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EXHIBIT 2.1
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PURCHASE AGREEMENT
between
DATRON INC.,
AND
SL INDUSTRIES VERTRIEB, GmbH
As of June 30, 1998
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS.......................................................1
ARTICLE II SALE AND TRANSFER OF OWNERSHIP INTEREST; CLOSING.................4
2.1 OWNERSHIP INTEREST TO BE SOLD....................................4
2.2 PURCHASE PRICE; PAYMENT OF PURCHASE PRICE........................4
2.3 CALCULATION OF OPERATING PROFIT..................................4
ARTICLE III THE CLOSING.....................................................7
3.1 TIME AND PLACE; SIMULTANEOUS SIGNING AND CLOSING.................7
3.2 DEED OF ASSIGNMENT...............................................7
3.3 DELIVERIES BY DATRON AND EME.....................................7
3.4 DELIVERIES BY SL.................................................8
ARTICLE IV [THIS ARTICLE INTENTIONALLY OMITTED].............................8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF DATRON..........................8
5.1 TITLE TO THE OWNERSHIP INTEREST..................................8
5.2 AUTHORIZATIONS: VALID AND BINDING AGREEMENT......................9
5.3 ORGANIZATION AND GOOD STANDING...................................9
5.4 CAPITALIZATION...................................................9
5.5 SUBSIDIARIES AND PARTNERSHIPS....................................9
5.6 NO VIOLATION....................................................10
5.7 FINANCIAL STATEMENTS............................................10
5.8 BOOK AND RECORDS................................................10
5.9 CERTAIN LIABILITIES.............................................10
5.10 NO LIABILITIES..................................................11
5.11 ABSENCE OF CERTAIN CHANGES......................................11
5.12 TITLE TO PROPERTIES, ENCUMBRANCES...............................12
5.13 DESCRIPTION OF ASSETS...........................................12
5.14 INVENTORY.......................................................12
5.15 ACCOUNTS RECEIVABLE.............................................13
5.16 ACCOUNTS PAYABLE................................................13
5.17 INTELLECTUAL PROPERTY...........................................13
5.18 LEASES..........................................................14
5.19 TAXES...........................................................14
5.20 LITIGATION......................................................15
5.21 EMPLOYMENT AND LABOR MATTERS....................................15
5.22 CONTRACTS AND COMMITMENTS.......................................15
5.23 BANK ACCOUNTS...................................................16
5.24 COMPLIANCE WITH APPLICABLE LAW..................................16
5.25 CONSENTS AND APPROVALS; GOVERNMENTAL AUTHORIZATIONS.............16
5.26 NO CONDEMNATION.................................................17
5.27 CONDUCT OF THE BUSINESS AFTER NOVEMBER 30, 1997.................17
5.28 INSURANCE.......................................................17
5.29 ENVIRONMENTAL MATTERS...........................................18
5.30 CERTAIN PAYMENTS................................................20
5.31 BROKERS OR FINDERS..............................................20
5.32 DISCLOSURE......................................................20
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SL............................20
6.1 ORGANIZATION AND GOOD STANDING..................................21
6.2 AUTHORIZATION...................................................21
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6.3 INVESTMENT REPRESENTATION.......................................21
6.4 LITIGATION......................................................21
6.5 BROKERS OR FINDERS..............................................21
ARTICLE VII OTHER OBLIGATIONS OF THE PARTIES...............................22
7.1 NO IMPLIED REPRESENTATIONS......................................22
7.2 TRANSITION COOPERATION..........................................22
7.3 SECTION 338 ELECTION............................................22
7.4 SOLICITATION OF INVESTIGATIONS BY GOVERNMENTAL BODIES...........22
7.5 TAX RETURNS.....................................................22
ARTICLE VIII THIS ARTICLE IS INTENTIONALLY OMITTED.........................23
ARTICLE IX THIS ARTICLE IS INTENTIONALLY OMITTED...........................23
ARTICLE X SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.....................23
10.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS; DEFINITIONS..........23
10.2 AGREEMENT BY DATRON TO INDEMNIFY................................23
10.3 AGREEMENT BY SL TO INDEMNIFY....................................24
10.4 DEFENSE OF CLAIMS...............................................24
10.5 CONDITIONS OF INDEMNIFICATION...................................25
ARTICLE XI THIS ARTICLE IS INTENTIONALLY OMITTED...........................26
ARTICLE XII MISCELLANEOUS..................................................26
12.1 EXPENSES........................................................26
12.2 FURTHER ASSURANCES..............................................27
12.3 PARTIES IN INTEREST.............................................27
12.4 ENTIRE AGREEMENT; AGREEMENT GOVERNS; AMENDMENTS................27
12.5 SEVERABILITY....................................................27
12.6 ARTICLE AND SECTION HEADINGS; CONSTRUCTION......................27
12.7 NOTICES.........................................................28
12.8 GOVERNING LAW...................................................28
12.9 PUBLIC DISCLOSURE...............................................29
12.10 COUNTERPARTS....................................................29
12.11 GOOD FAITH......................................................29
12.12 FACSIMILE EXECUTION.............................................29
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DATRON, INC./SL INDUSTRIES INC./SL INDUSTRIES VERTRIEB, GMBH
INDEX OF EXHIBITS AND DISCLOSURE SCHEDULE
Exhibit 2.3 Certain Intercompany Expenses allocated by SL and Datron to
EME and not added to Net Profit
Exhibit 3.2 Form of Deed of Assignment
Disclosure Schedule
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Section 3.3(b) Amounts Due from EME to Datron
Section 5.2 Consents of EME
Section 5.4 Capitalization
Section 5.5 Subsidiaries, Partnerships and Cooperative Arrangements
Section 5.6 Exceptions to "No Violation" Representation
Section 5.7 Certain Inventory
Section 5.11 Absence of Changes
Section 5.12 Title Exceptions and Encumbrances
Section 5.13 Fixed Assets
Section 5.15 Accounts Receivable
Section 5.16 Accounts Payable
Section 5.17 Intellectual Property
Section 5.18 Leases
Section 5.20 Litigation
Section 5.21 Employment Matters
Section 5.22 Contracts and Commitments
Section 5.23 Bank Accounts
Section 5.25 Consents, Approvals and Governmental Authorizations
Section 5.27 Payments to Datron
Section 5.28 Insurance
Section 5.28(c) Insurance Claims and Loss Experiences
Section 5.28(d) Exceptions to Effectiveness of Policies
Section 5.29 Environmental Matters
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EXECUTION COPY
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT ("Agreement") dated as of June 30, 1998
between Datron Inc., a Delaware corporation with corporate offices at 0000 X.
Xxxxxxxxx Xxxxx, Xxxxxxx, XX 00000 ("Datron"), and SL Industries Vertrieb, GmbH
("SL"), a limited liability company organized under the laws of the Federal
Republic of Germany and an Affiliate of SL Industries, Inc., a New Jersey
corporation with corporate offices at 000 Xxxxxxxxxx Xxxx, Xxxxx X-000, Xx.
Xxxxxx, XX 00000 ("SL Industries").
RECITALS
Datron desires to sell, and SL desires to purchase, all of Datron's
right, title, and interest in the Shares of Elektro-Metall Export GmbH
(hereinafter "EME"), a company with limited liability (Gesellschaft mit
beschrankter Haftung) organized under the laws of the Federal Republic of
Germany, registered under the No. HRB 201 in the commercial register of the
local court of Ingolstadt and having its seat in Ingolstadt, with corporate
offices at Xxxxxxxxxx Xxxxxxx 000, 00000 Xxxxxxxxxx, Xxxxxxx, for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
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For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"Affiliate" means any Person controlling, controlled by or under common
control with such Person.
A "breach" of a representation, warranty, covenant, or other provision of
this Agreement or any instrument delivered pursuant to this Agreement will be
deemed to have occurred if there is or has been (a) any inaccuracy in or breach
of, or any failure to perform or comply with, such representation, warranty,
covenant or other provision, or (b) any claim (by any Person) or other
occurrence or circumstance that is or was inconsistent with such representation,
warranty, covenant or other provision, and the term "breach" means any such
inaccuracy, breach, failure, claim, occurrence, or circumstance.
"Building" means the structure on the real property owned by EME located
in Ingolstadt, Germany.
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"Closing" is defined in Section 3.1.
"Closing Date" means the date as of which the Closing actually
takes place.
