1
EXHIBIT 10.6
PRELIMINARY AGREEMENT FOR THE TRANSFER OF
A BUSINESS
THIS AGREEMENT entered into on
between
ELLEBI S.P.A., an Italian corporation with paid-in capital of Lit. 9.250.000.000
and registered office at Gualtieri (Reggio Emilia) Frazione Santa Vittoria,
Strada Statale 63 n. 189, Taxpayer No. 00356930354, (hereinafter referred to as
"Seller"), represented by the Chairman of the Board of Directors Mr. Vittorio
Benaglia;
on the one part
AND
BRINK ITALIA S.R.L., an Italian corporation with paid-in capital of 20,000,000
and registered office at Milano, Piazza Meda n. 5, Taxpayer No. 12212400159
(hereinafter referred to as "Buyer" and which changed its corporate name into
"Ellebi Srl" and its corporate address to Gualtieri (Reggio Emilia), Frazione
Santa Vittoria, Strada Statale 63, n. 189, by means of a quotaholders resolution
of Dec. 9, 1997, subject to Court approval ), represented by Mr. Jan Willem
Rengelink, in his capacity as Managing Director;
BRINK INTERNATIONAL B.V., a Dutch corporation with registered office at
Industrieweg, 5, 7951 CX Staphorst, The Netherlands, Italian fiscal code No.
97203440157, represented by Mr. Jan Willem Rengelink, in his capacity as
Managing Director;
on the other part
2
WITNESSETH:
WHEREAS Seller, among other activities, is engaged in the manufacturing,
marketing and selling of towbars for passengers cars and vans, trailers,
accessories and parts thereof, and
WHEREAS Seller desires to sell to Buyer the business referred to above, and
WHEREAS Buyer desires to buy such business at the Closing (as such term is
defined in Article 1.0 hereinbelow) and, to this end, prior to the date of this
Agreement, has conducted, directly and through auditors and advisors of its
choice, a due diligence investigation of such business;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1.0 - DEFINITIONS
In this Agreement the following terms shall have the following meaning unless
otherwise specified:
(a) "Accounting Principles" shall mean the accounting principles
of the "Commissione per la statuizione dei principi contabili
dei Commercialisti e dei Ragionieri" as integrated (or, as the
case may be, superseded) by the special accounting principles
agreed upon between the parties, which are set forth in
Exhibit "E" hereto.
(b) "Assumed Liabilities" shall have the meaning set forth in
point (c) of paragraph 2.1 hereof.
(c) "Business" shall have the meaning set forth in paragraph 2.1
hereof.
2
3
(d) "Buyer" shall mean Brink Italia S.r.l.
(e) "Closing" shall have the meaning set forth in Article 7
hereof.
(f) "Effective Date" shall mean the hours 00.01 of January 1,
1998, or such different date that the parties hereto may
agree, and will be the date of the actual transfer from Seller
to Buyer of the Business, as hereinafter specified.
(g) "Effective Date Financial Statement" shall have the meaning
set forth in paragraph 6.3 hereof.
(h) "Financial Statement" shall mean a financial statement of the
Business as of 31 December 1996, which indicates the book
value at the same date of the assets and liabilities comprised
in the Business and which is attached under Exhibit "A"
hereto.
(i) "Guarantor" shall mean Brink International B.V.
(j) "Seller" shall mean Ellebi SpA.
(k) "Transferred Assets" shall have the meaning set forth in point
(A) of paragraph 2.1 hereof.
ARTICLE 2.0 - PURPOSE
2.1 Subject to the terms and conditions of this Agreement. Seller shall sell to
Buyer, and Buyer shall purchase from Seller, the Business, as hereinafter
defined, effective as of the Effective Date.
For the purposes of this Agreement Business shall mean the going concern
(azienda)of the Seller
3
4
comprising the assets and properties, the contracts and rights and the
liabilities and obligations set forth hereafter relating to the production, sale
and distribution of the products described in the first recital hereof, provided
that such going concern shall not include any assets or properties, contracts or
rights, liabilities or obligations that are not specifically and expressly
listed or referred to in this paragraph 2.1, even if they relate to or are
connected with the Business:
(A) Assets and Properties
(a) All machinery vehicles, equipment, fixtures, furniture, tools,
spare parts, maintenance equipment and supplies and other
items of personal property (other than inventory, which is
separately dealt with in paragraph (b) below), the book value
of which is indicated in the Financial Statement and such
other items of machinery, vehicles, equipment, furniture,
tools, spare parts, maintenance equipment and supplies and
other items of personal property as are owned or otherwise
held by the Seller on the date of this Agreement or which will
be acquired by same on or prior to the Effective Date and used
in connection with or for the purpose of the conduct and
operation of the Business, but excluding any such items
disposed of by the Seller in the ordinary course of business
between the reference date of the Financial Statement and the
Effective Date.
(b) All raw materials, work-in-process, finished products,
packaging, advertising and other materials owned or otherwise
held by the Seller as at the Effective Date and used in
connection with or for the purpose of the conduct and
operation of the Business.
4
5
(c) The accounts and notes receivable relating to or arising in
connection with the conduct and operation of the Business up
to the Effective Date (excluded), excluding tax refunds and
any other receivable relating to taxes.
(d) The intellectual property rights referred to in paragraph 3.3
hereof.
(e) Deposits, pre-paid expenses or premiums and other items of
similar nature as existing as of the Effective Date.
(f) All goodwill and goodwill related items concerning the
Business (customer lists, market information, marketing and
sales plans, etc.).
(B) Contracts and Rights
(a) All employment relationships entered into with the persons
employed by the Seller in the conduct and operation of the
Business as of the date hereof, listed on Schedule 5 attached
to Exhibit "F", plus any other employees hired by the Seller
in the ordinary course of the Business and upon written
approval of Buyer between the date hereof and the Effective
Date, but excluding any employees the employment of which was
terminated (for any cause) effective on or prior to the
Effective Date.
(b) All other contracts, agreements, commitments or other binding
arrangements, whether oral or written, including purchase
orders, existing as of the date of this Agreement entered into
by the Seller in connection with or for the purpose of the
conduct and operation of the Business and referred to in
paragraph 3.7.
