SHARE PURCHASE AGREEMENT
between
CTT Cutting Tool Technology B.V.
("Seller")
and
SNAP-ON Incorporated
("Buyer")
dated as of April 16, 1999
TABLE OF CONTENTS
1. DEFINITIONS
1.1 Certain Definitions
1.2 Further Definitions
2. REORGANIZATION OF THE BUSINESS
3. PURCHASE AND SALE OF THE SHARES
4. PURCHASE PRICE
4.1 Purchase Price
4.2 Calculation and Payment of Preliminary Purchase Price
4.3 Price Adjustment
4.4 Preparation of Closing Accounts
4.5 Payment of Purchase Price
5. REPRESENTATIONS AND WARRANTIES BY SELLER
5.1 Power and Authority of Seller
5.2 No Violation of Laws and Regulations
5.3 Existence of the Companies in the Group
5.4 Title to the Shares
5.5 Ownership of the Companies and the Ownership Interests
5.6 The Pro Forma Balance Sheet; the Closing Accounts and the 1998 EBIT
Statement
5.7 Dividends
5.8 Real Property
5.9 Leases
5.10 Title to Properties and Assets; Encumbrances
5.11 Assets
5.12 Loan Agreements, guarantees, etc.
5.13 Material Contracts; Certain Other Agreements
5.14 Breach of Agreement
5.15 Change of Control
5.16 Intellectual Property
5.17 Documents Relating to Environmental Liabilit
5.18 Environmental Liability
5.19 Compliance with Laws, Regulations and Permits
5.20 Insurance
5.21 Employees and other Representatives
5.22 Employee Benefit Plans
5.23 Litigation
5.24 Broker's or Finder's Fees
5.25 Events since the Pro Forma Balance Sheet
5.26 Tax
5.27 Corporate Documents
5.28 Accounts Receivable
5.29 Products
5.30 Ownership Interests
5.31 Inventory
5.32 Absence of Undisclosed or Unrelated Liabilities
5.33 Disclosure
5.34 Seller's Affiliates'Relationships with the Group
5.35 Y2K-program
5.36 Sole and Exclusive Representations and Warranties
6. REPRESENTATIONS AND WARRANTIES BY BUYER
6.1 Power and Authority of Buyer
6.2 No Violation of Laws and Regulations
6.3 Broker's or Finder's Fees 6.4 Financing
7. COVENANTS OF SELLER
7.1 Access to Information and Documents
7.2 Conduct of Business Pending Closing
7.3 Consents and Approvals
7.4 Resignation of Board Members
7.5 Certain Indebtedness; Factoring
7.6 Execution and Transfer of Agreements etc.
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7.7 Non-competition
7.8 Solicitation of Key Employees
7.9 Confidential Information
7.10 Consultation regarding Reorganization of the Business
7.11 Updated Disclosure Schedules
8. COVENANTS OF BUYER
8.1 Confidential Information
8.2 Consents and Approvals
8.3 No Interference
8.4 Execution and transfer of Agreements etc.
8.5 Certain Indebtedness; Guarantees etc.
8.6 Discharge of Liability
8.7 Handling of recalls, replacements and repairs
8.8 Corporate Actions
8.9 Board Members
9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO SELL THE SHARES
9.1 Shareholders'meetings etc.
9.2 Buyer's Performance
9.3 Consents and Approvals
9.4 Execution and delivery of Agreements
10. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO PURCHASE THE SHARES
10.1 Seller's Performance
10.2 Consents and Approvals
10.3 Resignations of Board Members
10.4 Execution and delivery of Agreements
11. CLOSING
11.1 Time and place for Closing
11.2 Items to be delivered and actions to be taken by Seller
11.3 Items to be delivered and actions to be taken by Buyer
12. TERMINATION
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12.1 Mutual Written Agreement
12.2 Termination by Buyer
12.3 Termination by Seller
12.4 Effect of Termination at or prior to Closing or the Absence of Closing
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
13.1 Survival of Seller's Representations and Warranties
13.2 Survival of Buyer's Representations and Warranties
14. INDEMNIFICATION
14.1 Indemnification for claims by Buyer of Seller's Representations and
Warranties
14.2 Indemnification for Breach by Buyer of Representations and Warranties
14.3 Calculation of Loss etc.
14.4 Limitation on Seller's Indemnification Obligations
14.5 Procedure for Indemnification Claims
14.6 Sole and Exclusive Remedy
15. LIMITATIONS OF PRICE ADJUSTMENT AND SELLER'S INDEMNIFICATION OBLIGATIONS
16. FURTHER UNDERTAKINGS BY THE PARTIES
16.1 The Sandvik name and trade xxxx
16.2 Execution of License Agreement
16.3 Related Arrangements
16.4 Matters relating to the Ownership Interests
16.5 Publicity
16.6 Disclaimer of liability; indemnification
16.7 Special Indemnification
17. MISCELLANEOUS
17.1 Expenses
17.2 Waiver
17.3 Notices
17.4 Entire Agreement
17.5 Parties in Interest; Nonassignability
17.6 Governing Law
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17.7 Arbitration
17.8 Headings; References to Sections and Schedules
17.9 Further Assurances
18. ENTERING INTO FORCE
List of Schedules
-----------------
Schedule 1.1(A) Accounting Principles
Schedule 1.1(B) Sandvik's public annual report for 1997 and Products,
Manufacturing Facilities and Distribution Centres
Schedule 1.1(C) Companies
Schedule 1.1(D) Ownership Interests
Schedule 1.1(E) Pro Forma Balance Sheet
Schedule 1.1(F) Seller's Auditors
Schedule 1.1(G) Seller's knowledge
Schedule 2 Reorganization structure
Schedule 5(a) Data Room Index
Schedule 5.3 Existence of the Companies in the Group
Schedule 5.5(a)-(d) Ownership of the Companies and the Ownership Interests
Schedule 5.6 1998 EBIT statement
Schedule 5.7 Dividends
Schedule 5.8(a)-(b) Real Property
Schedule 5.9 Leases
Schedules 5.10 Title to Properties and Assets; Encumbrances
Schedule 5.11 Assets
Schedule 5.12 Loan Agreements, guarantees etc.
Schedule 5.13(a)-(b) Material Contracts; Certain Other Agreements
Schedule 5.14(a)-(b) Breach of Agreement
Schedule 5.15 Change of Control
Schedule 5.16 Intellectual Property
Schedule 5.17 Environmental Documents
Schedule 5.18 Environmental Liability
Schedule 5.19 Compliance with Laws, Regulations and Permits
Schedule 5.20 Insurance
Schedule 5.21(a)-(g) Employees and other Representatives
Schedule 5.22 Employee Benefit Plans
Schedule 5.23 Litigation
Schedule 5.27 Corporate Documents
Schedule 5.35 Y2K Program
Schedule 7.4 Resignation of Board Members
Schedule 7.8 Key Employees
Schedule 9.4 Execution and Delivery of Agreements (by Buyer
and Companies)
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Schedule 10.4 Execution and Delivery of Agreements (by Seller
and Seller's Affiliates)
Schedule 11.2 (ii) Form of Seller's Closing Certificate
Schedule 11.2 (iii) Form(s) of Seller's Opinion(s)
Schedule 11.3 (ii) Form of Buyer's Closing Certificate
Schedule 11.3 (iii) Form(s) of Buyer's Opinion(s)
Schedule 16.2 Companies Parties to the License Agreement
Schedule 16.4.1 Agreements relating to Deville
Schedule 16.4.2 Certain Agreements relating to Uirlis
[The foregoing schedules are not filed herewith. Registrant agrees to furnish
supplementally a copy of any such omitted schedule upon request.]
vi
This Share Purchase Agreement is entered into on this 16th day of April, 1999,
between CTT Cutting Tool Technology B.V., a Dutch limited liability company, S
Xxxxxxxxxxxxxx 000, 0000 XX Xxxxxxxx, Xxx Xxxxxxxxxxx ("Seller") and Snap-On
Incorporated, a company incorporated and existing under the laws of the State of
Delaware, 00000 Xxxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxx, XX 00000, XXX ("Buyer").
WHEREAS, Seller is a wholly owned subsidiary of Sandvik AB ("Sandvik"), a
Swedish public company;
WHEREAS, Seller is the owner of the outstanding shares in SB Holding B.V.
("Holding"), a Dutch limited liability company;
WHEREAS, Holding, as the result of a reorganisation within the Sandvik group of
companies, is or will as of Closing (as defined herein) be the owner, directly
or indirectly, of the companies within the Sandvik group of companies conducting
the line of business known as Saws and Tools (collectively the "Companies" and
as defined in further detail in Section 1.1);
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all of the outstanding shares in Holding upon the terms and conditions
set forth herein;
WHEREAS, Sandvik, upon the consummation of the transaction contemplated
hereunder, is willing to enter into a separate arrangement with Buyer and
certain of the Companies whereby such Companies are granted a limited, personal,
non-transferable and non-exclusive right and license to use the Sandvik trade
xxxx and logo upon the terms set forth in such arrangement; and
WHEREAS, certain of Seller's Affiliates (as defined below) prior to or upon the
consummation of the transaction contemplated hereunder are willing to enter into
separate arrangements with Holding and/or certain of the Companies to provide
for continued use of
IT-capacity and distribution of products produced by the Companies and certain
other transition arrangements.
NOW, THEREFORE, the parties hereto agree as follows.
1. DEFINITIONS
1.1 Certain Definitions
When used in this Agreement, the following words and expressions shall have the
meaning set forth below (such meaning to be applicable to both the singular and
the plural form of such words and expressions).
"Accounting shall mean the Saws and Tools accounting principles set out
Principles" in Schedule 1.1 (A), or if not covered specifically in such
accounting principles then Sandvik accounting principles (as
set out in Schedule 1.1(A)), or if not covered by such
accounting principles, then applicable laws and applicable
generally accepted Swedish accounting principles;
"Agreement" shall mean this Share Purchase Agreement, including all the
exhibits and schedules attached hereto, each of which
constitutes an integral part of this Agreement;
"Business" shall mean the Saws and Tools business conducted by Seller
and Seller's Affiliates regarding the development (including
research and development), manufacture and/or sale and
distribution of hand saws, metal saws and various types of
hand tools, such as pruning tools, wrenches, pliers, files
etc. as described in further detail in Sandvik's public
annual report for 1998 and in the Saws and Tools website as
of March 31, 1999 (xxxx://xxx.xxxxxxxxxxxx. xxxxxxx.xxx)
and, including without limitation, the products, product
centres (including manufacturing facilities), sales units
and distribution centres (including welding shops) described
in Schedule 1.1 (B);
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"Business Day" shall mean any day when banks are open for general banking
business in Amsterdam and in New York;
"Closing" shall mean the consummation of the transaction contemplated
by this Agreement pursuant to Section 11;
"Closing Accounts" shall mean the audited consolidated balance sheet of the
Group (including the Post Closing Companies) as of the
Closing Date, prepared by Seller in conformity with the
Accounting Principles and audited by Seller's Auditors;
"Closing Adjusted shall mean the consolidated adjusted net assets of the Group
Net Assets" as of the Closing Date, as reflected in the Closing Accounts
and calculated as (i) the Group's total assets, exclusive of
(a) good will and (b) Liquid Assets (ii) minus the Group's
total liabilities exclusive of Interest Bearing Liabilities;
"Closing Date" shall mean the last Business Day in the calendar month which
falls not less than five Business Days after the date upon
which the conditions precedent listed in Sections 9 and 10
below are satisfied or waived;
"Companies" shall mean the companies (directly or indirectly)
wholly-owned or to be wholly-owned by Holding and listed in
Schedule 1.1(C) (each individually referred to as a
"Company" and collectively the "Companies");
"Confidential shall mean information of any kind or nature whatsoever,
Information" whether written or oral, including, without limitation,
financial information, trade secrets, customer lists and
other proprietary business information, regarding the
Business, the Group, Seller or Seller's Affiliates, which
information is not generally available to the public;
"1998 EBIT shall mean the statement attached hereto as Schedule 5.6
Statement" showing the 1998 EBIT for the Business;
"Group" shall mean Holding and the Companies;
"Holding" shall mean SB Holding B.V.;
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"Independent shall mean the independent authorised auditors (Sw.
Auditors" auktoriserade revisorer) of Price Waterhouse Coopers,
Stockholm, or any other accounting firm of internationally
recognized standing to be mutually selected by Seller and
Buyer or if no agreement is reached, by Seller's accountants
and Buyer's accountants, or failing agreement by the
accountants, by the Arbitration Institute of the Stockholm
Chamber of Commerce;
"Interest shall mean (a) all interest bearing liabilities to and/or
Bearing loans from Seller, Seller's Affiliates or others (b)
Liabilities" liabilities and/or loans (interest bearing or not) from
Seller and Seller's Affiliates resulting from the
Reorganization, and (c) trade accounts payable reflecting
financial relations and other current payables reflecting
financial relations as defined in further detail in Notes No
3 and 4 in the Pro Forma Balance Sheet after reduction for
trade accounts receivables reflecting financial relations
and other current receivables reflecting financial relations
as defined in further detail in Notes No 1 and 2 in the Pro
Forma Balance Sheet. For the avoidance of doubt, all items
listed in the category "Interest bearing liabilities and
other liabilities reflecting financial relations" in the Pro
Forma Balance Sheet shall constitute Interest Bearing
Liabilities;
"Key Employees" shall mean each of the persons set forth in Schedule 7.8
hereto;
"Leases" shall have the meaning set forth in Section 5.9;
"Liquid Assets" shall mean all items listed in the category "Cash and cash
deposits" in the Pro Forma Balance Sheet;
"Loss" shall have the meaning set forth in Section 14.1;
"Material shall mean (a) with respect to any Company in the Group or
Adverse with respect to any asset of a Company in the Group, as the
Effect" case may be, an effect on the item that is the subject of
the reference that exceeds SEK 5 million and (b) with
respect to two or more companies or the Business or the
Group an effect on the item that is the subject of the
reference that exceeds SEK 20 million, as the case may be;
4
"Material shall mean any contractual obligation of any company in the
Contract" Group:
(i) imposing either a liability for payment or obligation
exceeding SEK 5 million annually; or
(ii) which cannot be terminated by the relevant Company
within 18 months; or
(iii)having an annual lease-payment commitment exceeding
SEK 2 million; or
(iv) any shareholders' agreement or similar arrangement to
which a Company in the Group is a party; or
(v) to which Seller or any Seller's Affiliates is a party
(except for contractual obligations with Seller or any
Seller's Affiliates which are specifically contemplated
or referred to in this Agreement); or
(vi) any distributor or agency agreements with other parties
than Seller or Seller's Affiliates; or
(vii)any license agreements with other parties than Seller
or Seller's Affiliates; or
(viii) any other contract not in the ordinary course of the
Business;
"Ownership shall mean Sandvik's minority shareholding in Deville S.A
Interests" and Uirlis Torc Teoranta Ltd respectively as listed in
Schedule 1.1(D);
"Post Closing shall have the meaning set forth in Section 2;
Companies"
"Preliminary shall have the meaning set forth in Section 4.2;
Purchase Price"
"Price Adjustment" shall have the meaning set forth in Section 4.3;
"Pro Forma shall mean the consolidated adjusted net assets of the Group
Adjusted as reflected in the Pro Forma Balance Sheet as of December
Net Assets" 31, 1998, and calculated as (i) the Group's total assets,
exclusive of (a) good will and
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(b) Liquid Assets (i.e. SEK 2,246,578,000 minus SEK 0 minus
SEK 421,929,000, (ii) minus the Group's total liabilities
exclusive of Interest Bearing Liabilities (i.e. SEK
1,525,686,000 minus SEK 981,414,000), i.e. SEK
1,280,377,000;
"Pro Forma shall mean the consolidated pro forma net asset statement of
Balance Sheet" the Group as of December 31, 1998, prepared by Seller in
conformity with the Accounting Principles and attached
hereto as Schedule 1.1(E), as if the Reorganization was
completed as at December 31, 1998. The Pro Forma Balance
Sheet accurately sets forth the assets (except for good will
resulting from the Reorganization) and liabilities (other
than liabilities resulting from the Reorganization) of the
Group on a consolidated basis as at December 31, 1998;
"Purchase Price" shall have the meaning set forth in Section 4.1;
"Real Property" shall mean any real property owned by any of the Companies
in the Group, which real property all is listed in Schedule
5.8(a);
"Reorganization" shall mean the transactions described on Schedule 2 as such
transactions may be modified by the parties following
consultation in accordance with Sections 2 and 7.10 hereof;
"SEK" shall mean Swedish kronor;
"Seller's shall mean the Seller's present external auditors listed in
Auditors" Schedule 1.1(F);
"Seller's shall mean Sandvik and the legal entities in which Sandvik,
Affiliates" directly or indirectly (i) owns or controls more than 50 per
cent of the outstanding shares or ownership interests, (ii)
exercises or otherwise controls more than 50 per cent of the
voting power, or (iii) by agreement or similar arrangement
in effect has a controlling influence (in all cases except
for (a) Holding and the Companies and (b) Seco Tools AB and
the other companies in the Seco Tools AB group of
companies);
"Seller's any statement in this Agreement qualified by the expression
knowledge "to Seller's knowledge" or any similar
6
expression shall mean the knowledge of any of the
individuals listed in Schedule 1.1(G) and Schedule 7.8 which
individuals, in the judgement of Sandvik and Seller,
collectively have the best knowledge of all relevant
material facts and matters of the Business and the companies
in the Group and such knowledge shall include all
information which such individuals would have obtained
following due inquiry of appropriate officers and employees
responsible for the operation of the Business and the Group
Companies;
"Shares" shall mean all of the outstanding shares in Holding.