"Commercially Reasonable Efforts" means efforts that a reasonable
businessman desirous of achieving a result would use in similar circumstances to
ensure that such result is achieved as expeditiously as reasonably possible;
provided, however, that an obligation to use Commercially Reasonable Efforts
under this Agreement does not require the Person subject to that obligation to
take actions that would result in a materially adverse change in the benefits to
such Person of this Agreement and the contemplated Transaction.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Disclosure Schedule" means the schedule referred to in this
Agreement.
"EME Facility" is defined in Section 5.12.
"Encumbrance" means any charge, claim, community property interest,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on title, use,
voting, transfer, receipt of income, third party usufructs (Nissbrauchrechte),
or exercise of any other attribute of ownership.
"Financial Statements" means the balance sheets of EME at December 31,
1997 and March 31, 1998 and related statements of income and cash flow for the
one year period and the three month period then ended prepared by Datron.
"GAAP" means generally accepted United States accounting
principles.
"Governmental Authorization" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" means any:
(i) nation, state, county, city, town, village, district, or
other governmental jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign, or other
government;
(iii) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official,
or entity and any court or other tribunal);
(iv) governmental or quasi-governmental multi-national
organization or body; or
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(v) body authorized by any of the foregoing Persons to
exercise any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of such Persons.
"Intellectual Property Assets" is defined in Section 5.17.
"Knowledge of Datron" or "Datron's Knowledge" means (x) the actual
knowledge of Xxx X. Xxxxx, Xxxxxx X. Xxxxxx, and Xxxxxxx X. Xxxx; and (y) the
actual knowledge of, and knowledge that should have been obtained by Xxxxx X.
Xxxxxx, Xxxxx Xxxxx, and Xxxx-Xxxx Xxxxx in the performance of duties required
by their respective positions at EME.
"Knowledge of SL" or "SL's Knowledge" means the actual knowledge of Xxxxx
X. Xxxxxx, Xxxx Xxxxxx and Xxxxx Xxxxx and the knowledge they should have
obtained in the performance of duties required by their respective positions at
SL Industries or SL.
"Legal Requirement" means any federal, state, local, international,
multinational, law or regulation or ruling with the force of law of a
Governmental Body.
"Material Adverse Effect" means any material adverse effect on the
business, operations, results of operations, condition (financial or other),
assets or liabilities of EME.
"Operational Change" means a change made after the Closing Date (x) to
enter into or to drop a line of business of EME or (y) to pursue sales of new
products which are not currently in EME's product lines or not currently being
developed by EME or (z) to pursue sales in new geographical markets in which EME
does not currently pursue sales.
"Ordinary Course of Business" means an action taken by EME (x) which is
consistent with the past practices of EME and is taken in the ordinary course of
operations of EME or, if no such past practices exist, then only taken in the
ordinary course of operations of EME, and (y) where there is no Legal
Requirement or a requirement of the articles of association of EME or a
resolution of the shareholders of EME that such action be authorized by the
shareholders of EME (or by any Person or group of Persons exercising similar
authority).
"Ownership Interest" is defined in Section 2.1.
"Permitted Encumbrances" means Encumbrances listed or described in the
Disclosure Schedule, mechanics', carriers', workmen's or other like Encumbrances
arising in the ordinary course of business and Encumbrances for taxes,
assessments and other charges of a Governmental Body which may be thereafter
paid without penalty.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
including a Governmental Body.
"Shares" means all shares in EME, currently representing paid-in capital
of DM 3,000,000.
"Trade Secrets" is defined in Section 5.17.
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"Transactions" means the purchase of the Ownership Interest, the execution
and delivery of this Agreement and all documents and instruments required by
this Agreement and the performance and fulfillment of all acts, conditions,
obligations and responsibilities required by this Agreement to be performed and
fulfilled by a party hereto.
ARTICLE II
SALE AND TRANSFER OF OWNERSHIP INTEREST; CLOSING
2.1 OWNERSHIP INTEREST TO BE SOLD.
Subject to the terms and conditions of this Agreement, at the Closing,
Datron will sell and assign to SL, and SL will purchase and acquire by way of
assignment from Datron, free and clear of all Encumbrances of any kind
whatsoever, all right, title and interest in the Shares of EME ("Ownership
Interest").
2.2 PURCHASE PRICE; PAYMENT OF PURCHASE PRICE.
The purchase price ("Purchase Price") for the Ownership Interest is as
follows:
(a) Base Purchase Price. The purchase price for the Ownership
Interest payable at Closing is $9,500,000 (the "Base Purchase Price"). At the
Closing, SL will cause to be wire transferred in immediately available U.S.
funds to an account designated by Datron, the Base Purchase Price.
(b) Additional Purchase Price. If, for calendar year 1998, XXX'x XX
earnings under GAAP before interest, taxes, and foreign currency exchange
effects ("Operating Profit"), determined as provided in Section 2.3, equal or
exceed DM 3,000,000, SL will pay to Datron additional consideration in the
amount of $500,000, plus an amount equal to six percent (6%) simple interest per
annum thereon from the Closing Date to the date of payment (the "Additional
Purchase Price"), to be wire transferred in immediately available U.S. funds on
the date specified in Section 2.3(d) to an account designated by Datron.
2.3 CALCULATION OF OPERATING PROFIT.
(a) Operating Profit of EME for calendar year 1998 means:
(i) Net Profit for such year; plus,
(ii) to the extent deducted in determining Net Profit for such
fiscal year the sum of:
(A) interest expense;
(B) taxes;
(C) the excess of depreciation of tangible assets over
four times the amount of depreciation of tangible assets from January 1
through March 31, 1998;
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(D) amortization of goodwill and other intangible
assets;
(E) losses on disposal of property and equipment;
(F) any amounts paid or payable to any employees of EME
related to the Transactions as a bonus, stay-bonus or otherwise that are
higher than would otherwise be paid or payable absent the Transactions;
(G) expenses related to the Transactions;
(H) expenses to the extent covered by Indemnity Payments
payable by Datron under Section 10.2;
(I) expenses that constitute extraordinary items (as
defined by GAAP), including any reserves against, or write-downs of,
inventory (but only to the extent such reserves or write-downs constitute
extraordinary items);
(J) intercompany expenses allocated to EME by Datron or
SL or any of its Affiliates (except intercompany expenses listed in
Exhibit 2.3); plus
(K) foreign exchange losses; plus
(iii) increases in expenses (to the extent deducted in
determining Net Profit) or decreases in revenues or gains (to the extent
the same would otherwise have been included in determining Net Profit)
that result from any Operational Change; minus
(iv) increases in revenue or gains (to the extent included in
determining Net Profit), or decreases in expenses (to the extent that the
same would have been deducted in determining Net Profit), that result from
any Operational Change; minus
(v) extraordinary gains (as defined by GAAP) (to the extent
included in determining Net Profit); minus
(vi) gains on disposal of property and equipment (to the
extent included in determining Net Profit); and minus
(vii) foreign exchange gains.
Operating Profit shall be determined without duplication of any addition
or subtraction for any item.
(b) Any amount or calculation to be made in connection with
determining Operating Profit shall be made (i) in accordance with GAAP in a
manner consistent with the accounting principles and methodologies used in
preparation of the Financial Statements, and (ii) using the revenue, income and
expense recognition policies and practices used by EME in such statements;
provided, however, that if GAAP clearly requires treatment of any item or items
in a manner inconsistent with the treatment given to such items in the Financial
Statements, then the
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GAAP treatment shall be used. Calculations shall not reflect any purchase
accounting adjustments resulting from SL's purchase of the Ownership Interest
hereunder.
(c) The following procedures shall apply with respect to determining
the Operating Profit:
(i) SL shall cause the GAAP financial statements for EME for
calendar year 1998 (the "1998 Financial Statements") to be prepared and
delivered to Datron within 60 days of the end of such year accompanied by
SL's calculation of Operating Profit. If the Operating Profit so
calculated by SL is less than DM 3,000,000, during the ninety (90) days
immediately following receipt of the 1998 Financial Statements by Datron,
Datron and its representatives may review any working papers, trial
balances and similar materials relating to such financial statements
including material prepared by EME's accountants (the "Evaluation
Materials"). SL shall meet with Datron and its representatives and respond
to any questions they may have concerning such financial statements and
the calculation of Operating Profit. Until delivery of the 1998 Financial
Statements, SL shall cause EME to prepare and deliver to Datron, when
prepared, the monthly EME financial statements for the month of June 1998
and each successive month of 1998.