5
6
(c) All contracts, agreements, commitments or other binding
arrangements whether oral or written, including purchase
orders, entered into by the Seller in the ordinary course of
business between the date hereof and the Effective Date,
consistently with the provisions of Article 5.
(C) Liabilities and Obligations
(a) All liabilities and obligations relating to the employees of
the Seller, including (without limitation) any accrued
liabilities for severance indemnity (trattamento difine
rapporto) 13th and 14th month salary and unused vacation and
for any social security charges accrued prior to the Effective
Date the payment of which has not yet fallen due.
(b) The total amount which Seller would be required to pay to any
of its agents up to the Effective Date to cover any kind of
termination entitlements upon cessation of the relevant agency
relationship (i.e. "indennita di clientela" and "F.I.R.R." if
not accrued with ENASARCO) as provided for by the applicable
provisions of law.
(c) All obligations to be performed or accruing under the
contracts referred to under paragraph (b) preceding.
(d) The trading accounts and notes payable relating to or arising
in connection with the conduct and operation to the Business
up to the Effective Date (excluded).
2.2 In consideration for the sale, Buyer shall pay to Seller the difference
between the value of
6
7
the Transferred Assets, including goodwill, and the value of the Assumed
Liabilities as of the Effective Date, to be determined in accordance with the
criteria and adjustments hereinafter set forth.
ARTICLE 3.0 - REPRESENTATIONS, WARRANTIES AND GUARANTEES OF THE SELLER
Seller represents, warrants and guarantees to Buyer that each of the
representations and warranties contained in this Agreement is true as of the
date of execution of this Agreement and will be true as of the Effective Date.
3.1 Seller's Rights
(a) Seller is a corporation duly organized, validly existing and
in good standing under the laws of Italy.
It has full right and authority to own, operate and lease its
property and to carry on its business substantially as it is
being conducted on the date hereof, and to pursue the
purposes indicated in its by laws, and has obtained all
necessary governmental licences, permits and authorizations
to carry on its business.
(b) The execution of this Agreement by the proper representative
of Seller has been duly authorized by its Administrative Body
and no other authorizations and approvals are required by
Seller.
3.2 Title to property
7
8
Seller has good and marketable title to all the properties and assets presently
used in the operations of the Business (excepting only those properties and
assets which are leased) which are listed in Exhibit "B(i)" hereto. Except as
set forth in Exhibit "B(i)" hereto, such properties and assets are free from
liens, mortgages, pledges, encumbrances or charges of any kind or nature
whatsoever and, except as set forth in Exhibit "C" hereto, are not held or used
by Seller as a lessee or as a conditional vendee.
Attached hereto as Exhibit "C" is a true and complete list, with a detailed
description thereof, of all properties, leased or subleased or to be leased or
subleased by Seller in connection with the activity of the Business and
transferred under this Agreement, together with the terms, rental and other
material provisions of each lease.
All properties currently owned, used or leased by Seller in connection with the
activity of the Business conform to all applicable laws, statutes, ordinances
and regulations relating to such properties, including, by way of example,
zoning and environmental laws and regulations, and no notice of violation
relating to same has been received by Seller.
3.3. Know-How and Industrial Property
(a) Exhibit "B"(ii) is a list of all intellectual or industrial
property belonging to the Seller and related to the Business
including, without limitation, trademarks, patent and design
granted or applied for or de facto used in the Business.
(b) Tradenames, trademarks and patents listed in Exhibit "B"( ii)
are valid and enforceable in the countries where they have
been registered.
8
9
(c) Except as disclosed in Exhibit "B"(ii) Seller is in a position
to operate the Business without requiring any know-how,
trademark and/or patent licenses from third parties.
(d) Except for the trademarks whose use have been granted by the
Seller to the South African company Towlink Ltd., Seller has
not licensed any know-how, trademark or patent owned by Seller
to any third parties.
(e) All application and renewal fees, costs and charges for
patents and trademarks of Seller have been paid on time.
(f) Seller owns or has adequate licenses or other rights to use
all patents, inventions, trademarks, trade names and
copyrights, with all relating applications, presently used,
related to, or necessary for the conduct of the Business.
Seller owns or has adequate licenses or other rights relating
to the use of technical data and know-how used in its products
and operations, including the right to utilize the
manufacturing processes presently employed.
No claim for infringement of any such patents, inventions, trademarks, trade
names or copyrights, with all relating applications, or relating to use of
technical data or know-how, is pending or known to be threatened against Seller
nor has any such claim been filed or lodged against Seller in the five years
preceding the Effective Date.
To the best of Seller's knowledge and belief, none of the Seller's products
violates any industrial property rights of any third party.
9
10
3.4 Financial
(a) The Financial Statement attached under "A" hereto includes all
assets and liabilities comprised in the Business as of 31
December 1996 on the basis of the net value thereof resulting
from Seller's mandatory accounting books as of 31 December
1996, except the total value of the goodwill which has been
agreed upon between the parties hereto.
(b) The book value of the inventory indicated in the Financial
Statement has been calculated applying the Accounting
Principles and shall be adjusted following the procedure under
paragraph 6.3(ii) below.
3.5 Indemnities and Social Security
(a) The amount shown on the Financial Statement as "accrued
seniority indemnity" is equal to the total amount which the
Seller would be required to pay to the identified employees
through 31 December 1996 to cover employees' entitlements upon
cessation of the employment relationships as of that date,
including, by way of example, seniority indemnity, holiday
indemnity if applicable, thirteenth and fourteenth months pay,
prorated to the extent necessary. Such amount shall be
adjusted accordingly through the Effective Date.
(b) The amount shown on the Financial Statement as "termination
entitlements due to Agents", is equal to the total amount
which the Seller would be required to pay to all its agents
through 31 December 1996 to cover any
10
11
kind of termination entitlements upon cessation of the agency
relationships as of that date (including "i.e. "indenita di
clientela" and F.I.R.R. if not accrued with ENASARCO). Such
amount to be adjusted accordingly through the Effective Date.
(c) Except as set forth on Schedule 5 attached to Exhibit "F",
neither of employees or agents of the Business has been
granted any special termination pay, pension or beneficial
plan in excess of what is required by the law and by the
applicable National Collective Agreements.
