SHARE PURCHASE AGREEMENT
for the direct and indirect sale of
all the shares of
FIR GROUP COMPANIES
to
FIR GROUP HOLDINGS ITALIA, S.r.l.
DATED: MARCH 21, 1997
SHARE PURCHASE AGREEMENT
entered into this 21st day of March 1997
BETWEEN
Xx. Xxxxx Xxxxxxxxxxx, an Italian citizen, married under property
separation regime domiciled at Parma, Via Sarzana n. 5, fiscal code No. XXX
XXX 00X00 X000X; and
Xx. Xxxxx Xxxxxxxxxxx, an Italian citizen, domiciled at Parma Xxx
Xxxxxxx x. 0, xxxxxx xxxx Xx.XXX XXX 00X00 X000X; and
Xx. Xxxxxx Xxxxxx, an Italian citizen, married under property
separation regime domiciled at Parma, Via Sarzana n. 5, fiscal code No.XXX
XXX 00X00 X000X,
the above collectively referred to as the "Bergamaschi Group", and
TULIPA GESTAO e SERVICOS S.A., a Company formed under the laws of Portugal,
with registered office at Sao Xxxxx, Funchal, Madeira, Portugal, Xxx Xx
Xxxxxxxx Xx.000, Register of Companies No.808;
All of the above, including the Bergamaschi Group, collectively
referred to as the "Sellers",
AND
FIR Group Holdings Italia, S.r.l., a limited liability company formed under
the law of Italy and in the process of being registered with the Register
of Undertakings of Milan, hereinafter referred to as "Holdings" and Motor
and Gear Holdings Inc., a Delaware corporation, hereinafter referred to as
"Holdings-USA", solely as guarantor as hereinafter described.
The Sellers and Holdings being the Parties hereto.
1
Preamble:
WHEREAS, the Sellers own, and at the Closing shall own, directly
and indirectly, in the aggregate, not less than all of the shares of
capital stock of the FIR Group Companies, consisting of the following:
(a) CIME S.p.A. ("CIME"), a Company formed under the laws of Italy
with registered office at Viazzano (Xxxxxx xx Xxxxxxxx), Xxx Xxxxx
Xxxx, 0, Xxxxx, capital stock Lit. 200,000,000 divided into
200,000 shares, par value Lit.1,000 each (presently and at the
Closing owned 85% by Tulipa and 15% by the Bergamaschi Group), and
(b) XXXXX S.p.A. ("XXXXX"), a Company formed under the laws of Italy
with registered office at Genova, c/o Studio Commercialisti
Associati, Xxxxxx xxxxx Xxxxxxxx, 0/00, Xxxxx, capital stock Lit.
200,000,000 divided into 200,000 shares, par value Lit. 1,000 each
(presently and at the Closing owned 98% by CIME and 2% by Xxxxx
Xxxxxxxxxxx), and
(c) FIR S.p.A., ("FIR"), a Company formed under the laws of Italy with
registered office at Casalmaggiore (PR) Xxx Xxxx 00,Xxxxx, capital
stock Lit. 9,800,000,000 divided into 9,800,000 shares, par value
Lit. 1,000 each (presently and at the Closing owned 50% by XXXXX
and 50% by Tulipa)
(CIME, XXXXX and FIR being hereinafter sometimes individually referred as a
FIR Group Company and collectively referred to as the "FIR Group
Companies")
WHEREAS Sellers are willing to sell their shares in the FIR Group
Companies, and Holdings is willing to purchase the Sellers' shares in the
FIR Group Companies.
NOW, THEREFORE, the Parties hereto agree as follows acknowledging
to each other that the above premises and Exhibits attached hereto are an
integral part to this Agreement:
Article 1 -- Definitions
------------------------
1.1 Laws; Accounting Principles.
---------------------------
For the purpose of this Agreement, "laws" shall include, without
limitation, all United States, Italian, and foreign, federal, state and
local laws, statutes, rules, regulations, codes, notices, decisions or
demand letters issued, entered or promulgated pursuant to any United
States, Italian, and foreign, federal, state or local law. For the purpose
of this Agreement, "Accounting Principles", "GAAP" or "generally accepted
accounting principles" shall, unless otherwise stated, mean such
principles, applied on a consistent basis, as set forth in Opinions of the
accounting arinciples governing body of the Italian Institute of Certified
Public Accountants and/or in statements of the Financial Accounting
Standards regulatory board which are applicable in the circumstances as of
the date in question, for use and application in Italy.
Article 2 -- Purchase and Sale of the Shares
--------------------------------------------
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2.1 Purchase and Sale.
------------------
Subject to the terms and conditions of this Agreement, the Sellers
hereby undertake to assign and sell, on the Closing Date, the following
shares to Holdings:
(a) Xx. Xxxxx Xxxxxxxxxxx undertakes to sell and assign 10,000 shares
of CIME;
(b) Xx. Xxxxx Xxxxxxxxxxx undertakes to sell and assign
10,000 shares of CIME and 4,000 shares of XXXXX;
(c) Xx. Xxxxxx Xxxxxx undertakes to sell and assign 10,000 shares
of CIME;
(d) TULIPA undertakes to sell and assign170,000 shares of
CIME and 4,900,000 shares of FIR.
All of the shares to be sold and assigned hereunder being
hereinafter referred to as the "Stock". Holdings undertakes to purchase and
accept the assignment of the Stock on the terms and conditions set forth
herein.
Article 3 -- Purchase Price, Reduction, Adjustments, and Closing Date
---------------------------------------------------------------------
3.1 Base Purchase Price, Reduction and Adjustment.
---------------------------------------------
(a) Base Purchase Price. The Parties agree that the aggregate base
purchase price payable at the Closing for the Stock to be sold and
purchased hereunder is Lit. 82,110,000,000, (the "Base Purchase Price") and
shall be subject to reduction and adjustment as set forth in subsections
(b)(i), (c) and (d) hereof. In no event the adjustments pursuant to( c) and
(d) shall exceed, in the aggregate, the amount of the Price Deposit
Account, as defined below.
(b)(i) Price Reduction for Unpaid Indebtedness. The Base Purchase
Price shall be reduced by an amount equal to all unpaid principal and
interest (including interest, costs, loss or penalty due as a result of any
interest rate exchange agreements, change in ownership or early payment of
debt) on all indebtedness of the FIR Group Companies owed on March 31, 1997
to third party financial institutions. Exhibit A hereto sets forth the
names and an estimate of the unpaid balances due to such institutions on
February 28, 1997.
(b)(ii) Price Date, Financials and Computations Immediately after
the Price Date, at no cost to the Sellers, Holdings will have prepared by
Coopers & Xxxxxxx an audited balance sheet of the Fir Group Companies
(hereinafter in Section 3, "FGC") as of the Price Date and a statement of
income for the eight months ended on the Price Date, together with a
calculation of FGC's DFCE and the EBIT (defined in Section 3.1(d) below)
(the "Price Date Financials and Computations"). The Sellers and Holdings
will provide for all year-end expense and other accounting adjustments on a
pro-rata basis prior to the preparation of the Price Date Financials and
Computations. Sellers' accountants shall be allowed to participate in the
preparation of the Price Data Financials and Computations. The Price Date
Financials and Computations will be completed within 120 days after
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the Price Date and delivered to the Sellers for review. Any dispute
regarding the Price Date Financials and Computations shall be resolved in
accordance with Article 13.
In preparing the Price Date Financials Coopers & Xxxxxxx shall
apply such specific GAAP as were applied by FGC in preparing the audited
consolidated financials as of 31/07/1996.
In preparing the Computations, Coopers & Xxxxxxx shall apply the
methods and principles specifically described in Exhibit C.
(c) DFCE Price Adjustment. The Base Purchase Price shall be
adjusted in the manner set forth in this Section 3.1(c) (the "DFCE Price
Adjustment Amount").
(i) DFCE. "DFCE" shall mean debt free common equity of
the FIR Group Companies at March 31, 1997 (the "Price Date") and shall
equal (x) the aggregate Lira amount of FGC's Total Assets (as defined
below) less (y) the aggregate Lira amount of all FGC's liabilities except
net worth, unpaid indebtedness as defined above in article 3(1)(b)(i) and
income taxes payable. For example purposes only, FGC's DFCE as of July 31,
1996, is set forth on Exhibit B. In the calculation of DFCE, FGC will use
Italian GAAP, including all year end accruals and adjustments and shall
include and reflect the Acquisition of TEA consolidated on a line by line
basis (defined below). The minimum DFCE at the Price Date shall be
Lit.____________, or such amount as will result from the audited
consolidated balance sheet as of July 31st 1996 prepared by Coopers &
Xxxxxxx pursuant to section 11.6.(d)(i).
(ii) Definition of Total Assets. "Total Assets" shall
mean the amount of all assets other than cash and cash equivalents (net of
reserves for bad debts and similar "contra-asset" items) and tax credits of
FGC as reflected in the Price Date Financials and Computations (defined
below).
