Exhibit 2.1
SHARE PURCHASE AGREEMENT
------------------------
REGARDING ALL OF THE SHARES IN
XXXX XXXXXX HANDELS-GMBH PROZESS- UND LABORSYSTEME
between
1. XXXXXXXX CAPITAL OY
XXXXXXXXXXXXXX 00
00000 XXXXXXXX
XXXXXXX
- hereinafter referred to as "SELLER"-
on the one hand
and
2. MOCON, INC.
0000 XXXXX XXXXXX XXXXX
XXXXXXXXXXX, XX 00000
U.S.A.
- hereinafter referred to as "PURCHASER" -
on the other hand.
TABLE OF CONTENTS
-----------------
Preamble 6
Section I Definitions 6
Section II Sale, Purchase and Assignment of the Shares 10
Section III Purchase Price, Terms of Payment 11
Section IV Representations and Warranties of Seller 16
Section V Representations and Warranties and other Obligations
of Purchaser 27
Section VI Indemnification 28
Section VII Covenants 32
Section VIII Closing Date 35
Section IX Rescission 36
Section X Mailing Addresses 37
Section XI Miscellaneous Provisions 38
-3-
PREAMBLE:
---------
WHEREAS, Seller is interested in selling all of its shares in Xxxx Xxxxxx
Handels-GmbH Prozess- und Laborsysteme;
WHEREAS, Purchaser is interested in acquiring all of the Seller's shares in Xxxx
Xxxxxx Handels-GmbH Prozess- und Laborsysteme which has been the distributor of
Purchaser's products;
WHEREAS, Purchaser is interested in thereby acquiring and continuing to operate
the business of Xxxx Xxxxxx Handels-GmbH Prozess- und Laborsysteme as a
wholly-owned subsidiary;
WHEREAS, Seller and Purchaser are in agreement that the profits for the business
year 2003 shall belong to Seller and that the Seller may resolve on the
distribution of dividends prior to the closing of the transaction.
NOW THEREFORE, the Parties enter into the following
SHARE PURCHASE AGREEMENT
------------------------
SECTION I
---------
DEFINITIONS
-----------
In addition to the terms defined above, the following terms shall apply
throughout this Agreement:
Accounting Dispute has the meaning as defined in Sections 3.3.
and 3.4.2 hereof
Arbitration Rules has the meaning as defined in Section 11.9
hereof
Articles of Incorporation means the articles of incorporation of Target
as amended on July 8, 2003
-4-
Affiliated Company/ies means an undertaking directly or indirectly
affiliated with another undertaking within
the meaning of Section 15 of the German Stock
Corporation Act (AKTIENGESETZ)
Agreement means this share purchase agreement
Base Purchase Price has the meaning as defined in Section 3.1
hereof
Business means business conducted by Target involving
the Products and referring to the market
segments and principals as serviced by the
Target on the Closing Date and during the 12
(twelve) months prior to the Closing Date and
is the entire business Target is conducting
on the Closing Date and has been conducting
during the 12 (twelve) months prior to the
Closing Date.
Closing has the meaning as defined in Section 8.1
hereof
Closing Balance Sheet has the meaning as defined in Section 3.2
hereof or as determined by the Expert
Arbitrator pursuant to Section 3.5 hereof,
as the case may be
Closing Date shall be February 5, 2004 or any other date
the Parties may agree on
Closing Net Worth means difference between the book value of
the assets of Target and the book value of
the liabilities of Target as at the close of
business on the Effective Date, determined on
the basis of the Closing Balance Sheet and as
agreed by the Parties pursuant to Section 3.2
hereof or determined by the Expert Arbitrator
pursuant to Section 3.5 hereof, as the case
may be, minus the amount of any dividend
resolved and paid or payable on the Closing
Date to the extent not reflected in the
Financial Statements for 2003
Damages has the meaning as defined in Section 6.1.1
hereof
Earn-out has the meaning as defined in Section 3.4.1
hereof
-5-
Effective Date means January 1, 2004, 0:00 hours
EStG means the German Income Tax Code
(EINKOMMENSTEUERGESETZ)
Estimated Closing Net Worth has the meaning as defined in Section 3.2
hereof
Estimated Net Profits has the meaning as defined in Section 3.4.2
hereof
Expert Arbitrator has the meaning as defined in Section 3.5
hereof
Financial Statements has the meaning as defined in Section 4.2.1
hereof
Financial Statements for 2003 means the audited financial statements of
Target for the business year ending
December 31, 0000
Xxxxxxx means the Federal Republic of Germany
(BUNDESREPUBLIK DEUTSCHLAND)
Guaranteed Earn-out has the meaning as defined in Section 3.4.1
hereof
IPR refers to intellectual property rights as
defined in Section 4.6.1 hereof
Liens means any mortgage, pledge, security
interest, liens, encumbrances and other
rights of third parties other than (i) Liens
for taxes not yet due, warehouseman's,
mechanic's, carrier's, landlord's,
repairman's or similar Liens imposed by
operation of law and for amounts not yet due
and payable, and (ii) retention of title for
amounts not yet due and payable
Material Contract has the meaning as defined in Section 4.8.1
hereof
Net Profits has the meaning as defined in Section 3.4.1
hereof as agreed by the Parties pursuant to
Section 3.4.2 or determined by the Expert
Arbitrator pursuant to Section 3.5 hereof, as
the case may be
-6-
Non-Competition Covenant has the meaning as defined in Section 7.1
hereof
Party/Parties means any of the parties to this Agreement
Products means the products distributed by Target on
the Closing Date and during the 12 (twelve)
months prior to the Closing Date and
specified in EXHIBIT A and any developments
or versions resulting from these products
Signing Date means the date hereof
Shares means all shares in Target as defined in
Section 2.1 hereof
Target means Xxxx Xxxxxx Handels-GmbH Prozess- und
Laborsysteme, Neuwied, registered under HRB
1054 in the commercial register of the Local
Court (AMTSGERICHT) Neuwied
Taxes or Tax mean all taxes, ancillary tax-related charges
(STEUERLICHE NEBENLEISTUNGEN), customs
charges, social security payments and
contributions, workers' compensation charges
including charges of the German
BERUFSGENOSSENSCHAFT and any other
governmental fiscal charges, contributions
and public levies of any kind
Territory has the meaning as defined in Section 7.1
hereof
Third Party Claim has the meaning as defined in Section 6.4.1
hereof
Transfer Deed has the meaning as defined in Section 2.5
hereof
-7-
SECTION II
SALE, PURCHASE AND ASSIGNMENT OF THE SHARES
2.1 The share capital of Target amounts to a total of EUR 60,000 (Euro
sixty thousand) and is fully paid up.
Seller is the only shareholder in Target owning shares in the aggregate
nominal amount of EUR 60,000 (Euro sixty thousand) ("SHARES").
2.2 Seller herewith sells the Shares to Purchaser pursuant to the terms and
conditions of this Agreement.
2.3 Purchaser herewith purchases the Shares from Seller pursuant to the
terms and conditions of this Agreement.
2.4 Seller herewith agrees to assign and transfer the Shares to Purchaser
and Purchaser hereby agrees to accept such assignment and transfer.
2.5 The assignment and transfer of the Shares to Purchaser shall be
effected by way of a notarial transfer deed in the form of the draft
attached hereto as SCHEDULE 2.5 ("TRANSFER DEED") on the Closing Date.
2.6 Economically, the Shares will be deemed to have transferred with effect
as of the Effective Date and together with all rights and obligations
arising from the Shares. The Parties undertake to put each other in the
position they would have been in had the assignment and transfer of the
Shares been effected on the Effective Date.
2.6.1 On the Signing Date Seller will resolve on the distribution of an
interim dividend in the amount of EUR 200,000 (in words: Euro two
hundred thousand) which shall be paid in cash to Seller prior to or on
December 31, 2003.
