without prejudice to any other remedy which may be available against
Tenant, the abatement of rent provided for in this Article shall not be
effective (i) in the case of SUBSECTION (B) above, to the extent of the
uncollected insurance proceeds, and (ii) in the case of SUBSECTION (B) above,
to the extent of the excess of the cost of repair over the amount of the
collected insurance proceeds, but excluding in the case of clause (i) hereof
any amount not collected from insurance because Landlord has failed to obtain
the coverage required under this Lease.
ARTICLE 21 -- SURRENDER
21.01 SURRENDER. On the Expiration Date or upon the sooner
termination of this Lease or upon any re-entry by Landlord, Tenant shall, at
its expense, quit, surrender, vacate and deliver the Premises to Landlord
"broom clean" and in good order, condition and repair, ordinary wear, tear
and damage by fire or other insured casualty excepted, together with all
Existing Improvements and Alterations (except as otherwise provided for in
this Lease). Tenant shall, at its expense, remove from the Building (a) all
of Tenant's Property, (b) any internal staircases, vaults, safes, raised
computer floors, computer installations, kitchens, libraries, file rooms,
conveyors, dumbwaiters, specially finishes and private bathrooms and any
other unusual
33
<PAGE>
improvements and restore the Premises to their condition prior to the making
of such improvements and (c) any personal property of Tenant or persons
claiming through or under Tenant, and shall repair or pay the cost of
repairing all damage to the Premises and the Building occasioned by such
removal. Any Tenant's Property or other personal property which shall remain
in the Premises after the Expiration Date or after the termination of this
Lease shall be deemed to have been abandoned and either may be retained by
Landlord as its property or may be disposed of as Landlord may see fit. If
such property not so removed shall be sold, Landlord may receive and retain
the proceeds of such sale and apply the same, at its option, against the
expeises of the sale, moving and storage, arrears of rent and any damages to
which Landlord may be entitled. Any excess proceeds shall be the property of
Landlord. Any expense incurred by Landlord in removing or disposing of such
property shall be reimbursed to Landlord by Tenant as Additional Rent on
demand. The obligations of Tenant under this SECTION 21.01 shall survive the
expiration or sooner termination of the Lease.
21.02 HOLDING OVER. In the event of any holding-over by
Tenant after expiration or termination of this Lease without the consent of
Landlord, Tenant shall:
(a) pay as holdover rental for each month of the holdover
tenancy an amount equal to the greater of (i) the fair market rental value of
the Premises for such month (as reasonably determined by Landlord or (ii)
150% of the Gross Rent which Tenant was obligated to pay for the month
immediately preceding the end of the Term; and
(b) be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises (a "NEW TENANT") in order to
induce such New Tenant not to terminate its lease by reason of the
holding-over by Tenant and (ii) the loss of the benefit of the bargain if any
New Tenant shall terminate its lease by reason of the holding-over by Tenant.
No holding-over by Tenant after the Term shall operate to expend the Term. In
the event of any unauthorized holding-over, Tenant shall indemnify and hold
harmless Landlord against all claims for damages by any other tenant to whom
Landlord may have leased all or any part of the Premises effective upon the
termination of this Lease. Anything in this Article to the contrary
notwithstanding, the acceptance of any rent paid by Tenant pursuant to this
Section 21.02 shall not preclude Landlord from commencing and prosecuting a
holder or summary eviction proceeding.
ARTICLE 22 -- ESTOPPEL CERTIFICATES
22.01 ESTOPPEL CERTIFLCATES. Landlord and Tenant agree at any
time and from time to time upon ten (10) days' prior notice from the
requesting party to execute, acknowledge and deliver to the requesting party
and to such other persons and entities as such requesting party may
reasonably designate, a statement certifying (a) that this Lease is
unmodified and in full force and effect, or if there have been modifications,
that this Lease is in full force and effect as modified and stating the
modifications, (b) the date to which the Base Rent has been paid and the
current amount of Base Rent, (c) whether all Additional Rent that is due and
payable on or before such date has been paid in full, (d) that, to the best
of the certifying party's knowledge, the requesting party is not in default
in observing, performing or complying with any term, covenant or condition
contained in this Lease on such party's part to be observed, performed or
complied with or, if the certifying party has knowledge of any such default,
specifying each such default, (e) that, to the best of the certifying party's
knowledge, the certifying party has not made and does not have any claim
against the requesting party under this Lease or, if so, the nature and the
dollar amount, any, of such claim, (f) that, to the best of the certifying
party's knowledge, there do not exist any offsets, defenses or counterclaims
against enforcement of any of the terms,
34
<PAGE>
covenants or conditions of this Lease to be observed, performed or complied
with on the part of the requesting party, or, if such do exist, specifying
the same and the dollar amount thereof, and (g) in the case of a request by
Landlord, such further information with respect to this Lease or the Premises
as Landlord may reasonably request. Any such statement delivered pursuant to
this SECTION 22.01 shall be binding on the certifying party and may be relied
upon by the requesting party and any designee of the requesting party,
including, without limitation, any prospective purchaser of the Premises, any
mortgagee or prospective mortgagee of the Premises, or any lessor or
prospective lessor under any underlying lease of the Premises or any assignee
or prospective assignee of any such mortgagee or lessor.
ARTICLE 23 -- PARTIES BOUND
23.01 SUCCESSORS AND ASSIGNS. The terms of this Lease shall
bind and benefit the successors and assigns of the parties with the same
effect as if mentioned in each instance where a party is named or referred
to, except that no violation of the provisions of ARTICLE 12 shall operate to
vest any right in any successor or assignee of Tenant and that the provisions
of this Article shall not be construed as modifying the conditions of
limitation contained in ARTICLE 13 or ARTICLE 14.
23.02 LANDLORD FOR TIME BEING. The term "LANDLORD" shall mean
only the owner at the time in question of the present landlord's interest in
the Building and, in the event of a sale or transfer of the Building (by
operation of law or otherwise), or in the event of the making of a lease from
all or substantially all of the Building, or in the event of a sale or
transfer (by operation of law or otherwise) of the leasehold estate under any
such lease, the grantor, transferor or lessor, as the case may be, shall be
and hereby is (to the extent of the interest or portion of the Building or
leasehold estate sold, transferred or leased) automatically and entirely
released and discharged, from and after the date of such sale, transfer or
leasing, of all liability in respect of the performance of any of the terms
of this Lease on the part of Landlord thereafter to be performed; PROVIDED
that the purchaser, transferee or lessee (collectively, "TRANSFEREE") shall
have assumed and agreed to perform, subject to the limitations of this
Article and, in the case of a Successor Landlord, the provisions of SECTION
13.02 and only during and in respect of the Transferee's period of ownership
of Landlord's interest under this Lease, all of the terms of this Lease on
the part of Landlord to be performed during such period of ownership.
23.03 PARTNERSHIP TENANT. If Tenant is a partnership (or is
comprised of two (2) or more persons, individually or as co-partners of a
partnership) or if Tenant's interest in this Lease shall be assigned to a
partnership (or to two (2) or more persons, individually or as co-partners of
a partnership), any such partnership and such persons being referred to as a
"PARTNERSHIP TENANT", the following provisions of this Section shall apply to
such Partnership Tenant: (a) the liability of each of the parties comprising
Partnership Tenant shall be joint and several, (b) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by, any written instrument which may hereafter be executed, changing,
modifying or discharging this Lease, in whole or in part, or surrendering all
or any part of the Premises to Landlord or renewing or extending this Lease
and by any notices, demands, requests or other communications which may
hereafter be given by Partnership Tenant or by any of the parties comprising
Partnership Tenant, (c) any bills, statements, notices, demands, requests or
other communications given or rendered to Partnership Tenant or to any of the
parties comprising Partnership Tenant shall be deemed given or rendered to
Partnership Tenant and to all such parties and shall be binding upon
Partnership Tenant and all such parties, (d) if Partnership Tenant shall
admit new partners, all of such new partners shall, by their admission to
Partnership Tenant, be deemed to have assumed performance of all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed, and, upon demand of Landlord, shall confirm such assumption in
a writing satisfactory to Landlord, and (e) Partnership Tenant shall
35
<PAGE>
give prompt notice to Landlord of the admission of any such new partners,
and, upon demand of Landlord, shall cause each such new partner to execute
and deliver to Landlord an agreement in form satisfactory to Landlord,
wherein each such new partner shall assume performance of all of the terms,
covenants and conditions of this Lease on Tenant's part to be observed and
performed (but neither Landlord's failure to request any such agreement nor
the failure of any such new partner to execute or deliver any such agreement
to Landlord shall vitiate the provisions of this Section).
23.04 NO OFFER. The submission of this Lease to Tenant shall
not constitute an offer and shall not bind the parties hereto in any manner
whatsoever until (a) Tenant has duly executed and delivered duplicate
counterparts to Landlord and (b) Landlord has executed and delivered one
fully executed counterpart to Tenant.
23.05 INABILITY TO PERFORM. (a) This Lease and the
obligations of Tenant to pay Gross Rent and perform all of the other terms of
this Lease on the part of Tenant to be performed shall in no way be affected
because Landlord is unable or delayed in fulfilling any of its obligations
under this Lease by reason of Force Majeure. Landlord shall in each instance
exercise reasonable diligence to effect performance when and as soon as
possible; PROVIDED, HOWEVER. that Landlord shall be under no obligation to
employ overtime or premium labor.
(b) For purposes of this Lease, "FORCE MAJEURE" shall mean
any and all causes beyond the reasonable control of Landlord or Tenant, as
the case may be, including delays caused by the other party hereto or other
tenants, Legal Requirements and other forms of governmental restrictions,
regulations or controls (including energy and water conservation measures),
labor disputes, accidents. mechanical breakdowns, shortages or inability to
obtain labor. fuel. steam, water, electricity or materials through ordinary
sources, acts of God, war sabotage, embargo, enemy action, civil commotion,
fire or other casualty, but shall not include lack of funds or financial
inability to perform.
ARTICLE 24 -- PARKING
24.01 PARKING. (a) At all times during the Term, Landlord
agrees to furnish to Tenant for the use of its employees without charge to
Tenant parking rights for 180 vehicles (10 on a reserved or assigned basis)
in the general parking area designated by Landlord in the parking garage
facility located in the Building (the "GARAGE"), PROVIDED, HOWEVER, that if
Landlord constructs additional surface parking on the Land to accommodate the
parking needs of Landlord and tenants in the Building, Landlord reserves the
right to designate up to 30 of Tenant's parking rights to the surface parking
area. No specific spaces in the Garage are to be assigned to Tenant, but
Landlord will issue to Tenant the aforesaid number of parking stickers and/or
cards, each of which will authorize parking in the Garage of a vehicle on
which the sticker is displayed, or Landlord will provide a reasonable
alternative means of identifying and controlling vehicles authorized to be
parked in the Garage. Landlord may designate the area within which each such
vehicle may be parked, and Landlord may change such designations from time to
time. Access to and use of the Garage and other parking areas by Tenant and
the Tenant Parties shall be subject to the Building Rules (the present
Building Rules with respect to parking are set forth in PART II of EXHIBIT
"C" hereto).
(b) If the parking spaces described above are not available
to Tenant during any portion of the Term due to causes beyond the reasonable
control of Landlord (including, without limitation, as the result of a
casualty or condemnation), this Lease shall continue without abatement of
Gross Rent, and Landlord shall use reasonable efforts to make available to
Tenant sufficient substitute unassigned parking spaces (in the number of
those spaces not available to Tenant) on the Land.
36
<PAGE>
ARTICLE 25 -- MISCELLANEOUS PROVISIONS
25.01 WAIVER OF COUNTERCLAIMS AND JURY TRIAL. In the event
Landlord commences any summary proceeding or action for non-payment of rent,
Tenant covenants and agrees not to interpose, by consolidation of actions or
otherwise, any counterclaim in any such proceeding (provided that the claim
to be asserted in any such counterclaim would not be waived by Tenant's
failure to raise such claim), it being agreed that nothing contained herein
shall be deemed to prevent Tenant from bringing a separate proceeding with
respect to such counterclaim or be deemed a waiver thereof. To the extent
permitted by applicable law, Landlord and Tenant hereby waive trial by jury
in any matter arising out of or in any way connected with this Lease. The
provisions of this SECTION 25.01 shall survive the termination of this Lease.
25.02 NOTICES. Except as otherwise expressly provided in this
Lease or pursuant to any Legal Requirement, any bills, statements, notices,
demands, requests, consents or other communications given or required to be
given under or in connection with this Lease or pursuant to any Legal
Requirement shall be effective only if in writing and
(a) if to Tenant, then, at the option of Landlord,
(i) sent by registered or certified mail, return receipt
requested, postage prepaid, addressed to Tenant's Address for
Notices as set forth in SECTION 1.01 or to such other address as
Tenant may designate for such purpose by like notice, or
(ii) delivered by hand to Tenant at the Premises or at
the address to which a mailed notice would be sent pursuant to
clause (i) above;
(b) if to Landlord, sent by registered or certified mail,
return receipt requested, postage prepaid, addressed to Landlord's
Address for Notices as set forth in SECTION 1.01, or to such other
address or addresses as Landlord may designate for such purpose by,
like notice; and
(c) if to any other person, sent by registered or certified
mail, return receipt requested and postage prepaid, addressed to such
address or addresses as such person may designate to Landlord and Tenant
as its address or addresses for such purpose by like notice.
Any such bill, statement, notice, demand, request, consent or other
communication shall be deemed to have been rendered or given (A) on the date
delivered, if delivered to Tenant by hand, or (B) on the earlier of (1) the
date actually received or (2) the third (3rd) Business Day after mailing.
25.03 SEVERABILITY. If any term or provision of this Lease,
or the application thereof to any person or circumstances, shall to any
extent be invalid or unenforceable, the remainder of this Lease, or the
application of such provision to persons or circumstances other than those as
to which it is invalid or unenforceable, shall not be affected, and each
provision of this Lease shall be valid and shall be enforceable to the extent
permitted by law.
25.04 MERGER; AMENDMENTS. This Lease embodies the entire
understanding between the parties with respect to the subject matter hereof,
and all prior agreements, understandings and statements, oral or written,
with respect thereto are merged in this Lease. Landlord and Tenant hereby
agree that the Lease Agreement, dated August 4, 1994, between Willis Corroon
Corporation and MagneTek, Inc. is hereby terminated, such termination to be
37
<PAGE>
effective as of June 30, 1995. This Lease may not be altered, changed or
amended except by an instrument in writing signed by the party to be charged.
25.05 NO JOINT VENTURE. This Lease shall not be deemed or
construed to create or establish any relationship of partnership or joint
venture or similar relationship or arrangement between Landlord and Tenant.
25.06 BROKER. Each party represents to the other that it has
dealt with no broker in connection with this Lease or the Building other than
the Broker (as defined in SECTION 1.01). Tenant shall indemnity and hold
harmless Landlord from and against all loss, cost, liability and expense
(including, without limitation, reasonable attorneys' fees and disbursements)
arising out of any claim for a commission or other compensation by any broker
(other than the Broker) who has dealt with Tenant in connection with this
Lease or the Building (Tenant agrees not to make any settlement with any such
broker without Landlord's consent). Landlord shall indemnity and hold
harmless Tenant from and against all loss, cost, liability and expense
(including, without limitation, reasonable attorneys' fees and disbursements)
arising out of any claim for a commission or other compensation by any broker
who has dealt with Landlord in connection with this Lease or the Building
(Landlord agrees not to make any settlement with any such broker without
Tenant's consent). Landlord shall pay the Broker a commission in accordance
with a separate agreement with the Broker. The obligations of Landlord and
Tenant under this SECTION 25.06 shall survive the expiration or sooner
termination of this Lease.
25.07 APPLICABLE LAW. This Lease shall be construed and
enforced according to the laws of the State of Tennessee.
25.08 CONSENTS AND APPROVALS. (a) Wherever it is specifically
provided in this Lease that a party's consent or approval shall not be
unreasonably withheld, a response to a request for such consent or approval
shall also not be unreasonably delayed. If either Landlord or Tenant
considers that the other has unreasonably withheld or delayed a consent or
approval, it shall so notify the other party within ten (10) days after
receipt of notice of denial of the requested consent or approval or, in case
notice of denial is not received, within fifteen (15) days after making its
request for the consent or approval. "CONSENT" shall mean the prior written
approval or consent of the applicable party.
(b) Tenant hereby waives any claim against Landlord which it
may have based upon any assertion that Landlord has unreasonably withheld or
unreasonably delayed any consent or approval that, pursuant to the terms of
this Lease, is not to be unreasonably withheld and Tenant agrees that its
sole remedy shall be an action or proceeding to enforce any such provision or
for specific performance, injunction or declaratory judgment. In the event
of such a determination, the requested consent or approval shall be deemed to
have been granted.
25.09 BUSINESS HOURS. As used in this Lease "BUSINESS DAYS"
means any days which are not Saturdays, Sundays or Federal, state or local
holidays ("HOLIDAYS") and "BUSINESS HOURS" means the hours between 7:00 A.M.
and 6:00 P.M. on Business Days and 8:00 A.M. to 2:00 P.M. on Saturdays.
25.10 EXHIBITS. The terms and provisions of EXHIBITS A
through E, inclusive, attached to this Lease are made a part of this Lease
for all purposes.
25.11 MEMORANDUM. Simultaneously herewith, Landlord and
Tenant are executing a memorandum of lease with respect to this Lease which
shall be recorded in the records of Davidson County, Tennessee (and the
parties agree to execute and exchange such other documents as may be
necessary to cause the recordation of such memorandum upon demand).
38
<PAGE>
Upon the termination or expiration of this Lease, Tenant agrees to execute
(in recordable form), a notice of termination of this Lease within five (5)
Business Days after Tenant's receipt of a commercially reasonable form of
notice of termination from Landlord, and to indemnity and hold harmless
Landlord from and against any losses, claims, liabilities or expenses arising
out of the failure of Tenant to timely comply with the foregoing.
ARTICLE 26 -- LEASE TERMINATION OPTION
26.01 LEASE TERMINATION OPTION. Tenant may terminate this
Lease as of August 31, 2000 by given written notice (a "TERMINATION NOTICE")
to Landlord in accordance with the provisions of this Lease on or before
August 31, 1999 (as to which date, TIME IS OF THE ESSENCE) and by paying to
Landlord a termination fee equal to FOUR HUNDRED AND SEVENTY THOUSAND AND
00/XX DOLLARS ($470,000.00), which fee shall be payable as follows: (a) ten
percent (10%) ($47,000) shall be paid contemporaneously with the giving of
the Termination Notice, and (b) the remaining $423,000 shall be paid on the
earlier of June 30, 2000 or the date Tenant begins to permanently move out of
the Premises. If Tenant shall deliver a Termination Notice on or prior to
August 31, 1999 then this Lease shall terminate effective as of August 31,
2000 as if such date were the original Expiration Date set forth herein. If
Tenant shall fail to give such Termination Notice and payment on or prior to
August 31, 1999, then Tenant shall have no further right to terminate
pursuant to this ARTICLE 26. The obligations of Tenant under this ARTICLE 26
shall survive the termination or expiration of this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease as of the day and year first above written.
LANDLORD
WILLIS CORROON CORPORATION OF TENNESSEE
BY:______________________________________________
NAME: BART R. SCHWARTZ
TITLE: VICE PRESIDENT AND ASSISTANT SECRETARY
TENANT
MAGNETEK, INC.
BY:______________________________________________
NAME: DAVID P. REILAND
TITLE: EXECUTIVE VICE PRESIDENT/C.F.O.
TENANT'S FEDERAL TAX I.D. NO.:
95-3917584
39
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.53
<SEQUENCE>4
<DESCRIPTION>EXH 10.53 ASSET PURCHASE AGREE (MAY 27, 1994)
<TEXT>
<PAGE>
- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BETWEEN
MAGNETEK, INC.