(d) Seller has timely filed and will timely file all declarations,
returns and reports required to be filed with respect to
social security and welfare laws and regulations. All social
and welfare charges of Seller through the Effective Date have
been or will be timely paid in ful1.
3.6 Taxes
All declarations, returns and reports to be filed by Seller with respect to all
municipal, provincial, regional and national direct and indirect taxes, duties,
imposts and governmental levies (hereinafter collectively referred to as
"Taxes") have been or shall be timely filed. All Taxes concerning the Business
for which Seller is or may be liable through the Effective Date have been or
shall be timely paid in full by Seller.
3.7 Contracts and Commitments
The transfer of the Business includes (i) those contracts or commitments with
any third party listed in Exhibit "F", together with its attached schedules,
(ii) the contracts for the supply of
11
12
water, energy, telephone and other services (collectively referred to as
"utenze"); and (iii) all other oral and written contracts inherent to the
Business, but not listed in Exhibit "F", Schedule 1, provided that they do not
exceed, in the case of any one agreement, an obligation or benefit of Lire
10,000,000 (ten millions) and, in the case of all agreements, an aggregate
obligation of Lire 50,000,000 (fifty millions) [all of them referred to
hereinafter as "Contracts"].
The Seller is not in default or alleged to be in default under any Contract nor
is Seller aware of any default by any other party to any Contract, and there
exists no event, condition or occurrence which, after notice or lapse of time,
or both, would constitute a default under any Contract. All of the Contracts
are in full force and effect and constitute legal, valid and binding
obligations of the parties thereto in accordance with their terms, and will
remain in full force and effect after the Closing without any notice to or
consent by any other party, subject to the provisions of Section 2558, second
paragraph, of the Italian Civil Code. Copies of all agreements, contracts and
documents delivered and to be delivered hereunder by Seller are and will be
true and complete copies of such agreements, contracts and documents. All
written summaries of oral agreements will be true and complete.
Seller hereby represents that each of the following schedules of Exhibit "F" is
complete and the information contained therein is correct in all material
respect as of the date of execution of this Agreement and will be correct in
all material respect as of the Effective Date:
Schedule 1: This Schedule lists the following agreements, whether oral or
written to which Seller is a party as of the date of this Agreement, and which
relate to the activity of the Business to the extent such agreements are not set
forth in other Exhibits or Schedules:
12
13
(i) Each contract, agreement, or arrangements made in the course
of ordinary business by Seller for the purchase of any
services, materials, or equipment.
(ii) Each contract, agreement, or commitment by Seller for
delivery of its products or services.
(iii) Each consultancy agreement between Seller and third party
who is not an employee of Seller.
(iv) Each sales agency or distributorship agreements providing for
the services of an independent contractor to which Seller is a
party or by which it is bound.
Scheudle 2: This Schedule lists each policy of product liability covering only
the assets relating to the Business and not listed in Schedule 1.
Schedule 3: This Schedule lists the homologations obtained for the products of
the Business; Seller guarantees that it has obtained all permits, licences and
other approvals and authorizations which are necessary to conduct the activity
of the Business.
Schedule 4: This Schedule lists all tangible personal property owned by any
third parties (whether a customer, supplier or other person) for which Seller is
responsible, and which relate to the activity of the Business.
Schedule 5: This Schedule is a list of all current employees of the Seller
hereinafter referred to also as ("Transferred Employees"), a designation of such
employees' full or part time status, the compensation payable to each such
employee, all fringe benefits which Seller currently makes available to such
employees, and the accrued vacation pay owing by Seller to
13
14
each of its employee. It is hereby agreed that absent different agreement
between the parties, only the employees of the Seller listed in Schedule 5 shall
be transferred from Seller to Buyer. Seller does hereby undertake to hold Buyer
harmless from whatsoever liability it might incur for Seller's inability to
comply with its undertaking. Seller guarantees (i) that all employees listed in
Schedule 5 are employed in the correct level and category, as provided for by
the applicable Italian laws and Collective Agreements, and (ii) that it will
hold Buyer harmless from whatsoever liability it might incur for claims filed by
the employees relating to their employment with Seller and matured before the
Effective Date.
3.8 Legal proceedings.
(a) Exhibit "G" lists any legal action, suit, arbitration,
governmental investigation or other legal or administrative
proceeding and any order, decree or judgement against or
relating to Seller, its officers, directors or employees, its
properties, assets or business or the transaction contemplated
by this Agreement, with exclusion of credit collection cases.
(b) Any liability (or gain) arising out of the proceedings listed
under Exhibit "G" shall be borne (or accrued) to Seller.
3.9 Liabilities related to products
There are no liabilities, accrued or unaccrued, of the Seller, including
products liability, arising from the sale of the products manufactured and/or
sold by Seller, which products were and will be manufactured and/or sold in
compliance with all the applicable laws and regulations.
3.10 Accounts Receivable
14
15
All accounts receivable which will be reflected in the Effective Date Financial
Statement shall be actually due to Seller and shall be collected within 270 days
of Closing. None of such accounts receivable is or will be subject to any claim,
dispute or set off arising from any circumstances up to the Effective Date. Upon
expiration of the term of 270 days of Closing, within the following 30 days,
Buyer shall be entitled to require the Seller to repurchase all or part of the
accounts which remain uncollected for a price equal to the aggregate face value
thereof less the entire amount of the provision for bad and doubtful debts which
shall be reflected in the Effective Date Financial Statement.
3.11 Compliance with laws and environmental liabilities
(a) For the purposes of this Agreement:
(i) "the Environmental Legislation" means any law and any
other statute or subordinate legislation relating to pollution
of the environment in force in Italy as at the date hereof.
(ii) "Hazardous Items" means any controlled waste (as defined
in the Environmental Legislation) of any kind noise,
vibration, smell, fumes, smoke, soot, ash, dust, grit,
chemical, petroleum products, noxious, radioactive,
inflammable, explosive, dangerous or offensive gases or
materials and any other substances of whatever nature which
may cause harm to the health of living organisms or the
environment and which are regulated under the Environmental
Legislation.
