EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
BY AND AMONG
VARLEN CORPORATION,
XXXXXX XXXXXX GmbH,
XXXXX INDUSTRIES DEUTSCHLAND GmbH i. Gr.
AND
XXXXX INDUSTRIES, INC.
DATED AS OF JUNE 21, 1999
TABLE OF CONTENTS
Page
ARTICLE I Purchase and Sale of Shares....................... 1
1.1. Purchase of Shares................................... 1
1.2. Preparation of Closing Date Schedule................. 1
1.3. Adjustment of Purchase Price......................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES................... 3
2.1. Representations and Warranties of Seller............. 3
2.2. Representations and Warranties of Parent and Buyer... 14
ARTICLE III CLOSING; CONDITIONS OF CLOSING AND TERMINATION.. 16
3.1. Closing.............................................. 16
3.2. Conditions to Obligations of Buyer................... 16
3.3. Conditions to Obligations of Seller.................. 17
ARTICLE IV INDEMNIFICATION.................................. 17
4.1. Indemnification of Parent and Buyer.................. 17
4.2. Indemnification of Seller............................ 18
4.3. Survival............................................. 18
4.4. Claims............................................... 19
4.5. Limitations.......................................... 19
ARTICLE V CERTAIN POST CLOSING MATTERS...................... 21
5.1. Certain Tax Matters.................................. 21
5.2. Tax Sharing Arrangements............................. 21
5.3. Access to Records After Closing...................... 21
5.4. Covenant Not to Compete.............................. 22
5.5. Cooperation on Claims................................ 23
ARTICLE VI MISCELLANEOUS.................................... 23
6.1. Further Actions...................................... 23
6.2. Brokerage............................................ 24
6.3. Expenses............................................. 24
6.4. Entire Agreement..................................... 24
6.5. Descriptive Headings................................. 24
6.6. Notices.............................................. 24
6.7. Governing Law........................................ 25
6.8. Assignability........................................ 25
6.9. Waivers and Amendments............................... 25
6.10. Third Party Rights................................... 25
6.11. Illegality........................................... 26
6.12. Release.............................................. 26
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of June 21, 1999 (this "Agreement"), by
and among VARLEN CORPORATION, a Delaware corporation ("Seller"), XXXXXX XXXXXX
GmbH, a German limited liability company (the "Company"), and XXXXX INDUSTRIES,
INC., a Delaware corporation ("Parent"), and XXXXX INDUSTRIES DEUTSCHLAND GmbH
i. Gr., a German corporation in formation ("Buyer"). Seller, the Company,
Parent and Buyer will be sometimes referred to herein as a "Party" and
collectively as the "Parties".
The Company is engaged in the design, manufacture and sale of petroleum
analytical instrumentation products and related services (the "Business").
Seller owns and has the legal right and authority to sell, transfer, assign and
deliver one hundred percent (100%) of the share capital (the "Shares") of the
Company, and Seller desires to sell, and Buyer desires to purchase, all the
Shares upon the terms and conditions set forth in this Agreement. This
Agreement only creates contractual obligations, and the transfer of the Shares
shall be made pursuant to a Share Assignment Agreement, which shall be notarized
in Germany and governed by German law. In addition, simultaneously with the
execution and delivery of this Agreement, (i) Seller is entering into an
agreement with Xxxxx Industries, Inc., a Delaware corporation ("Xxxxx") with
respect to the sale by Seller to Xxxxx of all the outstanding capital stock of
Varlen Instruments, Inc., a Delaware corporation (the "U.S. Sales Agreement"),
and (ii) Seller and Acieries de Ploermel, a French corporation, are entering
into an agreement with Parent and Instrumentation Scientifique de Laboratoire
with respect to the sale of a 99% partnership interest of Xxxxxx Xxxxxx
Instruments (the "French Sales Agreement").
NOW, THEREFORE, in consideration of the mutual benefits to be derived and
of the mutual promises, covenants, representations, warranties and agreements
herein contained, and intending to be legally bound hereby, Seller, the Company
and Buyer hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1. Purchase of Shares.
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Upon the terms and subject to the conditions set forth in this Agreement
and the representations and warranties herein made by each of the Parties to the
other, Seller agrees to sell to Buyer, free and clear of Liens (as defined in
Section 2.1(h)), and Buyer agrees to purchase from Seller, on the Closing Date
(as hereinafter defined), the Shares for a purchase price of $16,029,513,
subject to adjustment as hereinafter provided (the "Purchase Price"), payable in
cash at closing by wire transfer to an account designated by Seller to Buyer two
days prior to the Closing Date.
1.2. Preparation of Closing Date Schedule.
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(a) Within two (2) days following the Closing Date, Buyer shall be
responsible for the taking of a physical inventory of all inventories of the
Company as of the
close of business on the Effective Date; no goods or items in inventory shall be
moved while the physical inventory is being conducted. Promptly after the
Closing, Buyer shall prepare a schedule showing the working capital of the
Company as of the close of business on the Effective Date (the "Closing Date
Schedule"). Amounts on the Closing Date Schedule with respect to inventories
shall be derived from the physical inventory taken by Buyer. The Closing Date
Schedule shall be prepared with the accounting principles and procedures used in
the preparation of the Financial Statements described in Section 2.1(f) hereof,
except as noted in Section 2.1(f) of the Disclosure Schedule. Buyer agrees to
use all reasonable efforts to cause the Closing Date Schedule to be prepared and
delivered to Seller within 90 days after the Closing.
(b) Seller and its authorized representatives and designees, at
Seller's expense, shall have the right to observe the physical inventory.
Seller and its authorized representatives and designees, at Seller's expense,
shall have the right to review the Closing Date Schedule and perform other
review procedures, including a review of any working papers with respect to its
preparation.
(c) Seller shall be deemed to have accepted the Closing Date Schedule
unless within thirty (30) days after delivery thereof to Seller, Seller gives
written notice to Buyer of Seller's objection to any item therein. In the event
Seller gives such written notice of objection, and Buyer and Seller have been
unable to resolve such dispute by a date twenty (20) days after delivery of such
notice of objection, either party may require that such dispute be resolved by
arbitration under the rules, but not the jurisdiction, of the American
Arbitration Association by one arbitrator (the "Arbitrator") who shall be a
certified public accountant and a partner in the Dallas, Texas, office of Price
Waterhouse Coopers.
(d) The Arbitrator shall have access to all documents and facilities
necessary to perform its function as Arbitrator. The Arbitrator's determination
with respect to any dispute shall be final and binding upon the parties hereto.
Seller and Buyer shall each pay one-half of the fees and expenses of the
Arbitrator for such services.
1.3. Adjustment of Purchase Price.
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(a) Within thirty (30) days after delivery of the Closing Date
Schedule to Seller pursuant to Section 1.2 hereof, or, if disputed, within ten
(10) days after the final resolution of such dispute pursuant to Section 1.2(c),
the Purchase Price shall be adjusted as follows. For the purposes of this
adjustment, Pro Forma Working Capital shall mean the working capital of the
Company calculated in the same manner as the working capital on the Financial
Statements described in Section 2.1(f) hereof, except as noted in Section 2.1(f)
of the Disclosure Schedule, but shall include all indebtedness of the Company
(including indebtedness to Seller existing on the Effective Date) without regard
to whether such indebtedness is classified as working capital under United
States generally accepted accounting principles ("GAAP"). To the extent there
is a liability which Seller has assumed or agreed to indemnify Buyer for, the
accrual for such item shall not be counted in the determination of the Pro Forma
Working Capital on the Closing Date Schedule.