AND
THE LOUIS ALLIS COMPANY
-----------------------------------------
DATED AS OF MAY 27, 1994
-----------------------------------------
SALE OF LOUIS ALLIS DIVISION
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . 6
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT . . . . . . . . . . . . . . . . 6
2.1 Sale and Transfer of the Assets . . . . . . . . . . . 6
2.2 Assets Not Transferred. . . . . . . . . . . . . . . . 8
2.3 Assumed and Excluded Liabilities. . . . . . . . . . . 9
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . .11
2.5 Purchase Price Adjustment . . . . . . . . . . . . . .12
2.6 Tax Allocation. . . . . . . . . . . . . . . . . . . .15
2.7 Sales and Use Tax . . . . . . . . . . . . . . . . . .15
ARTICLE III CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . .16
3.1 Buyer's Obligation. . . . . . . . . . . . . . . . . .16
3.2 Seller's Obligation . . . . . . . . . . . . . . . . .16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . .17
4.1 Authority; No Conflicts; Governmental
Consents. . . . . . . . . . . . . . . . . . . . . . .17
4.2 Financial Statements. . . . . . . . . . . . . . . . .18
4.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . .19
4.4 Assets Other than Real Property
Interests . . . . . . . . . . . . . . . . . . . . . .19
4.5 Real Property . . . . . . . . . . . . . . . . . . . .20
4.6 Intellectual Property . . . . . . . . . . . . . . . .20
4.7 Contracts . . . . . . . . . . . . . . . . . . . . . .20
4.8 Litigation; Decrees . . . . . . . . . . . . . . . . .21
4.9 Employee and Related Matters. . . . . . . . . . . . .21
4.10 Environmental Matters . . . . . . . . . . . . . . . .22
4.11 Employee and Labor Relations. . . . . . . . . . . . .22
4.12 Assets of the Division. . . . . . . . . . . . . . . .23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . .23
5.1 Authority; No Conflicts; Governmental
Consents. . . . . . . . . . . . . . . . . . . . . . .23
5.2 Actions and Proceedings, etc. . . . . . . . . . . . .24
5.3 Availability of Funds . . . . . . . . . . . . . . . .24
5.4 Buyer's Acknowledgment. . . . . . . . . . . . . . . .24
5.5 Exon-Florio . . . . . . . . . . . . . . . . . . . . .24
5.6 No Knowledge of Seller's Breach . . . . . . . . . . .25
i
<PAGE>
5.7 Management Ownership. . . . . . . . . . . . . . . . .25
ARTICLE VI COVENANTS OF SELLER. . . . . . . . . . . . . . . . . . . . . . . .25
6.1 Access. . . . . . . . . . . . . . . . . . . . . . . .25
6.2 Ordinary Conduct. . . . . . . . . . . . . . . . . . .25
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . .26
6.4 Environmental Study and Remediation . . . . . . . . .26
6.5 Title Commitment. . . . . . . . . . . . . . . . . . .27
6.6 Acquisition Proposals . . . . . . . . . . . . . . . .27
6.7 Accounts Receivable . . . . . . . . . . . . . . . . .27
6.8 Non-Competition . . . . . . . . . . . . . . . . . . .28
ARTICLE VII COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . .29
7.1 Confidentiality . . . . . . . . . . . . . . . . . . .29
7.2 Accounts Receivable . . . . . . . . . . . . . . . . .29
7.3 Waiver of Bulk Sales Law Compliance . . . . . . . . .30
7.4 Excluded Assets and Inventory . . . . . . . . . . . .30
7.5 Insurance . . . . . . . . . . . . . . . . . . . . . .30
7.6 Covenant Not to Compete . . . . . . . . . . . . . . .30
7.7 Surety Bond . . . . . . . . . . . . . . . . . . . . .31
ARTICLE VIII MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . .32
8.1 Permits and Consents. . . . . . . . . . . . . . . . .32
8.2 Cooperation . . . . . . . . . . . . . . . . . . . . .33
8.3 Reasonable Efforts. . . . . . . . . . . . . . . . . .33
8.4 Records . . . . . . . . . . . . . . . . . . . . . . .33
8.5 Access to Former Business Records . . . . . . . . . .34
8.6 Use of Trademark and Trade Names. . . . . . . . . . .34
8.7 Required Modifications or
Replacements of Products. . . . . . . . . . . . . . .35
8.8 Conduct of Business . . . . . . . . . . . . . . . . .36
ARTICLE IX EMPLOYEE BENEFIT MATTERS . . . . . . . . . . . . . . . . . . . . .36
9.1 Employee Retention. . . . . . . . . . . . . . . . . .36
9.2 Employee Benefit Plans. . . . . . . . . . . . . . . .36
9.3 Employees Covered by the Collective
Bargaining Agreement. . . . . . . . . . . . . . . . .37
9.4 Bargaining Benefit Plans. . . . . . . . . . . . . . .37
9.5 Vacation and Holiday Pay. . . . . . . . . . . . . . .37
9.6 Access to Information . . . . . . . . . . . . . . . .37
9.7 Third-Party Beneficiaries . . . . . . . . . . . . . .37
ARTICLE X INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . .38
10.1 Indemnification by Seller . . . . . . . . . . . . . .38
10.2 Indemnification by Buyer. . . . . . . . . . . . . . .38
10.3 Indemnification for Environmental
Matters.. . . . . . . . . . . . . . . . . . . . . . .39
10.4 Losses Net of Insurance, Etc. . . . . . . . . . . . .40
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10.5 Termination of Indemnification. . . . . . . . . . . .40
10.6 Procedures Relating to Indemnification
(Other than for Tax Claims) . . . . . . . . . . . . .41
10.7 Procedures Relating to
Indemnification of Tax Claims.. . . . . . . . . . . .42
10.8 Survival of Representations . . . . . . . . . . . . .43
ARTICLE XI GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . .43
11.1 Assignment. . . . . . . . . . . . . . . . . . . . . .43
11.2 No Third-Party Beneficiaries. . . . . . . . . . . . .44
11.3 Termination . . . . . . . . . . . . . . . . . . . . .44
11.4 Expenses. . . . . . . . . . . . . . . . . . . . . . .45
11.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . .45
11.6 Amendments. . . . . . . . . . . . . . . . . . . . . .45
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . .45
11.8 Interpretation; Exhibits and
Schedules . . . . . . . . . . . . . . . . . . . . . .46
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . .46
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . .46
11.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . .47
11.12 Severability. . . . . . . . . . . . . . . . . . . . .47
11.13 Governing Law . . . . . . . . . . . . . . . . . . . .47
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EXHIBITS
- --------
EXHIBIT A Bill of Sale, Assignment and Assumption Agreement. . . . . . . . A-1
EXHIBIT B Form of Exclusive Manufacturing Agreement. . . . . . . . . . . . B-1
EXHIBIT C Form of Sublease . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D Opinion of Gibson, Dunn & Crutcher . . . . . . . . . . . . . . . D-1
EXHIBIT E Opinion of General Counsel of Seller . . . . . . . . . . . . . . E-1
EXHIBIT F Opinion of Foley & Lardner . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G Form of License Agreement. . . . . . . . . . . . . . . . . . . . G-1
SCHEDULES
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Schedule 1.1 December Balance Sheet
Schedule 2.1(a) Owned Property
Schedule 2.1(b) Leased Property
Schedule 2.1(e) Intellectual Property
Schedule 2.1(j) Certain Excluded Assets
Schedule 2.2(l) Accounts Receivable and Bank Accounts
Schedule 2.6 Purchase Price Allocation
Schedule 4.1(b) Conflicts (Seller)
Schedule 4.3 Taxes
Schedule 4.4 Liens
Schedule 4.5 Division Properties
Schedule 4.6 Intellectual Property
Schedule 4.7 Certain Contracts
Schedule 4.8 Litigation
Schedule 4.9 Seller Plans
Schedule 4.11 Labor Matters
Schedule 5.1(b) Conflicts (Buyer)
Schedule 6.2 Exceptions to Ordinary Course
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of May 27, 1994, between
MAGNETEK, INC., a Delaware corporation ("Seller"), and THE LOUIS ALLIS COMPANY,
a Wisconsin corporation ("Buyer").
Seller desires to sell to Buyer certain assets (other than
excluded assets) relating to the Louis Allis division (the "Division") of
Seller. Buyer desires to purchase such assets and is willing to assume certain
associated obligations and liabilities.
Accordingly, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(f).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Bill of Sale, Assignment and Assumption Agreement" means a Bill of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
"Brownsville Facility" has the meaning set forth in Section 2.1(b).
"Business Day" means a day other than a Saturday or a Sunday or
other day on which commercial banks in Los Angeles are authorized or required by
law to close.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
<PAGE>
"Closing Date" means the day on which the Closing occurs pursuant
to Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collective Bargaining Agreement" means the Labor Agreement between
Seller and the International Union of Electronic, Electrical, Salaried, Machine
and Furniture Workers Local No. 1131 ("Union"), dated June 1, 1991 and all
schedules, appendices and letters of understanding (including as the same relate
to any "effects bargaining") related thereto.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral, to
which Seller or the Division is a party and relating primarily to the Division.
"Contractual Obligation" means, as to any Person, any provision of
any note, bond or security issued by such Person or of any mortgage, indenture,
deed of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property or assets is subject.
"December Balance Sheet" means the unaudited balance sheet of the
Division as of December 31, 1993, attached hereto as Schedule 1.1.
"Division Employee" means any employee of Seller working
exclusively for the Division on the Closing Date, including any employee on
vacation or illness leave on such date.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and hospitalization),
short and long-term disability, savings, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, salary continuation, sick pay,
sick leave, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit, flexible spending account programs and other
employee benefit arrangements, plans, contracts, policies or practices providing
employee or executive compensation or benefits to Division Employees, other than
the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit
plans," as defined in Section 3(3) of ERISA, maintained or contributed to by
Seller or in which Seller participates or participated and which provide
benefits to Division Employees,
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including (i) any such plans that are "employee welfare benefit plans" as
defined in Section 3(1) of ERISA and (ii) any such plans that are "employee
pension benefit plans" as defined in Section 3(2) of ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable statutes,
regulations, rules, ordinances or codes which relate to the protection of human
health or the environment from the effects of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC promulgated
from time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2(b).
"Excluded Inventory" has the meaning set forth in Section 2.2(c).
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"Exclusive Manufacturing Agreement" means the Agreement between
Buyer and Seller, substantially in the form of Exhibit B.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Material" means any substance: (i) which is defined as
a hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Law; (ii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any Governmental Authority; or (iii) which contains gasoline,
diesel fuel or other petroleum hydrocarbons.
"Knowledge of Buyer" means the actual knowledge of any one or more
of: Daniel E. Stetler, Philip Beltran, Jerry
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Borman, Susan Dertz, David Gaylord, Ronald Gray, Michael Gurch or Walter
Marquardt.
"Knowledge of Seller" means the actual knowledge of any "officer"
of Seller as such term is defined in 17 C.F.R. Section 240.16a-1(f), to the
extent such officer had, on the date hereof, responsibility for matters that are
the subject of such representation and warranty; PROVIDED, HOWEVER, that unless
such an officer had (a) actual knowledge to the contrary or (b) direct
responsibility at the Division level for the subject matter thereof, such
knowledge is based solely upon the representation and warranty in Section 5.6
hereof.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person
from whom indemnification is being sought hereunder.
"IRS" means the Internal Revenue Service.
"License Agreement" means the License Agreement between Buyer and
Seller in substantially the form of Exhibit G hereto, relating to the use of
certain names.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any kind
or nature whatsoever (including, without limitation, any conditional sale or
other title retention agreement or any financing lease having substantially the
same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense
(including reasonable attorneys' fees and disbursements and the costs of
investigation). Loss recoverable hereunder is subject to the limitations set
forth in Section 10.4.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property or condition (financial or other) of the
Division, taken as a whole or (b) the ability of Seller to consummate the
transactions contemplated by this Agreement.
"Milwaukee Facility" has the meaning set forth in Section 2.1(a).
"Owned Property" has the meaning set forth in Section 2.1(a).
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust,
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unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Phase II Report" has the meaning set forth in Section 4.10.
"ReCHILL Products" has the meaning set forth on Schedule 2.2(b).
"Records" has the meaning set forth in Section 2.1(h).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in Seller's
reasonable judgment to permit Seller to meet any duty or obligation owing by
Seller to remedy defects or hazards in such products or to provide any warning
with respect to any such defects or hazards. Required Modifications may also
include, but shall not be limited to, modifications, improvements or
enhancements necessary to meet industry standards, or to implement design
improvements, or modifications of or supplements to the product's design,
quality, components, safety features, labeling, warnings or instructions.
Required Modification shall in no event mean or include any modification,
improvement or enhancement required by any written warranty covering the
relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"SEC" means the Securities and Exchange Commission.
"Seller Plans" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by Seller under which any
Division Employee participates or is entitled to receive benefits.
"Sublease" means the agreement between Buyer and National Electric
Coil, Inc. relating to the Brownsville Facility in substantially the form of
Exhibit C.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use,
transfer, registration, ad valorem, value-added, alternative or add-on minimum,
capital, unitary, intangible, franchise, profits, license, withholding, payroll,
social security, Medicare, employment, disability, real
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property, personal, excise, severance, stamp, transfer, occupation, premium,
property, windfall profit tax, environmental, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any jurisdiction or other taxing authority, whether or not disputed,
on such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Transaction Documents" means (i) this Agreement, (ii) the Bill of
Sale, Assignment and Assumption Agreement, (iii) the warranty deeds of
conveyance of Owned Property, (iv) the Exclusive Manufacturing Agreement,
(v) the Sublease and (vi) the License Agreement.
"Transactions" means the transactions contemplated by the
Transaction Documents.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other
than Section 1.1 shall have the meanings as so defined when used in this
Agreement.
(b) As used herein, accounting terms not defined or to
the extent not defined, shall have the respective meanings given to them under
GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date Seller will sell, convey,
transfer, assign and deliver to Buyer all of Seller's right, title and interest
in and to the following assets (except the Excluded Assets) of Seller, to the
extent that they are used primarily in the operations of the Division, as the
same shall exist on the Closing Date (collectively, the "Assets"):
(a) the real property (including all buildings,
improvements and structures located thereon and all rights, privileges,
easements and appurtenances thereto) located at 385 and 427 East Stewart Street,
Milwaukee, Wisconsin (the "Milwaukee Facility") described on Schedule 2.1(a)
(the "Owned Property");
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(b) an interest, pursuant to the Sublease, in the
leasehold interest relating to the facility used by the Division in Brownsville,
Texas (the "Brownsville Facility") listed on Schedule 2.1(b) (the "Leased
Property");
(c) all tangible personal property, including, without
limitation, the fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, patterns, machinery, equipment, computer equipment
(including software), located upon or affixed to or normally located in, at or
upon, even if temporarily removed from, any of the Division Property
(collectively, including the fixtures, the "Equipment");
(d) all inventory, including without limitation, raw
materials, work-in-process, finished goods, packaging materials, spare parts and
supplies (the "Inventory");
(e) subject to the limited rights retained in
Section 8.6, the trademarks, trade names, patents, service marks, copyrights
(whether registered or unregistered) and pending applications for the foregoing
listed on Schedule 2.1(e) (the "Intellectual Property");
(f) all Contracts (including but not limited to all
Contracts listed on Schedule 4.7 and all Contracts entered into by the Division
through the Closing Date), provided that any Contract that requires the consent
to assignment of a party thereto which consent has not been obtained prior to
the Closing Date pursuant to Section 8.1 shall be deemed Assigned Contracts only
to the extent therein provided (the "Assigned Contracts");
(g) all transferable business licenses and permits used
primarily in or relating primarily to the Division or the Assets (the
"Permits");
(h) all books and records (other than historical
accounting, financial and Tax records), plans and specifications, surveys and
title policies relating to the Owned Property, sales literature, product
information, employment, records and files and all other information and/or data
related to or used by Seller primarily in connection with the Assets and the
operation of the Division and located at the Milwaukee Facility (the "Records");
(i) all insurance proceeds paid or payable by any
insurance provider for any Asset that is destroyed or damaged after the date
hereof and prior to the Closing Date;
(j) all accounts receivable and notes receivable of
Seller on the Closing Date arising exclusively out of the activities of the
Division, all cash and cash equivalents (except for amounts required to cover
payment of outstanding
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checks) in Division bank accounts on the Closing Date, all prepaid items and
deposits paid by Seller exclusively in connection with the Division (to the
extent reflected on the Closing Balance Sheet) a list of which, as of April 2,
1994, together with the names of the Division's bank accounts (noting which such
accounts may not be transferred to Buyer), is attached hereto as
Schedule 2.1(j); and
(k) all goodwill appurtenant to the foregoing Assets.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to
the contrary, the following assets are not included in the Assets and shall be
retained by Seller (the "Excluded Assets"):
(a) all rights, properties, and assets which have been
used or held for use in connection with the Division and which shall have been
transferred (including transfers by way of sale) or otherwise disposed of prior
to the Closing, provided such transfers and disposals shall have been in the
ordinary course of the business of the Division;
(b) all rights of Seller relating to "ReCHILL"
Products, including, without limitation, all rights of Seller under its
agreement with The Trane Company, as more fully described on Schedule 2.2(b),
and all related Records (including records that would constitute Records under
the definition thereof set forth in Section 2.1(h) if such records related to an
Asset), provided that, in the event such Records cannot be segregated in a
commercially reasonable manner from the Records or Assets or from records or
assets of Buyer generated or acquired on or after the Closing Date, Seller shall
have access to such Records pursuant to Section 8.5 hereof;
(c) the inventory of the Division (wherever located) on
the Closing Date of Louis Allis explosion-proof motors and "EVIG" finished good
inventories (the "Excluded Inventory");
(d) rights to or claims for refunds or rebates of Taxes
and other governmental charges and the benefit of net operating loss
carryforwards, carrybacks or other tax benefits or credits of Seller, in each
case whether or not attributable to the Division;
(e) claims or rights against third parties, including,
without limitation, claims or counterclaims arising in respect of the litigation
titled WRIGHT-SCHUCART VS. MAGNETEK, ET AL., (including the existing judgment in
Seller's favor) other than claims or rights against third parties arising with
respect to events or breaches occurring after the Closing
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Date under the Assigned Contracts; PROVIDED, HOWEVER, that any rights of
indemnification, contribution or reimbursement that may exist under the Assigned
Contracts solely in respect of Excluded Assets or Excluded Liabilities hereunder
shall be Excluded Assets;
(f) except as set forth in Section 2.1(i), all
insurance policies and rights thereunder, including but not limited to, rights
to any cancellation value as of the Closing Date;
(g) proprietary or confidential business or technical
information, records and policies that relate generally to Seller or any of its
Affiliates and are not used primarily in the Division, including, without
limitation, organization manuals and strategic plans;
(h) subject to the limited rights granted in
Section 8.6, all "MagneTek" marks, including any and all trademarks or service
marks, trade names, slogans or other like property relating to or including the
name "MagneTek," the mark MagneTek or any derivative thereof and the MagneTek
logo or any derivative thereof, and Seller's proprietary computer programs or
other software, including but not limited to Seller's proprietary data bases,
accounting and reporting formats, systems and procedures;
(i) all Records relating to pending lawsuits to which
Seller is a party and which involve the Division;
(j) the "back-up" annuity policy of Seller purchased
from Metropolitan Life Insurance Company for the benefit of certain retirees who
previously were employed in the business of the Division;
(k) all other assets of Seller, including but not
limited to assets used by Seller or its Affiliates in other businesses of Seller
or its Affiliates and assets used primarily in connection with Seller's
corporate functions (including but not limited to the corporate charter,
taxpayer and other identification numbers, seals, minute books and stock
transfer books), whether or not used for the benefit of the Division.
2.3 ASSUMED AND EXCLUDED LIABILITIES.
(a) On the Closing Date, Buyer shall execute and
deliver to Seller the Bill of Sale, Assignment and Assumption Agreement pursuant
to which Buyer shall assume and agree to pay, perform and discharge when due,
only the following liabilities and obligations of Seller pertaining to the
Assets and the Division (collectively, the "Assumed Liabilities"):
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(i) all of the accounts payable, accrued pay,
other accrued expenses and any other items shown as "current
liabilities" on the Closing Balance Sheet;
(ii) all liabilities and obligations of Seller
which pertain to or are to be performed during the period following
the Closing Date and which arise under any of the Assigned Contracts;
(iii) the liabilities expressly assumed by Buyer
in Section 2.7 and Article IX of this Agreement, and any other
liabilities expressly assumed by Buyer hereunder;
(iv) all liabilities and obligations under open
purchase orders that were entered into by Seller on behalf of the
Division and which provide for the delivery of goods or services (and
in either case for payment) subsequent to the Closing Date;
(v) all obligations and liabilities in respect
of real or personal property Taxes, utilities, gas and other services
pertaining to periods after the Closing Date;
(vi) all liabilities for (a) warranty claims
made after the Closing Date for service, repair, replacement and
similar work with respect to products sold or services provided
before the Closing Date, unless written notice of such claim has been
delivered to Seller within the two-year period following the Closing
Date; (b) workers compensation claims made after the Closing Date,
regardless of the date of injury; (c) product liability claims made
after the Closing Date for injuries, property damage or other Losses
arising with respect to products sold or services provided before the
Closing Date, unless written notice of such claim has been delivered
to Seller within the two-year period following the Closing Date; and
(d) all litigation, arbitration, civil or governmental proceedings,
labor grievances or complaints or similar matters filed after the
Closing Date and not referred to on Schedule 4.8 or Schedule 4.11,
regardless of the date on which the related claim or Loss arose;
(vii) all liabilities and obligations arising
from the operation of the Division from and after the Closing Date.
