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Exhibit 10.1(a)
AMENDED AND RESTATED AGREEMENT REGARDING
THE ESTABLISHMENT OF A SILENT PARTNERSHIP BETWEEN:
1. Xxxxx-Sundstrand GmbH & Co., an offene Handelsgesellschaft organized
under the laws of the Federal Republic of Germany with headquarters in
Neumuenster, represented by one of its principals, Xxxxx-Sundstrand GmbH, in
turn represented by Xxxxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxxx (the "Operating
Company"),
2. Xxxxx GmbH & Co. Hydraulik KG, legal successor of Sundstrand-Xxxxx
Company, represented by Xx. Xxxxx Xxxxxxx ("Hydraulik"),
3. Xxxxx GmbH, represented by Xxxxxx Xxxxxxxxxxx and Dirk Renders
("SG"), the parties listed in 1-3 being the partners of the Silent Partnership,
4. Xxxxx Inc., a Delaware corporation and a principal of the Operating
Company, represented by Xx. Xxxxx Xxxxxxx ("Xxxxx"), as an additional party,
and
5. Xxxxx-Sundstrand GmhH, a principal of the Operating Company,
represented by Xxxxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxxx ("Xxxxx-Sundstrand"), as
an additional party.
WHEREAS
In view of the initial public offering by Xxxxx and several selling
stockholders of shares of Xxxxx Common Stock, the parties have agreed to amend
and restate in its entirety the Contract regarding the Creation of a Minority
Interest Relationship dated December 15, 1989 among the Operating Company,
Sundstrand-Xxxxx Company and SG regarding the establishment of an atypical
silent partnership between the Operating Company and the two silent partners
(the "Silent Partnership Agreement").
WHEREAS
At the founding of the silent partnership, the Operating Company and
the U.S. operating company of Xxxxx Sundstrand Group (as defined herein) were
assessed to have equal market value. The parties had agreed to avoid conflicts
of interest within the Xxxxx-Sundstrand Group. Such conflicts might result when
the General Partners of the Operating Company make investment decisions that
favor either the Operating Company or other enterprises of the Xxxxx-Sundstrand
Group. The parties therefore agreed that the silent partners' share in the
profit or loss of the Operating Company was not to be determined solely by the
Operating Company's financial results, but by taking into account the financial
results of Xxxxx, on a consolidated basis.
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At the founding of the Silent Partnership on December 15, 1989, the
value of the silent partnership was assessed to be equal to that of 180 shares
of Xxxxx Common Stock. Its participation in the results therefore were expressed
by the ratio of 180 shares over the total number of outstanding shares plus the
180 shares of the silent partners, a ratio that will become smaller in
proportion to Xxxxx'x increase in capital in the initial public offering.
In addition to the other amendments contained herein, to prevent any
reduction, resulting from the above mentioned investment decisions, in the value
of the silent partners' interests in the silent partnership upon a termination
or liquidation thereof, Section 12 of the original Silent Partnership Agreement
shall be amended and restated as provided herein.
Therefore, the parties agree to amend and restate in its entirety the
Silent Partnership Agreement as follows:
Section 1.
1. The Operating Company is in the business of designing,
manufacturing, selling and licensing hydraulic systems and components, including
without limitation, hydrostatic, hydromechanical and mechanical transmissions,
hydraulic parts, open circuit piston pumps, gear pumps and motors, valves,
mechanical gear boxes and controls and other related products for transmissions
and mechanical engineering.
2. Since January 1, 1990, Hydraulik or its predecessor and SG have
participated in the business of the Operating Company as silent partners. This
silent partnership shall be continued between the Operating Company as the owner
of the business on one side and Hydraulik and SG as silent partners on the other
side. As of the date hereof, the silent partnership shall, however, be governed
by this amended Agreement.
3. The fiscal year of the silent partnership shall be the same as the
fiscal year of the Operating Company.
