EXHIBIT 2.1
AGREEMENT
among
VARTA AG, Hannover/Germany
and
Rayovac Corporation, Madison, Wisconsin, USA
and
ROV German Limited GmbH
dated July 28, 2002
regarding a joint venture in the portable battery business
TABLE OF CONTENTS PAGE
Recitals...................................................................................................6
Article 1 Definitions.....................................................................................10
Article 2 Formation of Joint Venture and Strategic Partner's Contribution.................................12
2.1 Sale of Shares in Non-German Subsidiaries/Purchase Price Allocation...........................12
2.2 Capital Increase, Subscription to New Shares..................................................12
2.3 Purchase of Closing Date Inter-Group Debt.....................................................14
2.4 Interest Bearing Third-Party Debt as of the Closing Date......................................15
2.5 Termination of Control and Profit Transfer Agreement, Profit Distribution.....................15
2.6 Closing Date Financial Statements.............................................................17
2.7 Adjustment Payment............................................................................18
2.8 Payments, Interest............................................................................19
2.9 Escrow Account I..............................................................................20
Article 3 Closing.........................................................................................20
3.1 Time and Place of Closing.....................................................................20
3.2 Conditions to Closing.........................................................................21
3.3 Filings under Merger Control Laws.............................................................25
3.4 Actions on the Closing Date...................................................................26
Article 4 Corporate Governance of the Joint Venture.......................................................28
4.1 Managing Directors............................................................................28
4.2 Supervisory Board.............................................................................28
4.3 Rights of Shareholders Meeting................................................................29
4.4 Consultation with VARTA.......................................................................29
4.5 Certain Restructurings and Other Actions after the Closing Date...............................30
4.6 FinanceCo.....................................................................................31
4.7 Shareholders' Rights in Consumer Group between Closing and Registration of Capital Increase...32
Article 5 Representations and Warranties of VARTA.........................................................32
5.1 Organization of the Consumer Group............................................................33
5.2 Ownership of Shares; Shareholdings............................................................34
5.3 Authorization of VARTA, Non-Contravention.....................................................35
5.4 Financial Statements / Equity.................................................................37
5.5 Assets, Encumbrances..........................................................................38
5.6 Intellectual Property Rights / Material Intellectual Property Rights..........................40
5.7 Governmental Permits; Compliance with Laws; Subsidies.........................................41
5.8 Environmental Matters.........................................................................42
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5.9 Litigation, Disputes..........................................................................43
5.10 Employee and Labor Matters....................................................................44
5.11 Material Agreements/Arrangements with Microlite...............................................45
5.12 Finders' Fees.................................................................................47
5.13 Insurance Coverage............................................................................48
5.14 Product Liability.............................................................................48
5.15 Conduct of Business since December 31, 2001...................................................48
5.16 Major Customers and Suppliers.................................................................50
5.17 VARTA's Knowledge.............................................................................50
5.18 Limitation of Warranties......................................................................50
Article 6 Representations and Warranties of Strategic Partner.............................................51
6.1 Incorporation, Authorization, Non-Contravention...............................................51
6.2 Litigation....................................................................................52
6.3 Financial Capability..........................................................................52
Article 7 Covenants.......................................................................................52
7.1 Conduct of Business of Consumer Group to the Closing Date.....................................52
7.2 Covenant not to Compete.......................................................................54
7.3 Confidentiality...............................................................................55
7.4 Release of VARTA Guarantees...................................................................55
7.5 Loan to VARTA/Strategic Partner...............................................................56
7.6 Additional Agreements, Financing..............................................................57
7.7 Access to Information.........................................................................58
7.8 Cooperation...................................................................................59
7.9 Financial Statements..........................................................................59
7.10 Check-the-Box Election........................................................................60
7.11 Minority Shares/VARTA Directors...............................................................61
7.12 Financing.....................................................................................61
Article 8 Legal Consequences..............................................................................62
8.1 Compensation of Losses/Indemnification by VARTA...............................................62
8.2 Limitation Periods............................................................................66
8.3 Procedures....................................................................................67
8.4 No Additional Rights or Remedies..............................................................68
8.5 Indemnification by Strategic Partner..........................................................69
Article 9 Trademark, Use of the Firm and Use of the Domains/Website.......................................70
9.1 Trademarks....................................................................................70
9.2 Company Name..................................................................................70
Article 10 Taxes..........................................................................................71
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10.1 Definitions...................................................................................71
10.2 Tax Representations...........................................................................71
10.3 Preparation of Tax Returns and Payment of Tax.................................................72
10.4 Tax Refunds...................................................................................73
10.5 Tax Indemnification...........................................................................73
10.6 Indemnification Procedures....................................................................74
10.7 Limitations...................................................................................75
10.8 Cooperation on Tax Matters....................................................................75
Article 11 Termination of Joint Venture, Exit Rights......................................................75
11.1 Right to Terminate............................................................................75
11.2 Notice of Termination.........................................................................76
11.3 Consequences of Termination...................................................................76
11.4 Implementation of Termination.................................................................77
11.5 Representations and Warranties of VARTA.......................................................78
Article 12 Termination of Agreement Prior to Closing......................................................78
12.1 Right to Terminate............................................................................78
12.2 Consequences of Termination...................................................................79
12.3 Surviving Provisions..........................................................................80
Article 13 Miscellaneous..................................................................................80
13.1 Notices.......................................................................................80
13.2 Assignments...................................................................................81
13.3 No Third Party Beneficiaries..................................................................81
13.4 Public Disclosure.............................................................................81
13.5 Taxes and Expenses............................................................................81
13.6 Entire Agreement..............................................................................82
13.7 Amendments and Waivers........................................................................82
13.8 Governing Law; Competent Courts...............................................................82
13.9 Interpretation; Exhibits......................................................................82
13.10 Severability..................................................................................83
13.11 XXXXX Comfort Letter; Guarantee by Strategic Partner..........................................83
13.12 Designated Purchaser..........................................................................84
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EXHIBITS*
--------
Exhibit R-1 Corporate chart of the Consumer Group
Exhibit R-2 Description of the entities of the Consumer Group
Exhibit 2.1 Share purchase agreements regarding shares in non-German subsidiaries (including
NewCos) / Purchase price allocation
Exhibit 2.2 (a) (1), (2) Shareholder resolution on capital increase; amended articles of association
Exhibit 2.2 (b) Subscription agreement
Exhibit 2.2 (c) Contribution agreement
Exhibit 2.2 (d) Form of filing of capital increase with the commercial register
Exhibit 2.2 (f) Share purchase and transfer agreement regarding FinanceCo Minority Share
Exhibit 2.6 (b) Accounting Principles
Exhibit 2.9 Escrow Agreement I
Exhibit 4.5 (a) Documentation of KGaA transformation
Exhibit 4.5 (b) Form of Profit Transfer Agreement between German Limited and VARTA Consumer
Exhibit 4.6 (e) Articles of association of FinanceCo
Exhibit 4.6 (f) Profit Transfer Agreement between VARTA Consumer and FinanceCo
Exhibit 5.17 VARTA's knowledge
Exhibit 7.5 (a) (1) Form of loan agreement between German FinanceCo. and VARTA
Exhibit 7.5 (a) (2) Form of a loan agreement between ROV German General Partner GmbH and VARTA
Exhibit 7.5 (b) Form of loan agreement between FinanceCo and Strategic Partner/Designee
Exhibit 7.5 (c) Form of loan agreement between VARTA Consumer and VARTA
Exhibit 8.1 (k) Escrow Agreement II
Exhibit 9.1 Trademark and Domain Names Protection and Delimination Agreement
Exhibit 11.3 (e) Guarantee of option purchase price by FinanceCo
Exhibit 13.11 (a) XXXXX comfort letter
* Exhibits to the Agreement have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Registrant agrees to furnish supplementally a copy of any
omitted exhibit to the Commission upon request.
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This Agreement is entered into on this 28 day of July 2002, by and among
(i) VARTA AG, a stock corporation incorporated under German law, registered
in the commercial register of the local court of Hanover/Germany under
no. HRB 55132,
(hereinafter referred to as "VARTA")
(ii) Rayovac Corporation , a corporation incorporated under Wisconsin law
(hereinafter referred to as "STRATEGIC PARTNER")
and
(iii) ROV German Limited GmbH, a limited liability company incorporated under
German law, registered in the commercial register of the local court of
Wiesbaden/Germany under no. HRB 13067 (with its registered seat to be
changed to Frankfurt am Main)
(hereinafter referred to as "GERMAN LIMITED")
VARTA, Strategic Partner and German Limited are hereinafter
collectively referred to as the "PARTIES".
RECITALS
1. VARTA and Strategic Partner are engaged in the business of development,
design, production, engineering and distribution of portable consumer
batteries and related products.
2. The European and certain Latin and North American activities of VARTA
in the portable battery business are conducted by VARTA Geratebatterie
GmbH, a limited liability company incorporated under German law,
registered in the commercial register of the local court of
Hannover/Germany under no. HRB 55848 (hereinafter referred to as "VARTA
GERATEBATTERIE") and its subsidiaries. VARTA Geratebatterie and its
subsidiaries constitute the consumer division of VARTA.
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3. VARTA is the sole shareholder of VARTA Geratebatterie, which has a
registered share capital of DM 90,000,000 (EUR 46,016,269.31), divided
into two shares in the nominal amount of DM 50,000 (EUR 25,564.59) and
DM 89,950,000 (EUR 45,990,704.71), each held by VARTA. The registered
headquarters of VARTA Geratebatterie are in Hannover/Germany. A control
and profit transfer agreement is in place between VARTA and VARTA
Geratebatterie, which will be terminated, after a change of the fiscal
year of VARTA Geratebatterie, with effect as of July 31, 2002.
4. The Parties have agreed that, prior to the Closing Date, VARTA
Geratebatterie GmbH will be merged, with economic effect as of July 31,
2002, into a newly established limited liability company (VARTA
Handelsbatterie GmbH with its registered office in Ellwangen registered
with the Local Court of Aalen under HRB 547 E. - "VARTA CONSUMER") with
a share capital of EUR 25,000 (to be increased to EUR 490,000 in
connection with the merger) and a business year beginning on August 1,
and ending July 31. Prior to the effective date of the merger, VARTA
Geratebatterie will sell and transfer to VARTA all of VARTA
Geratebatterie's interest in Microlite as well as in its non-German
subsidiaries, and VARTA Geratebatterie Finanzservice GmbH, a
wholly-owned subsidiary of VARTA Geratebatterie, which holds a 5.3%
interest in VARTA Colombia, at fair market value (EUR 105,359,000 in
the aggregate). The purchase price will not be paid immediately, but
will be offset against VARTA's claim for (i) a transfer of the profits
arising from the sale pursuant to the existing control and profit
transfer agreement with VARTA in the amount of EUR 53,920,000 (such
transfer to take place prior to the registration of the merger) and
(ii) the transfer by VARTA Consumer to VARTA, by way of an interim
dividend, of its capital reserve in an amount of EUR 78,124,000 (to be
resolved after the registration of the merger, but prior to the Closing
Date), resulting in a net receivable of VARTA against VARTA Consumer of
EUR 26,685,000. The corporate structure of the VARTA consumer group,
after this merger and various transfers and restructurings agreed among
the Parties (as described in this Agreement), is set forth in the
corporate chart attached as EXHIBIT R-1 and the list of companies
attached as EXHIBIT R-2.
5. The major manufacturing companies of the VARTA Geratebatterie group are
VARTA Geratebatterie, Pile d'Alsace S.A.S., Breitenbach/France and
VARTA S.A., Colombia. VARTA Geratebatterie, Pile d'Alsace S.A.S. and
VARTA S.A. and all
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other entities referred to in EXHIBIT R-2 which are identified as being
controlled by VARTA Geratebatterie (including also the German and other
European and Latin and North American subsidiaries of VARTA
Geratebatterie or VARTA Consumer and the NewCos as defined below, but
excluding (i) Microlite S.A. and Interelectrica Administra(sigma)ao e
Participacoes Ltda, Brazil (collectively "MICROLITE") and (ii) VARTA
Batteri AB, Sweden) are hereinafter collectively referred to as the
"CONSUMER GROUP" or the "COMPANIES" or individually the "COMPANY".
VARTA, Micro, and all companies controlled by it within the meaning of
Sec. 18 German Stock Corporation Act, other than the Consumer Group,
are referred to herein as the "VARTA GROUP".
6. The activities of VARTA in the micro battery business are conducted by
Microbatterie GmbH ("MICRO"). Micro's business comprises the production
and sale of primary and secondary button cells as well as of other
micro batteries. Since 2001, the micro battery business and the
consumer business of VARTA have been separated; such separation
includes and will have been completed upon (i) the transfer of the
German micro battery business to Micro (as of August 1, 2001); (ii) the
consummation of the sale (prior to the Closing Date at the latest) of
the U.K., French and Italian micro battery business by the respective
Companies in those countries to subsidiaries (U.K.) or branches (France
and Italy) of Micro in such countries, (iii) the consummation of the
sale (prior to the Closing Date ) of the US consumer battery business
owned by Micro's US operations to a newly incorporated company in the
US and of the Scandinavian consumer battery business owned by VARTA
Batteri AB (excluding certain real property and the liabilities
relating thereto) to a newly incorporated company in Denmark and the
Czech consumer battery business to a newly founded company in the Czech
Republic (such acquiring companies as newly incorporated by VARTA prior
to the date hereof referred to herein as "NEWCOS"), and (iv) the sale
and transfer of certain moulds by Microbatterie GmbH to VARTA
Geratebatterie/VARTA Consumer, as well as other transactions as set
forth in Section 5.2 (c) of the Disclosure Letter, prior to the Closing
Date.
7. The Parties have agreed that Strategic Partner will (directly or
indirectly) acquire a controlling interest in the Consumer Group:
(a) On the Closing Date VARTA will sell and transfer to Strategic
Partner or one or more entities affiliated with Strategic
Partner (each, a "DESIGNATED
8
PURCHASER"), all of the shareholdings in the non-German
subsidiaries (including the NewCos, but excluding Microlite
and VARTA Batteri AB) for a purchase price of EUR 86,927,000.
The Parties agree that each Designated Purchaser shall become
a party to this Agreement, provided that Strategic Partner
shall remain jointly and severally liable for all its
obligations hereunder.
(b) VARTA and Strategic Partner will continue the German
activities of the Consumer Group as a joint venture in order
to ensure (i) the smooth separation of VARTA's Micro business
from the Consumer business and (ii) continuity in the
management of the consumer battery business and its relations
with third parties. For this purpose, German Limited will
acquire, by way of a capital increase, a 51% interest in VARTA
Consumer, upon contribution by German Limited to VARTA
Consumer of (i) all shares in a newly incorporated group
finance company (FinanceCo, as defined in Section 2.2 (a)
below) (except for a minority share, which will be
transferred, with effect as of the registration of the capital
increase in the commercial register, to a managing director of
FinanceCo holding such share for the account of VARTA
Consumer) and (ii) a cash amount of EUR 510,000. The
separation of certain funds in FinanceCo has been agreed among
the Parties in order to secure the liquidity of the Consumer
Group and the Parties' compensation rights in the event of a
termination of the joint venture.
(c) VARTA Consumer and Micro shall enter into an exclusive
long-term distribution agreement relating to certain products
of Micro as set forth in Section 7.6 below.
(d) After the Closing Date, VARTA Consumer will be transformed
into a partnership limited by shares (KGAA). VARTA and ROV
Limited will have the right to terminate the joint venture in
VARTA Consumer only subject to certain agreed conditions.
Now, therefore, subject to and on the terms and conditions set forth
herein, the Parties agree as follows:
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ARTICLE 1
DEFINITIONS
1.1 In addition to the definitions of VARTA, Strategic Partner, German
Limited and the Parties in the introductory clause of this Agreement,
the capitalized terms used in this Agreement are defined in the
following clauses:
2001 Financial Statements Section 2.6 (b)
Assumed Financial Debt Section 2.4 (a)
Cap Section 8.1 (e)
Capital Increase Section 2.2 (a)
Cash Section 2.7 (c)
Claim Addressee Section 8.3 (b)
Closing Section 3.1 (a)
Closing Date Section 3.1 (c)
Closing Date Financial Statements Section 2.6 (a)
Closing Date Inter-Group Debt Section 2.3 (b)
Companies Recitals, paragraph 5
Company Recitals, paragraph 5
Consumer Group Recitals, paragraph 5
Consumer Group Guarantees Section 7.13 (b)
CPA Firm Section 2.6 (d)
Deductible Section 8.1 (e)
Designated Purchaser Recitals, paragraph 7 (a)
Environmental Contamination Section 5.8 (b) (ii)
Environmental Laws Section 5.8 (a)
Escrow Account I Section 2.9
Escrow Account II Section 8.1 (k)
Escrow Agent Section 2.9
Escrow Agreement I Section 2.9
Escrow Agreement II Section 8.1 (k)
Escrow Amount I Section 2.9
Escrow Amount II Section 8.1 (k)
Final Adjustment Amount Section 2.7 (c)
FinanceCo Section 2.2 (a)
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German GAAP Section 2.6 (b)
Governmental Permits Section 5.7 (a)
Income Tax Section 10.1
Intellectual Property Rights Section 5.6 (a)
Key Employees Section 5.10 (b)
Losses Section 8.1 (a)
Major Customers and Suppliers Section 5.11 (a) (6)
Material Adverse Effect Section 5.3 (c)
Material Agreements Section 5.11 (a)
Material Intellectual Property Rights Section 5.6 (a)
Micro Recitals, paragraph 6
Microlite Recitals, paragraph 5
Monthly Management Reports Section 5.4 (c)
NewCos Recitals, paragraph 6
Non-Scheduled-On-Site-Contamination Section 8.1(b)
Off-Site-Contamination Section 8.1(c)
Pre-Closing Date Tax Period Section 10.1
Purchased Receivables Section 2.3 (g)
Returns Section 10.2 (a)
ROV General Partner Section 4.5 (a)
Shares Section 5.2 (a)
Tax Section 10.1
Taxing Authority Section 10.1
Third Party Claim Section 8.3 (b)
Tax Loss Section 10.5 (a)
Transfer Charges Section 13.5
VARTA Consumer Recitals, paragraph 4
VARTA Geratebatterie Recitals, paragraph 2
VARTA Guarantees Section 7.4
VARTA Group Recitals, paragraph 5
1.2 Terms defined in the singular shall have a comparable meaning when used
in the plural, and vice versa.
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ARTICLE 2
FORMATION OF JOINT VENTURE AND STRATEGIC PARTNER'S CONTRIBUTION
2.1 SALE OF SHARES IN NON-GERMAN SUBSIDIARIES/PURCHASE PRICE ALLOCATION
The Parties agree, and shall ensure, that VARTA, and VARTA
Geratebatterie Finanzservice GmbH with respect to VARTA Colombia, shall
sell and transfer to German Limited or one or more Designated
Purchaser, on the Closing Date, all of its shares in its non-German
subsidiaries (not including the shares in Microlite and VARTA Batteri
AB, Sweden), as acquired from VARTA Geratebatterie prior to the Closing
Date (paragraph 4 of the Recitals) for an aggregate preliminary
purchase price of EUR 86,927,000 (subject to any adjustment pursuant to
Section 2.7 below), payable on the Closing Date, pursuant to share
purchase and transfer agreements substantially in the form as attached
hereto as EXHIBIT 2.1. The purchase price shall be allocated to the
sold shares as set forth in EXHIBIT 2.1.
The shares in such subsidiaries shall be sold and transferred with all
rights and obligations pertaining thereto, including the dividend
rights for the fiscal year ended on or before December 31, 2002. If for
registration or other reasons legal title shall not pass on the Closing
Date to Strategic Partner or Designated Purchasers VARTA shall hold the
shares in trust and for the benefit of Strategic Partner/Designated
Purchaser and shall, in particular, (i) exercise all shareholder rights
(including voting rights) in accordance with instructions from
Strategic Partner/ Designated Purchaser and (ii) consent to any pledge
or granting of any other security interest in the shares.