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(b) If Pro Forma Working Capital as set forth on the Closing Date
Schedule exceeds $4,145,000, the Purchase Price will be increased by, and Buyer
will pay to Seller, the amount of such excess.
(c) If Pro Forma Working Capital as set forth on the Closing Date
Schedule is less than $4,145,000, the Purchase Price will be decreased by, and
Seller will pay to Buyer, the amount of such deficiency.
(d) All payments to be made pursuant to this Section shall (i) be made
by wire transfer of immediately available funds to an account designated by the
recipient at least two business days prior to the transfer, except that payments
of less than $10,000 may be made by check subject to collection and (ii) be
accompanied by a payment of interest thereon at the "Prime Rate" from time to
time in effect on such amount from the Closing Date until paid. As used in this
Agreement, "Prime Rate" means the rate of interest equal to the "Prime Rate"
reported from time to time in the "Money" column of The Wall Street Journal, and
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shall change from time to time effective with any changes in the reporting of
such rate. The Closing Date Schedule shall value currency at the rate of 1.058
Euro to the US Dollar.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Simultaneously with the execution and delivery of this Agreement, Seller is
delivering to Buyer the Disclosure Schedule referred to herein.
2.1. Representations and Warranties of Seller.
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Except as and to the extent set forth in the specific section of the
Disclosure Schedule to which such representation and warranty relates, Seller
represents and warrants to Parent and Buyer, as of the Effective Date, as
follows:
(a) Organization and Standing.
-------------------------
(i) Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Seller is qualified to transact business as a foreign
corporation in each jurisdiction where it is required to qualify in order to
conduct its business as presently conducted.
(ii) The Company is a limited liability company ("Gesellschaft
mit beschrankter Haftung")duly organized, validly existing and in good standing
under the laws of Germany and has all requisite power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to carry on
its business as it is now being conducted.
(b) Consents, Authorizations and Binding Effect. Each of Seller and
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the Company has full corporate power and authority to execute, deliver and
perform its respective obligations under this Agreement without the necessity of
obtaining any consent, approval, authorization, advice or waiver or giving any
notice, except for such consents, approvals, authorizations, advice or waivers
(individually a "Consent" and collectively "Consents") which
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have been obtained and are unconditional and in full force and effect and such
notices (individually a "Notice" and collectively "Notices") which have been
duly given, all of which are listed on Section 2.1(b) of the Disclosure
Schedule, and except for Consents and Notices which are required under
immaterial contracts the absence of which would not have a material adverse
effect on the assets, business, financial condition or results of operations of
the Company or Seller. The board of directors of each of Seller and the Company
have duly authorized the execution, delivery and performance of this Agreement
by Seller and the Company. This Agreement has been duly executed and delivered
by each of Seller and the Company and constitutes their respective legal, valid
and binding obligations, enforceable against them in accordance with its terms,
except as may be limited by bankruptcy, reorganization, insolvency and similar
laws of general application relating to or affecting the enforcement of rights
of creditors. The execution, delivery and performance of this Agreement by
Seller and the Company, and the consummation of the transactions contemplated
thereby will not:
(i) conflict with, result in the breach of, or constitute a
default under, or the acceleration of any contract, agreement, commitment,
undertaking, restriction or instrument to which Seller or the Company is a party
or by which either of them may be bound or affected;
(ii) constitute a violation of any statute, judgment, order,
decree, regulation or rule of any court, governmental authority or arbitrator
applicable or relating to or binding upon Seller or the Company; or
(iii) violate any provision of the Articles of Incorporation or
Bylaws of Seller or the Articles of Association of the Company.
(c) Shares. Seller has good title to the Shares, and has the right,
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title, power and authority to sell to Buyer the Shares. The Shares are owned by
Seller, and will be sold by Seller to Buyer, free and clear of all Liens (as
defined in Section 2.1(h)), other than customary restrictions under applicable
securities laws. There are no options, proxies, voting trusts or other
agreements or understandings with respect to the issuance, transfer or voting of
the Shares. All issuances, sales and repurchases of equity interests by the
Company have been effected in compliance with all applicable laws, including,
without limitation, applicable federal and state securities laws.
(d) Capitalization of the Company.
-----------------------------
(i) The Company's share capital is DM 1,000,000, 100% of which
is owned by Seller. The Note has been duly authorized and validly issued.
(ii) There are no authorized, outstanding or existing:
(A) proxies or other agreements or understandings with
respect to the voting of any capital stock of the Company;
(B) depositary receipts of shares issued by the Company;
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(C) securities convertible into or exchangeable for any
capital stock of the Company (including notes, bonds or
debentures);
(D) options, warrants or other rights to purchase or
subscribe for any capital stock of the Company (other than this
Agreement), or securities convertible into or exchangeable for
any capital stock of the Company;
(E) agreements of any kind relating to the sale or issuance
of any capital stock of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights;
or
(F) agreements of any kind which may obligate the Company to
sell, issue or purchase any of its securities.
Subsequent to January 31, 1999, the Company has not declared or paid, and has no
obligation to declare or pay, any dividends that are payable after the Effective
Date, and as of the Effective Date, the Company has no obligation to make, any
distribution or payment to the stockholders of the Company or its affiliates,
except that the Company is indebted to Seller as described in Section 3.3(g).
(e) The Company. The Company is engaged only in the Business and has
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no subsidiaries, except as set forth in Section 2.1(e) of the Disclosure
Schedule. Copies of the Articles of Association of the Company have heretofore
been delivered to Buyer or Buyer's counsel and are correct and complete and
reflect all amendments or changes in effect.
(f) Financial Statements and Financial Condition. Attached as Section
--------------------------------------------
2.1(f) of the Disclosure Schedule are the following financial statements:
(i) the unaudited balance sheets of the Company as of December
31, 1997 and 1998 and statement of income of the Company for the fiscal years
ended December 31, 1997 and 1998 (collectively, the "Annual Financial
Statements"); and
(ii) the unaudited balance sheet of the Company as of April 30,
1999, and statement of income of the Company for the period then ended (the
"Interim Financial Statements" and together with the Annual Financial
Statements, sometimes collectively referred to herein as the "Financial
Statements").
The Financial Statements have been prepared in accordance with GAAP consistently
applied (except such deviations described in Section 2.1(f) of the Disclosure
Schedule) and the amounts set forth therein were used by Seller in connection
with the preparation of its financial statements. The Financial Statements are
consistent with the books and records of the Company. The Financial Statements
present fairly the financial condition and results of operations of the Company
at the dates and for the periods specified, except as otherwise noted therein
and subject, in the case of Interim Financial Statements, to recurring year-end
adjustments that are not expected to be material in amount.
As of the date hereof, the Company has no obligations or liabilities other than:
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(A) those set forth or reserved against in the Financial
Statements;
(B) those incurred since April 30, 1999 in the ordinary
course of business in arms-length transactions and consistent in
nature and scope with past practice, which liabilities will not
have, in the aggregate, a material adverse effect upon the
business, operations or financial condition of the Company as it
exists on the Effective Date;
(C) those under the executory portion of contracts and
agreements to which the Company is a party or by which it is
bound that are listed in the Disclosure Schedule or are not
required by the terms of this Agreement to be listed in the
Disclosure Schedule; and
(D) those incurred in the ordinary course of business and
consistent in nature and scope with past practice, which
liabilities are not required by GAAP to be shown on a balance
sheet (other than in notes thereto) and which liabilities,
individually and in the aggregate, are not material.
The Company has maintained its books of account and other records in accordance
with applicable laws, rules and regulations, and such books and records are and,
during the periods covered by the Financial Statements and from April 30, 1999,
through the Effective Date were, correct and complete in all material respects,
and provide or provided a fair and accurate basis for the preparation of the
Financial Statements and the Closing Date Schedule and reflect all material
transactions to which the Company has been a party.