(iii) Postclosing DFCE Adjustments Immediately after the
completion of the Price Date Financials and Computations, and the review
and acceptance of the same by the Sellers or upon the resolution of any
disputes regarding the same in accordance with the above, to the extent
that there is a deficiency in the DFCE requirement described in Subsection
3.1(c)(i), such deficiency ("DFCE Deficiency") shall be paid by the Escrow
Agent to Holdings from the Price Deposit Account in accordance with the
Escrow Agreement, provided however that in no event the amounts so payable
shall exceed the amount of the Price Deposit Account or such portion
thereof as is still outstanding following any EBIT Price Adjustment
pursuant to article 3.1.(d) below.And further provided that the DFCE
Deficiency shall not be subject to the Basket Limitation (defined in
Section 7.1(c)). To the extent there is a surplus over the minimum DFCE
requirement, such surplus shall be paid over to the Sellers, by Holdings.
(d) EBIT Price Adjustment. The Base Purchase Price payable at
Closing shall be subject to adjustment in the manner set forth in this
Section 3.1(d) (the "EBIT Price Adjustment"). The Sellers and Holdings
agree to adjust the Base Purchase Price by an amount equal to and
determined by application of the following formula:
(i) "EBIT" means the consolidated net income of FGC
before amortization of goodwill, including goodwill allocated to real
estate and pallets, extraordinary items and interest expense and income
taxes as shown in the Price Date Financials and Computations.
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(ii) "A" means shortage of 1996 EBIT of FGC as described
in Section 6.6(d) from that shown on the audited 1996 income statement
prepared by Coopers & Xxxxxxx as described in Section 11.6(d)(i).
(iii) "B" means shortage of August to March ("A/M") 1997
EBIT, as determined by Coopers & Xxxxxxx in the Price Date Financials and
Computations of FGC (including the contributions to EBIT by the TEA
Acquisition from January 1, 1997 to the Price Date), from A/M 1997 EBIT
target.
(iv) "A/M 1997 EBIT Target" means Lit. 7,904,000,000.
(v) The formula is the sum of A + B divided by 20 and the
result multiplied by 12 and then multiplied by 3 = X
---
(vi) "X" equals the EBIT Price Adjustment.
The EBIT Price Adjustment amount, if any, shall be paid over to
Holdings or the Sellers by the Escrow Agent from the Price Deposit Account
within fifteen working days after same is computed by Coopers & Xxxxxxx, if
not objected to in writing by the Sellers or Holdings. In the event of a
written objection to such computation by either party, the Escrow Agent
shall hold and invest that portion of the price adjustment amounts which is
in dispute and shall deliver the balance of the escrow funds to Holdings
and Sellers, as their interest may appear. The disputed amount shall be
resolved and distributed in accordance with Article 13 hereof. Interest and
increases on the funds held by the Escrow Agent shall be paid pro rata to
Holdings and Sellers in accordance with their distributive share of the
Escrow Funds, as finally determined.
(e) Interest on the Final Price. Holdings shall pay to the Sellers
interest on the amount of the Base Purchase Price, less the reduction
pursuant to Section 3.1(b), paid to Sellers pursuant to this Section 3.1,
at an annual rate equal LIBOR at Price Date computed from the Price Date to
the Closing Date.
3.2 Payment of Base Purchase Price.
-----------------------------
(a) Closing.
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(i) At the Closing, which shall take place on the Closing
Date defined in Article 3.6 below, Lit.82,110,000,000 less the reduction
for indebtedness described in Section 3.1(b)(i), plus interest pursuant to
Article 3.1.(e) shall be paid by Holdings to Sellers simultaneously with
the endorsementand delivery of the Stock by Sellers to Holdings.
(ii) Simultaneously, Lit. 11,755,000,000 (the "Price
Deposit Account") shall be paid over by Sellers to the Escrow Agent to be
held pursuant to the Escrow Agreement (Exhibit D-3) to secure, and be
available to pay, Holdings or Sellers any DFCE Price Adjustment (as defined
in Section 3.1(c)) or any EBIT Price Adjustment (as defined in Section
3.1(d) hereof).
(iii) Simultaneously, the Sellers shall deposit (a) Lit.
5,500,000,000 of the Base Purchase Price (the "Warranty Deposit Account")
with the Escrow Agent as provided in Article 7.3 below pursuant to the
Escrow Agreement D-1to guarantee the obligations of the Sellers under
Article 5 through 8 of this Agreement, and
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(iv) Simultaneously the Sellers shall deposit Lit.
483,000,000 of the Base Purchase Price (the "Environmental Deposit Amount")
with the Escrow Agent as provided in section 7.5 below, to be held pursuant
to the Environmental Escrow Agreement in the form attached hereto on
Exhibit D-2.
(b) The Escrow Agreements shall be in the form attached hereto as
Exhibit X-0, X-0 and D-3 with such changes as may be reasonably required by
the Escrow Agent (as defined therein).
3.3 Additional Purchase Price.
-------------------------
(a) As additional purchase price, Holdings agrees to pay to
Sellers within sixty (60) days after July 31, 2000 the amount of Lit.
4,830,000,000 if, and only if, the Annual Net Sales (as hereinafter
defined) for the year ended July 31, 2000 of the going concern of FGC, Tea
and Fratelli Moretti, if acquired equal or exceed Lit. 80,000,000,000.
(b) In addition to the above Lit. 4,830,000,000 payment, at the
time of the payment in Section 3.3(a), Holdings shall pay to Sellers an
amount equal to Lit. 322 for each Lit. 1,000 in Annual Net Sales in excess
of Lit. 80,000,000,000 in Annual Net Sales for the year ended July 31,
2000, of the going concern of FGC, Tea and Fratelli Moretti, if acquired.
Provided, however, the maximum additional payment from Holdings to Sellers
pursuant to this Section 3.3 (b) shall be Lit. 3,220,000,000, representing
Annual Net Sales of Lit. 90,000,000,000 (or a total of Lit. 8,050,000,000
including the Lit. 4,830,000,000 in 3.3 (a) above). For purposes of this
Section 3.3 (b), Annual Net Sales shall be defined as "the net amount of
the invoice rendered for each sale of product exclusive of freight and
transportation costs (including insurance), returns, customs, duties, and
any applicable sales or similar taxes" and shall be determined by reference
to Annual Net Sales of businesses owned and operated by FGC at the time of
Closing (as hereinafter defined) hereunder, and not by reference to any
acquisitions of any businesses or subsidiaries other than Fratelli Moretti
after the Closing. In the event that Holdings or the FIR Group Companies
acquire the stock or substantially all of the assets of another business
enterprise (other than Fratelli Moretti) after the closing (an
"Acquisition"), the Net Sales of the Acquisition shall be elimated for
purposes of this additional purchase price computation.
3.4 Other Obligations. It is agreed that the Purchase Price is inclusive of
the consideration for all of the other obligations of the Sellers pursuant
to this Agreement, including those set forth in Article 10 hereof.
3.5 Purchase Price Allocation. The Purchase Price shall be allocated among
the Sellers in accordance with Exhibit E attached hereto.
3.6 Closing Date and Conditions to Closing. Closing (the "Closing") shall
be held on April 30, 1997, or on such other date (the "Closing Date")
mutually agreed upon at such place or places as Holdings shall designate.
Each party has the right at any time to extend the Closing Date for a
period of up to fourteen (14) business days from the date stated above, by
written notice to the other party or parties. Prior to the Closing and as a
condition thereto, Holdings shall have caused the Sellers to be released of
the guarantees issued in favor of the banks extending credit to the FIR
Group Companies prior to Closing.
Article 4 -- Antitrust Compliance
----------------------------------
6
4.1 Antitrust.
---------
The Parties acknowledge that the transaction contemplated herein
is not subject to the authorization of the Italian antitrust authorities.
Article 5 - Books, Contracts and Records of the FIR Group Companies
-------------------------------------------------------------------
5.1 Books, etc.
-----------
The Sellers undertake, represent and warrant that originals, or
true, complete and correct copies, of all books, contracts and records of
the FIR Group Companies have been or shall be, within 20 days from the
execution of this Agreement, made available to Holdings by Sellers, and
that such books, contracts and records are accurate and correct.
Article 6 - Warranties and Representations
In addition to all other representations and warranties made by
the Sellers elsewhere herein, the Sellers jointly and severally represent
and warrant to Holdings the following:
6.1 Regarding the FIR Group Companies.
----------------------------------
(a) The FIR Group Companies are corporations duly organized,
validly existing and in good standing under the applicable laws, and are
duly qualified to carry on their business in the places and manners in
which they are presently conducted.
(b) None of the FIR Group Companies is insolvent or in a situation
contemplated by Art. 2446 or 2447 of the Italian Codice Civile, or has been
declared bankrupt and no action or request is pending to declare any of the
FIR Group Companies bankrupt or to make any of the FIR Group Companies
subject to any proceeding contemplated by Italian Bankruptcy law or similar
statutes.
(c) The FIR Group Companies' Deeds of Incorporation and By-laws in
force have been duly adopted, approved, published and recorded in
compliance with all requirements of all applicable laws.
(d) Neither the Deeds of Incorporation nor the By-laws of the FIR
Group Companies, nor any agreements between any FIR Group Company and a
Seller and/or a third party will affect Holding's control of the FIR Group
Companies or ownership of the Shares or the Stock after the completion of
the transactions contemplated herein.