1.2 Further Definitions
Other words or expressions which are intended to have a specific meaning are
explained in the context in which the word or the expression for the first time
is used in the Agreement.
2. REORGANIZATION OF THE BUSINESS
The Business has been and is presently operated by the existing Companies and by
various of Seller's Affiliates, some of which are operating their respective
part of the Business as a division among other lines of business.
The Business will prior to Closing be reorganized into a separate group of
companies (limited liability companies or the equivalent) operating exclusively
the Business (except as otherwise set forth herein or in the various agreements
referred to herein). Seller will be owner of Holding which will be the parent of
the companies in the Group.
The Seller will cause the Reorganization to be executed in all material respects
as described in further detail in Schedule 2. Seller shall consult with Buyer
prior to completing any further steps in connection with the Reorganization with
a view to causing the Reorganization to be accomplished in a fashion that
maximizes the tax position of the Group companies without tax detriment to the
Seller and Seller's Affiliates. All costs and
7
expenses for the Reorganization, (including, without limitation, all taxes,
stamp duties or other governmental charges, transfer fees, registration or
recording fees, legal or notarial fees and any and all other costs, fees or
expenses incurred or to be incurred to transfer any of the assets or liabilities
of or interests in the Business to Holding or the Companies or Post-Closing
Companies) will, to the extent not reflected as a liability on or provided for
as a reserve in the Closing Accounts, be borne by Seller or Seller's Affiliates.
As set forth in Schedule 2, the Reorganization of the Business will in certain
countries require the incorporation of new corporations and the transfer of the
concerned parts of the Business to such corporations. It is acknowledged and
agreed that in Spain and Italy, the incorporation of new companies and the
transfer of the concerned parts of the Business to such companies (individually
a "Post-Closing Company" and collectively the "Post Closing Companies") may not
be completed on or prior to Closing. However, the parties agree not to postpone
the Closing of the transaction as contemplated herein due to such possible
delays, but instead close the transaction as contemplated herein irrespective of
any delay in the reorganisation of the Business in such countries. In the event
that Seller requests that the Closing occur prior to the completion of any
transfer to any Post-Closing Company, Seller and Buyer shall, prior to Closing,
agree on appropriate mechanisms for the arrangement of continuing insurance
coverage for the operations related to the Business, for appropriate accounting
for operations of the Business from the Closing Date to the transfer to a
Post-Closing Company, and maintenance of appropriate financial books and records
relating to the operations of the Business from the Closing Date to the transfer
to a Post-Closing Company.
In the event the Closing occurs prior to the completion of the reorganization of
any Post Closing Company, the Seller shall at Seller's cost and expense complete
the reorganization
of such Post Closing Company and deliver (without any additional charge or
claim) to Holding all the issued and outstanding shares in such Post Closing
Company as soon as reasonably possible subsequent to Closing, but in no event
later than December 31, 1999. Pending Seller's delivery of the shares in any
Post Closing Company to Holding, the parties shall and shall cause their
respective affiliates to among themselves and in relation to third
8
parties to the greatest extent legally permitted act as if the Reorganization of
the Business in the countries concerned were completed and as if any such Post
Closing Company was incorporated and a member of the Group.
3. Purchase and Sale of the Shares
Upon and subject to the terms and provisions of this Agreement, Buyer agrees to
purchase and accept delivery from Seller of, and Seller agrees to sell, assign,
transfer and deliver to Buyer, at the Closing provided for in Section 11, the
Shares free and clear of all liens, claims, charges, restrictions, equities or
encumbrances of any kind.
4. PURCHASE PRICE
4.1 Purchase Price
The Purchase Price (i.e. the final price to be paid by Buyer) for the Shares
shall be SEK three billion two hundred twenty five millions (3,225,000,000) (a)
plus the Liquid Assets of the Group as of the Closing Date as stated in the
Closing Accounts, (b) minus the Interest Bearing Liabilities of the Group as of
the Closing Date as stated in the Closing Accounts, (c) plus or minus, as the
case may be, an amount equal to the difference (positive or negative) between
the Closing Adjusted Net Assets and the Pro Forma Adjusted Net Assets, (d) plus
or minus, as the case may be, the Price Adjustment, if any, calculated as
provided in Section 4.3 hereof.
Any write up, step-up, revaluation, or increase in the basis or value of any
assets of the Business, including interests or shares in any of the Companies,
resulting from or in connection with the Reorganization or otherwise occurring
after December 31, 1998, to the extent not already fully reflected in the
calculation of the Pro Forma Adjusted Net Assets, shall not be considered in the
determination of the Closing Adjusted Net Assets.
4.2 Calculation and Payment of Preliminary Purchase Price
9
Buyer shall at the Closing in exchange for delivery of the Shares pay in cash to
Seller a preliminary purchase price in the amount of SEK 2,665,515,000 (i.e. the
price offered by Buyer cash free, debt free for the Shares plus Liquid Assets as
set forth in the Pro Forma Balance Sheet (SEK 421,929,000) minus Interest
Bearing Liabilities as set forth in the Pro Forma Balance Sheet (SEK
981,414,000) (the "Preliminary Purchase Price").
4.3 Price Adjustment
During a period of ninety (90) days from the date hereof, Seller shall allow
Buyer and Buyer's external auditors, Ernst & Young LLP, to perform reasonable
post-signing due diligence procedures to confirm the accuracy of the 1998 EBIT
Statement. In order to enable Buyer's auditors to perform such procedures,
Seller and Seller's Affiliates will provide Buyer and Buyer's auditors access to
certain members of management and to financial records, including, but not
limited to (i) management of the Group and the Companies, (ii) the books and
accounting records of the Group and the Companies, (iii) the Seller's external
auditors, and (iv) relevant work papers of the Seller's external auditors.
To the extent Buyer's external auditors believe that the 1998 EBIT Statement
overstated EBIT (e.g. because of an understatement of expenses or an
overstatement of income), Buyer and Buyer's auditors shall consult and work with
Seller and Seller's auditors to determine jointly whether a Price Adjustment
should be made in accordance with the provisions of this Section 4.3.
To the extent Buyer's auditors believe that the 1998 EBIT Statement understated
expenses or overstated income, thereby overstating 1998 EBIT in such a way that
the EBIT corrected for such items is considered as the correct component of the
basis for the evaluation of the sustainable profitability of the Business on an
on-going basis, (an "EBIT Adjustment"), and, if Seller and Buyer have not agreed
on a Price Adjustment in accordance with the provisions of this Section 4.3,
then Buyer may notify Seller in writing of such item
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of EBIT Adjustment ("Notice of EBIT Adjustment"), providing adequate background
information justifying such adjustment.
If, but only if, Buyer submits such Notice of EBIT Adjustment, Seller and
Seller's auditors may raise any adjustments to 1998 EBIT that they may discover
in their review of Buyer's Notice of EBIT Adjustment or of the 1998 EBIT
Statement which have the effect of upward adjustments of the 1998 EBIT.
Any disagreements between Buyer and Seller regarding the net EBIT Adjustment
shall be resolved by the Independent Auditors as provided below. Any net EBIT
Adjustment increasing or decreasing 1998 EBIT as agreed to between Buyer and
Seller, or failing agreement, determined by the Independent Auditors, shall be
multiplied by a factor of 6, and the resulting sum of such net EBIT Adjustments
shall be an adjustment to the Purchase Price as provided in Section 4.1(d)
hereof ("Price Adjustment"). In no event shall the effect of any net EBIT
Adjustment result in a decrease in the Purchase Price under Section 4.1(d)
hereof of more than SEK 165,400,000 or in an increase in the Purchase Price
under Section 4.1 (d) hereof of more than SEK 41,350,000.
For the avoidance of doubt, there shall be no Price Adjustment unless (a) Seller
and Buyer agree to apply a Price Adjustment or (b) Buyer shall initiate the
Price Adjustment mechanism by submitting a Notice of EBIT Adjustment.
By way of example, if it is agreed, or the Independent Auditors determine, that
the 1998 EBIT Statement understated warranty expense by SEK 100,000, but that
the 0000 XXXX Xxxxxxxxx also overstated cost of goods sold by SEK 50,000, the
net SEK 50,000 downward adjustment of 1998 EBIT should result in a Price
Adjustment of SEK 50,000 multiplied by a factor of 6 (i.e. SEK 300,000),which
shall be reflected in Section 4.1(d) hereof.
Seller and Buyer shall instruct their respective auditors to seek agreement on
the EBIT Adjustment. In the event the auditors of Seller and Buyer have not
reached agreement on
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such adjustments within thirty (30) days from the date of Buyer's submitting its
Notice of EBIT Adjustment, any item of disagreement (each an "Item of Dispute")
may be referred by either of Seller or Buyer to the Independent Auditors for
resolution. The Buyer and Seller shall instruct their respective auditors to
allow the Independent Auditors to immediately have access to all material and
information, including work papers and other work material, which have been
subject to review by and discussion among the auditors of Seller and Buyer.
Within thirty (30) days from the date any Item of Dispute was referred to them,
the Independent Auditors shall provide to each of Seller and Buyer a written
report calculating the EBIT Adjustment per the provisions of this Section 4.3.
Such calculation shall (in the absence of a manifest error) be conclusive and
binding upon Seller and Buyer and shall not be subject to review, appeal or any
judicial proceeding or arbitration pursuant to Section 17.7.
The costs, fees and other charges by the Independent Auditors shall be shared
equally by Seller and Buyer.
4.4 Preparation of Closing Accounts
The Closing Accounts will be prepared by Seller in accordance with the
Accounting Principles applied on a basis consistent with the Pro Forma Balance
Sheet and shall be audited by Seller's Auditors. The Closing Accounts shall
reflect the liabilities and reserves of the Group computed in accordance with
the Accounting Principles applied on a basis consistent with the Accounting
Principles as they were used to prepare the Pro Forma Balance Sheet, but in no
instance will the amount recorded as reserves for doubtful accounts or for
inventory valuation reserve or for any other purpose be less than the amount
recorded in the Pro Forma Balance Sheet, unless the decrease is justified by the
operation of the Business between January 1, 1999 and the Closing Date. The cost
of such audit shall be borne by Seller.
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Buyer shall cause each of the companies in the Group to give Seller and Seller's
Auditors unlimited access during normal business hours to all books, records,
information etc. required or reasonably desirable to allow Seller and Seller's
Auditors to properly prepare the Closing Accounts on a timely basis. To this
end, Buyer shall, and shall cause each of the companies in the Group to, give
Seller and Seller's Auditors all reasonable assistance in obtaining all books,
records, information etc. reasonably required to prepare the Closing Accounts.
No later than sixty (60) days after the Closing Date, Seller will furnish the
Closing Accounts to Buyer along with Seller's calculation of the Purchase Price
for the Shares, reflecting Price Adjustment, if any, provided under Sections 4.3
and 4.1 (d) hereof. Seller will make available to Buyer or its auditors copies
of all work papers and work material (including, but not limited to Seller's
auditors' work papers and work material) supporting the Closing Accounts. Unless
Buyer notifies Seller that it disagrees with the Closing Accounts or Seller's
calculation of the Purchase Price within sixty (60) days after receipt thereof
by a notice in writing ("Buyer's Notice"), setting forth all items of
disagreement, including any items which may not have correctly stated a reserve,
accrual or contingent liability or any other item in the Pro Forma Balance Sheet
and which should be reflected on the Closing Accounts, (each an "Item of
Dispute") and an explanation thereof (including but not limited to the amount of
each such Item of Dispute), the Closing Accounts and Seller's calculation of the
Purchase Price will be conclusive and binding upon Buyer and Seller with respect
to the calculation of the Purchase Price. If Buyer so notifies Seller that it
disagrees with the Closing Accounts or Seller's calculation of the Purchase
Price within such sixty (60) day period, then Buyer and Seller will attempt to
resolve their differences with respect thereto within thirty (30) days following
Buyer's Notice. In the event that the Seller and Buyer are unable to resolve any
Item of Dispute, either party may elect to have all such unresolved Items of
Dispute resolved by the Independent Auditors. The Independent Auditors shall
make a final and binding resolution of all Items of Dispute without recourse to
arbitration pursuant to Section 17.7. The Independent Auditors shall be
instructed to use every reasonable effort to perform their services within
thirty (30) days of submission to it of the Items of Dispute and, in any case,
as soon as practicable after such submission. The costs,
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fees and other charges of the Independent Auditors shall be shared equally by
Seller and Buyer.
4.5 Payment of Purchase Price
Any difference (positive or negative) between the Purchase Price (calculated in
accordance with the provisions in Section 4.1) and the Preliminary Purchase
Price paid by Buyer, will be payable as follows.
If the Purchase Price is less than the Preliminary Purchase Price, Seller will
promptly pay to Buyer the difference no later than ten (10) days following the
final determination of the Closing Accounts and the calculation of the Purchase
Price as set forth in Section 4.1.
If the Purchase Price is greater than the Preliminary Purchase Price, Buyer will
promptly pay to Seller the difference no later than ten (10) days following the
final determination of the Closing Accounts and the calculation of the Purchase
Price as set forth in Section 4.1.