2.2 CAPITAL INCREASE, SUBSCRIPTION TO NEW SHARES
On the Closing Date, the registered share capital of VARTA Consumer
shall be increased and German Limited shall subscribe to a new share in
VARTA Consumer as follows:
(a) VARTA as sole shareholder of VARTA Consumer shall pass a
shareholder resolution of VARTA Consumer and resolve (i) to
increase the share capital (STAMMKAPITAL) of VARTA Consumer
from EUR 490,000 (after the merger referred to in paragraph 4
of the Recitals) by EUR 510,000 to EUR 1,000,000 (the "CAPITAL
INCREASE") and (ii) to amend its articles of
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association. The shareholder resolution shall provide that
German Limited shall have the right to subscribe to a new
share in the nominal amount of EUR 510,000, upon a
contribution in kind, consisting of one share in the nominal
amount of EUR 24,900, free and clear of any encumbrances or
third-party rights, of a newly established limited liability
company (ROV German Finance GmbH, registered in the commercial
register of the local court of Wiesbaden under no. HR B 13066,
with its registered seat to be changed to Frankfurt am Main -
"FINANCECO") with a registered share capital of EUR 25,000 and
a net equity (EIGENKAPITAL) of EUR 133,268,000, fully paid in
cash. In addition, German Limited shall make a cash payment of
EUR 510,000 into the capital reserves of VARTA Consumer. The
new shares shall have full dividend rights attached to them as
from October 1, 2002. The shareholder resolution and the
revised articles of association of VARTA Consumer shall be
substantially in the form of the drafts attached as EXHIBIT
2.2 (a) (1) and (2).
(b) German Limited shall subscribe to the new share acquired by it
and transfer the shares in FinanceCo, as referred to in
paragraph (a) above, to VARTA Consumer. Strategic Partner
shall ensure that FinanceCo shall have the net equity as
described in the subparagraph above. The subscription
agreement shall be substantially in the form of the draft
attached as EXHIBIT 2.2 (b).
(c) VARTA Consumer and German Limited shall enter into a
contribution agreement (EINBRINGUNGSVERTRAG), which shall be
substantially in the form of the draft attached as EXHIBIT 2.2
(c).
(d) VARTA Consumer shall file the Capital Increase and the
amendments to the articles of association for registration
with the commercial register of the Company at the local court
(AMTSGERICHT) at Aalen. The filing shall be substantially in
the form of the draft attached as EXHIBIT 2.2 (d).
(e) The Parties acknowledge that in case the registration of the
Capital Increase will not be effected on the Closing Date they
will treat each other internally with respect to all
shareholder rights (including voting rights) as if the
registration was effected on the Closing Date. VARTA shall (i)
refrain, and shall cause VARTA Consumer to refrain, from any
action that will impede or delay the registration or affect
the future rights (including the right to
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pledge the shares to the banks financing the transaction on
behalf of Strategic Partner) of German Limited as new
shareholder of VARTA Consumer and (ii) give its consent to any
pledge of or the granting of any other security interest in
the new shares.
(f) On the Closing Date, German Limited shall transfer to the
managing director of FinanceCo nominated by VARTA one share in
FinanceCo in the nominal amount of EUR 100 in accordance with
a transfer agreement in the form as set forth in EXHIBIT 2.2
(F). The share transfer shall be subject to the condition
precedent of the registration of the Capital Increase in the
commercial register of VARTA Consumer. The nominee shall hold
the share of EUR 100 for the account of VARTA Consumer to the
effect that the transfer of the share from German Limited to
the nominee shall be booked as a contribution by German
Limited into the capital reserves of VARTA Consumer.
(g) Prior to the Closing Date the ABS Agreement between VARTA
Geratebatterie/Automotive and AGFIN Finance Inc. dated
December 17, 1996, as amended, shall be terminated and VARTA
shall purchase certain account receivables of VARTA Consumer
totaling EUR 20,000,000 as selected by VARTA (the "PURCHASED
RECEIVABLES") without recourse, for a purchase price being the
nominal value discounted by 5,63 % p.a., pursuant to
arms-length terms and conditions.
2.3 PURCHASE OF CLOSING DATE INTER-GROUP DEBT
(a) On the Closing Date, Strategic Partner or ROV German General
Partner GmbH and/or a Designated Purchaser shall purchase all
receivables representing the Closing Date Inter-Group Debt for
a fixed amount of EUR 11,547,000 for the receivables
representing the Closing Date Inter-Group Debt of the German
Companies and of EUR 4,573,000 for the remaining the
receivables representing the Closing Date Inter-Group Debt.
With effect as of the Closing Date VARTA AG shall assign all
receivables representing the Closing Date Inter-Group Debt to
German Limited/Designated Purchasers the Closing Date
Inter-Group Debt.
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(b) The "CLOSING DATE INTER-GROUP DEBT" comprises the net balance
(including any accrued or unpaid interest thereon) of the
interest-bearing liabilities and receivables between the
entities of the Consumer Group and the VARTA Group, other than
the net receivable of EUR 26,685,000 referred to in paragraph
4 of the Recitals taking into consideration the estimated
replacement of financial debt under Section 2.4 (b) as of the
Closing Date.
2.4 INTEREST BEARING THIRD-PARTY DEBT AS OF THE CLOSING DATE
(a) Prior to the Closing Date, VARTA shall pay or put the
Companies in a position to pay and shall cause the Companies
to pay all of their interest bearing liabilities under
borrowings with banks or financial institutions as of the
Closing Date (except as otherwise agreed by Strategic Partner
and VARTA to remain with the Companies - the "ASSUMED
FINANCIAL DEBT"), including any penalties or extra costs
relating to an early termination of the underlying financing
agreements. VARTA shall ensure that the financing institutions
release all of the existing security granted to them upon
repayment of their debt and shall provide corresponding
release letters.
(b) The Parties agree that any debt paid back pursuant to
paragraph (a) above shall, to the extent required by business
needs of the Consumer Group, be replaced by VARTA with
inter-group debt.
2.5 TERMINATION OF CONTROL AND PROFIT TRANSFER AGREEMENT, PROFIT
DISTRIBUTION
(a) The Parties agree that the fiscal year of VARTA Geratebatterie
shall be changed to end on July 31, 2002 effectively. The
Parties are aware and agree that the control and profit
transfer agreement, dated November 26, 1997, as amended on May
11, 1998, between VARTA (formerly: VARTA Batterie AG) and
VARTA Geratebatterie (formerly: VARTA
Grundstucksverwaltungsgesellschaft mbH) will be terminated as
of July 31, 2002 for cause (AUS WICHTIGEM XXXXX) (i.e. the
merger of VARTA Geratebatterie into VARTA Consumer and the
change of majority ownership of VARTA Consumer contemplated by
this Agreement) and, as precaution, by mutual agreement
between VARTA and VARTA Geratebatterie.
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(b) Strategic Partner and German Limited agree that VARTA
Geratebatterie shall transfer, prior to the date of the
registration of the merger referred to in the Recitals,
Paragraph 4, the profits for the fiscal year ended on July 31,
2002, to VARTA, in accordance with the control and profit
transfer agreement. The profits shall not be paid out in cash
but shall be set off against the purchase price claim of VARTA
Geratebatterie arising from the sale of the shareholdings in
its non-German subsidiaries to VARTA, as referred to in
paragraph 4 of the Recitals, resulting in a net payable of
VARTA in the amount of EUR 51,439,000.
(c) Strategic Partner and German Limited are aware and agree that
VARTA Consumer will distribute to VARTA by way of an interim
dividend prior to the Closing Date, the capital reserves in an
amount of EUR 78,124,000, as referred to in paragraph 4 of the
Recitals. The interim dividend shall not be paid out in cash
but shall be set off against the net payable of VARTA referred
to in Section 2.5 (b) above. The remaining amount of the
dividend distribution of EUR 26,685,000 shall be booked as an
inter-company payable towards VARTA (but not be included in
the Closing Date Inter-Group Debt).
(d) Following the Closing Date Strategic Partner shall indemnify
and hold harmless, or cause VARTA Consumer to indemnify and
hold harmless, VARTA from any obligation under applicable law
to provide security to creditors of VARTA Consumer in respect
of liabilities related to the time prior to the registration
of the termination of the control and profit transfer
agreement in the commercial register of VARTA Consumer or of
the merger of VARTA Geratebatterie into VARTA Consumer (Sec.
20 German Reorganization Act - UMWG), provided such liability
was reflected in the July 31, 2002 financial statements of
VARTA Geratebatterie and will be reflected in the Closing Date
Financial Statements and except to the extent that VARTA is
under an obligation to indemnify and hold harmless Strategic
Partner, German Limited or VARTA Consumer in respect of such
obligation pursuant to this Agreement. Any indemnity claim of
VARTA against VARTA Consumer under applicable law in respect
of such security shall remain unaffected except to the extent
that the respective obligations
16
are subject to claims under the representation and warranties
contained in Article 5.
2.6 CLOSING DATE FINANCIAL STATEMENTS
(a) Promptly after the Closing Date, Strategic Partner shall
instruct the management of VARTA Consumer to prepare (in
accordance with the principles set forth in paragraph (b)
below) and deliver to VARTA (pro forma) consolidated financial
statements (comprising a balance sheet as at the Closing Date
and a profit and loss account for the period from and
including January 1, 2002 to the Closing Date) of the Consumer
Group including the non-German subsidiaries (the "CLOSING DATE
FINANCIAL STATEMENTS"). Strategic Partner shall ensure that
the Closing Date Financial Statements will be delivered to
VARTA by no later than forty-five days after the Closing Date.
(b) The Closing Date Financial Statements shall be prepared in
accordance with generally accepted accounting principles as
applied in Germany ("GERMAN GAAP") on a basis consistent with
those used in the preparation of the German GAAP audited
pro-forma consolidated financial statements of the Consumer
Group for the period ended as of December 31, 2001 (an
unaudited copy of which is attached hereto as Section 2.6 (b)
of the Disclosure Letter - the "2001 FINANCIAL Statements"),
applying the same methodology and standards as used in the
2001 Financial Statements. The Closing Date Financial
Statements shall be prepared on a going concern basis,
disregarding any actions or intentions of Strategic Partner or
German Limited and using the specific accounting principles
described in EXHIBIT 2.6 (B).
(c) VARTA shall review the Closing Date Financial Statements as
prepared and delivered by VARTA Consumer management. If VARTA
believes that any item or amount contained in the Closing Date
Financial Statements does not comply with the principles set
out in paragraph (b) above, VARTA may, within forty-five days
after receipt of the Closing Date Financial Statements,
deliver a notice of disagreement to Strategic Partner,
specifying those items or amounts as to which VARTA disagrees
and containing a revised version of the Closing Date Financial
Statements. During a period
17
of one month after the delivery of such notice of
disagreement, the Parties shall use all reasonable efforts,
together with their respective accountants, to agree on the
final Closing Date Financial Statements and to cause KPMG to
audit the Closing Date Financial Statements.
(d) If the Parties, during the one month period referred to in
paragraph (c) above, are unable to reach agreement on the
Closing Date Financial Statements, any Party may refer the
remaining differences to an internationally recognized firm of
independent public accountants (the "CPA FIRM"). If the
Parties cannot mutually agree upon the CPA Firm within two
weeks after any Party has requested its appointment, the CPA
Firm shall be appointed, upon request of any Party, by the
Institute of Chartered Accountants (INSTITUT DER
WIRTSCHAFTSPRUFER) in Dusseldorf. The CPA Firm shall, acting
as an expert (SCHIEDSGUTACHTER) and not as an arbitrator,
determine on the basis of the standards set forth in this
Section 2.6, and only with respect to the remaining
differences submitted to it and within the range in dispute
between the Parties, whether and to what extent the Closing
Date Financial Statements require adjustment. The decision of
the CPA Firm shall be conclusive and binding on the Parties
(within the limits set forth in Section 319 German Civil Code)
and shall not be subject to any appeal. The fees and
disbursements of the CPA Firm shall be borne in proportion to
the Parties' success or defeat.
(e) The Parties agree that they will, and agree to cause their
respective independent accountants and each Company to,
cooperate and assist in the preparation of the Closing Date
Financial Statements and in the conduct of the reviews
referred to in this Section 2.6, including without limitation,
the making available to each other and the CPA Firm to the
extent necessary of books, records, work papers and personnel
and access, during normal working hours, to the Consumer
Group's premises.
2.7 ADJUSTMENT PAYMENT
(a) VARTA and Strategic Partner agree on an adjustment payment as
set forth in this Section 2.7; such adjustment payment shall
be allocated to the purchase price payable for the shares
referred to in Section 2.1 as mutually agreed.
18
(b) If the Final Adjustment Amount defined below is a positive
amount , Strategic Partner shall pay an amount equal to the
difference to VARTA. If the Final Adjustment Amount is a
negative amount, VARTA shall pay to Strategic Partner an
amount equal to the difference.
(c) The "FINAL ADJUSTMENT AMOUNT" shall be the sum of
the cash at hand, cheques, bills of exchange,
deposits with banks and other financial institutions,
marketable securities and other short term
investments, as shown in the Closing Date Financial
Statements ("CASH")
minus EUR 1,000,000
minus the Assumed Financial Debt, as shown in the
Closing Date Financial Statements.
(d) VARTA shall use its reasonable best efforts to reduce the Cash
to an amount of less than EUR 5,000,000.
2.8 PAYMENTS, INTEREST
(a) Any payments to be made pursuant to this Article 2 shall be
made in Euro by wire transfer of immediately available funds
to the bank accounts to be specified by the Parties prior to
the Closing Date, subject to Section 2.9 below.
(b) Any settlement or adjustment payment to be made pursuant to
this Article 2 shall bear interest from and including the
Closing Date to but excluding the date of payment at a rate of
6% per annum. Such interest shall be payable at the same time
as the payment to which it relates and shall be calculated on
the basis of a year of 365 days.
(c) Any Party's failure to make or to cause any payment pursuant
to this Article 2 when it is due shall, in derogation of Sec.
286 (3) German Civil Code, result in its immediate default
(VERZUG), without any reminder
19
(MAHNUNG) being required. No party shall have any right of
set-off or retention right with respect to any of its
obligations under this Article 2.
2.9 ESCROW ACCOUNT I
VARTA shall open a bank account with a German bank of international
standing to be mutually agreed upon by VARTA and Strategic Partner
(hereinafter referred to as the "ESCROW AGENT"). VARTA agrees that the
amount of the loans referred to in Section 7.5 (a) (EUR 159,953,000)
("ESCROW AMOUNT I") will be paid into such escrow account ("ESCROW
ACCOUNT I") on the Closing Date.
The Escrow Amount I shall be pledged to German Limited and shall serve
as collateral for claims German Limited has against VARTA Group under
Section 7.13 or the Contribution Agreements. Escrow Amount I shall be
released to German Limited in the event that German Limited will not be
registered as shareholder of VARTA Consumer in accordance with Section
2.2 (a).
Subject to any retention rights under Section 7.13 Strategic Partner
hereby agrees to release the pledge of the funds upon registration of
the Capital Increase with no rights of retention or set-off in
accordance with the escrow agreement substantially in the form attached
as EXHIBIT 2.9 ("ESCROW AGREEMENT I").
ARTICLE 3
CLOSING
3.1 TIME AND PLACE OF CLOSING
(a) The closing of the transactions contemplated by Article 2
hereof (the "CLOSING") shall take place at the offices of
Xxxxxxxx Chance Punder in Frankfurt on Tuesday, October 1,
2002, or at any other time and place as the Parties may
mutually agree, provided that the conditions set forth in
Section 3.2 below have been met on such date.
(b) If the closing conditions outlined under Section 3.2 below are
not met or waived by five business days before October 1, 2002
or the first business day of any following month, the Closing
shall take place on the first
20
business day of the month following the month in which the
conditions were met.
(c) The date on which the Closing occurs is hereinafter referred
to as the "CLOSING DATE".
(d) The Parties agree that VARTA shall have the right to the
profits of the Consumer Group until September 30, 2002 which
however shall be fixed to an amount of EUR 1,000,000 in total
for the two months August and September 2002. The Parties
agree that irrespective of the final Closing Date Strategic
Partner shall be entitled to the profits of the Consumer Group
from October 1, 2002 onwards. From October 1, 2002 VARTA shall
only be entitled to the agreed fixed dividend in VARTA
Consumer on a pro rata basis. The Parties shall take all
necessary steps to implement this deviating profit
distribution (ABWEICHENDE GEWINNVERTEILUNG) including the
necessary changes in the articles of association of VARTA
Consumer to be resolved in accordance with Section 2.2 (a).
3.2 CONDITIONS TO CLOSING
(a) The obligation of Strategic Partner to consummate the Closing
is subject to the satisfaction of the following conditions
precedent:
(i) The authorizations of or filings with any
governmental authority (including applicable merger
control law authorizations) and the authorizations of
any non governmental third party relating to VARTA or
the Consumer Group which are required for the
consummation of the transactions contemplated hereby
(including any merger control clearances required in
Germany, France, Finland and Colombia, but excluding
any merger control clearances required in Poland and
Czech Republic) shall have been obtained or made,
except where the failure to obtain any such
authorizations would not have a material adverse
effect on Strategic Partner or the Consumer Group or
the ability of the Parties hereto to consummate the
transactions contemplated hereby. In the event that
the merger control clearances required in Poland, or
Czech Republic cannot be obtained prior to the
Closing Date, the Parties shall agree on an
21
appropriate way to postpone the consummation of the
transaction in respect of any such country until the
relevant merger control clearance will be obtained,
provided that Strategic Partner may withhold 50 % of
the portion of the purchase price allocated to the
respective shares pursuant to Exhibit 2.1 until the
share transfer is effected. If any merger control
clearance in Poland or Czech Republic is not obtained
by March 31, 2003, either Party may request that this
Agreement will be amended such that the business in
the relevant country will be excluded from this
transaction; in such case, such 50 % of the purchase
price for the respective shares shall not become
payable.
(ii) The consummation of the transactions contemplated
hereby will not violate the provisions of any binding
and enforceable judgment, injunction, order or decree
by any court or governmental authority prohibiting
the consummation of the Closing. No suit or
proceeding shall have been instituted by any person,
firm or entity or shall have been threatened by any
governmental authority, which has not been withdrawn,
dismissed or otherwise eliminated, and which seeks to
prohibit, restrict or delay consummation of the
transactions contemplated hereby, provided that in
the written opinion of an independent internationally
recognized law firm such suit or proceeding has
reasonable chance of success and except where such
suit or proceeding would not have a material adverse
effect on Strategic Partner or the Consumer Group or
the ability of the Parties hereto to consummate the
transactions contemplated hereby.
(iii) The representations and warranties of VARTA contained
in this Agreement shall have been true and correct on
the date hereof and shall also be true and correct in
all material respects at and as of the Closing Date
(except for representations and warranties that speak
specifically only as of a particular date), with the
same force and effect as if made at and as of the
Closing Date, and VARTA shall have performed or
complied (or cured any non-compliance) with all
agreements and covenants required by this Agreement
to be performed or complied with by them prior to the
Closing Date, provided that the breaches of the
representations and warranties
22
have or may reasonably be expected to have a material
adverse effect on the Consumer Group as a whole.