(e) Except as set forth in Exhibit F, FIR Group Companies have no
subsidiaries, Affiliates or investments in any other entity or business
operation. The term "Affiliates" includes each shareholder, director,
officer and employee of FIR Group Companies, the family members of
7
Sellers, and any director, officer or employee of FIR Group Companies, and
any corporation, partnership or other entity in which FIR Group Companies,
any Sellers, any family member of Sellers or director or officer of FIR
Group Companies has any financial interest or is a controlling person, as
that term is used in connection with the federal securities laws of the
United States, if such person or entity has, or in the past had, a
contractual relationship with or is transacting, or has in the past
transacted, business with FIR Group Companies. FIR Group Companies have no
Affiliate whose liabilities or obligations will be assumed by Holdings.
Exhibit F sets forth a complete list (including the parties) and copies (or
a detailed summary in the case of an oral agreement) of all oral or written
contracts, arrangements or other agreements to which FIR Group Companies or
any Affiliate is, will be or has been a party at any time from August 1,
1992, to the Closing Date, and to which any other Affiliate or FIR Group
Companies was or is also a party.
6.2 Regarding the Stock and the other shares of the FIR Group Companies.
--------------------------------------------------------------------
(a) The Stock and the shares of XXXXX and FIR held, respectively,
by CIME and XXXXX are duly and validly issued, fully paid in and
non-assessable.
(b) The CIME shares are owned as follows:
Xx. Xxxxx Xxxxxxxxxxx owns 10,000 shares
Xx. Xxxxx Xxxxxxxxxxx owns 10,000 shares
Xx. Xxxxxx Xxxxxx owns 10,000 shares
TULIPA owns 170,000 shares
(c) The XXXXX shares are owned as follows:
Xx. Xxxxx Xxxxxxxxxxx owns 4,000 shares
CIME owns 196,000 shares
(d) The FIR shares are owned as follows:
TULIPA owns 4,900,000 shares
XXXXX owns 4,900,000 shares
(e) The shares of Stock owned by the Sellers as set forth in
Section 6.2(b) through (d) hereof represent all of the issued and
outstanding capital stock of the FIR Group Companies. There are no issued
and outstanding options, warrants, rights, securities, contracts,
commitments, understandings or arrangements by which any of the FIR Group
companies is bound to issue any additional shares of its capital stock or
options to purchase shares of its capital stock.
(f) Each Seller is the sole owner of the Stock belonging to
him/it; and at the Closing all of such Stock shall, as a condition to
Closing, be free and clear of any pledges, claims, rights, actions, liens
or encumbrances; no person firm or entity has negotiations pending
concerning or has any option or right, even if conditional, to purchase or
to be offered to purchase or otherwise acquire in whole or in part, the
Stock or any securities convertible therein or any interest, or right of
whatever nature, therein, respectively belonging to them.
8
(g) The Sellers have full power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
(h) Except as described in Exhibit G, at Closing the FIR Group
Companies will not have any capital shares or other participation in any
corporation, partnership, or association.
(i) Under an agreement between FIR (formerly MEVA) and a pool of
banks led by Cariplo, the financing granted to FIR (formerly MEVA) in the
original amount of Lit 23,000,000,000 (presently outstanding in the amount
of Lit. 13,800,000,000) is immediately repayable in the event any of the
shareholders of record as of September 13, 1994 ceases to be a shareholder
of FIR or the aggregate participation of all such shareholders of records
is reduced below 51% of the capital stock of the FIR Group Companies unless
the new shareholders are accepted in writing by said lead bank.
(j) Each of the FIR Group Companies is and always has been
resident for tax purposes only in Italy. No FIR Group Company is liable to
pay tax in any country other than Italy. In any country in which a FIR
Group Company conducts business other than Italy, such Company is entitled
to the benefits of an applicable double tax agreement pursuant to which
such business does not constitute a permanent establishment within the
meaning of such double tax agreement. Each FIR Group Company has performed
all acts necessary to claim all the benefits of those double tax agreements
to which it is entitled, including any and all filings and other
communications with the relevant taxing authorities as may be required or
advisable.
(k) No FIR Group Company is or has been a member of a
consolidated, combined or unitary group for tax purposes in any taxing
jurisdiction.
(l) At no time prior to the Closing Date has any United States
corporation, partnership, trust, estate, citizen or resident been a
shareholder of any FIR Group Company.
6.3 Regarding the Assets of the FIR Group Companies.
------------------------------------------------
(a) Except as described in Exhibit H/a, the FIR Group Companies
have full and undisputed title to all their properties and assets and in
the case of real property good and marketable title, free and clear of any
claims, rights, actions, liens, encumbrances, mortgages, pledges and
privileges. The FIR Group Companies own all of the assets, tangibles and
intangibles, recorded or unrecorded, required to operate their businesses
consistent with past practices. All of such assets are reflected in the
1996 Consolidated Financial Statements or have been acquired since the date
thereof. Other than the real properties reflected in the 1996 Consolidated
Financial Statements, the FIR Group Companies have not owned or leased any
real property since 1987. All machinery and equipment (including machinery
and equipment under lease) presently used by the Fir Group Companies are in
normal operating conditions, showing normal wear and tear, and all
necessary maintenance and repair work has been duly conducted.
(b) All leases pursuant to which the FIR Group Companies lease
real estate, or other assets (the "Leases") are in good standing and are
valid and effective in accordance with their respective terms and no breach
has occurred thereunder which has not been remedied. Except for
9
the FIR Group Companies, no other person or entity has any right to, or
does in fact, enjoy in whole or part, any of the real estate or other
assets covered by the Leases or utilized by the FIR Group Companies in
their operations. A copy of all Leases are attached as Exhibit H/b. No such
lease requires any consent or approval as a result of the transactions
contemplated by this Agreement.
(c) All raw materials and semifinished goods are in good
conditions, fit for the use for which they have been purchased or begun
being manufactured; with regard to finished products, all of them are in
good condition, comply with their respective specifications and are
marketable.
(d) All accounts receivable shown in the financial statements of
the FIR Group Companies as of July 31, 1996 and shown in the accounting
records of the FIR Group Companies as of the day of execution of this
Agreement and as of the Closing Date (the "Accounts Receivable") were, are
and shall be actually due to the FIR Group Companies and have been or shall
be collected if the due date is after Closing, within 180 days of their due
dates in an aggregate amount not lower than their face value net of the
aggregate reserves for bad debts. The Accounts Receivable not collected on
their due dates prior to the Closing and still owing on the day of the
Closing shall be collected within 180 days from such date of Closing. No
Account Receivable is subject to any claim, dispute or set off. Upon
expiration of the above terms of 180 days, Holdings shall be entitled to
debit the Warranty Deposit Amount (as defined in Section 3.2(a)(iii)) for
all accounts which remain uncollected after 180 days subject to the
provisions of Section 7.1(b). In case Holdings does not cause the creditor
FIR Group Company to initiate a legal proceeding, the Sellers shall have
the right to so proceed in the name and on behalf of the FIR Group Company
entitled to the payment of such receivable and in general participate in
the collection procedure. Sellers shall be entitled to be assigned any
receivable which is debited against the Warranty Deposit Amount by the FIR
Group Company.
(e) At no time has any FIR Group Company owned, held, leased, or
had any interest in real property located in the United States or had any
earnings invested in tangible property located in the United States, stock
of a United States corporation, an obligation of a United States person, or
any right to use any intangible in the United States.
6.4 Regarding Know-how and Industrial Property.
-------------------------------------------
(a) Except as disclosed in Exhibit H/c the FIR Group Companies are
in a position to operate their businesses without requiring any know-how,
trademark and/or patent licenses from third parties.
(b) No FIR Group Company or Affiliate has licensed any know-how,
trademark or patent owned by any of the FIR Group Companies to third
parties.
(c) Each of the FIR Group Companies has full title and ownership
of its corporate name under the applicable laws. All application and
renewal fees, costs and charges for patents and trademarks of the FIR Group
Companies have been paid on time.
6.5 Regarding the Liabilities Related to Products of the FIR Group
Companies.
--------------------------------------------------------------
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Except as disclosed in Exhibit H/d there are no liabilities,
accrued or unaccrued, of the FIR Group Companies, including products
liability, arising from the sale of the products manufactured and/or sold
by them, which products were and will be manufactured and/or sold in
compliance with all the applicable laws and regulations.
6.6 Regarding the Consolidated Financial Statements of the FIR Group
Companies.
----------------------------------------------------------------
(a) The:
(i) FIR Group - 1996 Consolidated Balance Sheet as of 31
July 1996 (the "1996 Balance Sheet"), and the FIR Group - 1996 Consolidated
Income Statement for the twelve months ended 31 July 1996 (the "1996 Income
Statement") (together referred to as the "1996 Consolidated Financial
Statements" and attached here to as Exhibit H/e), have been prepared by IFI
REVI SOCIETA DI REVISIONE and drawn up in compliance with the Italian GAAP
(as herein defined);
(ii) 1995 Balance Sheet as of 31 July 1995 (the "1995
Balance Sheet"), and the 1995 Income Statement for the twelve months ended
31 July 1995 (the "1995 Income Statement") of each of the FIR Group
Companies (together referred to as the "1995 Financial Statements"); and
(iii) 1994 Balance Sheet as of 31 July 1994 (the "1994
Balance Sheet") of each of the FIR Group Companies
present a true and correct accounting representation and results of
operations of the FIR Group Companies and their affiliated companies and
describe correctly and give a true and faithful picture of the economic,
financial and proprietary consolidated (available for 1996) situation of
the FIR Group Companies as of the dates and for the periods herein stated.