15
16
(iii) "Pollution of the environment" means the pollution of
all or any of the air, water and land due to the release into
such from any process or substances which are capable of
causing harm to man or any other living organism.
(iv) "Properties" shall mean any real estate owned, leased or
occupied at the date hereof by the Seller for the operation of
the Business.
(v) "Consents" shall mean all necessary licenses, consents,
authorizations, and registrations required under the
Environmental Legislation to operate the Business.
(b) The Consents as hereinabove defined (or true and complete
evidential copies of the same) are in the possession or under
the control of the Seller and the Business and there are no
outstanding applications or appeals in relation to the same.
(c) Seller guarantees that there is anything in, on, over or under
the Properties the presence existence or condition of which
constitutes a breach of the Environmental Legislation nor is
any manufacturing, storage, generation, servicing treatment,
disposal or other process carried on at the Properties in such
a way as to amount to a breach of the same.
(d) The Consents with regard to the Properties and/or any
activities processes and substances from time to time on the
Properties have been obtained and made in the name of the
Seller and the Business.
16
17
(e) All statements made and all information supplied by or on
behalf of Seller and the Business in support of applications
made for the Consents were and remain true and accurate in all
respects.
(f) All conditions attached to the Consents have in all respects
been complied with and no claims or proceedings have been made
or issued or are contemplated or threatened alleging a breach
of such conditions.
(g) No writ, summons, orders, enforcement notice, prohibition
notice or other notice has been received by the Seller and the
Business and so far as the Seller is aware, no direction of
any public, local or other statutory authority has been made
with regard to the Properties and/or any activities, processes
or substances in, on, over or under the Properties pursuant to
the Environmental Legislation and no prosecutions have been
instituted with respect thereto.
(h) Seller and the Business guarantees that any offense pursuant
to the Environmental Legislation has been committed during
Seller and the Business, occupation of the Properties or
before in connection with the Properties or any activities,
processes or substances in, or over or under the Properties.
(i) No complaints have been received by Seller or the Business
from any governmental body or agency or any other competent
authority or any third party (including any employee) with
regard to the Properties and/or any activities, processes or
substances in, or over or under the properties as the
17
18
result of any actual or alleged breach of the Environmental
Legislation or the presence of any Hazardous Items and Seller
is not aware of any facts which may lead to any such
complaint.
(j) No works have been carried out on the Properties by any
public, local or other statutory authority under the
Environmental Legislation in respect of which such authority
is entitled to recover costs nor have Seller or the Business
received any notice or have any information indicating that it
is or may be responsible for all or some portion of the costs
of investigating, treating, containing, removing from any
place or otherwise addressing any Hazardous Items.
(k) There are not in use or stored on the Properties: (i) Any
radioactive material or radioactive apparatus.
(ii) Any hazardous substance as defined in the Environmental
legislation.
(iii) Any processes or substances prescribed by regulations
under the Environmental Legislation for which an authorization
is required.
(iv) Any underground storage tanks (UST), pipes or landfills.
(l) The Properties have not been affected by any landfill gas nor
has there been deposited on or in the Properties any Hazardous
Items.
18
19
(m) Seller guarantees that no Hazardous Items have been spilled,
released, discharged or disposed of and no contamination of
any kind has ever occurred in the soil or water in, under or
upon the Properties.
3.12 Governmental Authorities.
Seller is not required to submit any notice, report or other filing with, and no
consent, approval or authorization is required, by any governmental or
regulatory authority in connection with their execution, delivery, consummation
or performance of this Agreement or the transactions contemplated hereby, except
for any approval or authorization which may be required for the transfer to
Purchaser of any of the permits, licences and authorizations referred to in
point (b) of paragraph 3.11 preceding.
3.13 No Undisclosed Liabilities, Claims, etc.
Except for (a) liabilities fully reflected or reserved against in the Financial
Statement; and (b) regular and usual liabilities and obligations incurred in the
ordinary course of business consistent with past practices after the date of the
Financial Statement and which will be reflected in the Effective Date Financial
Statement, the Seller has no liabilities, obligations or claims (absolute,
accrued, fixed or contingent, matured or unmatured, or otherwise), including
liabilities, obligations or claims which may become known or which arise only
after the Effective Date and which result from actions, omissions or occurrences
of the Seller prior to the Closing, to the extent that any such liability,
obligation or claim may be enforced against the Purchaser.
3.14 Absence of Certain Business Practices
19
20
Neither Seller, or any person or entity related to or affiliated with the
Seller, any officer, employee or agent of the Seller, any other person or entity
acting on behalf of or associated with the Seller, nor any other entity directly
or indirectly owned or controlled by the Seller, acting alone or together, has
(a) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic
benefit, regardless of its nature or type, from any customer,
supplier, trading company, shipping company, governmental
employee or other entity or individual with whom the Seller
has done business directly or indirectly; or
(b) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company,
shipping company, governmental employee or other person or
entity who is or may be in a position to help or hinder the
business of the Seller (or assist the Seller in connection
with any actual or proposed transaction) which
(i) might subject the Seller to any damage or penalty in any
civil, criminal or governmental litigation or proceeding;
(ii) if not given in the past, might have had an adverse
effect on the assets, business or operations of the Seller as
reflected in the Financial Statements; or,
(iii) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Seller or
which might subject the
20
21
Seller to suit or penalty in any private or governmental
litigation or proceeding.
3.15 Disclosure
The representations, warranties and guarantees made by Seller herein and the
statements, documents and certificates furnished or to be furnished by or on
behalf of Seller to Buyer, in connection with the transaction contemplated
herein, do not and will not contain any untrue statement of a material fact, do
not and will not omit to state a material fact necessary to make any of said
representations, warranties, guarantees, statements, documents and certificates
not misleading. Seller shall give Buyer prompt written notice of any change in
any of the information contained in the representations and warranties made in
Article 3 or elsewhere in this Agreement or in the Exhibits or Schedules
referred to herein which occurs prior to the Effective Date.