(b) Notwithstanding Section 2.3(a) above, the Assumed
Liabilities shall in no event include the following liabilities (the "Excluded
Liabilities"):
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(i) any liability of Seller arising under or
relating to the settlements entered into in 1992 in respect of the
lawsuits filed against Seller by the United States Department of
Labor and by the International Union of Electronic, Electrical,
Salaried, Machine and Furniture Workers;
(ii) any liability in respect of litigation
currently pending against Seller;
(iii) any liability, responsibility or obligation
with respect to (a) any Seller Plan (including, without limitation,
for any retirement benefits due with respect to persons previously
employed by the Division and who retired prior to the Closing Date),
except as provided in Article IX, and excluding any Assigned Contract
and (b) any payments required to be made by virtue of retention bonus
plans or agreements of Seller disclosed on Schedule 4.7 as "Stay and
Pay Agreements";
(iv) any liability for (a) warranty claims made
after the Closing Date for service, repair, replacement and similar
work required under Seller's written warranties with respect to
products sold or services provided prior to the Closing, the expenses
of which, at shop level cost (direct materials plus labor and
variable overhead), in the aggregate exceed the warranty reserve on
the Closing Balance Sheet, (b) claims under health insurance plans of
Seller for covered Division Employees with respect to services
rendered prior to the Closing Date or (c) any product liability
claims for injuries, property damage or other Losses, arising with
respect to products sold or services provided prior to the Closing
Date, but only if written notice of such claims described in
clause (a), (b) or (c) shall have been delivered to Seller within the
two-year period following the Closing Date;
(v) any liability for Taxes attributable to the
ownership or operation of the Division for any period ending on or
prior to the Closing Date, excluding the Taxes covered by
Section 2.7; and
(vi) any liability arising under a Contractual
Obligation of Seller which is required to be, but is not, disclosed
on Schedule 4.7.
2.4 CLOSING. The closing (the "Closing") of the purchase and
sale of the Assets shall be held at the offices of Foley & Lardner, 777 East
Wisconsin Avenue, Milwaukee, Wisconsin, at 9:00 a.m. on May 27, 1994, or if the
conditions to Closing set forth in Article III shall not have been satisfied
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or waived by such date, subject to Section 11.3, as soon as practicable after
such conditions shall have been satisfied or waived. The date on which the
Closing shall occur is hereinafter referred to as the "Closing Date." At the
Closing, Buyer shall deliver to Seller by wire transfer (to a bank account
designated at least two business days prior to the Closing Date in writing by
Seller) immediately available funds in an amount equal to the sum of $8,300,000
(eight million three hundred thousand dollars, hereinafter, the "Purchase
Price"), plus or minus an estimate, if the parties mutually agree prior to the
Closing Date with respect thereto, of any adjustment to the Purchase Price under
Section 2.5 (the Purchase Price plus or minus such estimate of any adjustment
under Section 2.5 being hereinafter called the "Closing Date Amount"), and such
other documents as are required by this Agreement.
At the Closing, Seller shall deliver or cause to be delivered to
Buyer (a) the Bill of Sale, Assignment and Assumption Agreement, (b) warranty
deeds in recordable form for the Owned Property, (c) the documents and
agreements referred to in Section 3.1(d) hereof and (d) such other instruments
of transfer and documents required by this Agreement or as Buyer may reasonably
request, and Buyer shall deliver to Seller (a) the Bill of Sale, Assignment and
Assumption Agreement, (b) the documents and agreements referred to in
Sections 2.7 and 3.2 hereof, (c) insurance certificates evidencing compliance
with Section 7.5 hereof and (d) such other instruments of assumption and
documents required by this Agreement or as Seller may reasonably request. In
addition, Seller shall deliver to Buyer at the Closing a certificate in form and
substance satisfactory to Buyer, duly executed and acknowledged, certifying that
Seller is not a foreign person within the meaning of Section 1445(f)(3) of the
Code, and any corresponding affidavit or certificate required for state tax
purposes.
2.5 PURCHASE PRICE ADJUSTMENT.
(a) Within 60 days after the Closing Date, Seller shall
prepare and deliver to Buyer a balance sheet of the Division as of the close of
business on the Closing Date comprising the Assets and the outstanding Assumed
Liabilities (the "Closing Balance Sheet"). For purposes of preparing the
Closing Balance Sheet, Buyer shall make Division Employees available to Seller
(without charge) and such employees shall, for the purpose of assisting Seller
in preparing the Closing Balance Sheet, be instructed by Buyer to act at
Seller's direction.
During the 30 days immediately following Buyer's receipt of
the Closing Balance Sheet, Buyer shall be entitled to review the Closing Balance
Sheet and Seller's working papers relating to the Closing Balance Sheet, and
Seller shall provide
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Buyer access at all reasonable times to its personnel, properties, books and
records to the extent relevant and not comprising Assets. The Closing Balance
Sheet shall become final and binding upon the parties on the thirtieth day
following delivery thereof unless Buyer gives written notice to Seller of its
disagreement with the method of presentation of the Closing Balance Sheet (a
"Notice of Disagreement") prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted. If a
timely Notice of Disagreement is received by Seller with respect to the Closing
Balance Sheet, then the Closing Balance Sheet (as revised in accordance with
clause (x) or (y) below), shall become final and binding upon the parties on the
earlier of (x) the date the parties hereto resolve in writing any differences
they have with respect to any matter specified in a Notice of Disagreement or
(y) the date any matters properly in dispute are finally resolved in writing by
the Accounting Firm (as defined below). During the 30 days immediately
following the delivery of any Notice of Disagreement, Seller and Buyer shall
seek in good faith to resolve in writing any differences which they may have
with respect to any matter specified in such Notice of Disagreement. During
such period, Buyer and Seller shall each have access to the other party's
working papers prepared in connection with the other party's preparation of a
Notice of Disagreement. At the end of such 30-day period, Seller and Buyer
shall submit to an independent accounting firm (the "Accounting Firm") for
review and resolution any and all matters which remain in dispute and which were
properly included in any Notice of Disagreement, and the Accounting Firm shall
reach a final, binding resolution of all matters which remain in dispute. The
Closing Balance Sheet, with such adjustments necessary to reflect the Accounting
Firm's resolution of the matters in dispute, shall become final and binding on
Buyer and Seller on the date the Accounting Firm delivers its final resolution
to the parties. The Accounting Firm shall be Arthur Andersen, or if such firm
is unable or unwilling to act, such other nationally recognized independent
public accounting firm as shall be agreed upon by the parties hereto in writing.
The cost of any arbitration (including the fees and expenses of the Accounting
Firm) pursuant to this Section 2.5 shall be borne 50% by Buyer and 50% by
Seller.
(b) The Purchase Price shall be adjusted (after giving
effect to the payment of the Closing Date Amount) such that the Purchase Price
is (i) increased, to the extent that (A) current Assets of the Division increase
(B) Assumed Liabilities of the Division decrease or (C) the aggregate net book
value of plant and equipment increases, in each case from the amount reflected
on the December Balance Sheet, and (ii) decreased, to the extent that
(x) current Assets of the Division decrease, (y) Assumed Liabilities increase or
(z) the aggregate net book value of plant and equipment decreases, in
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each case from the amount reflected on the December Balance Sheet. The
adjustments referred to in the foregoing clauses (i) and (ii) shall be
cumulative as to each category. The Purchase Price shall be adjusted upward or
downward, dollar for dollar, in respect of any such negative or positive
adjustment; PROVIDED, HOWEVER, that no adjustment to the Purchase Price pursuant
to this Section 2.5 shall be made unless such adjustment would exceed $50,000,
and if the adjustment would exceed $50,000, then the full amount of the
adjustment shall be made; provided, however, that the estimated adjustment, if
any, included in the Closing Date Amount shall be taken into account in
determining whether such threshold is met. Any required adjustment to the
Purchase Price pursuant to this Section 2.5 shall be referred to as the
"Purchase Price Adjustment."
(c) The Closing Balance Sheet shall be prepared in
accordance with GAAP, applied in a manner consistent with that followed in the
preparation of the December Balance Sheet, subject to the following:
(i) inventory shall be reduced by
book value on the Closing Date of the Excluded Inventory,
but only to the extent that such inventory is in
merchantable condition on the Closing Date, and is
maintained in accordance with Section 7.4 hereof;
(ii) the Closing Balance Sheet shall
not reflect any provision for Taxes (whether as an asset or
a liability);
(iii) intercompany accounts receivable
and intercompany liabilities shall not be eliminated;
(iv) all Excluded Assets (and related
depreciation and reserves) shall be eliminated; and
(v) all Excluded Liabilities (and
related reserves) shall be eliminated.
(d) Buyer agrees, with respect to Purchase Price
Adjustments, that following the Closing, Buyer will not take any actions with
respect to the accounting books, records, policies and procedures of the
Division on which the Closing Balance Sheet is to be based that are not
consistent with GAAP applied in the manner consistent with the past practices of
the Division.
(e) Within thirty (30) days after the receipt by Buyer
of the Closing Balance Sheet in accordance with Section 2.5(a) hereof, Buyer
shall remit to Seller or Seller
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shall remit to Buyer, as the case may be, in immediately available funds, any
undisputed amount as to which there is required to be a Purchase Price
Adjustment. With respect to any items that are the subject of a Notice of
Disagreement, payment shall be made in immediately available funds within three
(3) Business Days after the resolution thereof pursuant to Section 2.5(a). Each
payment pursuant to this Section 2.5 shall be made with interest on the amount
of the payment at an annual rate equal to the reference rate quoted by the San
Francisco branch of Bank of America on the Closing Date for the period from the
Closing Date to the date of payment, computed on the basis of a 360-day year and
actual days elapsed.
(f) Gas, utility, real estate Taxes and similar
obligations that are being assumed by Buyer shall be prorated between the
parties based upon the days elapsed in the applicable payment period and
reflected in Purchase Price Adjustments.
2.6 TAX ALLOCATION. Buyer and Seller shall allocate the
Purchase Price plus the Assumed Liabilities (to the extent identifiable or
reasonably estimable as of the date hereof) to broad categories constituting
components of the Assets in accordance with Schedule 2.6 (as the same may be
updated as of the Closing to reflect changes in the Assets or Assumed
Liabilities occurring after the date thereof and prior to the Closing Date).
Buyer and Seller shall report the purchase and sale of the Assets in accordance
with the agreed-upon allocation among such broad categories for all Tax purposes
(including the filing of the forms prescribed under Section 1060 of the Code and
the Treasury Regulations promulgated thereunder). Within ten days from the
filing thereof, Buyer and Seller shall provide each other with IRS Forms 8594
(and any state or local equivalent form) reflecting such allocation which shall
be filed with the IRS and any applicable Governmental Authority.
2.7 SALES AND USE TAX. Buyer and Seller shall share equally
and shall cooperate in preparing, executing and filing use and sales Tax returns
relating to, and shall share equally and pay when due, any and all sales, real
estate, transfer, use or similar Tax due with regard to, the purchase and sale
of the Assets. The Closing Date Amount shall, to the extent reasonably
feasible, reflect the parties' estimates with regard to such Taxes. Such Tax
Returns shall be prepared in a manner that is consistent with the allocation of
the Purchase Price and Assumed Liabilities contemplated by Section 2.6. Buyer
shall also furnish Seller with a form of resale certificate that complies with
the requirements of Wisconsin, Texas and other applicable state taxation laws.
Buyer and Seller shall cooperate and use reasonable efforts to minimize the Tax
liabilities referred to in this Section 2.7.
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ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase
and pay for the Assets are subject to the satisfaction (or waiver by Buyer in
writing) as of the Closing of the following conditions:
(a) The representations and warranties of Seller made
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as specifically contemplated by this Agreement, on and
as of the Closing, as though made on and as of the Closing Date, and Seller
shall have performed or complied in all material respects with all obligations
and covenants required by this Agreement to be performed or complied with by
Seller by the time of the Closing; and Seller shall have delivered to Buyer a
certificate dated the Closing Date and signed by an authorized officer of Seller
confirming the foregoing.
(b) Buyer shall have received an opinion dated the
Closing Date of Gibson, Dunn & Crutcher, counsel to Seller, as to the matters
set forth in Exhibit D, an opinion dated the Closing Date of Samuel A. Miley,
Esq., General Counsel of Seller, as to the matters set forth in Exhibit E, and
an opinion dated the Closing Date of Richards, Layton & Finger, special Delaware
counsel to Seller, which opinions shall be reasonably satisfactory in form to
Buyer.
(c) No injunction or order shall have been granted by
any court or administrative agency or instrumentality of competent jurisdiction
that would restrain or prohibit any of the Transactions or that would impose
damages as a result thereof, and no action or proceeding shall be pending before
any court or administrative agency or instrumentality of competent jurisdiction
in which any person seeks such a remedy (if in the written opinion of counsel to
Buyer there exists a reasonable risk of a material adverse result in such
pending action or proceeding).
(d) Seller shall have executed and delivered the
Exclusive Manufacturing Agreement, the Sublease and the License Agreement.
3.2 SELLER'S OBLIGATION. The obligations of Seller to sell and
deliver the Assets to Buyer are subject to the satisfaction (or waiver by Seller
in writing) as of the Closing of the following conditions:
(a) The representations and warranties of Buyer made in
this Agreement shall be true and correct in all material
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respects as of the date hereof and on and as of the Closing, as though made on
and as of the Closing Date, and Buyer shall have performed or complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by Buyer by the time of the Closing; and Buyer
shall have delivered to Seller a certificate dated the Closing Date and signed
by an authorized officer of Buyer confirming the foregoing.
(b) Seller shall have received an opinion dated the
Closing Date of Foley & Lardner, counsel to Buyer, as to the matters set forth
in Exhibit F, which opinion shall be reasonably satisfactory in form to Seller.
(c) No injunction or order shall have been granted by
any court or administrative agency or instrumentality of competent jurisdiction
that would restrain or prohibit the Transactions or that would impose damages as
a result thereof, and no action or proceeding shall be pending before any court
or administrative agency or instrumentality of competent jurisdiction in which
any person seeks such a remedy (if in the written opinion of counsel to Seller
there exists a reasonable risk of a materially adverse result in such pending
action or proceeding).
(d) Buyer shall have executed and delivered the
Exclusive Manufacturing Agreement, the Sublease and the License Agreement.
(e) Continental Bank Letter of Credit No. C7242246 in
the amount of $847,500 issued to Seller in respect of the Division shall have
been returned to Seller and replaced (or the obligation to maintain such letter
of credit extinguished) by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Seller
has all requisite corporate power and authority to enter into the Transaction
Documents and to consummate the Transactions. All corporate acts and other
proceedings required to be taken by Seller to authorize the execution, delivery
and performance of the Transaction Documents and the consummation of the
Transactions have been duly and
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properly taken. This Agreement has been duly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) The execution and delivery of this Agreement does
not and of the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Seller under, any provision of (i) the Certificate of Incorporation or By-Laws
of Seller, (ii) subject to the matters disclosed in Schedule 4.1(b), any
Contractual Obligation of Seller or (iii) any judgment, order or decree or,
subject to the matters described in clauses (A)-(C) below, Requirement of Law
applicable to Seller or its property or assets, other than, in the case of
clauses (ii) and (iii) above, any such conflicts, violations, defaults, rights
or Liens that, individually or in the aggregate, would not have a Material
Adverse Effect. No consent, approval, license, permit, order or authorization
of, or registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Seller in connection with
the execution and delivery of the Transaction Documents or the consummation of
the Transactions contemplated hereby, other than (A) compliance with and filings
under Section 13(a) or 15(d), as the case may be, of the Exchange Act,
(B) compliance with and filings and notifications under applicable Environmental
Laws, (C) those that may be required solely by reason of Buyer's participation
in the transactions contemplated hereby, and (D) those that, if not made or
obtained, individually or in the aggregate, would not have a Material Adverse
Effect.
4.2 FINANCIAL STATEMENTS. To the Knowledge of Seller, the
December Balance Sheet was prepared in accordance with GAAP consistently
applied, and fairly presents the financial condition of the Division as of
December 31, 1993 except: (a) as set forth therein, (b) for the absence of
footnotes and (c) for normal recurring adjustments.
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4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, Seller, and
any affiliated group within the meaning of Section 1504 of the Code, of which
Seller is or has been a member (the "Affiliated Group," but only for the taxable
period during which Seller has been a member thereof), have filed or caused to
be filed in a timely manner (within any applicable extension periods) with the
appropriate Governmental Authority (i) all Tax returns, reports and forms
(collectively, "Tax Returns") required to be filed by the Code or by applicable
laws, (ii) all Taxes shown on such Tax Returns have been timely paid in full by
the due date thereof, (iii) no Tax Liens or assessments have been filed by any
Tax authority against any property or assets of the Division, and (iv) to the
Knowledge of Seller, no claims are being asserted in writing with respect to any
Taxes relating to the Division.
(b) Except as set forth in Schedule 4.3, (i) no
property of the Division is "tax exempt use property" within the meaning of
Section 168(h) of the Code, and (ii) the Assigned Contracts do not include any
lease made pursuant to former Section 168(f)(8) of the Internal Revenue Code of
1954.
(c) Seller is not a "foreign person" within the meaning
of Section 1445(f)(3) of the Code.
4.4 ASSETS OTHER THAN REAL PROPERTY INTERESTS. Seller has good
and valid title to all Assets reflected on the December Balance Sheet or
thereafter acquired, except those sold or otherwise disposed of since the date
of such December Balance Sheet in the ordinary course of business consistent
with past practice, in each case free and clear of all Liens except (a) such as
are disclosed on Schedule 4.4 and (b) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business, Liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business, Liens for Taxes and other governmental charges which are not
yet due and payable or which may thereafter be paid without penalty, and other
imperfections of title, restrictions or encumbrances, if any, which Liens,
imperfections of title, restrictions or other encumbrances do not, individually
or in the aggregate, materially impair the continued use and operation of the
specific assets to which they relate (the Liens described in the preceding
clause (b) are hereinafter referred to collectively as "Permitted Liens").
This Section 4.4 does not relate to real property or interests in
real property, such items being the subject of Section 4.5.
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4.5 REAL PROPERTY. Schedule 4.5 sets forth a complete list of
all Owned Properties and a complete list of all Leased Properties and, as to
Leased Property, identifies any leases relating thereto (an Owned Property or
Leased Property being sometimes referred to herein individually as a "Division
Property" and collectively as "Division Properties"). Seller has good,
marketable and insurable fee title to all Owned Property, free and clear of all
Liens, easements, covenants, rights-of-way and other similar restrictions of any
nature whatsoever, except (i) Permitted Liens, (ii) easements, covenants,
rights-of-way and other similar restrictions of record, and (iii) (A) zoning,
building and other similar restrictions, (B) Liens that have been placed by any
developer, landlord or other third party on property over which Seller has
easement rights or on any Leased Property and subordination or similar
agreements relating thereto and (C) unrecorded easements, covenants, rights-of-
way or other similar restrictions, none of which items set forth in clauses (A),
(B) and (C) above, individually or in the aggregate, materially impair the
continued use and operation of the property to which they relate.
4.6 INTELLECTUAL PROPERTY. Schedule 4.6 sets forth a list of
all Intellectual Property (excluding any such Intellectual Property that is
included in Excluded Assets). With respect to registered trademarks,
Schedule 4.6 contains a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. Except
as disclosed on Schedule 4.6, Seller owns or has the right to use, without
payment to any other party, the Intellectual Property listed on such
Schedule 4.6. Except as set forth on Schedule 4.8, no claims are pending or, to
the Knowledge of Seller, threatened against Seller by any person with respect to
the ownership, validity, enforceability or use of any Intellectual Property
listed on Schedule 4.6 or otherwise challenging or questioning the validity or
effectiveness of any such Intellectual Property.