(ii) The Operating Profit of less than DM 3,000,000 calculated
by SL shall become final and binding upon the parties on the ninety-first
(91st) day following delivery thereof unless Datron shall give written
notice to SL of its disagreement with the amount of Operating Profit (a
"Notice of Disagreement") prior to such date. The Notice of Disagreement,
if any, shall specify in reasonable detail the nature of any disagreement
so asserted and Datron's determination of Operating Profit. If a timely
Notice of Disagreement is delivered by Datron to SL, then the amount of
Operating Profit shall become final and binding upon the parties on the
earlier of (x) the date SL and Datron resolve in writing all differences
they have with respect to matters specified in the Notice of Disagreement
or (y) the date all remaining matters in dispute are finally resolved in
writing by the Accounting Firm (the date on which the Operating Profit
becomes final and binding being hereinafter called the "Final
Determination Date"). In rendering its written decision, the Accounting
Firm shall limit its review to such of the Evaluation Materials that it
deems appropriate in its discretion, and to submissions by the parties.
For purposes of this Section 2.3, the "Accounting Firm" shall be the New
York City office of Price Waterhouse Coopers or, if such Accounting Firm
is unwilling or unable to act on mutually acceptable terms, the New York
City office of such other independent "Big 5" public accounting firm as
shall be agreed upon by SL and Datron or, if SL and Datron are unable to
reach such agreement, such independent "Big 5" public accounting firm as
shall be chosen by lot in a manner agreed upon by SL and Datron.
(iii) Each party shall pay its own costs and expenses incurred
in connection with such dispute resolution (including all fees and
expenses of its accountants); provided that the fees and expenses of the
Accounting Firm shall be borne by SL if the Operating Profit is DM
3,000,000 or more and by Datron if it is less than DM 3,000,000.
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(d) The Additional Purchase Price shall be paid to Datron by SL (x)
within two (2) business days after SL's delivery to Datron of the 1998 Financial
Statements if the Operating Profit is at least DM 3,000,000; or (y) if SL
initially determines such Operating Profit is less than DM 3,000,000 and
subsequently the parties agree or the Accounting Firm determines that such
Operating Profit is at least DM 3,000,000, then within two (2) business days
after the Final Determination Date.
ARTICLE III
THE CLOSING
3.1 TIME AND PLACE; SIMULTANEOUS SIGNING AND CLOSING.
(a) The sale and purchase of the Ownership Interest will take place
at a closing (the "Closing") to be held simultaneously for the assignment of the
Shares in Germany and at X'Xxxxxxxx Graev & Karabell, 00 Xxxxxxxxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 or by facsimile and wire, at 10:00 a.m., United States
Eastern Daylight Time, on July 10, 1998 or at such other place, time and date as
the parties may mutually agree upon.
(b) Signing by the parties of this Agreement and Closing under this
Agreement are occurring simultaneously. Any provisions of this Agreement
relating to the period of time between signing and Closing are null and void.
3.2 DEED OF ASSIGNMENT.
At the Closing the parties will execute before a German notary, with
offices in Dusseldorf, Germany a notarial deed of assignment in which Datron
transfers the Ownership Interest in EME, and SL acquires the same, by way of
assignment. Upon confirmation to SL of such delivery, SL shall pay the Base
Purchase Price to Datron and, against delivery to Datron of the Purchase Price,
the German counsel of SL shall record or arrange to record such assignment in
the manner required by German law to complete transfer of the Ownership
Interest. The deed of assignment shall be substantially in the form attached as
Exhibit 3.2.
3.3 DELIVERIES BY DATRON AND EME.
(a) At the Closing, Datron will deliver to SL the following:
(i) A transfer agreement for the Ownership Interest
executed by Datron and otherwise duly notarized as required by German
law to complete the legal transfer of the Ownership Interest;
(ii) All sections of the Disclosure Schedule;
(iii) The Financial Statements;
(iv) Each of the consents and approvals required by Section
5.25 (a) including those necessary in connection with the conduct by EME
of its business as
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conducted on the date hereof and actions satisfactory to SL by IBJ Xxxxxxxx Bank
& Trust Company and Xxx Xxxxxx to release their Lien on the shares; and
(v) All other previously undelivered documents, instruments
and writings required to be delivered by Datron at or prior to the Closing
pursuant to this Agreement.
(b) At the closing, EME will deliver to Datron the following:
(i) A release of Datron, solely arising out of Datron's status
as a shareholder of EME without diminishing in any way Datron's
obligations to SL arising under this Agreement;
(ii) The amount due from EME to Datron on the Closing Date as
payment for purchases of products from the EEMCO division of Datron,
corporate allocations and costs of insurance, all as set forth on Section
3.3(b) of the Disclosure Schedule; and
(iii) A declaration of consent by EME to the assignment of the
Shares by Datron to SL.
3.4 DELIVERIES BY SL.
At the Closing, SL will cause to be delivered to Datron the following:
(a) The Base Purchase Price;
(b) A release by SL as a shareholder of EME of all liability of
Datron to EME arising solely out of Datron's status as the shareholder of EME
without diminishing in any way Datron's obligations to SL arising under this
Agreement; and
(c) All other previously undelivered documents, instruments and
writings required to be delivered by SL at or prior to the Closing pursuant to
this Agreement.
ARTICLE IV
[THIS ARTICLE INTENTIONALLY OMITTED]
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DATRON
Datron hereby represents and warrants to SL as follows:
5.1 TITLE TO THE OWNERSHIP INTEREST.
As of the Closing, Datron will have the complete and unrestricted power
and the unqualified right to sell, assign, transfer and deliver to SL good and
valid title to the Ownership Interest, free and clear of all Encumbrances.
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5.2 AUTHORIZATIONS: VALID AND BINDING AGREEMENT.
Datron has the full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. At Closing,
the Board of Directors of Datron will have complied with any Legal Requirement
and its certificate of incorporation and by-laws or otherwise to authorize the
execution and delivery of this Agreement by Datron and the consummation by
Datron of the Transactions. This Agreement constitutes a valid and binding
agreement of Datron, enforceable in accordance with its terms. Except for the
consent of EME required in EME's articles of association or in Section 5.2 of
the Disclosure Schedule, neither the execution and delivery by Datron of this
Agreement nor the consummation by Datron of the Transactions violates any Legal
Requirement or violates, conflicts with or will at the Closing constitute a
default under the certificate of incorporation or the by-laws of Datron or any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which Datron is a party or by which it is bound.
5.3 ORGANIZATION AND GOOD STANDING.
EME is a private limited company (Gesellschaft mit beschrankter Haftung)
validly existing under the laws of the Federal Republic of Germany, has the
corporate power to carry on its business as it is now being conducted and to own
and lease the properties and assets that it now owns and leases. Copies of the
articles of association (Gesellschaftsvertrag) of EME as currently in effect
have been delivered to SL.
5.4 CAPITALIZATION.
The stated capital (Stammkapital) of EME consists solely of the Ownership
Interest. The Shares represent all the paid-in capital of EME. The stated
capital of EME is fully paid in, not repaid to the shareholders of EME,
nonassessable and free of all pre-emptive or similar rights. Except for the
Ownership Interest, there is no equity interest in EME outstanding; there are no
outstanding securities convertible into or exchangeable for an equity interest
in EME; there are no outstanding options, warrants or other rights to purchase,
acquire or subscribe for any equity interest in EME and no equity of EME is
reserved for issuance for any purpose; and there are no contracts, commitments,
agreements, understandings or arrangements or restrictions of any kind relating
to the issuance, sale or transfer of any equity interest in EME or any such
options, warrants or rights other than restrictions on transfer imposed by U.S.
state and federal securities laws and in EME's articles of association. Except
as specified in Section 5.4 of the Disclosure Schedule, EME has made no
distributions that have resulted in a diminution of its stated capital from that
reflected in the Financial Statements.
5.5 SUBSIDIARIES AND PARTNERSHIPS.
EME has no subsidiaries and does not own, directly or indirectly, any
capital stock or other equity securities of any Person or any direct or indirect
equity, partnership or ownership interest in any business. Except as specified
in Section 5.5 of the Disclosure Schedule, EME does not maintain an enterprise
agreement within the meaning of Sections 291 and 292 of the Stock Corporation
Act (Aktiengesetz), or any joint venture agreements, and EME has not issued any
letter of comfort (Patronatserklarung) in favor of any third Person.
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5.6 NO VIOLATION.
Except as set forth in Section 5.6 of the Disclosure Schedule, neither the
execution and delivery by Datron of this Agreement nor the consummation by
Datron of the Transactions will violate any provision of the articles of
association or by-laws of EME, or violate, conflict with, result in any breach
of, or constitute a default (or an event or condition which, with notice or
lapse of time or both, would constitute a default) under, or result in or give
rise to any right with respect to the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any
liability or obligation of EME which is not immaterial pursuant to, or result in
the creation or imposition of any Encumbrance upon any properties or assets of
EME under, any note, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which EME is a party or by which EME may be bound, or
violate any judgment, decree, order, writ or injunction of a Governmental Body
naming EME, or violate any Legal Requirement applicable to EME, its properties
or assets.