(g) Absence of Certain Changes. Etc. Since December 31, 1998, there
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has been no material adverse change in the business, operations, financial
condition or assets, of the Company. Without limiting the generality of the
foregoing, since December 31, 1998, except as set forth on the Disclosure
Schedule, the Company has not:
(i) issued, sold or delivered any shares of capital stock or
notes, bonds or other debt instruments of the Company, or granted any rights
calling for the issuance, sale or delivery of any thereof (including without
limitation options, warrants, convertible securities, stock appreciation rights
or similar rights);
(ii) made any payments or distribution of assets (other than in
cash or as otherwise described in this Agreement) in the form of management fees
or otherwise to Seller or any Affiliate of Seller or of the Company. (As used
herein, the term "Affiliate" means a person or entity which controls, is
controlled by or is under common control with the person with respect to which
the determination is being made. "Control" means the power to direct or cause
the direction of the management and policies of a person or entity through
voting securities, by contract or otherwise.)
(iii) purchased or redeemed any share capital of the Company;
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(iv) subdivided, combined, reclassified or recapitalized any
of the share capital of the Company;
(v) amended the Articles of Association of the Company or
changed the Company's corporate name or permitted the use thereof by any other
person;
(vi) agreed to merge or consolidate the Company with any other
entity or to acquire any corporation, association, partnership, joint venture or
other entity;
(vii) changed the methods of accounting or accounting
principles or practices of the Company from those set forth in or reflected by
the Financial Statements or increased or experienced any adverse change in any
assumption underlying any method of calculating contingencies or other reserves
from that reflected in the Financial Statements;
(viii) cancelled or waived a claim of substantial value or sold,
transferred or otherwise disposed of (or agreed to sell, transfer or otherwise
dispose of) any assets of the Company, except for sales of inventory in the
ordinary course of business consistent with past practices or as otherwise set
forth on the Disclosure Schedule;
(ix) failed to maintain in full force and effect with respect
to the assets, employees and business of the Company all insurance coverage of
the types and in the amounts as were in effect on and as of December 31, 1998;
(x) made any legally binding commitment for additions to
property, plant or equipment having an individual cost in excess of $25,000 or
an aggregate cost of $75,000 for all such items taken together;
(xi) disposed of or permitted to lapse any right listed or
described on the Disclosure Schedule pursuant to Section 2.1(p);
(xii) made or agreed to make any increase in the compensation
payable to any of the officers, directors or employees of the Company, other
than in accordance with continuing obligations disclosed in the Disclosure
Schedule;
(xiii) entered into or amended any Company Plan (as that term is
defined in Section 2.1(k));
(xiv) suffered any significant casualty, damage, destruction or
loss, or interruption in use, of any significant asset or property (whether or
not covered by insurance), on account of fire, flood, riot, strike or other
hazard or act of God;
(xv) hired or terminated any employee who has an annual salary
in excess of $30,000;
(xvi) imposed or permitted any Liens upon any of its assets,
tangible or intangible;
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(xvii) without limitation by the enumeration of any of the
foregoing, entered into any agreement or transaction other than in the usual and
ordinary course of business in accordance with past practices, except for
actions taken in connection with the transactions contemplated by this
Agreement; or
(xviii) agreed, whether in writing or not, to do any of the
foregoing.
(h) Title and Condition of Assets. The Company has good and
-----------------------------
marketable title to all of its assets (other than leased assets), free and clear
of all Liens. The Company's tangible assets, taken as a whole, are in good
operating condition, ordinary wear and tear excepted and constitute all of the
assets necessary to conduct the Business of the Company as the same is presently
conducted. As used herein, "Liens" shall mean any mortgage, pledge, lien,
encumbrance, charge or other security interest, other than (a) mechanic's,
materialmen's and similar liens, (b) liens for Taxes (as defined in Section
2.1(l)) not yet due and payable or for Taxes that the taxpayer is contesting in
good faith through appropriate proceedings, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d) other liens
arising in the ordinary course of business and not incurred in connection with
the borrowing of money.
(i) Litigation; Compliance With Laws.
--------------------------------
(i) Except as set forth in the Disclosure Schedule, there are no
suits, actions, claims, arbitrations, administrative or legal or other
proceedings, whether in equity or at law, or governmental or administrative
investigations pending (i.e., where Seller or the Company has received service
of process or other formal action to commence such a proceeding) or, to the best
of Seller's knowledge, threatened (A) against or related to (x) Seller with
respect to the transactions contemplated by this Agreement, (y) the Company or
(z) any material asset or property owned, leased or used by the Company, or (B)
which question or challenge the validity of this Agreement or any action taken
or to be taken pursuant to this Agreement. Except as set forth on the
Disclosure Schedule and except for routine claims for benefits, no actions,
suits or claims are pending or, to the best of Seller's knowledge, threatened
with respect to any Employee Benefit Plan and no material product liability
claim is pending or, to the best of Seller's knowledge, threatened against the
Company with respect to the products of the Company. The Disclosure Schedule
lists all product liability claims with respect to the products or services of
the Company arising out of occurrences from January 1, 1995 through the date of
this Agreement.
(ii) The Company is in compliance with Federal or local
governmental or judicial laws, ordinances, permits, requirements, decrees,
rules, regulations, arbitration awards and orders applicable to the Company or
the business, operations or properties of the Company, except where
noncompliance would not have a material adverse effect on the Company. There is
no order, writ, injunction, judgment or decree of any court or Federal or local
department, official, commission, authority, board/bureau, agency, or other
instrumentality issued or pending against the Company. The Company has duly
filed all reports and returns required to be filed by it with governmental
authorities and obtained all governmental permits and licenses and other
governmental consents which are required in connection with the businesses and
operations of the Company; all of such permits, licenses and consents are in
full
8
force and effect, and no proceedings for the suspension or cancellation of
any of them are pending or threatened, except where any of the above would not
have a material adverse effect on the Company.
(j) Company Contracts. Except as set forth on the Disclosure
-----------------
Schedule, all Company Contracts (as defined herein) are valid, subsisting, in
full force and effect and binding upon the parties thereto in accordance with
their terms, subject to the qualifications that enforcement of the rights and
remedies created thereby is subject to (A) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and (B) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law), and the Company is not in default under any of them, nor does any
condition exist that with notice or lapse of time or both would constitute such
a default. To the knowledge of the Seller, no other party to any such Company
Contract is in default thereunder, nor does any condition exist that with notice
or lapse of time or both would constitute such a default. Subject to obtaining
any consents required under the terms of the Company Contracts, all of the
Company's rights under such Company Contracts will remain in full effect upon
consummation of the transactions contemplated by this Agreement. For purposes of
this Agreement, the term "Company Contracts" means and includes, and the
Disclosure Schedule lists, all contracts, mortgages, debt instruments, security
agreements, licenses, commitments, guaranties, leases, charters, franchises,
powers of attorney and agency and other agreements to which the Company is a
party or by which it is bound (excluding purchase and sale orders, inventory
acquisition agreements and product distribution agreements, in each case made in
the ordinary course of business in arms-length transactions and consistent in
nature and scope with prior practices of the Company) as of the date of this
Agreement and that:
(i) involve or would involve the payment by the Company of in
excess of $25,000 during any fiscal year, unless cancelable by the Company with
notice of less than six (6) months and premium or penalty of less than $10,000;
(ii) relate to the payment of royalties with respect to any
products sold by the Company;
(iii) guarantee, indemnify or otherwise cause the Company to be
liable for the obligations or liabilities of another;
(iv) involve the borrowing or lending of money, or the granting
of any Lien;
(v) involve an agreement with any bank, finance company or
similar organization for the sale of any products of the Company on credit;
(vi) involve the sale by or to the Company of products on
consignment;
(vii) are or contain a power of attorney;
(viii) contain any renegotiation or redetermination provision;
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(ix) require or are otherwise contingent upon the payment of
commissions or compensation to any person not a party to such Company Contract;
(x) concern the formation of a partnership or joint venture;
(xi) impose material noncompetition or confidentiality
obligations on the Company with respect to a third party;
(xii) involve any significant license agreement or arrangement;
or
(xiii) require the Company to supply any other party with such
party's requirements for products or services.