-8-
2.6.2 Prior to or on December 31, 2003 Seller will resolve on a further
distribution of an interim dividend which shall be, to the extent
possible, paid in cash to Seller prior to or on December 31, 2003 and
shall for the remainder be treated as an interest bearing shareholder
loan on the books of Target. A copy of this resolution shall be
attached to the Transfer Deed and evidence of the cash payment, if any,
shall be provided on the Closing Date.
2.6.3 Prior to or on January 31, 2004 Seller will resolve on the distribution
of dividends for the business year ending on December 31, 2003 which
shall be, to the extent possible, paid in cash to Seller prior to the
Closing Date which cash payment shall first be used for redemption of
the shareholder loan booked based on the resolution under Section 2.6.2
above and shall for the remainder be treated as an interest bearing
shareholder loan on the books of Target. A copy of this resolution
shall be attached to the Transfer Deed and evidence of the cash
payment, if any, shall be provided on the Closing Date.
2.6.4 The interest bearing shareholder loans booked based on the resolutions
under Section 2.6.2 and 2.6.3 shall be discharged on May 1, 2004 at the
latest. The interest rate applicable to the interest-bearing
shareholders loans shall be the minimum interest rate accepted by the
tax authorities in such cases.
2.6.5 All Taxes payable related to dividend(s) distributed to Seller under
any of Sections 2.6.1, 2.6.2 and 2.6.3 above, if any, shall be the
responsibility of Seller, and Seller shall indemnify Purchaser within a
reasonable time period for any Taxes imposed on or required to be
remitted by Target or Purchaser as a result of such dividends.
SECTION III
-----------
PURCHASE PRICE, TERMS OF PAYMENT
--------------------------------
3.1 The purchase price for the Shares shall consist of (i) an initial
amount of EUR 625,000 (Euro six hundred twenty-five thousand) less the
amount, if any, by which the Closing Net Worth is less than EUR 175,000
(Euro one hundred seventy-five thousand) ("BASE PURCHASE PRICE") and
(ii) an earn-out component.
3.2 Pre-Closing Determination of Base Purchase Price
-9-
Purchaser and Seller agree that they will, and agree to cause their
respective independent accountants to, cooperate and assist in the
preparation of the audited balance sheet of Target for the business
year ending on December 31, 2003 and the calculation of the Estimated
Closing Net Worth and the Seller agrees, to the extent reasonably
required, to cause Target to put suitable personnel, rooms, books,
records and work paper (subject to appropriate indemnification) at
Purchaser's disposal and otherwise give the necessary support.
Purchaser and Seller agree, in particular, that they will perform a
physical stock-take at the Target with representatives of both Parties
present.
No later than twenty-five (25) days after the Effective Date, the
Seller will deliver to Purchaser the audited balance sheet of Target
for the business year ending on December 31, 2003 together with the
resolution on the appropriation of profits, and a calculation of the
net worth as of the Closing Date ("ESTIMATED CLOSING NET WORTH"). The
audited balance sheet of Target for the business year ending on
December 31, 2003 shall be prepared in accordance with accounting
principles generally accepted in Germany and in accordance with past
practice (to the extent such past practice is in accordance with such
generally accepted accounting principles).
Purchaser and Seller shall, prior to the Closing Date, use their best
efforts to reach agreement on and finally determine the Closing Balance
Sheet and the net worth as of the Closing Date. The balance sheet of
Target for the business year ending on December 31, 2003 and the
Estimated Closing Net Worth agreed and finally determined by the
Parties in accordance with this Section 3.2 hereof (or deemed finally
determined in accordance with Section 3.3 hereof or finally determined
in accordance with Section 3.5 hereof) shall for the purpose of this
Agreement constitute the CLOSING BALANCE SHEET and the CLOSING NET
WORTH.
3.3 Post-Closing Adjustment of Base Purchase Price
If Purchaser and Seller cannot reach agreement on the Closing Net Worth
prior to the Closing Date ("ACCOUNTING DISPUTE"), the Estimated Closing
Net Worth as delivered by Seller and a notice of disagreement
summarizing points of disagreement delivered by Purchaser on the
Closing Date shall be attached to the Transfer Deed. Purchaser shall
deliver to Seller within 30 days from the Closing Date a notice of
disagreement specifying those items or amounts as to
-10-
which Purchaser disagrees along with a reasonable description regarding
each of the specified items and Purchaser shall be deemed to have
agreed with all other items and amounts contained in the audited
balance sheet of Target for the business year ending on December 31,
2003 and the Estimated Closing Net Worth as delivered to it. If no such
notice of disagreement is delivered to Seller on Closing Date, then
Purchaser shall be deemed to have agreed to and accepted the audited
balance sheet of Target for the business year ending on December 31,
2003 and the Estimated Closing Net Worth so that both shall be deemed
finally determined and Section 3.2 will apply.
3.4 Earn-out
3.4.1 The earn-out shall be a percentage of the Net Profits of the Business
for the business years ending on December 31, 2004 ("2004"), on
December 31, 2005 ("2005"), and on December 31, 2006 ("2006") with a
guaranteed minimum payment of EUR 100,000 (Euro one hundred thousand)
for each year of the earn-out (the "GUARANTEED EARN-OUT"). The earn-out
shall be
(i) 55% of the Net Profits 2004 but not less than EUR 100,000 (ii) 55%
of the Net Profits 2005 but not less than EUR 100,000 (iii) 50% of the
Net Profits 2006 but not less than EUR 100,000
(together the "EARN-OUT").
The Net Profits shall be determined in accordance with the principles
set forth in EXHIBIT 3.4.1.
3.4.2 As promptly as practicable, but no later than sixty (60) days after
December 31, 2004, December 31, 2005 and December 31, 2006,
respectively, Purchaser will prepare and deliver to Seller a
calculation of the Net Profits of the respective year ("ESTIMATED NET
PROFITS").
Upon request by Seller Purchaser shall provide supporting documentation
with sufficient detail to support the underlying numbers and verify the
calculation of the Net Profits.
If Seller disagrees with the Estimated Net Profits, Seller may, within
thirty (30) days after delivery of the document, deliver a notice to
Purchaser disagreeing with the Estimated Net Profits. Any such notice
of disagreement shall specify those items or amounts as to which Seller
-11-
disagrees along with a reasonable description regarding each of the
specified items, and Seller shall be deemed to have agreed with all
other items and amounts contained in the Estimated Net Profits as
delivered to it. If no such notice of disagreement is delivered to
Purchaser within the aforementioned timeframe, then Seller shall be
deemed to have agreed and accepted the Estimated Net Profits which
thereupon shall be deemed finally determined.
If a notice of disagreement is duly delivered, Purchaser and Seller
shall, during the 30 days following such delivery, use their best
efforts to reach agreement on the disputed items or amounts in order to
determine the Net Profits (any such dispute is referred to in this
Agreement as an "ACCOUNTING DISPUTE").
The Estimated Net Profits agreed upon by Purchaser and Seller in
accordance with this Section 3.4.2 (or as finally determined in
accordance with Section 3.5) shall for the purpose of this Agreement
constitute the NET PROFITS.
3.5 In the event an Accounting Dispute occurs, if Purchaser and Seller have
not settled any such dispute within 30 days after a notice of
disagreement by Purchaser or Seller has been delivered to Seller or
Purchaser pursuant to Section 3.3.1 or 3.4.2 hereof, as the case may
be, either Seller or Purchaser may refer the dispute for final
settlement to an expert arbitrator (SCHIEDSGUTACHTER) (hereinafter
referred to as "EXPERT ARBITRATOR") whose opinion shall be binding for
all Parties involved. If the Parties cannot agree upon an individual to
serve as the Expert Arbitrator, the Expert Arbitrator shall be
appointed by the President of the Institute of Chartered Accountants in
Germany (INSTITUT DER WIRTSCHAFTSPRUFER IN DEUTSCHLAND E.V.,
DUSSELDORF) upon formal request by either Seller or Purchaser. The
Expert Arbitrator shall be an independent accountant qualified as
WIRTSCHAFTSPRUFER in Germany and a member of a recognized firm with
international standing.