VARTA shall have delivered to Strategic Partner a
certificate dated as of the Closing Date certifying
that the conditions to closing set forth in this
Section 3.2 (a) (iii) have been satisfied. In
addition, VARTA shall have delivered to Strategic
Partner a certificate dated as of the Closing Date
certifying that the representations and warranties
contained in Section 5.6 (c), 5.9, 5.14 and 5.16 and
those representations and warranties of VARTA made
only to VARTA's knowledge are still true and correct
as of the Closing Date, except for matters that have
arisen or become known by VARTA after the date hereof
and are disclosed in a disclosure letter attached to
the certificate provided, however, that Section 5.17
second sentence shall not apply.
(iv) The merger of VARTA Geratebatterie as described in
paragraph 4 of the Recitals shall have been
registered in the commercial register and thereby
become effective.
(v) Strategic Partner has obtained sufficient financing
for the transactions contemplated under this
Agreement.
(vi) The supervisory board of VARTA and the requisite vote
of shareholders of VARTA shall have approved the
transaction contemplated by this Agreement.
(vii) VARTA shall have delivered to Strategic Partner
certificates certifying as to the matters set forth
in this Section 3.2 (a) (iv) and (vi).
(viii) VARTA shall have timely delivered to Strategic
Partner German GAAP accounts for the Consumer Group
reconciled under US GAAP for the periods ended on
December 31, 2001 (audited), by August 31, 2002, as
described in Article 7.9 below.
(ix) The check-the-box certificate as described in Section
7.10 (a) below has been duly signed and delivered to
Strategic Partner for submission to the relevant
authorities no later than on September 10, 2002.
23
(b) The obligations of VARTA to consummate the Closing is subject
to the satisfaction of the following conditions precedent:
(i) The authorizations of or filings with any
governmental authority (including applicable merger
control law authorizations) and the authorizations of
any non-governmental third party relating to VARTA or
the Consumer Group which are required for the
consummation of the transactions contemplated hereby
(including any merger control clearances required in
Germany, France, Finland and Colombia), but excluding
any merger control clearances required in Poland and
Czech Republic ) shall have been obtained or made,
except where the failure to obtain any such
authorizations would not have a material adverse
effect on VARTA or the ability of the Parties hereto
to consummate the transactions contemplated hereby.
(ii) The consummation of the transactions contemplated
hereby will not violate the provisions of any binding
and enforceable judgment, injunction, order or decree
by any court or governmental authority prohibiting
the consummation of the Closing. No suit or
proceeding shall have been instituted by any person,
firm or entity or shall have been threatened by any
governmental authority, which has not been withdrawn,
dismissed or otherwise eliminated, and which seeks to
prohibit, restrict or delay consummation of the
transactions contemplated hereby, provided that in
the written opinion of an independent internationally
recognized law firm such suit or proceeding has
reasonable chance of success and except where such
suit or proceeding would not have a material adverse
effect on VARTA or the ability of the Parties hereto
to consummate the transactions contemplated hereby.
(iii) The representations and warranties of Strategic
Partner contained in this Agreement shall have been
true and correct on the date hereof and shall also be
true and correct in all material respects at and as
of
24
the Closing Date (except for representations and
warranties that speak only as of a particular date),
with the same force and effect as if made at and as
of the Closing Date, and Strategic Partner shall have
performed or complied (or cured any non-compliance)
with all agreements and covenants required by this
Agreement to be performed or complied with by them
prior to the Closing Date, provided that the breaches
of the representations and warranties have or may
reasonably be expected to have a material adverse
effect on the Consumer Group as a whole. Strategic
Partner shall have delivered to VARTA a certificate
dated as of the Closing Date and executed by a duly
authorized officer of Strategic Partner on Strategic
Partner's behalf certifying that the conditions to
closing set forth in this Section 3.2 (a) (iii) have
been satisfied.
(iv) The merger of VARTA Geratebatterie as described in
paragraph 4 of the Recitals shall have been
registered in the commercial register and thereby
become effective.
(v) The supervisory board of VARTA and the requisite vote
of shareholders of VARTA shall have approved the
transaction contemplated by this Agreement.
(c) Each Party may waive the respective closing conditions in its
favor to the extent legally permitted.
3.3 FILINGS UNDER MERGER CONTROL LAWS
The Parties shall ensure that any filing required under any applicable
merger control laws as referred to in Section 3.2 (a) (i) will be made
without undue delay after execution of this Agreement. Such filings
shall be made jointly by the Parties, and the Parties shall closely
cooperate in their preparation. If the competent authorities deny their
approval or are prepared to grant their approval only on certain
conditions, the Parties shall have the obligation to (i) amend this
Agreement in a manner that such approval may be granted, or (ii) comply
with the conditions imposed by the authorities including the condition
to divest of certain businesses, provided however, that in the event
that such amendment or conditions would have
25
a material adverse effect on the transaction contemplated hereby or on
Strategic Partner or the Consumer Group, Strategic Partner shall have
the right to terminate this Agreement pursuant to Article 12. No Party
shall be under any obligation to appeal the decision by the competent
merger control authorities.
3.4 ACTIONS ON THE CLOSING DATE
On the Closing Date, the Parties shall take, or cause to be taken, the
following actions, which shall be taken simultaneously (ZUG UM ZUG):
(a) execution of the share purchase and transfer agreements
referred to in Section 2.1 and payment of the respective
purchase prices in each case in accordance with Section 2.1;
(b) passing by VARTA of the shareholder resolution of VARTA
Consumer as referred to in Section 2.2 (a);
(c) execution by VARTA Consumer and German Limited of the
subscription agreement pursuant to Section 2.2 (b);
(d) execution by VARTA Consumer and German Limited of the
contribution agreement (EINBRINGUNGSVERTRAG) and transfer by
German Limited of the shares in FinanceCo, as set forth in
Sections 2.2 (c) and 2.2 (f);
(e) filing by VARTA Consumer (or delivery to a German notary for
filing) of the Capital Increase and the amendment to the
articles of association with the commercial register pursuant
to Section 2.2 (d);
(f) payment by Strategic Partner or German Limited of the purchase
price for the receivables representing the Closing Date
Inter-Group Debt in accordance with Section 2.3 (a);
(g) delivery (i) by Strategic Partner of evidence satisfactory to
VARTA that all undertakings, bank guarantees, comfort letters
and other securities provided by members of the VARTA Group in
favor of VARTA Geratebatterie or VARTA Consumer and the
Companies have been replaced in accordance
26
with Section 7.4 and (ii) same evidence by VARTA to Strategic
Partner with respect to the Consumer Group Guarantees (as
defined in Section 7.13 (b) below);
(h) termination of all existing inter-company agreements between
the Consumer Group and the VARTA Group without any termination
fee or other penalties except as explicitly set forth
otherwise in this Agreement;
(i) execution by VARTA, Microbatterie GmbH and VARTA Consumer of a
transition services agreement in accordance with Section 7.6
(a) below;
(j) execution of the distribution agreement regarding the Micro
business as attached as Exhibit 7.6 (c);
(k) execution of all documents necessary to implement the
trademark, transfer, and domain sharing and license agreement;
in accordance with Section 9.1 below;
(l) granting and payment of the loan by FinanceCo to VARTA into
Escrow Account I in accordance with Section 7.5 (a) below;
(m) granting and payment of the loan by ROV General Partner to
VARTA into Escrow Account I in accordance with Section 7.5 (a)
below and execution of the Escrow Agreement I in accordance
with Section 2.9;
(n) granting and payment of the loan by FinanceCo to Strategic
Partner or its designee in accordance with Section 7.5 (b)
below;
(o) granting and payment of the loan by VARTA Consumer to VARTA in
accordance with Section 7.5 (c) below;
(p) payment by VARTA of the Escrow Amount into Escrow Account II,
as set forth in Section 8.1 (k) below; execution of the Escrow
Agreement II in accordance with Section 8.1 (k);
27
(q) execution by German Limited and VARTA of the share purchase
and transfer agreement relating to the FinanceCo Minority
Share in accordance with Section 2.2 (f);
(r) appointment of the managing directors and advisory board
members of FinanceCo in accordance with Section 4.6 (c) and
(d) below; and
(s) delivery by FinanceCo to VARTA of the guarantee in accordance
with Section 11.3 (e) below.
ARTICLE 4
CORPORATE GOVERNANCE OF THE JOINT VENTURE
4.1 MANAGING DIRECTORS
As long as VARTA is a shareholder of VARTA Consumer, VARTA shall have
the right to nominate one out of three managing directors
(GESCHAFTSFUHRER) of VARTA Consumer or, after its transformation into
partnership limited by shares (KGAA), one out of three managing
directors of the general partner, with joint power of representation
(GESAMTVERTRETUNGSMACHT). Strategic Partner and German Limited shall
have the right to reject any managing director nominated by VARTA
Consumer for sound business reasons.
4.2 SUPERVISORY BOARD
As long as VARTA owns 49% of the registered capital of VARTA Consumer,
VARTA shall have the right to nominate one supervisory board member out
of six of VARTA Consumer. The articles of association of VARTA Consumer
shall provide that, in the event of a tie, the chairman of the
supervisory board shall have the casting vote. The Parties shall
jointly cooperate with respect to the establishment of the new
supervisory board at VARTA Consumer after the merger. To the extent
legally permitted VARTA shall use its best efforts to ensure that the
supervisory board member appointed by VARTA votes for the nominee of
Strategic Partner as chairman of the board.
28
4.3 RIGHTS OF SHAREHOLDERS MEETING
Without prejudice to any rights of the shareholders meeting of VARTA
Consumer under statutory law or the articles of association, as long as
VARTA Consumer is a limited liability company (GMBH), the following
matters regarding VARTA Consumer shall require consent of the
shareholders meeting of VARTA Consumer (with simple majority) except
for any transaction contemplated by this Agreement or made in
connection with the financing by Strategic Partner of the transactions
contemplated by this Agreement:
(a) any transfer, encumbrance or acquisition of any shareholding,
business or substantial part of the assets of VARTA Consumer
which is material to the business of VARTA Consumer;
(b) any alteration (including cessation) to the general nature of
the business conducted from time to time by VARTA Consumer;
(c) any joint venture or partnership agreement with any third
party which is material to the business of VARTA Consumer;
(d) any loan to or guarantee or other security for the obligations
of any third party (other than any entity of the Consumer
Group), other than in the ordinary course of business; and
(e) any material transaction with Strategic Partner or VARTA or
any company affiliated with them, other than in the ordinary
course of business on arm's length terms.
4.4 CONSULTATION WITH VARTA
Promptly after receipt by VARTA of any invitation to a shareholders
meeting of VARTA Consumer, Strategic Partner shall consult with VARTA
on any matters on the agenda of the meeting requiring shareholder
approval, and the Parties shall negotiate and seek to agree on all such
matters prior to the date of the meeting (including an attempt to reach
an agreement by their respective chief executive officers). If the
Parties are unable to reach agreement and take diverting votes in the
shareholders meeting on
29
(a) matters requiring the approval of the shareholders meeting
with a 75% majority of the votes under applicable law or the
articles of association of VARTA Consumer, or
(b) as long as VARTA Consumer is a limited liability company, any
of the matters referred to in Section 4.3, or
(c) after the transformation of VARTA Consumer into partnership
limited by shares (KGAA), any matters submitted to the
shareholders meeting of VARTA Consumer pursuant to Sec. 119
(2) German Stock Corporation Act (including "Holzmuller"
resolutions),
VARTA shall be entitled to terminate the joint venture with Strategic
Partner and German Limited in accordance with Article 11 below.
4.5 CERTAIN RESTRUCTURINGS AND OTHER ACTIONS AFTER THE CLOSING DATE
Notwithstanding Sections 4.3 and 4.4, VARTA and Strategic Partner agree
and shall ensure that without undue delay after the Closing (documents
and resolutions to be agreed on the Closing Date),
(a) VARTA Consumer will be transformed into a partnership limited
by shares (KGAA), with German Limited and VARTA as limited
shareholders (KOMMANDITAKTIONARE) and 94. JFSC
Vermogensverwaltungs-GmbH (in future: ROV German General
Partner GmbH ("ROV GENERAL PARTNER") joining as general
partner (PERSONLICH HAFTENDER GESELLSCHAFTER) with a
contribution consisting of the loan receivable against VARTA
in the amount of EUR 78,000,000, as referred to in Section 7.5
(a) first sentence, and a receivable against VARTA Consumer in
an amount up to EUR 11,547,000, substantially in accordance
with the draft documentation contained in EXHIBIT 4.5 (a),
(b) German Limited and VARTA Consumer shall enter into a profit
transfer agreement (GEWINNABFUHRUNGSVERTRAG) in the form of
the draft substantially attached as EXHIBIT 4.5 (B), providing
for an annual guaranteed dividend for VARTA in the amount of
EUR 8,000,000, to be payable within three
30
months following the end of the respective fiscal year (the
first fiscal year covered by the profit and loss transfer
agreement to end on September 30, 2003). In the event that
VARTA ceases to be a shareholder in the course of a fiscal
year the fixed dividend shall be paid pro rata. VARTA shall be
obliged to agree to such profit and loss transfer agreement
and to changes of the business year (e.g. change of the
business year of VARTA Consumer to the end of the month
following the month in which the Closing takes place), if any;
(c) profits accrued between the Closing Date and the date on which
a profit transfer agreement is put in place shall be
distributed to the shareholders together with a first fixed
dividend to be paid under the profit transfer agreement
referred to under Section 4.5 (b);
(d) the capital reserve of VARTA Consumer in the amount of EUR
133,268,000 (resulting from the contribution of the shares in
FinanceCo referred to in Section 2.2 (a)) will be transformed
into a profit reserve in connection with the adoption of the
annual accounts of VARTA Consumer as of the end of the fiscal
year beginning August 1, 2002;
(e) without undue delay upon the transformation of VARTA Consumer
into a KGaA, the loan receivables of EUR 78,000,000
transferred to VARTA Consumer pursuant to paragraph (a) of
this Section 4.5 and the loan receivable of EUR 510,000 of
Consumer vis a vis VARTA under the loan agreement referred to
in Section 7.5 (c) will be partially set off against VARTA's
receivable of EUR 26,685,000, as referred to in paragraph 4 of
the Recitals and the remaining loan receivable of VARTA
Consumer in the amount of EUR 51,825,000 will be transferred
to FinanceCo in exchange for FinanceCo's loan receivable of
EUR 51,825,000 referred to in Section 7.5 (b).
4.6 FINANCECO
The Parties agree and shall ensure that, from the Closing Date and as
long as VARTA is a shareholder of VARTA Consumer, unless otherwise
mutually agreed,
31
(a) FinanceCo shall have no other purpose and conduct no other
activity than set forth in Section 7.5 below,
(b) Strategic Partner shall not permit VARTA Consumer to sell,
transfer, or otherwise dispose of, any interest in FinanceCo,
(c) FinanceCo shall have no more than two managing directors, both
with joint power of representation, and VARTA shall have the
right to nominate one managing director,
(d) FinanceCo shall have a advisory board consisting of four
members (two members to be appointed by German Limited and
VARTA respectively); the powers of the shareholder meeting
shall be transferred to the advisory board to the broadest
extent permitted under applicable law,
(e) the articles of association of FinanceCo shall be in the form
as set forth in EXHIBIT 4.6 (e),
(f) a profit transfer agreement shall be entered into between
VARTA Consumer and FinanceCo substantially in the form as set
forth in EXHIBIT 4.6 (f) and the fiscal year of FinanceCo
shall be changed to correspond to the fiscal year of VARTA
Consumer.
4.7 SHAREHOLDERS' RIGHTS IN CONSUMER GROUP BETWEEN CLOSING AND
REGISTRATION OF CAPITAL INCREASE
Between the Closing Date and the registration of the Capital Increase
VARTA shall only exercise its shareholder rights after consultation and
coordination with German Limited.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF VARTA
VARTA represents and warrants independently of negligence
(VERSCHULDENSUNABHANGIG) to Strategic Partner, any Designated Purchasers and
German Limited that, except as set forth in the Disclosure Letter and subject to
Section 5.18 below, the statements set forth in this
32
Article 5 are true and correct as of the date hereof. The representations and
warranties of VARTA pursuant to this Agreement shall be no seller's guarantees
(GARANTIE) within the meaning of Sec. 444 German Civil Code (BGB), but shall
constitute separate, independent obligations of VARTA, and the scope and content
of each representation and warranty of VARTA and VARTA's liability arising
thereunder shall be exclusively defined by the provisions of this Agreement
(including Article 8 below), which are an integral part of the representations
and warranties of VARTA.
5.1 ORGANIZATION OF THE CONSUMER GROUP
(a) Except as disclosed in EXHIBITS R-1 and R-2, each entity of
the Consumer Group referred to in EXHIBIT R-2 is a
corporation, limited liability company or partnership (as
indicated in EXHIBITS R-1 and R-2), duly incorporated, validly
existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers to
conduct its business as presently conducted. EXHIBIT R-2
contains a correct description of the registered office and,
as of the date hereof, the management (officers and directors)
of each Company. There are no side agreements among the
shareholders which affect the constitution and organization of
the Companies.
(b) All entities of the Consumer Group and their respective
jurisdictions of incorporation are identified in EXHIBIT R-2,
and no Company holds directly or indirectly any material
interests (also in the form of a silent partnership or
subparticipation) in any company or entity other than set
forth in Section 5.1 (b) of the Disclosure Letter. No entity
of the Consumer Group is - not even conditionally - obliged to
transfer any interests or to acquire any further interests.
(c) Except as set forth in Section 5.1 (c) of the Disclosure
Letter, no entity of the Consumer Group is a party to any
agreement which would permit any third party (including any
entity of the Consumer Group) to control such Company or
obligate it to transfer its profits to any such third party.
(d) Section 5.1 (d) of the Disclosure Letter contains a true and
correct list of the articles of association, by-laws or
similar organizational documents of the Companies (as
presently in effect). Except for the NewCos true and
33
complete copies of such documents have been delivered to
Strategic Partner prior to the execution of this Agreement.
(e) All facts relating to the Companies which can be registered in
the commercial register or the relevant foreign equivalent (if
any) are actually registered. Complete and accurate excerpts
from the commercial register or the foreign equivalent of all
Companies have been delivered to Strategic Partner prior to
the date hereof except for the NewCos.
5.2 OWNERSHIP OF SHARES; SHAREHOLDINGS
(a) EXHIBIT R-2 contains a complete and correct description of the
registered capital, issued capital, total capitalization and
shareholders of each Company and, to VARTA's knowledge, each
other entity set forth in Exhibit R-2 in which the Consumer
Group owns a minority interest. The capitalization chart on
EXHIBIT R-2 indicates the shareholder ownership of all issued
shares of any entity of the Consumer Group, any foreign
registered capital in Colombia and any minority interest owned
by the Consumer Group listed in Section 5.1 of the Disclosure
Letter ("SHARES"). Except as set forth in Section 5.2 (a) of
the Disclosure Letter, the Shares have been fully paid up in
cash or by means of permissible contributions in kind with
discharging effect, and the share capital of the Companies is
not reduced by any open or concealed repayment to the
shareholders. The Shares are free and clear of any liens,
encumbrances or other rights of third parties, and there are
no pre-emptive rights, rights of first refusal, options or
other rights of any third party to purchase or acquire any
shares of any entity in the Consumer Group (whether from a
shareholder or from a Company), in each case except as set
forth in Section 5.2 (a) of the Disclosure Letter. There are
no silent participations in the Consumer Group or
subparticipations in any Shares and there are also no
conditional obligations (options) or binding offers vis-a-vis
third parties concerning the creation of such participations
or the grant of shareholder rights or similar rights with
regard to the Consumer Group (e.g. voting rights,
participation in profits). To the extent that VARTA / or
Consumer Group do not hold 100% of the shares in the Companies
the minority shares are held by their nominees with no
authority and, to the extent permitted by local law, VARTA or
Varta Consumer has the right to reacquire them at nominal
costs.
34
(b) Except as set forth in Section 5.2 (b) of the Disclosure
Letter, no entity of the Consumer Group is over indebted or
insolvent. No insolvency proceeding with respect to any entity
in the Consumer Group has been started or has been applied
for.