Seller shall consult with and follow the recommendations of Buyer respect to (i)
the cancellation of contracts, agreements, commitments or other understandings
or arrangements to which Seller is a party, including, without limitation,
commitments for improvements (ii) the commencement in one or more of Seller's
locations of the orderly and gradual discontinuance of particular items or
operation, and (iii) purchasing, pricing or selling policy (including, without
limitation, selling merchandise at discounts); provided, however, that nothing
contained in this subsection shall require Seller to take or fail to take any
action that, in Seller's reasonable judgement, is likely to give rise to a
substantial penalty or a claim for damages by any third party against Seller, or
is likely to result in losses to Seller, or is otherwise likely to prejudice in
any material respect or unduly interfere with the conduct of Seller's business
and operations in the ordinary course
21
22
consistent with prior practice, or is likely to result in a breach by Seller or
any of its representations, warranties or covenants contained in this Agreement
(unless any such breach is first waived in writing by Buyer).
The representations and warranties of the Seller contained in this Agreement are
in lieu of all other representations and warranties however provided under
applicable law and constitute all of the representations and warranties made by
the Seller in connection with the purchase and sale of the Business and the
other transactions contemplated under this Agreement.
ARTICLE 4.0 - REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR
Buyer and Guarantor hereby make to Seller the following representations and
warranties as of the date of this Agreement and as of the Effective Date:
(a) The Buyer and the Guarantor are corporations duly organized,
validly existing and in good standing under the laws of Italy
and respectively, The Netherlands.
(b) The execution of this Agreement by the proper representative
of the Buyer and the Guarantor has been duly authorized by the
relevant Board of Directors and no other authorizations or
approvals are required.
(c) The execution of this Agreement by Buyer and Guarantor and its
performance hereunder will not contravene any contract to
which either the Buyer or the Guarantor are parties, or any
applicable law or regulations.
22
23
ARTICLE 5.0 - CONDUCT OF BUSINESS AND ACTIONS BY SELLER
5.1 Absence of Certain Changes.
Except as set forth in Exhibit "O", since the date of the Financial Statement,
Seller has conducted its business only in the ordinary course and has not:
(i) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
current liabilities for trade or business obligations incurred
in the ordinary course of business and consistent with its
prior practice, none of which liabilities, in any case or in
the aggregate, materially and adversely affects the business,
liabilities or financial condition of Seller;
(ii) mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of its
property, business or assets, tangible or intangible, other
than in the ordinary course of business;
(iii) received any notice of termination of any contract,
lease or other agreement or suffered any damage, destruction
or loss (whether or not covered by insurance) which, in any
case or in the aggregate, has had a materially adverse effect
on the assets, operations or prospects of Seller;
(iv) encountered any labour union organizing activity, had any
actual or threatened employee strikes, work stoppages,
slow-downs or lock-outs which have had a materially adverse
effect on its operations, or had any material change in its
relations with its employees, agents, customers or suppliers;
23
24
(iv) made any material change in the rate of compensation,
commission, bonus or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra compensation,
pension or severance or vacation pay, to any Shareholder,
director, officer, employee, salesman, distributor or agent of
Seller;
(v) suffered any change, event or condition which, in any case
or in the aggregate, has had or may have a materially adverse
effect on Seller's condition (financial or otherwise),
properties, assets, liabilities, operations or prospects,
including, without limitation, any change in Seller's
revenues, costs, backlog or relations with its employees,
agents, customers or suppliers;
(vi) entered into any transaction, contract or commitment
other than in the ordinary course of business or paid or
agreed to pay any legal, accounting, brokerage, finder's fee,
taxes or other expenses in connection with, or incurred any
severance pay obligations by reason of, this Agreement or the
transactions contemplated hereby;
(vii) made any change to its accounting methods, practices or
principles;
(viii) adopted or amended any collective bargaining, bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation, or other plan, agreement,
trust, fund or arrangement for the benefit of employees,
exception made for the coming into force of the National Metal
Workers Collective Agreement in 1997.
24
25
(ix) entered into any other transaction or event other than in
the ordinary course of the Business.
5.2 Between the date hereof and the Effective Date, Seller:
(a) Will not negotiate, enter into, renew or terminate any
shop-level collective labour agreement without prior written
consent of Buyer.
(b) Will cooperate with Buyer, if so requested by it, for the
purposes of obtaining from the appropriate authorities the
transfer of all licenses, franchises, permits, and
authorizations necessary to run the activity of the Business
in the name of Buyer.
(c) Will conduct its business and affairs in the ordinary course
and consistent with its prior practice and shall maintain,
keep and preserve its assets and properties in good condition
and repair and maintain insurance thereon in accordance with
present practices.
5.3 Without limiting the generality of the foregoing, prior to the Effective
Date, Seller will not without Buyer's prior written approval:
(i) increase the salaries or other fringe benefits made
available to its employees of more than lira 75,000,000
(seventy-five millions), other than in the ordinary course of
business (i.e. due to mandatory laws or collective agreements)
and excluding the increases of salary to Messrs. Guidetti,
Poti, Pavesi and Ragni referred to under 8.0 below;
25
26
(ii) enter into any contract or commitment with respect to the operation of the
Business extending beyond the Effective Date, other than sales or purchases made
in the ordinary course of business;
(iii) enter into any capital expenses higher than lira 15,000,000 (fifteen
millions) without written consent of Buyer.
ARTICLE 6.0 - PURCHASE AND SALE OF THE BUSINESS - CONSIDERATION
6.1 Purchase and Sale
The purchase and sale of the Business will occur on the basis of the Transferred
Assets and the Assumed Liabilities, as resulting from the Effective Date
Financial Statement.
6.2 Transfer of assets and liabilities
As of the Closing Seller shall transfer to Buyer, at latter's expenses, the
Business, including:
(i) the Transferred Assets and the Assumed Liabilities as of
the Effective Date;
(ii) all customer lists, and
(iii) the contracts and commitments pertinent to the Business
listed in Exhibit "F" hereto.
Buyer shall not assume nor be liable for any liabilities, obligations or
undertakings of Seller of any nature whatsoever, whether fixed or contingent and
whether known or unknown, other than the Assumed Liabilities and liabilities and
obligations deriving from the Contracts which will be transferred to the Buyer
as contemplated in this Agreement.