The Expert Arbitrator shall be instructed to, authorized to and shall,
if necessary, adjust the audited balance sheet of Target for the
business year ending on December 31, 2003 and the Estimated Closing Net
Worth or the Estimated Net Profits, as the case may be, so as to
conform them to his decision only as to the items or amounts in
dispute.
In the event of an Accounting Dispute related to the audited balance
sheet of Target for the business year ending on December 31, 2003 and
the Estimated Closing Net Worth such adjusted
-12-
audited balance sheet and adjusted Closing Net Worth by the Expert
Arbitrator shall, for the purpose of this Agreement, constitute the
CLOSING BALANCE SHEET and the CLOSING NET WORTH.
In the event of an Accounting Dispute related to the Estimated Net
Profits such adjusted Net Profits by the Expert Arbitrator shall, for
the purpose of this Agreement, constitute the NET PROFITS for the
applicable year.
Seller and Purchaser shall each pay one half of the expenses and fees
of the Expert Arbitrator and, if applicable, the costs of the INSTITUT
DER WIRTSCHAFTSPRUFER IN DEUTSCHLAND E.V., DUSSELDORF. Each party to
the proceedings shall bear its own costs and those of its advisers.
3.6 The purchase price is to be paid as follows:
(i) An initial amount of EUR 625,000 (Euro six hundred twenty-five
thousand) less the amount, if any, by which the Closing Net
Worth, if it is finally determined prior to the Closing Date,
or the Estimated Closing Net Worth, as the case may be, is
less than EUR 175,000 (Euro one hundred seventy-five thousand)
is to be paid by Purchaser to Seller on the Closing Date in
cash by express wire transfer (BLITZUBERWEISUNG) to the
following account of Seller:
Company: Xxxxxxxx Capital Oy
Bank: Nordea, Noormarkku
Account Number: 162830-749
BIC: XXXXXXXX
IBAN: XX00 0000 0000 0000 00
(ii) If the Closing Net Worth is finally determined after the
Closing Date:
(a) If the Estimated Closing Net Worth was less than EUR
175,000 (Euro one hundred seventy-five thousand) and
the Closing Net Worth is greater than the Estimated
Closing Net Worth, the Purchaser shall pay to Seller
an amount equal to (a) the lesser of the Closing Net
Worth or EUR 175,000 (Euro one hundred seventy-five
thousand) minus (b) the Estimated Closing Net Worth.
-13-
(b) If the Estimated Closing Net Worth was less than EUR
175,000 (Euro one hundred seventy-five thousand) and
the Closing Net Worth is less than the Estimated
Closing Net Worth, the Seller shall pay to the
Purchaser an amount equal to (a) the Estimated
Closing Net Worth minus (b) the Closing Net Worth.
(c) If the Estimated Closing Net Worth was greater than
EUR 175,000 (Euro one hundred seventy-five thousand)
and the Closing Net Worth is less than EUR 175,000
(Euro one hundred seventy-five thousand), the Seller
shall pay to Purchaser an amount equal to (a) EUR
175,000 (Euro one hundred seventy-five thousand)
minus (b) the Closing Net Worth.
Any amounts set forth in this Section 3.6(ii) shall be paid in
cash via wire transfer within five (5) business days of the
date that the Closing Net Worth is finally determined to the
bank account listed above under Section 3.6(i) hereof.
(iii) The Earn-out as set forth above under Section 3.4.1 hereof
shall be paid by Purchaser in cash via wire transfer within
five (5) business days of each date on which the Net Profits
of each year, as applicable, are finally determined to the
bank account listed above under Section 3.6(i) hereof.
SECTION IV
----------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants the following, effective both for the Signing
Date and the Closing Date, if not specifically indicated otherwise:
4.1 Incorporation and Shares
Target is a limited liability company (GESELLSCHAFT MIT BESCHRANKTER
HAFTUNG) duly incorporated and validly existing under the laws of
Germany.
Target has the corporate power and authority to own its properties and
carry on the Business in all material respects as owned or conducted at
the Closing Date.
-14-
The information stated in Section 2.1 hereof is true and correct.
4.1.1 Seller is the sole owner of all of the Shares. Target does not own
shareholdings or participations in other companies. There are no rights
of Seller or third parties to subscribe to or otherwise acquire new
shares or to convert any other rights into shares or to require the
issue of new shares or to grant any of the aforesaid rights. Seller has
not granted any third party the right to exercise Seller's voting
rights in shareholders' meetings of Target, whether by way of powers of
attorney or otherwise. The Shares are free from all liens, charges,
encumbrances and restrictions in favor of Seller or any third party;
there exist no pre-emptive rights, rights of first refusal, put or call
options of third parties regarding the Shares nor are there any other
restrictions with respect to the transfer of the Shares, all capital
contributions in cash regarding the Shares have been fully made; all
capital contributions in kind regarding the Shares have been made and
had the full value at which they were transferred and accepted;
repayments of subscriptions to the capital of Target were not made.
There are no share certificates regarding the Shares. The shareholders'
meetings of Target have not adopted any resolutions amending or
changing the Articles of Incorporation which have not yet been
registered in the commercial register (HANDELSREGISTER).
4.1.2 Seller may freely dispose of the Shares.
4.2 Accounts and Dividends
4.2.1 Seller provided Purchaser with audited financial statements of Target
for the business years which ended on December 31, 2001, 2002, and 2003
("FINANCIAL STATEMENTS").
The Financial Statements are correct and complete in all material
respects in accordance with German generally accepted accounting
principles, consistently applied, and fairly present, in accordance
with German generally accepted accounting principles, consistently
applied, the financial position and results of the operations of Target
for the respective financial year.
In particular, the reflection of assets and liabilities in the
Financial Statements and their valuation took place in compliance with
the generally accepted accounting principles applicable
-15-
to Target and pursuant to and/or in accordance with the principle of
formal and substantive consistency.
4.2.2 There are no liabilities of Target of any kind whatsoever that would be
required to be set forth on the balance of the Target that was prepared
as of December 31, 2003 in accordance with the provisions of the second
paragraph of Section 4.2.1 above other than: (i) liabilities fully
reflected or provided for in the Financial Statements for 2003; (ii)
current liabilities incurred in the ordinary course of business
consistent with past practice since Jan.01.2004 which in the aggregate
do not materially affect the valuation of the Business; and (iii)
liabilities under contracts entered into or made in the ordinary course
of business consistent with past practice and, to the knowledge of
Seller, there are no other liabilities of the Target whether accrued,
contingent, absolute, determined or, determinable , and there is no
existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability.
4.3 Pensions
Except as shown in EXHIBIT 4.3, Target has no pension obligations
vis-a-vis present or former members of any body corporate, or vis-a-vis
present or former managing directors (GESCHAFTSFUHRER) or employees or
vis-a-vis any other third party.
4.4 Guarantees and Financing Arrangements
Target is not bound by any guarantees comfort letters or commitments of
a similar nature in favor of any third party, any of Seller's
Affiliated Companies or any of its shareholders, partners, managers or
employees.
Except as listed in EXHIBIT 4.4, Target has not taken out any loans and
is not party to any other financing, borrowing or lease arrangement and
have not undertaken any kind of off-balance sheet financing.
Target has not obligated itself not to pledge or assign any of their
assets or to otherwise use them as collateral.
4.5 Assets
-16-
4.5.1 Target has good and valid title to all property and assets reflected in
the Financial Statements for 2003 or used by it free of all Liens, and
all property and assets are in good operating condition except for
ordinary wear and tear consistent with their age and use. To the best
of Seller's knowledge, the assets are in the condition to continue the
operation of the Business and are all of the assets necessary to
continue the operation of the Business as heretofore conducted.
Except to the extent of any special valuation provisions or write-downs
made in the Financial Statements for 2003, the inventories of Target
existing on the Closing Date, are in usable condition in line with
their determined purpose and are in saleable condition at normal
prices.
4.5.2 The aggregate amount of the accounts receivable of Target reflected in
the Financial Statements for 2003 will be fully paid no later than six
months after the Closing Date.