(b) The FIR Group - 1995 and 1994 internally-prepared Consolidated
Balance Sheets as of July 31, 1995 and 1994, respectively, and the FIR
Group 1995 and 1994 (seven months) internally- prepared Consolidated Income
Statements for the twelve months ended July 31, 1995 and the seven months
ended July 31, 1994, respectively, present true and correct management
accounting representations and results of operations of the FIR Group
Companies and their affiliated companies and describe correctly and give a
true and faithful picture of the economic, financial and proprietary
consolidated situation of the FIR Group Companies as of the dates and for
the periods stated to the best of the knowledge of Sellers.
(c) Except to the extent reflected or reserved for in the
Consolidated Financial Statements referred to above under Article 6.6(a)(i)
the FIR Group Companies had no liabilities or obligations of any nature,
which were incurred by them prior to the respective dates of the above
mentioned 1996 Consolidated Financial Statements, or arose from
transactions entered into or facts, acts or omissions occurring, on or
prior to that date, except those incurred in the ordinary course of
business and consistent with past practices, but not required under the
Italian GAAP to be reflected, or reserved for, in the above described 1996
Consolidated Financial Statements.
(d) The FIR Group Companies EBIT for the year ended
July 31, 1996 was and is Lit. 12,929,900,000.
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6.7 Regarding Bookkeeping, Taxes and Legal Compliance.
--------------------------------------------------
Except as disclosed in Exhibit H/f:
(a) The FIR Group Companies have regularly, fully and timely paid
all net income, capital gains, gross income, gross receipts, sales, use,
transfer, value added, ad valorem, franchise, profits, net worth, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits and any other taxes or customs duties,
any interest, penalties, additions to tax or additional amounts assessed or
similarly charged by any taxing authority in any jurisdiction upon FIR
Group Company ("Taxes" and, in the singular, a "Tax") which have become due
and payable from time to time and appropriate funds have been created in
the accounting books and/or financial statements of the FIR Group Companies
as any Tax contribution became due and not yet payable. The FIR Group
Companies have duly and timely filed all Tax returns and documents required
to be filed prior to the Closing including, without limitation, returns and
documents covering all the aforesaid Taxes, and such returns and documents
are complete, correct and accurate in all respects. For all periods through
July 31, 1996, all Tax returns filed by the FIR Group Companies have been
examined by the applicable taxing authorities or have been closed by the
applicable statute of limitations. A copy of any such returns filed for
each taxable period that remain open to audit, review or examination by the
relevant taxing authorities and the five most recent closed taxable periods
have been provided to Holdings prior to the Closing Date. None of the Tax
returns so delivered currently is the subject of any audit, administrative
proceeding, judicial proceeding or dispute. There are no facts or
circumstances likely to give rise to or be the subject of any such dispute.
Neither Sellers nor any FIR Group Company has executed or filed with any
taxing authority any agreement or other document extending or having the
effect of extending the period for assessment or collection of any Taxes
imposed on or with respect to any FIR Group Company, and no power of
attorney granted by a Seller or a FIR Group Company with respect to any
such Taxes is currently in force.
(b) All books and records of the FIR Group Companies have been
truly and accurately kept in full compliance with the Italian Accounting
Principles and the applicable laws and regulations.
(c) The FIR Group Companies and their businesses have been
conducted in full compliance with past and present laws and regulations
applicable to them and/or their business activities, including without
limitation environmental matters and exchange control matters. Except as
shown on Exhibit H/f, they have not handled or disposed of hazardous
materials waste in the past ten years and their sites contain no
underground tanks or pipes. None of their properties contain in the soils
any harzardous materials which are required to be remediated by Italian
law, except those which will in fact be remediated pursuant to Section 7.5
hereof. No hazardous materials have migrated to any adjoining property
owned by third party or to any water supply source used by any third party.
(d) The FIR Group Companies have obtained all permits, licenses
and authorizations,
12
including but not limited to, those relating to environmental matters which
are necessary for the conduct of their business. FIR Group Companies are in
all material aspects in full compliance with all terms and conditions of
the required permits.
6.8 Regarding Insurance; Regarding Wages, Employees and Labor Relations.
--------------------------------------------------------------------
(a) The FIR Group Companies have insured their assets and against
their potential liabilities, as shown in the policies, a list of which is
attached hereto as Exhibit H/g. All such policies shall be timely renewed
upon their expiration.
(b) All personnel of the FIR Group Companies have been timely and
fully paid their salaries; all taxes and other refund amounts have been
withheld, and relative to such salaries have similarly been timely and
fully paid to the competent authorities. Adequate funds or reserves have
been created in the financial statements of the FIR Group Companies to
provide for the severance indemnity due to the personnel upon resignation
or retirement. There are no pension or unpaid social security liabilities
of the FIR Group Companies. The FIR Group Companies have furnished to
Holdings, as Exhibit H/h, a list of and copies of all employee benefit
manuals; fringe benefit plans; retirement, welfare and pension plans;
health and medical insurance plans; labor collective bargaining agreements;
profit-sharing plans; and all similar types of employee benefit plans or
programs. Except as set forth in Exhibit H/h, there have been no strikes or
work stoppages each longer than five consecutive working days by any union
or labor organization since August 1, 1992. There is no dispute or
controversy with any union or other organization of the FIR Group
Companies' employees. FIR Group Companies currently have satisfactory
relationships with their employees. Exhibit H/h lists each former employee
and/or officer of FIR Group Companies whose aggregate annualized
compensation exceeded Lit. 60,000,000 and whose employment by FIR Group
Companies has ceased for any reasons since August 1, 1992. Set forth
opposite the name of each such employee and/or officer are: the positions
held; the beginning and ending employment dates; and the reason for the
cessation of the employment.
(c) Subcontractor data. Attached hereto as Exhibit H/(i) is
certain data prepared by Sellers regarding subcontractor relationship of
the FIR Group Companies which data Sellers represent is true, correct and
complete. None of the past or present subcontractors are actually (or will
be characterized by any court to be) employees of the FIR Group Companies
under Italian law.
6.9 Regarding Litigations.
----------------------
Except as described in Exhibit H/j, the FIR Group Companies are
not parties to any litigation, arbitration, regulatory or administrative
proceeding or investigations (including but not limited to tax and fiscal
authorities) pending or threatened.
6.10 Regarding Guarantees.
---------------------
No guarantee issued by any of the FIR Group Companies and
outstanding shall be in favor of third parties other than the Companies.
6.11 Regarding Governmental Authorities.
-----------------------------------
13
Neither the Sellers nor the FIR Group Companies is required to
submit any notice, report or other filing with, and no consent, approval or
authorization is required, by any governmental or regulatory authority in
connection with their execution, delivery, consummation or performance of
this Agreement or the transactions contemplated hereby.
6.12 Regarding No Undisclosed Liabilities, Claims, etc.
--------------------------------------------------
Except for (a) liabilities fully reflected or reserved against in
the 1996 Consolidated Financial Statements; and (b) regular and usual
liabilities and obligations incurred in the ordinary course of business
consistent with past practices after the date of the 1996 Consolidated
Financial Statements, the FIR Group Companies have no liabilities,
obligations or claims (absolute, accrued, fixed or contingent, matured or
unmatured, or otherwise), including liabilities, obligations or claims
which may become known or which arise only after the Price Date or the
Closing and which result from actions, omissions or occurrences of the FIR
Group Companies prior to the Price Date or the Closing.
6.13 Regarding Absence of Certain Changes.
-------------------------------------
Since the date of the 1996 Consolidated Financial Statements, there
has not been;
(a) any material adverse change in the business, financial
condition, earnings or operations of the FIR Group Companies' businesses;
(b) any damage, destruction or loss, whether covered by insurance
or not, adversely affecting the FIR Group Companies' properties and
business;
(c) any declaration, setting aside or payment of any dividend
whether in cash, stock or property with respect to the FIR Group Companies'
capital stock, or any redemption or other acquisition of such stock by any
FIR Group Company;
(d) any increase in the compensation payable or to become payable
by any FIR Group Company to its directors, officers, key employees,
Affiliates or Sellers or any adoption of or increase in any bonus,
insurance, pension or other employee benefit plan, payment or arrangement
made to, for or with any such party;
(e) any entry by any FIR Group Companies into any commitment or
transaction, including, without limitation, any borrowing or capital
expenditure other than in accordance with the Schedule of Capital
Expenditures (Exhibit H/k);
(f) any change by any FIR Group Companies in accounting methods,
practices or principles;
(g) any termination or waiver of any rights of value to the business
of any FIR Group Companies;
(h) any other transaction or event other than in the ordinary
course of the FIR Group
14
Companies' businesses;
(i) any adoption or amendment of any collective bargaining, bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, or other plan, agreement, trust, fund or arrangement for the
benefit of employees, exception made for the coming into force of the
National Metal Workers Collective Agreement in 1997; or
(j) any agreement or understanding made or entered into to do any
of the foregoing.