The Disclosure Schedule specifically describes the arrangements (formal and
informal, written or oral) between the Company and any Related Party (as defined
below) (including Seller) and the services or functions (administrative or
otherwise) provided to the Company by any Related Party. No Related Party owns
any assets which are used in the Company's business, and no Related Party which
is under the control of the Seller is engaged in any business which competes
with the Business. As used herein, the term "Related Party" means (A) Seller or
any Affiliate (as defined below) of Seller or the Company, or (B) any
corporation, partnership, association, limited liability company or other entity
(other than the Company), in which any of the foregoing persons has any relation
by blood or marriage, has any material interest, direct or indirect. As used
herein, "Affiliate" shall mean any person, firm, corporation, partnership,
association or entity that directly or indirectly or through one or more
intermediaries controls, is controlled by or is under common control with
another person, firm, corporation, partnership, association or entity.
(k) Pension and Other Employee Plans and Agreements.
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(i) As used in this Agreement, "Company Plan" shall mean each
employment, severance, salary continuation or other contract, stock purchase
plan, stock option plan, stock appreciation plan, vacation, sick leave or other
fringe benefit plan, incentive plan, insurance plan arrangement, bonus plan and
any deferred compensation arrangement, plan, policy or funding arrangement
sponsored, maintained or to which contributions are made by the Company or with
respect to which the Company or any of its subsidiaries has any potential
liability.
(ii) Each Company Plan has been administered in all material
respects in accordance with its terms and is in compliance in all material
respects with the applicable provisions of applicable German law. All reports,
returns and similar documents required to be filed with any governmental agency
or distributed to any participant of each Company Plan have been duly and timely
filed or distributed in all material respects.
(iii) No actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or, to the best of Seller's
knowledge, threatened with respect to any Company Plan and no event or condition
exists or may be reasonably expected to occur which would result in the Company
having any liability in respect of any Company Plan not reflected on the
Financial Statements.
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(iv) The Company has made all contributions or payments to or
under each Company Plan required by law or by the terms of such Company Plan.
(l) Tax Matters.
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(i) As used in this Agreement, the following terms shall have
the following meanings: (A) the term "Taxes" means all Federal, local, foreign
and other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, including without limitation German
taxes as defined in Section 3, paragraph 1 of the German General Tax Code,
together with any interest and any penalties, additions to tax or additional
amounts with respect thereto, including without limitation supplementary taxes
as defined in Section 3, paragraph 3 of the German General Tax Code; (B) the
term "Returns" means all returns, declarations, reports, statements and other
documents required to be filed in respect of Taxes; and (C) the term "Sales and
Use Tax" means all sales taxes, use taxes, retailer's occupation taxes and other
taxes commonly understood to be sales or use taxes. Any reference in this
Section to the Company includes a reference to a person or entity acting on
behalf of or with respect to the Company (including, without limitation,
Seller). The Company has duly and timely filed all Returns required to have been
filed by it prior to the Effective Date. All Taxes and Sales and Use Taxes
required to have been paid prior to the Effective Date, or accruing with respect
to the period ending on the Effective Date, have been fully paid on or prior to
the due date thereof, or will be fully accrued on the Closing Date Schedule.
Except for this Agreement, there are no tax sharing agreements to which the
Company is a party or by which the Company is affected.
(ii) The Company is not a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement.
(m) Environmental.
-------------
(i) The Company has complied with all Environmental Laws (as
defined herein), the failure to comply with which could result in Damages (as
defined herein) in excess of $25,000, and no action, suit, proceeding, hearing,
charge, complaint, claim, demand, or notice, and no investigation has been filed
or commenced against the Company alleging such failure.
(ii) Except (i) to the extent accrued in the Closing Balance
Sheet and (ii) liabilities for storage, handling, transportation, use and
disposal of Hazardous Substances (as defined herein) which are incurred by the
Company in the ordinary course of business, the Company has no liability for
Hazardous Substances (and has not handled, used, stored, recycled or disposed of
any Hazardous Substance (as defined herein), arranged for the disposal of any
Hazardous Substance, exposed any employee or other individual to any Hazardous
Substance or condition, or owned or operated any property or facility, in any
manner that could reasonably be expected to form the basis for any present or
future action, suit, proceeding, hearing, investigations, charge, complaint,
claim or demand giving rise to any liability for Hazardous Substances which
could result in Damages in excess of $25,000 for any reason under any
Environmental Laws.
11
(iii) Except (i) to the extent accrued in the Closing Balance Sheet
and (ii) liabilities for storage, handling, transportation, use and disposal of
Hazardous Substances which are incurred by the Company in the ordinary course of
business, all properties and equipment used in the Business are free of any
amounts of Hazardous Substances, the use and disposal of which could result in
Damages (as defined herein) in excess of $25,000.
(iv) There are no in service or out of service underground storage
tanks located in or on real property owned by the Company or, to the extent the
Company is responsible for such tanks or any environmental damage resulting
therefrom, real property leased by the Company.
(v) The Company has not received notice and has no knowledge of any
reasonably likely claim under any Environmental Laws regarding the Business, or
any real property owned or leased by the Company.
(vi) As used herein, the term Environmental Laws shall mean all
federal and local laws, statutes, ordinances, rules, regulations, decrees,
orders and settlements regarding the protection of human health, safety and the
environment and pollution, in effect as of the date of this Agreement and
applicable to the Facilities and the operations conducted thereon, as amended,
and any regulations promulgated thereunder, as they existed on the date hereof.
"Hazardous Substances" shall mean materials, substances or wastes defined
by or regulated by applicable Environmental Laws.
(n) Receivables. To the knowledge of Seller, all of the accounts
-----------
receivable of the Company arose in the ordinary course of business, and are good
and collectable in the ordinary course of business, net of reserves therefor in
the Financial Statements.
(o) Inventories. The inventory of the Company consists of raw
-----------
materials and supplies, manufactured and purchased parts, goods in process and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured. The inventories of the Company have been
valued in the Financial Statements at the lower of average cost or market and in
a consistent manner with respect to all periods covered thereby. Section 2.1(o)
of the Disclosure Schedule sets forth the Company's practices and procedures
with respect to the valuation of inventories which are consistent with those
used in the preparation of the Financial Statements (and will be used in the
preparation of the Closing Balance Sheet). The Company is not under any
liability or obligation with respect to the return of inventory or merchandise
in the possession of wholesalers, distributors, retailers or other customers.
Except as described on Section 2.1(o) of the Disclosure Schedule, no inventory
of the Company is on consignment.