4.6 Intellectual Property Rights
4.6.1 Except as listed in EXHIBIT 4.6.1, Target is not the owner of and has
not licensed any intellectual property rights (e.g. patents,
trademarks, service marks, make-ups, business or trade names, brand
names, logos, registered designs, design rights, database rights,
copyrights, recipes and formulas, rights in domain names, rights in
know-how or trade secrets), computer software including source codes
and licenses as of the Closing Date (such intellectual property rights
hereinafter referred to as "IPR").
4.6.2 There are no outstanding claims by third parties against the Target
regarding infringement of IPR and no such claims are pending or, to the
best of Seller's knowledge, threatened and there are no known
circumstances possibly leading to such claims.
4.7 Law, Administrative Approvals and Regulations
4.7.1 Target has at all times prior to the Closing Date operated its business
and presently so operates it in compliance with all applicable laws,
including competition and fair trade laws.
There are no administrative approvals, permits and licenses for Target
as of the Closing Date.
-17-
4.7.2 Target has at all times prior to the Closing Date been and is in
compliance with all administrative security regulations applicable to
it in connection with the operation of the Business, including
requirements imposed by trade authorities, construction authorities,
technical supervisors and the fire department. Any commissioners
required by law have been duly appointed.
4.8 Contracts
4.8.1 EXHIBIT 4.8.1 contains a complete and correct list of all of the
material contracts binding Target. A material contract under this
Agreement is any of the following (hereinafter referred to as "MATERIAL
CONTRACT"):
(i) any lease agreement concerning real estate and any other lease
providing for annual rentals of EUR 25,000 (Euro twenty-five
thousand) or more;
(ii) any contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual
payments of Target of EUR 25,000 (Euro twenty-five thousand)
or more (except any contract entered into with the Purchaser);
(iii) any sales, distribution, agency or other similar agreement
providing for the sale by Target of materials, supplies,
goods, services, equipment or other assets that provides for
annual payments to or commission paid by Target of EUR 50,000
(Euro fifty thousand) or more (except any contract entered
into with the Purchaser);
(iv) any partnership, joint venture or other similar contract,
arrangement or agreement;
(v) any contract relating to indebtedness for borrowed money or
the deferred purchase price of property (whether incurred,
assumed, guaranteed or secured by any asset);
(vi) any outgoing or incoming license agreement, franchise
agreement or agreement in respect of similar rights granted to
or by Target;
(vii) any agency, distribution, dealer, sales representative or
other similar agreement where Target does not act as
principal;
-18-
(viii) any agreement, contract or commitment that limits the freedom
of the Target to compete in any line of business or with any
person or in any area or to own, operate, sell, transfer,
pledge or otherwise dispose of or encumber any of its assets
(except any contract entered into with the Purchaser);
(ix) any agreement, contract or commitment which is or relates to
an agreement with or for the benefit of the Seller or of
Seller's Affiliated Companies or any of its shareholders,
partners, managers or employees or any member of Target;
(x) any other agreement, contract or commitment on which the
Business of Target is substantially dependent ; or
(xi) the agreements, contracts and consultancy arrangements or
other forms of service relationships listed in EXHIBIT 4.13.1,
which list is incorporated into EXHIBIT 4.8.1 by this
reference.
Complete copies of all Material Contracts have been delivered to
Purchaser.
4.8.2 (i) No Material Contract has been cancelled, (ii) to the best of
Seller's knowledge, no Material Contract has been breached by the other
party and (iii) Target has in all material respects performed the
obligations required to be performed by it in connection with any
Material Contract and is not in receipt of any claim of default under
any such contract.
4.8.3 Except as disclosed in EXHIBIT 4.8.3, no Material Contract grants a
right to another party to prematurely terminate any Material Contract
as a result of the change of ownership in Target.
4.8.4 Except as disclosed in EXHIBIT 4.8.4 there are no agency, dealer, sales
representative, distributorship or similar agreements binding Target as
principals existing as of the Closing Date.
4.8.5 As of the Closing Date Target will be bound only by those contracts
which are entered into in the course of ordinary business and which do
not contain terms and conditions not entered into at arm's length.
-19-
4.9 Litigation
Target is not involved in any kind of actions, suits, proceedings or
investigations, irrespective of whether pending or, to the best of
Seller's knowledge, threatened, before courts or administrative
agencies or arbitration tribunals and there are, to the best of
Seller's knowledge, no facts or circumstances which could give rise to
any such actions, suits, proceedings or investigations. This is in
particular true with respect to proceedings in trade, tax, product
liability, product warranty, environmental liability, or unfair trade
practices matters.
4.10 Insurance
The product liability connected with the operation of the respective
businesses of Target and all other risks are insured as indicated in
EXHIBIT 4.10.
To the best of Seller's knowledge, the insurance coverage as described
in EXHIBIT 4.10 is in line with prudent business practice.
All insurance coverage of Target will continue in full force and effect
at least until the Closing Date.
4.11 Grants and Subsidies
Target has not received any grants (INVESTITIONSZULAGEN) or subsidies
(BEIHILFEN).
4.12 Inter-Company Relationships
Except as listed in EXHIBIT 4.12A, there are no contractual
relationships or agreements or arrangements between Target and any of
their Affiliated Companies or any of its shareholders, partners,
managers or employees and there are no fees for services due by Target
to any or all of Seller or of Seller's Affiliated Companies or any of
its shareholders, partners, managers or employees and there is no
agreement or arrangement providing for future services for which fees
would be payable. Except as listed in EXHIBIT 4.12B, there are no cash
pooling arrangements concerning Target or any of Seller's Affiliated
Companies or any of its
-20-
shareholders, partners, managers or employees. There are no claims of
Target against Seller or Seller's Affiliated Companies or any of its
shareholders, partners, managers or employees and no claims of Seller
or Seller's Affiliated Companies or any of its shareholders, partners,
managers or employees against Target.
4.13 Employees
4.13.1 On the Closing Date Target will have on their payrolls not more than 15
employees. EXHIBIT 4.13.1 contains a list of all service, employment
and labor contracts of Target, including the following data: age of
employee, date of commencement of employment, contractual notice
period, special status (e.g. status of handicapped person, maternity
protection, end of maternity leave, member of or candidate for German
works council, end of employment relationship in case of terminated
employment contracts), annual salary or hourly wage, as the case may
be, individual or collective performance bonus or incentive, pension
entitlement, if any, and any other benefits of any kind whatsoever,
e.g. direct insurances or company car.
There are no consultancy arrangements or other forms of service
relationships.
4.13.2 Target is bound by the collective bargaining agreement with the Verband
der Metall- und Elektroindustrie Rheinland-Rheinhessen e.V. and the
Verband der Pfalzischen Metall- und Elektroindustrie e.V... Target is
not involved in any collective bargaining dispute or claim, nor are
there any facts known which might suggest that there may be any
collective bargaining disputes or claims involving Target or that any
of the provisions of this Agreement may lead to any such collective
bargaining dispute or claim.
4.13.3 No service contract or employment agreement between Target on the one
hand and any of its managing directors (GESCHAFTSFUHRER) or employees
on the other hand provides for any severance payment to be made upon
termination of the service contract or employment agreement or in the
event of a change of control.
4.13.4 Except as mentioned in EXHIBIT 4.13.4, Target has not entered into
legally binding obligations for any increase in remuneration or
benefits of their employees in the period of six months prior to the
Closing Date and they will not enter into such obligations prior to the
Effective Date.
-21-
4.13.5 There are no shop agreements (BETRIEBSVEREINBARUNGEN) applicable at
Target as of the Closing Date.
4.13.6 All employees to whose benefit direct insurance contracts have been
entered into have agreed to assume all individual taxes and surcharges
on direct insurance premiums to the extent such premiums exceed or will
exceed in the future the limits up to which a flat tax rate can be
applied. Seller will hold Target and Purchaser harmless from and
indemnify them against any claims of employees or the tax authorities
in this regard.