6.14 Regarding Contracts.
--------------------
Exhibit H/l contains a schedule of, and copies of, all Contracts to which
any FIR Group Company is a party. The term "Contracts" shall include, but
shall not be limited to, all oral (which shall be summarized in Exhibit
H/m) and written contracts, agreements, agency agreements, loan agreements,
mortgages, indentures, deeds of trust, guarantees, commitments, joint
venture agreements, purchase and/or sale agreements, collective bargaining,
union, consulting and/or employment contracts, leases of real or personal
property, easements, distribution or dealer agreements, service agreements,
license agreements and advertising agreements except there shall not be
included agreements which do not exceed, in the case of any one agreement,
an obligation or benefit of Lit. 10,000,000 and, in the case of all
agreements, an aggregate obligation of Lit. 30,000,000. The FIR Group
Companies are not in default or alleged to be in default under any Contract
nor are Sellers aware of any default by any other party to any Contract,
and there exists no event, condition or occurrence which, after notice or
lapse of time, or both, would constitute a default under any Contract. All
of the Contracts are in full force and effect and constitute legal, valid
and binding obligations of the parties thereto in accordance with their
terms, and will remain in full force and effect after the Closing without
any notice to or consent by any other party. Copies of all agreements,
contracts and documents delivered and to be delivered hereunder by Sellers
or the FIR Group Companies are and will be true and complete copies of such
agreements, contracts and documents. All written summaries of oral
agreements will be true and complete.
6.15 Regarding Absence of Certain Business Practices.
------------------------------------------------
Neither Sellers, or any person or entity related to or affiliated
with the Sellers, any officer, employee or agent of the FIR Group Companies
or the Sellers, any other person or entity acting on behalf of or
associated with the FIR Group Companies or the Sellers, nor any other
entity directly or indirectly owned or controlled by the Sellers or the FIR
Group Companies, acting alone or together, has
(a) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic benefit,
regardless of its nature or type, from any customer, supplier, trading
company, shipping company, governmental employee or other entity or
individual with whom the FIR Group Companies have done business directly or
indirectly; or
(b) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company, shipping
company, governmental employee or other person
15
or entity who is or may be in a position to help or hinder the business of
the FIR Group Companies (or assist the FIR Group Companies in connection
with any actual or proposed transaction) which
(i) might subject the FIR Group Companies to any damage
or penalty in any civil, criminal or governmental litigation or proceeding,
(ii) if not given in the past, might have had an adverse
effect on the assets, business or operations of the FIR Group Companies as
reflected in the 1996 Consolidated Financial Statements or ,
(iii) if not continued in the future, might adversely
affect the assets, business, operations or prospects of the FIR Group
Companies or which might subject the FIR Group Companies to suit or penalty
in any private or governmental litigation or proceeding.
Article 7 - Indemnity
---------------------
7.1 Indemnification and Hold Harmless.
----------------------------------
(a) The Sellers shall indemnify and hold harmless Holdings and
each of its shareholders, officers and directors for any loss, damage, cost
and/or expense borne by them or the FIR Group Companies and relative to
events which occurred prior to the Closing and which would not have been
borne if the representations and warranties given above had been fully
accurate ("Loss") subject to the exemptions and limitations set forth
below, provided, however, that no such exemption or limitation of any kind
shall apply to the representations and warranties set forth in Sections
6.1and 6.2 hereof, nor with respect to any intentional act or
misrepresentation committed by Sellers.
(b) Any indemnifiable Loss shall be calculated after set-off with
any provision included in the Consolidated Financial Statements against any
such or different loss, and after deduction of windfalls deriving from
events occurred prior to the closing, and the income and other taxes that
would have been paid by the FIR Group Companies if the Loss had not
occurred, after giving effect to the receipt of any indemnity payment for
tax purposes.
(c) Sellers shall not be liable for any Loss notified to them
later than December 31, 2000, and shall not be liable unless and until in
the aggregate, the Loss exceeds Lit. 80,500,000 (the "Basket Limitation").
7.2 Limitations on Indemnity.
-------------------------
Except as set forth in Section 7.1(a), in no event shall the
indemnity due by Sellers for the representations and warranties given
herein exceed the amount of the Warranty Deposit Account deposited with the
Escrow Agent at the time the claim is notified. With regard to
Environmental matters, any indemnity due by Sellers shall first be drawn
from the Environmental Escrow Fund mentioned in section 7.5 below and then,
to the extent necessary, from the Warranty Deposit Account and in no event
should exceed the amount in such Account.
16
7.3 Escrow Agreement and Procedures Thereunder.
-------------------------------------------
(a) At the Closing, Sellers and Holdings shall enter into the
Escrow Agreements provided for in Section 3.2 hereof and in the form of
Exhibit X-0, X-0 and D-3 hereto. The Escrow Agent shall hold and administer
three separate and distinct escrow accounts (collectively the "Escrow
Accounts", singularly "Account"). One Account shall be referred to herein
as the Price Deposit Account, another as the Warranty Deposit Account and
the third ad the Environmental Escrow Fund. The total amount initially
deposited into the Escrow Accounts shall be Lit. 17,738,000,000 (the
"Initial Escrow Amounts"). The Initial Escrow Amounts and any interest
earned thereon shall be referred to as "Escrow Funds". The Initial Escrow
Amounts shall be deposited by Sellers with the Escrow Agent under the
Escrow Agreements at Closing as follows:
Account Amount
------- ------
Price Deposit Account Lit. 11,755,000,000
Warranty Deposit Account Lit. 5,500,000,000
Environmental Escrow
Fund
Lit. 483,000,000
(b) The Escrow Accounts shall be held, invested and distributed in
accordance with the Escrow Agreement.
(c) The Warranty Deposit Account shall remain in escrow, unless
released as herein provided:
(i) Holdings shall be entitled, at any time and from time
to time that it has a claim or claims subject to indemnification, payment
or distribution to make a written notice of claim ("Notice of Claim") on
the Warranty Deposit Account to the Escrow Agent and the other party,
through their representatives. The Escrow Agent shall disburse Escrow Funds
from the Warranty Deposit Account to Holdings with respect to such claim or
claims upon the expiration of (15) fifteen working days after receipt by
the Escrow Agent of such Notice of Claim, unless prior to the expiration of
such 15working day period, the Escrow Agent shall have received a written
notice of objection ("Notice of Objection") from Sellers, specifying, with
particularity, the basis for such objection. A claim or claims paid
pursuant to this Section 7.3 (c) (i ) shall be "Paid Claims." A claim can
be made and funds be drawn by Holdings for any requirements of Holdings to
pay orders of payment issued by tax, social security or other governmental
agencies or courts relative to an indemnifiable claim.
(ii) If a Notice of Objection is filed with the Escrow
Agent, the claim or claims described in the Notice of Claim shall be the
subject of arbitration in accordance with Article 13 hereof and the Escrow
Agent shall retain or disburse the Escrow Funds from the Warranty Deposit
Account which are the subject of the claim or claims in accordance with the
order of the arbitrators with respect thereto (the "Arbitrators Order"). A
claim or claims which are the subject of, and pending receipt of, an
Arbitrators Order shall be "Pending Claims."
(iii) On the first anniversary of the Closing hereunder,
Lit. 1,375,000,000 of the Escrow Funds in the Warranty Deposit Account less
the cumulative amount of any Paid Claims or Pending Claims for the
preceding one-year period ("Period 1") on such Warranty Deposit Account
17
shall be paid to Sellers by the Escrow Agent. In the event that the
cumulative amount of Paid Claims or Pending Claims on such Warranty Deposit
Account for Period 1 exceed Lit. 1,375,000,000, no Escrow Funds in such
Warranty Deposit Account shall be paid to Sellers from such Warranty
Deposit Account from such Warranty Deposit Account.
(iv) On December 31, 1998, an additional
Lit.1,375,000,000 of the Escrow Funds in the Warranty Deposit Account plus
any such Escrow Funds described in Section 7.3 (c)(iii) which, during
Period 2 (being the period from the anniversary of the Closing to December
31, 1998), cease to be subject to Pending Claims on such Warranty Deposit
Account less the cumulative amount of any such Paid Claims or Pending
Claims on such Warranty Deposit Account for Period 1 and Period 2 shall be
paid to Sellers by the Escrow Agent. In the event that the cumulative
amount of such Paid Claims or Pending Claims for said Periods 1 and 2
exceed such Escrow Funds in such Warranty Deposit Account available for
payment for the Periods 1 and 2, no such Escrow Funds shall be paid to
Sellers from such Warranty Deposit Account.
(v) On December 31, 1999, an additional Lit.1,375,000,000
of the Escrow Funds in the Warranty Deposit Account plus any Escrow Funds
on such Warranty Deposit Account described in Sections 7.3(c)(iii) and
7.3(c)(iv) which, during Period 3 (being the period from January 1, 1999 to
December 31, 1999), cease to be subject to Pending Claims on such Warranty
Deposit Account less the cumulative amount of any such Paid Claims or
Pending Claims for Periods 1, 2 and 3 shall be paid to Sellers by the
Escrow Agent. In the event that the cumulative amount of Paid Claims or
Pending Claims for said Periods 1, 2 and 3 exceed the Escrow Funds in such
Warranty Deposit Account available for payment for Periods 1, 2 and 3, no
Escrow Funds shall be paid to Sellers from such Warranty Deposit Account.