(p) Intangible Assets. The Disclosure Schedule lists all material
-----------------
patents, trademarks and service marks, patent, trademark and service xxxx
registrations and applications, trade names, copyrights, copyright registrations
and applications, and licenses with respect thereto owned by the Company or used
by the Company in its business operations (collectively, "Intellectual
Property"). Intellectual Property which is owned by a third party and used by
the Company has been duly licensed to the Company and the Company has sufficient
rights to use
12
such Intellectual Property to conduct its business as presently conducted. There
is no material item of Intellectual Property not owned by or licensed to the
Company which is necessary for the conduct of the Company's business as
presently conducted. There are no claims, demands or proceedings instituted,
pending or, to the best of Seller's knowledge, threatened pertaining to or
challenging the right of the Company to use any of the Intellectual Property or
alleging that any of the Intellectual Property infringes or otherwise violates
the patent, trade name, trademark, copyright or other rights of any other
person. Except as set forth in the Disclosure Schedule, the Company has not
granted any licenses or other rights under, or authorized or permitted anyone
else to use, any of the Intellectual Property.
(q) Customers. To the best of Seller's knowledge, since May 31,
---------
1999, there has not been any termination, cancellation or material limitation,
modification or change in the business relationship of the Company with any
significant customer of the Company.
(r) Employees. With respect to employees of the Company: (i) there
---------
is no pending, or to the best of Seller's knowledge threatened, unfair labor
practice charge or employee grievance charge; (ii) there is no request for union
representation, labor strike, dispute, slowdown or stoppage pending, or to the
best of Seller's knowledge threatened, against or directly affecting the Company
and (iii) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claims therefor exist.
Within the last 90 days, no key employee of the Company has advised Seller that
he intends to terminate his employment with the Company and Seller has not
encouraged any employee of the Company to terminate his employment with the
Company.
(s) Real Estate.
-----------
(i) Section 2.1(s) of the Disclosure Schedule contains a true
and correct list of all real property owned by the Company (the "Real
Property"). The Company has good and marketable title to the Real Property, free
and clear of all Liens.
(ii) The Disclosure Schedule lists and describes briefly all real
property leased to the Company. The Company has delivered to the Buyer correct
and complete copies of the leases listed in the Disclosure Schedule. With
respect to each lease listed in the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in accordance with its
terms.
(B) the Company is not, and to the knowledge of the Company,
no party to the lease or sublease is, in breach or default, and
no event has occurred and is continuing which, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(C) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease;
13
(D) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold; and
(E) all facilities leased thereunder have received all
approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and
have been operated and maintained in all material respects in
accordance with applicable laws, rules, and regulations.
(t) No Other Representations and Warranties by Seller; Specific
-----------------------------------------------------------
Disclosure.
----------
(i) Seller shall not be deemed to have made to Buyer any
representation or warranty other than as expressly made by Seller in this
Section 2.1.
(ii) Without limiting the generality of the foregoing, but
subject to the express representations and warranties made by Seller in Section
2.1, Seller is not making any representation and warranty with respect to:
(A) any projections, estimates or budgets of future
revenues, expenses or expenditures, results of operations (or any
component thereof) or financial condition (or any component
thereof) of the Company, or
(B) any other information or documents made available to
Buyer or any of its representatives or investors with respect to
the Company.
(iii) For purposes of this Agreement, references to the
"knowledge of Seller", "Seller's knowledge" or "Seller's awareness" or words of
similar import shall mean and include the actual knowledge of Seller after due
inquiry of the individuals listed on Section 2.1(t) of the Disclosure Schedule
with respect to the indicated matters.
(iv) A disclosure in one section of the Disclosure Schedule
shall not be effective with respect to another representation and warranty
unless such section is specifically cross-referenced.
2.2. Representations and Warranties of Parent and Buyer.
---------------------------------------------------
Parent and Buyer hereby represent and warrant, jointly and severally, to
Seller, as of the Effective Date, as follows:
(a) Organization and Good Standing of Buyer. Buyer is a corporation
---------------------------------------
in formation, and all efforts are being undertaken to have Buyer registered.
(b) Organization and Good Standing of Parent. Parent is a corporation
----------------------------------------
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has all requisite power and authority to execute and
deliver this Agreement and to perform its
14
obligations hereunder. Parent is qualified to do business as a foreign
corporation in each jurisdiction where it is required to qualify in order to
conduct its business as presently conducted.
(c) Consents, Authorizations and Binding Effect. Each of Parent and
-------------------------------------------
Buyer has full corporate power and authority to execute, deliver and perform its
obligations under this Agreement without the necessity of obtaining any Consent
or giving any Notice, except for such Consents which have been obtained and are
unconditional and in full force and effect and such Notices which have been duly
given. The board of directors of Parent has duly authorized the execution,
delivery and performance of this Agreement by Parent. This Agreement has been
duly executed and delivered by each of Parent and Buyer and constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms, except as may be limited by bankruptcy, reorganization, insolvency
and similar laws of general application relating to or affecting the enforcement
of rights of creditors. The execution, delivery and performance of this
Agreement by each of Parent and Buyer will not:
(i) conflict with, result in the breach of or constitute a
default under or the acceleration of any contract, agreement commitment,
undertaking, restriction or instrument to which Parent or Buyer is a party or by
which Parent or Buyer may be bound or affected, or
(ii) constitute a violation of any statute, judgment, order,
decree, regulation or rule of any court, governmental authority or arbitrator
applicable or relating to or binding upon Parent or Buyer, or
(iii) violate any provision of the Charter or Bylaws of Parent
or Buyer.
(d) Acquisition of Shares for Investment. Buyer acknowledges that in
------------------------------------
acquiring the Shares under this Agreement, Buyer has relied solely on its own
due diligence investigation, the representations and warranties set forth in
Section 2.1, including the information in the Disclosure Schedule related
thereto and the documents and information referred to therein, and the other
covenants and statements of Seller set forth in this Agreement, and not upon any
other representations, warranties, covenants or statements of any kind. Buyer
is an "accredited investor", as defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the "Securities Act"), and has sufficient
knowledge, experience and sophistication to enable it properly and fully to
evaluate and understand the merits and risks associated with its acquisition of
the Shares. Buyer is acquiring the Shares for its own account for investment and
with no present intention of distributing or reselling such Shares or any part
thereof in any transaction which would constitute a "distribution" within the
meaning of the Securities Act. Buyer understands that the Shares have not been
registered under the Securities Act or any state securities laws and may not be
sold or transferred except in compliance therewith or pursuant to an exemption
thereunder and are being transferred to Buyer, in part, in reliance on the
foregoing representation and warranty.
15
ARTICLE III
CLOSING; CONDITIONS OF CLOSING AND TERMINATION
3.1. Closing.
--------
The Closing and the sale, purchase and transfer of the Shares will take
place at the offices of Powell, Goldstein, Xxxxxx & Xxxxxx LLP, 16/th/ Floor,
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000, on June 21, 1999 (the
"Closing Date"), effective as of the close of business on June 18, 1999 (the
"Effective Date").
3.2. Conditions to Obligations of Buyer.
-----------------------------------
The obligations of Buyer to consummate the sale and purchase under this
Agreement are subject to the satisfaction of the following conditions, each of
which may be waived by Buyer.
(a) Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of Seller set forth in this Agreement shall be
true and correct in all material respects. Seller shall have performed in all
material respects the covenants and obligations necessary to be performed by it
under this Agreement prior to the Closing Date.
(b) Authorization of Agreement. All action necessary to authorize
--------------------------
the execution, delivery and performance of this Agreement by Seller shall have
been duly and validly taken, and Seller shall have full right, power and
authority to consummate the transactions contemplated hereby on the terms
provided herein.
(c) Security Interests, Encumbrances, Liens, etc. Buyer shall have
---------------------------------------------
received written advice to the effect that a search of the public records has
disclosed that no Liens, other than those reflected in Section 2.1(f) of the
Disclosure Schedule, have been filed or recorded with respect to the Company,
and all Liens requested by Buyer to have been released or satisfied shall have
been released or satisfied.