4. Subject to earlier termination as provided herein, the silent
partnership shall have a term expiring December 31, 2016, which shall
automatically be renewed for successive one year terms until terminated pursuant
to Section 2.2(a)(vii) or 2.2(d)
Section 2.
1. The silent partnership or a silent partnership interest can be
terminated by the Operating Company or the silent partners only as provided in
this Section 2.
2. (a) The Operating Company may terminate the silent
partnership and the silent partnership interests in
exchange for the consideration specified in
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Section 11.1 for cause as provided in Section 723 of
the German Federal Civil Law ("BGB") and in any of
the following instances:
(i) the transfer of a silent partnership
interest, in whole or in part (or any voting
rights in respect thereof) to a person other
than a member of the Murmann family;
(ii) termination of the silent partnership
interests and termination of the silent
partnership, directly or indirectly, at the
instance of the silent partners;
(iii) the sale of a majority in book value of the
assets of Xxxxx and its subsidiaries on a
consolidated basis, sale of assets of Xxxxx
and its subsidiaries that generated in the
preceding fiscal year a majority of the
revenues of Xxxxx on a consolidated basis or
a merger or similar transaction involving
Xxxxx in which Xxxxx is not the survivor; in
such case the termination shall occur
concurrently with the consummation of the
sale, merger or similar transaction and the
Operating Company shall give the silent
partners as much notice of its election to
terminate the silent partnership and the
silent partners' interests as is reasonably
practical;
(iv) the proposed acquisition by exchange offer
or tender offer of at least a majority of
the outstanding shares of Xxxxx Common
Stock, provided that the termination of the
silent partnership and the silent
partnership interests may not be effected
pursuant to this provision unless the
acquisition of at least a majority of the
outstanding Xxxxx Common Stock is completed,
in which case such termination shall occur
concurrently therewith; in the case of such
offer the Operating Company shall give the
silent partners as much notice of its
election to terminate the silent partners'
interests as is reasonably practical;
(v) the withholding of consent by a silent
partner under Section 4.1(a), (b) and (d)
below where the effect is adverse to the
interests of the shareholders of Xxxxx;
(vi) the decline in the Murmann family's
beneficial ownership (either economic or
voting) of Xxxxx Common Stock to less than
50.1% of the outstanding shares of Common
Stock; provided that the election to
terminate the silent partnership and silent
partnership interests is made within six
months after the later of (1) the
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disposition of ownership resulting in
beneficial ownership of less than 50.1% of
the outstanding Common Stock and (2) written
notice of the disposition being provided to
the independent directors of Xxxxx; and that
in determining the Murmann family's
beneficial ownership, all shares owned by
the Murmann family under contract of sale or
option to sell and an amount equal to any
short position of any member of the Murmann
family in Xxxxx Common Stock shall be
deducted; or
(vii) at any time after December 31, 2016, upon
three months' notice to the silent partners.
(b) The Operating Company may elect to terminate the
silent partnership and the silent partnership
interests in exchange for the consideration specified
in Section 11.2 at any time upon three months' notice
to the silent partners.
(c) Any election by the Operating Company pursuant to
subsection 2(a) or 2(b) above shall be with respect
to all silent partnership interests in the Operating
Company; the Operating Company may not elect to
terminate less than all the silent partnership
interests existing at the time of the election.
(d) The holders of a majority of the outstanding silent
partnership interests may elect to terminate the
silent partnership and the silent partnership
interests in exchange for the consideration specified
in Section 11.1 below for cause as provided in
Section 723 BGB and at any time upon three months'
notice to the Operating Company, or such shorter time
as may be acceptable to the Operating Company.
3. For purposes of this Agreement, as provided in the Operating
Partnership Agreement, the Operating Company's election to terminate the silent
partnership and silent partnership interests means an election proposed by an
independent director of Xxxxx that has been approved by the vote of a majority
of the independent directors of Xxxxx or by the holders of at least a majority
of the outstanding Xxxxx Common Stock that is not owned, directly or indirectly,
by the Murmann family.