5.7 FINANCIAL STATEMENTS.
Datron has delivered to SL the Financial Statements. Except for the
inventory set forth in Section 5.7 of the Disclosure Schedule, the Financial
Statements are true, complete and accurate and fairly present the financial
condition, results of operations and cash flow of EME as of the respective dates
of and for the periods referred to in such Financial Statements, all in
accordance with and to the extent required by GAAP consistently applied
throughout the periods involved, except as to the lack of a report of
independent certified public accountants and the absence of notes. Any Financial
Statements that are not as of year end are also subject to year-end adjustments
in accordance with GAAP and consistent with prior periods.
5.8 BOOK AND RECORDS.
The books of account, and other records of EME, all of which have been
made available to SL, are, in all material respects, accurate, complete and
correct and have been maintained in accordance with sound business practices. At
the Closing, all of those books and records will be in the possession of EME.
5.9 CERTAIN LIABILITIES.
At March 31, 1998, the date of the last balance sheet in the Financial
Statements, EME had no liabilities or obligations of any nature (whether known
or unknown, whether absolute, accrued or contingent, and whether due or to
become due) which are required under GAAP to be reflected or reserved in the
balance sheet at that date (the "Last Balance Sheet") which are not reflected or
reserved against in the Last Balance Sheet. There was no liability or obligation
of EME of any nature whatsoever existing as of the date of the Last Balance
Sheet which was required under GAAP to be reflected or reserved in such balance
sheet which was not fully reflected or reserved against in the Last Balance
Sheet and, except as set forth in Section 5.9 of the Disclosure Schedule, there
are no obligations or liabilities of EME of any nature whatsoever incurred since
the date of the Last Balance Sheet which were not incurred in the Ordinary
Course of Business.
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5.10 NO LIABILITIES.
There are no liabilities, obligations or claims against EME (whether
absolute, accrued, contingent or otherwise) the full cost of which, including
attorneys fees, will not be timely paid by insurance therefor, relating to (i)
employee matters not covered by the representations by Datron in Section 5.21
hereof or (ii) tortious liability claims against EME (as "tortious liability" is
interpreted under Delaware law), existing as of the Closing Date or arising out
of facts, conditions or circumstances existing at or prior thereto, whether or
not such liabilities, obligations or claims were known at the time of the
Closing, except for (i) liabilities therefor reflected or reserved against in
(x) the Last Balance Sheet or (y) in the Disclosure Schedule or (ii) liabilities
arising since the date of the Last Balance Sheet in the Ordinary Course of
Business.
5.11 ABSENCE OF CERTAIN CHANGES.
Except as set forth in Section 5.11 of the Disclosure Schedule, since
December 31, 1997, EME has conducted its business only in the Ordinary Course of
Business, and has not:
(a) Suffered any Material Adverse Effect;
(b) Permitted, allowed or suffered any of its properties or assets
(real, personal or mixed, tangible or intangible) to be subjected to
Encumbrances except Permitted Encumbrances;
(c) Disposed of or permitted to lapse any right to the use of any
Patents or, disclosed to any Person not authorized to have such information any
Trade Secrets not previously a matter of public knowledge or existing in the
public domain;
(d) Made any single capital expenditure or commitment in excess of
DM 20,000 for additions to property, plant, equipment or intangible capital
assets;
(e) Paid, loaned or advanced any amounts to, or sold, transferred or
leased any properties or assets (real, personal, or mixed, tangible or
intangible) to or entered into any agreement or arrangements with Datron or any
other stockholder, any of the officers, employees or directors of EME or any
Affiliate of any such Person except for travel and expense advances in the
Ordinary Course of Business;
(f) Sold, transferred or otherwise disposed of any of its properties
or assets (real or personal, tangible or intangible) except in the Ordinary
Course of Business;
(g) Made any material change in any method of accounting or
accounting principle, practice or policy;
(h) Suffered any single casualty loss (whether or not insured
against) in excess of DM 10,000;
(i) Declared, paid or set aside for payment any dividend or
distribution in respect of, or directly or indirectly redeemed, purchased or
otherwise acquired, any of its Shares;
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(j) Taken any other action not either in the Ordinary Course of
Business and consistent with past practice (if such past practice exists) or
provided for in this Agreement, the consequence of which would have a Material
Adverse Affect; or
(k) Agreed, so as to legally bind EME, whether in writing or
otherwise, to take any of the actions set forth in this Section and not
otherwise permitted by this Agreement.
5.12 TITLE TO PROPERTIES, ENCUMBRANCES.
(a) Except as set forth in Section 5.12 of the Disclosure Schedule,
EME has good and valid title to all the properties and assets that it purports
to own (whether real, personal, or mixed, and whether tangible or intangible),
including without limitation, Intellectual Property Assets. Except as set forth
in Section 5.12 of the Disclosure Schedule and as reflected in the Last Balance
Sheet all properties and assets of or used in the business of EME are free and
clear of all Encumbrances, except (a) Permitted Encumbrances, and (b) with
respect to real property owned by EME in Ingolstadt (the "EME Facility"), (i)
imperfections of title, if any, none of which are substantial in amount,
detracts from the value or impairs other than in a minor way the use of the
property subject thereto, or impairs the operations of EME, and (ii) zoning laws
and other land use restrictions.
(b) Consistent with Section 5.1 hereof, no security, pledge or
similar agreement between Datron and any other Person with respect to the
Shares, including, but not limited to, that certain Amended and Restated
Security Agreement dated as of September 22, 1997 between Datron, IBJ Xxxxxxxx
Bank & Trust Company, as trustee, and Xxx Xxxxxx, as trustee, has been notarized
pursuant to German law.
5.13 DESCRIPTION OF ASSETS.
Section 5.13 of the Disclosure Schedule contains a complete list of the
fixed assets owned, leased or used by EME at March 31, 1998. At Closing, the
plumbing and heating system in the Building shall be in good working order, the
roof of the Building shall be free from leaks, and the Building shall be
structurally sound and all machinery and equipment in Section 5.13 of the
Disclosure Schedule used by EME in its business is in good working order,
subject to reasonable wear and tear and ordinary maintenance and repairs, and is
adequate for EME to conduct its business as it is currently being conducted. The
Building, subject to completion of current construction, is adequate for EME to
conduct its business as it is currently being conducted.
5.14 INVENTORY.
All inventory of EME reflected in the Last Balance Sheet or subsequently
acquired is, to the extent still owned by EME, of a quality and quantity usable
and saleable in the Ordinary Course of Business, except for obsolete items,
slow-moving items, and items of below-standard quality. All obsolete and
slow-moving inventory at the date of the Last Balance Sheet (other than the
items in Section 5.7 of the Disclosure Schedule) has been written off on the
Last Balance Sheet, and all below-standard quality inventory at the date of the
Last Balance Sheet has been written down on the Last Balance Sheet to net
realizable value. All such inventories not so
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written off have been priced on the Last Balance Sheet at the lower of cost or
market (or net realizable value) on a first-in, first-out basis.
5.15 ACCOUNTS RECEIVABLE.
All accounts receivable of EME reflected in the Last Balance Sheet or
subsequently created (collectively, the "Accounts Receivable"), represent as of
the date reflected valid obligations arising from sales actually made or
services actually performed in the Ordinary Course of Business. Section 5.15 of
the Disclosure Schedule sets forth a complete and accurate list of all Accounts
Receivable as of the date of the Last Balance Sheet, which list sets forth the
aging of such Accounts Receivable.
5.16 ACCOUNTS PAYABLE.
Except as specified in Section 5.16 of the Disclosure Schedule, all
accounts payable set forth in the Last Balance Sheet or arising since the date
thereof, to the extent they remain obligations of EME, have been incurred in the
Ordinary Course of Business.
5.17 INTELLECTUAL PROPERTY.
(a) The term "Intellectual Property Assets" means: (i) all patents
and patent applications listed on Section 5.17 of the Disclosure Schedule
(collectively, "Patents"); and (ii) all know-how, trade secrets, confidential
information, customer lists, proprietary software developed by EME, technical
information, data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets") owned, or licensed by EME as licensee or
licensor.
