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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 2, 1998
P. H. GLATFELTER COMPANY
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(Exact name of registrant as specified in its charter)
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Pennsylvania 1-3560 23-0628360
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
Spring Grove, Pennsylvania 17362
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (717) 225-4711
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 2
Acquisition or Disposition of Assets
On January 2, 1998, two wholly-owned German subsidiaries of
the Registrant acquired all of the capital stock of S&H Papier Holding GmbH,
the German company holding the specialty paper business of the Schoeller &
Hoesch group ("S&H"), from Deutsche Beteiligungs AG and EVOBESTRA
Vermogensverwaltungsgesellschaft mbh (the "Sellers") pursuant to a Stock
Purchase Agreement, dated as of November 14, 1997.
The purchase price paid was DM 270 Million (approximately
$150,000,000) in cash. The acquisition was financed with borrowings under a
five-year, variable rate, multi-currency revolving credit facility provided to
the Registrant and certain of its subsidiaries by a syndicate of banks for
which Bankers Trust Company is acting as agent. The purchase price was
determined through arms' length negotiations between the Registrant and the
Sellers. The Registrant obtained a fairness opinion in connection with the
acquisition from BT Wolfensohn. The Registrant was not affiliated with S&H
prior to the acquisition.
For the fiscal year ended December 31, 1997, the S&H specialty
paper business had revenues of approximately DM 310 million (approximately $182
million). At year-end 1997 the S&H specialty paper business had debt of
approximately DM 68 million (approximately $38 million). The S&H specialty
paper business produces a variety of specialty papers, including tea bag and
other long fiber papers, tobacco papers, metalized papers, overlay and other
lightweight printing papers.
The S&H specialty paper business was founded in 1881 in
Gernsbach, Germany, where its corporate offices and major paper production
facilities are located. A smaller paper production facility is located in
Odet, France, in which the S&H specialty paper business has a 50% interest, and
other facilities are located in Wisches, France, the Philippines, and
Summerville, South Carolina. The S&H specialty paper business employs
approximately 940 people. The Registrant intends to continue the current
operation of the S&H specialty paper business without material change.
The acquisition of the S&H specialty paper business represents
a significant step in the Registrant's long-term strategic plan, which
emphasizes growth in technically engineered specialty paper markets. It
provides the Registrant with a strong business position in the world tea bag
market and in other long fiber markets, such as stencil, filter and casing
paper. It
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also strengthens the Registrant's tobacco paper business by providing a
manufacturing presence in Europe, a significant share of the European tobacco
paper market, and the ability to manufacture and market ultraporous plug wrap,
a growing segment of the world tobacco paper market.
The S&H specialty paper business has an experienced management
team that will continue to provide leadership and direction to the business.
The exchange of knowledge between the technical and marketing teams of the
Registrant and the S&H specialty paper business will allow the combined company
to achieve various market synergies, such as product interchanges, new product
development and distribution.
The Stock Purchase Agreement is attached as Exhibit 2.1 to
this Form 8-K and the description of the acquisition herein is qualified in its
entirety thereby.
Any statements set forth herein or otherwise made in writing
or orally by the Registrant with regard to its expectations for its business
after the completion of the acquisition of the S&H specialty paper business,
including its position in the market for certain products, its management, its
financial results and the benefits of the acquisition, may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Registrant makes such statements
based on assumptions which it believes to be reasonable, there can be no
assurance that actual results will not differ materially from the Registrant's
expectations. Accordingly, the Registrant hereby identifies the following
important factors, among others, which could cause its results to differ from
any results which might be projected, forecasted or estimated by the Registrant
in any such forward-looking statements: (i) variations in demand for or pricing
of products of the S&H specialty paper business; (ii) changes in the cost or
availability of raw materials used by the S&H specialty paper business; (iii)
changes in industry paper production capacity, including the construction of
new mills, the closing of mills and incremental changes due to capital
expenditures or productivity increases; (iv) the gain or loss of significant
customers; (v) cost and other effects of environmental compliance, cleanup,
damages, remediation or restoration, or personal injury or property damage
related thereto; (vi) significant changes in international cigarette
consumption; (vii) enactment of adverse state or federal legislation or changes
in government policy or regulation; (viii) adverse results in litigation; (ix)
disruptions in production and/or increased costs due to labor disputes; (x)
potential political instability in the Philippines; (xi) changes in foreign
currency exchange rates; and (xii) the Registrant's ability to integrate the
S&H specialty paper business with the Registrant's business.