4.7 CONTRACTS. Schedule 4.7 sets forth a list of each of the
following types of Contracts:
(a) any employment or severance agreement that has an
aggregate future liability in excess of $100,000 and is not terminable by notice
of not more than 60 days for a cost of less than $50,000 (including any
contracts or agreements with Division Employees that relate to the transactions
contemplated by this Agreement);
(b) any employee collective bargaining agreement or
other contract with any labor union covering Division Employees;
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(c) to the Knowledge of Seller, any Contract other than
in the ordinary course of business pursuant to which the aggregate of payments
to become due from or to Seller is equal to or exceeds $200,000, and which is
not terminable by no more than 60 days' notice for a cost of less than $100,000;
(d) any lease or similar agreement under which Seller
is a lessor or sublessor of, or makes available for use by any third party
(including another division of Seller), any Division Property or premises
otherwise occupied by the Division.
Except as disclosed on Schedule 4.7, each Contract listed on
Schedule 4.7 is valid, binding and in full force and effect and is enforceable
by Seller in accordance with its terms. Except as disclosed in Schedule 4.7, to
the Knowledge of Seller, Seller has performed all material obligations required
to be performed by it to date under the Contracts and is not (with or without
the lapse of time of the giving of notice, or both) in breach or default in any
material respect thereunder and, to the Knowledge of Seller, no other party to
any of the Contracts is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder.
4.8 LITIGATION; DECREES. To the Knowledge of Seller,
Schedule 4.8 sets forth a list, as of the date of this Agreement, of all pending
and threatened lawsuits or claims with respect to which Seller has contacted in
writing the defendant or been contacted in writing by the claimant or by counsel
for the claimant by or against Seller relating to the Division which
(a) involves a claim by or against Seller of more than $100,000, (b) seeks any
injunctive relief or (c) relates to the Transactions. To the Knowledge of
Seller, except as disclosed on Schedule 4.8, Seller is not in default under any
judgment, order or decree of any court, administrative agency or commission or
other Governmental Authority applicable to the Division; except where the
default would not have a Material Adverse Effect.
4.9 EMPLOYEE AND RELATED MATTERS. Schedule 4.9 sets forth each
material Employee Benefit Plan. Seller has made available to Buyer true,
complete and correct copies of (i) each Seller Plan (or, in the case of any
unwritten Seller Plans, descriptions thereof), (ii) the most recent annual
report on Form 5500 filed with the IRS with respect to Seller's Pension Plan and
(iii) the most recent summary plan description for each Seller Plan for which
such a summary plan description is required. Except as disclosed on
Schedule 4.7, as provided in Section 9.2 or as provided in the Collective
Bargaining Agreement, no Division Employee is entitled to any benefit under any
Seller Plan by reason of the Transactions.
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4.10 ENVIRONMENTAL MATTERS. Except as disclosed in (i) the
Phase I Report regarding the Milwaukee Facility prepared by Dames & Moore (the
"Phase I Report"), (ii) the report based on further investigation (the "Phase II
Report") or (iii) otherwise in writing by Seller addressed to Buyer, to the
Knowledge of Seller, as to the Division and the operation of the Milwaukee
Facility and Brownsville Facility:
(a) Seller is not in material violation of any
applicable Environmental Law nor is Seller under investigation or review by any
Governmental Authority with respect to compliance therewith, or with respect to
the generation, use, treatment, storage or disposal, or the spillage or other
release of any Hazardous Material;
(b) there is no Hazardous Material that is likely to
pose any material risk to safety, health or the environment, and there has
heretofore been no spillage, discharge, release or disposal of any such
Hazardous Material on or under the Division Property in an amount and of a
nature which could reasonably be expected to result in material liability to the
Division; and
(c) there are no pending citations, fines, penalties or
claims have been asserted against Seller under any Environmental Law which could
reasonably be expected to have a Material Adverse Effect and which have not been
reflected in the December Balance Sheet.
4.11 EMPLOYEE AND LABOR RELATIONS. Except as set forth on
Schedule 4.11:
(a) there is no labor strike, dispute, or work stoppage
or lockout pending, or, to the Knowledge of Seller, threatened, involving the
Division;
(b) to the Knowledge of Seller, no union organization
campaign is in progress with respect to the employees of the Division, and no
question concerning representation exists respecting such employees;
(c) there is no unfair labor practice charge or
complaint against Seller pending, or, to the Knowledge of Seller, threatened,
before the National Labor Relations Board involving the Division;
(d) there is no pending, or, to the Knowledge of
Seller, threatened, grievance involving an employee of the Division that, if
adversely decided, would have a Material Adverse Effect; and
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(e) no charges with respect to or relating to Seller
are pending before the Equal Employment Opportunity commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse determination
involving the Division, other than those which, if so determined would not have
a Material Adverse Effect.
4.12 ASSETS OF THE DIVISION. Except for any Assets that may not
be transferred to Buyer pursuant to Section 2.2 or Section 8.1, the Assets and
the rights conferred by the Transaction Documents comprise all the properties
and assets used by Seller primarily in the operation of the business of the
Division as conducted on the date hereof. Except as expressly provided herein
or in any of the Transaction Documents, Seller makes no representation or
warranty concerning the Assets or the Division, including as to the quality,
condition, merchantability, salability, obsolescence, working order or fitness
for a particular purpose thereof. Except as expressly provided herein, the
Assets are sold to Buyer "as is and where is."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Buyer is a corporation duly organized, validly
existing and in active status under the laws of the State of Wisconsin. Buyer
has all requisite corporate power and authority to enter into the Transaction
Documents and to consummate the Transactions. All corporate acts and other
proceedings required to be taken by Buyer to authorize the execution, delivery
and performance of the Transaction Documents and the consummation of the
Transactions have been duly and properly taken. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or by general principles (regardless of whether such enforceability is
considered in a proceeding in equity or law).
(b) Except as disclosed on Schedule 5.1(b), the
execution and delivery of this Agreement does not and of the other Transaction
Documents will not, and the consummation of the Transactions and compliance with
the terms of the
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Transaction Documents will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of Buyer under, any provision of (i) the Certificate
of Incorporation or By-Laws of Buyer, (ii) any Contractual Obligation of Buyer
or (iii) any judgment, order or decree or, subject to the matters described in
clauses (A)-(C) below, or Requirement of Law applicable to Buyer or its property
or assets. No material consent, approval, license, permit order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect to Buyer or its
Affiliates in connection with the execution and delivery of the Transaction
Documents or the consummation by Buyer of the Transactions, other than
(A) compliance with and filings under Section 13(a) and 15(d), as the case may
be, of the Exchange Act, (B) compliance with and filings and notifications under
applicable Environmental Laws and (C) those that may be required solely by
reason of Seller's (as opposed to any other third party's) participation in the
transactions contemplated hereby.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending or,
to the Knowledge of Buyer, threatened against Buyer.
5.3 AVAILABILITY OF FUNDS. Buyer has currently effective
commitments, subject to customary exceptions and conditions, as to the
availability to Buyer of all funds required to consummate the Transactions.
5.4 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees
that, (a) other than the representations and warranties of Seller specifically
contained in this Agreement, there are no representations or warranties of
Seller either expressed or implied with respect to Seller, the Division or the
Transactions, and (b) it shall have a right to indemnification solely as
provided in Article X hereof and shall have no claim or right to indemnification
with respect to any information, documents or materials furnished by Seller or
any of its officers, directors, employees, agents or advisors, or otherwise
available to Buyer.
5.5 EXON-FLORIO. Buyer is not a "foreign person" for purposes
of the Exon-Florio Amendment to the Defense Production Act of 1950.
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5.6 NO KNOWLEDGE OF SELLER'S BREACH. To the Knowledge of
Buyer, the representations and warranties of Seller herein (and the Schedules
pertaining thereto) are true and accurate in all material respects and, to the
Knowledge of Buyer, Seller is not in breach of any of its representations or
warranties or of any other condition or circumstance that would excuse Buyer
from its timely performance of its obligations hereunder.
5.7 MANAGEMENT OWNERSHIP. Buyer is a corporation of which at
least 51% of the equity securities are owned (or the voting thereof is
controlled) by individuals who are officers or key employees of the Buyer.
ARTICLE VI
COVENANTS OF SELLER.
Seller covenants and agrees as follows:
6.1 ACCESS. Subject to the provisions of Section 7.1 hereof,
prior to the Closing, Seller will give Buyer and its representatives, employees,
counsel and accountants, together with representatives of Persons providing
financing to Buyer for the Transactions, with reasonable access, during normal
business hours and upon reasonable notice, to the personnel, properties, books
and records of the Division for purposes of investigating its assets,
operations, prospects, obligations and liabilities; provided, however, that such
access does not unreasonably disrupt the normal operations of the Division.
Additionally, subject to the provisions of Section 7.1 hereof and to prior
notification, and the consent (which will not be unreasonably withheld or
delayed), of Seller, Buyer and such representatives may contact the principal
customers and suppliers of the Division for purposes of the foregoing
investigation.
6.2 ORDINARY CONDUCT. Except as contemplated by this Agreement
or as set forth in Schedule 6.2, from the date hereof to the Closing, Seller
will cause the business of the Division to be conducted in the ordinary course
in substantially the same manner as presently conducted and will make all
reasonable efforts consistent with past practices to preserve relationships with
customers, suppliers and others with whom the Division deals. Except as
contemplated by this Agreement, Seller will not do any of the following with
respect to the Division without the prior written consent of Buyer, which
consent will not be unreasonably withheld or delayed:
(a) adopt or amend in any material respect any Seller
Plan or collective bargaining agreement, except as required by law or insofar as
a collective bargaining agreement
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is then subject to negotiation in advance of its expiration in the ordinary
course;
(b) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any material portion of its assets (other
than Excluded Assets), except in the ordinary course of business consistent with
past practice;
(c) enter into any lease of real property, except any
renewals of existing leases; or
(d) agree, whether in writing or otherwise, to do any
of the foregoing.
6.3 INSURANCE. Seller shall keep, or cause to be kept, all
insurance policies presently maintained relating to the Division and its
properties, or replacements therefor, in full force and effect through the close
of business on the Closing Date. Buyer will not have any rights under any such
insurance policies from and after the Closing Date.
6.4 ENVIRONMENTAL STUDY AND REMEDIATION.
(a) Seller agrees to retain Dames & Moore, or another
reputable environmental consulting firm selected by Seller, to perform a
Phase II environmental study of the Milwaukee Facility, and to obtain the Phase
II Report from such consulting firm as promptly as possible (without incurring
any additional charge over such firm's customary fees). The Phase II Report
shall indicate that Buyer may rely upon such Phase II Report. Seller further
agrees, at its own expense, to conduct any remediation suggested by the Report
to the extent required, in Seller's reasonable judgment, to cause the Milwaukee
Facility to conform to currently applicable standards applied by Governmental
Authorities. If Seller so determines that remediation is required and the same
is not completed by Seller prior to the Closing, Seller shall complete such
remediation as promptly as is reasonably feasible thereafter, and in a manner
that will minimize, consistent with reasonable commercial practices, the
disruption of the business of the Division. Buyer will cooperate with Seller
and will provide access to the Milwaukee Facility in order to permit Seller to
perform its obligations hereunder.
(b) In the event that as a result of the Phase II
investigation referred to above there is determined to be Hazardous Material
contamination at the Milwaukee Facility, Seller shall perform or cause to be
performed any further remedial investigation, clean-up, removal or other
remedial action necessary, in Seller's reasonable judgment, to cause the
Milwaukee Facility to conform to currently applicable standards applied by
Governmental Authorities ("Remedial Work"); PROVIDED,
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HOWEVER, that if such contamination is discovered prior to the Closing Date,
Seller shall have the right to terminate this Agreement prior to the Closing
Date in the event Seller reasonably determines that Remedial Work will cost in
excess of $500,000 in addition to amounts expended in connection with its
Phase I and II investigations; PROVIDED, HOWEVER, that in the event Seller so
terminates this Agreement, Seller shall reimburse Buyer (within 60 days of
Buyer's submission of itemized invoices in reasonable detail) for its out-of-
pocket expenses incurred to date in connection with the Transactions, but in no
event to exceed $100,000. In the event Seller does not so elect to terminate
this Agreement, Seller shall proceed to perform the Remedial Work in the manner
described in the penultimate sentence of Section 6.4(a) above, and Buyer shall
comply with the final sentence thereof.
6.5 TITLE COMMITMENT. Seller has furnished to Buyer a standard
form commitment for an owner's policy of title insurance (the "Title
Commitment") issued by Lawyers Title Insurance Corporation dated March 26, 1994
in the amount of $3,000,000. Buyer shall reimburse Seller for one-half of the
expense of the Title Commitment.
6.6 ACQUISITION PROPOSALS. Neither Seller nor any Person
authorized by Seller shall solicit, initiate or encourage any acquisition
proposal or engage in any discussion with respect thereto or provide information
to any other person, concerning a possible sale of the Assets or the business of
the Division.
6.7 ACCOUNTS RECEIVABLE. Seller agrees promptly to forward to
Buyer any and all proceeds from accounts receivable of the Division that are
received by Seller after the Closing Date. If, after the Closing Date, Seller
receives any payment from any Person who at the time of such payment has
outstanding accounts payable to Seller, on the one hand (for the purposes of
this Section, "Seller Accounts Receivable"), and to Buyer, on the other hand
(for the purposes of this Section, "Buyer Accounts Receivable"), and the payment
(a) does not indicate whether it is in respect of Seller Accounts Receivable or
Buyer Accounts Receivable or (b) indicates that it is in payment of both Seller
Accounts Receivable and Buyer Accounts Receivable without specifying the portion
to be allocated to each, then Seller and Buyer shall consult with one another to
determine the proper allocation of such payment; and, if they are unable to
reach agreement on the proper allocation, such payment shall be applied so as to
retire undisputed Seller Accounts Receivable and undisputed Buyer Accounts
Receivable in chronological order based upon the period of time such accounts
receivable have existed on the books of Seller, the Company or the Subsidiaries,
as applicable.
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6.8 NON-COMPETITION.
(a) Subject to the terms, conditions and exceptions of
this Section 6.8, Seller hereby covenants and agrees that neither it nor any
Affiliate controlled by it (a "Seller Affiliate"), for a period of five (5)
years from and after the Closing Date, will engage, directly or indirectly,
whether as principal, consultant, investor or otherwise, in the design,
development, fabrication, test or delivery of (i) 500-frame and larger motors,
(ii) mine motors, (iii) Navy service motors, (iv) secondary propulsion motors,
(v) synchronous motors and (vi) synchronous condensers in excess of 1,500 KVAR.
Notwithstanding anything to the contrary in this Section 6.8, the acquisition by
Seller of (a) any Person, less than 10% of the gross revenues of which are
derived from a business involving the production of any of the foregoing
products (a "Competitive Business"); PROVIDED that the foregoing business is not
thereafter expanded such that its revenues exceed 20% of the gross revenues of
such Person or (b) no more than 5% of any class of securities of a Person, if
such securities are traded in any public market (within or outside the United
States) or 15% of any class of privately held securities of a Person, in either
case if such Person derives 10% or more of its gross revenues from a Competitive
Business, shall not constitute a breach of this Section 6.8.
(b) Notwithstanding the provisions of Section 6.8(a),
nothing herein shall prohibit Seller or any Seller Affiliate from (i) selling,
marketing or servicing the products described in Section 6.8(a) or
(ii) designing, developing, fabricating, testing, delivering, selling, marketing
or servicing any ReCHILL Products. In addition, nothing herein shall prohibit
Seller or any Seller Affiliate from servicing any product it owns and uses or
from selling spare parts for products that it is permitted to sell hereunder.
(c) The prohibition in Section 6.8(a) shall apply to
all counties in the State of California and all similar political subdivisions
or regions in all states of the United States and all other geographical areas
worldwide. Seller agrees that, in connection with the purchase by Buyer of the
Assets and the Division, the time and geographic restrictions set forth above
are reasonable. Seller agrees that the remedy at law for any breach by it of
this Section 6.8(c) will be inadequate and that Buyer shall be entitled to
injunctive relief. The parties intend that the unenforceability or invalidity
of any term or provision of this Section 6.8(c) shall not render any other term
or provision contained herein unenforceable or invalid. If the activities
described in Section 6.8(a) or the period of time or the geographical area
covered by this Section 6.8 should be deemed too extensive, then the parties
intend that this Section 6.8 be construed to cover
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the maximum scope of business activities, period of time and geographical area
(not exceeding those specifically set forth herein) as may be permissible under
applicable law.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information
being provided to it by Seller is subject to certain provisions regarding
confidentiality set forth in a letter of intent between Buyer and Seller dated
February 7, 1994 (the "Letter of Intent"), which provisions are incorporated
herein by reference. Effective upon, and only upon, the Closing, such
provisions will terminate; PROVIDED, HOWEVER, that Buyer acknowledges that such
provisions will terminate only with respect to information relating solely to
the Division; and PROVIDED, FURTHER, HOWEVER, that Buyer acknowledges that any
and all other information provided to it by Seller or Seller's representatives
concerning Seller shall remain subject to the confidentiality provisions of the
Letter of Intent after the Closing Date.
7.2 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or
cause to be forwarded to Seller any and all proceeds from accounts receivable of
Seller that are received by Buyer or the Division after the Closing Date. If,
after the Closing Date, Buyer or the Company receives any payment from any
person who at the time of such payment has outstanding accounts payable to
Seller, on the one hand (for the purposes of this Section, "Seller Accounts
Receivable"), and to Buyer, on the other hand (for the purposes of this Section,
"Buyer Accounts Receivable"), and the payment (a) does not indicate whether it
is in respect of Seller Accounts Receivable or Buyers Accounts Receivable or
(b) indicates that it is in payment of both Seller Accounts Receivable and Buyer
Accounts Receivable without specifying the portion to be allocated to each, then
Seller and Buyer shall consult with one another to determine the proper
allocation of such payment; and, if they are unable to reach agreement on the
proper allocation, such payment shall be applied so as to retire undisputed
Seller Accounts Receivable and undisputed Buyer Accounts Receivable in
chronological order based upon the period of time such accounts receivable have
existed on the books of Seller or Buyer, as applicable.
7.3 WAIVER OF BULK SALES LAW COMPLIANCE. Buyer hereby waives
compliance by Seller with the requirements, if any, of Article 6 of the Uniform
Commercial Code as in force in any state in which Assets are located and all
other similar
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Requirements of Law applicable to bulk sales and transfers, to the extent
applicable to the Transactions.
7.4 EXCLUDED ASSETS AND INVENTORY. If, after the Closing Date,
Excluded Assets shall remain on the premises utilized or controlled by Buyer,
then (subject to the following sentence) Buyer shall take reasonable steps at
the expense of Seller to deliver such Excluded Assets to Seller, and so long as
such assets remain in Buyer's control, shall exercise reasonable care with
respect thereto, and in no event less care than with respect to its own
properties; PROVIDED, HOWEVER, that Buyer shall not be deemed to have any duty
to obtain insurance for such Excluded Assets (unless so required by the
Exclusive Manufacturing Agreement) to the extent they are not automatically
covered by Buyer's insurance policies. Notwithstanding the foregoing, the
Excluded Inventory shall remain at the Milwaukee Facility in an appropriate
location, at no charge to Buyer, until the earlier of (i) its sale by Seller and
(ii) the first anniversary of the Closing Date, and shall be afforded the degree
of care referred to in the preceding sentence. At the end of such time, either
Seller shall remove such inventory (at Seller's expense) or Buyer may charge a
reasonable warehousing fee to Seller for its continued storage.
7.5 INSURANCE. Buyer shall secure insurance with respect to
the Division from the Closing Date covering general liability and products
liability in amounts customary for the industry in which the Division operates.
7.6 COVENANT NOT TO COMPETE.
(a) Subject to the terms, conditions and exceptions of
this Section 7.6, Buyer hereby covenants and agrees that neither it nor any
Affiliate controlled by it (a "Buyer Affiliate"), for a period of five (5) years
from and after the Closing Date, will engage, directly or indirectly, whether as
principal, consultant, investor or otherwise, in the design, development,
fabrication, testing, delivery, sale, marketing or servicing of ReCHILL
Products.
(b) Notwithstanding the provisions of Section 7.6(a),
nothing herein shall prohibit Buyer from engaging in the activities contemplated
by the Exclusive Manufacturing Agreement. In addition, nothing herein shall
prohibit Buyer or any Buyer Affiliate from servicing any product it owns and
uses.