4. The provisions of this Section 2 providing for termination of this
Agreement at the election of the Operating Company and of Section 11 providing
for payments upon such termination are intended to be for the benefit of holders
of Xxxxx Common Stock (other than the Murmann family), and are to be enforceable
on their behalf as provided in Section 2.3. The silent partners acknowledge
that, damages being an inadequate remedy in the
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circumstances, the independent directors of Xxxxx may enforce the obligations of
the silent partners under Sections 2 and 11 in an action for an injunction or
specific performance in a court in Kiel, Germany. The silent partners agree to
provide prompt written notice of any event or proposed action known to them of
the type referred to in Section 2.2(a) to the independent directors of Xxxxx in
order to enable them to determine whether to exercise the Operating Company's
rights to terminate the silent partnership, provided that no notice will be
required if the silent partners know that the independent directors are aware of
any such event or proposed action.
Section 3.
1. Hydraulik has made a capital contribution in the amount of DM
12,350,000 that constitutes Hydraulik's fixed capital account for purposes of
Section 6.2 hereof.
2. SG has made a capital contribution in the amount of DM 650,000 that
constitutes SG's fixed capital account for purposes of Section 6.2 hereof.
Section 4.
1. The Operating Company will conduct its own affairs. The following
events require the consent of each silent partner:
(a) changing the business purpose of the Operating Company from
that specified in Section 1 hereof or its legal form;
(b) admitting additional silent partners; the transfer of all or
any portion of a silent partnership interest to any entity
that is included within the Murmann family, will not require
the consent of other silent partners under this Section;
(c) amendment of the Operating Partnership Agreement in a manner
that adversely affects the silent partnership interests;
(d) actions outside the ordinary course of business of the
Operating Company; or
(e) dissolution or partial dissolution of the Operating Company.
2. In the event the Operating Company intends to undertake any of the
above actions, the silent partners must be notified and must be sent a request
for their approval.
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3. The silent partners must respond without delay. Each of the silent
partners is entitled to inspect all documents related to transactions requiring
such approval. In the event a silent partner fails to respond within four weeks
after notice for approval has been mailed, such approval is considered to have
been granted; this provision has to be explicitly referred to in the notice and
the request for approval.
Section 5.
1. In addition to the information and inspection rights granted by
Section 233 of the Handelsgesetzbuch ("HGB") the German Federal Commercial Law
the rights granted by Section 716 BGB and Section 118 HGB are also owed by the
Operating Company to the silent partners. These rights also include access
rights to all books and documents used in ascertaining income tax, to all tax
balance sheets and the reports on the audits of the annual financial statements.
The rights also extend to the period after the Operating Company's dissolution
to the extent necessary for the examination of the dissolution proceeds.
2. The silent partners may delegate their inspection and information
rights under Section 5.1 to legal or tax counsel, or an auditor.
Section 6.
1. Each silent partner will have a fixed capital account, a private
(current) account and an accumulated loss account as capital accounts in the
Operating Company.
2. The fixed capital account includes the contributed capital of each
silent partner. This account is fixed and bears no interest.
3. The private (current) account includes all profits payable to the
silent partner pursuant to Section 8.3(a) hereof (less withdrawals) and interest
thereon. The balance of the private account, if positive, will bear interest at
the then current "sparbuch" rate of Deutsche Bank. The balance of a private
account, if negative, will be charged interest at a quarterly rate equal to the
average rate of interest paid by the Operating Company during the preceding
quarter for its outstanding senior unsecured debt or, if no such debt is
outstanding, at the then current "sparbuch" rate of Deutsche Bank.
4. The accumulated loss account will include the silent partner's share
in any loss(es) pursuant to Section 8.3(b). In the event the accumulated loss
account is in debit, all profit that would otherwise be included in the private
account will be credited to the accumulated loss account until such loss account
balance is zero.
5. Profits (losses) will be posted annually upon approval of the
financial statements of the Operating Company by the Operating Company's general
partners. Interest on any
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profit allocated to the private account will begin to accrue as of the January
1st following the year to which the profit is attributable. Interest on any
negative balance of a private account will be charged from the time the account
balance becomes negative.