(c) The carve-out of Microlite and of the total micro battery
business (comprising the transfer of the German, French, UK
and Italian micro battery business into Microbatterie GmbH)
will have been validly effected and completed as of the
Closing Date in accordance with and subject to the terms and
conditions attached as Section 5.2 (c) of the Disclosure
Letter. No further contractual relation will exist between the
Consumer Group and Microbatterie GmbH and Microlite as of the
Closing Date, unless explicitly described in Section 5.2 (c)
of the Disclosure Letter.
(d) As of the Closing Date certain consumer battery operations of
VARTA Batteri AB and Micro's US and Czech subsidiary will have
been transferred to NewCos (except for certain real property
and the liabilities relating thereto), and the shares in VARTA
Batteri AB will have been transferred to VARTA or any other
company of the VARTA Group, in accordance with the terms and
conditions set forth in Section 5.2 (c) of the Disclosure
Letter.
5.3 AUTHORIZATION OF VARTA, NON-CONTRAVENTION
(a) As of the Closing, the execution of this Agreement by VARTA
Group and the consummation of the transactions contemplated
hereby are within VARTA's Group corporate powers and have been
duly authorized by all necessary corporate action on the part
of VARTA Group. This applies accordingly for all Companies.
This Agreement (and the agreements delivered pursuant hereto)
will, when executed by an entity included within the Consumer
Group and assuming the due execution of this Agreement by
Strategic Partner, German Limited or any other party
affiliated with them, constitute the valid and binding
obligation of such entity, enforceable in accordance with its
terms.
(b) The execution of this Agreement by VARTA Group and the
consummation of the transactions contemplated hereby require
no filing by VARTA Group
35
with, or approval by, any governmental body, agency or
official or consent of any third party, other than the
compliance with any applicable requirements under merger
control laws as set forth in Sections 3.2 and 3.3 (assuming
that the financial and other information relevant for the
assessment of any filing requirements which has been provided
by Strategic Partner is accurate and complete in all material
respects) and except as otherwise agreed by the Parties.
(c) The execution by the VARTA Group and the consummation of the
transactions contemplated hereby do not and will not (i)
violate the certificate of incorporation or bylaws of VARTA
Group, (ii) assuming compliance with the matters referred to
in Sections 3.2 (a) (i) and 3.3, violate any applicable law,
rule, regulation, judgment, injunction, order or decree,
except for any such violations which would not reasonably be
expected to have a Material Adverse Effect; (iii) violate,
conflict with, constitute a default or require any payment
under, permit a termination of, or result in the creation or
imposition of any lien upon any assets of any Company under
any agreement (including any Material Agreement) except as set
forth in Section 5.3 (c) of the Disclosure Letter; or (iv)
create, or cause the acceleration of the maturity of, any
debt, obligation or liability that would result in any lien or
other claim upon the assets of any Company, except, with
respect to (iii) and (iv) above, as set forth in any Material
Agreement a copy of which was delivered to Strategic Partner
prior to the date hereof as identified in Section 5.11 (a) of
the Disclosure Letter and except for matters which would not
be reasonably expected to have a Material Adverse Effect.
For the purpose of this Article 5, "MATERIAL ADVERSE EFFECT"
used as a defined term means any change or effect that is
materially adverse to the financial condition, liabilities,
results of operations or business operations of the Consumer
Group, taken as a whole, other than any change or effect
arising out of (i) general economic conditions or conditions
affecting companies generally in the industries in which the
Consumer Group operates, (ii) disruptions to any business of
the Consumer Group attributable to the announcement of this
Agreement or the transactions contemplated hereby and (iii)
changes in laws or interpretations thereof after the date of
this Agreement.
36
5.4 FINANCIAL STATEMENTS / EQUITY
(a) The audited statutory annual accounts (which include balance
sheets and income statements) of the Companies for the fiscal
year ended on December 31, 2001 (as made available to
Strategic Partner) have been prepared in accordance with the
relevant generally accepted accounting principles (GAAP) as
applicable in the respective jurisdiction, on a basis
consistent with the respective financial statements for the
preceding two financial years and accurately present, in
accordance with the applicable GAAP, in all material respects
the financial condition and results of operations of the
relevant Companies as of and for the respective periods.
(b) The 2001 Financial Statements (as defined in Section 2.6 (b))
have been prepared in accordance with German GAAP, on the
basis of the relevant statutory annual accounts and using
VARTA's usual consolidation principles consistently
applied, and accurately present, in accordance with such
principles, in all material respects the consolidated
financial condition and results of operations of the Consumer
Group as of and for the respective periods, taking into
consideration the carve-out of the micro battery business.
(c) The monthly management reports as of May 31, 2002 ("MONTHLY
MANAGEMENT REPORTS") as made available to Strategic Partner
have been prepared in accordance with principles consistent
with those used for the preceding management reports and in
the reasonable opinion of VARTA Consumer management fairly
reflect in accordance with such principles, in all material
respects, the financial condition and results of the Consumer
Group as of their respective dates.
(d) VARTA is not aware of any facts which would require a material
change of the 2001 Financial Statements if such facts had been
known at the time when the 2001 Financial Statements were
adopted.
(e) All bookkeeping and financial records of the Companies as
required under commercial and tax law of the respective
jurisdictions have been properly
37
maintained and are completely available together with the
Companies' business records in accordance with the
requirements under applicable law.
(f) As of the Closing there is no interest bearing liabilities
with banks or financial institutions and no interest bearing
liabilities and receivables between Consumer Group and VARTA
Group which will not be shown in the Closing Date Financial
Statements, unless explicitly agreed by Strategic Partner in
accordance with Section 2.4.
5.5 ASSETS, ENCUMBRANCES
(a) The Companies have good title to, or in the case of leased or
licensed property and assets have valid and unrestricted
leasehold interests or licenses in, all property and assets
(whether real, personal, tangible or intangible) reflected in
the 2001 Financial Statements and in the Closing Date
Financial Statements, except for assets disposed of since
December 31, 2001 in the ordinary course of business
consistent with past practices, in which case they have been
replaced or replenished to the extent required by sound
business principles and except as set forth in Section 5.5 (a)
of the Disclosure Letter.
(b) The (fixed and current) assets, including all Material
Intellectual Property Rights and all other Intellectual
Property Rights, as defined below under 5.6, owned by the
Companies are not encumbered with any liens, pledges or other
rights or encumbrances in favor of any third party, except for
(i) retention of title rights, liens, pledges or other
security rights agreed in favor of suppliers, mechanics,
workmen, carriers and the like in the ordinary course of
business, (ii) security rights of any kind granted to banks
and other financial institutions over cash and other assets
deposited with them to secure any Assumed Financial Debt,
(iii) statutory liens and other security rights in favor of
tax authorities or other governmental entities, (iv) customary
easements and similar rights in real property which do not
affect any Company's ability to conduct its business as
presently conducted and (v) the rights and encumbrances listed
in Section 5.5(b) of the Disclosure Letter. The Companies have
placed no liens on any material assets leased by them, except
as set forth in Section 5.5(b) of the Disclosure Letter. For
the avoidance of doubt this Section 5.5(b) does not apply to
licenses and
38
other contractual relationships with respect to Intellectual
Property Rights which may limit the use of such Intellectual
Property Rights.
Any kind of encumbrances (listed or not listed) only serve to
secure liabilities/debts of the Consumer Group (except where
such encumbrances, including those described in (iv) above, by
their nature do not secure debt).
(c) The Companies do not own other real property or equivalent
rights to real property other than disclosed in Section 5.5
(c) (1) of the Disclosure Letter, specifying the land
register, local court volume, folio and serial no. All real
property disposed of since December 31, 2001 is disclosed in
Section 5.5(c) (2) of the Disclosure Letter. Apart from the
property mentioned in Section 5.5 (c) (2) of the Disclosure
Letter, the Companies are not obliged to acquire or to dispose
of any real property and their right to dispose of the real
property owned by them is not limited in any way. Section 5.5
(c) (3) of the Disclosure Letter contains a list of all real
property which has been owned or used by the Companies for the
purpose of manufacturing or storing significant volumes of
batteries (e.g. warehouses) during the last ten years prior to
the Closing Date and which is not listed in Section 5.5 (c)
(1).
(d) The Xxxxx property is excluded from this transaction and has
been sold and transferred to VARTA Group or a third party
prior to Closing for a purchase price equal to its current
book value minus provisions made in respect of Xxxxx property,
substantially in the form of the draft attached as Section 5.5
(d) of the Disclosure Letter.
(e) All inventories of the Companies which are reflected in the
2001 Financial Statements and in the Closing Date Financial
Statements have been acquired or manufactured in the ordinary
course of business of the Companies.
(f) Except as otherwise set forth in this Agreement or in Section
5.5 (f) of the Disclosure Letter, and taking into account the
services referred to in Section 7.6, the Companies will be, on
the Closing Date, the unrestricted owner or authorized user of
all assets and the holder of all rights including all
intellectual property rights and have available all know-how,
trade secrets and other information which are material for,
and are required to
39
continue, the existing business operation in the field of
consumer batteries (as opposed to the micro battery business
referred to in paragraph 6 of the Recitals) in the same manner
as it has been conducted up until now. There are no
obligations to sell any of these assets owned by the
Companies, to dispose of them in rem (except for any assets to
be replaced in the ordinary course of business and for any
inventory to be sold in the ordinary course of business) or to
grant any rights of use with regard to them, whether as a
whole or in part, if, as a result of such sale, disposal or
granting of rights, the representation and warranty in the
preceding sentence would no longer be correct. Micro and
Consumer Group have allocated the relevant assets, liabilities
and employees between Consumer Group and Micro and its group
on the basis of their primary use or activities to the extent
such allocation has already taken place, except as set forth
in Section 5.5 (f) of the Disclosure Letter.
(g) Except as set forth in Section 5.5 (g) of the Disclosure
Letter, the information technology systems used by the
Companies (except for the NewCos) are available to them and
are functionable in all material respects, as required by such
Companies to conduct the existing business operation in the
field of consumer batteries (taking into account any
restructurings and carve-outs set forth in this Agreement) in
the ordinary course.
5.6 INTELLECTUAL PROPERTY RIGHTS / MATERIAL INTELLECTUAL PROPERTY RIGHTS
(a) For the purpose of this Section 5.6, "INTELLECTUAL PROPERTY
RIGHTS" shall mean all registered (or, in case of pending
applications, registrable) intellectual property rights
(including trademarks, service marks, trademark registrations
and applications for registration thereof, tradenames,
copyrights, copyright registrations and applications for
registrations thereof, patents, patent rights, patent
applications and patent licenses, and licenses in and licenses
out of such rights). Section 5.6 (a) of the Disclosure Letter
contains a list of all Intellectual Property Rights owned,
used by, licensed to or registered on behalf of any Company
which are material to the business of any Company (the
"MATERIAL INTELLECTUAL PROPERTY Rights"), specifying as to
each, as applicable: (i) the nature of such Intellectual
Property Right, (ii) the owner of such Intellectual Property
Right and (iii) if applicable, the jurisdictions in which such
Intellectual Property Right has been registered
40
or in which an application for such issuance or registration
has been filed and the registration or application numbers or
with respect to licenses the respective contracting partner.
(b) No Material Intellectual Property Right is subject to any
outstanding judgment, injunction, order, decree or agreement
restricting the use thereof by the Consumer Group or
restricting the licensing thereof by the Consumer Group to any
third party. With respect to other Intellectual Property
Rights owned by the Consumer Group, this holds true to VARTA's
knowledge with respect to any outstanding judgment,
injunction, order or decree.
(c) As of the date hereof, no third party has challenged or
threatened to challenge (i) any Material Intellectual Property
Rights owned by the Consumer Group or (ii) to VARTA's
knowledge (without any inquiries with licensors), any other
Intellectual Property Rights owned by or licensed to the
Consumer Group. To VARTA's knowledge, there are no facts which
are likely to result in any Material Intellectual Property
Rights being successfully challenged by any third party or
deregistered or declared void by any public authority for
other reasons. To VARTA's knowledge, no rights of third
parties are infringed by the Material Intellectual Property
Rights or their use (whether by any Company or any Company's
licensee). The payment of fees due as well as all other
measures necessary to maintain any Material Intellectual
Property Rights have been undertaken completely and in good
time.
5.7 GOVERNMENTAL PERMITS; COMPLIANCE WITH LAWS; SUBSIDIES
(a) Except as set forth in Section 5.7 (a) of the Disclosure
Letter, the Companies have all governmental permits, licenses
and consents which are required by them in order to operate
their business as presently conducted and are material for the
business of any Company (the "GOVERNMENTAL PERMITS"). There is
no written notice by any authority to any Company of a
withdrawal, revocation, restrictions or alteration of any
Governmental Permit. There are no unsettled complaints by or
legal proceedings in respect of any Governmental Permit before
any competent public authority or
41
employers' liability insurance associations
(Berufsgenossenschaft) with respect to any Company.
(b) Except as disclosed in Section 5.7 (a) of the Disclosure
Letter, the business of each of the German Companies, and, to
VARTA's knowledge, the European and Latin American
subsidiaries of VARTA Consumer, is conducted, in all material
respects, in compliance with all applicable public and civil
laws and all Governmental Permits.
(c) Except as disclosed in Section 5.7 (c) of the Disclosure
Letter, the operative facilities of the German Companies have
been constructed, and any subsequent alterations or extensions
thereof have been made, in all material respects, in
compliance with all applicable legal provisions and orders by
public authorities. This holds true for all other Companies to
VARTA's knowledge.
(d) The Companies have applied for, received and used public
subsidies only in accordance with the applicable legal
provisions and in compliance with any public authority orders,
conditions and duties. No repayment of such subsidies will
become necessary as a consequence of the implementation of the
provisions of this Agreement or by reason of any Company's
failure to comply with the terms and conditions on which the
subsidies have been granted or, to VARTA's knowledge, any
other circumstances already existing today.
(e) With respect to environmental matters, exclusively the
representations and warranties contained in Section 5.8 and
the specific indemnities in Section 8.1 (b) and (c) shall
apply.
5.8 ENVIRONMENTAL MATTERS
(a) For the purposes of this Section 5.8, "ENVIRONMENTAL LAWS"
means any law or order applicable in the respective country of
incorporation or operation of the Companies and relating to or
imposing liability or standards of conduct for the protection
of the environment or the use, handling, generation,
manufacturing, distribution, collection, transportation,
storage, disposal, cleanup or release of hazardous materials.
42
(b) Except as disclosed in Section 5.8 (b) of the Disclosure
Letter:
(i) each Company is in compliance with all Environmental
Laws in all material respects;
(ii) there is no soil, soil-air (BODENLUFT), air and/or
groundwater contamination or noise emission, or
asbestos on or stemming from real estate, facilities
or buildings currently or formerly owned or used by
any Company (including any off-site waste disposal
use) (the "ENVIRONMENTAL CONTAMINATION"), which could
lead to any liability or claims under applicable law
(civil, public or other) as in effect on the Closing
Date (including an order to safeguard against
pollution, an examination order, a monitoring order
or a decontamination order);
(iii) no written notice, order, complaint or penalty has
been received, and there are no judicial,
administrative or other actions, suits or proceedings
pending or threatened which allege a violation of any
Environmental Law, in each case relating to any
Company and arising out of any Environmental Law;
(iv) each Company has all environmental permits necessary
for its operations to comply with all applicable
Environmental Laws and is in compliance with the
terms of such permits in all material respects; and
(v) there has been no environmental audit conducted
within the past three years by any independent
environmental expert of any property currently owned
or leased by any Company.
5.9 LITIGATION, DISPUTES
Except as disclosed in Section 5.9 of the Disclosure Letter, no Company
is involved in any lawsuit or other proceeding pending against it
before any court, arbitral tribunal or governmental agency involving an
amount in excess of EUR 25,000 in a single case (provided that related
lawsuits or proceedings shall be
43
deemed to be a single case). No such lawsuit or proceeding has been
threatened against any Company as of the date hereof, and no Company is
subject to any governmental or court order or decree that materially
limits its ability to operate its business in the ordinary course.
There is no action, suit, investigation or proceeding pending against,
or to the knowledge of VARTA as of the date hereof threatened against,
VARTA or any company of the Consumer Group before any court or
arbitrator or any governmental body, agency or official which in any
manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement and limits the
ability of VARTA Group to consumate the transactions under this
Agreement.
5.10 EMPLOYEE AND LABOR MATTERS
(a) Section 5.10 (a) of the Disclosure Letter contains a true and
correct list, as of the date hereof, of all collective
bargaining agreements and all material agreements with unions,
workers' councils and similar organizations to which the
Companies are bound and of all obligations based on regular
business practice (BETRIEBLICHE UBUNG), to the extent that
such business practices result in material payment obligations
or other unusual and onerous obligations of the Companies. The
business of the Companies is and (to the extent relevant as of
today) has been conducted, in all material respects, in
compliance with these agreements. Except as disclosed in
Section 5.10 (a) of the Disclosure Letter, no Company is
experiencing and, to VARTA's knowledge, there is no basis to
expect any Company to experience (i) any strike, slowdown,
picketing or work stoppage by or lockout of its employees or
(ii) any suit relating to the alleged violation of any law or
order applicable in the respective country of incorporation of
the Companies and relating to labor relations or employment
matters (including any charge or complaint filed by an
employee or union) which, in each case has, or could
reasonably be expected to have, a Material Adverse Effect.
(b) Section 5.10 (b) of the Disclosure Letter sets forth, as of
the date hereof, a true and complete list of the employment
contracts of (i) all managing directors and officers of the
Companies, (ii) all employees of the second management level
(in respect of Companies with a second level of employees with
managerial functions) and (iii) all other employees of each
Company whose annual base salary (excluding, for the avoidance
of doubt,
44
performance-related payments and bonuses) exceeds EUR 100,000
(the "KEY EMPLOYEES"). Copies of the contracts have been
delivered to Strategic Partner. No side agreements with the
Key Employees exist.
(c) Except as disclosed in Section 5.10 (c) of the Disclosure
Letter or the actuarial reports referred to herein, none of
the Companies granted any pension rights to any of its
employees or former employees (including managing directors
and officers) or third parties. Pension accruals have been
made in the statutory annual accounts of the German Companies
as of December 31, 2001 up to the maximum amount permitted
under Section 6 a German Income Tax Act, and all funded or
unfunded pension schemes (defined benefit schemes) of the
Companies are operated, in all material respects, in
compliance with their respective terms, except as disclosed in
the Disclosure Letter. No employees or former employees or
their heirs of the Companies are entitled under any applicable
law to additional payments as a result of a failure of the
Companies to fully adjust the pension payments in any period
prior to the Closing Date.
(d) Except as disclosed in Section 5.10 (d) of the Disclosure
Letter, all redundancies relating to reorganization measures,
in particular with respect to the plant closure in Xxxxx and
the carve out of the Micro battery business have been
completed as of the date hereof and all outstanding
obligations are or will be correctly reserved for in the 2001
Financial Statements and in the Closing Date Financial
Statements.