(vi) After December 31, 2000 and upon the resolution of
all Pending Claims on such Warranty Deposit Account, the balance of the
Escrow Funds in the Warranty Deposit Account shall be paid to Sellers.
(d) The Price Deposit Account shall be distributed in accordance
with Sections 3.1(c) and (d) hereof.
(e) The Environmental Escrow Fund should be distributed in
accordance with Section 7.5.
(f) As provided in the Escrow Agreement, all fees and expenses of
theEscrowAgent shall be paid from interest earned on the Escrow Funds.
7.4 Tax Indemnification.
--------------------
(a) Sellers shall be liable for (i) all Taxes of the FIR Group
Companies for the taxable periods ending on or before the Closing Date and
(ii) the portion of any Taxes for a period not ending on or before the
Closing Date that is attributable to the operations of the FIR Group
Companies prior to the Closing Date and that exceeds the amount of such
Taxes that have been fully accrued for in the Closing Financial Statements.
(b) All Taxes attributable to the operations of the FIR Group
Companies after the Closing Date shall be borne by the FIR Group Companies,
or Holdings, and any refunds or credits in respect
18
of such Taxes shall be the property of the FIR Group Companies, or
Holdings, as the case may be. For the purposes of determining the amount of
the liability for Taxes attributable to the period from July 31, 1996
through the Closing Date, the income, deductions, credits, allowances and
other items for the taxable year that includes the Closing Date shall be
allocated pro rata to the period in the taxable year occurring on or before
the Closing Date and to the period in that taxable year occurring after the
Closing Date.
(c) The Sellers shall prepare or cause to be prepared in an
interim report the results of operations of the FIR Group Companies from
July 31, 1996 through the Closing Date on a basis consistent with the
existing procedures for preparing Tax returns and in a manner consistent
with prior years' practice with respect to the treatment of specific items
on a Tax return, other than in the case of an applicable change in law
affecting such Tax return or the treatment of any item thereon. Holdings
shall, or shall cause the FIR Group Companies to, be responsible for
preparing and filing all Tax returns and reports of the FIR Group Companies
for periods ending: (i) after the Closing Date and (ii) on or prior to the
Closing Date when the Tax returns relating to such tax periods are due
after the Closing Date (after taking into account any applicable extensions
of time to file), which returns shall be prepared and filed timely and on a
basis consistent with existing procedures for preparing such returns and in
a manner consistent with prior years' practice with respect to the
treatment of specific items on the return, other than in the case of any
applicable change in law affecting such Tax return or the treatment of any
item thereon. Any deficiency for Taxes for which the Sellers are liable as
provided in Section 7.4(a) hereof in connection with the returns described
in the immediately preceding sentence shall be deemed a Loss and be subject
to indemnification as set forth in sections 7.1 and 7.2 hereof
(d) Holdings, the FIR Group Companies and the Sellers (and their
respective tax, accounting and legal service providers) shall provide each
other with such assistance as may reasonably be requested by any of them in
connection with the preparation of any return or report of Taxes, any audit
or other examination by any taxing authority, or any judicial or
administrative proceedings relating to liability for Taxes. Holdings, the
FIR Group Companies, the Sellers (and their respective tax, accounting and
legal service providers) will retain for the full period of any statute of
limitations and provide the others with any records or information that may
be relevant to such preparation, audit, examination, proceeding or
determination.
(e) Holding and Sellers hereby agree that in the event a claim
with respect to Taxes is made pursuant to this Agreement, each party shall
furnish or cause to be furnished to any of them all books, records, tax
returns and other information reasonably requested by such other party that
relate to such claims, and each party agrees to file on behalf of the other
party any returns, forms or other statements that relate to such claims.
(f) Sellers hereby agree that any and all tax agreements,
arrangements or undertakings between Sellers, on the one hand, and any FIR
Group Company, on the other hand, that relate to any payment or liability
by any FIR Group Company for its Taxes shall terminate as of the Closing
Date and any rights or obligations resulting from such agreements shall be
eliminated as of the Closing Date.
19
(g) If in connection with any examination, investigation, audit or
other proceeding of any Tax return for a taxable period ending prior to the
Closing Date, any governmental body or authority issues to a FIR Group
Company, or Holdings, a written notice of deficiency, a proposed
adjustment, an assertion of claim or demand concerning the tax period
covered by such return, Holdings shall notify Sellers of its receipt of
such communication from the governmental body or authority. The failure or
delay of Holdings to so notify Sellers shall not reduce or otherwise affect
the obligations of Sellers hereunder. Sellers shall, at their expense, have
the sole and exclusive right, power and authority to contest any such
assessment, proposal, claim, demand or other proceeding and to represent
and act for and on behalf of the relevant FIR Group Company in connection
with any notice, proposal, investigation, assessment, audit, examination or
any other proceedings of any kind whatsoever in connection with any Tax
return for a taxable period of any FIR Group Company ending on or prior to
the Closing Date. Sellers agree to keep Holdings informed of the progress
of any such proceeding and to consult with Holdings in good faith in
connection therewith. Sellers further agree that they will not settle or
resolve any issue related to Taxes which, is so settled or resolved, would
have an effect on any FIR Group Company or Holdings for periods ending
after the Closing Date, without the prior written consent of Holdings. If
any examination, investigation, audit or other proceeding relates to a Tax
return for a period that ends after the Closing Date, the FIR Group
Companies, or Holdings, shall control and resolve such examination,
investigation, audit or other proceeding.
(h) If there is an adjustment to any return or report of Taxes for
any FIR Group Company that creates a deficiency in any Taxes for which
Sellers are liable under the provisions of this Section 7.4, or if Sellers
shall receive a refund with respect to Taxes that is the property of a FIR
Group Company, or Holdings, under the provisions hereof, Sellers shall
either (i) pay to Holdings as an adjustment to the Base Purchase Price the
refund received by Sellers (plus interest thereon actually received from
any governmental authority) or (ii) be liable to Holdings for such
deficiency as a loss subject to indemnification under Section 7.1 hereof .
If there is an adjustment to any return or report of Taxes for a FIR Group
Company that results in a refund realized by Holdings which is the property
of Sellers under the provisions hereof, Holdings shall pay the amount of
such refund to Sellers as an adjustment to the Base Purchase Price (plus
any interest thereon actually received from any governmental authority).
(i) The terms and provisions of this Section 7.4 shall control and
govern with respect to the matters covered thereby notwithstanding any
terms and provisions of Section 7.1 and 7.3 to the contrary.
7.5 Environmental Idemnity.
-----------------------
(a) Sellers and Holdings agree that there currently exist certain
possible environmental conditions in the soil of the Casalmaggiore plant
(the "Site") of the Fir Group Companies which may require additional
testing and possible remediation under Italian law. The parties agree to
proceed with the required testing and possible remediation in accordance
with the terms of this Section 7.5. Any environmental indemnity exceeding
the Environmental Escrow paid shall be paid out of the Warranty Deposit
Account to the extent that money is available therein.
20
(b) Holdings has retained Xxxxxxxxxx Xxxxxx SpA (Milano) ("M/W")
to test the Site for environmental conditions that may require remediation
under the laws of Italy. M/W has delivered a preliminary report indicating
certain possible conditions of the Site that may require remediation and
recommending further testing.
(c) At the Closing Sellers will deliver to Escrow Agent pursuant
to the Environmental Escrow Agreement the amount of Lit. 483,000,000 to be
held and administered as provided herein and therein.
(d) A firm of Environmental advisors (the Advisors) acceptable to
both parties shall, within ninety (90) days from Closing, deliver a Second
Preliminary Report recommending further testing and any remediation of the
Site that may be required by law. Such Second Report shall be subject to
approval by Sellers and Holdings and be subject to arbitration of disputes
by Sellers and Holdings. The Environmental Escrow Funds shall be utilized
by the Escrow Agent to pay for (i) the fees for the Second and further
Reports, for any agreed upon further testing or monitoring of the Site and
(ii) for the costs of any required remediation of the Site. No legal fees
of Seller or Holdings (other than those of Holdings relating to the
interpretation of environmental laws) shall be paid from the Environmental
Escrow Funds. Within twelve (12) months of the Closing Date, the Advisors
shall deliver a Final Environmental Report on the Site, which report will
be subject to approval by Sellers and Holdings, subject to arbitration of
disputes by Sellers and Holdings. The Final Report shall provide if
required for a Remediation Plan for the Site, including Maximum Estimated
Costs of same. The amount of the Maximum Costs shall be held in the Escrow
account and all amounts in excess of same in said account shall be paid by
Escrow Agent to Sellers not later than 15 months of the Closign Date. The
Escrow Agent shall pay funds to third parties for the cost of testing and
remediation as approved by the parties or instituted by an Arbitration
Order, all pursuant to the Final Environmental Report.
7.6 FIR Representations, Warranties and Guaranties.
-----------------------------------------------
(a) Holdings acknowledges that FIR is the holder of
representations and warranties given by the previous owners of the Fir
Group Companies relating to the period ending September 1994 and that such
representations and warranties are assisted by Bank guarantees (the FIR
Representations, Warranties and Guarantees) (Exhibit H/n).