Section 7.
1. According to the commercial and tax laws of the Federal Republic of
Germany, the Operating Company must keep books and prepare an annual statement
of accounts. The Operating Company is also obliged to fulfill this duty for the
benefit of the silent partners.
2. Within six months after the end of the fiscal year, the Operating
Company must prepare financial statements; such statements must be mailed to the
silent partners. The silent partners may each make objections within four weeks
after receipt of the report. Thereafter, the report is considered accepted.
3. The annual financial statements of the Operating Company must be in
accordance with bookkeeping principles of German commercial law and accounting
("GoB"). In addition, the report has to be prepared in accordance with
regulations regarding income tax-related determination of profit. The GoB
financial statements of the Operating Company shall be used to determine the
profit or loss of the Operating Company for purposes of the silent partnership.
German tax law will be observed in the preparation of such financial statements.
Section 8.
1. The parties agree that conflicts of interest among Xxxxx and its
subsidiaries and affiliates (the "Xxxxx-Sundstrand Group") should be avoided.
Such conflicts might result when the general partners of the Operating Company
make investment decisions that favor either the Operating Company or other
enterprises of the Xxxxx-Sundstrand Group. In view of the strong
interconnections within the Xxxxx-Sundstrand Group, the parties agree that the
silent partners' share in the profit or loss of the Operating Company is not to
be determined solely by the Operating Company's financial results, but, by
taking into account the financial results of Xxxxx, on a consolidated basis, as
determined under U.S. generally accepted accounting principles, as from time to
time in effect, and audited by an internationally recognized independent
accounting firm.
2. The silent partners' total share of the Operating Company's annual
profit or loss will be an amount equal to Xxxxx'x consolidated income (loss)
before the silent partners' share in the profit (loss) of the Operating Company
and before taxes as determined under U.S. generally accepted accounting
principles in effect from time to time ("GAAP") (except as set forth in the
proviso hereto) as derived from Xxxxx'x audited financial statements ("Xxxxx'x
EBMIT") multiplied by the ratio of 180 shares/180 shares + the weighted daily
average
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number of outstanding shares of Xxxxx Common Stock during Xxxxx'x fiscal year
(the "Annual Allocation"); provided that, in calculating Xxxxx'x EBMIT for
purposes of determining the Annual Allocation, (i) depreciation, if any, on the
Neumunster Facility and (ii) any profits from a sale of the Neumunster Facility
shall, in each case, be determined in accordance with GoB rather than GAAP.
Distribution of the Annual Allocation between the silent partners will be
pursuant to subsection 3 below. The 180 shares and the average number of
outstanding shares of Xxxxx Common Stock are subject to adjustment to reflect
stock splits, reverse stock splits and dividends payable in Xxxxx Common Stock.
Xxxxx'x EBMIT will be translated into Deutsche marks using the exchange rate as
of the last day of the Operating Company's fiscal year.
3. The following is agreed to be a fair and appropriate method of
calculating the silent partners' share in the Operating Company's profit (loss),
as used in Section 231 HGB:
(a) In the event Xxxxx'x EBMIT is positive, an amount
equal to 19/20 of the Annual Allocation will be
allocated to Hydraulik's private (current) account,
and an amount equal to 1/20 of the Annual Allocation
will be allocated to SG's private (current) account,
as provided below:
(i) in the event the Operating Company has a
profit that is equal to or larger than the
Annual Allocation, the amounts specified
above shall be credited to the silent
partners' private accounts and the balance
shall be allocated to the General Partners
as provided in the Operating Partnership
Agreement;
(ii) in the event the Operating Company has a
profit that is smaller than the Annual
Allocation, 1/20 of the Operating Company's
profit shall be credited to SG and 19/20 of
the Operating Company's profit shall be
credited to Hydraulik. The difference
between the Operating Company's profits and
the Annual Allocation will be allocated to
the General Partners as an Operating Company
loss in accordance with the Operating
Partnership Agreement and credited to the
private accounts of the silent partners,
19/20 to Hydraulik, 1/20 to SG; and
(iii) in the event the Operating Company has a
loss, the General Partners must bear the
loss and the Annual Allocation shall be
credited to the silent partners as provided
above by an amount equal to the Annual
Allocation being allocated to the General
Partners as an Operating Company loss in
accordance with the Operating Partnership
Agreement and credited to the private
accounts of the silent partners, 19/20 to
Hydraulik, 1/20 to SG.