All payments made in accordance with this Section 4.5 will be paid by wire
transfer of immediately available funds in SEK made to an account designated by
the party to receive such payment. Each such payment will include interest on
the amount payable at an annual rate of five (5) per cent from the Closing Date
to and including the date of payment.
5. REPRESENTATIONS AND WARRANTIES BY SELLER
Prior to the date hereof, the Buyer has conducted a limited due diligence
investigation of documents made available to Buyer in Seller's data room. The
said due diligence investigation has referred to environmental, legal,
accounting, tax and business aspects included in the data room material
including certain requested and received environmental business, legal and
financial documentation and other written information relating to the Group.
Each of Seller and Buyer has on the date hereof taken a copy of all documents
14
contained in the dataroom and an index of the information contained in the
dataroom is attached hereto as Schedule 5(a).
It is explicitly agreed that the representations and warranties of the Seller
set forth in this Section 5, shall not apply to facts or circumstances disclosed
to Buyer prior to the execution of this Agreement in the data room materials or
in the additional documentation requested by and supplied to Buyer prior to the
date hereof provided that the Buyer reasonably should have foreseen the
consequences of such disclosed facts or circumstances bearing in mind, inter
alia, the limited access to photocopies, materials and answers to attendant
questions.
Seller represents and warrants to Buyer as follows:
5.1 Power and Authority of Seller
Seller is and will on the Closing Date be a corporation duly organized and
validly existing under the laws of the Netherlands. Assuming the adoption of the
appropriate resolution(s) satisfying Seller's condition precedent set forth in
Section 9.1, Seller has and will on the Closing Date have the corporate power
and authority to make, execute, deliver and perform this Agreement, and this
Agreement has been duly authorized and approved by all required corporate action
of Seller and constitutes and will on the Closing Date constitute a legal, valid
and binding obligation of Seller enforceable against Seller in accordance with
its terms.
5.2 No Violation of Laws and Regulations
Assuming that Seller's condition precedent set forth in Sections 9.1 and 9.3 are
fulfilled, the execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby:
(i) will not violate any provision of the Articles of
Association of Seller;
15
(ii) will not violate any statute, rule, regulation, order or
decree of any public body or authority by which Seller or
any company in the Group or any of their properties or
assets is bound; and
(iii) will not result in a violation or breach of, constitute a
default under, or give rise to a right of termination,
modification or acceleration of the performance required by
any licence, permit, agreement or other instrument to which
Seller or any company in the Group is a party or otherwise
is bound or by which any properties or assets of the
Business are bound,
excluding from the foregoing clauses (ii) and (iii) violations, breaches or
defaults, which, either individually or in the aggregate, would not prevent
Seller from performing its obligations under this Agreement or consummation of
the transactions contemplated by this Agreement or would not have a Material
Adverse Effect on the assets, financial condition or business of the Group or of
any Company following the consummation of the transactions contemplated by this
Agreement.
5.3 Existence of the Companies in the Group
Each of the companies in the Group will on the Closing Date, or, with respect to
the Post Closing Companies, on the day of Seller's delivery to Holding of the
shares in the respective Post Closing Companies, be a limited liability
corporation (or the equivalent), duly organized and validly existing under the
laws of its respective jurisdiction of incorporation and will on the Closing
Date, or, with respect to the Post Closing Companies, on the day of Seller's
delivery to Holding of the shares in the respective Post Closing Companies, have
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as such business is now being conducted
within the Business. Except as set forth in Schedule 5.3, each of the companies
in the Group will on the Closing Date, or, with respect to the Post Closing
Companies, on the day of Seller's delivery to Holding of the shares in the
respective Post Closing Companies, be duly qualified or licensed to do business
in each jurisdiction in which the character or location of the property owned,
16
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so duly qualified
or licensed would not have a Material Adverse Effect on the business, financial
condition or results of the operations of the relevant company in the Group.
Except as set forth in Schedules 16.4.1 and 16.4.2 and the documents referred to
therein, to Seller's knowledge, the representations and warranties in the
preceding paragraph are and will on the Closing Date be true and correct also
with respect to the companies identified in Schedule 1.1(D). No petition for
bankruptcy or liquidation or similar proceeding has been or is required to be
filed by or against a Company.
5.4 Title to the Shares
Seller will on the Closing Date own all of the Shares (including all of the
voting powers of such shares) free and clear of all liens, encumbrances, claims,
options and restrictions of every kind. Seller will at the Closing have good and
transferable title to the Shares and will at the Closing have the right, power
and authority to sell and deliver the Shares to Buyer in accordance with the
terms of this Agreement. There will on the Closing Date be no outstanding
obligations, warrants, options, preemptive rights or other agreements to which
Seller or Holding is a party or otherwise bound, providing for the issuance of
any additional shares or for the purchase, sale or repurchase, redemption or
other acquisition of shares in Holding, except for this Agreement. The Shares
will on the Closing Date be duly authorized, validly issued and fully paid.
5.5 Ownership of the Companies and the Ownership Interests
Except as set forth in Schedule 5.5(a) Holding will on the Closing Date or, with
respect to the Post Closing Companies, on the day of Seller's delivery to
Holding of the shares in the respective Post Closing Companies, own all of the
issued and outstanding shares of the share capital in each of the respective
Companies (including all of the voting power of such shares) free and clear of
all liens, claims, charges, restrictions, equities or encumbrances of
17
any kind, and the shares in the respective Companies will then be duly
authorized, validly issued and fully paid. Except as set forth in Schedule
5.5(b), there will on the Closing Date, or, with respect to the Post Closing
Companies, on the day of Seller's delivery to Holding of the shares in the
respective Post Closing Companies, be no outstanding obligations, warrants,
options, convertible debt instruments, debt instruments with subscription rights
for new shares, preemptive rights or other agreements to which Seller, Holding
or any of the Companies is a party or otherwise bound, providing for the
issuance of any additional shares or for the purchase, sale or repurchase,
redemption or other acquisition of shares in Holding or the Companies, except
for this Agreement. The respective authorized and issued share capital in
Holding and each of the Companies and the par value of the respective shares are
accurately listed in Schedule 5.5(c).
Holding will on the Closing Date be the owner of the Ownership Interests. Except
as set forth herein or in Schedules 16.4.1 and 16.4.2 and the documents referred
to therein, there will be no outstanding obligations, warrants, options,
preemptive rights or other agreements providing for the issuance of any
additional shares or for the purchase, sale or repurchase, redemption or other
acquisition of shares in the companies to which the Ownership Interests pertain
and the Ownership Interests will be free and clear of any other liens,
encumbrances, claims, options and restrictions of every kind. The respective
authorized and issued share capital in the companies to which the Ownership
Interests pertain and the par value of the respective shares are accurately
listed in Schedule 5.5 (d).
Holding will on the Closing Date have no ownership interest in any other company
or legal entity other than the Companies - including the Post Closing Companies
as provided for in Section 2 herein - and the Ownership Interests. No former
shareholder or third party has any claim regarding contribution or any similar
claim towards a Company.
5.6 The Pro Forma Balance Sheet; the Closing Accounts and the 1998 EBIT
Statement
18
The Pro Forma Balance Sheet was prepared in conformity with the Accounting
Principles. For the avoidance of doubt, the Pro Forma Balance Sheet was prepared
as if the reorganization of the Business was completed as at December 31, 1998.
The Pro Forma Balance Sheet accurately sets forth the assets (except for good
will resulting from the Reorganization) and liabilities (other than liabilities
resulting from the Reorganization) of the Group on a consolidated basis as at
December 31, 1998. The 1998 EBIT Statement attached hereto as Schedule 5.6 was
prepared in accordance with the Accounting Principles. For the avoidance of
doubt, the 1998 EBIT Statement was prepared as if the Reorganization was
completed as at January 1, 1998. The 1998 EBIT Statement accurately sets forth
all items of income and expense incurred by the Group on a consolidated basis
for the twelve month period ended December 31, 1998, and properly characterizes
such items as operating or as non-recurring/extraordinary items.
The Closing Accounts will be prepared in conformity with the Accounting
Principles as if the Reorganization was completed as at the Closing Date. The
Closing Accounts will accurately set forth the assets and liabilities of the
Group on a consolidated basis as at the Closing Date.
5.7 Dividends
Except as set forth in Schedule 5.7, since December 31, 1998, no dividends,
interim dividends, stock repurchases or other distributions (including
distribution of share capital) have been declared or paid by Holding or any of
the Companies to Seller or Seller's Affiliates.
5.8 Real Property
Schedule 5.8(a) contains an accurate list of all Real Property which will be
owned by Holding or the Companies on the Closing Date, or, with respect to the
Post Closing Companies on the day of Seller's delivery to Holding of the shares
in the respective Post Closing Companies.
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Except as set forth in Schedule 5.8(b)
(i) the Real Property will on the Closing Date, or, with respect to the
Post Closing Companies on the day of Seller's delivery to Holding of
the shares in the respective Post Closing Companies, be owned (and
with respect to Swedish Real Property, the respective Companies will
be registered as owners of such property; Sw. "lagfart") free and
clear of any mortgages, liens, encumbrances or claims and will not be
subject to any pending contract of sale or any other restrictions,
pledges or similar charges of any kind;
(ii) no Real Property, including installations and improvements thereon,
will on the Closing Date, or, with respect to the Post Closing
Companies on the day of Seller's delivery to Holding of the shares in
the respective Post Closing Companies, be in violation of any
applicable zoning, building, security or environmental protection
code; there will on the Closing Date, or, with respect to the Post
Closing Companies on the day of Seller's delivery to Holding of the
shares in the respective Post Closing Companies, be no zoning,
building or environmental protection code or any other restriction of
whatever nature in regard to use or occupancy which is likely to have
a Material Adverse Effect on the use and occupancy of that real
estate, including installations and improvements thereon, after the
Closing Date (for the purposes for which they are presently used) or
require any material expenditure by the relevant Company;
(iii) no Real Property will on the Closing Date, or, with respect to the
Post Closing Companies on the day of Seller's delivery to Holding of
the shares in the respective Post Closing Companies, be subject, in
whole or in part, to any expropriation or requisition procedure or
other administrative procedure which may have a Material Adverse
Effect on the value of such Real Property; and
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(iv) to Seller's knowledge, no Real Property will on the Closing Date, or,
with respect to the Post Closing Companies on the day of Seller's
delivery to Holding of the shares in the respective Post Closing
Companies, be subject to or likely to be subject to any material claim
or action in connection with hidden defects, failure to comply with
applicable regulations or builders' liability.
5.9 Leases
Schedule 5.9 contains an accurate list as of the date hereof of all material
lease contracts (and the term for building leases) covering personal property
and all lease contracts covering real property pertaining to the Business. All
such leases, subject to Section 16.3, will be transferred to the companies in
the Group on or prior to Closing or, with respect to the Post Closing Companies,
on or prior to the day of Seller's delivery to Holding of the shares in the
respective Post Closing Companies.
With respect to the leases listed in Schedule 5.9 and other lease agreements
covering personal or real property pertaining to the Business, except as set
forth in Schedule 5.9
(i) the leased properties are and will on the Closing Date be in good
operating condition and in such condition as would be required at the
end of the term of such lease;
(ii) the respective owners and lessees of the leased properties have and
will on the Closing Date have fulfilled all material obligations under
the leases;
(iii) there are no legal or administrative proceedings pertaining to the
leases or the leased properties and, to Seller's knowledge, there are
no reasons to believe that such proceedings will be initiated; and
(iv) the leases remain in full force and effect and no notice has been
given by any party thereto to terminate any of the same.
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5.10 Title to Properties and Assets; Encumbrances
Except as set forth in Schedule 5.10, each of Holding and the Companies will on
the Closing Date, or, with respect to the Post Closing Companies, on the day of
Seller's delivery to Holding of the shares in the respective Post Closing
Companies, have good and marketable title to all of their respective material
properties and assets including, without limitation, all assets reflected on the
Closing Accounts (collectively "Material Properties"). Further, all such
Material Properties and other assets are and will on the Closing Date be subject
to no mortgage, encumbrance, lien, charge or other restriction of any kind or
character (collectively "Liens"), except for Liens reflected in Schedule 5.10
and:
(i) Liens reflected in the Pro Forma Balance Sheet;
(ii) Liens consisting of zoning or planning restrictions, easements,
permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of, such property by the
relevant owner in the operation of its business;
(iii) Liens for current taxes, assessments or governmental charges or levies
on property not yet due and delinquent but fully accrued on the
Closing Accounts for the period from December 31, 1998 to the Closing
Date; and
(iv) Liens arising by operation of law which do not materially affect the
operation of the business of the concerned company in the Group
provided that the same have arisen in the ordinary course of business
of such Company.
The consummation of the transactions contemplated herein will not result in the
creation of any Lien on the Material Property.
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5.11 Assets
All the assets, tangible and intangible, used in or intended for the Business as
presently conducted including, without limitation, the Saws & Tools website and
all assets reflected on the Closing Accounts but no other assets - will, except
as otherwise set forth herein or resulting from the transactions or arrangements
contemplated herein, on the Closing Date, or, with respect to the Post Closing
Companies, on the day of Seller's delivery to Holding of the shares in the
respective Post Closing Companies, be owned by the companies within the Group,
and such assets will, together with the agreements and arrangements contemplated
herein, allow and be sufficient for the Group to continue to operate the
Business subsequent to Closing in a manner in all material respects consistent
with the present operation of the Business. For the avoidance of doubt, the
assets to be transferred to and owned by Holding and the Companies within the
Group (including the Post-Closing Companies) on the Closing Date shall include
all books and records of the Companies in the Group and copies of any books and
records of Seller and any Seller's Affiliates relating directly or indirectly to
the operation of the Business.
Except as contemplated or reflected herein, since January 1, 1998, there has
been no material change to the Business or the assets (tangible or intangible)
of the Business, which has not been in the ordinary course of the Business.
Except as set forth in Schedule 5.11, the respective Material Properties
(including Real Property and leased assets) of the Business are and will on the
Closing Date, or, with respect to the Post Closing Companies, on the day of
Seller's delivery to Holding of the shares in the respective Post Closing
Companies, be in good working order and condition, ordinary wear and tear
excepted.
5.12 Loan Agreements, guarantees, etc.
Schedule 5.12 lists all loans, credit agreements, bank overdrafts, discount
facilities, and all banking facilities, and all guarantees and sureties of any
kind including pledges, mortgages,
23
endorsements and pledges on contracts, which are binding upon Holding or any of
the Companies or otherwise pertaining to the Business on the date hereof.
All loans etc. listed in Schedule 5.12 have been made in the ordinary course of
the Business.
5.13 Material Contracts; Certain Other Agreements
All Material Contracts pertaining to the Business and to which the companies in
the Group are or on the Closing, or, with respect to the Post Closing Companies,
on the day of Seller's delivery to Holding of the shares in the respective Post
Closing Companies, will be parties or otherwise be bound and all Material
Contracts which are intended to be transferred or assigned to companies in the
Group in the course of the transactions contemplated herein, are listed in
Schedule 5.13(a). For the avoidance of doubt, no agreement, contract or other
arrangement contemplated or provided for in this Agreement shall be deemed to be
a Material Contract.
All Material Contracts to which the companies in the Group are or will be
parties or otherwise be bound have been or will be made for commercial reasons
and on commercial terms in the ordinary course of business within the interest
of the Business and consistent with the commercial practice of the Sandvik group
of companies and no Material Contract provides or will provide for aggregated
rebates or discounts (i.e. rebates or discounts established upon the sale of
other products than products sold within the Business).