(b) The parties agree that they shall jointly examine any claim
submitted by Holdings against Sellers in order to determine whether such
claims may be enforced against the previous owners by Fir under the Fir
Representations, Warranties and Guarantees. In the event both parties agree
that the claims may be so enforced, then Holdings shall cause Fir to
enforce such claims, without prejudice to Sellers liability in the event
the claim cannot be enforced and without prejudice to Holdings right to
draw provisionally on the Warranty Deposit Account in the event the
enforcement is not completed within six month, subject to restitution to
Sellers upon completion. Notwithstanding the foregoing agreement to delay
enforcement of an indemnifiable claim against the Sellers for six (6)
months, such claim may be made and shall be effective on the date made to
freeze in the Warranty Deposit Account.
21
(c) In the event Holdings does not agree on the enforcement of the
Fir Representations, Warranties and Guarantees with regard to the claim
submitted then Holdings shall nevertheless as a condition to drawing on the
Warranties Deposit Account cause Fir to enforce such Representations,
Warranties and Guarantees for the account and at the expenses of Sellers.
Article 8 -- Interim Management
-------------------------------
8.1 Covenants of Sellers.
---------------------
As to the interim period between July 31, 1996 and the Closing
Date the Sellers represent and warrant the following:
(a) The business of the FIR Group Companies has been and shall be
conducted only in the ordinary course of business and in accordance with
past practices, which were in accordance with the law. From the date of
signature of this Agreement, Sellers shall cause the FIR Group Companies to
consult with Holdings prior to entering into any transaction or negotiation
or taking any action that may have a material effect on the FIR Group
Companies. The Holdings officer to be consulted for the purposes hereof
shall be Xx. Xxxxxx Xxxxxx or such other person as will be designated by
such officer or Holdings in writing.
(b) The business and organization of the FIR Group Companies have
not been and shall not be adversely affected by actions or omissions under
the reasonable control of the Sellers or the FIR Group Companies.
(c) No employees receiving an annual compensation of Lit.
70,000,000 or more, consultants, agents or representatives have been or
shall be hired or dismissed and none of the respective rights and
obligations thereof have been or shall be modified, except as required by
the law or national collective agreements.
(d) No indebtedness, contract, commitment or unusual transaction
has been nor shall be entered into by or on behalf of the FIR Group
Companies extending beyond the Closing Date, or involving the sale or
disposition of a capital asset, except commitments which are normal in the
ordinary course of the FIR Group Companies' business for the purchase of
supplies and orders from or contracts with customers. Investments made or
committed for an amount exceeding Lit.
200.000.000 are disclosed in Exhibit H/o hereto.
(e) The Sellers have maintained and shall maintain the FIR Group
Companies solvent and in good standing and have taken and shall take no
action that may lead to any change in the FIR Group Companies Deeds of
Incorporation or By-laws or the share ownership of the FIR Group Companies.
(f) Except as disclosed in Exhibit H/p hereto no dividend,
distribution, extraordinary bonus or payment or other operation affecting
the capital of the FIR Group Companies has been or shall be declared,
resolved or paid to the Sellers with respect to the shares of the FIR Group
22
Companies.
(g) No transaction has taken or shall take place between the FIR
Group Companies and the Sellers except commercial transactions at arms
length in the ordinary course of the business of the FIR Group Companies.
(h) No exceptional increase in the inventory of the FIR Group
Companies has taken or shall take place.
(i) No shareholder resolution other than necessary under
the applicable law has been, or shall be adopted, no shareholders agreement
shall be entered into or amended, as the case may be, and no By-laws of any
of the FIR Group Companies shall be changed.
(j) Sellers shall cause Holdings to have full access to the FIR
Group Companies' premises, records and interim financial information
pending the Closing.
8.2 Applicability of Indemnification.
---------------------------------
The Interim Management covenants set forth herein shall be subject to the
indemnification procedure set forth in Article 7.
Article 9 -- Boards of the FIR Group Companies
----------------------------------------------
9.1 Actions of Directors and Shareholders.
--------------------------------------
Sellers shall cause all members of the board of directors of the
FIR Group Companies to tender their resignations on or before the day of
the Closing and shall cause a meeting of the board of directors or of the
shareholders of the FIR Group Companies, as Holdings shall request, to be
called for the day of the Closing in order to allow Holdings to replace as
many directors of the FIR Group Companies as Holdings shall deem fit.
9.2 Actions of Board of Statutory Auditors.
---------------------------------------
Sellers shall furthermore cause their representatives on the board
of statutory auditors of the FIR Group Companies to tender their
resignations on or before the day of the Closing.
Article 10 -- Other Agreements
------------------------------
10.1 Consultants, Brokers and Finders.
---------------------------------
Sellers and Holdings each represent and warrant to the other that they
have not retained any consultant, broker or finder in connection with the
transactions contemplated by this Agreement, except for Societe Generale
retained by Sellers and Xxxxxxxx X. Xxxxxxxxxx of Greendrive Capital
23
and Xxxxxxx X. Xxxxxx of Pranzo, Inc. retained by Holdings. Sellers and
Holdings each hereby agree to indemnify, defend and hold the other party
and its officers, directors, employees and affiliates, harmless from and
against any and all claims, liabilities or expenses for any brokerage fees,
commissions or finders fees due to any consultant, broker or finder
retained by the indemnifying party other than those set forth above.
10.2 Noncompetition Agreement.
-------------------------
At the Closing, Holdings and Xxxxx Xxxxxxxxxxx will enter into a
Noncompetition Agreement in the form set forth in Exhibit I.
10.3 Noncompetition Agreement.
-------------------------
At the Closing, Holdings and the Sellers other than Xxxxx
Xxxxxxxxxxx, will enter into Noncompetition Agreements in the form set
forth in Exhibit J.
Article 11 -- Conditions to the Obligations of Holdings
-------------------------------------------------------
Each and every obligation of Holdings under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions unless waived in writing by Holdings:
11.1 Representations and Warranties; Performance.
--------------------------------------------
The representations and warranties made by the Sellers herein
shall be true and correct in all material respects on the date of this
Agreement and on the Closing Date with the same effect as though made on
such date; the Sellers shall have performed and complied with all material
agreements, covenants and conditions required by this Agreement to be
performed and complied with by them prior to the Closing Date; Sellers
shall have, and shall have caused the President and chief financial officer
of FIR Group Companies to have delivered to Holdings a certificate, dated
the Closing Date, in the form to be designated Exhibit K hereto, certifying
to such matters and the other conditions contained in this Article 11.
11.2 Consents and Approvals.
-----------------------
All consents from and filings with third parties, regulators and
governmental agencies required to consummate the transactions contemplated
hereby, or which, either individually or in the aggregate, if not obtained,
would cause a material adverse effect on FIR Group Companies' financial
condition or business shall have been obtained and delivered to Holdings.
11.3 Opinion of Sellers' Counsel.
----------------------------
Holdings shall have received an opinion of Sellers' counsel, dated
the Closing Date, in the form to be mutually agreed upon and attached
hereto as Exhibit L.
24
11.4 No Material Adverse Change.
---------------------------
There shall have been no material adverse change since the
Financial Statement Date in the business, financial condition, earnings or
operations of FIR Group Companies' business.
11.5 No Proceeding or Litigation.
----------------------------
No action, suit or proceeding before any court or any governmental
or regulatory authority shall have been commenced or threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced or threatened against any of Sellers, FIR Group Companies,
Holdings or any of their respective principals, officers or directors
seeking to restrain, prevent or change the transactions contemplated hereby
or questioning the validity or legality of any of such transactions or
seeking damages in connection with any of such transactions.
11.6 Financial Condition at Closing.
-------------------------------
(a) At the Closing, FIR Group Companies will have the necessary
fixed assets, intangible and tangible, to continue their business in its
normal course and consistent with past practices.
(b) No dividends, shareholder distributions, bonuses, debt
repayments, or excessive compensation shall have been declared or paid by
FIR Group Companies from March 1, 1997 to the Closing, unless otherwise
mutually agreed or otherwise in the normal course of business.
(c) FIR Group Companies shall have closed the acquisition of TEA
in accordance with the draft acquisition agreement attached hereto as
Exhibit M.
(d)1) Holdings' auditor shall conduct a certified audit of FIR
Group Companies as at July 31, 1996 and 1995, the results of which shall
not result in a reduction for 1996 of the FIR Group Companies' EBIT of more
than Lit. 1,000,000,000 or for 1995 or 1996 of their Net Worth of Lit.
2,000,000,000 as compared to the financial statements for such period
delivered hereunder, provided however that reductions resulting from the
application of principles of consolidation different from those applied by
Sellers to the individual balance sheets shall not be taken into
consideration. This condition to Closing will expire, if not availed of by
April 7, 1997 and shall not remain a condition thereafter. Net Worth shall
mean all assets less all liabilities. EBIT shall have the same meaning as
in Section 3.1 hereof. This audit will use Italian generally accepted
accounting principles and the accrual basis of accounting. Holdings will
bear the cost of this audit.
(d)2) Offsite Environmental Due Diligence. Holding shall have
completed by April 7, 1997 reasonable due diligence with respect to offsite
environmental matters at Casalmaggiore site and shall be satisfied in its
reasonable discretion that no liability or claims exist on behalf of any
third party of more than Lit.11,000,000,000 in the aggregate. This
condition to Closing will expire, if not availed of by April 7, 1997 and
shall not remain a condition thereafter.