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ITEM 7
Financial Statements and Exhibits
(a) Financial statements of the S&H specialty paper
business:
Pursuant to Item 7(a), the Registrant is required to
file certain financial statements with respect to the S&H specialty paper
business and certain pro forma financial information. As of the date hereof,
it is impractical to provide the audited financial statements of the S&H
specialty paper business, including the Notes thereto, for the periods required
by Regulation 210.3-05(b), as well as the required pro forma financial
information. The Registrant expects to file all such required financial
statements and pro forma financial information as soon as it is practicable,
and in any event within the time period required by Item 7(a).
(b) Exhibits:
2.1 Stock Purchase Agreement dated as of November 14,
1997 by and among certain subsidiaries of P.H. Glatfelter Company, the
Stockholders of S&H Papier Holding GmbH and Deutsche Beteiligungs
Aktiengesellschaft Unternehmensbeteiligungsgesellschaft and P.H. Glatfelter
Company.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
P. H. GLATFELTER COMPANY
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(Registrant)
Date: January 15, 1998 By: /s/ Robert S. Wood
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Robert S. Wood
Secretary and Treasurer
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
RABOISEN ZWEIHUNDERTNEUNTE VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
AND
RABOISEN ZWEIHUNDERTZEHNTE VERMOGENSVERWALTUNGSGESELLSCHAFT MBH,
SUBSIDIARIES OF THE P.H. GLATFELTER COMPANY,
AND
THE STOCKHOLDERS OF S&H PAPIER-HOLDING GMBH
DATED AS OF NOVEMBER 14, 1997
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TABLE OF CONTENTS PAGE
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ARTICLE 1 - PURCHASE AND SALE OF COMPANY CAPITAL STOCK
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.2 Purchase and Sale / Transfer/Deemed Effective Date . . . . . . . . . . . . . . . . . . . 7
1.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.5 Closing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE SELLING
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.7 Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.8 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.9 Tax Matters; Public Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.10 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.11 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.12 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.14 Breach of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.15 Interested Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.16 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.17 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.18 Accounts Receivable - Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.19 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.21 Employee Benefit Plans; Compliance with Labour Law . . . . . . . . . . . . . . . . . . 29
2.22 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.23 Insurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.24 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.25 Absence of Sensitive Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.26 Completeness; No Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.27 Compliance with U.S. Internal Revenue Code . . . . . . . . . . . . . . . . . . . . . . 34
2.28 Best Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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ARTICLE IV - PROTECTIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2 FCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.3 Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.5 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.6 Additional Documents and Further Assurances . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE V - SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNITY; ESCROW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 38
5.2 Agreement to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.3 Costs Included . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.4 Limitation on Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.5 De Minimis Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.6 Further Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.7 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.8 Escrow Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.9 Mechanics of Making Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VI - APPOINTMENT OF AGENT FOR SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . 43
6.1 Appointment of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VII - AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.2 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VIII - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.3 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.6 English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.7 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IX - GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 DBAG Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.2 PHG Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as of
November 14, 1997 by and among (1) (a) Raboisen Zweihundertneunte
Vermogensverwaltungsgesellschaft mbH ("Raboisen 209.") and (b) Raboisen
Zweihundertzehnte Vermogensverwaltungsgesellschaft mbH ("Raboisen 210."), both
wholly owned by P.H. Glatfelter Company, with limited liability organized under
the laws of the Federal Republic of Germany (each a "Purchaser", but
collectively the "Purchaser") and the stockholders whose names appear on
Schedule 1.2 hereto (each a "Selling Stockholder" and, collectively, the
"Selling Stockholders") and (3) Deutsche Beteiligungs Aktiengesellschaft
Unternehmensbeteiligungsgesellschaft ("DBAG") as guarantor for the Selling
Stockholders' obligations and (4) P.H. Glatfelter Company ("PHG") as guarantor
for the Purchaser's obligations.