(b) Section 5.17(b) of the Disclosure Schedule contains a complete
and accurate list of all agreements relating to the Intellectual Property Assets
to which EME is a party. There are no outstanding disputes with respect to any
such agreement nor, to Datron's knowledge, are any such disputes threatened. The
Intellectual Property Assets are adequate for EME to conduct its business as it
is currently being conducted.
(c) Except as set forth in Section 5.17 of the Disclosure Schedule,
EME is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of Encumbrances except Permitted
Encumbrances, and has the right to use without payment to a third Person all of
the Intellectual Property Assets, with the exception of a license for a power
drive unit patent from Xxxx Xxxxxxxx, which license is listed in Section 5.17 of
the Disclosure Schedule.
(d) EME is not infringing the copyrights of any other Person.
(e) Section 5.17(d) of the Disclosure Schedule contains a complete
and accurate list and summary description of all Patents. (i) All of the issued
Patents are currently in compliance in all material respects with formal Legal
Requirements (including payment of filing, examination, and maintenance fees and
proofs of working or use), are valid and enforceable; (ii) no Patent has been or
is now involved in any interference, reissue, reexamination, or opposition
proceeding, and neither Datron nor EME has been notified that a patent or patent
application of a third Person interferes with any of the Patents; (iii) to
Datron's knowledge, no Patent is
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infringed, has been challenged or threatened in any way, and none of the
products manufactured or sold, nor any process or know-how used, by EME
infringes or is alleged to infringe any patent or other proprietary right of any
other Person. Patented products sold by EME are not marked with patent numbers.
(f) With respect to each Trade Secret, (i) documentation has been
prepared (and, with respect to know-how, generally prepared) therefor in
accordance with reasonable business practice (ii) the documentation which has
been prepared relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it; (iii) EME has taken reasonable
precautions to protect its secrecy, confidentiality, and value; (iv) EME has
good title and an absolute (but not necessarily exclusive) right to use the
Trade Secrets, and the Trade Secrets, to Datron's knowledge, have not been used,
divulged, or appropriated either for the benefit of any Person (other than EME)
or to the detriment of EME. No Trade Secret is subject to any adverse claim or,
to Datron's knowledge, has been challenged or threatened in any way.
5.18 LEASES.
Section 5.18 of the Disclosure Schedule contains an accurate and complete
list of all leases (including all amendments thereof and modifications thereto)
pursuant to which EME leases real or personal property (collectively, the
"Leases"). EME is not in default with respect to any of the Leases, and to
Datron's knowledge, no event or condition has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default by EME thereunder. All the Leases are valid, binding
and enforceable in accordance with their respective terms and are in full force
and effect.
5.19 TAXES.
EME has duly filed or caused to be filed all tax reports and returns (each
of which was accurate and complete in all material respects) required to be
filed by it and has duly paid all taxes and other charges due or claimed to be
due from it by any Governmental Body, including, without limitation, those due
in respect of all federal, state, and local or foreign income and capital,
payroll, withholding, excise, sales, use, real and personal property, use and
occupancy, business and occupation, mercantile, real estate, capital stock and
franchise tax, VAT, trade tax, or other tax relating to EME's business (all the
foregoing taxes, including interest and penalties thereon) and including
estimated taxes thereof are hereinafter collectively called "Taxes"); except as
noted on the Balance Sheet at December 31, 1997 which is a part of the Financial
Statements, the reserves for Taxes, without regard to deferred tax assets,
reflected in such balance sheet, are adequate for the payment of all unpaid
Taxes, net of any refunds of Taxes, in each case applicable to the period ended
on the date of such balance sheet and all periods prior thereto. There are no
Tax liens upon any property or assets of EME except liens for current Taxes not
yet due. No claim has been made during the past seven years by a Governmental
Body in a jurisdiction where EME does not file tax returns that it is or may be
subject to taxation by that jurisdiction for a period ended on or before
December 31, 1997.
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5.20 LITIGATION.
Except as may be set forth in Section 5.20 of the Disclosure Schedule,
there are no claims, actions, suits, proceedings or investigations pending or,
to Datron's knowledge, threatened against EME or seeking to block the
Transactions, at law or in equity or before or by Governmental Body or any
arbitration tribunal; to Datron's knowledge, there is no valid basis for any
such claim, action, suit, proceeding, inquiry or investigation. EME is not
subject to any judgment, order or decree naming it entered in any lawsuit or
proceeding which has had or may have a Material Adverse Effect.
5.21 EMPLOYMENT AND LABOR MATTERS.
Section 5.21 of the Disclosure Schedule sets forth a complete and accurate
list of (a) all work agreements (Betriebsvereinbarungen) pertaining to EME, (b)
all employment agreements and pension and benefit plans for general managers,
officers and senior employees (leitende Angestellte) of EME, and (c) all other
employment agreements providing for (i) an annual base salary of more than DM
100,000, (ii) company pension benefits, or (iii) notice of termination periods
of more than one year. Section 5.21 of the Disclosure Schedule sets forth all
employee benefit plans, not otherwise set forth in Section 5.21 of the
Disclosure Schedule, in which employees employed by EME are participating or are
eligible to participate. The names, ages, functions, seniority and monthly
salary of each employee of EME, including Auszubildende and students, are set
forth in Section 5.21 of the Disclosure Schedule. Other than the payments due
under agreements or other obligations set forth in Section 5.21 of the
Disclosure Schedule or payments required by any Governmental Body, there are no
additional payments due to any employee of EME. Except as set forth in Section
5.21 of the Disclosure Schedule, neither EME nor Datron have received notice
during the past seven years of any EME strikes, slowdowns or, labor disputes
involving the practices of the management of EME which have been brought before
that Governmental Body or arbitration tribunal in Germany before which such
labor disputes are brought for resolution in accordance with applicable Legal
Requirements or, to the knowledge of Datron, written threats of strikes,
slowdowns or the bringing of such disputes for resolution before such body or
tribunal.
5.22 CONTRACTS AND COMMITMENTS.
(a) Section 5.22 of the Disclosure Schedule sets forth agreements,
contracts, commitments, arrangements or restrictions of EME at March 31, 1998
which individually involve payments to EME in excess of DM 250,000 in any year
or by EME in excess of DM 100,000 in any year; EME is in compliance in all
material respects with such agreements, contracts, commitments, arrangements or
restrictions.
(b) Subject to obtaining any requisite consents of third Persons as
set forth in Section 5.25 and 7.3 and as specified in Section 5.6 of the
Disclosure Schedule, the enforceability of the contracts and commitments of EME
will not be affected in any material respect by Datron's execution and delivery
of this Agreement or Datron's consummation of the Transactions.
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(c) EME is not restricted by an agreement to which it is a party or
by a judgment, order, decree, writ or injunction of a Governmental Body naming
it, from carrying on its business anywhere in the world; and
(d) EME has no agreements with Datron.
5.23 BANK ACCOUNTS.
Section 5.23 of the Disclosure Schedule sets forth the names and locations
of all banks, trust companies, savings and loan associations and other financial
institutions at which EME has accounts or safe deposit boxes and the names of
all persons authorized to draw thereon or to have access thereto.
5.24 COMPLIANCE WITH APPLICABLE LAW.
(a) EME is presently and has been complying with each Legal
Requirement that is or has been applicable to it;
(b) To Datron's knowledge, no event has occurred nor circumstance
exists that (with or without notice or lapse of time) may constitute or result
in a violation by EME of, or a failure on the part of EME to comply with, any
Legal Requirement. EME has not has received, at any time during the five years
preceding the date of this Agreement, any notice or other communication from any
Governmental Body regarding (i) any actual or alleged violation of, or failure
to comply with, any Legal Requirement, or (ii) any actual or alleged obligation
on the part of EME to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature.
5.25 CONSENTS AND APPROVALS; GOVERNMENTAL AUTHORIZATIONS.
(a) At Closing Datron shall have obtained all consents, approvals,
licenses, permits or authorizations of, or declaration, filing or registration
required by any Person in connection with (i) the execution and delivery by
Datron of this Agreement and (ii) the consummation by Datron of the
Transactions.
(b) Section 5.25 of the Disclosure Schedule contains a complete and
accurate list of each Governmental Authorization that is held by EME or that is
required to be held by EME in order to operate its business. Each Governmental
Authorization listed or required to be listed on Section 5.25 of the Disclosure
Schedule is valid and in full force and effect. Except as set forth on Section
5.25 of the Disclosure Schedule:
(i) EME is, and at all times during the five year period ended
on the date of this Agreement has been, in compliance in all material
respects with all of the terms and requirements of each Governmental
Authorization identified or required to be identified on Section 5.25 of
the Disclosure Schedule;
(ii) EME has not received, during the five year period ended
on the date of this Agreement, any notice or other communication (which
shall include oral communications only if they were communicated by a
Governmental Body to Xxxxx X.