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(b) In the event Xxxxx'x EBMIT is negative, Hydraulik
will have allocated to its accumulated loss account
an amount equal to 19/20 of the Annual Allocation,
and SG will have allocated to its accumulated loss
account an amount equal to 1/20 of the Annual
Allocation as provided below:
(i) in the event the Operating Company has a
loss the absolute value of which is equal to
or larger than the absolute value of the
Annual Allocation, the silent partners shall
bear the loss as provided above in an amount
equal to the Annual Allocation, and the
General Partners shall bear the remaining
loss in accordance with the Operating
Partnership Agreement;
(ii) in the event the Operating Company has a
loss the absolute value of which is smaller
than the absolute value of the Annual
Allocation, SG shall bear 1/20 of such loss
and Hydraulik 19/20 of such loss as provided
above. The difference between the Annual
Allocation and the Operating Company's loss
shall also be charged to the accumulated
loss accounts of the silent partners (1/20
to SG and 19/20 to Hydraulik) and will be
allocated to the General Partners as an
Operating Company profit in accordance with
the Operating Partnership Agreement; and
(iii) in the event the Operating Company has a
profit, the Operating Company's profit will
be fully credited to the General Partners as
provided in the Operating Partnership
Agreement. 1/20 of the Annual Allocation
will be allocated to SG's accumulated loss
account and 19/20 of the Annual Allocation
will be allocated to Hydraulik's accumulated
loss account as provided above. An amount
equal to the Annual Allocation will be
allocated to the General Partners as an
Operating Company profit in accordance with
the Operating Partnership Agreement.
4. Losses in excess of the amount of the capital contribution of the
silent partners will be debited to their accumulated loss accounts.
Section 9.
The silent partners can freely withdraw funds from their private
(current) accounts.
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Section 10.
A silent partnership interest and any voting rights with respect
thereto can only be transferred with the permission of both the Operating
Company and all other silent partners, except that a transfer of such interest
or voting right to any entity that is included within the Murmann family as
defined in Section 14.4 shall not require the permission of either the Operating
Company or other silent partners. Any person who acquires ownership of a silent
partnership interest shall be subject to and bound by all the provisions of this
Agreement as if originally a party to this Agreement.
Section 11.
In the event the silent partnership and the silent partnership
interests are terminated pursuant to Section 2 above or in connection with the
dissolution in whole or in part of the Operating Company, the silent partners
will receive only the consideration specified in subsections 1 or 2 below, in
exchange for, and in full satisfaction of, all their rights in, and claims
against, the Operating Company and the General Partners.
1. In the event of a termination of the silent partnership interests
for cause or pursuant to Section 2.2(a) or 2.2(d) above, each silent partner
shall receive the net balance in its private account and its respective portion
of 180 shares of Xxxxx Common Stock (adjusted to reflect stock splits, reverse
stock splits and dividends payable in Xxxxx Common Stock) allocated between the
silent partners as set forth in subsection 4 below.
2. In the event of a termination of the silent partnership interests
pursuant to Section 2.2(b) above, each silent partner shall receive the net
balance in its private account and its respective portion of 180 shares of Xxxxx
Common Stock (adjusted to reflect stock splits, reverse stock splits and
dividends payable in Common Stock) allocated between the silent partners as set
forth in subsection 4 below. In addition, each silent partner that is, at the
time of the termination, a member of the Murmann family shall receive an amount
in cash equal to the German income tax payable by such silent partner directly
as a result of such exchange, without gross-up to pay any additional tax on the
amount so received, provided that in no event will the amount payable by the
Operating Company in respect of the tax exceed in the aggregate for all silent
partners $__________.