(c) The prohibition in Section 7.6(a) shall apply to
all counties in the State of California and all similar political subdivisions
or regions in all states of the United States and all other geographical areas
worldwide. Buyer agrees that, in connection with the purchase by Buyer of the
Assets and
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the Division, the time and geographic restrictions set forth above are
reasonable. Nothing contained in this section shall be construed to prohibit
Buyer or any Buyer Affiliate from investing in debt or equity securities of any
company engaged in any activity described in Section 7.6(a), the capital stock
of which company is listed on a national securities exchange or traded in the
over-the-counter markets, provided that the aggregate stock holdings of Buyer
and such Buyer Affiliates are less than ten percent (10%) of the outstanding
capital stock of such company. Buyer agrees that the remedy at law for any
breach by it of this Section 7.6 will be inadequate and that Buyer shall be
entitled to injunctive relief. The parties intend that the unenforceability or
invalidity of any term or provision of this Section 7.6 shall not render any
other term or provision contained herein unenforceable or invalid. If the
activities described in Section 7.6(a) or the period of time or the geographical
area covered by this Section 7.6 should be deemed too extensive, then the
parties intend that this Section 7.6 be construed to cover the maximum scope of
business activities, period of time and geographical area (not exceeding those
specifically set forth herein) as may be permissible under applicable law.
7.7 SURETY BOND. Buyer agrees that:
(a) On or before the 30th day following the Closing
Date, Buyer shall effect the release or cancellation of the existing Seller
surety bond in the amount of $1,350,000 for the benefit of Divane Brothers
Electric Company, and Seller shall have no further liability under such bond;
and
(b) On or before the 30th day following the Closing
Date, Buyer shall effect the release or cancellation of the existing Seller
surety bond in the amount of $847,500 for the benefit of EBARA Corporation, and
Seller shall have no further liability under such bond. On or before such 30th
day following the Closing Date, Buyer shall reimburse Seller for any theretofore
unreimbursed portion of the $22,310 purchase price thereof.
ARTICLE VIII
MUTUAL COVENANTS
Seller and Buyer each covenant and agree as follows:
8.1 PERMITS AND CONSENTS.
(a) As promptly as practicable after the date hereof,
Buyer and Seller shall make all filings with governmental bodies and other
regulatory authorities, and use all reasonable efforts to obtain all permits,
approvals,
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authorizations and consents of all third parties, required to consummate the
Transactions. Buyer and Seller shall furnish promptly to each other all
information that is not otherwise available to the other party and that such
party may reasonably request in connection with any such filing. Seller and
Buyer shall use reasonable efforts to obtain such consents to the assignment of
the Assigned Contracts as may be required. Buyer acknowledges that consents to
the Transactions may be required from parties to the Assigned Contracts, that
such consents have not been obtained and that Seller will not assign to Buyer at
the Closing any Assigned Contract that by its terms requires, prior to such
assignment, the consent of any other contracting party thereto unless such
consent has been obtained prior to the Closing Date.
(b) Buyer agrees that Seller shall not have any
liability whatsoever to Buyer arising out of or relating to the failure to
obtain any consents to the assignment of Contracts that may be required in
connection with the Transactions or because of the default, acceleration or
termination of any Assigned Contract as a result thereof. Buyer further agrees
that no representation, warranty or covenant of Seller contained herein shall be
breached or deemed breached, and no condition shall be deemed not satisfied, as
a result of (i) the failure to obtain any such consent or as a result of any
such acceleration or termination or (ii) any lawsuit, action, claim, proceeding
or investigation commenced or threatened by or on behalf of any Person arising
out of or relating to the failure to obtain any such consent or any such
acceleration or termination. Seller shall cooperate with Buyer in any
reasonable manner in connection with Buyer obtaining any such consents;
PROVIDED, HOWEVER, that such cooperation shall not include any requirement that
Seller commence any litigation or offer or grant any accommodation (financial or
otherwise) to any third party. The Purchase Price shall not be subject to
adjustment by reason of any such consents that are not obtained.
(c) With respect to each such Assigned Contract not
assigned on the Closing Date, after the Closing Date Seller shall continue to
deal with the other contracting party(ies) to such Assigned Contract as the
prime contracting party, and Buyer and Seller shall continue to use reasonable
efforts to obtain the consent of all required parties to the assignment of such
Assigned Contract. Such Assigned Contract shall be promptly assigned by Seller
to Buyer after receipt of such consent after the Closing Date. Notwithstanding
the absence of any such consent, Buyer shall be entitled to the benefits of such
Assigned Contract accruing after the Closing Date to the extent that Seller may
provide Buyer with such benefits without violating the terms of such contract;
and to the extent such benefits are so provided, Buyer agrees to perform at its
sole
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expense all of the obligations of Seller to be performed under such Assigned
Contract after the Closing Date.
8.2 COOPERATION. Buyer and Seller shall cooperate with each
other and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other after the Closing to ensure the
orderly transition of the Division to Buyer and/or its designated subsidiaries
and to minimize any disruption to the respective businesses of Seller or the
Division that might result from the transactions contemplated hereby. Neither
party shall be required by this Section 8.2 to take any action that would
unreasonably interfere with the conduct of its business.
8.3 REASONABLE EFFORTS. Subject to the terms and conditions of
this Agreement (including the limitations set forth in Section 8.1), each party
will use all reasonable efforts to cause the Closing to occur.
8.4 RECORDS. On the Closing Date, Seller shall deliver or
cause to be delivered to Buyer all Records (including copies of any material
records that would constitute Records under the definition thereof set forth in
Section 2.1(h) if such material records were located at the Milwaukee Facility)
included in the Assets, which are in the possession of Seller to the extent not
then in the possession of the Division, except any records relating to Excluded
Liabilities (including, without limitation, to any Seller Tax liability or to
any litigation or claim not assumed by Buyer hereunder). After the Closing,
upon reasonable written notice and at Buyer's sole expense, Seller agrees to
furnish or cause to be furnished to Buyer and its representatives (including its
auditors), access at reasonable times and during normal business hours to such
information relating to the Division in Seller's possession as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any Tax Returns, reports or forms or the defense of any Tax Claim or
assessment; PROVIDED, HOWEVER, that such access does not unreasonably disrupt
the normal operations of Seller.
8.5 ACCESS TO FORMER BUSINESS RECORDS.
(a) For a period of seven (7) years following the
Closing, Buyer will retain all Records (including any (i) records that relate to
Excluded Assets but would constitute Records if such records related to an Asset
and (ii) Records that cannot be segregated in a commercially reasonable manner
from the Assets or from records or assets of Buyer generated or acquired on or
after the Closing Date). During such period, Buyer will afford authorized
representatives of Seller (including its auditors) access to such Records at
reasonable times and during normal business hours at the principal business
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office of the Division, or at such other location or locations at which such
Records may be stored or maintained from time to time, and will permit such
representatives to make abstracts from, or copies of, any of such Records, or to
obtain temporary possession of any thereof as may be reasonably required by
Seller at Seller's sole cost and expense. During such period, Buyer will, at
Seller's expense (limited, however, to Buyer's reasonable out-of-pocket
expenditures without regard to any employee cost or other overhead expenses),
reasonably cooperate with Seller in furnishing information, evidence, testimony,
and other reasonable assistance in connection with any action, proceeding, Tax
audit, or investigation to which Seller or any of its Affiliates is subject
relating to the business of the Division prior to the Closing. The term
"Record" as used in this Section 8.5 shall include any data processing files or
other computerized data.
(b) Buyer acknowledges that there is currently pending
on appeal a judgment in favor of Seller in a matter arising from the Division's
activities titled WRIGHT-SCHUCART V. MAGNETEK, ET AL. (the "Litigation"). Buyer
acknowledges, without limiting the generality of the foregoing provisions of
this Section 8.5, that its obligations of cooperation with Seller, in the event
the Litigation is remanded for retrial, may include extensive devotion of time
(including travel, at the reasonable expense of Seller) of senior executives of
Buyer. Buyer expressly covenants to make such personnel as may be reasonably
requested by Seller available in the event of such retrial or of other future
proceedings relating to the Litigation.
8.6 USE OF TRADEMARK AND TRADE NAMES.
(a) Notwithstanding anything to the contrary in this
Agreement, Buyer may continue to use the name "MagneTek" and related trademarks,
corporate names, and trade names incorporating "MagneTek," and the stylized
"MagneTek" logos (i) in displays, signage and postings for the period after the
Closing Date necessary to permit the reasonably prompt removal of such names,
and only to the extent such displays, signage or postings exist on the Closing
Date; (ii) for a period of two years, to state the Company's former affiliation
with MagneTek (e.g., "formerly a division of MagneTek, Inc.") and (iii) to the
extent any such trade names, trademarks, service marks or logos appear on
stationery, packaging materials, supplies or inventory on hand as of the Closing
Date or on order at the time of the Closing, until such is exhausted.
(b) Notwithstanding anything to the contrary in this
Agreement, pursuant and subject to the terms of the License Agreement, until the
third anniversary of the Closing Date, Seller may continue to use the name
"Louis Allis" and related
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trademarks and tradenames incorporating "Louis Allis," and any stylized "Louis
Allis" logos to the extent permitted in the License Agreement.
8.7 REQUIRED MODIFICATIONS OR REPLACEMENTS OF PRODUCTS. The
following provisions of this Section 8.7 shall govern the responsibilities of
Buyer and Seller regarding Required Modifications:
(a) Buyer shall advise Seller promptly after becoming
aware of any Required Modifications to the products shipped by the Division on
or prior to the Closing Date to the extent Seller would be required to indemnify
Buyer for any claims in respect of such products.
(b) Whether or not Buyer gives the foregoing notice,
Buyer shall make any Required Modifications to products shipped by the Division
on or prior to the Closing Date which are necessary or advisable, in the
reasonable discretion of Seller. If the cost to Seller under Section 8.7(c) of
implementing any such Required Modification exceeds the cost to Seller of
replacing such products, Buyer shall replace such products. The obligation of
Buyer hereunder shall include, but not be limited to, such actions as Seller may
reasonably request for (i) the notification of customer and other third parties
in possession of the applicable products, (ii) the shipping of such products, if
necessary, to and from Buyer's facilities for modification, improvement,
enhancement or replacement, (iii) production of replacement products, parts or
supplies necessary for the implementation of the product modification,
enhancement, improvement or placement, (iv) the installation, modification or
replacement of the product by personnel of Buyer, either at the customer's
location or at Buyer's facilities, as appropriate, and (v) recordkeeping and
reports with respect to such product modifications, enhancements, improvements
or replacements to the extent required by law or reasonably requested by Seller.
(c) Seller shall reimburse Buyer for direct
manufacturing, installation, labor and materials costs incurred by Buyer in
installing or implementing any Required Modification under Section 8.7(b) or in
producing any replacement products, parts or supplies under Section 8.7(b),
together with all reasonable out-of-pocket shipping, postage and printing costs
incurred by Buyer in connection therewith.
8.8 CONDUCT OF BUSINESS. Effective on the Closing Date, Seller
shall cease conducting business at the Milwaukee Facility and shall execute any
forms reasonably required to evidence such cessation to the Taxing authorities
of the State of Wisconsin.
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ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE RETENTION. Buyer shall offer employment to
commence as of the Closing Date to all Division Employees, at the same
salaries and wages (including bonus and incentive programs) and on
substantially the same terms and conditions as those in effect immediately
prior to the Closing Date except (i) as to post-retirement health benefits
and (ii) the compensation payable to sales personnel. Buyer has no present
intention (subject to its discretion as to employee performance) to terminate
the employment of any Division Employee within the sixty (60) days following
the Closing Date, and Buyer assumes all obligations and liabilities, if any,
under the Worker Adjustment and Retraining Notification Act (the "WARN Act")
arising out of the Transactions. Buyer also agrees to comply with the terms
of the WARN Act following the Closing Date.
9.2 EMPLOYEE BENEFIT PLANS. Effective as of the Closing Date,
(a) Division Employees shall cease accruing any benefits under any Seller Plan,
and Seller shall take, or cause to be taken, all such action, if any, as may be
necessary to effect such cessation of participation and (b) Buyer shall
establish employee benefit plans for its employees not covered by the Collective
Bargaining Agreement providing benefits which in the aggregate are substantially
the same as the benefits provided to such Division Employees under Seller Plans
for such employees (the "Buyer's Benefit Plans"). All Division Employees will
be fully vested in their accrued benefits under Seller Plans qualified under
Code Section 401(k) and shall be treated as having terminated employment under
such Seller Plans for all applicable purposes; PROVIDED, HOWEVER, that nothing
herein shall be deemed to give rise to a claim for severance under the
Collective Bargaining Agreement. With respect to the Buyer's Benefit Plans,
Buyer shall grant all Division Employees from and after the Closing Date credit
for all service with Seller and its Affiliates and their respective predecessors
prior to the Closing Date for all purposes (other than the accrual of benefits
under a defined benefit or contributory pension plan, however, this proviso
shall not preclude Buyer from granting such credit) for which such service was
recognized by Seller and its Affiliates. With respect to Buyer's Benefit Plans
(and any plan established pursuant to Section 9.4) that provide medical or
dental benefits after the Closing Date, such plans shall waive any exclusions or
limitations with respect to pre-existing conditions and actively-at-work
exclusions. Buyer shall also cause its health plan(s) to be responsible for all
health benefit claims by Division Employees and their covered dependents for
services rendered after the Closing Date. Notwithstanding the foregoing, to the
extent services are rendered after the Closing Date, Buyer shall be responsible
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therefor, except as to Division Employees who have a condition prior to Closing
and who are covered pursuant to Seller's health maintenance organization
contract, which expires June 1, 1994, to the extent coverage is provided under
such health maintenance organization contract.
9.3 EMPLOYEES COVERED BY THE COLLECTIVE BARGAINING AGREEMENT.
Prior to, but effective as of, the Closing Date Buyer shall have entered into a
new collective bargaining agreement ("New CBA") covering the Division Employees
who are presently covered by the Collective Bargaining Agreement ("Bargaining
Employees") and, except for the matters set forth on Schedule 4.11, shall
expressly assume any and all of Seller's obligations and liabilities under the
Collective Bargaining Agreement arising on or after the Closing Date, except any
claims thereunder (without conceding any merit thereof) with respect to
severance pay or plant closing which are based upon the Transactions.
9.4 BARGAINING BENEFIT PLANS. Effective as of the Closing
Date, Buyer shall establish for the benefit of the Bargaining Employees such
employee benefit plans as are required by the New CBA.
9.5 VACATION AND HOLIDAY PAY. As of the Closing Date, Buyer
shall assume all of Seller's obligations for vacation and holiday pay to all
Division Employees.
9.6 ACCESS TO INFORMATION. Commencing with the date hereof and
continuing to the Closing Date and thereafter, Seller shall make reasonably
available to Buyer such actuarial, financial, personnel and related information
as may be reasonably requested by Buyer with respect to any Seller Plan as it
relates to a Division Employee, including, but not limited to, compensation and
employment histories.
9.7 THIRD-PARTY BENEFICIARIES. No provision of this Article IX
shall create any third-party beneficiary rights in any employee or former
employer of the Division (including any beneficiary or dependent thereof),
including, without limitation, any right to continued employment or employment
in any particular position with Buyer for any specified period of time after the
Closing Date.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Subject to the terms and
conditions of this Article X, Seller shall indemnify Buyer and each of its
officers, directors, employees and agents against, and hold them harmless from,
any Loss suffered or
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incurred by any such Indemnified Person (other than any relating to
environmental matters, for which indemnification provisions are set forth in
Section 10.3) to the extent arising from (a) if the Closing occurs, any breach
of any representation or warranty of Seller contained in this Agreement which
survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto, (b) any breach of any covenant of Seller contained in
this Agreement requiring performance after the Closing Date or (c) if the
Closing occurs, the existence of, or the failure of Seller to pay, perform and
discharge when due, any of the Excluded Liabilities (including, without
limitation, any Losses as a result of the failure of Seller to comply with any
Bulk Sales Laws referred to in Section 7.3); PROVIDED, HOWEVER, that Seller
shall not have any liability under this Section 10.1 unless the aggregate of all
Losses relating thereto for which Seller would, but for this proviso, be liable
exceeds on a cumulative basis with Losses for which Buyer is indemnified under
Section 10.3, an amount equal to $50,000 (and then only to the extent of any
such excess); and PROVIDED FURTHER, HOWEVER, that Seller's aggregate liability
under this Section 10.1 and Section 10.3 shall in no event exceed $5,000,000.
Notwithstanding the foregoing, (i) Seller shall have no obligation to indemnify
Buyer for Losses, whether or not they result from the breach of a representation
or warranty of Seller, if Buyer's representation and warranty in Section 5.6 has
been breached as to the same matter, and the Losses sustained by Buyer in such
matter shall not be cumulatively counted towards the $50,000 threshold, (ii) the
covenant of Seller to perform remediation pursuant to Section 6.4 shall not be
subject to any minimum or maximum liability in the event of indemnification of
Buyer for Seller's breach thereof and (iii) Seller shall have no obligation to
indemnify Buyer with respect to any Loss, including but not limited to, any
breach of the representations set forth in Section 4.5, which is within the
scope of the Title Commitment, and Buyer agrees that its sole recourse with
respect to such matters shall be against the issuer of the Title Commitment.
10.2 INDEMNIFICATION BY BUYER. Subject to the terms and
conditions of this Article X, Buyer shall indemnify Seller and each of its
officers, directors, employees and agents against, and hold them harmless from,
any Loss suffered or incurred by any such Indemnified Person (other than any
relating to environmental matters, for which indemnification provisions are set
forth in Section 10.3) to the extent arising from (a) if the Closing occurs, any
breach of any representation or warranty of Buyer contained in this Agreement
which survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto or in connection herewith, (b) any breach of any
covenant of Buyer contained in this Agreement requiring performance after the
Closing Date, (c) if the Closing occurs, the existence of, or the failure of
Buyer to pay, perform and
38
<PAGE>
discharge when due, any of the Assumed Liabilities and (d) if the Closing
occurs, the ongoing operations of Buyer and the Assets after the Closing Date;
PROVIDED, HOWEVER, that Buyer shall not have any liability under this
Section 10.2 unless the aggregate of all Losses relating thereto for which Buyer
would, but for this proviso, be liable exceeds on a cumulative basis with Losses
for which Seller is indemnified under Section 10.3, an amount equal to $50,000
(and then only to the extent of such excess); and PROVIDED FURTHER, HOWEVER,
that Buyer's aggregate liability under clauses (a) and (b) of this Section 10.2
shall in no event exceed $5,000,000.
10.3 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS. Subject to the
terms and conditions of this Article X, Seller shall indemnify and hold Buyer
harmless from and against all Losses resulting from claims or demands by any
Governmental Agency or any third party which is unrelated to Buyer or its
Affiliates arising under any Environmental Law to the extent such Losses (a) are
attributable to Seller's use and/or occupancy of any premises owned or used by
Seller prior to the Closing Date (a "Seller Facility") or to Hazardous Materials
transported offsite from a Seller Facility for treatment, storage or disposal
prior to the Closing, (b) are not attributable to acts or omissions (whether
before or after the Closing) that are within the Knowledge of Buyer and
(c) exceed, on a cumulative basis with Losses for which Buyer is indemnified
under Section 10.1, an amount equal to $50,000; but only to the extent of such
excess and PROVIDED, FURTHER, that Seller's aggregate liability under this
Section 10.3 and Section 10.1 shall in no event exceed $5,000,000. Seller's
indemnification liability hereunder (and its remediation obligation under
Section 6.4) shall in no event be construed to extend to or include any
remediation or other liability arising as a result of the presence of asbestos
in or upon any of the improvements located on the Division Property at any time.
Seller's obligation to indemnify Buyer under this Section 10.3 (but not the
covenant of Seller to perform remediation pursuant to Section 6.4, which is
governed by Section 10.1 hereof) shall expire on the second anniversary of the
Closing Date, and Buyer hereby expressly releases Seller from and after such
second anniversary from any liability in respect of the matters covered by such
indemnification, whether arising by statute or common law, or otherwise. Seller
shall have no obligation to indemnify Buyer with respect to conditions that
existed prior to Seller's use or occupancy of any Seller Facility. Buyer shall
indemnify and hold Seller harmless from and against all Losses resulting from
claims or demands by any Governmental Agency or private party arising under any
Environmental Law to the extent such Losses are attributable to Buyer's use
and/or occupancy of any Seller Facility.
39
<PAGE>
10.4 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is
provided under this Article X shall be net of any amounts recovered or
recoverable by the Indemnified Person under insurance policies with respect to
such Loss and of any reserve in respect thereof reflected on the Closing Balance
Sheet.
(b) If the Indemnifying Person makes any payment under
this Article X in respect of any Loss, the Indemnifying Person shall be
subrogated, to the extent of such payment, to the rights of the Indemnified
Person against any insurer or third party with respect to such Losses.