Except as set forth in Schedule 5.13(a), all Material Contracts are and will on
the Closing Date be in full force and effect and no notice of termination of any
Material Contract has as of the date hereof been given.
Except for the Material Contracts and the contracts, agreements and other
arrangements provided for or contemplated in this Agreement and those listed in
Schedule 5.13(b), on the Closing Date, or, with respect to the Post Closing
Companies, on the day of Seller's
24
delivery to Holding of the shares in the respective Post Closing Companies,
neither Holding, nor any of the Companies will be a party to or otherwise bound
by:
(i) any agreement, contract or commitment materially limiting the freedom
of disposing its assets;
(ii) any agreement, contract or commitment which contains restrictions
which materially limits the development of their respective
businesses; or
(iii) any share or asset sale (i.e. sale of a business) agreement or any
contract not in the ordinary course of the business containing
outstanding indemnities on the part of Holding or any Company.
5.14 Breach of Agreement
Except as set forth in Schedule 5.14(a), neither Holding, nor any of the
Companies or the Seller's Affiliates operating the Business has or will on the
Closing Date have in any material respect violated any Material Contract and, to
Seller's knowledge, no counterparty to any of the Material Contracts has or will
on the Closing Date have in any material respect violated any such contract, the
effect of which will not be fully reflected in the Closing Accounts.
With respect to other arrangements than the Material Contracts, except as set
forth in Schedule 5.14(b), Holding, the existing Companies and the concerned
Seller's Affiliates have not and will not on the Closing Date have violated any
of their obligations under any agreement, contract or arrangement pertaining to
the Business (other than the Material Contracts), which are binding upon them or
the properties or assets of the Business, in a manner which may have a Material
Adverse Effect on the Business, and no other party to such agreement, contract
or arrangement has and will not on the Closing Date have violated any of its
obligations thereunder in a manner which may have a Material Adverse Effect on
25
the Business, the Group or any of the Companies which will not be fully
reflected in the Closing Accounts.
5.15 Change of Control
Except as disclosed in Schedule 5.15, or as contemplated in Section 16.3, no
agreement to which Holding or any of the Companies on the Closing Date, or, with
respect to the Post Closing Companies, on the day of Seller's delivery to
Holding of the shares in the respective Post Closing Companies, will be a party
or otherwise bound, contains provisions giving the other party or parties
thereto the right to amend, terminate, accelerate the performance under or
refuse extension of such agreement as a result of the transactions contemplated
by this Agreement. For the avoidance of doubt, this Section 5.15 does not cover
any agreement which if so amended, accelerated, terminated or not extended would
not have a Material Adverse Effect on the company or companies in the Group
being a party or parties to it or otherwise bound by it.
5.16 Intellectual Property
Listed in Schedule 5.16 are the trade names, trade marks, designs, models and
patents which on the Closing Date will be owned or have been applied for by
Holding or any of the Companies (collectively, the "Intellectual Property").
Except as set forth in Schedule 5.16;
(i) either Holding or a Company will on the Closing Date, or, with respect
to the Post Closing Companies, on the day of Seller's delivery to
Holding of the shares in the respective Post Closing Companies, own
the entire right, title and interest in and to the Intellectual
Property (including, without limitation, the exclusive right to use
and license the same) and each item constituting part of the
Intellectual Property shall have been, in the jurisdictions indicated
in Schedule 5.16, duly registered with, filed in or issued by, as the
case may be, the proper government entity and such
26
registrations, filings and issuances remain in full force and effect
and, if and to the extent set forth therein, such registrations expire
on the dates indicated in such schedule;
(ii) there are and will on the Closing Date be no pending proceedings or
litigation or other adverse claims which will have a Material Adverse
Effect on the use of the Intellectual Property; and
(iii) the Business is not infringing and has not infringed any intellectual
property rights of any third parties, nor, to Seller's knowledge
(except as set forth in Schedule 5.16) is any third party infringing
the Intellectual Property.
The Intellectual Property together with the intellectual property and know-how
which will be owned by or licensed to or otherwise, under the arrangements
contemplated herein, provided to the Group on or prior to the Closing, or, with
respect to the Post Closing Companies, on the day of Seller's delivery to
Holding of the shares in the respective Post Closing Companies, is all the
intellectual property and know how presently used in the Business and will be
sufficient to allow the Group to continue to operate the Business as presently
conducted.
There has been and there will on the Closing Date be no infringement of
Intellectual Property which has had or will be likely to have a Material Adverse
Effect on the Business, which is not fully reflected in the Closing Accounts.
5.17 Documents Relating to Environmental Liability
Attached as Schedule 5.17 are all of the documents in Seller's, Seller's
Affiliates', Holding's and the existing Companies' possession concerning current
or potential environmental liabilities arising under applicable environmental
laws, regulations, orders,
27
judgements, permits and decrees pertaining to the Businesses or any of its
properties or assets, whether owned or leased.
5.18 Environmental Liability
Except as otherwise set forth in the documents contained in Schedule 5.17 or as
set forth in Schedule 5.18, each of Holding, the Companies and the Seller's
Affiliates engaged in the relevant parts of the Business are and will on the
Closing Date be in compliance with and there are and there will on the Closing
Date be no current or potential material liabilities including remediation
relating to or arising under applicable environmental laws, regulations, orders,
judgements, permits or decrees and Holding, the Companies and the Seller's
Affiliates engaged in the relevant parts of the Business have obtained and are
and will on the Closing Date be in compliance with all material permits required
by applicable environmental laws (as in force and effect on the date hereof).
5.19 Compliance with Laws, Regulations and Permits
Except as set forth in Schedule 5.19, Holding, the Companies and the Seller's
Affiliates presently operating the relevant parts of the Business are and will
on the Closing Date be in compliance with all applicable laws, regulations,
orders, judgements and decrees and have obtained and are and will on the Closing
Date be in compliance with all governmental licenses, permits and authorizations
required to conduct their respective parts of the Business as conducted as of
the date hereof, except where the failure to so comply or to obtain such
licenses, permits or authorizations would not have a Material Adverse Effect on
the relevant company in the Group or the relevant parts of the Business (as the
case may be).
All such material licenses, permits and authorizations are and will on the
Closing Date be in full force and effect and no proceeding is pending or, to
Seller's knowledge, threatened, seeking to cancel or amend any such license,
permit or authorization and, except as otherwise provided for or contemplated
herein or in the arrangements referred to or
28
contemplated hereby, to Seller's knowledge, none of the transactions
contemplated in this Agreement or any agreement contemplated herein will result
in the cancellation or amendment to any such license, permit or authorization
which could have a Material Adverse Effect.
For the avoidance of doubt, the representations and warranties contained in the
preceding paragraphs of this Section 5.19 shall in no event apply to any
environmental matter or aspect.
The financial condition of each of Holding and the Companies and the companies
to which the Ownership Interests pertain is and will on the Closing, or, with
respect to the Post Closing Companies, on the day of Seller's delivery to
Holding of the shares in the respective Post Closing Companies, not be such as
could result in an obligation under applicable law to enter into liquidation,
bankruptcy or similar proceedings or in any of its shareholders being required
under applicable law to further capitalize or otherwise provide financial
support to it or assume any of its debts, obligations or liabilities.
5.20 Insurance
The insurance coverage maintained by or covering the Business is adequate and
customary for the Business and is in full force and effect as of the date
hereof. The "Sandvik Policies" (as defined in Schedule 5.20) are group
insurances which will cease to cover Holding and the Companies on Closing.
5.21 Employees and other Representatives
Except for the President and the Vice President of XX Xxxxxxx Saws and Tools,
Schedule 5.21(a) contains a list of the employment contracts with top level
managers employed in the Business and other employees employed in the Business
having special or significantly unusual terms of employment. The terms of
employment for other employees employed in the Business are in line with what is
customary in the business.
29
Without prejudice to the foregoing, except as set forth:
(i) in Schedule 5.21(b), no sum is and no sum will as of the Closing, or,
with respect to the Post Closing Companies, on the day of Seller's
delivery to Holding of the shares in the respective Post Closing
Companies, be due to any present or former employee, agent or
representative of Holding or any of the Companies (including the Post
Closing Companies) as the result of their service and/or other
contracts or agreements, other than the right to payments accrued but
not yet payable or the reimbursement for expenses;
(ii) in Schedule 5.21(c), there are and there will on the Closing Date, or,
with respect to the Post Closing Companies, on the day of Seller's
delivery to Holding of the shares in the respective Post Closing
Companies, be no collective bargaining agreements or bonus programs or
severance pay program with respect to any of the employees, board
members or former employees or former board members of Holding or any
of the Companies.
(iii) in Schedule 5.21 (d) the consummation of the transactions contemplated
by this Agreement will not entitle any employee or former employee of
the Group to severance pay, unemployment compensation, bonus or any
other payment resulting in payments from or costs for Buyer or the
Group or accelerate the time of payment or vesting for, or increase
the amount of, compensation due to any such employee or former
employee and payable by Buyer or the Group;
(iv) in Schedule 5.21(e), no former employee of the Group or the entities
presently operating the Business is or will as of Closing, or, with
respect to the Post Closing Companies, on the day of Seller's delivery
to Holding of the shares in the respective Post Closing Companies, be
entitled to re-employment by any company in the Group;
30
(v) in Schedule 5.21(f), no senior manager of the companies in the Group
or employed in the Business including, without limitation, those
listed on Schedule 7.8 hereof has given notice of termination of his
or her employment as of the date hereof;
(vi) in Schedule 5.21(g), since January 1, 1997, there have not occurred
any strikes, slow downs, work stoppages or other similar labour
actions by any group of employees in the Business.
5.22 Employee Benefit Plans
Each material employee benefit plan, which is or which will be maintained by
either Holding or any of the Companies on the Closing Date, or, with respect to
the Post Closing Companies, on the day of Seller's delivery to Holding of the
shares in the respective Post Closing Companies (collectively, the "Plans") is
set forth in Schedule 5.22. Each such Plan is and will on the Closing Date, or,
with respect to the Post Closing Companies, on the day of Seller's delivery to
Holding of the shares in the respective Post Closing Companies, be in
substantial compliance with the respective applicable laws and each such Plan
has been and will as of the Closing Date, or, with respect to the Post Closing
Companies, on the day of Seller's delivery to Holding of the shares in the
respective Post Closing Companies, be administered and operated in all material
respects in accordance with its terms and, if and to the extent required
pursuant to applicable law or the terms of such Plans, such Plans are and will
as of the Closing Date, or, with respect to the Post Closing Companies, on the
day of Seller's delivery to Holding of the shares in the respective Post Closing
Companies, be adequately funded.
5.23 Litigation
Except for the matters listed in Schedule 5.23, there is and there will on the
Closing Date be no suit, administrative proceeding, arbitration or other legal
proceeding pending or threatened against any of Holding, the Companies or any of
Seller's Affiliates with respect to the Business conducted by such concerned
Seller's Affiliate, their businesses, properties
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or assets which would, if adversely decided, have a Material Adverse Effect on
the Business or the financial condition or results of the operations of the
concerned companies in the Group, and, to Seller's knowledge there are no facts
or circumstances which are likely to give rise to any such suit or legal
proceeding.
Except for the matters listed in Schedule 5.23, there is and there will on the
Closing Date be no such suit or proceeding pending by any of Holding or the
Companies against any other individual or party, which would, if adversely
decided, have a Material Adverse Effect on the Business or the financial
condition or results of the operations of the concerned companies in the Group.
5.24 Broker's or Finder's Fees
No agent, broker, person or firm acting on behalf of Seller, Seller's Affiliates
or the companies in the Group is on the date hereof, or will on the Closing Date
be, entitled to any commission or broker's or finder's fees from any of the
parties hereto, in connection with any of the transactions contemplated herein,
except for Xxxxxx Brothers whose fees and expenses will be paid by Seller or
Seller's Affiliates.
5.25 Events since the Pro Forma Balance Sheet
From December 31, 1998, and except as expressly contemplated or required or
permitted by this Agreement, the Business conducted (or to be conducted) by each
of Holding, the Companies, including the Post Closing Companies, and the
Seller's Affiliates to the extent engaged in the Business, have been operated in
the ordinary course and no action has been taken which, if taken subsequent to
the execution of this Agreement and on or prior to the Closing, would constitute
a breach of Seller's covenants set forth in Section 7.2, and, to Seller's
knowledge, there are no events or circumstances (except for macro economic
events or developments or similar circumstances which are publicly known), which
may have a Material Adverse Effect on the Business or the financial condition of
the Group or any Company.
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5.26 Tax
Each of Holding and the Companies, has filed all tax returns that it was
required to file. All such tax returns were correct and complete in all material
respects. Each of Holding and the Companies will as of Closing, or, with respect
to the Post Closing Companies on the day of Seller's delivery to Holding of the
shares in the respective Post Closing Companies, have withheld or paid all
taxes, including any interest or penalties, social security contributions and
charges (including compulsory health and unemployment insurance and pension fund
payments required by applicable law), required to have been withheld or paid
(whether or not shown on any tax return) or, if and to the extent required under
applicable laws and the Accounting Principles, will have made the appropriate
reservations therefor in the Closing Accounts.
No Company in the Group is or will on the Closing Date, and no Post-Closing
Company will, on the date of Seller's delivery to Holding of the shares of such
Post-Closing Company, be subject to any liability for tax resulting from the
operations of the Business or the ownership, operation or transfer of the assets
of the Business, prior to Closing including, without limitation, from the
Reorganization as contemplated in Section 2 hereof, for which sufficient
reservations will not be made in the Closing Accounts.
5.27 Corporate Documents
True and correct copies of the Articles of Association or similar and
registration certificates or similar records (if and to the extent applicable)
for each of Holding, the existing Companies and Deville and Uirlis, are attached
hereto as Schedule 5.27. Except as may be required by applicable laws or as a
result of the Reorganisation, no resolution has been passed or will have been
passed on the Closing Date to alter any of such corporate documents. All
material corporate documents (including minutes, contracts and permits) of the
companies in the Group are kept in good order.
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5.28 Accounts Receivable
All accounts receivable of the companies in the Group as of Closing or, with
respect to the Post Closing Companies, on the day of Seller's delivery to
Holding of the shares in the respective Post Closing Company will be bona fide
accounts receivable created in the ordinary course of the Business and will be
collectable within a period of six months from their respective due dates in
amounts not less than the aggregate amount thereof as reflected in the Closing
Accounts.
5.29 Products
The companies within the Group have and will on the Closing Date have no
liability for replacement or repair, or damages arising out of any injury to
persons or property or otherwise as a result of the ownership, possession or use
of any products sold by the Business up to the Closing Date.
Holding, the existing Companies and the Seller's Affiliates to the extent
engaged in the Business have not received any order from any administrative,
judicial or other authority, or any request from any professional or consumer
body to recall any of their products, or to inform their customers of a defect
or danger caused by a defect in any of their products or linked to their use,
and do not anticipate any spontaneous recall campaign for any of their products.
5.30 Ownership Interests
With respect to the Ownership Interests, neither Holding, nor any of the
companies in the Group will be liable to the creditors of Uirlis or Deville and
there will be no requirement under applicable laws on the shareholders in such
companies to further capitalize or otherwise provide financial support or
corporate guarantees or comfort letters supporting any debts or liabilities of
such companies due to any event or circumstances which have occurred prior to
Closing.