4.13.7 There are no stock option plans or any other agreements or arrangements
of any kind and nature whatsoever pursuant to which the employees of
Target are entitled to subscribe to or otherwise receive shares in
Target or to otherwise participate in or exercise any rights pertaining
to the earnings or the ownership of Target.
4.14 No Known Material Changes in the Business
As a direct result of the Transaction, to the best of Seller's
knowledge, (i) no supplier of Target will substantially reduce its
supplies, (ii) no material customer of Target as listed on EXHIBIT 4.14
will cease doing business with Target, (iii) no party to a Material
Contract as disclosed on EXHIBIT 4.8.3 will elect to prematurely
terminate such contract based on change of control, and (iv) there are
no other circumstances, resulting directly from the Transaction, which
could materially change the Business.
4.15 Taxes
All Taxes of Target required to be paid have been paid when due or have
been properly provided for in the Financial Statements for 2003; for
additional payments of Taxes which may result from audits relating to
Taxes, adequate accruals or provisions have been made in the Financial
Statements for 2003. Target has filed all returns required to be filed
and has fulfilled all other filing, reporting obligations and
information obligations (INFORMATIONSPFLICHTEN) under applicable laws
relating to Taxes.
To the extent any audits concern periods prior to the Closing Date,
Purchaser shall cause Target to use commercially reasonable efforts in
order to agree with Seller on any declaration or
-22-
statement to be made vis-a-vis the tax authorities and Seller or a
representative of Seller may be present at negotiations with the tax
authorities. Purchaser shall cause Target to inform Seller in a timely
manner of any tax audits concerning periods prior to the Closing Date.
4.16 Business between the Signing Date and the Closing Date
4.16.1 In the period of time between the Signing Date and the Closing Date:
(i) the Business of the Target has been and will be conducted in
substantially the same manner as hitherto and consistent with past
practice, with the care of a prudent businessman and in accordance with
all applicable laws and regulations; (ii) the assets of Target have not
been and will not be disposed of, except current assets for full value
in the ordinary course of business; (iii) no new share capital or other
similar capital or any right to obtain any such capital has been or
will be created or issued; (iv) Target has not extended and will not
extend existing financing arrangements nor has it entered into any new
or additional financing arrangements; (v) no dividends will be payable
on or after the Signing Date except as set forth under Section 2.6;
(vi) there has been no material deterioration in the overall financial
position or prospects of Target and there will not be, to the best of
Seller's knowledge, any such material deterioration before the Closing
Date.
4.16.2 The orders for traded merchandise and for raw materials, maintenance
materials and supplies placed by Target prior to the Closing Date but
to be delivered after the Closing Date are and will be placed with the
care of a prudent business man consistent with past practice as regards
number, price, payment and other terms.
-23-
4.17 General Provisions on Warranties
4.17.1 Meaning of Representations and Warranties
All of the representations and warranties of Seller in this Agreement
have the meaning of independent guarantees (SELBSTANDIGE
GARANTIEVERSPRECHEN) within the meaning of Section 311 para. 1 BGB
(German Civil Code). Purchaser's rights and remedies mentioned in this
Agreement do not require fault on the part of Seller or its agents. For
the avoidance of doubt, no representation and warranty of Seller shall
be construed as Seller's guarantees (GARANTIEN FUR DIE BESCHAFFENHEIT
DER SACHE) within the meaning of Sections 443 para. 1 and 444 of the
German Civil Code.
4.17.2 Imputable Knowledge
To the extent Seller makes representations and warranties in this Agreement "to
the best of Seller's knowledge" or in a similarly qualified manner, there is
agreement between the Parties that knowledge of Xx. Xxxxxx Xxxxxxx, managing
director (GESCHAFTSFUHRER) of Target as of the Closing Date, is imputable to
Seller and, for purposes of Section 4.2.2, the knowledge that Xx. Xxxxxx Xxxxxxx
would have upon an inquiry into the relevant matter that a prudent person
holding his position would have made is also imputable to Seller.
4.17.3 The Purchaser acknowledges and agrees that
(i) representations and warranties of Seller in Section IV hereof
are the only representations and warranties of any kind given
by or on behalf of Seller and on which the Purchaser has
relied or may rely in entering into this Agreement;
(ii) no other information, statement, promise, forecast (written or
oral), made by or on behalf of Seller, or Target, their
officers, directors, employees or advisors may form the basis
of, or be pleaded in connection with, any claim by the
Purchaser in connection with this Agreement.
-24-
SECTION V
---------
REPRESENTATIONS AND WARRANTIES AND OTHER OBLIGATIONS OF THE PURCHASER
---------------------------------------------------------------------
5.1 The Purchaser hereby represents and warrants by way of an independent
guarantee (SELBSTANDIGES GARANTIEVERSPRECHEN) pursuant to Section 311
para. 1 of the German Civil Code to the Seller as of the Signing Date
and, except where otherwise indicated, as of the Closing Date, as
follows:
5.1.1 Organization of the Purchaser; Authorization; No Conflict
The Purchaser is a corporation duly organized and validly existing
under the laws of the State of Minnesota, U.S.A., and has full
corporate power and authority to execute this Agreement and to carry
out the transactions contemplated hereby. The execution of this
Agreement and the performance by the Purchaser of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate actions on the part of the Purchaser. This
Agreement has been duly executed by the Purchaser and constitutes a
valid and binding agreement of the Purchaser, enforceable against the
Purchaser in accordance with its terms.
Neither the execution of this Agreement by the Purchaser nor the
consummation by the Purchaser of the transactions contemplated hereby
(i) will violate any provisions of the articles of incorporation or
similar constituent documents of the Purchaser, (ii) will violate or
conflict with any law applicable to the Purchaser, or (iii) will
violate or conflict with or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under any material contract, commitment, understanding, arrangement,
agreement or restriction of any kind binding upon the Purchaser, or to
which any of its assets or properties are subject. The execution and
performance of this Agreement does not conflict with any other
agreements or obligations by which the Purchaser is bound.
5.1.2 Approvals and Consents
No registration or filing with or consent or authorization of any
governmental agency is required in connection with the execution of
this Agreement or with the performance of the transactions contemplated
hereby.
-25-
5.2 The Purchaser agrees to appoint a committee (BEIRAT) for the Target.
For the duration of the Earn-out period, the Seller shall have the
right to appoint one member to the committee of three (3) persons. The
Purchaser will cause Target to hold at least two annual meetings of the
committee, the location of which will be determined by the Target. The
Purchaser and Seller will each bear the expenses of the members they
have appointed to the committee. The committee shall have the rights,
tasks and responsibilities as set forth in the Rules of Procedure
attached hereto as EXHIBIT 5.2.
SECTION VI
----------
INDEMNIFICATION
---------------
6.1.1 Subject to the terms and conditions contained in this Section VI, the
Party in breach shall indemnify and hold harmless the other Party from
and against all damages resulting from the breach or inaccuracy of
representations or warranties given in Section IV or V, as the case may
be, hereof provided that the Party in breach has not remedied such
breach or inaccuracy within 30 calendar days after having been given
notice as provided in Section 6.3 hereof. The Party in breach shall be
obligated to pay damages suffered by the other Party or, if the Seller
is the Party in breach, the Target. Damages shall include actual and
direct damages as well as lost profits resulting from a breach of the
representations or warranties given in Section IV or V hereof, as the
case may be, and reasonable costs and expenses, but shall not include
damages and losses to goodwill or any other indirect or consequential
damages (collectively the "DAMAGES").
6.1.2 The Seller shall not be liable for Damages under this Agreement if an
individual claim is less than EUR 15,000 (Euro fifteen thousand) or,
alternatively, if an aggregate amount of claims is less than EUR 25,000
(Euro twenty-five thousand) irrespective of the amount of the
individual claims. The Seller shall also not be liable for any of the
Damages that may result from or be related to Purchaser's capacity as
manufacturer of the Products.