3. Dissolution of the Operating Company will be deemed an election to
terminate the silent partnership interests under Section 2.2(b) unless the
circumstances of the dissolution fall within the provisions of Section 2.2(a),
in which case dissolution shall be deemed a termination under Section 2.2(a).
Accordingly, in the case of a dissolution of the Operating Company, the silent
partners shall receive only the consideration set forth in 1 or 2 above, as the
case may be, and shall not share in the proceeds from the liquidation of the
business.
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4. The shares of Xxxxx Common Stock to be given to the silent partners
pursuant to subsection 1 or 2 above shall be distributed 1/20 to SG and 19/20 to
Hydraulik.
Section 12.
1. This Agreement may only be changed with the written consent of all
parties, including Xxxxx.
2. This Agreement states the entire agreement among the parties and
supersedes any and all prior agreements, understandings and representations made
by any party hereto, including, without limitation, the Silent Partnership
Agreement. Changes or amendments to this Agreement, including without
limitation, this Section 12, must be made in writing.
3. This Agreement shall be deemed to have been entered into and shall
be construed and enforced in accordance with the laws of the Federal Republic of
Germany.
Section 13.
Every provision of this Agreement is intended to be severable, and, if
any term or provision of this Agreement is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement. Such an inoperative provision will
be replaced by one coming closest to one the parties would have agreed on, if
their business purpose is kept in mind; the same consideration applies in case
this Agreement does not address a specific point.
Section 14.
As used in this Agreement, the following terms shall have the following
meanings:
1. Agreement shall mean this amended and restated agreement as may be
amended from time to time.
2. General Partners shall mean Xxxxx Inc. and Xxxxx-Sundstrand, the
general partners of Xxxxx-Sundstrand GmbH & Co. and their respective successors,
if any, under the Operating Partnership Agreement.
3. Independent director shall mean a person who is neither a member of
Murmann family nor is otherwise related by blood or marriage to the Murmann
family, nor has ever been an employee of Xxxxx, any of its subsidiaries or
affiliates, or any company owned or controlled by any member of the Murmann
family.
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4. Murmann family shall mean Xxxxx Xxxxxxx, his spouse, Xxxxxxx
Xxxxxxxx, Xxxxxxxx Xxxxxxxx and each of the direct descendants and spouses of
any of the foregoing, persons inheriting from any of the foregoing under estate
laws, any company at least 90% of the beneficial interests and voting rights are
owned or held by the foregoing and any fiduciary acting under any instrument as
to which the foregoing represents 90% or more of the beneficial interests.
5. Neumunster Facility shall mean the Operating Company's principal
operating facility on the date of this agreement, which is located in
Neumunster, Germany.
6. Operating Company shall mean Xxxxx-Sundstrand GmbH & Co.
7. The Operating Partnership Agreement shall mean the general
partnership agreement between SG and Xxxxx, dated as of __________ and amended
by Amendment No. 1, dated as of January 29, 1990, and as amended and restated as
of April __, 1998, as may be further amended from time to time.
8. Xxxxx Common Stock shall mean the Common Stock, par value .01 per
share, of Xxxxx Inc.
9. Silent partners shall mean Xxxxx GmbH & Co. Hydraulik KG and Xxxxx
GmbH and their successors, if any.
10. Transfer, when used with respect to partnership interests or
shares, shall include any sale, contract or option to sell or purchase,
mortgage, hypothecation, pledge, encumbrance or direct or indirect transfer of
any economic interest in such interests or shares.
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Neumuenster, April __, 1998
XXXXX SUNDSTRAND GMBH & CO.
By ___________________________
XXXXX GMBH & CO. HYDRAULIK KG
By ___________________________
XXXXX GMBH
By ___________________________
XXXXX INC.
By ___________________________
XXXXX-SUNDSTRAND GMBH
By ___________________________