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5.31 Inventory
All inventory reflected in the Closing Accounts will consist of quality and
quantity usable and saleable in the ordinary course of business of the Business,
will have a commercial value at least equal to the value shown on such Closing
Accounts and will be valued in accordance with the Accounting Principles.
5.32 Absence of Undisclosed or Unrelated Liabilities
Except as and to the extent fully accrued or reserved in the Closing Accounts,
no Company in the Group will on the Closing Date, and no Post-Closing Company
will, on the day of Seller's delivery to Holding of the shares of such
Post-Closing Company, have or be subject to any liabilities, commitments or
obligations, whether accrued, absolute, contingent, direct, indirect or
otherwise, other than commercial liabilities and obligations incurred in the
ordinary course of business of the Business and consistent with past practice.
As of the Closing, no Companies of the Group, and as of the day of the delivery
to Holding of the shares of the Post-Closing Companies, no Post-Closing Company,
shall have or be subject to any liabilities not solely related to or arising
from the conduct of the Business, and Seller represents and warrants that no
such liabilities unrelated to the Business shall have been transferred in
connection with the Reorganization.
5.33 Disclosure
No representation or warranty by Seller in this Agreement, nor any statement,
certificate, schedule or document furnished or to be furnished by or on behalf
of Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby or contained in the data room, contains any untrue statement
of a material fact or omits a material fact necessary to make the statements
contained therein not misleading.
5.34 Seller's Affiliates' Relationships with the Group
35
Following the Closing or, with respect to the Post-Closing Companies, following
the day of Seller's delivery to Holding of the shares of the Post-Closing
Companies, neither Seller nor any of Seller's Affiliates shall have any direct
or indirect interests in the Business, in any of the properties, assets or
rights which are used in the conduct of the Business, any claims against the
Business, any of the companies of the Group or any of their respective
properties or assets, or shall have any direct or indirect interest in any
entity which does business with any of the companies in the Group, excepting
only any interests, rights or claims resulting from the Reorganization which
will be repaid at or shortly following the Closing or arising under or in
connection with the ancillary agreements referred to herein and to be executed
in connection with the transactions contemplated hereby.
5.35 Y2K-program
The companies in the Group are covered by a year 2000 program as described in
further detail in Schedule 5.35 hereto. The companies in the Group are and will
on the Closing Date be in compliance with such program.
5.36 Sole and Exclusive Representations and Warranties
Seller makes no representation or warranty whatsoever, expressed or implied,
beyond the representations and warranties given in this Agreement and Seller's
liability for the companies in the Group and their respective businesses is
limited to the representations and warranties set forth in this Section 5. For
the avoidance of doubt, except as explicitly set forth herein, no
representations or warranties are given with respect to the Ownership Interests
or Deville and Uirlis respectively.
6. REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer represents and warrants to Seller on the date hereof and on the Closing
Date as follows.
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6.1 Power and Authority of Buyer
Buyer is a corporation duly organised and validly existing under the laws of
Delaware. Buyer has and will have the corporate power and authority to make ,
execute, deliver and perform this Agreement, and this Agreement has been duly
authorized and approved by all required corporate action of Buyer. This
Agreement constitutes and will constitute a legal, valid and binding obligation
of Buyer enforceable against Buyer in accordance with its terms.
6.2 No Violation of Laws and Regulations
Assuming that Buyer's conditions precedent set forth in Section 10.2 are
fulfilled, the execution and delivery of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby will not:
(i) violate any provisions of the Articles of Associations or other
similar organizational document of Buyer;
(ii) violate any statute, rule, regulation, order or decree of any public
body or authority by which Buyer or any of its properties or assets is
bound; and
(iii) result in a violation or breach of, constitute a default under, or
give rise to a right of termination or acceleration of the performance
required by any license, permit, agreement or other instrument to
which Buyer is a party, or by which Buyer or any of its properties or
assets is bound,
excluding from the foregoing clauses (i) through (iii) violations, breaches or
defaults which, either individually or in the aggregate, would not prevent Buyer
from performing its obligations under this Agreement or consummation of the
transactions contemplated by this Agreement.
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6.3 Broker's or Finder's Fees
No agent, broker, person or firm acting on behalf of Buyer is, or will be,
entitled to any commission or broker's or finder's fees from any of the parties
hereto, or from any person controlling, controlled by or under common control
with any of the parties hereto, in connection with any of the transactions
contemplated herein, except Xxxxxx Xxxxx whose fees and expenses will be paid by
Buyer.
6.4 Financing
Buyer will on the Closing and on the date for payment of the balance of the
Purchase Price pursuant to Section 4.5, have sufficient cash, available lines of
credit or other sources of immediately available funds to enable Buyer to make
all payments it may be required to make hereunder.
7. COVENANTS OF SELLER
Seller covenants and agrees with Buyer as follows.
7.1 Access to Information and Documents
Subject to any applicable antitrust restrictions, from the date hereof until the
Closing, Seller will cause Holding, each of the Companies and the concerned
Seller's Affiliates to give Buyer and its agents and representatives (including,
but not limited to, auditors, lawyers and appraisers) full and complete access
during normal working hours to any and all of the properties, assets, books,
records and other documents and employees of Holding, each Company and the
concerned Seller's Affiliates (to the extent included in or relating to the
Business) to enable Buyer to make such examination of the business, properties,
assets, books, records, and other documents of Holding, each Company and the
Business and to conduct such other due diligence investigation of the Business,
including environmental
38
audits, as Buyer may reasonably deem necessary or desirable. As part of such
examination Buyer may make such inquiries of such persons having business
relationships with Holding, the Companies and the Business (including, but not
limited to, suppliers, licensees and customers) as Buyer shall deem necessary or
desirable and Seller shall cooperate fully, and shall cause Holding, each
Company and the concerned Seller's Affiliates to cooperate fully, with Buyer in
connection therewith.
Seller shall and shall cause Seller's Affiliates after Closing to provide to
Buyer or Holding copies of documents and other information relating to and of
importance to the continued conduct of the Business, if and to the extent so
reasonably required by Buyer.
7.2 Conduct of Business Pending Closing
From the date hereof until Closing or, with respect to the Post Closing
Companies until the day of Seller's delivery to Holding of the Shares in the
respective Post Closing Companies, except as permitted under this Agreement or
as consented to by Buyer in writing:
(i) Seller will cause Holding, each of the Companies and the Seller's
Affiliates to the extent engaged in the Business to maintain itself at
all times as a corporation duly organized, validly existing under the
laws of the jurisdiction under which it is incorporated and Seller
will and will cause Holding, the Companies and the concerned Seller's
Affiliates to execute the Reorganization as expediently and
efficiently as reasonably possible;
(ii) Seller will cause Holding, each of the Companies and the concerned
Seller's Affiliates to carry on the Business in a good and diligent
manner, i.e. substantially in the manner carried on as of the date
hereof, and will not permit Holding, any of the Companies or the
concerned Seller's Affiliates to engage in any activity or transaction
or make any commitment to purchase or spend other than in the ordinary
course of the Business as heretofore conducted, or as permitted or
contemplated herein;
39
(iii) Seller will not permit Holding or any Company to declare, authorize or
pay any dividend or make any distribution to its respective
stockholders or others entitled to share in the profits and will not
permit Holding or any Company to redeem, purchase or otherwise
acquire, or agree to redeem, purchase or otherwise acquire, any shares
of its stock;
(iv) Seller will not permit Holding, any Company or any concerned Seller's
Affiliates to pay or obligate itself to pay any compensation,
commission or bonus to any director, officer, employee or independent
contractor engaged in the Business, except for the regular
compensation and commissions payable to such director, officer,
employee or independent contractor at the rate (compensation level) in
effect on the date of this Agreement;
(v) Seller will see to it that Holding, each Company and each of the
concerned Seller's Affiliates maintains its existing insurance
coverage with respect to the Business;
(vi) Seller will cause Holding, each Company and each of the concerned
Seller's Affiliates to use its reasonable best commercial efforts to
preserve the Business intact, to maintain the services of employees
and independent contractors of the Business and to preserve its
relationships with suppliers, licensees, distributors and customers
and others having business relationships with the Business, as well as
public authorities;
(vii) Seller will without undue delay inform Buyer if any senior manager of
any of the companies in the Group or employed in the Business gives
notice of termination of his or her employment;
(viii) Seller will not permit Holding, any Company or any of the concerned
Seller's Affiliates to, or to obligate itself to, sell or otherwise
dispose of or pledge or otherwise encumber, any of its properties or
assets pertaining to the Business except
40
in the ordinary course of the Business and Seller will cause Holding,
each Company and each of the concerned Seller's Affiliates to maintain
its facilities, machinery and equipment pertaining to the Business in
good operating condition and repair, subject only to ordinary wear and
tear;
(ix) Seller will not permit Holding or any Company to amend its Articles of
Association (unless required by law or as a result of the
Reorganization); and
(x) If and to the extent relating to the Business, or the Seller's ability
to perform or comply with its obligations and undertakings hereunder,
Seller will and will cause Holding, the Companies and the concerned
Seller's Affiliates to comply with the applicable employment laws and
collective bargaining agreements; and
(xi) Seller agrees, for itself and on behalf of Seller's Affiliates, not to
directly or indirectly solicit or furnish any information to any
prospective buyer, commence or conduct presently ongoing negotiations
with any other party or enter into any agreement with any other party
concerning the sale of the Business, any of the Companies or any of
their respective assets or business or any part thereof.
Without limiting the generality of the foregoing, Seller will consult with Buyer
regarding all significant developments, transactions and proposals relating to
the Business or operations of any of the assets or liabilities pertaining to the
Business.
7.3 Consents and Approvals
Prior to Closing, Seller shall use its reasonable best efforts to provide Buyer
with all information concerning Seller, Seller's Affiliates and the Business
necessary to obtain all consents, authorizations and approvals under all
statutes, laws, ordinances, regulations, rules, judgements, decrees and orders
of any court or governmental agency, board, bureau, body, department or
authority required to be obtained by Buyer in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions
41
contemplated hereby. Seller shall provide Buyer all reasonable assistance in
obtaining such consents, approvals etc.
Seller shall use its best efforts following the execution of this Agreement, to
make all antitrust filings and notices required of Seller and to obtain prior to
the Closing all consents, authorizations and approvals under all statutes, laws,
ordinances, regulations, rules, judgements, decrees and orders of any court or
governmental agency, board, bureau, body, department or authority required to be
obtained by Seller in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby, and
to obtain any consents to assignment necessary in connection with the
Reorganization or the sale of Shares.
7.4 Resignation of Board Members
Prior to or at the Closing, or with respect to the Post Closing Companies, on or
prior to the day of Seller's delivery to Holding of the shares in the respective
Post Closing Companies, Seller shall (unless otherwise agreed with Buyer)
procure either;
(i) that shareholders meetings are held in each of Holding and the
Companies at which the board members earlier appointed (the "Board
Members") are removed from office without such Board Members having
any claims for compensation of any kind due to their loss of office;
or
(ii) the delivery to Buyer of resignation letters from each of the Board
Members substantially in the form set forth in Schedule 7.4.
7.5 Certain Indebtedness; Factoring
Except for trading balances in the ordinary course of business, Seller will
cause all indebtedness (whether due or not) from either Seller or Seller's
Affiliates to either Holding or any of the Companies to be satisfied in full
prior to or as soon as reasonably possible
42
subsequent to Closing and, except for trading balances in the ordinary course of
business, and except for factoring arrangements (which are dealt with in the
second paragraph of this Section 7.5), Seller will cause indebtedness (whether
due or not) from Holding or any of the Companies to Seller or Seller's
Affiliates to be satisfied in full on, or prior to Closing.
Seller shall cause the existing factoring arrangement between Seller's
Affiliates and the companies in the Group to terminate effective as of the close
of business on the Closing Date. Buyer shall be jointly and severally liable
with the concerned companies in the Group for any indebtedness to Seller's
Affiliates resulting from such factoring arrangements which shall be payable in
accordance with their existing terms, if, but only if, such factoring
arrangements constituted Interest Bearing Liabilities and as such were deducted
from the Purchase Price under Section 4.1 (b) hereof.
7.6 Execution and Transfer of Agreements etc.
Seller will, or will cause the concerned Seller's Affiliates or the concerned
companies in the Group (as the case may be) to comply with the provisions in
Section 16.3 (however, with respect to the companies in the Group, prior to
Closing only) and, on or prior to Closing, execute and deliver the License
Agreement as contemplated in Section 16.2.
Moreover, Seller will prior to Closing cause the Ownership Interests in Deville
to be transferred to Holding and to transfer and assign to Holding any other
arrangements pertaining thereto. With respect to Uirlis, the Ownership Interests
therein and the arrangements pertaining thereto, have been transferred to
Sandvik Bahco AB, which is a company in the Group. For the avoidance of doubt,
the Seller will make appropriate arrangements for any de minimis holdings listed
in schedule 5.5.(a) to be transferred to Holding or to nominee holders nominated
by Buyer.
7.7 Non-competition
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From Closing and for a period of three (3) years thereafter Seller agrees, for
itself and on behalf of Seller's Affiliates, not to anywhere in the world
participate, engage or invest, directly or indirectly, in any business that
competes with the Business as presently conducted. Notwithstanding the
foregoing, Seller's undertaking shall not prevent Seller, or Seller's Affiliates
from supplying raw material, components and products (not developed,
manufactured or sold within the Business as presently conducted) to competitors
to the Business, or from continuing to conduct and develop their respective
businesses (except for the Business) including any distribution, service,
maintenance and other arrangements so long as the continuation or development of
such business is not competitive with the Business as presently conducted (i.e.
any activity not directly aimed at the same customer base and principal product
application, or from directly or indirectly acquiring or investing in any
company or business containing a business competing with the Business, provided,
that such company's revenues derived from activities competing with the Business
represents less than 20% of the revenues of such acquired company or business.
In the event that Seller or any Seller's Affiliate carries out an acquisition or
investment in a company conducting business competing with the Business and
subsequently wishes to dispose of all or any part of such competing business,
Buyer shall have a right of first refusal to acquire such competing business.
The foregoing shall not impose any restrictions on Seller or Seller's Affiliates
with respect to the operation of or ownership interests in the Sandvik Bisov
joint venture in Belorussia.
7.8 Solicitation of Key Employees
Seller agrees, for itself and on behalf of Seller's Affiliates, to use its best
efforts to cause all key employees of the Business who, prior to the completion
of the Reorganization, were employees of Seller or of Seller's Affiliates, to
transfer to the Group.
From the date hereof and for a period of three (3) years after Closing, Seller
undertakes and shall cause Seller's Affiliates not to offer employment to or
otherwise induce any of the employees of the Companies in the Group listed in
Schedule 7.8 to terminate his or her employment with the concerned company in
the Group, without the prior written consent of
44
Buyer. For the avoidance of doubt, Seller or Seller's Affiliates shall not be
restricted from hiring any of the listed employees, who has terminated its
employment with the Group without any interference of Seller.
7.9 Confidential Information
Seller agrees, for itself and on behalf of Seller's Affiliates, at any time
subsequent to the Closing not to use for any purpose or disclose to any person
any Confidential Information other than information relating solely to the
Seller and/or Seller's Affiliates.