(d) Suits or Proceedings. No suit, proceeding or investigation shall
--------------------
have been commenced or threatened by any governmental authority to restrain,
enjoin or hinder, or to seek material damages on account of, the consummation of
the transactions herein contemplated.
(e) Corporate Matters. Buyer shall have received (i) such
-----------------
resignations of the directors and officers of the Company as it may have
requested, such resignations to be effective as of immediately following the
Closing and (ii) the minute books and corporate seal of the Company.
(f) Other Agreements. The sellers under the U.S. Sales Agreement and
----------------
under the French Sales Agreement are closing the transactions contemplated under
such agreements simultaneously with the Closing.
(g) Shares. Buyer shall have received an undertaking from Seller to
------
execute, promptly after the date hereof, such additional documents as shall be
necessary to effect the transfer to Buyer of the Shares in accordance with the
terms of this Agreement.
16
(h) Opinion. Buyer shall have received a legal opinion from Seller's
-------
General Counsel containing customary opinions with respect to the Company and
the transactions contemplated hereby.
3.3. Conditions to Obligations of Seller.
------------------------------------
The obligations of Seller to consummate the sale and purchase under this
Agreement are subject to the satisfaction of the following conditions, each of
which may be waived by Seller:
(a) Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects. Buyer shall have performed in all
material respects the covenants and obligations necessary to be performed by it
under this Agreement prior to the Closing Date.
(b) Authorization of Agreement. All action necessary to authorize
--------------------------
the execution, delivery and performance of this Agreement by Buyer shall have
been duly and validly taken and Buyer shall have full right, power and authority
to consummate the transactions contemplated hereby on the terms provided herein.
(c) Suits or Proceedings. No suit, proceeding or investigation shall
--------------------
have been commenced or threatened by any governmental authority to restrain,
enjoin or hinder, or to seek material damages on account of, the consummation of
the transactions herein contemplated.
(d) Other Agreements. The buyers under the U.S. Sales Agreement and
----------------
under the French Sales Agreement are closing the transactions contemplated under
such agreements simultaneously with the Closing.
(e) Purchase Price. Seller shall have received the Purchase Price.
--------------
(f) Opinion. Seller shall have received a legal opinion from Buyer's
-------
counsel with respect to Parent and the transactions contemplated by this
Agreement.
(g) Intercompany Repayment. The intercompany Note from the Company
----------------------
to Seller in the aggregate amount (principal and interest) of DM 10,762,000
shall be paid in full by payment of US $5,720,487 within one day following the
Closing Date in full satisfaction of intercompany indebtedness of the Company.
ARTICLE IV
INDEMNIFICATION
4.1. Indemnification of Parent and Buyer.
------------------------------------
Subject to the terms and conditions of this Article IV, Seller shall
defend, at its own expense, and shall indemnify Parent, Buyer and Company
against, and hold Parent, Buyer and Company harmless from, any and all loss,
damage or liability, and all expenses, including without limitation reasonable
legal fees and costs of investigation, remediation or other response action and
other costs (collectively "Damages"), asserted against or incurred by Parent,
Buyer and Company arising out of:
17
(a) a breach of the representations and warranties made by Seller in
this Agreement or in any certificate or other instrument furnished or to be
furnished to Parent or Buyer hereunder;
(b) the non-fulfillment of any agreement or covenant made by Seller
in or pursuant to this Agreement or in any certificate or other instrument
furnished or to be furnished to Parent or Buyer hereunder;
(c) any liability or obligation of the Company arising out of or in
connection with the conduct of the Business prior to the Effective Date, except
to the extent such liability or obligation (i) is described in Paragraphs (A),
(B), (C) or (D) of Section 2.1(f) (without regard to any materiality qualifier
contained therein) or (ii) results in an indemnifiable claim for a breach of
representation and warranty for which Buyer otherwise recovers under Section
4.1(a) above.
4.2. Indemnification of Seller.
--------------------------
Subject to the terms and conditions of this Article IV, Parent and Buyer
shall defend, at their own expense, and shall indemnify Seller against, and hold
Seller harmless from, any and all Damages asserted against or incurred by Seller
arising out of:
(a) any breach of the representations and warranties made by Parent
or Buyer in this Agreement or in any certificate or other instrument furnished
or to be furnished to Seller hereunder,
(b) the non-fulfillment of any agreement or covenant made by Parent
or Buyer in or pursuant to this Agreement, or
(c) the operations of the Company following the Effective Date.
4.3. Survival.
---------
All representations and warranties contained herein or made pursuant
hereto, whether by Seller or Parent, shall survive the closing hereunder until
the second anniversary of the Closing Date, except that:
(a) the representations and warranties of Seller contained in or made
pursuant to Sections 2.1(a) (other than the last sentence thereof), 2.1(b),
2.1(c) and 2.1(d), and of Buyer contained in Sections 2.2(a), 2.2(b), 2.2(c) and
2.2(d) shall survive the Closing hereunder without any limitation as to time;
and
(b) the representations and warranties of Seller contained in or made
pursuant to Section 2.1(l) hereof or otherwise with respect to Tax matters shall
survive the Closing until six months after the date on which the right to file
any claim in respect of such matters by the appropriate governmental or
administrative authority or any other Person has expired.
The expiration of any representation and warranty or any indemnification
obligation hereunder shall not affect any claim made by the giving of written
notice by a Party to the other in the
18
manner provided by this Agreement, prior to the date of such expiration. All
covenants, indemnities and agreements shall survive the Closing forever.
4.4. Claims.
-------
(a) Promptly after receipt by an indemnified party of written notice
of the commencement of any investigation, claim, proceeding or other action in
respect of which indemnity may be sought from the indemnitor (an "Action"), such
indemnified party shall notify the indemnitor in writing of the commencement of
such Action; but the omission to so notify the indemnitor shall not relieve it
from any liability that it may otherwise have to such indemnified party, except
to the extent that the indemnitor is materially prejudiced or forfeits
substantive rights or defenses as a result of such failure. In connection with
any Action in which the indemnitor and any indemnified party are parties, the
indemnitor shall be entitled to participate therein, and may assume the defense
thereof. So long as the indemnifying party is diligently defending in good
faith any such Action, the indemnifying party may control the defense thereof;
in such event, the indemnified party may participate in the defense of the
Action at its own expense. Neither the indemnifying party nor the indemnified
party will settle or compromise the Action without the consent of the other,
which consent will not be unreasonably withheld.
(b) In the event a Party should have a claim for indemnification that
does not involve a claim or demand being asserted by a third party, the Party
seeking indemnification shall promptly send notice of such claim to the Party
from whom indemnification is sought. If the latter does not dispute such claim,
the latter shall pay such claim in full within 10 business days. If the latter
disputes such claim, such dispute shall be resolved by agreement of the Parties
or in any other manner available under law.
(c) The indemnified party shall make available to the indemnifying
party or its representatives all records and other materials reasonably required
by them for use in connection with any such claim and shall cooperate with the
indemnifying party in the defense of all third party claims.