5.11 MATERIAL AGREEMENTS/ARRANGEMENTS WITH MICROLITE
(a) Section 5.11 (a) of the Disclosure Letter contains a true and
correct list of all of the following written contracts and
agreements (including all amendments thereto) to which any
Company is a party and which have not yet been completely
fulfilled (the "MATERIAL AGREEMENTS"):
(1) agreements relating to the acquisition or sale of
interests in other companies or businesses;
(2) joint venture, cooperation and similar agreements
relating to the conduct of a material part of the
business of a Company;
45
(3) rental and lease agreements relating to real estate
and agreements granting the use of assets
("NIE(SS)BRAUCHRECHTE") used for the Companies'
business operations which, individually, provide for
annual payments of EUR 50,000 or more;
(4) loan agreements (other than customary credits on
goods in the ordinary course of business and
customary overdraft facilities with banks and other
financial institutions involving an amount of less
than EUR 50,000 each), bonds, notes or any other
instruments of debt issued by any of the Companies;
(5) guarantees issued, sureties assumed or similar
obligations (including legally binding comfort
letters) assumed by any of the Companies for any
financial debt of any third party, other than debt of
any entity of the Consumer Group;
(6) frame or master agreements with the ten largest
customers and with the 20 largest suppliers of the
VARTA Consumer business, in each case based on the
aggregate sales in 2001("MAJOR CUSTOMERS AND
SUPPLIERS");
(7) agreements with distribution agents and commercial
agents with sales commissions;
(8) all agreements, other than agreements of the type
described in any other paragraph of this Section 5.11
(a) and except lease and similar agreements relating
to company cars, EDP, telephone systems and other
office equipment, which oblige any Company to pay a
fee or remuneration of more than EUR 100,000 p.a. and
which cannot be terminated by any Company with a
notice period of less than six months or,
irrespective of the notice period, can only be
terminated with the consequence of the payment of a
lump sum termination fee, contractual penalty or the
like;
(9) material agreements with VARTA or any other company
of the VARTA Group including Microlite, other than in
connection with
46
commercial transactions made in the ordinary course
of the Companies' business;
(10) agreements or commitments not made in the ordinary
course of business that are material to the business
of any Company, taken as a whole; and
(11) licence agreements relating to the use of any
Material Intellectual Property Rights including the
VARTA trademark (to the extent that such rights are
currently owned or used by or will be transferred to
VARTA Consumer pursuant to Section 9.1 below).
(b) True and complete copies of all Material Agreements have been
disclosed to Strategic Partner prior to the execution of this
Agreement, except as otherwise set forth in Section 5.11 (a)
of the Disclosure Letter. Each Material Agreement referred to
under 5.11 (a) (1), (2), (3), (6) or (11) is in full force and
effect. Neither the Companies nor, to VARTA's knowledge, any
third party are in material default or material breach under
any such agreement. Except as provided in Section 5.11 (b) of
the Disclosure Letter, no Material Agreement hinders any
Company to continue the existing business operations in the
same way as prior to Closing or contains regulations on
competition between any Company and third parties, in
particular excluding or limiting the right of any Company to
do business in certain fields of activity and geographical
areas except for exclusive distribution agreements.
(c) As of the Closing Date and except for purchase orders in the
ordinary course of trading there are no material agreements
between Consumer and Microlite other than the Industrial
Technology Supply and Technical Assistance Agreement. All
arrangements between Consumer Microlite are on
arm's-length terms.
5.12 FINDERS' FEES
Except as set forth in Section 5.12 of the Disclosure Letter no Company
has any obligation or liability to pay any fees or commissions to any
broker, finder or agent
47
or any stay bonus to any employee with respect to any of the
transactions contemplated by this Agreement.
5.13 INSURANCE COVERAGE
Section 5.13 of the Disclosure Letter contains a true and complete list
of all material insurance policies relating to the assets, business or
operations of the Companies, indicating any policies which will
terminate or may be terminated by the insurer as a result of the
consummation of the transactions contemplated by this Agreement. All
such policies are in full force and effect and there are no claims
exceeding an amount of EUR 10,000 by any Company pending under any of
such policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or in respect of which
such underwriters have reserved their rights.
5.14 PRODUCT LIABILITY
The products manufactured by the Companies prior to the Closing Date
comply with all applicable product liability and safety laws in the
respective jurisdiction (including with respect to Germany the German
Product Safety Act - PRODUKTSICHERHEITSGESETZ) except where such
failure does not have a Material Adverse Effect. Except as disclosed in
the Disclosure Letter, as of the date hereof, no claims for Losses
based on defective products (comprising personal injury claims and
claims because of damages to property of any third party, but
excluding, for the avoidance of doubt, product warranty claims) have
been asserted or threatened in writing against the Companies which
exceed EUR 10,000 each. To VARTA's knowledge, no preliminary
investigations under criminal law have been instituted against
employees, executives and/or corporate bodies of the Companies based on
personal injury or damage to property caused by defective products, nor
are there any indications that such claims or investigations will be
asserted or instituted, respectively.
5.15 CONDUCT OF BUSINESS SINCE DECEMBER 31, 2001
Except as disclosed in Section 5.15 of the Disclosure Letter and except
for any transactions contemplated by or any facts or events disclosed
in this Agreement, in the period between December 31, 2001 and the date
hereof, the business of each
48
Company has been operated in the ordinary course, in all material
respects, in accordance with prudent business practice and materially
in a manner consistent with past practice, and, since December 31,
2001, no measures have been taken and no obligations have been incurred
which go beyond the ordinary course of business; in particular, there
have not been:
(a) any damage, destruction or other casualty loss (whether or not
covered by insurance) adversely affecting the business or
assets of any Company which has had or could reasonably be
expected to have a Material Adverse Effect;
(b) any distribution or payment of profits (open or concealed) by
any Company to VARTA, other than the distribution by VARTA
Geratebatterie of the profits for the fiscal year ended on
December 31, 2001, as shown in the relevant statutory
financial statements of VARTA Geratebatterie, under the
existing control and profit transfer agreement; or any release
or withdrawal of hidden reserves except in the ordinary course
of business;
(c) any sale of shareholdings or businesses;
(d) any redundancies in respect of the Companies (except as in the
normal course of the business);
(e) material adverse changes as to the object and/or the scope of
the business activities the business operations, the income
and financial situation and the result of operations as a
whole of the Consumer Group, unless reflected in the Monthly
Management Reports;
(f) any investment with a volume of more than EUR 500,000
(individually);
(g) any change in compensation or other benefits payable to any
director or officer of any Company or any of the employees
referred to in Section 5.10 (b) pursuant to any severance or
retirement plans or agreements, other than changes made in the
ordinary course of business consistent with past practice.
To VARTA's knowledge, no extraordinary event (excluding, for the
avoidance of doubt, general business or market developments) has
occurred since December 31,
49
2001, which has, or, in the reasonable opinion of VARTA, is likely to
have, a Material Adverse Effect except as disclosed to Strategic
Partner under Section 5.15 of the Disclosure Letter.
5.16 MAJOR CUSTOMERS AND SUPPLIERS
Except as disclosed in Section 5.16 of the Disclosure Letter, as of the
date hereof, no Company has received a written or oral notification
addressed to the management of the Company (or, with respect to any
oral notification, only to the persons listed in EXHIBIT 5.17 or
otherwise to their knowledge) indicating that any of the Major
Customers and Suppliers intend to cease doing business with the
Consumer Group or materially alter the amount of business it is
presently doing with the Consumer Group following the Closing.
5.17 VARTA'S KNOWLEDGE
VARTA's knowledge or awareness refers to the actual knowledge, as of
the date hereof, of the members of the executive board (VORSTAND) of
VARTA, the general managers of the Companies or of one of the persons
listed in EXHIBIT 5.17. The deliberate failure of any of such persons
to make any inquiry that would reasonably be expected to be made in
respect of any representation and warranty shall be deemed to
constitute actual knowledge of such person of any facts that would have
been disclosed as a result of such inquiry.
5.18 LIMITATION OF WARRANTIES
To the extent that warranties are limited in this Article 5, such
limitation shall apply only to the warranty to which it refers. If
VARTA has disclosed facts to Strategic Partner, German Limited or
Designated Purchaser or its advisors outside this Agreement which refer
to individual warranties given in this Article 5, or that the Strategic
Partner, German Limited or Designated Purchaser has otherwise gained
knowledge of such facts, this can only be held against the Strategic
Partner, German Limited or Designated Purchaser if and to the extent
that these facts are expressly mentioned in a representation and
warranty contained in this Article 5 or the Disclosure Letter.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF STRATEGIC PARTNER
Strategic Partner represents and warrants to VARTA as follows, in each case as
of the date hereof:
6.1 INCORPORATION, AUTHORIZATION, NON-CONTRAVENTION
(a) Strategic Partner and German Limited are corporations duly
incorporated, validly existing and in good standing under the
laws of their respective countries of incorporation and have
all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to
carry on their businesses as now conducted. Strategic Partner
(directly or indirectly) owns all shares in German Limited.
(b) The execution by Strategic Partner and German Limited of this
Agreement and the consummation of the transactions
contemplated hereby are within the corporate powers of
Strategic Partner and German Limited and have been duly
authorized by all necessary corporate action on the part of
Strategic Partner and German Limited. This applies accordingly
for all other entities affiliated with Strategic Partner. This
Agreement (and the agreements delivered pursuant hereto) will,
when executed by Strategic Partner, German Limited or any
entity affiliated with them and assuming the due execution of
this Agreement by VARTA or any other company of the VARTA
Group, constitute the valid and binding obligation of such
entity, enforceable in accordance with its terms.
(c) The execution by Strategic Partner and German Limited of this
Agreement and the consummation of the transactions
contemplated hereby require no filing with, or approval by,
any governmental body, agency or official, other than the
compliance with any applicable requirements under merger
control laws as set forth in Sections 3.2 (a) (i) and 3.3
(assuming that the financial and other information relevant
for the assessment of any filing requirements which has been
provided by VARTA and the Consumer Group is accurate and
complete) and except for informational filings with the United
States Securities and Exchange Commission and the consent of
Strategic Partner's lenders under the existing credit
agreement (which, however, will be
51
terminated in connection with the financing contemplated by
Section 7.12) or as otherwise agreed by the Parties.
(d) The execution by Strategic Partner and German Limited of this
Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) violate the
certificate of incorporation or bylaws of Strategic Partner or
German Limited, or (ii) assuming compliance with the matters
referred to in Sections 3.2 (a) (i) and 3.3, violate any
applicable law, rule, regulation, judgment, injunction, order
or decree, except where any violation would not have a
material adverse effect on the transactions contemplated
hereby.
6.2 LITIGATION
There is no action, suit, investigation or proceeding pending against,
or to the knowledge of Strategic Partner as of the date hereof
threatened against, Strategic Partner or German Limited before any
court or arbitrator or any governmental body, agency or official which
in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement and
limits the ability of Strategic Partner to consummate the transactions
under this Agreement.
6.3 FINANCIAL CAPABILITY
As of the date hereof Strategic Partner has a financing commitment in
the form attached as Section 6.3 of the Disclosure Letter.
ARTICLE 7
COVENANTS
7.1 CONDUCT OF BUSINESS OF CONSUMER GROUP TO THE CLOSING DATE
From the date hereof to the Closing Date and up to the date on which
the Capital Increase is registered, VARTA shall cause the Companies to
conduct their businesses in the ordinary course consistent with past
practice and to use their reasonable best efforts to (i) preserve
intact their business organizations and
52
relationships with third parties and to (ii) keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, from the date hereof until Closing Date,
except as contemplated by this Agreement, VARTA will not permit any
Company to:
(a) adopt or propose any change in its certificate of
incorporation or bylaws;
(b) make, declare or pay any dividend;
(c) merge or consolidate with any other person or acquire material
shareholdings or businesses from any other person;
(d) sell, lease, license or otherwise dispose of any shareholding
or business except pursuant to existing contracts or
commitments disclosed in this Agreement;
(e) materially change the object and/or scope of the business
activities or business operations of the Companies;
(f) incur additional indebtedness for borrowed money which may not
be repaid on the Closing Date without any penalty or the like,
or guarantee any indebtedness for borrowed money of another
person (other than any Company);
(g) deliberately fail to perform material obligations under any
Material Agreement;
(h) issue or pledge any shares;
(i) grant any severance or termination pay to any Key Employee or,
as part of a general scheme, a significant number of other
employees, except pursuant to agreements existing on the date
hereof that have been disclosed to Strategic Partner;
(j) agree or commit to do any of the foregoing;
(k) pay its suppliers in any country contrary to past practice in
that country;
53
(l) to reduce its inventory contrary to past practice;
(m) to sell receivables contrary to past practice.
In addition, upon granting of the merger control clearances referred to
in Sections 3.2 and 3.3, the following matters shall require the prior
written consent of Strategic Partner or German Limited, which shall not
be unreasonably withheld:
(1) any investments made by any Company in excess of EUR 100,000
each which are not provided for in any budget of the Consumer
Group disclosed to Strategic Partner prior to the date hereof;
(2) any amendment to any Material Agreement except for (i)
non-material amendments in the ordinary course, consistent
with past practice, (ii) agreements referred to in item (4) of
Section 5.11 (a) and (iii) agreements with distributors or
agents which are not material for the business of the Consumer
Group; and
(3) any increases of compensation of any Key Employee, except
pursuant to agreements existing on the date hereof that have
been disclosed to Strategic Partner.
7.2 COVENANT NOT TO COMPETE
(a) For a period of two years from the Closing Date but in any
event until the termination of the joint venture (Article 11),
VARTA shall not compete, either directly or indirectly, and
shall cause the other companies of the VARTA Group, for so
long as they continue to be part of the VARTA Group, and in
case they are to be sold to a third party, shall oblige the
Companies of the VARTA Group, not to compete, with the
Consumer Group's business as conducted as of Closing Date in
the production and distribution of portable batteries (as
specified in the Trademark and Domain Names Protection and
Delimitation Agreement as set forth in Section 9.1) in the
territories in which they are operating on the Closing Date
provided, however, that (i) the acquisition (including by way
of a merger) of a non-controlling interest not exceeding 5% of
the respective capital by voting-
54
rights in an entity engaged in a competing business and (ii)
the business activities of Microlite shall be exempt from the
covenant not to compete.
(b) The severability clause explicitly applies with respect to
this covenant not to compete.
7.3 CONFIDENTIALITY
Without prejudice to any confidentiality obligations of the Parties
under applicable law, VARTA shall, for a period of five years after the
termination of joint venture (Article 11) and with respect to technical
know-how for an unlimited period of time, keep confidential and not
disclose to any third party (and shall cause the other companies of the
VARTA Group, for as long as they continue to be part of the VARTA
Group, and in case they are to be sold to a third party, shall oblige
the Companies of the VARTA Group, to keep confidential and not to
disclose to any third party) any business or trade secrets or other
confidential information of the Consumer Group, other than those which
have become publicly known through no fault of VARTA or any other
companies of the VARTA Group.
7.4 RELEASE OF VARTA GUARANTEES
With effect as of Closing Date, Strategic Partner (i) hereby
assumes all undertakings, guarantees, comfort letters and
other securities listed in Section 7.4 (1) of the Disclosure
Letter. In respect of non-financial debt of the Companies and
those guarantees which relate to Assumed Financial Debt
(together, the "VARTA GUARANTEES") which certain members of
the VARTA Group have provided in favor of the Consumer Group
to banks, other financial institutions, suppliers, customers
or other third parties and (ii) shall indemnify and hold
harmless all such members of the VARTA Group from all
obligations and liabilities arising under the VARTA
Guarantees. Strategic Partner shall further, prior to or on
the Closing Date replace the VARTA Guarantees (provided that
VARTA shall notify Strategic Partner of the outstanding
guarantees at least ten business days before the Closing
Date), so that the respective member of the VARTA Group shall
be fully released from such VARTA Guarantees as of the Closing
Date.
55
If and to the extent that the VARTA Guarantees are not
replaced by the Closing Date Strategic Partner shall pay to
VARTA a guarantee premium of 1 % p.a. of the secured amount
actually outstanding to be computed and paid as of the end of
each month.
7.5 LOAN TO VARTA/STRATEGIC PARTNER
(a) Strategic Partner agrees and shall ensure that, on the Closing
Date, (i) FinanceCo will grant a loan of EUR 81,443,000 and
(ii) ROV General Partner will grant a loan in the amount of
EUR 78,000,000 to VARTA pursuant to loan agreements to be
entered into in the form of the draft attached as EXHIBIT 7.5
(a) (1) and EXHIBIT 7.5 (a) (2). The loan amount shall be paid
as set forth in Section 2.9. Interest shall be paid annually
in an amount of 5,63 % p.a. Strategic Partner warrants and
shall ensure (STEHT DAFUR EIN) that such loans will not be
repayable by VARTA other than in accordance with the expressed
terms of the loan agreement.
(b) The Parties agree and shall ensure that on the Closing Date
FinanceCo will grant a loan of EUR 51,825,000 to Strategic
Partner or its designee pursuant to a loan agreement to be
entered into in the form of the draft attached as EXHIBIT 7.5
(b). Interest shall be paid annually in an amount of 5,63 %
p.a.
(c) The Parties agree and VARTA shall ensure that on the Closing
Date VARTA Consumer will grant a loan of EUR 510,000 to VARTA
pursuant to a loan agreement to be entered into in the form of
the draft attached as EXHIBIT 7.5 (c). Interest shall be paid
annually in an amount of 5,63 % p.a.
(d) VARTA agrees and shall upon request of Strategic Partner
pledge its shares in VARTA Consumer to FinanceCo and/or ROV
General Partner to secure the loans referred to in Section 7.5
(a) and (c).
56
7.6 ADDITIONAL AGREEMENTS, FINANCING
(a) Transition Services
o Between VARTA and Consumer Group
The Parties shall ensure that VARTA shall enter, on the
Closing Date, into one or more service agreements with
Consumer Group, whereby, if and to the extent requested by
Consumer Group by September 15, 2002, VARTA will provide
Consumer Group with any services that they currently provide
to Consumer Group; such services will be continued for 12
months following the Closing Date at current prices, terms and
conditions, subject to earlier termination by Consumer Group
after six months on two months' prior written notice as of the
end of a calendar month.
o Between Consumer Group and Micro
The existing services agreements and those to be entered into
in the course of the carve out shall have a term of twelve
months minimum from the Closing Date and VARTA shall ensure
that Consumer Group can terminate them with a six month
notice.
The Master Agreement with Revolving Order Systems For
Semi-Finished Products shall run for a minimum period of two
years following the Closing Date with a twelve month notice
period. Upon termination, Consumer Group shall pay the lesser
of EUR 2,000,000 or the actual redundancy cost or, at Consumer
Group's option, Consumer Group can hire the employees. VARTA
shall ensure that the existing agreement is amended
accordingly prior to the Closing Date.
o Services to be provided by Consumer Group to Microlite if
requested by VARTA
VARTA may request that the Consumer Group continues to provide
services to Microlite for a period up to 18 months and under
the same terms and conditions as have been provided prior the
Closing Date. VARTA will use its reasonable best efforts that
Microlite continues to provide the same
57
services or supply to Consumer Group for a period of 18 months
following the Closing Date under the same terms and conditions
as have been provided prior to the Closing Date.
(b) Financing
As from the Closing Date, VARTA shall have no responsibility
to provide any financing to the Consumer Group.
(c) Distribution Agreement
Micro and Strategic Partner shall enter into the exclusive
long-term distribution agreement in the form attached as
Section 7.6 (c) of the Disclosure Letter.
(d) Assets and Employees
Unless otherwise agreed by the Parties, VARTA shall ensure
that Micro and Consumer Group shall allocate the relevant
assets, liabilities and employees, to the extent not yet
allocated on the date hereof, between the Consumer Group and
Micro and its group on the basis of their primary use or
activities.
7.7 ACCESS TO INFORMATION
On and after the Closing Date, Strategic Partner shall afford promptly
to VARTA and its representatives reasonable access to books of account,
financial and other records (including, without limitation,
accountant's work papers), information, employees and auditors of the
Consumer Group and German Limited to the extent necessary or useful for
VARTA in connection with any audit, investigation, dispute or
litigation or any other reasonable business purpose; provided that any
such access by VARTA shall not unreasonably interfere with the conduct
of the business of such companies.