(c) Notwithstanding anything to the contrary elsewhere
in this Agreement, no Indemnifying Person shall, in any event, be liable to the
other party for any consequential damages, including, but not limited to, loss
of revenue or income, cost of capital, or loss of business reputation or
opportunity relating to the breach or alleged breach of this Agreement. Each
party agrees that it will not seek punitive damages as to any matter under,
relating to or arising out of the Transactions.
(d) The parties hereto agree that the indemnification
provisions of this Article X are intended to provide the exclusive remedy as to
all Losses either may incur arising from or relating to the Transactions, and
each party hereby waives, to the extent they may do so, any other rights or
remedies that may arise under any applicable statute, rule or regulation.
10.5 TERMINATION OF INDEMNIFICATION. The obligations to
indemnify and hold harmless a party hereto, (A) pursuant to Sections 10.1(a)
and 10.2(a), shall terminate when the applicable representation or warranty
terminates pursuant to Section 10.8, (B) pursuant to Section 10.3, shall
terminate as set forth therein and (C) pursuant to Sections 10.1(b) and
10.2(b), shall terminate on the second anniversary of the Closing Date;
PROVIDED, HOWEVER, that as to clauses (A), (B) and (C) above, such
obligations to indemnify and hold harmless shall not terminate with respect
to any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis of such claim) to the
Indemnifying Person. For avoidance of doubt, in the event any of the
remediation required to be performed by Seller pursuant to Section 6.4 is not
completed prior to the second anniversary of the Closing Date, any breach of
such covenant occurring after such second anniversary shall nevertheless give
rise to an indemnification obligation on the part of Seller, and
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<PAGE>
the other provisions of this Article X shall continue to govern any claim of
Buyer for indemnification in respect thereof.
10.6 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR TAX
CLAIMS). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than for Tax Claims) in
respect of, arising out of or involving a claim or demand made by any Person
against the Indemnified Person (a "Third-Party Claim"), such Indemnified Person
must notify the Indemnifying Person in writing, and in reasonable detail, of the
Third-Party Claim within 10 Business Days after receipt by such Indemnified
Person of written notice of the Third-Party Claim; PROVIDED, HOWEVER, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Person shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Person
shall not be liable for any Losses incurred during the period in which the
Indemnified Person failed to give such notice). Thereafter, the Indemnified
Person shall deliver to the Indemnifying Person, within five Business Days after
the Indemnified Person's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Person relating to the
Third-Party Claim.
If a Third-Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Person and reasonably satisfactory to the Indemnified Person.
Should the Indemnifying Person so elect to assume the defense of a Third-Party
Claim, the Indemnifying Person will not be liable to the Indemnified Person for
legal fees and expenses subsequently incurred by the Indemnified Person in
connection with the defense thereof. If the Indemnifying Person assumes such
defense, the Indemnified Person shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Person, it being understood that the
Indemnifying Person shall control such defense. The Indemnifying Person shall
be liable for the fees and expenses of counsel employed by the Indemnified
Person for any period during which the Indemnifying Person has not assumed the
defense thereof (other than during any period in which the Indemnified Person
shall have failed to give notice of the Third-Party Claim as provided above).
If the Indemnifying Person chooses to defend or prosecute any Third-Party Claim,
all the parties hereto shall cooperate in the defense or prosecution thereof.
Such cooperation shall include the retention and (upon the Indemnifying Person's
request) the provision to the Indemnifying Person of records and information
which are reasonably relevant to such Third-Party Claim, and making employees
available on a
41
<PAGE>
mutually convenient basis in the manner specified in Section 8.5 hereof to
provide additional information and explanation of any material provided
hereunder. Notwithstanding the foregoing, in the event a Third-Party Claim is
made against Seller as to which Seller is entitled to seek indemnification under
this Article X and Seller concludes, in its reasonable judgment, that Buyer
lacks the financial and personnel resources to vigorously defend Seller from
such Third-Party Claim, Seller may elect to retain the defense of such
Third-Party Claim and shall be entitled to be reimbursed by Buyer for its Losses
incurred in such defense, such expenditures to be reimbursed promptly after
submission of invoices therefor. Whether or not the Indemnifying Person shall
have assumed the defense of a Third-Party Claim, the Indemnified Person shall
not admit any liability with respect to, or settle, compromise or discharge,
such Third-Party Claim without the Indemnifying Person's prior written consent
(which consent shall not be unreasonably withheld or delayed). All Tax Claims
(as defined in Section 10.7) shall be governed by Section 10.7.
10.7 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Tax authority,
which, if successful, might result in an indemnity payment to any Person
hereunder (a "Tax Indemnitee"), the Tax Indemnitee shall promptly notify the
party against whom indemnification is sought (the "Tax Indemnitor") in writing
of such claim (a "Tax Claim"). If notice of a Tax Claim is not given to the Tax
Indemnitor within a sufficient period of time to allow the Tax Indemnitor to
effectively contest such Tax Claim, or in reasonable detail to apprise the Tax
Indemnitor of the nature of the Tax Claim, in each case taking into account the
facts and circumstances with respect to such Tax Claim, the Tax Indemnitor shall
not be liable to the Tax Indemnitee to the extent that the Tax Indemnitor's
ability to effectively contest such Tax Claim is actually prejudiced as a result
thereof.
(b) With respect to any Tax Claim, the Tax Indemnitor
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion (and at its sole cost and expense) pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with any taxing authority with respect thereto and may, in its sole
discretion, either pay the Tax claimed and sue for a refund where applicable law
permits such refund suits or contest the Tax Claim in any permissible manner;
PROVIDED, HOWEVER, that the Tax Indemnitor shall not settle or compromise a Tax
Claim without giving 30 days' prior notice to the Tax Indemnitee, and without
the Tax Indemnitee's consent, which shall not be unreasonably withheld or
delayed, if such settlement or compromise would have a material adverse effect
on
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<PAGE>
the Tax liabilities of the Tax Indemnitee, its Affiliates or any member of its
affiliated group. The Tax Indemnitee, and each of its Affiliates, shall
cooperate with the Tax Indemnitor in contesting any Tax Claim, which cooperation
shall include, without limitation, the retention and (upon the Tax Indemnitor's
request) the provision to the Tax Indemnitor of Records and information which
are reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
10.8 SURVIVAL OF REPRESENTATIONS. The representations and
warranties in this Agreement and in any other document delivered in connection
herewith shall survive the Closing solely for purposes of Sections 10.1(a) and
10.2(a) and shall terminate at the close of business on the second anniversary
of the Closing Date except for the representations and warranties in Section 4.3
hereof, which shall survive until the expiration of the applicable statute of
limitations. Representations and warranties relating to environmental matters
in Section 4.10 shall not survive the Closing; however, the covenant in
Section 6.4 shall be governed by Section 10.1 and Seller and Buyer's
indemnification obligations as to environmental matters, which are not covered
by Section 6.4, shall be governed by Section 10.3.
ARTICLE XI
GENERAL PROVISIONS
11.1 ASSIGNMENT. Prior to the Closing, this Agreement and the
rights and obligations hereunder shall not be assignable or transferable by
Buyer (including by operation of law in connection with a merger or sale of
substantially all the assets, of Buyer) without the prior written consent of
Seller; PROVIDED, HOWEVER, that Buyer may assign its right to purchase the
Assets hereunder to an Affiliate of Buyer that can accurately make all of
Buyer's representations and warranties as of the Closing without the prior
written consent of Seller; PROVIDED FURTHER, HOWEVER, that no assignment shall
limit or affect Buyer's obligations hereunder.
11.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in
Article X as to Indemnified Persons, this Agreement is for the sole benefit of
the parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any person or entity, other than
the parties hereto and such assigns, any legal or equitable rights hereunder.
43
<PAGE>
11.3 TERMINATION.
(a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated (except as set forth in
Section 11.3(c)) and the Transactions abandoned at any time prior to the Closing
Date:
(i) by mutual written consent of
Seller and Buyer;
(ii) by Seller pursuant to Section 6.4
or if any of the conditions set forth in Section 3.1
shall have become incapable of fulfillment, and shall
not have been waived by Seller;
(iii) by Buyer if any of the conditions
set forth in Section 3.2 shall have become incapable of
fulfillment, and shall not have been waived by Buyer; or
(iv) by either party hereto, if the
Closing does not occur on or prior to May 27, 1994.
(b) In the event of termination by Seller or Buyer
pursuant to this Section 11.3, written notice thereof shall forthwith be given
to the other party and the Transactions shall be terminated, without further
action by either party. If the Transactions are terminated as provided herein:
(i) Buyer shall return all documents
and copies and other material received from Seller
relating to the Transactions, whether so obtained before
or after the execution hereof, to Seller;
(ii) all confidential information
received by Buyer with respect to the Division and
Seller shall be treated in accordance with the
applicable provisions of the Letter of Intent which
shall remain in full force and effect notwithstanding
the termination of this Agreement.
(c) If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this
Section 11.3, this Agreement shall become void and of no further force and
effect, except for the provisions of (i) Section 7.1 relating to the obligation
of Buyer to keep confidential certain information and data obtained by it,
(ii) Section 11.4 relating to certain expenses, (iii) Section 12.5 relating to
attorney fees and expenses,
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<PAGE>
(iv) Section 11.11 relating to finder's fees and broker's fees and (v) this
Section 11.3. Nothing in this Section 11.3 shall be deemed to release either
party from any liability for any breach by such party of the terms and
provisions of this Agreement which occurred prior to its termination or to
impair the right of either party to compel specific performance by the other
party of its obligations under this Agreement.
11.4 EXPENSES. Whether or not the Transactions are consummated,
and except as otherwise provided in this Agreement, all fees, costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such fees, costs or expenses.
11.5 ATTORNEYS' FEES. Should any litigation be commenced
concerning this Agreement or the rights and duties of any party with respect to
it, the party prevailing shall be entitled, in addition to such other relief as
may be granted, to a reasonable sum for such party's attorney fees and expenses
determined by the court in such litigation or in a separate action brought for
that purpose.
11.6 AMENDMENTS. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by both parties hereto.
11.7 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
(i) if to Buyer, to:
The Louis Allis Company
427 East Stewart Street
P.O. Box 2020
Milwaukee, Wisconsin 53201-2020
Attention: Daniel E. Stetler, President
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Luke E. Sims, Esq.
45
<PAGE>
(ii) if to Seller, to:
MagneTek, Inc.
11150 Santa Monica Boulevard
15th Floor
Los Angeles, California 90025
Attention: Samuel A. Miley, Esq.
General Counsel
with a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East
Suite 4200
Los Angeles, California 90067
Attention: Jennifer Bellah, Esq.
11.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings
contained in this Agreement, in any Exhibit or Schedule hereto and in the table
of contents to this Agreement, are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Any matter
disclosed in one Schedule hereto shall be deemed incorporated by reference into
each other Schedule hereto and disclosed in each such Schedule. All Exhibits
and Schedules annexed hereto or referred to herein are hereby incorporated in
and made a part of this Agreement as if set forth in full herein. Any
capitalized terms used in any Schedule or Exhibit, but not otherwise defined
therein, shall have the meaning as defined in this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other party.
11.10 ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written agreements and understandings (including, without limitation, the
Letter of Intent except as to the confidentiality provisions thereof) relating
to such subject matter.
11.11 FEES. Each party hereto hereby represents and warrants
that no broker or finder has acted for such party in connection with this
Agreement or the transactions contemplated hereby or may be entitled to any
brokerage fee, finder's fee or commission in respect thereof.
11.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any person
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<PAGE>
or circumstance shall be held invalid, illegal or unenforceable in any respect
by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
11.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
MAGNETEK, INC.
By:/s/John P. Colling, Jr.
------------------------
Name: John P. Colling, Jr.
Title: Vice President and
Treasurer
THE LOUIS ALLIS COMPANY
By:/s/Daniel E. Stetler
------------------------
Name: Daniel E. Stetler
Title: President
47
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.54
<SEQUENCE>5
<DESCRIPTION>EXH 10.54 ASSET PURCHASE AGREE (JUNE 17, 1994)
<TEXT>
<PAGE>
[Execution Copy]
- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
MAGNETEK, INC.,
MAGNETEK CONTROLS, INC.
and
CONTROLS ACQUISITION CORPORATION
-----------------------------------------
Dated as of June 17, 1994
-----------------------------------------
SALE OF MAGNETEK CONTROLS, INC.
AND THE MAGNETEK TRANSDUCERS DIVISION
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . 7
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT. . . . . . . . . . . . 7
2.1 Sale and Transfer of the Assets . . . . . . . . . . . . . 7
2.2 Assets Not Transferred. . . . . . . . . . . . . . . . . . 9
2.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . 10
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Purchase Price Adjustment . . . . . . . . . . . . . . . . 14
2.6 Tax Allocation. . . . . . . . . . . . . . . . . . . . . . 17
2.7 Sales and Use Tax . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . 18
3.1 Buyer's Obligation. . . . . . . . . . . . . . . . . . . . 18
3.2 Sellers' Obligation . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . 21
4.1 Authority; Corporate Matters;
No Conflicts; Governmental Consents . . . . . . . . . . . 21
4.2 Financial Statements; Absence of Changes. . . . . . . . . 22
4.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 Assets Other than Real Property Interests . . . . . . . . 25
4.5 Real Property . . . . . . . . . . . . . . . . . . . . . . 26
4.6 Intellectual Property . . . . . . . . . . . . . . . . . . 27
4.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 28
4.8 Litigation; Decrees . . . . . . . . . . . . . . . . . . . 29
4.9 Employee and Related Matters. . . . . . . . . . . . . . . 30
4.10 Environmental Matters . . . . . . . . . . . . . . . . . . 30
4.11 Employee and Labor Relations. . . . . . . . . . . . . . . 31
4.12 Assets Owned by Affiliates. . . . . . . . . . . . . . . . 31
4.13 Compliance with Law; Governmental Authorizations. . . . . 32
4.14 Assets of the Business. . . . . . . . . . . . . . . . . . 32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . 32
5.1 Authority; No Conflicts; Governmental Consents. . . . . . 32
5.2 Actions and Proceedings, Etc. . . . . . . . . . . . . . . 33
5.3 Inconsistent Representations. . . . . . . . . . . . . . . 33
i
<PAGE>
ARTICLE VI COVENANTS OF SELLERS. . . . . . . . . . . . . . . . . . . 34
6.1 Access. . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Ordinary Conduct. . . . . . . . . . . . . . . . . . . . . 35
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Title Commitment. . . . . . . . . . . . . . . . . . . . . 35
6.5 Acquisition Proposals . . . . . . . . . . . . . . . . . . 36
6.6 Accounts Receivable . . . . . . . . . . . . . . . . . . . 36
6.7 Disclosure of Information; Non-Competition. . . . . . . . 37
6.8 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.9 Removal of Liens. . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . 39
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . 39
7.2 Accounts Receivable . . . . . . . . . . . . . . . . . . . 39
7.3 Excluded Assets . . . . . . . . . . . . . . . . . . . . . 40
7.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . 40
8.1 HSR Filings; Permits and Consents . . . . . . . . . . . . 40
8.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . 41
8.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4 Reasonable Efforts. . . . . . . . . . . . . . . . . . . . 42
8.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.6 Access to Former Business Records . . . . . . . . . . . . 42
8.7 Use of Trademark and Trade Names. . . . . . . . . . . . . 43
8.8 Required Modifications or Replacements of Products. . . . 43
8.9 Assumed Litigation. . . . . . . . . . . . . . . . . . . . 44
8.10 Waiver of Bulk Sales Law Compliance . . . . . . . . . . . 45
8.11 Further Instruments and Assurances. . . . . . . . . . . . 45
ARTICLE IX EMPLOYEE BENEFIT MATTERS. . . . . . . . . . . . . . . . . 46
9.1 Employee Retention. . . . . . . . . . . . . . . . . . . . 46
9.2 Employee Benefit Plans. . . . . . . . . . . . . . . . . . 46
9.3 Vacation and Holiday Pay. . . . . . . . . . . . . . . . . 47
9.4 Access to Information . . . . . . . . . . . . . . . . . . 47
9.5 No Third Party Beneficiary. . . . . . . . . . . . . . . . 47
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 48
10.1 Indemnification by Sellers. . . . . . . . . . . . . . . . 48
10.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . 48
10.3 Indemnification for Environmental Matters.. . . . . . . . 49
10.4 Losses Net of Insurance, Etc. . . . . . . . . . . . . . . 50
10.5 Termination of Indemnification. . . . . . . . . . . . . . 51
10.6 Procedures Relating to Indemnification (Other than
for Tax Claims) . . . . . . . . . . . . . . . . . . . . . 51
ii
<PAGE>
10.7 Procedures Relating to Indemnification of Tax Claims. . . 53
10.8 Survival of Representations . . . . . . . . . . . . . . . 54
10.9 Parties Free to Refer to Obligations of the Other . . . . 54
10.10 Interest. . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XI GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . 54
11.1 Benefits of Agreement; Assignment . . . . . . . . . . . . 54
11.2 No Third-Party Beneficiaries. . . . . . . . . . . . . . . 55
11.3 Termination . . . . . . . . . . . . . . . . . . . . . . . 55
11.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 56
11.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 56
11.6 Amendment, Modification and Waiver. . . . . . . . . . . . 57
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.8 Interpretation; Exhibits and Schedules. . . . . . . . . . 58
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 58
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 58
11.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.12 Severability. . . . . . . . . . . . . . . . . . . . . . . 59
11.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . 59
EXHIBIT A Form of Bulk Bill of Sale, Assignment and
Assumption Agreement. . . . . . . . . . . . . . . . . . . 1
EXHIBIT B Supply Agreement. . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT C Escrow Agreement. . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT D Form of Opinion of Gibson, Dunn & Crutcher. . . . . . . . 1
EXHIBIT E Form of Opinion of General Counsel of MagneTek, Inc.. . . 1
EXHIBIT F Form of Opinion of O'Sullivan Graev & Karabell. . . . . . 1
iii
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SCHEDULES
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Schedule 2.1(a) Owned Property
Schedule 2.1(b) Leased Property
Schedule 2.6 Purchase Price Allocation [post signing]
Schedule 4.1(b) Jurisdictions where the Business does business
Schedule 4.1(c) Capital Stock Owned By Controls
Schedule 4.1(d) Seller Consents
Schedule 4.2(a) Financial Statements
Schedule 4.2(b) Additional Liabilities
Schedule 4.2(c) Changes since December 31, 1993
Schedule 4.3 Taxes
Schedule 4.4 Liens
Schedule 4.5 Real Property and Leases
Schedule 4.6 Intellectual Property
Schedule 4.7 Contracts
Schedule 4.8 Litigation
Schedule 4.9(a),(b) Employee and Related Matters
Schedule 4.11 Labor Matters
Schedule 4.12 Assets Owned by Affiliates
Schedule 4.13 Compliance with Law
Schedule 5.1(b) Conflicts
Schedule 6.2 Exceptions to Ordinary Course
Schedule 6.7 Products Covered by Noncompete Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of June 17, 1994, between MAGNETEK,
INC., a Delaware corporation ("MagneTek"), MAGNETEK CONTROLS, INC., a Delaware
corporation ("Controls"; and together with MagneTek, the "Sellers") and CONTROLS
ACQUISITION CORPORATION, a Delaware corporation (the "Buyer").
MagneTek, through its MagneTek Transducers Division (the "Division"),
and Controls are engaged in the business (the "Business") of developing,
manufacturing, selling and distributing various products, including rotary cam
limit switches, programmable limit switches, tank monitoring systems, industrial
brakes, pressure and position transducers, accelerometers, programmable logic
controllers and other products related to the foregoing. The parties hereto
desire that the Sellers sell, transfer, convey and assign to the Buyer all of
the assets, properties, interests in properties and rights used primarily in,
held for use primarily in or otherwise relating to the Business, and that the
Buyer purchase and acquire the same, subject to the assumption by the Buyer of
certain liabilities and obligations of the Sellers relating to the Business,
upon the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(f).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
<PAGE>
"Assumed Litigation" has the meaning set forth in Section 2.3(b).
"Bill of Sale, Assignment and Assumption Agreement" means a Bill of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
"Business" has the meaning set forth in the preamble.
"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in New York are authorized or required by law to
close.
"Business Employee" means any individual actively employed by either
Seller working primarily for the Business on the Closing Date, including any
such employee on vacation or illness leave on such date.
"Business Property" has the meaning set forth in Section 4.5 hereto.
"Claim" means any claim, demand, assessment, action, arbitration,
suit, proceeding, investigation, cause of action, litigation, judgment, order or
decree.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
"Closing Date" means the day on which the Closing occurs pursuant to
Section 2.4.