4.5. Limitations.
------------
Any claims for breach of any representation or warranty made hereunder
shall be subject to the following limitations and adjustments:
(a) indemnification under Section 4.1(a) and 4.1(c) shall only be
required to be provided by Seller when the aggregate amount of all claims for
which indemnification is sought from Seller under Sections 4.1(a) and 4.1(c) of
this Agreement, the U.S. Sales Agreement and the French Sales Agreement exceeds
US $250,000, in which case Seller shall be liable for all such amounts in excess
thereof;
(b) no individual claim for indemnity under Section 4.1(c) may be
brought unless the aggregate Damages in respect of such claim exceeds US
$20,000, but in such event Damages shall be recoverable without regard to such
US $20,000 threshold, subject to any other limitations imposed under this
Section 4.5;
19
(c) no claim for indemnity under Sections 4.1 or 4.2 shall be
effective unless noticed, pursuant to Section 4.4, within the survival period
specified under Section 4.3;
(d) in no event shall Seller's indemnification obligation with
respect to a breach of representations and warranties under Section 4.1(a) (but
excluding Sections 2.1(a), except the last sentence thereof, 2.1(b), 2.1(c) and
2.1(d)) of this Agreement, the U.S. Sales Agreement and the French Sales
Agreement exceed the amount of US $4,200,000. The indemnification obligations of
either Seller or Buyer respectively, for representations and warranties set
forth in Sections 2.1(a), 2.1(b), 2.1(c) and 2.1(d) and Sections 2.2(a), 2.2(b),
2.2(c) and 2.2(d) of this Agreement, the U.S. Sales Agreement and the French
Sales Agreement shall not exceed the aggregate purchase price under this
Agreement, the U.S. Sales Agreement and the French Sales Agreement;
(e) in no event shall either Seller's or Buyer's and Parent's
respective indemnification obligations under Section 4.1(c) or 4.2(c) exceed the
amount of US $5,000,000.
(f) under no circumstances shall any Party be liable to another Party
for punitive, consequential or non-compensatory damages;
(g) any indemnifiable claim shall be reduced by the amounts actually
recovered by the indemnified party from insurance carriers and any amount
recovered by the indemnified party subsequent to the payment by the indemnitor
with respect to the same claim shall be remitted to the indemnitor, provided
that such remittance shall not exceed the amount of such indemnification payment
by the indemnitor; and
(h) Notwithstanding the foregoing, the provisions of this Section 4.5
shall not apply to any indemnification obligations arising out of the
indemnities contained in Sections 4.1(b) or 4.2(b) of this Agreement, but all
such indemnification obligations of either party shall be limited to and shall
not exceed the aggregate purchase price under this Agreement, the U.S. Sales
Agreement and the French Sales Agreement.
(i) the Parties agree that the sole liability and the sole remedy of
Seller, Buyer and the Company for any claim with respect to the transactions
contemplated under this Agreement (including without limitation under
Environmental Laws) shall be limited to indemnification under Article IV of this
Agreement, and in connection therewith each Party waives any and all statutory
and common law rights and remedies (including without limitation rights of
indemnification and contribution) which any such Party may have against another
Party (except equitable remedies such as injunction and specific performance).
(j) For purposes of this Section 4.5, any amount paid as Damages
under this Agreement or the French Sales Agreement in foreign currency shall be
valued at the US exchange rate on the Effective Date.
20
ARTICLE V
CERTAIN POST CLOSING MATTERS
5.1. Certain Tax Matters.
-------------------
Following the Closing, Buyer and the Company agree that the Company will
not:
(a) pay any dividends (including without limitation deemed dividends
under Sections 304 and 956 of the US Internal Revenue Code) or make any
distributions to its shareholder during calendar year 1999;
(b) enter into any transaction outside the ordinary course of
business that could generate "Subpart F income" for the Company or Seller within
the meaning of the US Internal Revenue Code; or
(c) elect to treat the transactions contemplated under this Agreement
as an asset acquisition under Section 338 of the US Internal Revenue Code.
5.2. Tax Sharing Arrangements.
-------------------------
All tax sharing arrangements and any other contracts with respect to Taxes
between Seller (and its affiliates) and the Company, if any, are terminated as
of the Effective Date.
5.3. Access to Records After Closing.
--------------------------------
(a) Following the Closing, Buyer shall give to Seller, without
charge, reasonable access to (and the right to make copies at the expense of
Seller of) the books, files, records and tax returns of the Company to the
extent that such relate to the business and operations of the Company on or
prior to the Effective Date and are in the Company's possession on the Closing
Date or subsequently come into Buyer's possession, but any access pursuant to
this Section 5.3 shall be conducted by Seller in good faith, with a reasonable
purpose and in such manner as not to interfere unreasonably with the operations
of Buyer following the Closing. Buyer shall also use reasonable diligence to
provide all information requested by Seller with respect to the period ending
December 31, 1999, for tax purposes. For a period of five years after the
Closing, Buyer shall maintain such books, files, records and tax returns and
thereafter, prior to destroying or disposing of any of them, Buyer shall give,
or shall cause the Company to give, 30 days' advance notice to Seller of their
intended destruction or disposition, and during such 30-day period Seller shall
have the right to take possession of the same or to make copies of the same, all
at Seller's expense.
(b) Following the Closing, Seller shall give to Buyer, without
charge, reasonable access to (and the right to make copies at the expense of
Buyer of) the books, files, records and tax returns of Seller to the extent that
such relate to the business and operations of the Company on or prior to the
Effective Date and are in Seller's possession on the Closing Date or
subsequently come into Seller's possession, but any access pursuant to this
Section 5.3 shall be conducted by Buyer in good faith, with a reasonable purpose
and in such manner as not to interfere unreasonably with the operations of
Seller following the Closing. For a period of five years after the Closing,
Seller shall maintain such books, files, records and tax returns and
21
thereafter, prior to destroying or disposing of any of them, Seller shall give,
30 days' advance notice to Buyer of their intended destruction or disposition,
and during such 30-day period Buyer shall have the right to take possession of
the same or to make copies of the same, all at Buyer's expense.
(c) For a period of one hundred twenty (120) days following the
Closing, Buyer shall cause to be prepared and delivered to Seller (to the extent
not already prepared and delivered) in the normal time frame followed by Seller
and the Company consistent with past practice and in all events within fifteen
(15) days after it shall have been requested by Seller, the financial reporting
package for the Company (but only in respect of periods ending on or prior to
the Closing Date) for (i) the quarterly Closing for Seller's fiscal quarter
ending July 31, 1999, and (ii) Seller's fiscal year ending January 31, 2000.
After such one hundred twenty (120) day period, Buyer shall cooperate and use
reasonable diligence to provide Seller with all information requested by Seller
to assist Seller in preparing a financial reporting package for the Company (but
only in respect of periods ending on or prior to the Closing Date) for (i) the
quarterly closing for Seller's fiscal quarter ending July 31, 1999, and (ii)
Seller's fiscal year ending January 31, 2000.
5.4. Covenant Not to Compete.
------------------------
As an inducement for Buyer to enter into this Agreement, Seller agrees
that:
(a) Non-Compete. For a period of three (3) years after the Closing,
-----------
Seller shall not do, and shall cause any Affiliate of Seller controlled by it
not to do, any one or more of the following, directly or indirectly:
(i) engage, manage, operate, finance, control or participate,
as an owner, partner, shareholder, member, consultant, or (without limitation by
the specific enumeration of the foregoing) otherwise, in any business whose
products or activities compete, in whole or in part, with the products or
activities which the Company manufactures or distributes (which products or
activities include those currently sold and under active development on the
Effective Date (any such business is referred to herein as a "Competitive
Business"). For purposes of this Section, "active development" shall mean
efforts for which resources have been committed by the Company having a value in
excess of $50,000.
(ii) solicit or attempt to solicit, with respect to a
Competitive Business, any customer of Buyer which has been a customer of the
Company within the past three (3) years; or
(iii) except as set forth in the Disclosure Schedule, induce or
attempt to induce any person or entity that is an employee or agent of the
Company on the Effective Date to terminate his, her or its relationship with, or
employment by, the Company.