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7.8 COOPERATION
Subject to the other provisions of this Agreement, the Parties hereto
shall in good faith perform their obligations under this Agreement and
shall each use their reasonable best efforts to do, or cause to be
done, all things necessary, proper or advisable under applicable law to
obtain all necessary consents and satisfy all conditions to the
obligations of the respective Parties under this Agreement and to cause
the transactions contemplated by this Agreement to be carried out
promptly in accordance with the terms hereof and shall cooperate fully
with each other and their respective officers, directors, employees,
agents, counsel, accountants and other designees in connection with any
steps required to be taken as part of their respective obligations
under this Agreement. After the execution of this Agreement, each Party
shall take such actions and execute and deliver such documents as may
be reasonably required in order to consummate more effectively the
transactions contemplated by this Agreement.
Strategic Partner will support VARTA with respect to the defense in the
Bodega litigation described in Section 5.9 of the Disclosure Letter
against reimbursement of reasonable external cost and out-of-pocket
expenses.
7.9 FINANCIAL STATEMENTS
VARTA acknowledges that Strategic Partner will be required to include
US GAAP audited and unaudited financial statements for the business of
the Consumer Group for periods prior to the Closing Date in its filings
with the United States Securities and Exchange Commission and VARTA
agrees to reasonably cooperate with Strategic Partner in all respects
with this effort upon Strategic Partner's request. For this purpose,
VARTA shall use its reasonable best efforts to deliver to Strategic
Partner (i) on or before August 31, 2002, German GAAP audited pro-forma
consolidated financial statements (including consolidated balance sheet
consolidated profit and loss account, and consolidated statement of
cash flow) for the calendar year 2001 with all statements reconciled to
US GAAP also audited (Strategic Partner to assist through an
independent consulting firm with reconciliation to US GAAP at Strategic
Partner's cost), and (ii) on or before August 31, 2002, German GAAP
unaudited interim consolidated financial statements for the 6 month
period ended June 30, 2002, also reconciled to US GAAP, and VARTA shall
deliver for the periods after May 31, 2002 up to, but
59
excluding the Closing Date, monthly internal management reports of the
Consumer Group no later than 18 days after closing of the respective
period. VARTA and the Consumer Group and its accountants and Strategic
Partner and its accountants shall closely cooperate with each other in
the reconciliation of the financial statements referred to in (i) and
(ii) of the preceding sentence. Without hindering the foregoing and
after completion of the financial statements described above, VARTA
will use its reasonable best efforts to cause the VARTA Group and,
prior to Closing, VARTA Consumer, to cooperate with Strategic Partner
in the preparation of German GAAP audited pro-forma consolidated
financial statements (including consolidated balance sheet,
consolidated profit and loss account and consolidated statement of cash
flow) for the calendar year 2000, if Strategic Partner determines such
financial statements are required under United States law or ,at
Strategic Partner's option, to cooperate with Strategic Partner in the
preparation of the financial statements described above for calendar
year 2001 and the 2002 period up to the Closing Date in accordance with
US GAAP with footnotes rather than in accordance with German GAAP and
reconciled to US GAAP.
Any out-of-pocket expenses reasonably incurred by VARTA or the Consumer
Group in connection with the matters set forth in this Section 7.9
shall be borne by Strategic Partner.
7.10 CHECK-THE-BOX ELECTION
(a) VARTA as shareholder of VARTA Consumer shall have submitted to
Strategic Partner for filing an election pursuant to US
Treasury Regulation Section 301.7701-3 a signed standard form
to treat VARTA Consumer as a disregarded entity for US tax
purposes effective as of September 15, 2002.
(b) After Closing VARTA shall sign and submit for signature and
filing by German Limited/Strategic Partner the standard form
to effect an election pursuant to US Treasury Regulation
Section 301.7701-3 to treat VARTA Consumer as a partnership
for US tax purposes effective as of the Closing.
(c) Strategic Partner shall fully cooperate with VARTA in the
preparation and filing of the standard forms referred to in
Section 7.10.
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7.11 MINORITY SHARES/VARTA DIRECTORS
(a) VARTA shall ensure that all minority shares in the Companies
not held by VARTA or Consumer Group as set forth in EXHIBIT
R-2 shall be transferred to Strategic Partner or its designees
within three months following the Closing Date unless
otherwise agreed.
(b) VARTA shall ensure that all officers and employees of the
VARTA Group which are members of any board of directors or
officers of the Consumer Group shall resign or otherwise be
removed from their offices prior to or on the Closing Date,
with no consideration payable by VARTA Consumer.
7.12 FINANCING
Strategic Partner shall use commercially reasonable efforts to obtain
the final financing in accordance with the commitment as set forth in
Section 6.3 of the Disclosure Letter or to seek different financing.
Strategic Partner shall keep VARTA informed about its efforts to obtain
financing and shall promptly notify VARTA in writing if Strategic
Partner has any indication that the financing as described in Section
6.3 of the Disclosure Letter may not or not timely be obtained. The
parties acknowledge that the failure to timely deliver the financial
statements referred to in Section 7.9 may delay or hinder the
financing.
7.13 MICRO AND MICROLITE / INDEMNIFICATION BY VARTA
(a) VARTA shall, prior to or on the Closing Date replace all
Consumer Group Guarantees (as defined in Section 7.13 (b)
below) so that the respective member of the Consumer Group
shall be fully released from such Consumer Group Guarantees as
of the Closing Date, provided that, if VARTA Consumer has not
been fully released from all guarantees especially but not
limited to those with respect to Microlite, the respective
guaranteed amount shall remain in the Escrow Account I and
shall serve as security for Strategic Partner/Consumer Group
until the respective release has been obtained.
(b) With effect as of the Closing Date, VARTA will assume and
shall indemnify and hold harmless the Consumer Group from any
liability under
61
any guarantees, comfort letters, securities, sureties,
performance bonds and similar undertakings issued by any
company of the Consumer Group to secure or back financial
obligations of Micro or Microlite or any other member of the
VARTA Group, including those set forth in Section 7.13 of the
Disclosure Letter ("CONSUMER GROUP GUARANTEES").
7.14 OTHER
VARTA Consumer has no obligations relating to the matters listed in
Section 7.14 of the Disclosure Letter.
ARTICLE 8
LEGAL CONSEQUENCES
8.1 COMPENSATION OF LOSSES/INDEMNIFICATION BY VARTA
(a) In the event that one or more of the representations and
warranties given by VARTA in this Agreement are inaccurate or
incomplete or to the extent that VARTA gave a representation
and warranty based on its knowledge and VARTA has actual
knowledge (Section 5.17) or in case of any violation by VARTA
of any covenant, obligation or other agreement contained
herein, Strategic Partner shall be entitled to demand from
VARTA that the breach is remedied (NACHERFULLUNG) or damages
instead of performance (SCHADENSERSATZ STATT DER LEISTUNG) in
the meaning of Section 249 subs. German Civil Code including
lost profits of the Companies and related reasonable
out-of-pocket expenses (including reasonable attorney's fees)
but excluding other consequential damages (FOLGESCHADEN),
internal administration and overhead costs be paid ("LOSSES"),
provided, however, that VARTA shall have one month to remedy
the breach following the notification of the claim.
In case of payments of Losses, VARTA has to pay the Loss to
the respective entity of the Consumer Group, to the extent the
Loss has been incurred by the Consumer Group or to Strategic
Partner or German Limited to the extent that the Loss has been
incurred by Strategic Partner or German Limited (in each case,
on the basis of 100% of the Loss).
62
If Strategic Partner demands that the breach be remedied and
the demand is not fully met within one month following the
notification of the claim, Strategic Partner shall instead be
entitled to demand damages instead of performance as outlined
above.
The statements made in the certificates delivered pursuant to
Sections 3.2 (a)/(b) (iii) shall be deemed to be
representations and warranties of the certifying party for all
purposes under this Agreement.
(b) With respect to facilities which are operating facilities of
the Consumer Group as of the Closing Date, VARTA shall
indemnify the Companies against all Losses resulting from
public law and civil law claims of public authorities or third
parties and related (out-of-pocket) expenses (including
reasonable attorneys' fees) which relate to Environmental
Contamination whether or not disclosed in Section 5.8 (b) of
the Disclosure Letter, ("NON-SCHEDULED-ON-SITE-CONTAMINATION")
to the extent that such Environmental Contamination was caused
before the Closing Date and is in violation of or is otherwise
required to be remedied or investigated under, any
Environmental Law as in effect on or prior to the Closing
Date.
If on-site ground water contamination is discovered within
eighteen months after Closing, it shall be rebuttably presumed
that it was caused before the Closing Date.
VARTA's indemnification obligation under this Section 8.1 (b)
shall be excluded to the extent that (i) changes of current
use regarding the site (NUTZUNGSANDERUNG) after the Closing
Date, or (ii) investigations by Strategic Partner or any
Company (other than those imposed by a final and binding order
of the competent authority or required by law or industry
standards) or (iii) the sale or lease of the property if the
seller or lessor of the property assumes any environmental
liability that goes beyond that assumed by VARTA under this
Agreement or (iv) the closure of any plant, gave rise to the
authority's investigation and order or the third-party claim,
or may reasonably have had an impact on the authority's
decision or the third-party claim. However, with respect to
any plant closure VARTA shall be liable under this Section 8.1
(b) for 25% of the related Losses.
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VARTA's indemnification obligation under this Section 8.1 (b)
shall only apply to Losses exceeding, in the aggregate, an
amount of EUR 2,650,000 and, in respect of such excess amount,
only to 90 per cent of such Losses in respect of any Losses
notified to VARTA within 18 months after the Closing Date and
to 80 per cent of any Losses notified to VARTA after such 18
months period.
(c) With respect to all other facilities (owned by the Consumer
Group but no longer operating facilities as of the Closing
Date or not owned by the Consumer Group on the Closing Date,
including properties which are carved out from this
transaction pursuant to Sections 5.2 (d) and 5.5 (d)) or with
respect to Environmental Contamination outside the operating
facilities, e.g. neighborhood, resulting from disposal of
hazardous substances (e.g. batteries) and ground water
contamination caused prior to the Closing, or with respect to
environmental damages caused, in any Company's business
process on sites no longer operated by the Consumer Group on
the Closing Date, whether or not disclosed to Strategic
Partner ("OFF-SITE-CONTAMINATION"), VARTA shall fully
indemnify Strategic Partner against any and all claims. VARTA
shall only be liable for any ground water contamination on
neighboring premises if such contamination is discovered
within eighteen months after the Closing; in such case it
shall be rebuttably presumed that the ground water
contamination was caused before the Closing Date.
(d) With respect to the Bodega case disclosed in Section 5.9 of
the Disclosure Letter VARTA shall fully indemnify Strategic
Partner/Consumer Group. With respect to the litigation
disclosed in Section 5.9 of the Disclosure Letter VARTA shall
fully indemnify Strategic Partner/Consumer Group, (i) to the
extent that the total Losses are above EUR 3,500,000 and (ii)
for 50 % of the total Losses between EUR 1,500,000 and EUR
3,500,000. Consumer Group shall bear the total Losses below
EUR 1,500,000.
VARTA shall indemnify Strategic Partner/Designated Purchaser
with respect to all claims brought against Consumer Group
arising out of the sale/use or manufacture of micro or
automotive batteries by any member of the VARTA Group prior to
the Closing.
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(e) Strategic Partner may assert claims pursuant to Section 8.1
(a) arising from a breach of a representation and warranty
contained in this Agreement only to the extent that all such
Losses exceed EUR 1,000,000 in the aggregate ("DEDUCTIBLE").
VARTA's liability for any claims pursuant to Section 8.1 (a)
arising from breach of the representations and warranties
contained in this Agreement and VARTA's indemnification
obligation under Section 8.1 (b) and (d) shall be limited to
an aggregate amount of EUR 65,000,000 ("CAP"). With respect to
(i) defects in title regarding the ownership of the shares in
the Companies including VARTA's remaining 49% interest in the
Consumer Group and (ii) any claims under any covenants of
VARTA under this Agreement and with respect to VARTA's
indemnification obligation contained in Section 8.1 (c),
VARTA's liability for these claims and VARTA indemnification
obligation shall be limited to EUR 245,000,000 with no
Deductible.
(f) The existence of a specific indemnity related to a certain
subject matter does not limit Strategic Partners' ability to
make claims under Section 8.1 (a) related to the same subject
matter, provided, for the avoidance of doubt, that Strategic
Partner and the Consumer Group may only recover the same Loss
once. In case of a breach of the representation contained in
Section 5.8 which also falls under the indemnification
obligation in Sections 8.1 (b) and (c), Sections 8.1 (b) and
(c) shall apply exclusively.
(g) Claims of Strategic Partner under this Section 8.1 shall be
excluded to the extent that the Loss to be indemnified is
reflected as a write-off, adjustment, liability or provision
in the 2001 Financial Statements.
(h) Strategic Partner undertakes to satisfy any claims under this
Agreement first from the Escrow Account II in accordance with
the terms of the escrow agreement and, if the funds in the
Escrow Account II are insufficient, such claims shall be paid
by VARTA.
(i) For the avoidance of doubt, any limitations of claims of
Strategic Partner pursuant to this Section 8.1 shall also
apply to claims of German Limited or any Designated Purchaser.
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(j) VARTA does not assume any liability under this Article 8 to
the extent that Strategic Partner, its group or the Companies
have any collectible claims against third parties, including
insurance companies (provided that VARTA shall indemnify
Strategic Partner or the Companies from the discounted cash
value, determined on the basis of a discount rate of 8% per
annum, of any increase in insurance premiums resulting from
the relevant matter).
(k) VARTA shall pay, on the Closing Date, an amount of EUR
5,000,000 (the "ESCROW AMOUNT II") into an escrow account
which is separate from the Escrow Account I referred to in
Section 2.9 ("ESCROW ACCOUNT II") with the Escrow Agent which
amount shall be pledged to Strategic Partner/Designated
Purchaser. The amount of any collected Purchased Receivables
shall be paid into Escrow Account II.
If the aggregate amount of the Purchased Receivables collected
within four months after the Closing Date is less than EUR
20,000,000 Strategic Partner will replenish Escrow Account II
with the shortfall within ten business days thereafter.
Strategic Partner shall consent to the release of the Escrow
Amount and to the reassignment of not yet collected Purchased
Receivables to VARTA three years following the Closing Date
except to the extent that claims secured by the Escrow Amount
have been timely brought against VARTA. VARTA shall consent to
the release of the Escrow Amount to Strategic Partner, German
Limited or any Designated Purchaser to the extent such amount
is payable under a non-appealable and enforceable judgment of
a competent court or arbitration panel. The Parties shall
jointly instruct the Escrow Agent accordingly. Details are set
forth in the escrow agreement attached as EXHIBIT 8.1 (k),
which will be executed on the Closing Date ("ESCROW AGREEMENT
II").
8.2 LIMITATION PERIODS
The representations, warranties, covenants, agreements, and indemnities
contained in this Agreement shall survive Closing. All representations
and warranties contained in Article 5 and indemnification claims for
Non-Scheduled-On-Site-Contamination shall be time-barred (VERJAHREN)
upon the expiration of a period of 3 years after the Closing Date with
the following exceptions:
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(a) Indemnification claims for Off-Site-Contamination shall be
time-barred upon the expiration of a thirty year period after
the Closing Date, except with respect to groundwater
contamination on neighboring premises which claims shall be
time-barred upon the expiration of 18 months after the Closing
Date.
(b) Claims relating to legal title, covenants and fraud shall be
time-barred upon the expiration of a ten year period after the
Closing Date.
Notwithstanding anything to the contrary in this Agreement, the rights
and remedies available with respect to any other specific indemnities,
covenants and agreements shall be time-barred in accordance with
applicable law.
8.3 PROCEDURES
(a) In the event of a breach of a representation, warranty or
covenant of VARTA contained in this Agreement, Strategic
Partner or German Limited shall, within a reasonable period,
notify VARTA of any breach, and, to the extent then feasible,
describe its claim in reasonable detail and set forth the
estimated amount of such claim. Notwithstanding the foregoing
sentence, Strategic Partner shall not be required to give
notice of such a breach until Strategic Partner has the right
to make a claim pursuant to the limitation in Section 8.1.
(b) If a claim for indemnification under Section 8.1 is asserted
against VARTA arising from any demand, claim, action, suit,
proceeding or investigation by or before any court,
arbitrator, governmental authority or other third party (a
"THIRD PARTY CLAIM") against Strategic Partner or the Consumer
Group ("CLAIM ADDRESSEE"), VARTA may assume the defense of
such Third Party Claim at its own expense. If VARTA assumes
the defense of such Third Party Claim, such defense shall be
conducted in accordance with VARTA's instructions and by
counsel chosen by VARTA approved by the Claim Addressee, which
approval shall not be unreasonably withheld. The Claim
Addressee shall retain the right to employ its own counsel and
participate in the defense of such Third Party Claim at its
own expense if (i) in the written opinion of counsel to the
Claim Addressee reasonably satisfactory to VARTA, use of
counsel of VARTA's choice would be expected to give rise
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to a conflict of interest, or (ii) VARTA shall not have
employed counsel to represent the Claim Addressee within a
reasonable time after notice of the assertion of any such
claim or institution of any such action or proceeding, or
(iii) the amount at issue is likely to exceed the amount of
VARTA's indemnification obligation under this Article 8.
Notwithstanding the foregoing provisions of this Section 8.3
(b), VARTA shall not be entitled to settle any Third Party
Claim for which indemnification is sought under Section 8.1
without Claim Addressee's prior written consent unless such
settlement provides that the Claim Addressee is released from
all liability with respect to such Third Party Claim and such
settlement does not impose any remedy other than the payment
of money and does not require the Claim Addressee to admit any
wrong doing. Strategic Partner and German Limited shall, at
their own expense, reasonably cooperate (and cause German
Limited and the Consumer Group to reasonably cooperate) with
VARTA in the defense of any Third Party Claim, provide VARTA's
representatives access, during normal business hours, to all
relevant business records and documents and permit VARTA and
its representatives to consult with the directors, employees
and representatives of Strategic Partner, its group or the
Consumer Group (as the case may be).
(c) The failure of Strategic Partner or German Limited to comply
with their obligations under this Section 8.3 shall not
release VARTA from its respective remedy obligation hereunder,
except (i) if (and to the extent that) that VARTA proves that
it is prejudiced by such failure or (ii) in the event of
Strategic Partner's or German Limited's deliberate or gross
failure to comply with such obligations, unless Strategic
Partner or German Limited proves that VARTA is not prejudiced
by such failure.
8.4 NO ADDITIONAL RIGHTS OR REMEDIES
(a) The Parties agree that the rights and remedies which Strategic
Partner, German Limited and the Consumer Group may have in
respect of the breach of a representation and warranty,
covenant, agreement or indemnity of VARTA contained in this
Agreement are limited to the rights and remedies explicitly
contained herein except in case of fraud or willful misconduct
(VORSATZ). VARTA makes no representations and warranties with
respect to the Consumer Group and the transactions
contemplated
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hereby, except those expressly set forth in this Agreement
(Articles 5, 8.1 (a) (last paragraph) and 10.2) or the
documents executed pursuant to the Agreement provided that in
case of inconsistencies this Agreement shall prevail.
(b) Any further claims and rights of Strategic Partner based on
statutory warranties or breach of pre-contractual duties and
obligations (ss. 280 para. 1, 311 para. 2, 241 para. 3 BGB)
shall be excluded. Claims for specific performance, delay in
performance (VERZUG) or positive breach of contractual duties
and obligations (ss. 280 paras. 2, 3, 281, 282 BGB) shall
not be excluded, but damage claims shall be subject to any
limitations contained in this Agreement. Strategic Partner or
German Limited shall have no right to rescind, cancel or
otherwise terminate this Agreement or exercise any right or
remedy which would have a similar effect, except for the
termination rights set forth in Article 12 below. For
clarity's sake ss. 377 HGB do not apply.