7.10 Consultation regarding Reorganization of the Business
Pending Closing, Seller shall and shall cause the concerned Seller's Affiliates,
to the greatest extent practically possible, to keep Buyer informed on the
Reorganization and to consult with Buyer on all matters which may reasonably be
of significant interest to Buyer. Seller will consult with Buyer prior to
completing any further steps in connection with the Reorganization with a view
to causing the Reorganization to be accomplished in a fashion that maximizes the
tax position of the Group Companies without tax detriment to the Seller and
Seller's Affiliates.
It is foreseen that the Reorganization will require additional financing and
similar arrangements. Seller will consult with Buyer prior to making any such
new arrangement which is significant with regard to the financial position of
the concerned company or companies in the Group.
7.11 Updated Disclosure Schedules
Seller shall have a continuing obligation to promptly notify Buyer in writing
with respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the disclosure schedules, but no such disclosure shall except as
otherwise set forth herein cure any breach
45
of any representation or warranty which is inaccurate without Buyer's written
waiver of such breach, provided, however, such disclosure shall be without
prejudice to Seller's right to cure any breach of any representation or warranty
as provided for herein.
8. COVENANTS OF BUYER
Buyer covenants and agrees with Seller as follows.
8.1 Confidential Information
Buyer shall preserve and maintain all Confidential Information of Seller,
Seller's Affiliates, the Business and the companies in the Group received from
or confirmed by Seller, Seller's Affiliates or the companies in the Group and
shall not disclose to any third person (i.e. to other persons than those of its
employees, officers and advisors being in need thereof for the purpose of the
transactions contemplated herein) or use any such Confidential Information or
trade secret for personal advantage, except that Buyer shall be free to use and
disclose all or any of such Confidential Information and trade secrets which
(i) were already in Buyer's possession at the time of disclosure to Buyer
or subsequently developed by Buyer without reference to and
independent of the confidential information;
(ii) are a matter of public knowledge;
(iii) have been or are hereafter published or otherwise made public other
than through Buyer; or
(iv) obtained by Buyer from a third party not known by Buyer to be under a
confidentiality obligation to Seller or any Seller's Affiliate;
46
provided, however, that the exceptions contained in subsections (i) through (iv)
above shall not apply to such information or pieces of information which alone
would fall within the exceptions but which collectively or in combination with
other information would constitute Confidential Information.
The covenants of Buyer contained in this Section 8.1 shall with respect to
information concerning the companies in the Group (but only with respect to the
Business and the companies in the Group), terminate at the Closing. For the
avoidance of doubt, it is acknowledged and agreed that the Confidentiality
Agreement dated December 9, 1998 and executed by Buyer is superseded by the
foregoing provision.
8.2 Consents and Approvals
Buyer shall use its best efforts to as soon as reasonably possible following the
execution of this Agreement make all anti-trust filings required of Buyer and
notices and to obtain prior to the Closing all consents, authorizations and
approvals under all statutes, laws, ordinances, regulations, rules, judgements,
decrees and orders of any court or governmental agency, board, bureau, body,
department or authority required to be obtained by Buyer in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
8.3 No Interference
Except as authorized by Seller or this Agreement, pending the Closing, Buyer
will not take any action which could reasonably be expected to interfere with
the business or operations of the Seller, Seller's Affiliates or the companies
in the Group.
8.4 Execution and transfer of Agreements etc.
Buyer will and will subsequent to Closing cause the concerned companies in the
Group to comply with the provisions in Sections 16.2 and 16.3.
47
Moreover, Buyer will, on or prior to the Closing, execute and deliver to Sandvik
the License Agreement as contemplated in Section 16.2 and accept the transfer
and assume all remaining rights and obligations of Sandvik pursuant to the
agreements as listed in Schedules 16.4.1 and 16.4.2 pertaining to the Ownership
Interests and in connection therewith, execute and deliver to Sandvik any and
all agreements and other instruments, if any, necessary or reasonably required
to properly effect such transfer.
8.5 Certain Indebtedness; Guarantees etc.
Except for trading balances in the ordinary course of business and except for
factoring arrangements (which are dealt with in the second paragraph of Section
7.5), in the event there is indebtedness from Holding or any of the Companies to
Seller or Seller's Affiliates which has accrued on or prior to Closing and which
is fully reflected on or reserved for in the Closing Accounts (i.e. those items
which reduce Purchase Price under Section 4.1(b) hereof) but which are not
satisfied in full at Closing, Buyer shall subsequent to Closing enable and cause
the concerned companies in the Group to satisfy in full such indebtedness,
whether due or not, as soon as reasonably possible, except for the factoring
arrangements which are repayable in accordance with their terms and as provided
in the second paragraph of Section 7.5 hereof.
Moreover, Buyer shall either assume those guarantees, letters of comfort,
letters of awareness or similar instruments issued by Seller or Seller's
Affiliates in favour of any Company in the Group or the Business if and to the
extent such instruments are pertaining exclusively to the Business and were made
in the ordinary course of the Business, or alternatively, provide Seller or the
concerned Seller's Affiliates with an indemnity issued by the Buyer and
providing Seller or the concerned Seller's Affiliates a full coverage for any
liability under such instruments.
8.6 Discharge of Liability
48
Buyer shall at the next ordinary shareholders meetings in each of Holding and
the Companies procure that the shareholders meetings vote in favour of discharge
of liability of the respective Board Members (as defined in Section 7.4) and
otherwise take all reasonable actions necessary to discharge the Board Members
of future liability, provided, however, that the respective auditors have not
objected to such discharge.
8.7 Handling of recalls, replacements and repairs
Buyer covenants to Seller that in the event of a recall, a replacement or repair
of any products within the Business sold prior to Closing which may give rise to
a claim against Seller under Section 5.29, it will or will cause the companies
in the Group to handle such recall, replacement or repair in a manner reasonably
agreed upon with Seller. (Provisions regarding Seller's obligation to provide
indemnification in the event of a recall, replacement or repair of any products
are contained in Section 14.4.2.)
8.8 Corporate Actions
If and to the extent applicable, following Closing Buyer shall without undue
delay prepare all documentation required in addition to the minutes of
shareholder's meetings delivered by Seller, and Buyer shall procure that such
documentation is appropriate in form and substance and submitted to the
appropriate authorities, registers etc. for registration of the members of the
board in the respective Companies (provided, that with respect to the Post
Closing Companies such actions shall be taken following Seller's delivery to
Holding of the shares in and minutes relating to the respective Post Closing
Companies).
8.9 Board Members
No later than twenty (20) days following the execution of this Agreement, Buyer
shall provide to Seller a complete list of the members of the board in each of
the companies in the Group to be appointed at Closing (or with respect to the
Post Closing Companies, subsequent to Closing). Such list shall contain for each
individual listed the full name, date
49
of birth, residential address, citizenship, photocopies of passport and any
other information as may be reasonably required.
9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO SELL THE SHARES
The obligation of Seller to sell the Shares is subject to the fulfilment or
waiver by Seller prior to or at the Closing of the following conditions:
9.1 Shareholders' meetings etc.
Shareholders' meetings in each of Sandvik and Seller have been held and each
such meeting has passed a resolution or resolutions to the effect that the
transaction contemplated herein has been approved.
9.2 Buyer's Performance
The representations and warranties of Buyer contained in this Agreement or in
any written statement delivered by Buyer to Seller pursuant to this Agreement
shall be true and correct in all material respects at and as of the Closing as
though such representations and warranties were made at and as of such date and
Buyer shall have performed and complied with all the terms, provisions and
conditions of this Agreement to be performed and complied with by Buyer at or
before the Closing.
9.3 Consents and Approvals
Seller and, if and to the extent applicable, Seller's Affiliates and Buyer shall
have obtained all consents, authorization and approvals under all statutes,
laws, ordinances, regulations, rules, judgements, decrees and orders of any
court or governmental agency, board, bureau, body, department or authority
required to be obtained by Seller or Buyer, as the case may be, in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including all approvals of
antitrust
50
or merger control authorities in all relevant jurisdictions (or, to the extent
such antitrust approval is not required, all required antitrust filings or
notices shall have been duly made).
9.4 Execution and delivery of Agreements
Each of the agreements set forth in Schedule 9.4 has been duly executed and
delivered by each of the Buyer and/or the companies in the Group intended to be
parties to such agreements (as the case may be).
10. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO PURCHASE THE SHARES
The obligation of Buyer to purchase the Shares is subject to the fulfilment or
waiver by Buyer prior to or at the Closing of the following conditions:
10.1 Seller's Performance
There shall not be any error, misstatement or omission in or breach of the
representations and warranties made by Seller in this Agreement which may have a
material adverse effect on the Business (defined for this purposes as an effect
of more than SEK 100 million) and which is not cured by Seller prior to Closing;
and Seller shall have performed and complied with all other terms, provisions
and conditions of this Agreement to be performed and complied with by Seller at
or before the Closing. For the avoidance of doubt, with respect to the
Reorganization, Seller shall have or shall have caused the Reorganization to
have been completed except for in the countries of Spain and Italy.
10.2 Consents and Approvals
Seller and, if and to the extent applicable, Seller's Affiliates and Buyer shall
have obtained all consents, authorizations and approvals under all statutes,
laws, ordinances, regulations, rules, judgements, decrees and orders of any
court or governmental agency, board, bureau,
51
body, department or authority required to be obtained by Seller or Buyer, as the
case may be, in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
including all approvals of antitrust or merger control authorities in all
relevant jurisdictions (or, to the extent such antitrust approval is not
required, all required antitrust filings or notices shall have been duly made).
10.3 Resignations of Board Members
The members of the board of Holding and each of the Companies shall have been
removed from office or resigned in accordance with Section 7.4.
10.4 Execution and delivery of Agreements
Each of the agreements listed in Schedule 10.4 shall have been duly executed by
Seller and the concerned Seller's Affiliates (as the case may be).
11. CLOSING
11.1 Time and place for Closing
The closing of the purchase and sale of the Shares (the "Closing") shall take
place at the office of Sandvik, located in Sandviken, Sweden (or at such other
place as the parties may mutually agree) at 09:00 o'clock in the forenoon, local
time, on the Closing Date. If the Closing is postponed, all references to the
Closing Date in this Agreement shall refer to the postponed date.
11.2 Items to be delivered and actions to be taken by Seller
At the Closing, Seller shall:
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(i) deliver to Buyer a duly executed notarial deed of transfer evidencing
the transfer of the Shares to Buyer along with a copy of all pages of
the share register of Holding reflecting the change of ownership to
the Shares;
(ii) deliver to Buyer a certificate of Seller in the form of Schedule
11.2(ii) certifying (a) that Seller has performed and complied with
all of the terms, provisions and conditions to be performed and
complied with by Seller at or before the Closing and confirming the
completion or waiver of all Seller's conditions precedent as of
Closing Date and (b) that the Reorganization has in all material
respects been completed in accordance with the provisions set forth
herein and (c) that each of the representations and warranties in
Section 5 hereof which by their terms shall be true and correct as of
the Closing Date are true and correct as of the Closing Date with the
same effect as though such representations and warranties had been
made or given on and as of the Closing Date;
(iii) deliver to Buyer a legal opinion or opinions substantially in the form
set forth in Schedule 11.2(iii) and reasonably acceptable to Buyer;
and
(iv) deliver to Buyer reasonable evidence that the provision in Section 7.4
have been complied with and, to the extent possible, minutes of
shareholder's meetings in Holding and each of the Companies in the
Group (except for the Post Closing Companies) evidencing that
shareholder's meetings in each of such companies have been held and
have resolved to appoint the directors of the respective board of such
companies as designated by Buyer; (and, with respect to the Post
Closing Companies, such minutes shall be delivered along with the
shares in the respective Post Closing Companies);
(v) deliver to Buyer each of the agreements listed in Schedule 10.4
executed by Seller, the concerned Seller's Affiliates or the concerned
Companies in the Group (as the case may be); and
53
(vi) deliver to Buyer such other certificates and documents as Buyer or its
counsel may reasonably request.
11.3 Items to be delivered and actions to be taken by Buyer
At the Closing, Buyer shall:
(i) pay the Preliminary Purchase Price by way of transfer of immediately
available funds to such account at such bank as Seller will designate
no later than five (5) Business Days prior to Closing;
(ii) deliver to Seller a certificate of Buyer in the form of Schedule
11.3(ii) certifying (a) that Buyer has performed and complied with all
of the terms, provisions and conditions to be performed and complied
with by Buyer at or before the Closing and confirming the completion
or waiver of all Buyer's conditions precedent as of Closing Date and
(b) that all representations and warranties of Buyer under Section 6
hereof continue to be true and correct as of the Closing Date;
(iii) deliver to Seller a legal opinion or opinions, substantially in the
form set forth in Schedule 11.3(iii) and reasonably satisfactory to
Seller;
(iv) execute and deliver to Seller or the concerned Seller's Affiliates (as
the case may be) each of the agreements listed in Schedule 9.4; and
(v) deliver to Seller such other certificates and documents as Seller or
its counsel may reasonably request.
12. TERMINATION
This Agreement may only be terminated as follows.
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12.1 Mutual Written Agreement
The parties may by mutual written agreement terminate this Agreement.
12.2 Termination by Buyer
Buyer may, without liability to Seller, terminate this Agreement by notice to
Seller
(i) at any time prior to the Closing if the Seller is responsible for a
material breach of any of Seller's covenants in Sections 7.1, 7.2 and
7.3 and such breach cannot be cured or caused to be cured by Seller at
or prior to the Closing; or
(ii) at the Closing if fulfilment of any of the conditions precedent to the
performance of Buyer's obligations at the Closing shall have become
impossible due to an act or omission by Seller.
12.3 Termination by Seller
Seller may, without liability to Buyer, terminate this Agreement by notice to
Buyer
(i) at any time prior to the Closing if Buyer is responsible for a
material breach of any of Buyer's covenants in Sections 8.1, 8.2 and
8.4 (with respect to Buyer's obligations to be fulfilled or complied
with as of Closing) and such breach cannot be cured or caused to be
cured by Buyer at or prior to the Closing;
(ii) at the Closing if fulfilment of any of the conditions precedent to the
performance of Seller's obligations at the Closing shall have become
impossible due to an act or omission by Buyer.
12.4 Effect of Termination at or prior to Closing or the Absence of Closing
55
If this Agreement is terminated pursuant to this Section 12 or if Closing does
not occur by November 1, 1999, due to a condition precedent that has not been
fulfilled or waived, this Agreement (except for Section 8.1 which will survive
termination indefinitely) shall automatically terminate at the end of the said
date and shall no longer be of any force or effect and there shall be no
liability on the part of any party or its respective directors, officers or
shareholders.
Notwithstanding the foregoing, in the case of termination or absence of Closing
because of a material default or material breach resulting from the negligent or
wilful fault of the other party, the aggrieved party may recover from the
defaulting party the amount of expenses (including costs which the aggrieved
party would otherwise have to bear pursuant to Section 17.1 of this Agreement)
and losses incurred by such aggrieved party in connection with the
non-fulfilment of this Agreement and the transactions contemplated hereby.
If this Agreement shall be terminated or if Closing does not occur, each party
will:
(i) redeliver all documents, work papers and other materials of any other
party relating to the transactions contemplated hereby, whether so
obtained before or after the execution of this Agreement, to the party
furnishing the same; and
(ii) destroy all documents, work papers and other materials developed by
its auditors, agents and employees in connection with the transactions
contemplated hereby which embody proprietary information or trade
secrets furnished by any party hereto or deliver such documents, work
papers and other materials to the party furnishing the same or excise
such information or secrets therefrom.