6.1.3 The Seller's liability for Damages shall be limited to an aggregate
amount of 50% of the Base Purchase Price plus 50 % of the Guaranteed
Earn-out for claims based on the breach of any other representations
and warranties made under Section IV hereof. However, for claims also
based on the breach of the representations and warranties made under
Section 4.1 hereof Seller's
-26-
liability for Damages shall be increased to but limited to an aggregate
amount of 100% of the Base Purchase Price plus Guaranteed Earn-out.
6.1.4 If assessments for Taxes for Target are issued or amended with respect
to any period of time prior to the Closing Date, and if this results in
additional tax liabilities including penalties allocable to the period
of time prior to the Closing Date, including interest thereon falling
due after the Closing Date, Seller will indemnify Purchaser and Target
concerned and hold them harmless from such additional liabilities and
penalties for Taxes to the extent they have not been provided for in
the Financial Statements for 2003.
The Seller shall not bear additional tax liabilities referred to in
this Section 6.1.4 to the extent they had their origin in a mere
shifting of taxable profits to another taxable year and there is
correspondingly less tax in the following years. To the extent that
there are any tax benefits resulting from the business years prior to
the Effective Date but acknowledged by the tax authority after the
Effective Date, they shall be set off against any tax liabilities
resulting from business years prior to the Effective Date.
6.1.5 Claims by Purchaser can be asserted only to the extent that the Damages
have not been provided for in the Financial Statements for 2003 or have
not been recognized as damage to be compensated by an insurance company
under an insurance policy of Target in force on the Closing Date.
6.2 Mitigation
Each Party shall use commercially reasonable efforts to mitigate all
financial prejudice to be indemnified pursuant to Section 6.1.1 hereof.
6.3 Notice of Claims
All claims made by the one Party hereunder shall be made by written
notice from that Party to the other Party describing in reasonable
detail the nature of the claim and if possible a good faith estimate of
the amount involved; such notification shall be made no later than
thirty (30) days after the date on which the Party is being made aware
of the Damages and shall include a good faith estimate of the amount of
Damages.
-27-
6.4 Third Party Claims
6.4.1 In the case of the commencement of any action or proceeding or the
assertion of any written claim by a third party (including any tax
authority or other governmental agency) or the imposition of any
penalty or assessment for which indemnity may be sought pursuant to
Section 6.1.1 above (a "THIRD PARTY CLAIM"), the Purchaser shall,
within twenty-five (25) days from the date upon which it receives the
notification of the Third Party Claim, provide notice of such Third
Party Claim to the Seller, and, within a reasonable period of time,
provide copies of all available and relevant documents and information
in connection with such event, and the Seller shall, upon receipt of
such notice, be entitled to participate in the defense, appeal or
settlement of such Third Party Claim with counsel selected and paid by
it, and the Purchaser shall cooperate in a reasonable manner with the
Seller in connection therewith. Purchaser shall exercise due care in
providing the documents and information and in pursuing the Third Party
Claim.
6.4.2 To the extent that the Seller participates in the defense, appeal or
settlement of any Third Party Claim, the following provisions shall
apply:
(i) the Seller and its counsel shall be informed from time to time
and in a timely manner as appropriate under the circumstances
by the Purchaser or its counsel of the factual and procedural
status of the proceedings;
(ii) no waiver, admission, withdrawal of claim or settlement may be
effected by the Purchaser in the course of the Third Party
Claim without the prior written consent of the Seller, which
consent may not be unreasonably refused;
(iii) the Purchaser may not lodge an appeal without the prior
written consent of the Seller, which consent may not be
unreasonably refused; and
(iv) any waiver, admission, withdrawal of claims, settlement or
appeal must, unless unreasonable, be made or pursued if the
Seller so demands in writing in a timely manner, in which case
the Seller shall reimburse the Purchaser for all reasonable
costs resulting therefrom.
-28-
6.4.3 Failure by the Purchaser to comply with Section 6.4.1 hereof shall
relieve the Seller of any obligation to provide indemnification with
respect to the Third Party Claim.
6.5 In derogation from the statutory provisions, the following limitations
periods (VERJAHRUNGSFRISTEN) shall apply:
The limitations period with respect to claims of Purchaser or Seller
resulting from a breach of the representations and warranties by Seller
or Purchaser shall expire, to the extent not otherwise provided for in
this Agreement, thirteen (13) months after the Closing Date.
The limitations period with respect to claims of Purchaser resulting
from an incorrectness of the warranties made under Sections 4.1.1,
4.1.2, 4.1.3 hereof shall expire three (3) years after the Closing
Date.
The limitations period with respect to claims of Purchaser resulting
from the incorrectness of the warranties made in this Agreement
relating to Taxes shall expire three (3) months after the date on which
the respective assessment has become final and absolute, whether in the
form of an administrative decision (BESTANDSKRAFTIG) or a court
decision (RECHTSKRAFTIG), and is therefore no longer appealable and no
longer subject to change or amendment by the authorities. A tax
assessment is not deemed to be final if it is subject to review
(STEUERFESTSETZUNG UNTER DEM VORBEHALT DER NACHPRUFUNG, Section 164 AO)
or is stated to be a preliminary assessment (VORLAUFIGE
Steuerfestsetzung, Section 165 AO), the assessment is amended due to
new facts (AUFHEBUNG ODER ANDERUNG VON STEUERBESCHEIDEN WEGEN NEUER
TATSACHEN ODER BEWEISMITTELN, Sections 173 para. 1 No. 1 AO), or the
assessment is amended due to an amendment of a basic assessment
(AUFHEBUNG DES GRUNDLAGENBESCHEIDS, Section 175 para. 1 No. 1 AO).
The relevant periods of limitation (i) shall be suspended (GEHEMMT) by
Purchaser commencing judicial proceedings prior to the expiry of the
relevant period set forth in the preceding paragraphs or (ii) shall
recommence (BEGINNT ERNEUT) upon acknowledgement of the Purchaser's
claim (ANERKENNTNIS) by the Seller, as the case may be. Otherwise, the
interruption and tolling of the limitations period shall be governed by
the statutory provisions.
-29-
6.6 Any claims of Purchaser resulting from an incorrectness of warranties
made in this Agreement shall bear interest from the day the claims are
asserted by Purchaser against Seller in writing until the day of
receipt of the indemnification payment by Purchaser at an annual rate
of 2% (two percent) above the base interest rate (BASISZINSSATZ) of the
German Federal Bank applicable at any given time. Interest shall be due
for payment together with the respective payments of principal.
6.7 The Seller and the Purchaser agree that the rights and remedies which
the Seller on the one hand and the Purchaser on the other hand may have
in respect of any breach of warranties and representations are limited
to the rights and remedies explicitly contained herein (including the
limitations on the rights and remedies set forth in this Section VI,
which shall be an integral part of the representations and warranties).
In particular, without limitation, no Party shall have the right to
rescind, cancel or otherwise terminate this Agreement or exercise any
right or remedy which would have a similar effect, except as set forth
in this Agreement.
6.8 The Parties hereby waive any and all rights and remedies of any legal
nature (contractual, quasi contractual, such as culpa in contrahendo,
torts or otherwise, in particular rights and remedies under Sections
280 through 282, 311 para. 2, 323 ET SEQ., 313, 434 ET SEQ. and 823 ET
SEQ. BGB (German Civil Code)) including any claims under statutory
rules and claims for negligent misrepresentation, which they may
otherwise have (in addition to the rights and remedies explicitly set
forth herein) against each other in connection with this Agreement or
the transaction contemplated thereby.
SECTION VII
-----------
COVENANTS
---------
7.1 Non-Competition
Seller undertakes, whether by itself or through others, not to
manufacture or distribute, not to economically or technically assist in
manufacturing or distributing, or otherwise support (e.g. by transfer
of know-how or by rendering consultancy services) the manufacturing or
distribution of the Products in the present territory of the European
Union and, in particular, Austria, Belgium, Luxembourg, Germany,
Denmark, Spain, France, Finland, Great Britain, Greece, Italy, Iceland,
-30-
The Netherlands, Portugal, Sweden, and, in addition, Switzerland,
Norway, Hungary, Poland, Croatia, Yugoslavia, India, Australia, South
Africa, Egypt (the "TERRITORY") for a period of 3 (three) years from
the Closing Date ("NON-COMPETITION COVENANT").