8.5 INDEMNIFICATION BY STRATEGIC PARTNER
(a) Strategic Partner shall indemnify and hold harmless VARTA of
any Losses resulting from a breach of a representation and
warranty, covenant or other agreement of Strategic Partner
contained in this Agreement. VARTA may assert claims pursuant
to Article 6 only to the extent that all such Losses exceed
the Deductible. Strategic Partner's liability for a breach of
any representation and warranty contained in Article 6 shall
be limited to the Cap. Claims of VARTA arising from a breach
of the representations and warranties in Article 6 shall be
time-barred upon the expiration of a period of three years
after the Closing Date, and all other claims of VARTA against
Strategic Partner or German Limited under this Agreement shall
(subject to paragraph (b) below) be time-barred in accordance
with applicable law. With respect to the indemnification
procedure, Section 8.3 (a) - (d) shall apply with the
necessary changes.
(b) In addition to any indemnity obligation arising from a breach
of the representations and warranties, Strategic Partner shall
indemnify and hold harmless VARTA and all other companies of
the VARTA Group, subject only to the maximum limitation period
of 30 years permitted under
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applicable law (Sec. 202 (2) German Civil Code), from any
liability, all costs and expenses and all other losses
relating to (i) ground water contamination on neighboring
premises and (ii) On-Site Contamination, if and to the extent
that Strategic Partner's claims in respect thereof are
time-barred pursuant to Section 8.2.
(c) Section 8.4 shall apply accordingly.
ARTICLE 9
TRADEMARK, USE OF THE FIRM AND USE OF THE DOMAINS/WEBSITE
9.1 TRADEMARKS
The Parties agree that, on the Closing Date, VARTA, Micro, Strategic
Partner and VARTA Consumer will enter into a Trademark and Domain Names
Protection and Delimitation Agreement substantially in the form of the
draft attached hereto as EXHIBIT 9.1.
9.2 COMPANY NAME
With respect to the usage of "VARTA" as part of the company names of
the VARTA Group and the Consumer Group, the Parties agree that the
entities of the Consumer Group are without limitation entitled to
continue to use their company names after the Closing Date. Whenever
the entities of the Consumer Group change their company names, "VARTA"
shall be used in combination with a clear indication of their business
such as "Consumer Battery". VARTA shall ensure that the entities of the
VARTA Group (other than VARTA) will only use "VARTA" as part of their
company name in combination with a clear indication of their respective
business. VARTA shall be under no obligation to change its company name
with effect to delete "VARTA" therein after the Closing Date.
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ARTICLE 10
TAXES
10.1 DEFINITIONS
The following terms, as used herein, have the following meanings:
"INCOME TAX" means any federal, state, local, provincial, or other tax
imposed on net income (including trade income tax) or net profits.
"PRE-CLOSING DATE TAX PERIOD" means any Tax period ending on or before
the Closing Date.
"TAX" means any tax, social security contributions, duties or other
public levies of any kind, including, but not limited to, withholding
on amounts paid to or by any person and together with any interest,
penalty or addition to tax, imposed by any competent governmental
authority (a "TAXING AUTHORITY").
10.2 TAX REPRESENTATIONS
VARTA represents and warrants to Strategic Partner and German Limited
as of the date hereof and as of the Closing Date that, except as
otherwise disclosed under Section 10.2 of the Disclosure Letter,
(a) all Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to
be filed with any Taxing Authority with respect to any
Pre-Closing Date Tax Period by or on behalf of any of the
Companies (collectively, the "RETURNS"), have been filed when
due in accordance with all applicable laws;
(b) as of the time of filing, the Returns were true and complete
in all material respects;
(c) all Taxes shown as due and payable on the Returns that have
been filed or on any Tax assessment notice issued by a Taxing
Authority have been timely paid, or withheld and remitted, to
the appropriate Taxing Authority when due;
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(d) there is no ongoing or announced audit with respect to any of
the Companies in respect of any material Tax;
(e) no Company is a member of any consolidated or unitary group or
a party to any arrangement with any third party (other than
any company of the Consumer Group) as a result of which any
income, loss, asset or liability of any of the Companies is
attributed for Tax purposes to any such third party or is
otherwise taken into account in determining any Tax payable by
any third party, or vice versa.
(f) no Company has any Tax liability from a former shareholding in
any VARTA Group entity which does no longer belong to the
Consumer Group;
(g) no Company is involved in any Tax protest (EINSPRUCH) or Tax
court proceeding (FINANZGERICHTSVERFAHREN) or any other
proceeding (other than regular tax audits) pending in respect
of any Tax against it before any court, arbitral tribunal or
governmental agency and no such Tax protest, Tax court
proceeding or other Tax proceeding has been threatened against
any Company.
10.3 PREPARATION OF TAX RETURNS AND PAYMENT OF TAX
VARTA shall (i) prepare or cause the Companies to prepare and file all
Tax returns required to be filed by or on behalf of the Companies that
relate to periods ending on or before the Closing Date, (ii) prepare
and file all Tax returns which are filed on a consolidated basis and
which include any of the Companies for a Pre-Closing Date Tax Period
and (iii) prepare, and submit to the German Companies for filing, all
Tax returns to be filed by the German Companies for any Pre-Closing
Date Tax Period. Except as set forth in the preceding sentence,
Strategic Partner shall prepare and file, or cause to be prepared and
filed, all Tax returns required to be filed by or on behalf of any of
the Companies after the Closing Date, subject, in the case of any Tax
returns for any Pre-Closing Date Tax Period, to the review and approval
of VARTA (which may not be unreasonably withheld or delayed). Strategic
Partner shall ensure that any Tax return to be reviewed and approved by
VARTA will be furnished to VARTA no later than 30 days, where
practical, prior to the due date of such Tax return. Strategic Partner
shall ensure the timely payment of all Taxes
72
shown as due on any Tax return to be filed by Strategic Partner under
this Section 10.3.
10.4 TAX REFUNDS
VARTA shall be entitled to use refunds with respect to Taxes of the
Companies for any Pre-Closing Date Tax Period to offset against any
claim under Section 10.5 or Tax Loss previously paid except for refunds
resulting from losses carried back from periods after the Closing Date
to any Pre-Closing Date Tax Period.
10.5 TAX INDEMNIFICATION
(a) Notwithstanding the provisions of Article 8, claims relating
to this Article 10 shall be exclusively dealt with in Article
10, except to the extent Article 10 makes specific reference
to Article 8.
(b) VARTA shall indemnify and hold harmless the relevant Company
from and against any (i) Tax of any of the Companies related
to a Pre-Closing Date Tax Period (except to the extent of any
accrued liabilities for Taxes shown on the Closing Date
Financial Statements) irrespective whether disclosed or not
and (ii) any liability for Taxes arising from a breach of any
Tax representation and warranty contained in Section 10.2 or
any other Loss arising therefrom (the sum of (i) and (ii)
being referred to herein as a "TAX LOSS").
(c) If acts of VARTA or the Companies before the Closing Date
which are not connected with the Companies' operative
business, or transactions which were conducted for the
preparation of the execution of this Agreement, lead to
additional tax liabilities of the Companies for periods after
the Closing Date, VARTA shall indemnify the Companies from any
Taxes and Losses arising therefrom.
(d) VARTA's indemnification obligation under this Section 10.5
does not apply to the extent that additional tax liabilities
in one fiscal period are compensated by corresponding reduced
liabilities in subsequent fiscal periods; in the calculation
of the corresponding reduced liabilities; unaccrued interest
shall be deducted at 6% p.a. or, if the period for
73
deduction is uncertain, at 10% on a flat-rate basis, applying
the respective accumulation tax rate in the case of different
tax rates. VARTA shall further not be liable under this
Article 10 to the extent that any actions of Strategic
Partner, its group or the Companies after the Closing Date
have given rise to any additional tax liabilities of the
Companies related to a Pre-Closing Date Tax Period, except to
the extent such actions of Strategic Partner, its group or the
Companies were required under this Agreement.
10.6 INDEMNIFICATION PROCEDURES
(a) Any payment to be made by VARTA pursuant to Section 10.5 shall
be made (i) not later than 10 business days after receipt by
VARTA of written notice from Strategic Partner stating that
any Tax Loss has been paid by Strategic Partner or any Company
or (ii) needs to be paid at the due date of the relevant Tax
as notified to VARTA at least ten business days in advance in
which case payment is to be timely made directly to the
relevant tax authority, provided that such notice shall be
accompanied by evidence reasonably necessary to determine the
fact, amount and payment, if applicable, by Strategic Partner
or any Company of such Tax Loss irrespective of whether there
is already a binding tax assessment or not.
(b) After the Closing Date, Strategic Partner shall, without undue
delay, inform VARTA of any notice of a proposed audit, claim
assessment or dispute concerning Taxes with respect to which
VARTA may incur liability hereunder. Strategic Partner shall
(i) give and shall cause the Companies to give VARTA the
opportunity to participate in any audits, disputes,
administrative, judicial or other proceedings related to
indemnifiable Taxes for Pre-Closing Tax Periods and (ii)
challenge and litigate, or cause the Companies to challenge
and litigate, any Tax assessment or other decision of any
Taxing Authority related to such Taxes, in each case in
accordance with Section 8.3.
(c) If Strategic Partner has failed to comply with any of its
obligations set forth in Section 10.6 (b), Section 8.3 (c)
shall apply.
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10.7 LIMITATIONS
(a) The provisions of this Section 10 shall be time-barred upon
expiration of (i) a limitation period of three months after
the final and binding assessment of the relevant Tax or (ii)
the full limitation period for the relevant Tax (whichever is
earlier), except for VARTA's rights under Sections 10.4, which
shall be time-barred three months after the Tax refund has
been made by the Taxing Authorities and VARTA has been
notified thereof in writing.
(b) Cap and Deductible shall not apply to claims under this
Article 10. Any claims can only be brought under this Article
10 if the total amount of the claims under this Article 10
exceed EUR 50,000.
10.8 COOPERATION ON TAX MATTERS
Without prejudice to the obligations under Sections 10.3 and 10.5, the
Parties shall fully cooperate with each other and their representatives
in connection with any Tax matter including the preparation and filing
of any Tax return or the conduct of any audit, investigation, dispute
or appeal with respect to Taxes. Cooperation between the Parties shall
include (but shall not be limited to) providing and making available
all relevant books, records and information, and the consulting of and
information support by officers and employees necessary or useful in
connection with any Tax inquiry, audit, examination, investigation,
dispute, litigation or any other tax matter.
ARTICLE 11
TERMINATION OF JOINT VENTURE, EXIT RIGHTS
11.1 RIGHT TO TERMINATE
The Parties shall have the right to terminate the joint venture
relating to VARTA Consumer subject to the following conditions:
75
(a) Strategic Partner and German Limited may terminate the joint
venture, without having to give any reasons therefor, on or
after August 1, 2005, but not later than on October 31, 2005;
(b) VARTA may terminate the joint venture (i) at any time on or
after January 1, 2006, without having to give any reasons for
the termination, or (ii) at any time on or after the Closing
Date, provided that VARTA has been outvoted in the
shareholders meeting of VARTA Consumer as set out in Section
4.4 or VARTA has, in its reasonable judgment, other sound
business reasons for this termination.
11.2 NOTICE OF TERMINATION
Any termination pursuant to Section 11.1 (a) and (b) shall require a
written notice to the other Party, in accordance with Section 13.1.
Strategic Partner and German Limited may exercise their termination
right only jointly.
11.3 CONSEQUENCES OF TERMINATION
If notice of termination has been given by either Party in accordance
with Sections 11.1 and 11.2, German Limited shall acquire VARTA's
interest in VARTA Consumer as follows:
(a) VARTA's interest in VARTA Consumer shall be redeemed
(EINGEZOGEN) in deviation of the articles of association of
VARTA Consumer, against a redemption price to solely comprise
(i) the shares in FinanceCo owned by VARTA Consumer and (ii)
an additional amount in cash of EUR 1,000,000, in case of a
termination by Strategic Partner and German Limited.
(b) In case of a termination by VARTA pursuant to Section 11.1 (b)
(ii), VARTA may request in its notice of termination that,
instead of a redemption in accordance with paragraph (a)
above, the shares in FinanceCo owned by VARTA Consumer shall
be spun-off from VARTA Consumer and transferred to VARTA,
against transfer of VARTA's interest in VARTA Consumer (NICHT
VERHALTNISWAHRENDE ABSPALTUNG).
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(c) If a redemption or spin-off pursuant to paragraphs (a) or (b)
above is not permitted under applicable law (in particular,
because payment of the redemption price would affect the
registered share capital of VARTA Consumer) or cannot be
implemented within 3 months after the termination right has
been exercised, VARTA shall sell and transfer to German
Limited, and German Limited shall purchase and acquire from
VARTA, VARTA's interest in VARTA Consumer for a purchase price
consideration comprising the assumption of VARTA's loan
payable towards FinanceCo and, in case of a termination by ROV
Limited and Strategic Partner, an additional amount of EUR
1,000,000. VARTA shall make no representations and warranties
in respect of this sale and its interest in VARTA Consumer
(except that it has not disposed of such interest after the
Closing Date) and shall assume no liability in respect of the
financial condition and solvency of VARTA Consumer.
(d) Strategic Partner and German Limited shall ensure and hereby
represent and warrant that, as of the date the redemption
consideration will be transferred, FinanceCo shall have no
liabilities and a net equity of EUR 133,268,000 (comprising
its registered share capital of EUR 25,000 and profit reserves
of EUR 133,243,000), and its assets shall solely comprise loan
receivables against VARTA in the aggregate amount of EUR
133,268,000.
(e) Strategic Partner shall cause FinanceCo to guarantee
irrevocably, unconditionally and upon first written demand by
VARTA the timely fulfillment by VARTA Consumer or German
Limited of its obligation pursuant to paragraphs (c) and (d)
above up to an amount of FinanceCo's net equity referred to in
Section 11.3 (d) above minus its registered share capital. The
guarantee shall be in the form of the draft attached as
EXHIBIT 11.3 (e) and shall be delivered to VARTA on the
Closing Date. Strategic Partner shall not unreasonably
withhold its consent to the retainment of the law firm
referred to in the guarantee.
11.4 IMPLEMENTATION OF TERMINATION
VARTA and German Limited shall pass the shareholder resolutions on the
redemption or the spin-off or enter into a share purchase and transfer
agreement
77
implementing the transactions pursuant to Section 11.3 (a) and (b) (as
the case may be) within two months after notice of termination has been
given in accordance with Section 11. The redemption price and
additional compensation by Strategic Partner or the purchase price
shall be payable to VARTA upon passing of the respective shareholder
resolution or the execution of the share purchase and transfer
agreement, as the case may be. The Parties shall ensure (if required,
also by an assignment of the loan receivable of FinanceCo to VARTA
Consumer or German Limited) that such payments will be set off against
the repayment by VARTA of the loan referred to in Section 7.5; in all
other respects, any rights of set-off or retention of Strategic
Partner, German Limited or VARTA Consumer shall be excluded. The
Parties shall further do, or cause to be done, without undue delay, all
other actions (including any filings with the commercial register)
required in connection any transaction pursuant to Section 11.3.
11.5 REPRESENTATIONS AND WARRANTIES OF VARTA
VARTA hereby represents (GEWAHRLEISTET) that, at the time of the
transfer of its interest in VARTA Consumer, VARTA will be the sole
owner of such interest, free and clear of any liens, encumbrances or
other rights of third parties and there will be no pre-emptive rights,
rights of first refusal, options or other rights of any third party to
purchase or acquire such interest (or any portion thereof). VARTA shall
make no other representation and warranty in connection with the
termination of the joint venture, and any other liability of VARTA
shall be excluded in accordance with Section 8.4.
ARTICLE 12
TERMINATION OF AGREEMENT PRIOR TO CLOSING
12.1 RIGHT TO TERMINATE
This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual written agreement of the Parties;
(b) by Strategic Partner:
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(i) if any event shall have occurred as a result of which
any condition set forth in Section 3.2 (a) is no
longer capable of being satisfied; or
(ii) if there has been a material breach by VARTA of any
representation or warranty contained in this
Agreement or of any of the covenants or agreements
set forth in this Agreement, in each case which
breach is not curable, or, if curable, is not cured
within one month after written notice of such breach
is given by Strategic Partner, provided that such
breach would entitle Strategic Partner not to
consummate the Closing in accordance with Section 3.2
(a) (iii);
(c) By VARTA;
(i) if any event shall have occurred as a result of which
any condition set forth in Section 3.2 (b) is no
longer capable of being satisfied; or
(ii) if there has been a material breach by Strategic
Partner of any representation or warranty contained
in this Agreement or of any of the covenants or
agreements set forth in this Agreement, in each case
which breach is not curable or, if curable, is not
cured within one month after written notice of such
breach is given by VARTA, provided that such breach
would entitle VARTA not to consummate the Closing in
accordance with Section 3.2 (b) (iii); or
(d) By either VARTA or Strategic Partner if the Closing shall not
have occurred by January 10, 2003, provided that a party whose
breach of this Agreement has resulted in the Closing not
having occurred on or before said date shall not have the
right to terminate this Agreement pursuant to this Section
12.1 (d).
12.2 CONSEQUENCES OF TERMINATION
If this Agreement is terminated as permitted by Section 12.1, such
termination shall be without liability of either Party (or any
shareholder, director, officer, employee, agent, consultant or
representative of such Party) to any other Party to this Agreement;
provided that if such termination shall result from the knowing or
willful breach by either Party hereto of any representation, warranty,
covenant or
79
agreement contained herein, such Party shall be fully liable, in
accordance with this Agreement, for any and all damages incurred or
suffered by any other Party as a result of such failure or breach.
12.3 SURVIVING PROVISIONS
The provisions of Sections 13.4 (Public Disclosure), 13.5 (Taxes and
Expenses) and 13.8 (Governing Law; Competent Courts) shall survive any
termination hereof pursuant to this Article 12.
ARTICLE 13
MISCELLANEOUS
13.1 NOTICES
All notices or other communications hereunder shall be deemed to have
been duly made if they are made in writing and are personally delivered
by registered mail or courier service or sent by telecopier (provided
that receipt of the telecopy is promptly confirmed in writing) to the
person at the address set forth below, or such other address as may be
designated by the respective Party to the other Parties in the same
manner:
To VARTA:
VARTA XX
- Xxxxxxxx -
Xx Xxxxxxxxx 00
00000 Xxxxxxxx
Fax: +49 - 511 - 00 00 000
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To Strategic Partner, each Designated Purchaser and/or German Limited:
Rayovac Corporation
000 Xxxxxxx Xxxxx Xxxxxxx, XX 00000-0000
Fax +001 - 608 - 278 - 6666
Attention: President.
13.2 ASSIGNMENTS
No Party may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the consent of each other
Party hereto, except that Strategic Partner may transfer all of its
rights and obligations under this Agreement to any purchaser of all or
substantially all of its business, whether by sale of stock, sale of
assets, merger or otherwise and except for the assignment of any
monetary claims hereunder to any German group companies of either Party
or to any other Party.
13.3 NO THIRD PARTY BENEFICIARIES
Neither this Agreement nor any provision set forth in this Agreement is
intended to confer any rights or remedies upon any person or entity
other than the Parties.
13.4 PUBLIC DISCLOSURE
Prior to the Closing Date, no Party shall make any press release or
similar public announcement with respect to this Agreement without the
prior written consent of the other Party, except as may be required to
comply with the requirements of any applicable laws or the rules and
regulations of any stock exchange upon which the securities of one of
the Parties or their respective parent companies are listed.