26
27
6.3 Consideration
In consideration for the transfer, Buyer shall pay to Seller a purchase price
equal to the difference between the Transferred Assets and the Assumed
Liabilities as of the Effective Date plus Lire 17,734,764,795 (seventeen billion
seven hundred thirty-four millions seven hundred sixty-four thousand seven
hundred ninety-five) for goodwill:
(i) as of January 2, 1998, Buyer (i) shall pay to Seller in
cash, to the bank account which shall be communicated by the
Seller the amount of lire 33,500,000,000 (thirty-three billion
five hundred millions):
(ii) shall put in escrow with the notary public Pasquale
Lebano of Milan the amount of lira 1,500,000,000 (one billion
five hundred millions), to secure payment of the adjustment of
the Purchase Price (if any). The parties undertake to
instruct the notary to release the amount only upon joint
request of duly authorized representatives of the Seller and
of the Buyer or upon request of one of the parties supported
by the award of the arbitration panel referred to under
article 11.10 hereinbelow, as per the draft instructions
attached hereto under Exhibit "P"; and
(iii) within forty-five days from the Effective Date the
parties shall jointly prepare a financial statement of the
Business as of the Effective Date (the "Effective Date
Financial Statement") on the basis of the Accounting
Principles, with the purpose to adjourn the Financial
Statement to the situation of the Business as of the Effective
Date. The difference between (i) the net value of the Business
(excluding goodwill) as resulting
27
28
from the Effective Date Financial Statement and the net value
of the Business (excluding goodwill) as resulting from the
Financial Statement shall be paid by the Buyer to the Seller
or reimbursed by Seller to the Buyer within the following 30
days, increased by an interest of 5% p.a. starting from the
Effective Date. Should the parties fail to reach an agreement
on the Effective Date Financial Statement, each of them may
promote an audit to be carried out by Arthur Andersen of Milan
(or, should the latter refuse, by an auditing company
appointed by the Chairman of the Milan Chamber of Commerce),
whose report shall be released to the parties within 45 days
from the mandate and shall be binding upon the parties.
The cost of the audit shall be borne equally by the parties
and the aforesaid difference shall be paid (or reimbursed)
within 30 days from the delivery of the audit report,
increased by an interest of 5% p.a. starting from the
Effective Date.
ARTICLE 7.0 - CLOSING
As of the Effective Date, (i) a Deed of Sale shall be executed before the public
notary Pasquale Lebano in Milano, according to the Draft attached hereto under
Exhibit "H", it being understood that all obligations of Seller and Buyer set
forth by this agreement shall survive and shall prevail over the Deed of Sale;
(ii) a lease agreement for the plants and buildings hosting the Business shall
be entered into between Seller and Buyer according to the draft attached under
Exhibit "L" hereto; (iii) Buyer and Seller shall enter into a pre-emption
agreement substantially in the terms of Exhibit "Q" hereto; (iv) Seller shall
deliver the original bank guarantee referred to under
28
29
article 9.3, as per the draft attached under "N"; (v) the parties shall give the
notary the letter of instructions as per the draft attached under Exhibit "P";
(vi) each party shall deliver such documents, instructions and materials as may
be reasonably required in order to effectuate the intent and provisions of this
Agreement, and all such documents, instruments and materials shall be
satisfactory in form and in substance to counsel for the other party. The
closing shall take place in the offices of Baker & McKenzie at Milano, Piazza
Meda, 3, or at such other time and place as shall be mutually acceptable to the
parties.
ARTICLE 8.0 - CONDITIONS PRECEDENT TO THE CLOSING
The obligations of Buyer and Seller hereunder to complete the purchase of the
Business on the Effective Date are subject to the conditions precedent (i) that
a revision of the employment agreement with Messrs. Guidetti, Poti, Pavesi and
Ragni entered into according to Exhibit "I" hereto, (ii) that current
shareholders of Seller and their relatives resign as employees effective as of
March 31, 1998 without any cost for the Business, save for ordinary termination
entitlements due under Italian labour laws, and (iii) that the procedure
contemplated in paragraph 11.8 has been duly completed in accordance with the
applicable provisions of law.
ARTICLE 9.0 - ENFORCEMENT PROVISIONS
9.1 Indemnities
9.1.1 Seller shall defend at its expenses, and hold Buyer harmless against any
liability, damage or loss in any way relating to the Business which are the
consequence of circumstances, obligations and omissions before the Effective
Date, including, without limitation,
(i) any and all liabilities relating to the Business arising
from operations or transactions occurring before the Effective
Date, and (ii) any
29
30
and all liability concerning employees and agents accrued
before the Effective Date and any charge and liability
vis-a-vis employees, agents and social security agencies, to
the extent (but only to the extent) that any such liabilities
are not reflected or reserved for in the Effective Date
Financial Statement or do not arise from the contracts and
commitments transferred to Buyer pursuant to this Agreement.
Anything in any applicable law to the contrary
notwithstanding, no breach or inaccuracy of any representation
or warranty contained herein shall give rise to any right on
the part of the Buyer to rescind or terminate this Agreement
after completion of the Closing, unless the default is
"serious" according to article 1455 of the Italian Civil Code.
The parties hereto agree that a default shall be considered
"serious" if it implies the impossibility to carry out the
Business or involves a liability for the Seller or the Buyer
exceeding 4 billion lira. The non defaulting party shall give
the other party 30 days to cure the default, warning it that
the failure to cure it shall entitle the other party to
terminate the agreement.
9.2 Survival of Representations - Limitation of liability.
(a) All representations, warranties, guarantees and undertakings
set forth in this Agreement and the obligations and rights
arising therefrom shall survive the Effective Date and shall
continue in full force for a period of 2 years following the
Effective Date.
With respect to Taxes, claims from employees, social security
contributions and environmental matters, all obligations and
undertakings shall survive
30
31
for 6 years or until final settlement thereof, or until
expiration of the statute of limitations relating to thereto,
whichever is later.
(b) Buyer and Seller (and their respective tax, accounting and
legal service providers) shall provide each other with such
assistance as may reasonably be requested by any of them in
connection with the preparation of any return or report of
Taxes, any audit or other examination by any taxing authority,
or any judicial or administrative proceedings relating to
liability for Taxes. Buyer and Seller (and their respective
tax, accounting and legal service providers) will retain for
the full period of any statute of limitations and provide the
others with any records or information that may be relevant to
such preparation, audit, examination, proceeding or
determination.