"Closing Net Assets" has the meaning set forth in Section 2.5(a).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Confidential Information" has the meaning set forth in Section 6.7.
"Contract" means any contract, agreement, instrument, license, lease,
sales or purchase order or other legally binding commitment or undertaking,
whether written or oral, to which Controls is a party or to which MagneTek or
the Business is a party and relating primarily to the Business.
"Contractual Obligation" means, as to any Person, any provision of any
note, bond or security issued by such Person or of any mortgage, indenture, deed
of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property or assets is subject.
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"December Balance Sheet" means the unaudited balance sheet of the
Business as of December 31, 1993, attached hereto as part of Schedule 4.2, which
shows the adjustments made to the Interim Balance Sheet to arrive at the
December 31 Balance Sheet.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and hospitalization),
short and long-term disability, savings, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, salary continuation, sick pay,
sick leave, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit, flexible spending account programs and other
employee benefit arrangements, plans, contracts or policies or practices
providing employee or executive compensation or benefits to Business Employees,
other than the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit plans,"
as defined in Section 3(3) of ERISA, maintained or contributed to by Sellers or
in which Sellers participate or participated and which provides benefits to
Business Employees, including (i) any such plans that are "employee welfare
benefit plans" as defined in Section 3(1) of ERISA and (ii) any such plans that
are "employee pension benefit plans" as defined in Section 3(2) of ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable statutes,
regulations, rules, ordinances or codes or any order, decree, consent decree or
similarly binding instrument from a court or other Governmental Authority which
relate to the protection of human health or the environment, including but not
limited to, any of the foregoing regulating the presence, manufacture, transfer,
generation, production, refinement, pumping, processing, distribution, use,
treatment, storage, transport, handling, abatement, remediation, clean up or
removal of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Escrow Agent" means Commerce Escrow Agent (or other party serving as
successor escrow agent under the Escrow Agreement).
"Escrow Agreement" means an escrow agreement to be entered into by
Sellers and Buyer on the Closing Date relating
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to the escrow of $2,300,000 of the purchase price pending final determination
thereof in substantially the form of Exhibit C hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state,
local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Material" means any substance: (i) which is defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Law, (ii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any Governmental Authority, or (iii) which contains gasoline,
diesel fuel or other petroleum hydrocarbons.
"Hired Employees" has the meaning set forth in Section 9.1.
"Knowledge of Sellers" with reference to any of the representations
and warranties of Sellers means (i) the actual knowledge of the following
individuals: David P. Reiland, John P. Colling, Jr., Samuel A. Miley, Dennis
Hatfield, Brian Dundon, Dennis Berndt, Thomas Kmak, John Steiner and Kent
Kirchstein; PROVIDED, HOWEVER, that any such individual shall be deemed to have
had actual knowledge of any matter that would have been apparent to a reasonable
person of comparable education, background and responsibilities under the
circumstances and (ii) in addition, insofar as either Blair Simmons or Richard
Baumhauer (the "Business Representatives") has reviewed or prepared, and
provided written materials to MagneTek for use in connection with this
Agreement, the actual knowledge of either such Business Representative;
PROVIDED, HOWEVER, that in the absence of actual knowledge (including deemed
actual knowledge) of either Seller as defined in the preceding clause (i) to the
contrary on any subject covered
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thereby, such written materials shall be conclusive evidence as to the knowledge
of Sellers.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person from
whom indemnification is being sought hereunder.
"Intellectual Property Rights" has the meaning set forth in
Section 4.6.
"Interim Balance Sheet" has the meaning set forth in Section 4.2.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other), option, right of first refusal or right
of first offer or other security interest or agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement or any financing lease having substantially the same
economic effect as any of the foregoing).
"Loss" means any loss, cost, liability, claim, damage, or expense
(including reasonable attorneys' fees and disbursements and the costs of
investigation).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, results of operations, property, assets, liabilities or
condition (financial or other) of the Business, taken as a whole or (b) the
ability of Sellers to consummate the Transactions.
"Owned Property" has the meaning set forth in Section 2.1(a).
"Permits" has the meaning set forth in Section 4.13.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Records" has the meaning set forth in Section 2.1(h).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in Sellers'
reasonable discretion to permit Sellers to meet any duty or obligation owing by
Sellers to remedy defects or hazards in such products or to provide any warning
with respect to any such defects or hazards. Required
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<PAGE>
Modification shall in no event mean or include any modification,
improvement or enhancement required by any written warranty covering the
relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, statute, treaty, rule, regulation, ordinance, order,
decree, consent decree or similar instrument or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or assets or to which such
Person or any of its property or assets is subject.
"SEC" means the Securities and Exchange Commission.
"Sellers" has the meaning set forth in the preamble hereto.
"Sellers' Plans" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by Sellers under which any
Business Employee participates or is entitled to receive benefits.
"Specifically Excluded Liabilities" has the meaning set forth in
Section 2.3.
"Supply Agreement" means the agreement between Buyer and Sellers
relating to the supply of certain components relating to the Allispede product
line, in form and substance reasonably satisfactory to Buyer and Sellers,
containing the terms set forth on the summary attached hereto as Exhibit B.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use, ad
valorem, value-added, capital, unitary, intangible, franchise, profits, license,
withholding, payroll, employment, unemployment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or additional
amount imposed by any jurisdiction or other taxing authority, on such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Transaction Documents" means (i) this Agreement, (ii) the Bill of
Sale, Assignment and Assumption Agreement, (iii) the special warranty deeds of
conveyance of Owned Property and the other instruments of conveyance furnished
pursuant to
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Section 2.4, (iv) the Escrow Agreement and (v) the Supply Agreement.
"Transactions" means the transactions contemplated by the Transaction
Documents.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other than
Section 1.1 shall have the meanings as so defined when used in this Agreement.
(b) As used herein, accounting terms not defined or to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date Sellers will sell, convey,
transfer, assign and deliver to Buyer all of Sellers' right, title and interest
in, to and under the assets, properties, interests in properties and rights of
Sellers of every kind, nature and description, whether real, personal or mixed,
tangible or intangible, used primarily in, held for use primarily in or
otherwise primarily relating to the Business (other than the Excluded Assets),
wherever located, as the same shall exist on the Closing Date (the "Assets"),
including, without limitation, the following:
(a) the real property (including all buildings, improvements and
structures located thereon and all rights, privileges, easements and
appurtenances thereto) located at the Clawson and Peck facilities in Michigan
(respectively, the "Clawson Facility" and the "Peck Facility") described on
Schedule 2.1(a) hereto (the "Owned Property");
(b) the leasehold interest relating to the facility used by the
Business at 650 Easy Street, Simi Valley, California (the "Simi Valley
Facility") listed on Schedule 2.1(b) (the "Leased Property");
(c) all tangible personal property, including, without
limitation, all fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, machinery, equipment, computer equipment (including
software) (collectively, including the fixtures, the "Equipment");
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(d) all inventory, including without limitation, raw materials,
work-in-process, finished goods, packaging materials, spare parts and supplies
(the "Inventory");
(e) all Intellectual Property Rights, including such rights as
to the names "Gemco," "B/W Controls," "Industrial Brake Products," "Rayelco" and
the trademarks, trade names, patents, service marks, copyrights (whether
registered or unregistered) and pending applications for the foregoing listed on
Schedule 4.6;
(f) all Contracts (including but not limited to all Contracts
listed on Schedule 4.7, except to the extent indicated on such Schedule 4.7, and
all Contracts entered into by the Business through the Closing Date) (the
"Assigned Contracts");
(g) all transferable Permits used primarily in or relating
primarily to the Business or the Assets;
(h) all books and records either in original or photostatic form
(except in the case of computer software, which shall be in the form in which it
is used in the Business) (including copies, to the extent segregatable from
other MagneTek records and/or located at the Clawson, Peck or Simi Valley
Facilities, of historical accounting, financial and Tax records), Controls'
proprietary accounting and reporting formats, data bases, systems and
procedures, plans and specifications, surveys and title policies relating to the
Owned Property, sales literature, product information, engineering drawings and
records, employment records and files and all other information and/or data
related to or used by Sellers primarily in connection with the Assets and the
operation of the Business (the "Records");
(i) all insurance proceeds paid or payable by any insurance
provider, other than Sellers or any Affiliate of Sellers, for any Asset that is
destroyed or damaged after the date hereof and prior to the Closing;
(j) all accounts receivable;
(k) all prepaid expenses (other than prepaid Taxes, except
prepaid property Taxes pertaining to post-Closing Date periods), advances and
deposits (including utility deposits);
(l) all telephone, telex and telecopier numbers and all existing
listings in all telephone books and directories;
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(m) all warranties and guaranties received from vendors,
suppliers or manufacturers with respect to the Assets or the Business;
(n) all transferable rights (including transferable experience
ratings) with respect to unemployment and workers' compensation insurance
reserves, in each case relating to Business Employees who become Hired
Employees; and
(o) all goodwill appurtenant to the foregoing Assets.
Anything contained in this Agreement to the contrary notwithstanding, but
subject to the provisions of Section 2.2, to the extent that any asset,
property, interest in property or right used primarily in, held for use
primarily in or otherwise primarily relating to the Business is owned by any
Affiliate of either Seller, such asset, property, interest in property or right
shall be deemed to be an Asset for all purposes of this Agreement, and Sellers
shall do, and shall cause any such other Affiliate of any Seller to do, all
things required to be done to effect the transfer thereof as if such Asset were
referred to above.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to the
contrary, the following assets are not included in the Assets and shall be
retained by Sellers (the "Excluded Assets"):
(a) all cash and cash equivalent items (except as described in
Section 2.1(i) and (k), including, without limitation, checking accounts, bank
accounts, certificates of deposit, time deposits, securities, and the proceeds
of accounts receivable, including uncashed checks in payment thereof, received
by either Seller on or prior to the Closing Date; PROVIDED, HOWEVER, that
accounts receivable on the Closing Balance Sheet do not include any such
accounts receivable as to which Seller has received proceeds, to the extent of
such proceeds;
(b) all rights, properties, and assets which have been used or
held for use in connection with the Business and which shall have been
transferred (including transfers by way of sale) or otherwise disposed of prior
to the Closing, provided such transfers and disposals shall have been in the
ordinary course of the business of the Business as conducted at the date hereof;
(c) rights to or claims for refunds or rebates of Taxes and
other governmental charges for periods ending on or prior to the Closing Date
and the benefit of net operating loss
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carryforwards, carrybacks or other credits of Sellers, whether or not
attributable to the Business;
(d) Claims or rights against third parties arising from breaches
of any of the Assigned Contracts (other than those described in Section 2.1(m))
on or prior to the Closing Date; PROVIDED, HOWEVER, that any rights of
indemnification, contribution or reimbursement that may exist under the Assigned
Contracts in respect of Excluded Assets or Excluded Liabilities hereunder shall
also be Excluded Assets regardless of the period to which they pertain;
(e) except as set forth in Sections 2.1(i) and 2.1(n), all
insurance policies and rights thereunder, including but not limited to, rights
to any cancellation value as of the Closing Date;
(f) proprietary or confidential business or technical
information, records and policies that relate generally to either Seller and are
not used primarily in, held for use primarily in or otherwise primarily relating
to the Business, including, without limitation, organization manuals and
strategic plans;
(g) subject to the limited rights granted in Section 8.7, all
"MagneTek" marks, including any and all trademarks or service marks, trade
names, slogans or other like property relating to or including the name
"MagneTek," the mark MagneTek or any derivative thereof and the MagneTek logo or
any derivative thereof, the name "MagneTek Controls"; and MagneTek's proprietary
computer programs or other software not primarily used in the Business,
including but not limited to Sellers' proprietary data bases, accounting and
reporting formats, systems and procedures;
(h) all Records relating to pending lawsuits (other than any
included in the Assumed Liabilities) to which either Seller is a party and which
involve the Business; and
(i) all other assets used primarily in connection with the
Sellers' corporate functions (including but not limited to the corporate
charter, taxpayer and other identification numbers, seals, minute books and
stock transfer books), whether or not used for the benefit of the Business.
2.3 ASSUMED LIABILITIES. On the Closing Date, Buyer shall execute
and deliver to Sellers the Bill of Sale, Assignment and Assumption Agreement
pursuant to which Buyer shall assume and agree to pay, perform and discharge
when due, only the following liabilities and obligations of Sellers pertaining
to the Assets and the Business (collectively, the "Assumed Liabilities"):
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(a) all of the accounts payable, accrued pay, other accrued
expenses and any other items accrued or otherwise reflected as "current
liabilities" on the Closing Balance Sheet in accordance with Section 2.5;
(b) all liabilities and obligations of each Seller which pertain
to or are to be performed during the period following the Closing Date and which
arise under any of the Assigned Contracts (i) listed on Schedule 4.7, (ii) not
required to be listed on Schedule 4.7 either (A) pursuant to the provisions of
Section 4.7 or (B) because they were entered into after the date hereof and on
or before the Closing Date, but in each case only to the extent effectively
assigned and transferred to Buyer pursuant to the provisions hereof or the
benefits of which are provided to Buyer pursuant to Section 8.1(c) and subject
to the subsequent assignment thereof pursuant to Section 8.1(c);
(c) the liabilities expressly assumed by Buyer in Section 2.7,
Section 8.9, Article IX and Section 11.4 of this Agreement, and any other
liabilities expressly assumed by Buyer hereunder;
(d) all liabilities and obligations under open purchase orders
that were entered into by Seller on behalf of the Business and which provide for
the delivery of goods or services (and in either case for payment) subsequent to
the Closing Date;
(e) all obligations and liabilities for Taxes, utilities, gas
and other services arising out of, or in connection with, or attributable to the
Business for any periods after the Closing Date, including the Taxes covered by
Section 2.7;
(f) all liabilities for (i) warranty claims made after the
Closing Date for service, repair, replacement and similar work pursuant to
Sellers' written warranties with respect to products sold or services provided
before the Closing Date, unless written notice of such claim has been delivered
to Sellers within the two-year period following the Closing Date and the
warranty reserve on the Closing Balance Sheet has been exhausted (based upon
expenses at shop level cost (direct materials plus labor)); (ii) workers'
compensation claims relating to injury occurring after the Closing Date; and
(iii) warranty and product liability claims made after the Closing Date for
injuries, property damage or other Losses arising after the Closing Date;
(g) all liabilities and obligations (fixed or contingent, known
or unknown, matured or unmatured, whether arising by operation of law, by
contract or otherwise) arising
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from the operation of the Business from and after the Closing Date; and
(h) all liabilities and obligations of Buyer relating to the
transactions contemplated hereby, including, without limitation, finders, legal
and accounting fees and expenses incurred by Buyer in connection with the
Transactions, to the extent required to be paid for by Buyer pursuant to the
provisions of this Agreement.
Buyer is not assuming any liabilities or obligations (fixed or
contingent, known or unknown, matured or unmatured) of Sellers, whether related
to the Assets or the Business or not, or of the Business, other than the Assumed
Liabilities (such other liabilities or obligations being referred to as the
"Excluded Liabilities," which term includes, but is not limited to, the
Specifically Excluded Liabilities) and the Assumed Liabilities shall in no event
include the following liabilities (the "Specifically Excluded Liabilities"):
(i) all Claims, liabilities and obligations arising under
or with respect to (A) any Contract that is not an Assigned Contract, or
any Assigned Contract to the extent not assumed pursuant to Section 2.3(b);
(B) except as provided in Section 2.3(f), products liability, warranty,
personal injury, property damage, workers' compensation, labor grievance
proceedings, auto physical damage claims, medical claims or any other
Claims not expressly included in the Assumed Liabilities which arose or
were incurred on or before the Closing Date or which are based on events
occurring on or before the Closing Date notwithstanding that the date on
which the Claim, liability or obligation is asserted is after the Closing
Date; and (C) violations of any Requirement of Law for which either Seller
is responsible;
(ii) all liabilities and obligations of any nature
whatsoever of Sellers to any of their respective Affiliates;
(iii) except to the extent included in the Assumed
Liabilities, including pursuant to Article IX, all Claims by and all
liabilities and obligations to employees and independent contractors for
periods prior to and including the Closing Date, including, without
limitation, any Claims, liabilities and obligations arising (x) out of any
of Sellers' Plans, (y) from any bonus plans or agreements of Sellers
disclosed on Schedule 4.7 as "Bonus Agreements" and (z) from Sellers'
failure to deposit or fund any amounts withheld from employees pursuant to
any of Sellers' Plans;
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(iv) all liabilities and obligations of Sellers to financial
institutions or other Persons for borrowed money or with respect to
indebtedness and obligations of others which any Seller has directly or
indirectly guaranteed;
(v) all liabilities and obligations of Sellers relating to
the Excluded Assets or with respect to the transactions contemplated
hereby, including, without limitation, legal and accounting fees and
expenses incurred by Sellers in connection with the Transactions, except to
the extent required to be paid for by Buyer pursuant to the provisions of
this Agreement;
(vi) any liability or obligation for Taxes, utilities, gas
and other services arising out of, or in connection with, or attributable
to the Business for any period ending on or prior to the Closing Date,
excluding the Taxes covered by Section 2.7; and
(vii) any liability or obligation of any nature
whatsoever of Sellers relating to any business of Sellers (other than the
Business) or any employees of Sellers (other than the Hired Employees),
including, without limitation, under any employee plans, benefits contracts
or arrangements that would be Sellers' Plans if any Business Employee were
participating or entitled to benefits thereunder.
2.4 CLOSING. The closing (the "Closing") of the purchase and sale of
the Assets shall be held at the offices of Gibson, Dunn & Crutcher, 2029 Century
Park East, Suite 4000, Los Angeles, California, at 10:00 a.m. on June 30, 1994
or, if the waiting period referred to in Section 3.1(k) has not theretofore
expired, on July 1, 1994, provided that the conditions to Closing set forth in
Article III have been satisfied or waived by such date, or on such other date as
the parties may agree upon in writing. The foregoing date on which the Closing
shall occur is hereinafter referred to as the "Closing Date." At the Closing,
Buyer shall deliver:
(a) to Sellers by wire transfer (to a bank account designated at
least two business days prior to the Closing Date in writing by Sellers)
immediately available funds in an amount equal to the sum of $43,700,000 (forty-
three million seven-hundred thousand dollars); and
(b) to the Escrow Agent, an amount equal to $2,300,000 (two
million three hundred thousand dollars) (the "Escrow Amount").
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At the Closing, the Sellers shall deliver or cause to be delivered to
Buyer (a) the Bill of Sale, Assignment and Assumption Agreement, (b) special
warranty deeds in recordable form for the Owned Property, (c) the Escrow
Agreement, (d) the Supply Agreement and (e) such other instruments of transfer
and documents as Buyer may reasonably request, and Buyer shall deliver to Seller
(a) the Bill of Sale, Assignment and Assumption Agreement, (b) the Escrow
Agreement, (c) a favorable opinion of counsel in accordance with the terms
hereof and (d) such other instruments of assumption and documents as Sellers may
reasonably request. In addition, the Sellers shall deliver to Buyer at the
Closing an affidavit in form and substance reasonably satisfactory to Buyer,
duly executed and acknowledged, certifying that neither Seller is a foreign
person within the meaning of Section 1445(f)(3) of the Code, and any
corresponding affidavit required for state tax purposes.
2.5 PURCHASE PRICE ADJUSTMENT.
(a) Within 60 days after the Closing Date, MagneTek shall
prepare and deliver to Buyer (i) a balance sheet of the Business as of the close
of business on the Closing Date comprising the Assets and the outstanding
Assumed Liabilities in the manner set forth in Section 2.5(c) (the "Closing
Balance Sheet") and (ii) the Sellers' calculation of the Closing Net Assets. As
used herein, the term "Closing Net Assets" means the difference between the
total amount of Assets at the Closing Date and the total amount of the Assumed
Liabilities at the Closing Date, in each case as reflected on the Closing
Balance Sheet. For purposes of preparing the Closing Balance Sheet, Buyer shall
make the necessary Business Employees reasonably available to Sellers (without
charge) during normal business hours of the Business and without unduly
disrupting the normal operations of the Business and such employees shall, for
the purpose of assisting Sellers in preparing the Closing Balance Sheet, be
instructed by Buyer to act at Sellers' direction consistent herewith.