11.7 Good Faith Deposit; Liability Limitation
----------------------------------------
On April 8, 1997 Holdings shall deposit with the Escrow Agent the sum
of Lit.3,544,000,000 to be held by the Escrow Agent to secure the
performance of Holdings obligations hereunder. Such
25
deposit shall be repaid by the Escrow Agent to Holdings if Holdings
complies with all of the terms of this agreement, either at the Closing, or
earlier if Holdings rightfully terminates this agreement. If Holdings
wrongfully terminates this agreement or fails to perform its obligation to
deliver the Base Purchase Price at the Closing, the Escrow Agent shall
deliver the deposit amount to Sellers. If the deposit amount is delivered
to Sellers hereunder, Holdings shall have no further or additional
liability to Sellers of any kind under this agreement.
11.8 Other Documents.
----------------
Sellers will furnish or cause FIR Group Companies to furnish
Holdings with such other and further documents and certificates of its
officers and others as Holdings shall reasonably request to evidence
compliance with the conditions set forth in this Agreement.
11.9 Other Agreements.
-----------------
The Agreements described in Article 10 shall have been entered
into and delivered.
Article 12 -- Miscellaneous
---------------------------
12.1 Partial Invalidity.
-------------------
If one or more provisions of this Agreement should be or become
invalid or unenforceable, this shall not affect the validity and
enforceability of the remaining provisions of this Agreement. In such event
the Parties shall cooperate to substitute for the invalid or unenforceable
provision another valid and enforceable provision the business effect of
which comes as close as possible to the intended business purpose of the
invalid or unenforceable provision.
12.2 Notices. All notices hereunder shall be given to the respective
Parties hereto as follows:
Sellers:
Tulipa S.A.
c/o Svasa
Attention Xxxxxx Xxxx'Ava
Xxx Xxxxxx 00
XX 0000 Xxxxxx
Xxxxxxxxxxx
Telephone: xx00 00 00.00.000
Telecopier: xx00 00 00.00.000
with copies to:
Xxxxxxx Xxxxxxxxx, Esq.
Xxxxx Xxxxx Xxxxx, 0
00
00000 Xxxxx
Xxxxx
Telephone: xx00.0.00.00.00.00
Telecopier: xx00.0.00.00.00.00
Holdings and Holdings-USA:
Xx. Xxxxxx X. Xxxxx
Xx. Xxxxxx Xxxxxx
Xx. Xxxxxx Xxxxxx
FIR Group Holdings, Inc.
c/o Jordan Industries, Inc.
Arbor Lake Centre, Suite 000
Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
XXX
Telephone: xx0.000.000.0000
Telecopier: xx0.000.000.0000
with copies to:
G. Xxxxxx Xxxxxx, Esq.
XXXXX XXXX LLP
3500 One Kansas City Place
0000 Xxxx Xxxxxx,
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
XXX
Telephone: ++1.816.374-3200
Telecopier: ++1.816.374-3300
and
Xxxxxxx X. Xxxxxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx & XxXxxxxx
Xxxxxx Xxxx, 0
00000 Xxxxx
Xxxxx
Telephone: ++39.2.76. 01.39.21
Telecopier: xx00.0.00.00.00.00
or to such other person or address as either Party hereto shall designate
by written notice to the other Parties hereto. All notices shall be given
in writing or by telefax and shall be deemed to be received when delivered
if sent by registered mail and when transmitted if sent by telefax.
27
12.3 Documents.
----------
All agreements and other documents which have been submitted to
Holdings by the Sellers prior to Closing have been identified as such and
initialed by the Parties for purposes of identification. Holdings confirms
receipt of them.
12.4 Assignment.
-----------
Except that Holdings may assign the Agreement to one of its
affiliated companies or entities or to its financial institutions, or merge
with one of its affiliated companies, this Agreement and any rights or
claims hereunder shall not be assignable.
12.5 Costs.
------
Each party to this Agreement shall pay its own costs of and
expenses incidental to this Agreement. The cost of the stamp duties payable
on the transfer of the shares and relative notarial fees, as well as the
cost of registration of this Agreement, if any, shall be paid by Holdings.
12.6 Announcements.
--------------
No announcement shall be made by any party hereto relating to the
transaction described herein without the prior written consent of the other
party not unreasonably withheld.
12.7 Waiver.
-------
Failure to assert any right or claim shall not be construed as a
waiver to assert such right or claim or any other right or claim.
12.8 Integration.
------------
This Agreement and its Exhibits constitute the entire
understanding of the parties relating thereto.
12.9 Amendments.
-----------
Any amendments to this Agreement shall be in writing and signed by
all parties hereto and indicating the intent to amend this Agreement.
28
Article 13 -- Arbitration and Applicable Law
--------------------------------------------
13.1 Arbitration.
------------
All disputes arising out of or in connection with this Agreement
or any agreement ancillary hereto or executed at the Closing, including any
question regarding its existence, validity or termination, shall be finally
settled under the Rules of Arbitration of the International Chamber of
Commerce of Paris by three arbitrators in accordance with said Rules.
13.2 Selection of Arbitrators.
-------------------------
Holdings and the Sellers shall each nominate one arbitrator for
confirmation by the competent authority under the applicable Rules
(Appointing Authority). Both arbitrators shall agree on the third
arbitrator within 30 days. Should the two arbitrators fail, within the
above time-limit, to reach agreement on the third arbitrator, he shall be
appointed by the Appointing Authority. Any nomination of an arbitrator by
or on behalf of the Sellers must be by joint agreement between them; if the
Sellers fail, within the time-limit fixed by the Appointing authority, to
agree on such joint nomination, said arbitrator shall immediately be
appointed by the Appointing Authority.
13.3 Location and Procedural Law.
----------------------------
The seat of arbitration shall be Milan, Italy and the procedural
law of Italy shall apply where the Rules are silent.
13.4 Language.
---------
The language to be used in the arbitration proceeding shall be
English.
13.5 Substantive Law.
----------------
All disputes shall be settled in accordance with the provisions of
this Agreement, otherwise in accordance with the substantive law in force
in Italy without reference to other laws. The application of the United
Nations Convention on contracts for the International Sale of goods of
April 11, 1980 shall be excluded.
This Share Purchase Agreement is executed in six copies whereby
each Party shall receive one signed original.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on this 21st day of March, 1997.
29
SELLERS
--------------------------------
Xxxxx Xxxxxxxxxxx
--------------------------------
Xxxxx Xxxxxxxxxxx
--------------------------------
Xxxxxx Xxxxxx
TULIPA S.A.
By: _________________________________
Name: _________________________________
Title: _________________________________
HOLDINGS
FIR Group Holdings Italia, S.r.l.
By: _________________________________
Name: __________________________________
Title: __________________________________
30
GUARANTEE
---------
The undersigned, Motor and Gear Inc. ("Holdings-USA") hereby guarantees the
performance by FIR Group Holdings Italia, S.r.l. of its obligations hereunder.
MOTOR AND GEAR INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
31
SCHEDULE OF EXHIBITS TO
AGREEMENT FOR PURCHASE AND SALE OF
SHARES OF FIR GROUP COMPANIES
Exhibit Title
------- -----
Exhibit A Estimate of Indebtedness to Third Party Financial
Institutes on February 28, 1997
Exhibit B DFCE Example
Exhibit C Methods and Principles of Computations of DFCE and
EBIT
Exhibit D1 Warranty Deposit Account Escrow Agreement
Exhibit D2 Environmental Escrow Agreement
Exhibit D3 Price Deposit Account Escrow Agreement
Exhibit E Purchase Price Allocation
Exhibit F List of Subsidiaries or Affiliates and Agreements
Among Them
Exhibit G Exceptions re: Capital Shares or Other Participation
Exhibit H/a Details on Title to Properties and Assets
Exhibit H/b List of Leases
Exhibit H/c Exceptions to Industrial Property and Know-How
Exhibit H/d List of Liabilities relating to the Sale of Products
Exhibit H/e 1996 Consolidated Financial Statements
1
Exhibit H/f Exceptions to Representations and Warranties in
Section 6.7
Exhibit H/g List of Insurance Policies
Exhibit H/h List of Employee Benefit Plans; Exceptions to
Strikes or Work Stoppages; List of Former Employees/
Officers Compensation Exceeding Lit. 60,000,000
Exhibit H/i Subcontractor data
Exhibit H/j List of Pending Litigations
Exhibit H/k Schedule of Capital Expenditures
Exhibit H/l Schedule of Contracts
Exhibit H/m Summary of Oral Contracts
Exhibit H/n FIR Representations, Warranties and Guarantees
Exhibit H/o List of Investments Exceeding Lit. 200,000,000
Exhibit H/p List of Dividends, Distributions and Payments
Affecting the Capital of the FIR Group Companies
Exhibit I Noncompetition Agreement between Holdings and Xxxxx
Xxxxxxxxxxx.
Exhibit J Noncompetition Agreement between Holdings and Tulipa
S.A.
Exhibit K Certificate Regarding Representations and Warranties
Given by FIR Group Companies
Exhibit L Opinion of Seller's Counsel
Exhibit M TEA Draft Acquisition Agreement
2