(c) Buyer and Seller hereby agree that in the event a claim with
respect to Taxes is made pursuant to this Agreement, each
party shall furnish or cause to be furnished to any of them
all books, records, tax returns and other information
reasonably requested by such other party that relate to such
claims, and each party agrees to file on behalf of the other
party any returns, forms or other statements that relate to
such claims.
(d) If in connection with any examination, investigation, audit or
other proceeding of any Tax return for a taxable period ending
prior to the Effective Date, any governmental body or
authority issues to Buyer, a written notice of deficiency, a
proposed adjustment, an assertion of claim or demand
concerning the tax period covered by such return, Buyer shall
31
32
notify Seller of its receipt of such communication from the
governmental body or authority. Seller shall, at its expense,
have the sole and exclusive right, power and authority to
contest any such assessment, proposal, claim, demand or other
proceeding and to represent and act for and on behalf of
Seller in connection with any notice, proposal, investigation,
assessment, audit, examination or any other proceedings of any
kind whatsoever in connection with any Tax return for a
taxable period of Seller ending on or prior to the Effective
Date. Seller agrees to keep Buyer informed of the progress of
any such proceeding and to consult with Buyer in good faith in
connection therewith. Seller further agrees that they will not
settle or resolve any issue related to Taxes which, is so
settled or resolved, would have an effect on Seller or Buyer
for periods ending after the Effective Date, without having
consulted with Buyer. If any examination, investigation, audit
or other proceeding relates to a Tax return for a period that
ends after the Effective Date, Buyer shall control and resolve
such examination, investigation, audit or other proceeding,
without prejudice to Seller's liability under article 3.6
hereof.
9.3 Bank Guarantee
The performance by Seller of all the obligations arising as of this agreement,
including, without limitation, the obligation to indemnify Buyer in case of
breach of the representations and warranties given by Seller, shall be
guaranteed by a Bank guarantee, released at Seller's cost by a primary Italian
Bank according to the draft attached under Exhibit "N".
32
33
The Bank guarantee shall amount to 2 (two) billion lira and shall have a
duration of 6 years from the Effective Date for the indemnification obligations
arising as of the breach of guarantees referred to under articles 3.6, 3.5 and
3.7 (Exhibit F.5) and 3.11 hereof and of 2 years for all other obligations.
The Bank shall pay to Buyer, without delay, (I) the amounts indicated in a
written request bearing the joint signature of the Seller and of the Buyer, or
(II) the amounts indicated in a written request of the Buyer, provided that it
is supported by the award of the arbitration panel referred to in article 11.10
hereinbelow.
The duration of the guarantee shall be suspended from the date of the filing of
the arbitration claim to the date of delivery of the arbitration award.
9.4 Covenants of Buyer
Buyer shall indemnify and hold Seller harmless in respect of any claim or demand
of third parties however relating to liabilities comprised in the Business
pursuant to this Agreement, to the extent that such liabilities are reflected in
the Effective Date Financial Statement.
ARTICLE 10.0 - EXCLUSIONS AND LIMITATIONS - REFUND
10.1 Exclusions and Limitations
Anything herein or in any applicable law to the contrary notwithstanding:
(a) The Seller shall not be liable to the Buyer under Article 9 or
otherwise:
(i) if the sum due in connection with any single occurrence
giving rise to liability pursuant thereto does not exceed Lire
20 (twenty) million; and
33
34
(ii) until the aggregate of all amounts that would otherwise
be due pursuant to such Article 9 or otherwise, exceeds Lire
300 (three hundred) million, provided that, if such limit is
exceeded, the Seller's liability shall be limited to the
excess.
(b) The Seller's maximum aggregate liability under Article 9 or
otherwise shall be limited to Lire 8.5 (eightpointfive)
billion.
(c) The amount of all indemnities payable by the Seller to the
Buyer pursuant to Article 9 or otherwise shall be further
reduced by:
(i) any reserve amount recorded on the Effective Date
Financial Statement relating to the event giving rise to
indemnification;
(ii) the amount of any insurance or similar payment that Buyer
has received or is entitled to receive in connection with the
event giving rise to indemnification;
(iii) the amount of any indemnification that Buyer has
received or is entitled to receive from any third party;
(iv) the amount by which any liabilities or provisions shown
on the Effective Date Financial Statement subsequently proves
to have been overstated or unnecessary.
(d) The Seller will not be required to indemnify the Buyer under
Article 9 or otherwise in respect of any contingent or
potential liability, unless and until
34
35
such liability has become actual and has been paid for by the
Buyer or has become the subject matter of a final and
uncontestable obligation to pay the Buyer.
(e) In no event will the Seller be responsible to the Buyer under
Article 9 or otherwise in respect of:
(i) any actual or alleged inaccuracy or breach of the
representations and warranties (other than representations and
warranties referred to at point (ii) below) which is notified
to the Seller later than two (2) years following the Effective
Date; or
(ii) any actual or alleged inaccuracy or breach of the
representations and warranties with respect to Taxes, claims
from employees, social security contributions and
environmental matters that is notified to the Seller later
than 30 (thirty) days after the elapse of 6 years or final
settlement thereof or expiration of the statute of limitations
relating thereto, whichever is later.
10.2 Refund
Buyer shall refund to Seller any portion of the provision which will be
reflected in the Effective Date Financial Statement to cover any termination
entitlements (including "indennita di clientela" and F.I.R.R., if not accrued
with ENASARCO) accrued in favour of the agents of the Seller as of the Effective
Date, if and to the extent that any portion of such provision will become
unnecessary or excessive under the applicable provisions of law after the
Effective Date,
35
36
including the fact that the relevant agents or any of them have
terminated the respective agency relationship with Buyer thus becoming no longer
entitled to the payment by Buyer of the respective termination entitlements
(including "indennita di clientela" and F.I.R.R., if not accrued with ENASARCO).