During the 30 days immediately following Buyer's receipt of the
Closing Balance Sheet, Buyer and Deloitte & Touche (the "Buyer's Accountants")
shall be entitled to review the Closing Balance Sheet and Sellers' working
papers, trial balances and similar materials relating to the Closing Balance
Sheet, and Sellers shall provide Buyer and Buyer's Accountants with timely
access during Sellers' normal business hours and without unduly disrupting the
normal operation of the Sellers' business the necessary personnel, properties,
books and records to the extent relevant and not comprising Assets. The Closing
Balance Sheet shall become final and binding upon the parties on the
thirty-first day following delivery thereof unless Buyer gives written notice to
Sellers of its disagreement with the Closing Balance Sheet (a "Notice of
Disagreement") prior to such
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date. Any Notice of Disagreement shall specify in reasonable detail the nature
of any disagreement so asserted. If a timely Notice of Disagreement is received
by Sellers with respect to the Closing Balance Sheet, then the Closing Balance
Sheet (as revised in accordance with clause (x) or (y) below), shall become
final and binding upon the parties on the earlier of (x) the date the parties
hereto resolve in writing any differences they have with respect to any matter
specified in a Notice of Disagreement or (y) the date any matters in dispute are
finally resolved in writing by the Accounting Firm (as defined below) (the date
on which the Closing Balance Sheet so becomes final and binding being
hereinafter referred to as the "Final Determination Date"). During the 30 days
immediately following the delivery of any Notice of Disagreement, Sellers and
Buyer shall seek in good faith to resolve in writing any differences which they
may have with respect to any matter specified in such Notice of Disagreement.
During such period, Buyer and Sellers shall each have access to the other
party's working papers, trial balances and similar materials prepared in
connection with the other party's preparation of the Closing Balance Sheet and
the Notice of Disagreement, as the case may be. At the end of such 30-day
period, Sellers and Buyer shall submit to an independent "Big 6" public
accounting firm (the "Accounting Firm") for review and resolution any and all
matters which remain in dispute and which were included in any Notice of
Disagreement, and the Accounting Firm shall reach a final, binding resolution of
all matters which remain in dispute, which final resolution shall be (A) in
writing, (B) furnished to Buyer and Sellers as soon as practicable after the
items in dispute have been referred to the Accounting Firm, (C) made in
accordance with this Agreement and (D) conclusive and binding upon Buyer and
Sellers. The Closing Balance Sheet, with any adjustments necessary to reflect
the Accounting Firm's resolution of the matters in dispute, shall become final
and binding on Buyer and Sellers on the date the Accounting Firm delivers its
final resolution to the parties. The Accounting Firm shall be Arthur Andersen,
or if such firm is unable or unwilling to act, such other independent Big 6
public accounting firm as shall be agreed upon by the parties hereto in writing
or, if Buyer and Sellers cannot so agree within the 30-calendar day period
referred to above, by lot from among the remaining independent Big 6 public
accounting firms willing to act. Each party shall pay its own costs and
expenses incurred in connection with such arbitration, provided that the fees
and expenses of the Accounting Firm shall be borne 50% by Buyer and 50% by
Sellers.
(b) Upon the final determination of the Closing Balance Sheet in
accordance with this Section 2.6, the following Additional Payment or Seller
Refund (in each case as hereinafter defined) will be payable, as applicable, in
accordance with Section 2.5(e): (i) if the Closing Net Assets are greater than
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or equal to $29,240,470 (the "Target Amount"), then the Escrow Agent shall pay
to Sellers from the funds held in escrow an amount equal to the Escrow Amount
and Buyer shall pay to Sellers the amount, if any, by which the Closing Net
Assets exceed the Target Amount, (ii) if the Closing Net Assets are less than
the Target Amount by an amount less than or equal to the Escrow Amount, then the
Escrow Agent shall pay to Sellers from the funds held in escrow an amount equal
to the Escrow Amount less the amount, if any, by which the Target Amount exceeds
the Closing Net Assets and to Buyer the balance of the Escrow Amount, and
(iii) if the Closing Net Assets are less than the Target Amount by an amount
greater than the Escrow Amount, then Sellers shall pay to Buyer an amount equal
to the amount by which the Target Amount exceeds the Closing Net Assets and the
Escrow Agent shall pay the Escrow Amount to Buyer from the funds held in escrow.
Any required adjustment to the purchase price pursuant to this Section 2.5 shall
be in an amount equal to the difference between the Closing Net Assets and the
Target Amount and shall be referred to as the "Purchase Price Adjustment."
(c) The Closing Balance Sheet shall be prepared in accordance
with GAAP, applied in a manner consistent with that followed in the preparation
of the Interim Balance Sheet, subject to the following:
(i) the Closing Balance Sheet shall not reflect
any provision for Taxes (whether as an asset or a
liability), except in the case of taxes that are an Asset or
an Assumed Liability;
(ii) intercompany accounts receivable and
intercompany liabilities shall be eliminated; and
(iii) all Excluded Assets (and related
depreciation and reserves) shall be eliminated and all
Excluded Liabilities (and related reserves) shall be
eliminated;
(iv) all accounts payable as to which checks
written on the accounts included in the Excluded Assets are
outstanding shall be eliminated;
(v) all accounts receivable as to which proceeds
have been received shall be eliminated to the extent of such
proceeds; and
(vi) vacation and holiday pay accrued in respect
of any employee who is not a Hired Employee shall be
eliminated.
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(d) Buyer agrees, solely with respect to the calculation of
Purchase Price Adjustments, and without restricting in any manner whatsoever
Buyer's right to take any such action that would not affect such calculation,
that following the Closing, Buyer will not take any actions with respect to the
accounting books, records, policies and procedures of the Business on which the
Closing Balance Sheet is to be based that are not consistent with GAAP applied
in the manner consistent with the past practices of the Business.
(e) Within thirty-three (33) days after the receipt by Buyer of
the Closing Balance Sheet in accordance with Section 2.5(a) hereof, Buyer and
the Escrow Agent shall remit to Sellers and the Escrow Agent or Sellers shall
remit to Buyer, as the case may be, in immediately available funds, any
undisputed amounts constituting Purchase Price Adjustments. With respect to any
items that are the subject of a Notice of Disagreement, payment shall be made in
immediately available funds within three (3) business days after the Final
Determination Date. Each payment not pursuant to the Escrow Agreement made
pursuant to this Section 2.5 shall be made with interest on the amount of the
payment at an annual rate equal to the reference rate quoted by the San
Francisco branch of Bank of America on the Closing Date for the period from the
Closing Date to the date of payment, computed on the basis of a 360-day year and
actual days elapsed.
2.6 TAX ALLOCATION. As promptly as practicable after the date
hereof, Buyer and Sellers shall agree in writing upon the allocation of the
Purchase Price plus the Assumed Liabilities in a manner consistent with
applicable law to broad categories constituting components of the Assets and the
covenant not to compete contained in Section 6.7 hereof. Such allocation shall
be attached hereto as Schedule 2.6 and shall be updated by a similar mutual
writing as of the Closing to reflect changes in the Assets or Assumed
Liabilities occurring after the date thereof and prior to the Closing Date. The
same procedure shall apply to any changes necessary as a result of the Purchase
Price Adjustment, if any, on the Final Determination Date pursuant to
Section 2.5(b)). Buyer and Sellers shall report the purchase and sale of the
Assets in accordance with the applicable agreed-upon allocation among such broad
categories for all Tax purposes (including the filing of the forms prescribed
under Section 1060 of the Code and the Treasury Regulations promulgated
thereunder), and none of Buyer and Sellers shall take a position inconsistent
with such allocation for Tax or other purposes.
2.7 SALES AND USE TAX. Buyer and Sellers shall cooperate in
preparing, executing and filing use and sales Tax returns relating to, and at
the Closing, Buyer shall pay one-half, and Sellers shall pay one-half of any and
all sales,
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real estate, transfer or use Tax due with regard to, the purchase and sale of
the Assets. To the extent such Taxes cannot be accurately computed at the
Closing, the parties shall each pay their respective shares of such Taxes when
they are due. Such Tax Returns shall be prepared in a manner that is consistent
with the allocation of the Purchase Price and Assumed Liabilities contemplated
by Section 2.6. Buyer shall also furnish Sellers with a form of resale
certificate that complies with the requirements of the California Taxation and
Revenue Code and other applicable state taxation laws, and Sellers shall furnish
any information or assistance reasonably requested by Buyer in obtaining such
certificates.
ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase and pay
for the Assets are subject to the satisfaction (or waiver by Buyer) as of the
Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Sellers made in this Agreement shall be true
and correct in all material respects (except to the extent that any
representation is qualified by materiality, in which case, to such extent, the
representation shall be true and correct in all respects) as of the date hereof
and, except as specifically contemplated by this Agreement, on and as of the
Closing, as though made on and as of the Closing Date, and Sellers shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Sellers
by the time of the Closing; and Sellers shall have delivered to Buyer a
certificate dated the Closing Date and signed by an authorized officer of the
respective Seller confirming the foregoing.
(b) SECRETARY'S CERTIFICATES. Sellers shall each have delivered
to Buyer a certificate of the Secretary of such Seller, as the case may be, as
to the Certificate of Incorporation, By-laws, corporate resolutions and
incumbency of certain officers of such Seller, in each case in form and
substance reasonably satisfactory to Buyer.
(c) CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority or other Person which are required for or in connection
with the execution and delivery by each of Sellers of the Transaction Documents
to which each of them is or will be a party and the consummation by
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Sellers of the transactions contemplated hereby and thereby shall have been
obtained or made.
(d) INSTRUMENTS OF TRANSFER, CONVEYANCE AND ASSIGNMENT. Buyer
shall have received a duly executed Bill of Sale, Assignment and Assumption
Agreement, deeds and such other duly executed conveyance instruments, in form
and substance reasonably satisfactory to Buyer, as are necessary or desirable to
effect the sale, transfer, conveyance and assignment of the Assets to Buyer in
accordance herewith.
(e) FINANCING. The closing of the financing necessary for the
consummation of the transactions contemplated hereby and the payment of all
costs and expenses incurred in connection therewith (the "Financing") to be
provided by one or more financial institutions or other investors (the
"Lenders") shall have occurred.
(f) SUPPLY AGREEMENT. MagneTek shall have executed and
delivered to Buyer the Supply Agreement.
(g) ESCROW AGREEMENT. Sellers shall have executed and delivered
to Buyer the Escrow Agreement.
(h) TITLE POLICIES. Buyer shall have obtained an ALTA owner's
policy of title insurance (the "Title Policies") with respect to each parcel of
Owned Property in form and substance reasonably acceptable to Buyer and in
accordance with the Title Commitment for such Owned Property referred to in
Section 6.4.
(i) OPINIONS OF COUNSEL. Buyer shall have received an opinion
dated the Closing Date of Gibson, Dunn & Crutcher, counsel to Sellers, and an
opinion dated the Closing Date of Samuel A. Miley, Esq., General Counsel of
Sellers, covering the matters referred to in Exhibits D and E, respectively,
which opinions shall be reasonably satisfactory in form and substance to Buyer.
(j) LEGAL RESTRAINT. No injunction or order shall have been
granted by any Governmental Authority of competent jurisdiction that would
restrain, delay or prohibit any of the Transactions or that would impose damages
as a result thereof, and no action or proceeding shall be pending before any
Governmental Authority of competent jurisdiction in which any Person seeks such
a remedy (if in the opinion of counsel to Buyer there exists a reasonable risk
of a materially adverse result in such pending action or proceeding).
(k) HSR ACT. The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have
expired or been terminated.
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3.2 SELLERS' OBLIGATION. The obligation of Sellers to sell and
deliver the Assets to Buyer are subject to the satisfaction (or waiver by
Sellers) as of the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Buyer made in this Agreement shall be true and
correct in all material respects (except to the extent that any representation
is qualified by materiality, in which case, to such extent, the representation
shall be true and correct in all respects) as of the date hereof and on and as
of the Closing, as though made on and as of the Closing Date, and Buyer shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Buyer
by the time of the Closing; and Buyer shall have delivered to Sellers a
certificate dated the Closing Date and signed by an authorized officer of Buyer
confirming the foregoing.
(b) SECRETARY'S CERTIFICATES. Buyer shall have delivered to
Sellers a certificate of the Secretary of Buyer as to the Charter, By-laws,
corporate resolutions and incumbency of certain officers of Buyer, in form and
substance reasonably satisfactory to Sellers.
(c) CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority or other Person which are required for or in connection
with the execution and delivery by Buyer of the Transaction Documents to which
it is or will be a party and the consummation by Buyer of the transactions
contemplated hereby and thereby shall have been obtained or made.
(d) INSTRUMENTS OF TRANSFER, CONVEYANCE AND ASSIGNMENT. Sellers
shall have received a duly executed Bill of Sale, Assignment and Assumption
Agreement and such other duly executed conveyance instruments, in form and
substance reasonably satisfactory to Sellers, as are necessary or desirable to
effect the assumption of the Assumed Liabilities.
(e) SUPPLY AGREEMENT. Buyer shall have executed and delivered
to MagneTek the Supply Agreement.
(f) ESCROW AGREEMENT. Buyer shall have executed and delivered
to Sellers the Escrow Agreement.
(g) OPINIONS OF COUNSEL. Sellers shall have received an opinion
dated as of the Closing Date of O'Sullivan Graev & Karabell, counsel to Buyer,
covering the matters referred to in Exhibit F, which opinion shall be reasonably
satisfactory in form and substance to Sellers.
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(h) LEGAL RESTRAINT. No injunction or order shall have been
granted by any Governmental Authority of competent jurisdiction that would
restrain or prohibit the Transactions or that would impose damages as a result
thereof, and no action or proceeding shall be pending before any Governmental
Authority of competent jurisdiction in which any Person seeks such a remedy (if
in the opinion of counsel to Sellers there exists a reasonable risk of a
materially adverse result in such pending action or proceeding).
(i) HSR ACT. The waiting period under the HSR Act shall have
expired or been terminated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby, jointly and severally, represents and warrants to
Buyer as follows:
4.1 AUTHORITY; CORPORATE MATTERS; NO CONFLICTS; GOVERNMENTAL
CONSENTS.
(a) Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each
Seller has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the Transactions. All corporate acts
and other proceedings required to be taken by each Seller to authorize the
execution, delivery and performance of the Transaction Documents and the
consummation of the Transactions have been duly and properly taken. This
Agreement has been, and each of the Transaction Documents, when executed and
delivered, will be, duly executed and delivered by each Seller and constitutes
(or will constitute) a valid and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) Schedule 4.1(b) sets forth a true and complete list of all
jurisdictions in which Sellers are qualified to do business, and Sellers are
qualified to do business in all jurisdictions where the conduct of the Business
or the ownership of the Assets requires such qualification, except where the
failure to so qualify would not have a Material Adverse Effect.
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(c) Controls does not currently have any subsidiaries and, except as
set forth on Schedule 4.1(c), does not currently own any capital stock or other
proprietary interest, directly or indirectly, in any Person.
(d) The execution and delivery of this Agreement does not and of
the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents will not
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Sellers under, any provision of (i) the Certificate of Incorporation or By-Laws
of either Seller, (ii) subject to the matters disclosed in Schedule 4.1(d), any
Contractual Obligation of either Seller or (iii) any judgment, order or decree
or, subject to the matters described in clauses (A)-(D) below, any Requirement
of Law applicable to either Seller or their respective property or assets, other
than, in the case of clause (ii) above, any such conflicts, violations,
defaults, rights or Liens that, individually and in the aggregate, would not
have a Material Adverse Effect. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect to either Seller
in connection with the execution and delivery of the Transaction Documents or
the consummation of the Transactions contemplated hereby, other than
(A) compliance with and filings under Section 13(a) or 15(d), as the case may
be, of the Exchange Act, (B) as set forth on Schedule 4.1(d), (C) those that may
be required solely by reason of Buyer's participation in the transactions
contemplated hereby and (D) compliance with and filings under the HSR Act.
4.2 FINANCIAL STATEMENTS; ABSENCE OF CHANGES.
(a) Schedule 4.2(a) contains true and complete copies of the
following:
(i) the unaudited balance sheet of the Business as at
June 30, 1993, and the related unaudited statements of income and
retained earnings and cash flows for the fiscal year then ended;
(ii) the unaudited balance sheet of the Business as at
December 31, 1993 (the "Interim Balance Sheet"), and the related
statements of income and retained earnings and cash flows for the
six-month period ended
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December 31, 1993 (the "Interim Balance Sheet Date"); and
(iii) the December Balance Sheet.
The financial statements described in the foregoing clauses (i), (ii) and (iii)
are collectively referred to herein as the "Financial Statements." Except as
set forth on Schedule 4.2(a) (including as indicated by any PRO FORMA
calculations made thereon), the Financial Statements (A) were prepared in
accordance with the books and records of the Business (whether maintained by
MagneTek or Controls or otherwise), (B) fairly present the financial position of
the Business in each case at and as of the dates indicated and the results of
operations, retained earnings and cash flows of the Business for the periods
indicated (in each case other than the December Balance Sheet) and (C) except as
otherwise set forth on Schedule 4.2 and except for the adjustments made to
arrive at the December Balance Sheet, were prepared in accordance with GAAP
consistently applied throughout the periods covered thereby (subject to the
absence of notes and to normal year-end adjustments).
(b) ABSENCE OF UNDISCLOSED LIABILITIES. To the Knowledge of
Sellers, except (i) as set forth on Schedule 4.2(b), (ii) any and all
Specifically Excluded Liabilities and (iii) liabilities incurred in the ordinary
course of the Business since the Interim Balance Sheet Date, there are no
liabilities of any nature (matured or unmatured, fixed or contingent) affecting
or relating to the Business which were not provided for or disclosed on the
Interim Balance Sheet.
(c) ABSENCE OF CHANGES. Except as set forth on Schedule 4.2(c),
since the Interim Balance Sheet Date the Business has been operated in the
ordinary course and consistent with past practice, and there have not been any:
(i) material adverse changes in the business,
operations, results of operations, assets (including, without
limitation, levels of working capital and the material components
thereof), liabilities, earnings or financial condition (financial
or otherwise) of the Business;
(ii) to the Knowledge of Sellers, occurrences resulting
in the damage, destruction or loss (whether or not covered by
insurance) affecting any tangible asset or property of the
Business in excess of $100,000 in the aggregate;
(iii) material increases in, or, to the Knowledge
of Sellers, changes in the method
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of computing, the compensation of employees of MagneTek or Controls
who are employed in the Business (including, without limitation,
increases pursuant to or change in method under any bonus, pension,
profit sharing, deferred compensation arrangement or other plan or
commitment), or increase in compensation payable to any officer,
employee, consultant or agent of MagneTek or Controls who are employed
in the Business, or entering into of any employment contract with or
making of any loan to, or engagement in any transaction with, any
officer or employee of MagneTek or Controls who are employed in the
Business, in each case other than in the ordinary course of the
business of the Business and consistent with past practice;
(iv) to the Knowledge of Sellers, material changes in
the manner in which the Business extends discounts or credits to
customers or otherwise deals with customers;
(v) changes in the accounting methods or practices
followed by or with respect to the Business, or, to the Knowledge
of Sellers, any changes in depreciation or amortization policies
or rates theretofore adopted;
(vi) agreements or commitments to merge or consolidate
with or otherwise acquire any other Person, or, to the Knowledge
of Sellers, any part or division thereof;
(vii) cancellation or termination of any insurance
policy maintained by or with respect to the Business;
(viii) incurrence of indebtedness for borrowed money
or the guaranty thereof (in either case, involving amounts
exceeding $100,000) in respect of such indebtedness of an
Affiliate;
(ix) termination of employment of any key Business
Employee, or, to the Knowledge of the Sellers, any expression of
intention by any key Business Employee to terminate his
employment in the immediate future;
(x) to the Knowledge of Sellers, sales or other
dispositions of any material tangible or intangible assets of the
Business, other than in the ordinary course of the business
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of the Business and consistent with past practice;
(xi) other material transactions relating to the
Business, other than in the ordinary course of the Business and
consistent with past practice; or
(xii) agreements or understandings, whether in
writing or otherwise, for either Seller to take any of the
actions specified in items (i) through (xi) above.
4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, each Seller, and any
affiliated group within the meaning of Section 1504 of the Code, of which each
Seller is or has been a member (the "Affiliated Group," but only for the taxable
period during which such Seller has been a member thereof), have filed or caused
to be filed in a timely and accurate manner (within any applicable extension
periods) with the appropriate Governmental Authority (i) all Tax returns,
reports and forms (collectively, "Tax Returns") required to be filed by the Code
or by applicable laws, (ii) all Taxes shown on such Tax Returns have been timely
paid in full by the due date thereof, (iii) no Tax Liens or assessments have
been filed by any Tax authority against any property or assets of the Business
and (iv) no claims have