All information received by any party hereto with respect to the business of any
other party or any of its subsidiaries (other than information which is a matter
of public knowledge or which has heretofore been or is hereafter published in
any publication for public distribution or filed as public information with any
governmental authority), is provided solely for the purpose of consummating the
transaction contemplated herein and shall not at any time be
56
used for any other purpose whatsoever, including but not limited to personal
advantage, and shall not be disclosed by such party to any third person to the
detriment of the party furnishing such information or any of its subsidiaries or
affiliates.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
13.1 Survival of Seller's Representations and Warranties
The Seller's representations and warranties set forth in Section 5 shall survive
for twenty (20) months from the Closing Date, provided, however, that the
Seller's representations and warranties in Sections 5.18 (Environmental), 5.19
(Compliance with laws), 5.26 (Tax) and 5.29 (Products), shall survive until the
applicable statutes of limitations have expired, and that the representations
and warranties in Section 5.4 (Title to Shares) and 5.5 (Ownership of the
Companies and the Ownership Interests) and 5.10 (Title to Properties and Assets;
Encumbrances) shall survive indefinitely.
13.2 Survival of Buyer's Representations and Warranties
The representations and warranties of Buyer set forth in Section 6 shall survive
for twenty (20) months from the Closing Date.
14. INDEMNIFICATION
14.1 Indemnification for claims by Buyer of Seller's Representations and
Warranties
Subject to the limitations set forth in this Section 14 and in Section 15,
Seller shall indemnify and hold Buyer harmless (in all cases as a Purchase Price
reduction) from and against any loss, prejudice, damage, cost (including
additional taxes) and/or expenses (including attorney fees), collectively "Loss"
(in all cases to be calculated as set forth in Section 14.3), suffered or
incurred by Buyer, Holding or any of the Companies (as the case may be) as a
result of, a breach of any of Seller's representations and warranties.
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Notwithstanding anything to the contrary herein, in the event of a claim by
Buyer for indemnification by Seller hereunder, in respect of a matter which in
Seller's reasonable opinion is capable of being cured, Seller shall have the
right, exercisable upon written notice within seven days to Buyer, to cure the
breach of the representation or warranty in question for a period of 30 days,
following the date of notice by Buyer to Seller claiming indemnification with
respect thereto, (or, if the breach cannot reasonably be cured within such 30
days period, the longer period reasonably necessary to cure the breach but in no
event more than 60 days).
For the avoidance of doubt
(i) Buyer shall have no claim for a breach of a representation or warranty
when an exception to such representation or warranty was expressly
made herein or with respect to any breach of any of Seller's
representations or warranties which was based on facts and
circumstances disclosed in the data room materials or in the
additional documentation requested by and supplied to Buyer prior to
the date hereof provided that the Buyer reasonably should have
foreseen the consequences of such disclosed facts and/or circumstances
bearing in mind, inter alia, the limited access to photocopies,
materials and answers to attendant questions.
(ii) Buyer shall have no right to indemnification for a breach of
representation or warranty if and to the extent the amount of the Loss
claimed in respect of such breach was specifically taken into account
when determining the Purchase Price under Section 4.1 hereof or
adjusted for in the Closing Accounts.
14.2 Indemnification for Breach by Buyer of Representations and Warranties
If Buyer breaches or has breached any of Buyer's representations and warranties,
Buyer shall indemnify and hold Seller and Seller's Affiliates harmless from and
against any loss, prejudice, damage, cost (including additional taxes) and/or
expenses (including attorney
58
fees) suffered or incurred as a result of such breach. When calculating such
loss the provisions in Sections 14.3(i) and (ii) shall apply (mutatis mutandis).
14.3 Calculation of Loss etc.
In calculating the amount of Loss according to Section 14.1, there shall be
deducted
(i) the amount of any indemnification or other recovery (including without
limitation insurance proceeds) actually paid to and received on an
after-tax basis by any of the companies in the Group from any third
party with respect to such Loss;
(ii) 100 per cent of the tax benefit, if any, actually realized by any of
the companies in the Group, as a result thereof. In case tax benefits
are realized subsequent to Seller's payment of compensation for a Loss
(which has not been reduced for such tax benefit) the tax benefit
shall promptly be reimbursed to Seller by Buyer as soon as the tax
benefit has been actually realized; and
(iv) any amount which has been or will be compensated for by way of
adjustment of the Purchase Price or in any other manner whatsoever.
Further, goodwill not included in the calculation of the Purchase Price, shall
be disregarded when calculating a Loss and in no event shall a loss relating to
an asset exceed its fair market value.
In the event of double recovery from Seller and from a third party (including
insurers), Buyer shall promptly reimburse Seller the net amount of such double
recovery.
14.4 Limitation on Seller's Indemnification Obligations
14.4.1 General
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Seller shall be obligated to provide indemnification for breach of
representations and warranties pursuant to Sections 14.1 when (i) the individual
breach has caused a Loss exceeding SEK 200,000; and (ii) to the extent the
aggregate amount of all Losses (but for this Section 14.4.1) have exceeded SEK 5
million and Seller's obligation to provide indemnification shall be limited to
the excess amount (and, consequently, such SEK 5 million shall constitute a
deductible and not a threshold, and SEK 200,000 shall constitute a threshold and
not a deductible).
The limitation set forth in this Section 14.4.1 shall not apply with respect to
Seller's representations and warranties contained in Sections 5.1, 5.2, 5.3,
5.4, 5.5, 5.10 and 5.26.
14.4.2 Products
In case of a recall, replacement or repair of products sold prior to the Closing
Date constituting a breach of Seller's representations and warranties in Section
5.29 (Products), Seller's liability to indemnify the Buyer or the concerned
company or companies in the Group shall in all cases be limited to the actual
variable costs for such recall, replacement or repair plus any fines, fees or
penalties which may be imposed as a result thereof. For the avoidance of doubt,
the provisions in Section 14.4.1 shall not apply to such indemnification.
Seller's liability to provide indemnification as a result of a breach of
Seller's representation and warranties in Section 5.29 (Products), shall in all
cases be conditioned upon Buyer's compliance with the provisions in Section 8.7
(Handling of recalls, replacements and repairs).
14.4.3 Environmental matters
The limitations set forth in Section 14.4.1 shall not apply to any Buyer's claim
for indemnification relating to environmental matters.
60
Instead, with respect to any Buyer's claims relating to environmental matters,
Seller and Buyer shall carry any Losses in accordance with the following
schedule:
Seller Buyer
up to SEK 10,000,000 100% 0%
SEK 10,000,001 - 20,000,000 80% 20%
SEK 20,000,001 - 30,000,000 60% 40%
SEK 30,000,001 - 200,000,000 50% 50%
SEK 200,000,001 and above 100% 0%
14.5 Procedure for Indemnification Claims
The respective indemnification obligations of Seller and Buyer pursuant to
Sections 14.1 and 14.2 shall be conditioned upon compliance by Buyer and Seller
respectively with the following procedures for indemnification claims.
(i) All claims for indemnification must be made in writing and must be
based on facts or circumstances which have occurred and are discovered
prior to the expiration of the respective representations and
warranties set forth herein as provided in Sections 13.1 and 13.2
hereof, respectively.
(ii) All claims for indemnification shall be notified without undue delay
to the other party and in no case later than three (3) months after
the claiming party became aware of the breach in question, specifying
in reasonable detail the claim and the alleged breach of the
representation or warranty in question, including all facts and
circumstances on which such alleged breach is based.
(iii) In the event any third party asserts any claim with respect to any
matter for which Buyer shall have the right to seek indemnification
hereunder, Buyer shall without undue delay give notice to Seller, and
Seller shall have the right at its election to control the defense of
such third-party claim at its own expense by giving notice to
61
Buyer. Buyer shall have the right at its choice and cost also to
participate in the defense. If Seller elects to control the defense,
it will so do acting in good faith and taking into consideration the
reasonable interests of each of Holding and the Companies. Buyer
undertakes to provide Seller all reasonable assistance and to provide
to Seller, free of charge, all material and information in its
possession or otherwise available to Buyer which is required or
desired to efficiently conduct the defence of such third party claim.
Further, Buyer undertakes that it shall not settle any such third
party claim without Seller's consent. In all events, the parties shall
cooperate in defending against any asserted third-party claims, and
the defending party shall keep the other duly and reasonably informed
during the defense of such claims. Notwithstanding the foregoing, if
there is a reasonable probability that a claim may materially and
adversely affect the indemnified party other than as a result of money
damages or other money payments, the indemnified party shall have the
right to defend, compromise or settle such claim. The indemnifying
party shall not, without the written consent of the indemnified party,
settle or compromise any claim or consent to the entry of any judgment
which does not include as an unconditional term thereof, the claimant
or the plaintiff giving to the indemnified party a release from all
liability in respect of such claim.
14.6 Sole and Exclusive Remedy
The indemnification obligations of Seller and Buyer under this Section 14 shall
constitute the sole and exclusive remedies available for Buyer and Seller with
respect to any breach of any representation or warranty contained in this
Agreement and it is agreed that no remedy under the Swedish Sale of Goods Act
(1990:931), the International Sale of Goods Act (1987:822) or any other statute
or legal principle shall be available, except to the extent expressly provided
for in this Agreement.
15. LIMITATIONS OF PRICE ADJUSTMENT AND SELLER'S INDEMNIFICATION
OBLIGATIONS
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Notwithstanding anything to the contrary herein, the total aggregate maximum
amount of (a) the Price Adjustment in favour of Buyer pursuant to the provisions
in Section 4.3 and (b) the Seller's obligation to indemnify Buyer for breaches
of Seller's representations and warranties pursuant to the provisions in Section
14, shall in all cases be limited to an amount equal to 22% per cent of the
Purchase Price as calculated in Section 4.1 hereof.
16. FURTHER UNDERTAKINGS BY THE PARTIES
16.1 The Sandvik name and trade xxxx
Xxxxxxx is the sole and exclusive owner of all rights in and to the Sandvik
name, the Sandvik trademark and the Sandvik logo.
Neither the Buyer or any of its affiliated companies, nor Holding or any Company
has by virtue of this Agreement or otherwise maintained, acquired or been
granted any right to use or continue to use the name Sandvik or the Sandvik
trade xxxx or the Sandvik logo in any manner whatsoever (except as provided for
in the License Agreement contemplated in Section 16.2 and upon the terms set
forth therein).
Prior to Closing, Seller will procure that Holding and each of the Companies
having the name "Sandvik" or similar expressions in its corporate name, resolve
to change its corporate name to exclude the name "Sandvik" or similar
expressions.
Following Closing, Buyer shall (if and to the extent not previously effected by
Seller) procure all such resolutions to be properly recorded, registered or
otherwise effected without undue delay and Buyer shall cause each of the
Companies concerned to cease to use the name "Sandvik" (except as permitted in
the License Agreement).
Pursuant to the terms of the License Agreement contemplated in Section 16.2,
certain of the Companies will be granted a limited, personal, non-exclusive,
non-assignable and non-transferrable right and licence to use the Sandvik trade
xxxx and the Sandvik logo (as
63
defined in the License Agreement). Buyer undertakes not to use and shall cause
its affiliates not to use the Sandvik trade name and logo except in each case as
permitted pursuant to the terms of the License Agreement.
For the avoidance of doubt, the application of any other remedy as a result of a
breach of the undertakings by Buyer hereunder, shall not be construed as
consideration for a right to use the Sandvik name, the Sandvik trade names, the
Sandvik trade marks or the Sandvik logo and shall in no case give Buyer, Holding
or any of the Companies any right whatsoever in and to the Sandvik name, the
Sandvik trade names, the Sandvik trade marks or the Sandvik logo.
16.2 Execution of License Agreement
Prior to Closing, Seller shall cause each of the Companies set forth on Schedule
16.2 to execute and deliver a license agreement with Sandvik (in the form of the
draft agreement attached to the said Schedule) whereby said Companies, effective
as of Closing and upon Buyer's execution thereof (as provided for herein), are
granted a limited, personal, non-transferable and non-exclusive right to use
Sandvik's trade xxxx and logo, all upon the terms set forth in such agreement.
On the Closing, also Buyer shall execute and deliver to Sandvik such license
agreement.
16.3 Related Arrangements
Seller shall as soon as reasonably possible following the execution and delivery
of this Agreement identify and present to Buyer a list of agreements or other
arrangements with third parties to which Seller or Seller's Affiliates are
parties or otherwise bound but which, in whole or in part, exclusively relate to
the Business. Buyer shall without undue delay identify those of the listed
agreements or other arrangements which Buyer wants to be transferred to Buyer or
the concerned companies in the Group (collectively "Related Arrangements").
Subject to any necessary third party consent being obtained, the Related
Arrangements shall be transferred (in whole or in relevant parts) from Seller or
Seller's
36
Affiliates to Holding or the concerned Companies (as the case may be) to the
effect that Seller and Seller's Affiliates are released from any and all rights
and obligations under the Related Arrangements and all such rights and
obligations are assumed by Holding or the concerned Companies.
The Seller shall use its reasonable best efforts to obtain the necessary third
party consents required to effectuate the transfer of Related Arrangements as
contemplated herein and Buyer shall itself and shall (subsequent to Closing)
cause Holding or the concerned Companies to give Seller all reasonable
assistance in obtaining such consents.
Notwithstanding anything to the contrary in this Agreement, this Agreement shall
not constitute an agreement to assign or transfer any Related Arrangement or an
attempt to make such an assignment or transfer without the consent of a third
party, which would constitute a breach or violation thereof or affect adversely
the rights of a party thereunder; and any transfer or assignment of any Related
Arrangement that requires the consent of a third party shall be made subject to
such consent or approval being obtained. In the event any such consent or
approval is not obtained on or prior to Closing, Seller shall continue to use
all reasonable efforts to obtain any such approval or consent after the Closing
until such time as such consent or approval has been obtained, and Seller will
cooperate with Buyer and the concerned companies in the Group in any lawful and
economically feasible arrangement to provide that the concerned companies in the
Group shall receive the interest of Seller or Seller's Affiliates (as the case
may be) in the benefits under any such Related Arrangement, including
performance by Seller or Seller's Affiliates (as the case may be) as agent, if
economically feasible, provided that the Buyer shall undertake to pay or satisfy
or cause the concerned company or companies in the Group to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent the
Buyer or the concerned companies in the Group would have been responsible
therefor hereunder if such consent or approval had been obtained.
16.4 Matters relating to the Ownership Interests
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16.4.1 Deville
All agreements relating to the Ownership Interests in Deville are attached as
Schedule 16.4.1 hereto.
16.4.2 Uirlis
With respect to Uirlis it is recognized and agreed that (a) pursuant to the
Shareholders' Agreement with the majority shareholders Holding will (following
the transfer of the Ownership Interests - direct or indirect - to it) have a
right to acquire additional shares in Uirlis from the present majority
shareholders, and thereby becoming the majority shareholder, and that (b) Uirlis
has made a major recall of certain of the products manufactured and distributed
by it and a financial restructuring of the company has been made. All agreements
relating to the Ownership Interests in Uirlis are attached as Schedule 16.4.2.