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Xxxxxx, Xxxxx Xxxxx, Xxxx-Xxxx Xxxxx or Xxxxxxxxx Xxxxxx) from any
Governmental Body regarding (A) any actual or alleged violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual or proposed revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iii) All applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed
on Section 5.25 of the Disclosure Schedule have been duly filed on a
timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.
5.26 NO CONDEMNATION.
Neither Datron nor EME have received notice that the whole or any portion
of the leaseholds or any other assets of EME is subject to any order of a
Governmental Body to be sold or is being condemned, expropriated or otherwise
taken by any Governmental Body with or without payment of compensation therefor,
or that any such condemnation, expropriation or taking has been proposed by any
Governmental Body.
5.27 CONDUCT OF THE BUSINESS AFTER NOVEMBER 30, 1997.
EME has not, subsequent to November 30, 1997, made any payments to Datron
except: (a) a December 1997 dividend payment of DM 387,402.22; (b) normal
monthly charges of $2,000 per month for a corporate overhead allocation charge
and charges for insurance premiums (c) expenses in the Ordinary Course of
Business paid by Datron on behalf of EME; and (d) product purchases in the
Ordinary Course of Business. Section 5.27 of the Disclosure Schedule sets forth
all payments made to Datron by EME after November 30, 1997.
5.28 INSURANCE.
(a) Datron has delivered to SL:
(i) True and complete copies of all policies of insurance to
which EME is a party or under which EME, or any director of EME, is or has
been covered at any time within one year preceding the date of this
Agreement;
(ii) Any statement by the auditor of the Financial Statements
with regard to the adequacy of EME's insurance coverage or of the reserves
for insurance claims.
(b) Section 5.28 of the Disclosure Schedule contains a true and
complete schedule of Insurance maintained by or for EME and a description
of any self-insurance arrangement by EME or by Datron that includes
coverage for EME, including any reserves established thereunder, but
excluding any deductibles or coverage limits.
(c) Section 5.28(c) of the Disclosure Schedule sets forth, by year,
for the current policy year and each of the two preceding policy years:
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(i) A statement describing each claim under an insurance
policy for an amount in excess of DM 20,000, which sets forth:
(A) The name of the claimant;
(B) A description of the policy by insurer, type of
insurance, and period of coverage; and
(C) The amount and a brief description of the claim; and
(ii) A statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such
claims.
(d) Except as set forth on Section 5.28(d) of the Disclosure
Schedule:
(i) All policies to which EME is a party or that provide
coverage to EME or any director or officer of EME:
(A) Are valid, outstanding, and enforceable;
(B) To Datron's knowledge, are issued by insurers
bearing the ratings specified on Section 5.28 of the Disclosure Schedule;
(C) Are sufficient for compliance with all Legal
Requirements and contracts to which EME is a party;
(D) With respect to EME's policies, will continue in
full force and effect following the Closing; and
(E) Do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of EME not
otherwise reflected in the Financial Statements.
(e) EME has not within the past 9 years received (A) any refusal of
insurance coverage or any notice that a defense will be afforded by an insurer
with reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(f) EME has given notice to the insurer of all claims involving
personal injury and other claims over DM 20,000 that may be insured thereby.
5.29 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Section 5.29 of the Disclosure Schedule:
(i) EME is presently and at all times has been complying with
each Environmental Law applicable to it and EME has not
received any
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communication within the past five years from
a Governmental Body alleging that EME is not in such
compliance;
(ii) there is no Environmental Claim pending or, to
Datron's knowledge, threatened against EME;
(iii) there are no Materials of Environmental Concern present on
or in the Environment at the EME Facility or, to the
knowledge of Datron, at any geologically or hydrologically
adjoining property, including any Materials of
Environmental Concern contained in barrels, above or
underground storage tanks, landfills, land deposits,
dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited
or located in land, water, sumps, or any other part of the
EME Facility or such adjoining property, or incorporated
into any structure therein or thereon;
(iv) there has been no release or, to the knowledge of Datron,
threat of release of any Materials of Environmental
Concern at or from the EME Facility or at any other
locations where any Materials of Environmental Concern
were or may have been generated, manufactured, refined,
transferred, produced, imported, used or processed from or
by the facilities, or by or from any other properties and
assets (whether real, personal or mixed) in which EME has
or had an interest, or to the knowledge of Datron, any
geologically or hydrologically adjoining property, whether
by Datron, EME or any other Person; and
(v) set forth on Section 5.29 of the Disclosure Schedule are
true and complete copies and results of any studies,
analyses, tests or monitoring possessed or initiated by
Datron or EME pertaining to Materials of Environmental
Concern, in, on or under the EME Facility, or concerning
compliance by Datron, EME or any other Person for whose
conduct they are or may be held responsible, under
Environmental Laws.
(b) "Environmental Claim" means any written notice by any Person
alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages,
property damages, personal injuries or penalties) arising out
of, based on or relating to (A) the presence, or release into
the environment, or disposal in any manner of any Material of
Environmental Concern or (B) circumstances forming the basis
of any violation, or alleged violation, of any Environmental
Law.
(c) "Environmental Laws" means all Legal Requirements relating to
pollution or protection of the environment, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport,
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removal, remediation or otherwise handling of Materials of
Environmental Concern.
(d) "Materials of Environmental Concern" means chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum and petroleum products or other
substances with respect to which liability or standards of
conduct are imposed pursuant to any Environmental Laws
(excluding, however, tobacco and tobacco products to the
extent, if any, tobacco or tobacco products are included in
the foregoing description.)
(e) "Environment" means soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters,
streams, ponds, drainage basins and wetlands), ground waters,
drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other
environmental medium or natural resource.
5.30 CERTAIN PAYMENTS.
For the past five years, neither EME nor any director, officer, agent, or
employee of EME, or to Datron's knowledge any other Person associated with or
acting for or on behalf of EME, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services to obtain favorable treatment in securing business or to
pay for favorable treatment for business secured or to obtain special
concessions or for special concessions already obtained, for or in respect of
EME, in each case which is in violation of any Legal Requirement, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of EME.
5.31 BROKERS OR FINDERS.
Datron and its officers, employees and agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and the
Transactions.
5.32 DISCLOSURE.
No representation or warranty of Datron in this Agreement and no statement
on any Schedule hereto omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SL
SL hereby represents and warrants to Datron and EME as follows:
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6.1 ORGANIZATION AND GOOD STANDING.
SL is a limited liability company duly organized, validly existing and in
good standing under the laws of the Federal Republic of Germany.
6.2 AUTHORIZATION.
SL has the full corporate power and authority to, enter into this
Agreement and to consummate the Transactions. At Closing, the managing director,
shareholder or other appropriate body of SL will have taken all action required
by any Legal Requirement and its certificate of incorporation by-laws or other
governing documents or otherwise to authorize the execution and delivery of this
Agreement and its consummation of the Transactions. This Agreement constitutes a
valid and binding obligation of SL enforceable in accordance with its terms. No
other act or proceeding on the part of SL is necessary to authorize this
Agreement or the Transactions.
Neither the execution and delivery by SL of this Agreement nor the
consummation by SL of the Transactions violates any Legal Requirement or
violates, conflicts with or will at the Closing constitute a default under the
certificate or incorporation or by-laws or other governing documents of SL, or
any contract, commitment, agreement, understanding, arrangement or restriction
of any kind to which SL is a party or by which it is bound.
6.3 INVESTMENT REPRESENTATION.
SL is represented by both United States and German counsel and accountants
to assist it to evaluate the risks and merits of the Transactions.
SL acknowledges that the Ownership Interest has not been registered under
the Securities Act of 1933, and that the Ownership Interest will be transferred
to SL pursuant to an exemption from registration under such Securities Act.
6.4 LITIGATION.
There are no actions, suits, proceedings, investigations of any kind
pending or, to SL's knowledge, threatened against SL before any Governmental
Body or arbitration tribunal which, if adversely determined, might either in
each case or in the aggregate materially and adversely affect SL's ability to
carry out the terms of this Agreement and the Transactions.
6.5 BROKERS OR FINDERS.
SL and the officers, employees and agents of SL have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and the Transactions.
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ARTICLE VII
OTHER OBLIGATIONS OF THE PARTIES
7.1 NO IMPLIED REPRESENTATIONS.
SL acknowledges that neither Datron nor any other Person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding EME, its assets and its liabilities
which is not included in this Agreement or the Disclosure Schedule hereto.