During the term of the Non-Competition Covenant Seller shall also
refrain from
(a) acquiring or owning a direct or indirect ownership interest in
enterprises which develop, maintain or support or perform
services in connection with, or otherwise support the
development, maintenance and support of as well as services
relating to the Products in the Territory, which shall,
however, not apply to enterprises whose business in the
Products is not material to said enterprises' entire business;
and from
(b) disclosing confidential information relating to the business
of Target except if and to the extent the information is or
becomes public knowledge, is disclosed to Seller in good faith
from another source, is discovered by Seller otherwise than by
disclosure from any person presently or in the future working
or having worked for Target or any business activity in which
the Seller or Target hold or ever held a majority interest
within the 5 (five) years immediately preceding the Closing
Date or is required to be disclosed by Seller to a
governmental authority; and from
(c) soliciting any employee of Target or otherwise offering such
employees benefits for the event that they terminate their
employment relationship with Target; and from
(d) taking any action which could (i) interfere with any
contractual or customer relationship of Target in the
Territory, or (ii) result in a diminuation of Business in the
Territory.
In each case of a violation of the Non-Competition Covenant Seller
shall pay to Purchaser a penalty of EUR 100,000 (Euro one hundred
thousand). Should Seller despite a written warning letter from
Purchaser continue the violation, Seller will have to pay for each
month during part of which the violation continues a further penalty of
EUR 50,000 (Euro fifty thousand).
-31-
In addition to the contractual penalty Purchaser has the right to seek
injunctive relief in the event of a violation of the Covenant and to
assert damage claims against the party in violation over and above the
amount of the contractual penalty.
7.2 Continuance of Firm Name
Purchaser and any of its Affiliated Companies shall be entitled to
continue to use the firm name Xxxx Xxxxxx, with or without an addendum,
and, in its sole discretion, to amend or, as the case may be, to
transfer same on the occasion of a transfer of the respective business
enterprises or parts thereof and/or of Shares.
Seller and its Affiliated Companies shall, as of the Closing Date,
desist from continued use of the aforementioned name in any area
related to the Business or in any other business Seller and its
Affiliated Companies may conduct and Seller shall cause any Affiliated
Companies to comply with this obligation. Seller shall, however, be
entitled to limited use of the firm name for purposes of describing its
company history, for track records and success stories as long as such
use of the firm name is in no way derogatory to Purchaser or any of
Purchaser's Affiliated Companies.
Should Seller despite a written warning letter from Purchaser continue
a violation of the obligations stipulated in this Section 7.2, Seller
will have to pay for each month during part of which the violation
occurs and continues a penalty of EUR 25,000 (Euro twenty-five
thousand).
Any claims of Purchaser to further Damages and the right to seek
injunctive relief to stop the prohibited conduct shall remain
unaffected.
7.3 Disposal of Business
Purchaser shall not sell, spin off, transfer, merge or otherwise
dispose of or discontinue the entire or any part of the Business or any
of the Shares or substantially change the Business or liquidate the
Target until December 31, 2006 without the prior written consent of
Seller, which shall not be unreasonably withheld. In the event the
Business is transferred to or otherwise acquired by another entity, the
Parties agree on a reasonable adjustment of the provisions
-32-
regarding the Earn-out in order for Seller to be able to benefit
economically from the Earn-out in substantially the same manner as set
forth in Section 3.4 above.
SECTION VIII
------------
CLOSING DATE
------------
8.1 On the Closing Date, the Purchaser and the Seller shall, subject to the
fulfillment or mutual waiver of the closing conditions set forth in
Section 8.4 below, meet at the offices of Xxxxx Xxxxx, Xxxx & Maw LLP,
Bockenheimer Xxxxxxxx(beta)e 98-100, 60323 Frankfurt am Main and shall
carry out with simultaneous effect (ZUG-UM-ZUG) the following actions
(the "CLOSING"):
(i) The Seller and the Purchaser shall execute a deed of transfer
in the form as attached hereto as SCHEDULE 2.5 providing for
the assignment and transfer of the Shares.
(ii) Both Seller and Purchaser shall confirm that the
representations and warranties given under this Agreement are
still true and correct as of the Closing Date.
(iii) The Purchaser shall pay the amount as set forth in Section
3.6(i) hereof.
(iv) After receipt of the amount in compliance with Section
8.1(iii) hereof, Seller shall confirm receipt to the Purchaser
in writing.
8.2 The Parties furthermore undertake to make all declarations,
registrations and take all further steps that are useful or required to
effectuate the transfer of the Shares on the terms hereof.
8.3 At the end of the Closing, the Parties shall sign a certificate
confirming that the Closing has occurred.
-33-
SECTION IX
----------
RESCISSION
----------
9.1 Purchaser is entitled to rescind this Agreement if, between the Signing
Date and the Closing Date,
(i) insolvency proceedings or similar proceedings are initiated
with respect to the assets of Target or the opening of such
proceedings is rejected due to the lack of funds sufficient to
cover the costs of such proceedings, or the opening of
insolvency proceedings is applied for by Target or by one of
their creditors, or
(ii) warranties or representations given by Seller in this
Agreement turn out to be materially inaccurate, whereby
"material" in this context shall mean that the inaccuracy (i)
results in ascertained or foreseeable Damages exceeding EUR
75,000 (Euro seventy five thousand), or (ii) relates to the
warranties given in Sections 4.1.1, 4.1.2, 4.1.3 hereof.
9.2 Seller is entitled to rescind this Agreement if, between the Signing
Date and the Closing Date,
(i) insolvency proceedings or similar proceedings are initiated
with respect to Purchaser's assets or the opening of such
proceedings is rejected due to the lack of funds sufficient to
cover the costs of such proceedings, or the opening of
insolvency proceedings is applied for by Purchaser or by a
creditor of Purchaser, or
(ii) warranties or representations by Purchaser given in this
Agreement turn out to be inaccurate.
9.3 The right to rescind this Agreement can only be exercised in writing
within a period of two weeks after the Party entitled to rescission has
obtained knowledge or been informed by the other Party of the grounds
leading to the right of rescission.
If this Agreement is rescinded, this Agreement and all other agreements
between the Parties relating to the transaction contemplated herein
shall become null and void and cease to bind the
-34-
Parties in any form whatsoever. In such case, no Party shall have any
claims of whatever nature against the other, in particular no claims on
the ground of an alleged violation of duties engendered by the conduct
of negotiations.
SECTION X
---------
MAILING ADDRESSES
-----------------
10.1 Notices which are directed to Seller are to be sent in writing to the
following address:
XXXXXXXX CAPITAL XX
Xxxxxxxxxxxxxx 00
X.X. Xxx 000
XXX-00000 Xxxxxxxx
Attention: Chief Executive Officer
Telephone: x000 00 000-0000
Facsimile: x000 00 000-0000
10.2 Notices which are directed to Purchaser are to be sent in writing to
the following address:
MOCON, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxxxx
Telephone: x0 000 000-0000
Facsimile: x0 000 000-0000
With a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx XXX
Xxxxx XXX Xxxxxxxx, Xxxxx 0000
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
10.3 Each Party to this Agreement may at any time change its address by
giving notice in writing to the other Party.
-35-
10.4 Notices shall only be valid if sent by registered mail or by fax to the
address and attention as set forth above in Section 10.1 and 10.2 or in
accordance with Section 10.3.
SECTION XI
----------
MISCELLANEOUS PROVISIONS
------------------------
11.1 The Parties are not entitled to assign to third parties any rights
arising from this Agreement or any claims against the other Party or
Parties, except with the prior written consent of the other Party. No
Party shall be entitled to exercise any rights of set-off
(AUFRECHNUNG), or withhold a counterclaim against a claim under this
Agreement (ZURUCKBEHALTUNGSRECHT) unless the counterclaim of that Party
is undisputed or the arbitral tribunal has adopted a final and binding
decision on such counterclaim.