16.5 Publicity
It is acknowledged and agreed that the respective parties pursuant to applicable
laws or rules of securities exchanges may be required to make public
announcements or statements with respect to the transactions contemplated
herein. Prior to making any public announcement or statement relating to the
transaction contemplated herein, each of the parties agree to consult with the
other party with respect to the detailed content of any such announcement or
statement, and, further, to the greatest extent permitted under applicable laws,
rules and regulations, take any comments made or views expressed by the other
party into due and careful consideration when making any public announcement or
statement.
16.6 Disclaimer of liability; indemnification
Seller and Seller's Affiliates have caused the Business to be reorganized into
the Companies within the Group. The Buyer acknowledges and agrees that all
transfers, transactions and
66
other arrangements effected or made in order to reorganize the Business in the
Group have been based on the principles "as is" and "where is" and in accordance
with the general practice applied with respect to reorganizations within the
Sandvik Group and that no representations and warranties, expressed or implied,
are given with respect to any transfer, transaction or other arrangement
relating to the Reorganization, except for the representations and warranties in
Section 5 hereof. Consequently, all other warranties, conditions,
representations or guarantees, expressed or implied, arising by law, custom,
oral or written statements (including but not limited to any warranty for
merchantability or fitness for a particular purpose) by Seller or Seller's
Affiliates to Buyer or any of the Companies in the Group related to the
Reorganization are hereby irrevocably superseded, excluded and disclaimed.
For the avoidance of doubt, the provisions in this Section 16.6 shall not limit
the Seller's liability under the representations and warranties, covenants and
other obligations under this Agreement (including Section 2, Schedule 2 and
Section 7.2(i)).
Buyer hereby undertakes to indemnify and hold Seller and Seller's Affiliates
harmless from any and all claims made by the Companies in the Group relating to
the Reorganization. For the avoidance of doubt, Buyer's obligation to provide
indemnification, shall not apply to the representations given by Seller to Buyer
in Section 5 in this Agreement.
16.7 Special Indemnification
For the avoidance of doubt, the undertakings of the respective parties set forth
in this Section 16 shall not be subject to any limitation of liability provided
for in this Agreement. Instead, in case of a breach of any obligation set forth
in this Section 16, any and all remedies available under applicable law shall
apply, provided, however, that a breach of any obligation set forth in this
Section 16 shall in no event give a party the right to cancel or terminate this
Agreement.
17. MISCELLANEOUS
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17.1 Expenses
Whether or not the Closing is consummated, except as otherwise provided in
Section 12.4, each of the parties will pay all of its own legal and accounting
fees and other expenses incurred in the preparation of this Agreement and the
performance of the terms and provisions of this Agreement.
17.2 Waiver
The parties hereto may by written agreement (i) extend the time for or waive or
modify the performance of any of the obligations or other acts of the parties
hereto or (ii) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement
17.3 Notices
All notices, requests or other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered or sent by certified mail
postage prepaid or by facsimile with confirmation by certified mail postage
prepaid, addressed as follows:
If to Seller to:
CTT Cutting Tools B.V.
c/o Sandvik AB
SE-811 00 Xxxxxxxxx
Xxx: Xxx Xxxxxxxxx xx Xxxxxxx XX
fax: +46 (26) 26 10 22
68
If to Buyer to:
Snap-On Incorporated
Lake View office
00000 Xxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxxx 00000
XXX
Attention: General Counsel
fax: x0 (000) 000-0000
With a copy to:
Xxxx X. Xxxx
Xxxxx & Xxxxxxx
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
XXX
fax: x0 (000) 000-0000
or to such other address as may have been furnished in writing to the party
giving the notice by the party to whom notice is to be given. Any notice,
request or other communication hereunder shall be deemed to be received (i) if
made by registered mail, postage prepaid and return receipt requested, on the
date of receipt thereof; and (ii) if made by facsimile, on the date of receipt
of such facsimile as evidenced by the receipt issued by the sender's fax
machine, unless the sender failed to send a confirmation and copy of such
notice, request or other communication by registered mail, postage prepaid and
return receipt requested no later than the Business Day next succeeding the date
on which such facsimile has been sent, in which case such notice, request or
other communication shall be deemed to be received on the date of the receipt
thereof by registered mail, postage prepaid and return receipt requested.
17.4 Entire Agreement
This Agreement embodies the entire agreement among the parties with respect to
the subject matter hereof and there have been and are no agreements,
representations or
69
warranties, oral or written among the parties other than those set forth or
provided for in this Agreement. This Agreement may not be modified or changed,
in whole or in part, except by a supplemental agreement signed by each of the
parties.
17.5 Parties in Interest; Nonassignability
This Agreement shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns, but shall not be assignable by any
party without the prior written consent of the other parties. Nothing contained
in this Agreement is intended to confer upon any person, other than the parties
to this Agreement and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
17.6 Governing Law
This Agreement shall be governed by and construed in accordance with the
substantive laws of Sweden without giving effect to the choice of law principles
thereof which would result in the application of the laws of another
jurisdiction.
17.7 Arbitration
Any dispute, controversy or claim arising out of or in connection with this
Agreement, or the breach, termination or invalidity hereof, that the parties are
unable to resolve between themselves, shall be finally settled by arbitration in
accordance with the rules of the Arbitration Institute of the Stockholm Chamber
of Commerce.
The place of arbitration shall be Stockholm and the language to be used in the
arbitral proceedings shall be English.
The arbitration proceedings shall be confidential and the arbitral tribunal
shall issue appropriate protective orders to safeguard each party's confidential
information. Except as required by law, no party shall make (or instruct the
arbitral tribunal to make) any public
70
announcement with respect to the proceedings or decision of the arbitral
tribunal without the prior written consent of each other party. The existence of
any dispute submitted to arbitration, and the award of the arbitral tribunal,
shall be kept in confidence by the parties and the arbitral tribunal, except as
required in connection with the enforcement of such award or as otherwise
required by applicable law.
Either party may, notwithstanding this Agreement, seek from any judicial
authority pre-award interim, provisional or conservatory relief that may be
necessary to protect the rights of that party pending the arbitral tribunal's
determination of the merits of the controversy, as well as an order compelling
arbitration or enforcing any arbitral award. Seller agrees, for itself and on
behalf of Seller's Affiliates, that the provisions and restrictions contained in
Sections 7.7, 7.8 and 7.9 are necessary to protect the legitimate continuing
interests of Buyer in acquiring the Shares, and that any violation or breach of
these provisions will result in irreparable injury to Buyer for which a remedy
at law would be inadequate and that, in addition to any relief at law which may
be available to Buyer for such violation or breach and regardless of any other
provisions contained in this Agreement, Buyer shall be entitled to such
injunctive and other equitable relief as a court may grant.
17.8 Headings; References to Sections and Schedules
The headings of the Sections, paragraphs and subparagraphs of this Agreement are
solely for convenience and reference and shall not limit or otherwise affect the
meaning of any of the terms or provisions of this Agreement. The Schedules of
disclosures provided for in this Agreement are numbered for convenience purposes
only to coincide with the numbering of the Sections. It is therefore agreed that
a disclosure for one Section is a disclosure for all Sections herein. All
references to Sections and Schedules, unless otherwise indicated, are references
to Sections and Schedules of this Agreement.
17.9 Further Assurances
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From time to time, at Buyer's request and without further consideration, Seller
and Seller's Affiliates will execute and deliver to Buyer such documents and
take such other action as Buyer may reasonably request in order to consummate
more effectively the transactions contemplated hereby or the Reorganization as
described in Section 2 hereof.
Seller shall or shall cause the concerned Seller's Affiliates to allow Buyer to
exercise a right of first refusal before transferring the ownership interests in
the Bisov joint venture in Belorussia to a party outside Sandvik group of
companies.
With respect to pension liabilities of the companies in the Group covered by
PRI/FPG insurance, the following shall apply. The Seller and/or Seller's
Affiliates (as the case may be) shall as soon as practically possible subsequent
to closing be released from any guarantee or similar undertaking securing or
otherwise arranged in support of such insurance and Buyer shall simultaneously
use its reasonably best efforts to obtain a corresponding PRI/FPG insurance to
cover such pension liabilities and to provide in support of such insurance
guarantees or similar support substantially equivalent to the arrangements
existing immediately prior to Closing. In the event Buyer shall fail to make
such arrangements on terms in all material respects similar to the arrangements
existing immediately prior to Closing, Seller shall, as agreed between Seller
and Buyer, or failing such agreement, at Buyer's option, either (a) provide
guarantees or similar arrangements sufficient to allow Buyer to obtain such
PRI/FPG insurance, in which case Buyer shall issue an appropriate back-up
corporate guarantee to Seller or (b) assume the pension liabilities from the
companies in the Group covered by the existing PRI/FPG insurance, in which case
Buyer and/or the concerned companies in the Group shall pay to Seller or the
concerned Seller's Affiliates an amount equal to the amount of the pension
liability assumed, provided, however, that on or after the third anniversary of
Closing, Seller shall in all events have the right to apply alternative (b)
above. Moreover, in the event alternative (a) above is applied and if Buyer's
credit rating is reduced below investment grade rated, triple B, then Buyer
shall upon Seller's request provide additional back-up security, reasonably
acceptable to Seller.
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18. ENTERING INTO FORCE
This Agreement shall enter into force and effect and become legally valid,
binding upon and enforceable against the parties hereto upon:
(i) the due execution and delivery thereof by each of Seller and Buyer;
and
(ii) the approval of this Agreement by the Boards of Directors of Seller
and Buyer, respectively.
---------------------
73
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
CTT CUTTING TOOL TECHNO- SNAP-ON INCORPORATED
LOGY B.V.
/s/ Xxxxxxx Falkland /s/ Xxxxxx X. Xxxxxx
-------------------------- --------------------------
By: Xxxxxxx Falkland By: Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxx
--------------------------
By: Xxxxxx X. Xxxxx
Acknowledged, accepted and agreed
on the Closing Date with respect to
Section 16.6.
SB HOLDING B.V.
/s/ Xxxxxxx Falkland
--------------------------
By: Xxxxxxx Falkland
/s/ Xxxxxx X. Xxxxx
--------------------------
By: Xxxxxx X. Xxxxx
73.a.
Undertaking and Guarantee
This undertaking and guarantee is made on this 16th day of April, 1999, by
Sandvik AB ("Sandvik"), a Swedish public company, in favour of Snap-On
Incorporated ("Buyer"), a company incorporated and existing under the laws of
the State of Delaware, USA.
WHEREAS, Sandvik is the ultimate parent in the Sandvik group of companies;
WHEREAS, CTT Cutting Tool Technology B.V. ("Seller"), a Dutch company and a
subsidiary of Sandvik, and Buyer on the date hereof have entered into a Share
Purchase Agreement (the "SPA") whereby Buyer will acquire all the shares in
Holding (as defined in the SPA), a Dutch company and the parent company in the
Group (as defined in the SPA); and
WHEREAS, Buyer has requested Sandvik to stand behind Seller's obligations and
undertakings under the SPA and Sandvik is willing to do so.
NOW THEREFORE, Sandvik makes the following representations, undertaking and
guarantee in favour of the Buyer.
1. Representations and warranties by Sandvik
1.1 Power and Authority of Sandvik
Sandvik is and will on the Closing Date (as defined in the SPA) be a corporation
duly organized and validly existing under the laws of Sweden. Assuming the
adoption of the appropriate resolution(s) satisfying Seller's condition
precedent set forth in Section 9.1 in the SPA, Sandvik has the corporate power
and authority to make, execute, deliver and perform this Undertaking and
Guarantee, and this Undertaking and Guarantee has been duly authorized and
approved by all required corporate action of Sandvik and will constitute a
legal, valid and binding obligation of Sandvik enforceable against Sandvik in
accordance with its terms.
1.2 No Violation of Laws and Regulations
Assuming that Seller's condition precedent set forth in Sections 9.1 and 9.3 in
the SPA are fulfilled, the execution and delivery of this Undertaking and
Guarantee by Sandvik and the consummation of the transactions contemplated
hereby and by the SPA:
(i) will not violate any provision of the Articles of Association of
Sandvik;
(ii) will not violate any statute, rule, regulation, order or decree of any
public body or authority by which Sandvik or any of its properties or
assets is bound; and
(iii) will not result in a violation or breach of, constitute a default
under, or give rise to a right of termination, modification or
acceleration of the performance required by any licence, permit,
agreement or other instrument to which Sandvik is a party or otherwise
is bound or by which any of its properties or assets are bound,
excluding from the foregoing clauses (ii) and (iii) violations, breaches or
defaults, which, either individually or in the aggregate, would not prevent
Sandvik from performing promptly and fully its obligations under this
Undertaking and Guarantee.
2. UNDERTAKING
Sandvik hereby agrees on behalf of itself and on behalf of Seller's Affiliates
(as defined in the SPA) to see to it that Seller and the Seller's Affiliates
(including Sandvik) will comply with the provisions in Section 2, 7 and 17.9 in
the SPA.
3. GUARANTEE
Sandvik hereby guarantees to Buyer the performance of all of Seller's
undertakings and obligations under all other provisions of the SPA than those
referred to in Section 2 above as if such undertakings and obligations were made
directly by Sandvik itself (i.e. as for its own debt (Sw. sasom for egen skuld).
4. TERM
The undertaking made pursuant to Section 2 herein shall remain valid until
fulfilled, or if earlier, the SPA or the relevant provision thereof has been
terminated in accordance with its terms.
The guarantee made in Section 3 herein shall remain valid until 20 months from
the Closing Date (as defined in the SPA), provided, however, that with respect
to Seller's representations and warranties regarding environmental, compliance
with laws, tax and products set forth in Sections 5.18, 5.19, 5.26 and 5.29 in
the SPA, this Guarantee shall remain valid until the applicable statutes of
limitations have expired and with respect to representations and warranties
regarding title to Shares, Ownership of the Companies and the Ownership
Interests and Title to Properties and Assets; Encumbrances in Sections 5.4, 5.5
and 5.10 shall survive indefinitely.
The provisions in Section 14.5 in the SPA, shall apply mutatis mutandis to any
claim or claims made under the guarantee made in Section 3 herein.
5. ENTERING INTO FORCE AND EFFECT
This undertaking and guarantee shall become binding and effective if and when
the SPA becomes binding and effective pursuant to the provisions in Section 18.
in the SPA.
6. ARBITRATION
The arbitration agreement in Section 17.7 in the SPA shall cover also any
dispute, controversy or claim arising out of or in connection with this
Undertaking and Guarantee, provided, however, that in the event of arbitration
proceedings involving both Seller and Sandvik, Seller and Sandvik shall jointly
appoint one arbitrator.
* * *
This Undertaking and Guarantee is executed on the day first written above in two
originals of which Sandvik AB and Buyer has taken one each.
SANDVIK AB; (publ)
/s/ Clas Xxx Xxxxxxxx /s/ Leif Sunnermalm
----------------------- --------------------
Clas Ake Xxxxxxxx Xxxx Sunnermalm
The receipt and acceptance
of this guarantee is hereby
acknowledged as of the date
first written above.
SNAP-ON INCORPORATED
/s/ Xxxxxx X. Xxxxxx
--------------------------
By: Xxxxxx X. Xxxxxx
Accepted and agreed with respect to the provisions in Section 4 herein on the
date first written above.
CTT CUTTING TOOL
TECHNOLOGY B.V.
/s/ Xxxxxxx Falkland
--------------------------
By: Xxxxxxx Falkland
/s/ Xxxxxx X. Xxxxx
--------------------------
By: Xxxxxx X. Xxxxx