7.2 TRANSITION COOPERATION.
Datron will, at the expense of SL, use Commercially Reasonable Efforts to
cooperate with SL and any Affiliate of SL after the Closing to assist in
effecting an orderly transfer of control of EME's business and will provide, at
the expense of SL, such assistance concerning such transfer as SL may reasonably
require.
7.3 SECTION 338 ELECTION.
SL shall cause SL Industries not to elect under Section 338(g) of the U.S.
Internal Revenue Code to write-up the value of the assets of EME unless the tax
benefit to SL Industries as a result of such write-up, valued at the date of the
write-up, exceeds $50,000.
7.4 SOLICITATION OF INVESTIGATIONS BY GOVERNMENTAL BODIES.
Except as may be required by Legal Requirements or deemed prudent by SL or
EME for the purposes of reducing a potential claim or preventing a future claim,
or ameliorating a past release of Materials of Environmental Concern, neither SL
nor EME nor any of their Affiliates or agents shall after the Closing request,
solicit or otherwise contact a Governmental Body for the purpose of causing an
investigation to be commenced as to whether EME has to the Closing Date complied
with any Environmental Laws or whether there are present Materials of
Environmental Concern for which EME, based on its activities to the Closing
Date, may be responsible.
7.5 TAX RETURNS.
Tax returns of EME prepared after the Closing Date which relate to periods
prior to or including the Closing Date shall be prepared by SL and EME in a
manner consistent with preparation of tax returns of EME prior to the Closing
Date.
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ARTICLE VIII
THIS ARTICLE IS INTENTIONALLY OMITTED
ARTICLE IX
THIS ARTICLE IS INTENTIONALLY OMITTED
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
10.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS; DEFINITIONS.
(a) All representations and warranties including the Disclosure
Schedule hereto, made or delivered by any party to this Agreement or pursuant
hereto will survive the Closing hereunder for a period of two years, except (i)
for those contained in Sections 5.1, 5.29, 5.31 and 6.5 hereof, which shall
survive until the termination of the applicable statute of limitations, (ii) for
those contained in the second sentence of Section 5.13 which shall terminate 60
days after Closing and (iii) for those contained in Section 5.19, which shall
survive until three months after submitting a noncontestable tax xxxx for the
concerned taxes and the relevant tax period, or the applicable statute of
limitations for tax fraud or tax evasion, whichever is longer. No claim for
breach of a representation or warranty may be asserted unless first asserted
prior to the end of the survival period thereof. Covenants of each party
hereunder shall survive the Closing for a period of three (3) years and no claim
for a breach of a covenant may be asserted unless first asserted prior to three
years from the Closing Date.
(b) "Indemnity Payment" means any amount of Damages required to be
paid pursuant to Section 10.2 or 10.3, (ii) "Indemnitee" means any Person
entitled to indemnification under this Agreement, and (iii) "Indemnifying Party"
means any Person required to provide indemnification under this Agreement.
10.2 AGREEMENT BY DATRON TO INDEMNIFY.
Subject to the terms and conditions of this Section 10, Datron hereby
agrees to indemnify, defend and hold harmless SL (which after the Closing will
include EME), from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties and attorneys' fees and expenses
(collectively, "Damages"), asserted against, imposed upon or incurred by SL,
directly or indirectly, by reason of or resulting from the following claims
(collectively, "Claims"):
(a) A breach by Datron at Closing of any representation or warranty
of Datron contained in this Agreement; or
(b) A breach by Datron of any covenant of Datron contained in this
Agreement.
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10.3 AGREEMENT BY SL TO INDEMNIFY.
Subject to the terms and conditions of this Section 10, SL (which after
the Closing will include EME) hereby agrees to indemnify, defend and hold
harmless Datron, from and against the Cost of all Damages asserted against,
imposed upon or incurred by Datron, directly or indirectly, by reason of or
resulting from the following Claims:
(a) A breach by SL at Closing of any representation or warranty
of SL contained in this Agreement; or
(b) A breach by SL of any covenant of SL contained in this
Agreement.
10.4 DEFENSE OF CLAIMS.
The obligations and liabilities of each party for Claims under Section
10.2 and 10.3 hereof will be subject to the following terms and conditions:
(a) The Indemnitee will give prompt notice of any Claim by a Person
not a party to this Agreement or an Affiliate of such party (a "Third Person
Claim") to the Indemnifying Party and the Indemnifying Party will have the right
to undertake the defense thereof by representatives chosen by it and shall keep
the Indemnitee informed and shall consult with the Indemnitee in connection with
such defense. The Indemnitee shall cooperate in such defense including providing
such information related thereto as the Indemnifying Party reasonably requests.
(b) If the Indemnifying Party, within a reasonable time after notice
of any such Third Person Claim, fails to defend, then the Indemnitee will have
the right to undertake the defense, compromise or settlement of such Claim on
behalf of and for the account and risk of the Indemnifying Party, subject to the
right of the Indemnifying Party to assume the defense of such Claim at any time
prior to settlement, compromise or final determination thereof. If, within a
reasonable time after giving notice of a Third Party Claim to an Indemnifying
Party pursuant to Section 10.4(a), an Indemnitee receives written notice from
the Indemnifying Party that the Indemnifying Party has elected to assume the
defense of such Third Party Claim, the Indemnifying Party will not be liable for
any costs and expenses subsequently incurred by the Indemnitee in connection
with the defense thereof; provided, however, that if the Indemnifying Party
fails to take reasonable steps necessary to defend such Third Party Claim within
20 calendar days after receiving written notice from the Indemnitee that the
Indemnitee believes the Indemnifying Party has failed to take such steps, the
Indemnitee may assume its own defense, and the Indemnifying Party will be liable
for all Damages paid or incurred in connection therewith.
(c) If a firm offer is made to settle a Third Party Claim without
leading to liability or creating a financial or other obligation or Material
Adverse Effect on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party shall give written notice
to the Indemnitee to that effect. If the Indemnitee fails to consent to such
firm offer within 10 calendar days after its receipt of such notice, the
Indemnitee may continue to contest or defend such Third Party claim and, in such
event, the maximum liability of the
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Indemnifying Party as to such Third Party Claim shall not exceed the amount of
such settlement offer, plus costs and expenses paid or incurred by the
Indemnitee through the end of such ten-day period. The Indemnifying Party will
not, without the written consent of the Indemnitee settle or compromise any
Third Party claim or consent to the entry of any judgment thereon which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnitee of a release from all liability in respect of such
Claim.
(d) Anything in Section 10.4(b) to the contrary notwithstanding, if
the Indemnitee in its sole discretion determines that there is a reasonable
probability that a Claim may adversely affect the Indemnitee other than as a
result of money damages, then the Indemnitee will have the right, upon notice to
the Indemnifying Party, at its own cost and expense, to defend, compromise or
settle such Claim; provided, (x) the Indemnitee shall keep the Indemnifying
Party informed and consult with the Indemnifying Party in connection therewith
and (y) the Indemnitee shall not settle any such claim without the consent of
the Indemnifying Party, which consent shall not be unreasonably withheld.
(e) Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, and in any event not later than 30 calendar days after the Indemnitee
becomes aware of such Direct Claim. If the Indemnifying Party does not so
respond within such 30 calendar day period, the Indemnifying Party shall be
deemed to have rejected such claim, in which event the Indemnitee shall be free
to pursue such remedies as may be available to the Indemnitee under this Article
X.
(f) A failure to give timely notice as provided in this Section 10.4
shall not affect the rights or obligations of any party hereunder except and
only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise directly and materially
damaged as a result of such failure.
10.5 CONDITIONS OF INDEMNIFICATION.
(a) In no event will the Indemnifying party be liable to an
Indemnitee for an aggregate amount exceeding the Purchase Price or for any
Claims of which the Indemnitee did not notify the Indemnifying Party prior to
the survival date therefor in Section 10.1.
(b) Except for a claim by SL for a breach by Datron at Closing of
the representations of Datron contained in Sections 5.1 and 5.19 of this
Agreement, no Indemnitee shall be entitled to make Claim against an Indemnifying
Party pursuant to either Section 10.2(a) or 10.3(a) unless and until the
aggregate amount which may be asserted for Damages for all such Claims pursuant
to each such Section exceeds $175,000 and then, only to the extent of the excess
of the cost of all such Claims over $50,000.