11.2 This Agreement constitutes the entire agreement between the Parties and
supersedes all prior agreements and negotiations, both written and
oral, between the Parties with respect to the matters set forth in this
Agreement. Amendments and alterations to this Agreement, including this
Section 11.2, are only valid if they are made in writing, or, if
required by mandatory law, in notarized form. The same applies to a
waiver of the written form requirement.
11.3 Neither Party shall make any public announcement of the transactions
contemplated herein except at a time and in a manner agreed by Seller
and Purchaser in writing or as required under the applicable laws and
regulations.
11.4 All negotiations relating to this Agreement and the transactions
contemplated hereby have been carried out without the intervention of
any person acting on behalf of Seller, Target or Purchaser in such
manner as to give rise to any valid claim against Purchaser, Target or
Seller for any broker's or finder's fee or similar compensation.
11.5 If any one or several provisions of this Agreement should be or become
invalid, unenforceable, void or illegal, the remainder of the Agreement
shall remain unaffected. In place of the invalid, unenforceable, void
or illegal provision the Parties shall be deemed to have agreed upon
such valid, enforceable and legal provision which accomplishes, to the
nearest extent possible, the same economic purpose as the invalid,
illegal, void or unenforceable provision unless the
-36-
Parties agree otherwise. The same applies MUTATIS MUTANDIS if a gap is
found which requires a regulation.
11.6 Each Party shall bear its own costs, including, without limitation, the
costs of its own advisers.
The costs of the Expert Arbitrator and the INSTITUT DER
WIRTSCHAFTSPRUFER IN DEUTSCHLAND E.V., DUSSELDORF, acting pursuant to
this Agreement shall be borne by Seller and Purchaser as provided in
Section 3.5 last paragraph hereof.
Seller and Purchaser shall equally share the notarial fees arising in
connection with the notarization of this Agreement and its
implementation.
11.7 No failure or delay by any of the Parties in exercising any right or
claim hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right or claim. The rights and
remedies as provided in this Agreement shall be cumulative and not
exclusive of any rights or remedies provided by law.
11.8 This Agreement shall be subject to German law with the exception of its
conflict of laws rules.
11.9 Settlement of Disputes
Any and all disputes arising out of or in connection with this
Agreement and any further agreements between the Parties arising out of
or in connection with this Agreement shall be finally settled according
to the Arbitration Rules of the German Institution of Arbitration e.V.
("ARBITRATION RULES") (DEUTSCHE INSTITUTION FUR SCHIEDSGERICHTSBARKEIT
E.V. - DIS) without recourse to the ordinary courts of law except for
interim proceedings (EINSTWEILIGER RECHTSSCHUTZ). The place of
arbitration shall be Frankfurt am Main, Germany. The arbitral tribunal
shall consist of three arbitrators appointed in accordance with said
Arbitration Rules. Each arbitrator shall be eligible for the office of
a judge in Germany. The laws of Germany shall be applicable to the
dispute. The language of the arbitral proceedings shall be English, but
each Party may submit testimony or documentary evidence in Finnish or
German and shall, at the request of the other Party, furnish a
translation or interpretation of any such evidence into English. The
expenses of the arbitration proceedings shall be borne by the Parties
in accordance
-37-
with the applicable determinations of the arbitrators under the rules
of arbitration referred to therein.
SECTION XII
-----------
Now the parties give power of attorney to Xx. Xxxxxx Xxxxx to agree on
the text of Exhibit Nr. 3.4.1. and to add this Exhibit signed by the
parties to the deed.
EXHIBIT 3.4.1
Earn-Out Formula
----------------
The basic concept is to determine a direct gross margin ("DGM") each year for
all of the Products ("Products", as defined in the Agreement) in total, subtract
from this total amount an agreed upon fixed overhead amount (the "Fixed
Expenses") which would encompass indirect costs of sales and services, sales and
marketing expenses, research and development expenses, general and
administrative expenses, and other operating overhead expenses, to come up with
earnings before interest and taxes ("EBIT"). An assumed tax amount would then be
subtracted from EBIT based on the company-wide average tax rate for Xxxxxx for
that year ("Effective Tax Rate Amount"), to arrive at a final profit ("Net
Profits") amount to be used in determining the earn-out payment each year.
The attached "Earn-out Attachment A" document shows the mechanics of the basic
concept, along with the German accounting terms for certain of the amounts to be
used in the calculation, and what the Net Profit result would have been based on
the audited 2002 actual amounts for Xxxxxx as shown in the attached sample
calculation.
Because Fixed Expenses are variable to a certain degree when revenues increase
or decrease from projected levels, it is necessary to modify the "Fixed
Expenses" amount for significant revenues changes. Accordingly, we propose that
Fixed Expenses be 1,600,000 Euro for total Product revenue levels 6,000,000 Euro
or higher, 1,550,000 Euro for revenue levels higher than 5,500,000 Euro and less
than 6,000,000 Euro, 1,500,000 Euro for revenue levels higher than 5,000,000
Euro and less than or equal to 5,500,000 Euro, and 1,450,000 Euro for all
revenue levels below 5,000,000 Euro.
/s/ Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxx /s/ Xxxxxx Xxxxx
Sample Calculation
------------------
Sales of Products
(UMSATZERLOSE)
(item 1 on the attached P&L) 4,940,483 Euro
Total direct cost of Product
(MATERIALAUFWAND)
(item 3 on the attached P&L) -2,364,019 Euro
---------------
Direct Gross Margin (DGM)
(ROHERTRAG) 2,576,464 Euro
Total Fixed Expenses
(includes the indirect costs of goods
and services, sales and marketing costs,
research and development costs,
general and administrative costs, and
depreciation and amortization) -1,430,000 Euro
---------------
EBIT 1,146,464 Euro
Interest and other income not applicable
Effective Tax Rate Amount
(STEUERN VOM EINKOMMEN UND VOM ERTRAG)
assuming 39% total average tax rate for Target -447,120 Euro
------------
Net Profits 669,344 Euro
============
/s/ HM /s/ RLD
/s/ KCL /s/ AM
Anlage 2
GEWINN-UND VERLUSTRECHNUNG
FUR DIE ZEIT VOM 1. JANUAR 2002 BIS 31. DEZEMBER 2002
DER XXXX XXXXXX HANDELS-GMBH PROZESS-UND LABORSYSTEME, NEUWIED
Vorjahr
EUR TEUR
--------------------------- -----
1. Umsatzerlose 4.940.483,32 5.545
2. Sonstige betriebliche Ertrage 114.879,52 212
------------
Bruttoergebnis 5.055.362.84 5.757
3. Materialaufwand
a) Aufwendungen fur Roh-, Hilfs- und
Betriebsstoffe und fur bezogene Waren 2.355.356,94 2.998
b) Aufwendungen fur bezogene Leistungen 8.662,47 49
------------
2.364.019,41 3.047
------------
4. Rohergebnis 2.691.343,43 2.710
5. Personalaufwand
a) Lohne und Gehalter 790.199,25 752
b) Soziale Abgaben und Aufwendungen fur
Altersversorgung und fur Unterstutzung 145.454,45 134
davon fur Altersversorgung:
EUR 14.580,19 Vorjahr: TEUR 16
6. Abschreibungen auf Sachanlagen 87.215,98 82
7. Sonstige betriebliche Aufwendungen 751.820,14 620
------------
1.744.689,82 1.588
------------
8. Betriebsergebnis 916.653,61 1.122
9. Sonstige Zinsen und ahnliche Ertrage 24.040,00 26
10. Zinsen und ahnliche Aufwendungen 71,23 0
------------
23.968,77 26
11. Ergebnis der gewohnlichen ------------
Geschaftstatigkeit 940.622,38 1.148
12. Steuern vom Einkommen und vom Ertrag 362.370,04 437
13. Sonstige Steuern 636,34 1
------------
363.006,38 438
------------
14. Jahresuberschuss 577.616,00 710
============ =====
/s/ HM /s/ KCL
/s/ RLD /s/ AM