13.5 TAXES AND EXPENSES
All transfer taxes, fees (including notarial fees), stamp or
registration duties and charges (including those incurred with any
governmental approvals) (together, "TRANSFER CHARGES") payable in
connection with the execution and implementation of this Agreement
shall be borne by Strategic Partner. Each Party shall pay its own
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expenses, including the fees of its advisers, incurred in connection
with this Agreement.
Transfer Charges and any out-of-pocket expenses resulting from the
pre-closing restructurings referred to in paragraphs 4 and 6 of the
Recitals, Section 5.2 (c) and (d) and Section 5.5 (d) shall be borne by
VARTA, to the extent that they have not been paid by the Consumer Group
prior to the Closing Date.
13.6 ENTIRE AGREEMENT
This Agreement (including all Exhibits hereto) contains the entire
agreement among the Parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings with respect
thereto, except for the confidentiality agreement previously executed
by Strategic Partner and VARTA, which will remain in full force and
effect until the Closing Date or, if this Agreement is terminated
pursuant to Section 12.2 hereof, beyond the date of such termination.
13.7 AMENDMENTS AND WAIVERS
Any provision of this Agreement may be amended or waived if, but only
if, such amendment or waiver is by written instrument executed by all
Parties and explicitly referring to this Agreement, unless notarization
is required by law.
13.8 GOVERNING LAW; COMPETENT COURTS
This Agreement shall be governed by, and construed in accordance with,
the laws of Germany. Any dispute arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be
exclusively settled in the courts of Frankfurt am Main.
13.9 INTERPRETATION; EXHIBITS
(a) The headings of the Articles and Sections of this Agreement
are for convenience purposes only and do not affect the
interpretation of any of the provisions hereof.
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(b) For the purpose of this Agreement, a business day shall be any
day other than a Saturday, a Sunday or any other day on which
banks in Hanover, Germany, are generally closed.
(c) Words such as "hereof", "herein" or "hereunder" refer (unless
otherwise required by the context) to this Agreement as whole
and not to a specific provision of this Agreement. The term
"including" shall mean including, without limitation.
(d) References to the German Civil Code (BGB) shall be to the
German Civil Code as amended by the Reform Xxx 0000 (GESETZ
ZUR MODERNISIERUNG DES SCHULDRECHTS).
(e) The Exhibits of this Agreement and the Disclosure Letter are
an integral part of this Agreement and any reference to this
Agreement includes this Agreement, the Exhibits and the
Disclosure Letter as a whole. The disclosure of any matter in
this Agreement (including any Exhibit thereto or the
Disclosure Letter) shall be deemed to be a disclosure for all
purposes of this Agreement.
13.10 SEVERABILITY
Should any provision of this Agreement, or any provision incorporated
in the future, be or become invalid or unenforceable, the validity or
enforceability of the other provisions of this Agreement shall not be
affected thereby. The invalid or unenforceable provision shall be
deemed to be substituted by a suitable and equitable provision which,
to the extent legally permissible, comes as close as possible to the
intent and purpose of the invalid or unenforceable provision. The same
shall apply if any provision of this Agreement is invalid because of
the stipulated scope of a time period or if this Agreements contains
any omissions.
13.11 XXXXX COMFORT LETTER; GUARANTEE BY STRATEGIC PARTNER
(a) XXXXX, as major shareholder of VARTA, has provided, on the
date hereof, an enforceable comfort letter to Strategic
Partner, a copy of which is attached as EXHIBIT 13.11 (a).
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(b) Strategic Partner hereby unconditionally and irrevocably
guarantees the due and timely fulfillment of all obligations
of German Limited under this Agreement. To the extent that
Strategic Partner appoints any Designated Purchaser, Strategic
Partner shall remain jointly and severally liable for all of
its obligations under this Agreement.
13.12 DESIGNATED PURCHASER
The Designated Purchaser may become a party to this Agreement by
unilateral (notarized) declaration. Subject to Section 13.11 (b), all
rights and obligation under this Agreement shall be assumed by
Designated Purchaser to the extent they relate to the acquisition of
the respective Companies by the respective Designated Purchaser.
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AMENDMENT AGREEMENT
SECTION 1
ACCESSION OF DESIGNATED PURCHASERS
ROV German Holding, ROV Colombia and ROV Mexico hereby become a party to the
Joint Venture Agreement as Designated Purchasers.
SECTION 2
CLOSING /COLUMBIA
2.1 Closing Date shall be October 1, 2002.
2.2 Any payments to be made by or on behalf of Strategic Partner on the
Closing Date shall be made as follows: On the Closing Date, Strategic
Partner shall give irrecovable instructions to its banks to
wire-transfer the respective funds to VARTA and shall provide VARTA
with written confirmation (also by telefax) thereof. The respective
funds shall be received by VARTA at the latest on October 2, 2002,
value as of the same date.
2.3 All other actions to be taken by or on behalf of the Parties shall be
taken on the Closing Date in accordance with the Joint Venture
Agreement, provided, however, that the Parties shall instruct their
respective advisers or representatives or other persons involved (in
particular notary publics) to hold the relevant documentation in escrow
and, in particular, not release it to Strategic Partner until they have
received written confirmation (also by telefax) from VARTA that VARTA
has received the funds referred to in Section 2.1.
2.4 The Parties acknowledge that the Colombian cartel filing is still
pending. The Parties have waived the respective condition to Closing
under Sections 3.2 (a) (i) and 3.2 (b) (i).
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SECTION 3
CASH, ASSUMED FINANCIAL DEBT, INTERCOMPANY LOANS/DIVIDEND IN COLOMBIA/NEW
WORKING CAPITAL FINANCING
3.1 The Parties agree that certain bank financing of Varta Pilleri Ticaret
Ltd., Turkey, in the amount approximately of Euro 1,500,000 will not be
paid prior to the Closing but shall be treated as Assumed Financial
Debt under Sections 2.4 (a) and 2.7 (c) of the Joint Venture Agreement.
3.2 Strategic Partner shall ensure that the profits reflected in the
financial statement of VARTA Colombia for the business year ending
September 30, 2002 limited to distributable profits earned in the
fiscal year 2002 shall be resolved to be distributed to VARTA by
October 15, 2002. The payment, including interest at a rate of 6 % per
annum from the Closing Date on the distributed amounts shall be made to
VARTA simultaneously with the payment of the Final Adjustment Amount
pursuant to Section 2.7 of the Joint Venture Agreement. Any applicable
withholding or other tax or other costs of VARTA in connection with the
dividend payment shall be borne by Strategic Partner and paid
simultaneously to VARTA. The amount distributed shall be deducted from
the Final Adjustment Amount.
3.3 The purchase price for the receivables representing the Closing Date
Inter-Group Debt of the German Companies shall be reduced by the amount
of the accounts payable of the German Companies as reflected in ANNEX
1. Such reduction amount shall be settled by way of a set off against
the Final Adjustment Amount or, if and to the extent set off is not
possible, paid simultaneously with the Final Adjustment Amount.
3.4 The Parties acknowledge that VARTA Consumer has entered into a credit
facility agreement and related security agreements with Bank of America
and others to refinance its working capital requirements. Such
agreements have been entered into on Strategic Partner's request and
within Strategic Partner's responsibility.
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SECTION 4
US BUSINESS
4.1 The Parties agree that, other than as described in paragraph 6 of the
Recitals of the Joint Venture Agreement, the separation of the VARTA
consumer battery business and the micro battery business in the United
States of America shall not be implemented by way of a sale of the US
consumer battery business owned by Micro's US operations (the "US
BUSINESS") to a newly incorporated company in the US. Instead, Varta
Microbattery, Inc. shall sell and transfer, on the Closing Date, the
assets, liabilities and employees related to the US Business to
Strategic Partner. The asset purchase agreement (the "US ASSET PURCHASE
AGREEMENT") shall be substantially in the form of the draft attached as
ANNEX 2.
4.2 The Parties agree that the representations and warranties, covenants
and indemnities made by VARTA in respect of the consumer battery
business in the Joint Venture Agreement shall also apply mutatis
mutandis in respect of the US Business, as if the US Business had been
sold to Strategic Partner through a share deal under the Joint Venture
Agreement. VARTA shall cause Varta Microbattery, Inc. to comply with
all covenants and agreements made by Varta Microbattery Inc. under the
US Asset Purchase Agreement.
SECTION 5
ARGENTINA
5.1 VARTA Consumer is the legal owner of all shares in VARTA Baterias
S.A.I.C. ("VARTA ARGENTINA"). Pursuant to a share purchase agreement
(the "VARTA ARGENTINA SHARE PURCHASE AGREEMENT"), VARTA Consumer sold
and transferred its shares in VARTA Argentina to VARTA, but the share
transfer has not yet become legally effective. For the avoidance of
doubt the Parties confirm that VARTA Argentina shall not be subject of
the transaction.
5.2 VARTA and Strategic Partner agree and shall ensure that VARTA Consumer
shall, without undue delay after the date hereof, transfer legal title
to the shares in VARTA Argentina to VARTA at no cost for the Consumer
Group.
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5.3 The Parties agree, and VARTA represents and warrants (within the
meaning of Section 5 of the Joint Venture Agreement) to Strategic
Partner, that economic ownership of the shares in VARTA Argentina has
been transferred to VARTA in accordance with the VARTA Argentina Share
Purchase Agreement as of the date of such agreement. VARTA Consumer and
VARTA will treat each other accordingly and, in particular, VARTA shall
indemnify Strategic Partner and VARTA Consumer from any liability or
other loss resulting from the fact that legal ownership was not validly
transferred in accordance with, and as of the date of, the VARTA
Argentina Share Purchase Agreement. To VARTA's knowledge there are no
legal or other obstacles which could hinder or impede the final
transfer of legal title.
SECTION 6
MEXICO
The Parties acknowledge that Strategic Partner will withhold 25 % of the
purchase price allocated to the Mexican shares (being EUR 1,425,000) and is
obliged to pay the respective amount withheld within 6 weeks following the
Closing to the tax authorities unless VARTA can provide sufficient evidence that
the requisite election of the net method has been made. The Parties therefore
agree that ROV Mexico shall withhold an amount of EUR 1,425,000 and shall pay
the respective amount either to VARTA as soon as the necessary evidence is
obtained or on VARTA's account to the financial authorities if the respective
evidence has not been timely provided within the applicable six weeks period.
Strategic Partner shall cooperate and cause VARTA S.A., Mexico, to cooperate
with VARTA in order to obtain such evidence and fulfill other requirements in
connection with the election of the net method.
XXXXXXX 0
XXXXX XXXXXXXX
7.1 According to paragraph 6 of the Recitals of the Joint Venture
Agreement, VARTA agreed to procure the transfer of the Czech consumer
battery business to a newly incorporated company in the Czech Republic
(the "CZECH COMPANY") prior to the Closing Date. The Parties are aware
that the Czech Company will not be validly incorporated prior to the
Closing Date, because due to a force majeure event the
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incorporation of the Czech Company can currently not be registered in
the Czech companies register.
7.2 The Parties agree that the respective assets and liabilities relating
to the Czech consumer battery business will be transferred to the Czech
Company (while still in the process of incorporation) on the Closing
Date in accordance with the principles agreed in the Joint Venture
Agreement. The Parties shall take all actions required under applicable
law to validate or confirm the transfer upon the incorporation of the
Czech Company.
7.3 The Parties agree and shall ensure that, promptly upon incorporation of
the Czech Company, VARTA will transfer its shares in the Czech Company
to ROV German Holding GmbH in accordance with a share transfer
agreement substantially in the form of the draft attached as Exhibit
2.1 to the Joint Venture Agreement. For the period between the Closing
Date and the date when such share transfer becomes effective, the
Parties shall treat each other as if such share transfer had become
effective on the Closing Date.
SECTION 8
VARTA FINANZSERVICE GMBH
8.1 For the avoidance of doubt, the Parties confirm that VARTA
Finanzservice GmbH ("VARTA FINANZSERVICE") shall not be subject of the
transaction contemplated by the Joint Venture Agreement, but that the
shares in such company shall remain with VARTA. Consequently, VARTA
Finanzservice GmbH shall, other than stated in Section 5.1 (b) of the
Disclosure Letter, not be part of the Consumer Group.
8.2 The results of VARTA Finanzservice for the ongoing fiscal year shall be
for the account of VARTA.
8.3 The Parties agree that the control and profit transfer agreement
between VARTA Geratebatterie GmbH as the controlling party and VARTA
Finanzservice (which agreement was transferred, as a result of a
merger, to VARTA Consumer) shall be terminated with legal effect as of
the Closing Date and with economic effect as of 1 January 2002. Should
such termination not become legally effective as of the
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Closing Date, the Parties shall in any event treat each other as if the
termination had become effective in accordance with the preceding
sentence.
8.4 VARTA shall indemnify VARTA Consumer from any obligation to compensate
VARTA Finanzservice for any loss shown in its annual accounts for the
fiscal year 2001 or any preceding fiscal year and any obligation to
provide security to the creditors of VARTA Finanzservice in connection
with the termination of the control and profit transfer agreement.
SECTION 9
PROFITS FOR AUGUST/SEPTEMBER 2002
For the avoidance of doubt, the Parties agree that the fixed profits of VARTA
Consumer payable to VARTA for the period August through September 2002 pursuant
to Section 3.1 (d) of the Joint Venture Agreement shall become payable, in
accordance with Section 4.5 (c) of the Joint Venture Agreement, together with
the first fixed dividend to be paid under the profit transfer agreement referred
to in Section 4.5 (b) of the Joint Venture Agreement, at the latest on December
31, 2003.
SECTION 10
ADVISORY BOARD OF FINANCECO
The Parties agree the advisory board of FinanceCo shall consist of two members
(rather than four members as set forth in Section 4.6 (d) of the Joint Venture
Agreement), with one member to be appointed by German Limited and VARTA
respectively.
SECTION 11
CERTAIN LITIGATION/NEW PRODUCT LIABILITY CASE
11.1 Section 8.1 (d) of the Joint Venture Agreement contains an indemnity by
VARTA in respect of the litigation disclosed in Section 5.9 of the
Disclosure Letter. Strategic Partner is aware and acknowledges that the
litigation referred to in Section 5.9 under the headings "Manedra" and
"Megacell" has been settled and that
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the reserves carried on VARTA Consumer's books in respect of such
litigation (EUR 720,000 in the aggregate) have been released.
11.2 The Parties agree that the respective thresholds referred to in Section
8.1 (d) of the Joint Venture Agreement shall be reduced by EUR 720,000.
Section 8.1 (d) second and third sentence shall read as follows:
"With respect to the litigation disclosed in Section 5.9 of the
Disclosure Letter VARTA shall fully indemnify Strategic
Partner/Consumer Group, (i) to the extent that the total Losses
are above Euro 2,780,000 and (ii) for 50 % of the total Losses
between Euro 780,000 and Euro 2,780,000. Consumer Group shall
bear the total Losses below Euro 780,000."
11.3 No reserves shall be made in the Closing Date Financial Statements in
respect of the litigation referred to in Section 11.1 above.
11.4 VARTA disclosed to Strategic Partner that a new product liability case
was brought against VARTA Consumer in the UK by Astucia. The Parties
agree that this liability obligation relates to the Micro Business and
VARTA shall fully indemnify VARTA Consumer against any and all
liabilities resulting therefrom in accordance with the general
principles governing the carve-out as agreed in the Joint Venture
Agreement.
SECTION 12
RELEASE OF VARTA GUARANTEES
12.1 Section 7.4 of the Joint Venture Agreement provides that Strategic
Partner shall, prior to or on the Closing Date, replace the VARTA
Guarantees so that the respective member of the VARTA Group shall be
fully released from such VARTA Guarantees as of the Closing Date.
Section 7.4 also provides that, to the extent the VARTA Guarantees are
not replaced by the Closing Date, Strategic Partner shall pay to VARTA
a certain guarantee premium.
12.2 Contrary to the agreement under Section 7.4, the two VARTA Guarantees
relating to sale and lease back transactions have not been replaced by
Strategic Partner. The Parties shall closely cooperate to achieve the
replacement and/or ensure the release
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of the VARTA guarantees which are still outstanding on the Closing Date
within six months following the Closing Date. The respective premium to
be paid to VARTA under Section 7.4 with respect to these outstanding
guarantees shall amount to 1 % of EUR 10,400,000 and 1 % of EUR
8,100,000 p.a. and shall be paid pro rata until the respective VARTA
guarantees have been replaced.
SECTION 13
TRANSITION SERVICES
13.1 VARTA and and VARTA Consumer shall enter into a transition services
agreement substantially in the form attached as ANNEX 3.
13.2 VARTA Consumer and Micro shall enter into a transition services
agreement substantially in the form attached as ANNEX 4.
13.3 Micro and VARTA Consumer shall enter into a transition services
agreement substantially in the form attached as ANNEX 5.
13.4 Micro and VARTA Consumer shall enter into a lease agreement
substantially in the form attached as ANNEX 6.
SECTION 14
DISTRIBUTION OF CONSUMER AND MICRO PRODUCTS FOR INTERIM PERIOD
14.1 Strategic Partner shall permit, and shall cause VARTA Consumer to
permit, Microlite S.A. to sell VARTA branded products in stock on the
Closing Date and use the VARTA trademarks in connection with such sale
for an interim period until March 31, 2002. For the first twelve months
following the Closing the Parties shall ensure that Microlite S.A. and
VARTA Consumer continue their existing battery and components supply
arrangements.
14.2 Under Section 1 (1) (b) of the Trademark and Domain Names Protection
and Delimitation Agreement (the "TRADEMARK AGREEMENT"), Micro is not
entitled to
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use certain Micro trademarks, including trademarks which include the
name "VARTA", for hearing battery applications. (Such trademarks, as
defined and further specified in the Trademark Agreement, are
hereinafter referred to as the "VARTA TRADEMARKS".) Strategic Partner
is aware that Micro is bound under the supply agreements listed in
ANNEX 7 to supply VARTA branded batteries for hearing aid applications
(the "VARTA HEARING AID BATTERIES") to certain of its customers (the
"RESELLERS"). Strategic Partner hereby agrees, and shall cause VARTA
Consumer to agree, to the sale of the VARTA Hearing Aid Batteries in
accordance with the supply agreements listed in ANNEX 7 (limited,
however, to the remaining term of the supply agreements as specified
in ANNEX 7) and to any use of the VARTA Trademarks for such sale.
VARTA shall cause Micro to use reasonable efforts to cause the
Resellers to accept a change of the brand from VARTA to Power One
prior to the end of the term specified in ANNEX 7.
14.3 Strategic Partner shall ensure that VARTA Consumer will supply Micro
with VARTA branded batteries for resale in the OEM channel to the
existing customers limited, however, to the remaining term of the
respective customer contracts, or for any term otherwise agreed.
SECTION 15
MISCELLANEOUS
15.1 The provisions of this Amendment Agreement shall be deemed to become an
integral part of the Joint Venture Agreement. In particular, any
liability of the Parties under this Amendment Agreement shall be
subject to any relevant limitations agreed in the Joint Venture
Agreement, which shall apply accordingly. Sections 13.1 - 13.10 of the
Joint Venture Agreement shall apply to this Amendment Agreement mutatis
mutandis.
15.2 Except as explicitly otherwise stated herein, the Joint Venture
Agreement shall remain unchanged.
Basel, Switzerland, this 1st (first) day of October 2002 (two thousand two)
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ANNEXES*
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Annex 1 Schedule of Accounts Payable
Annex 2 United States Asset Purchase Agreement
Annex 3 Transition Services Agreement between VARTA and VARTA Consumer
Annex 4 Transition Services Agreement between VARTA Consumer and Micro
Annex 5 Transition Services Agreement between Micro and VARTA Consumer
Annex 6 Lease Agreement between Micro and VARTA Consumer
Annex 7 Schedule of Supply Agreements
* Annexes have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The
Registrant agrees to furnish supplementally a copy of any omitted annex to
the Commission upon request.
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