(b) Limitation. Notwithstanding the foregoing, the provisions of
----------
Section 5.4(a) hereof shall not be deemed to prohibit or restrict in any manner
(i) the acquisition by Seller or any Affiliate of Seller of any company
partially engaged in a Competitive Business, provided that if such Competitive
Business accounts for more than the lesser of $10,000,000 or five percent (5%)
of the net revenues of the acquired company, Seller or such Affiliate shall use
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commercially reasonable efforts promptly after the consummation of the
acquisition to divest itself of the Competitive Business within eighteen (18)
months after such consummation, or (ii) acquisition or ownership by Seller or
any Affiliate of Seller of up to five percent (5%) of the debt or equity
interest in any company partially engaged in a Competitive Business whose
securities are traded on a national securities exchange or NASDAQ, so long as
such Competitive Business does not account for more than the lesser of
$10,000,000 or five percent (5%) of the net revenues of such company and neither
Seller nor an Affiliate of Seller is an Affiliate of such company.
(c) Modifications. Seller recognizes that the time and scope
-------------
limitations set forth in this Section 5.4 are reasonable and are required for
the protection of Buyer and in the event that any such territorial, time or
scope limitation is deemed to be unreasonable by a court of competent
jurisdiction, Buyer and Seller agree to the reduction of either of such time or
scope limitations to such a period or scope as such court shall deem reasonable
under the circumstances.
(d) Injunctive Relief. The Parties specifically recognize that any
-----------------
breach of Section 5.4(a) may cause irreparable injury and that actual damages
may be difficult to ascertain, and in any event, may be inadequate. Accordingly
(and without limiting the availability of legal or equitable, including
injunctive, remedies under any other provisions of this Agreement), each Party
agrees that in the event of any such breach, the other Party shall be entitled
to injunctive relief in addition to such other legal and equitable remedies that
may be available.
5.5. Cooperation on Claims.
-----------------------
Without limiting the generality of any other provision of this Agreement,
with respect to any claim of any kind for which Seller has retained liability
under this Agreement, (i) Buyer will not settle or compromise any such claim
without the consent of Seller, (ii) Buyer will make available to Seller, its
insurer and their respective representatives all records and other materials as
may be reasonably requested by them for use in handling any such claim and (iii)
Buyer will reasonably cooperate, and will use its best efforts to cause its
employees to cooperate, with Seller, its insurer and their respective
representatives in the handling of all such claims.
ARTICLE VI
MISCELLANEOUS
6.1. Further Actions.
----------------
From time to time, as and when requested by Buyer and at Buyer's expense,
Seller shall execute and deliver, or cause to be executed and delivered, all
such documents and instruments and shall take, or cause to be taken, all such
further or other actions as Buyer may reasonably deem necessary or desirable to
carry out the intent and purposes of this Agreement, to convey, transfer, assign
and deliver on the Closing Date to Buyer, and its successors and assigns, the
Shares (or to evidence the foregoing) and to consummate the other transactions
contemplated hereby.
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6.2. Brokerage.
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Seller represents and warrants to Buyer that Seller has no obligation or
liability to any broker or finder by reason of the transactions which are the
subject of this Agreement; Seller shall indemnify Buyer and the Company against,
and shall hold Buyer and the Company harmless from, at all times after the date
hereof, any and all liabilities (including without limitation legal fees), and
shall pay any final judgment obtained by any person claiming brokerage
commissions or finder's fees, or rights to similar compensation, on account of
services purportedly rendered on behalf of Seller, or prior to Closing the
Company, in connection with this Agreement or the transactions contemplated
hereby. Buyer represents and warrants to Seller that Buyer has no obligation or
liability to any broker or finder by reason of the transactions which are the
subject of this Agreement; Buyer shall indemnify Seller against, and shall hold
Seller harmless from, at all times after the date hereof, any and all
liabilities (including without limitation legal fees), and shall pay any final
judgment obtained by any person claiming brokerage commissions or finder's fees,
or rights to similar compensation, on account of services purportedly rendered
on behalf of Buyer, or after Closing the Company, in connection with this
Agreement or the transactions contemplated hereby.
6.3. Expenses.
---------
Each of Buyer and Seller shall pay their respective expenses in connection
with the negotiation, execution, delivery and performance of this Agreement.
6.4. Entire Agreement.
-----------------
This Agreement, which includes the Schedules and Exhibits hereto and the
other documents, agreements and instruments executed and delivered pursuant to
or in connection with this Agreement, contains the entire agreement between
Buyer, the Company and Seller with respect to the transactions contemplated by
this Agreement and supersedes all prior arrangements or understandings with
respect thereto.
6.5. Descriptive Headings.
---------------------
The descriptive headings of this Agreement are for convenience only and
shall not control or affect the meaning or construction of any provision of this
Agreement.
6.6. Notices.
--------
All notices and other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
overnight delivery service or by registered or certified mail, postage prepaid,
addressed as follows:
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If to Seller, or pre-Closing to the Company:
Varlen Corporation
00 Xxxxxx Xxxxxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx Xxxxxxx
General Counsel
If to Buyer, or post-Closing to the Company:
Xxxxx Industries, Inc.
000 Xxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
Attn: President
Any party may by notice change the address to which notices or other
communications to it are to be delivered or mailed.
6.7. Governing Law.
--------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware. The transfer of the Shares pursuant to the Share
Transfer Agreement shall be governed by German law. Each of the parties hereto
irrevocably submits to the jurisdiction of the Courts of the State of Delaware,
and of any Federal Court located in the State of Delaware, in connection with
any action or proceeding arising out of or relating to, or breach of, this
Agreement or of any document or instrument delivered pursuant to or in
connection with this Agreement.
6.8. Assignability.
--------------
This Agreement shall not be assignable otherwise than by operation of law
by any Party without the prior written consent of the other Parties, and any
purported assignment by any Party without the prior written consent of the other
Parties shall be void. This Agreement shall inure to the benefit of and be
binding upon the Parties hereto and their respective successors and permitted
assigns.
6.9. Waivers and Amendments.
-----------------------
Any waiver of any term or condition, or any amendment or supplementation,
of this Agreement shall be effective only if in writing. A waiver of any breach
of any of the terms or conditions of this Agreement shall not in any way be
construed as a waiver of any subsequent breach.
6.10. Third Party Rights.
-------------------
This Agreement shall be effective only as between the Parties hereto, their
successors and permitted assigns.
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6.11. Illegality.
-----------
In the event that any one or more of the provisions contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in any other respect and the remaining provisions of this Agreement
shall not, at the election of the Party for whom the benefit of the provision
exists, be in any way impaired.
6.12. Release.
--------
As of the Effective Date, the Company hereby releases, acquits and forever
discharges each officer, director and stockholder of the Company from any and
all liabilities, obligations, claims, demands, actions and causes of action
which the Company ever had, now has or hereafter may have based upon, relating
to or arising out of any event, occurrence, act, omission or condition occurring
or existing as of or prior to the Effective Date in any way connected with such
officer's, director's or stockholder's status as such or actions taken in such
capacity. Buyer consents to the foregoing release. Seller and Buyer agree that
this release shall not in any manner limit or otherwise affect the rights and
obligations of Seller and Buyer under this Agreement.
[REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
Seller:
VARLEN CORPORATION
By:___________________________
Name:_________________________
Title:________________________
The Company:
XXXXXX XXXXXX GmbH
By:___________________________
Name:_________________________
Title:________________________
Buyer:
XXXXX INDUSTRIES DEUTSCHLAND
GmbH i. Gr.
By:___________________________
Name:_________________________
Title:________________________
Parent:
XXXXX INDUSTRIES, INC.
By:___________________________
Name:_________________________
Title:________________________