ARTICLE 11.0 - MISCELLANEOUS
11.1 Finder's Fees Expenses
(a) Buyer agrees to indemnify and hold harmless Seller against any
claim asserted against Seller for brokerage or finder's fees
in respect to the transactions contemplated herein by any
person purporting to act on behalf of Buyer and its
representatives. Seller agrees to indemnify and hold harmless
Buyer for brokerage or finder's fees in respect of the
transactions contemplated herein by any person purporting to
act on behalf of Seller.
(b) Each of the parties hereto shall pay the expenses incident to
its preparation, signature and performance under this
Agreement whether or not the transactions contemplated herein
are consummated. The Seller shall bear the income tax incident
to this transaction, whereas the registration tax of the Deed
of Sale and the notary fees shall be borne by Buyer.
11.2 Covenant not to Compete
Seller and its shareholders represent, warrant and agree that for the maximum
duration of 5 (five) years from the Effective Date, they shall not, either
jointly or separately, directly or indirectly,
36
37
engage in any business in competition with the Business in Italy, and in the
territory in which, at the Effective Date, shall be marketed the products
manufactured by the Business.
Each of the Seller and its shareholders shall be severally (and not jointly with
the others) liable towards Buyer for any breach of the aforesaid covenant.
The shareholders of the Seller execute this agreement for acceptance of the
above mentioned non compete obligation and of any other provision set forth in
this agreement whose accomplishment will require their actions and or
intervention.
11.3 Notices
Unless otherwise provided herein, any notices under this Agreement or in
connection therewith shall be sent by registered airmail, or telegraph, cable or
telex to the addresses indicated in the preamble hereof. Such notice or
communication shall be deemed to have been given as of the date of receipt.
Either party may change its address for receipt of notices and copies by notice
duly given to the other party.
11.4 Assignment
Neither party may assign this Agreement unless such assignment is authorized in
writing by the other party except that Buyer without consent of Seller may
assign this Agreement to any company belonging to the Brink Group, it being
however understood that in such event the Guarantor shall be jointly liable
towards the Seller for the due performance of the obligations of the aforesaid
assignee arising out of this Agreement.
11.5 Headings
37
38
The descriptive words or phrases at the head of the various Articles hereof are
inserted only as a convenience and for reference and in no way are or are
intended to be a part of this Agreement, or in any way define, limit or describe
the scope or intent of the particular Article to which they refer.
11.6 Waivers
No party hereto shall have been deemed to have waived any right arising out of
this Agreement or out of any default or breach hereunder, unless such waiver is
evidenced by a written instrument by such party. No waiver of any default or
breach hereunder shall be construed to constitute a waiver of any other default
or breach hereunder whether similar or not.
l1.7 Complete agreement
This Agreement including the Exhibits hereto constitute the entire agreement
between the parties relating to the subject matter hereof, and there are no
prior representations, warranties, or agreements relating thereto. No change in,
addition to, or waiver of the terms and conditions hereof shall be binding on
any party unless approved by it in writing.
11.8 Announcements - Notice to the Unions
This Agreement and the transaction contemplated hereby shall be maintained as
confidential. No public announcements or publicity shall be made by Seller and
Buyer without the prior written consent of the other party. Seller and Buyer, as
soon as practicable after the execution of this agreement, shall send a joint
communication to the Unions and to the Shop Representatives of the Unions
(R.S.A.) under section 47 of the Law no. 428 according to the draft attached
hereto under Exhibit "M", and shall thereafter take any actions required
pursuant to the aforesaid law.
38
39
11.9 Obligations of the Guarantor
The Guarantor hereby jointly and severally guarantees to the Seller-the
obligations of the Buyers (i) to complete the purchase of the Business at
closing, and (ii) to pay the Purchase Price, including its adjustments.
11.10 Post-closing obligation
As soon as possible after Closing, Seller shall transfer to Buyer, free of
charge, all the 250 shares equity it currently owns in Towlink Ltd., a company
with registered office at 19 Ficus, Heldervue 7130, Cape Town, South Africa,
representing 25% of the corporate capital of Towlink Ltd., (the "South African
Shares"). Buyer recognizes that the other shareholder of Towlink Ltd, the
company Aucrite Close Corporation may exercise a pre-emptive right on the
transfer of the South African Shares and Seller shall endeavor to obtain its
consent to the sale of the South African Shares to the Buyer. The parties hereto
agree that should Seller not obtain within 60 days from the date of closing the
consent of Aucrite Close Corporation to the transfer of the Shares from Seller
to Buyer, Seller shall repossess tile financial rights related to Towlink (Lire
71.219.429) free of charge and, if so requested by Buyer, shall terminate the
distribution agreement on July 8, 1998.
11.11 Governing law and jurisdiction
This agreement is subject to the Italian law and all the controversies arising
therefrom shall be settled by formal arbitration to be conducted and governed
under the rules of the Camera Arbitrale of the Chamber of Commerce of Milan.
39
40
For the purpose of the arbitration proceedings, Buyer and Guarantor shall be
deemed to constitute a single party.
IN WITNESS WHEREOF, the parties hereto have signed and delivered this Agreement.
- ------------------------ ------------------------ ------------------------
(Buyer) (Seller) (Guarantor)
- --------------------- Shareholders of Ellebi
( )
Vittorio Benaglia
------------------------
Gianfranco Landini
------------------------
Paolo Landini
------------------------
Renato Bianchi
------------------------
40
41
LIST OF EXHIBITS
A - Financial Statement 1.
B(i) - List of properties and assets presently used in the operations of the Business 3.2
B(ii) - List of the industrial property and know how 3.3
C - List of all properties leased or subleased or to be leased or subleased by Seller 3.2
D - Annulled
E - Accounting principles 3.3(c)
F - Contracts and commitments 3.6
Schedule 1. Agreements
Schedule 2. Product liability policies
Schedule 3. Permits and licenses
Schedule 4. Personal property owned by third parties
Schedule 5. List of employees
G - Legal proceedings 3.8(a)
H - Draft Deed of Sale 7.0
I - Draft Employment Agreement 8.0(i)
L - Draft Lease Agreement 8.0(ii)
M - Notice under section 47 of Law no. 428 11.8
N - Draft Bank Guarantee 9.3
O - "Changes" since the date of Financial Statement 5.0
P - Instructions to notary (draft) 6.3(i)
Q - Draft pre-emption agreement 7.0
41