(c) If the amount of any Damages, at any time subsequent to the
making of an Indemnity Payment, is reduced by recovery, settlement or otherwise
under or pursuant to any insurance coverage, or pursuant to any claim, recovery,
settlement or payment by or against any other Person, the amount of such
reduction, less any costs, expenses or premiums incurred in
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connection therewith (together with interest thereon from the date of payment
thereof at a rate equal to Citibank, N.A.'s prime rate), shall promptly be
repaid by the Indemnitee to the Indemnifying Party.
(d) If the amount of Damages is reduced in the year in which an
Indemnity Payment is made therefor as a result of a tax benefit to the
Indemnitee determined by (x) subtracting from such Damages the amount of any tax
benefit resulting from a tax deduction and (y) adding to Damages the amount of
any additional tax liability caused by the Indemnity Payment (the "Reduction"),
then the Indemnity Payment shall be made by the Indemnifying Party after being
adjusted by the Reduction. If the Reduction is realized after the year in which
the Indemnity Payment is made, the Indemnitee shall repay to the Indemnifying
Party promptly after the Reduction is realized, the amount of the Reduction less
any out-of-pocket costs and expenses paid by the Indemnitee to defend the tax
benefit included in the Reduction. To the extent a tax benefit included in a
Reduction for which the Indemnifying Party received a decrease in an Indemnity
Payment is thereafter disallowed (and no challenge or appeal is possible) by a
Governmental Body, then the Indemnifying Party shall pay the Indemnitee the
amount of such decrease which was so disallowed.
All determinations made pursuant to this subsection (d) shall be
made in good faith by the independent public accounting firm then employed by
the Indemnitee. All amounts payable to SL, as Indemnitee, will be treated by the
parties as a reduction of the Purchase Price and not as taxable income to SL.
(e) Upon making any Indemnity Payment the Indemnifying Party shall,
to the extent of such Indemnity Payment, be subrogated to all rights of the
Indemnitee against any Person that is not an Affiliate of the Indemnitee in
respect of the Damages to which the Indemnity Payment relates; provided,
however, that (i) the Indemnifying Party shall then be in compliance with its
obligations under this Agreement in respect of such Damages and (ii) until the
Indemnitee recovers full payment of the Cost of such Damages, any and all claims
of the Indemnifying Party against any such Person on account of said Indemnity
Payment shall be subrogated and subordinated in right of payment to the
Indemnitee's rights against such Person. Without limiting the generality or
effect of any other provision hereof, each such Indemnitee and Indemnifying
party shall duly execute upon request all instruments reasonably necessary to
evidence and perfect the above-described subrogation and subordination rights.
ARTICLE XI
THIS ARTICLE IS INTENTIONALLY OMITTED
ARTICLE XII
MISCELLANEOUS
12.1 EXPENSES.
Except as otherwise provided herein, all fees and expenses incurred by
Datron in connection with this Agreement and the Transactions will be borne by
Datron. All such fees and
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expenses incurred by SL, as well as all taxes and fees to transfer the Ownership
Interest will be borne by SL.
12.2 FURTHER ASSURANCES.
Each party shall agree that from time to time, at the request the other
party hereto to execute and deliver such other documents and take such other
action (without cost to the party executing documents and taking action), as
such other party may reasonably request in order to consummate more effectively
the Transactions and to carry out the intent of this Agreement.
12.3 PARTIES IN INTEREST.
This Agreement will be binding upon, inure to the benefit of and be
enforceable by the respective successors, heirs and permitted assigns of the
parties hereto. The rights and obligations of Datron on the one hand and SL on
the other hand may not be assigned without the prior written consent of the
other.
12.4 ENTIRE AGREEMENT; AGREEMENT GOVERNS; AMENDMENTS.
This Agreement, the exhibits, schedules and other writings referred to
herein or delivered pursuant hereto which form a part hereof, contain the entire
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to its subject matter, whether written or oral. Since the entire
understanding of the parties relating to the subject matter of this Agreement is
set forth herein, the parties intend that any and all claims related thereto
(other than claims arising from fraud) shall be governed by the terms of this
Agreement. The foregoing notwithstanding, the provisions of the Confidentiality
Agreement dated September 15, 1997, ("Confidentiality Agreement") between SL
Industries and Datron shall continue to be effective. In the event of a conflict
between the provisions of the Confidentiality Agreement and this Agreement, the
provisions of this Agreement shall prevail. This Agreement may be amended only
by a written instrument duly executed by the parties. Any condition to a party's
obligations hereunder may be waived in writing by such party.
12.5 SEVERABILITY.
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
12.6 ARTICLE AND SECTION HEADINGS; CONSTRUCTION.
The headings of Articles and Sections in this Agreement are inserted only
as a matter of convenience and will not affect in any way the meaning or
interpretation of this Agreement. All references to "Section" or "Sections," or
"Article" or "Articles" refer to the corresponding Section or Sections, or
Articles or Articles of this Agreement. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
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12.7 NOTICES.
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt) or (c) when received by the addressee, if
sent by a nationally recognized overnight delivery service (receipt requested),
or an internationally recognized express service (receipt requested) in each
case to the appropriate addresses and telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may designate by notice
to the other parties):
If to SL:
c/o SL Industries
000 Xxxxxxxxxx Xxxx, Xxxxx X-000
Xx. Xxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile No. (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Bockius, LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. XxXxxxxx, Xx.
Facsimile No.: (000) 000-0000
If to Datron:
0000 X. Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Vice-President of
Finance
Facsimile No.: (000) 000-0000
with a copy to:
0000 X. Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, General Counsel
Facsimile No.: (000) 000-0000
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
12.8 GOVERNING LAW.
This Agreement will be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware without regard to its
conflicts of law rules. Any legal action brought by either party to enforce any
of the terms of this Agreement or for the performance or
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nonperformance thereof shall be instituted in the appropriate state or federal
court located in Delaware, and for that purpose each party submits itself to the
jurisdiction of said courts.
12.9 PUBLIC DISCLOSURE.
The parties will consult with each other and agree on desirability, timing
and substances of any press releases or public announcements or other
disclosures to the public, including announcement to employees, relating to the
Transactions.
12.10 COUNTERPARTS.
This Agreement may be executed simultaneously in several counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument. This Agreement shall not be binding on
any of the parties hereto unless and until this Agreement or a counterpart
hereof shall be signed by all parties.
12.11 GOOD FAITH.
The parties shall act in good faith in the performance of their
obligations under this Agreement.
12.12 FACSIMILE EXECUTION.
To evidence the fact that it has executed this Agreement, each party may
send a copy of its executed counterpart to the other party by facsimile
transmission. That party shall be deemed to have executed this Agreement on the
date it sent such facsimile transmission. In such event, such party shall
forthwith deliver to the other party the counterpart of this Agreement executed
by such party.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by a duly authorized officer of SL and a duly authorized officer of
Datron on the date first above written.
DATRON INC.
By: /s/ XXXXXX XXXXXX
--------------------------
Xxxxxx Xxxxxx
Vice President
SL INDUSTRIES VERTRIEB, GmbH
By: [SIGNATURE]
--------------------------
Name:
Title:
35
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by a duly authorized officer of SL and a duly authorized officer of
Datron on the date first above written.
DATRON INC.
By:
--------------------------
Xxxxxx Xxxxxx
Vice President
SL INDUSTRIES VERTRIEB, GmbH
By: [SIGNATURE]
--------------------------
Name: Xxxx Xxxxxx
Title:
36
DISCLOSURE SCHEDULE
Section 3.3(b) Amounts Due from EME to Datron
Section 5.2 Consents
Section 5.4 Capitalization
Section 5.5 Subsidiaries, Partnerships and Cooperative Arrangements
Section 5.6 Exceptions to "No Violation" Representation
Section 5.7 Certain Inventory
Section 5.9 Liabilities
Section 5.11 Absence of Changes
Section 5.12 Title Exceptions and Encumbrances
Section 5.13 Fixed Assets
Section 5.15 Accounts Receivable
Section 5.16 Accounts Payable
Section 5.17 Intellectual Property
Section 5.18 Leases
Section 5.20 Litigation
Section 5.21 Employment Matters
Section 5.22 Contracts and Commitments
Section 5.23 Bank Accounts
Section 5.25 Consents, Approvals and Governmental Authorizations
Section 5.27 Payments to Datron
Section 5.28 Insurance
Section 5.28(c) Insurance Claims and Loss Experiences
Section 5.28(d) Exceptions to Effectiveness of Policies
Section 5.29 Environmental Matters
Capitalized terms defined in the Purchase Agreement shall have the same defined
meanings when capitalized and used herein.