RECITALS
A. The Selling Stockholders collectively own all of the capital stock of
S&H Papier-Holding GmbH, a corporation organized under the laws of the
Federal Republic of Germany registered under HRB 238-G, Amtsgericht
Rastatt (the "Company") issued and outstanding as described on
Schedule 1.2.
B. The Company is - together with EVOBESTRA
Vermogensverwaltungsgesellschaft mbH - the legal and beneficial owner
of the entire capital stock of Papierfabrik Schoeller & Hoesch GmbH,
Gernsbach, a corporation organized under the laws of the Federal
Republic of Germany, registered under HRB 9-G, Amtsgericht Rastatt
("Papierfabrik GmbH"), which is the entire or partial legal and
beneficial owner of certain companies as set out in Section 2.3 of the
Company Disclosure Letter attached hereto as Schedule B.
C. The Purchaser desires to acquire from the Selling Stockholders, and
the Selling Stockholders desire to sell to the Purchaser, all of the
shares of the capital stock of the Company currently owned by the
Selling Stockholders and such future shares as were created by the
capital increase resolved by the shareholders' meeting on September
19, 1997 (URNr. 246/1997 of the notary public Dr. Joachim Treeck in
Frankfurt/Main) (the "Acquisition"), for the consideration specified
herein and subject to the terms and conditions hereof.
NOW, THEREFORE, the parties agree as follows:
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ARTICLE I
PURCHASE AND SALE OF COMPANY CAPITAL STOCK
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
not otherwise defined herein shall have the meanings specified in this
Section 1.1:
(a) "Company Capital Stock" shall mean the aggregate number of
shares in the Company ("Geschaftsanteile" / "Shares")
outstanding at the Closing Date (as hereinafter defined) with
a total nominal value of DEM 100,000.-.
(b) "Escrow Amount" shall be 10 % (ten percent) of the Purchase
Price.
(c) "Subsidiary" shall mean any entity of which 50 % or more of
the voting power or the capital stock is directly or
indirectly, legally or beneficiarily, owned by the Company,
such entities being set forth in Section 2.3 of the Company
Disclosure Letter.
(d) Schoeller & Hoesch Group shall mean the Company and its
Subsidiaries.
1.2 PURCHASE AND SALE / TRANSFER/DEEMED EFFECTIVE DATE. Subject to the
terms and conditions set forth in this Agreement, each Purchaser as
reflected in SCHEDULE 1.2 agrees to purchase from each Selling
Stockholder as reflected in SCHEDULE 1.2 and each Selling Stockholder
agrees to sell to the Purchaser all right, title and interest in the
number of Shares of the Company Capital Stock (as defined
hereintofore) indicated next to such Selling Stockholder's name on
SCHEDULE 1.2 hereto with all rights attaching to them, including, but
not limited to the right to any non-distributed profits of the Company
for the business years 1997 and any profits of the Company for 1998.
Subject to the condition precedent of the payment of the Purchase
Price (as hereinafter defined) and the Escrow Amount (as hereinafter
defined) pursuant to Sections 1.5(c), each Selling Stockholder
herewith transfers his Shares to the Purchaser and the Purchaser
accepts such transfers. As between the parties hereto, January 1,
1998 shall be deemed to be the effective date regardless of the
Closing Date (as defined in Section 1.4 below).
1.3 PURCHASE PRICE.
(a) In reliance on the representations, warranties and covenants
of the Selling Stockholders contained herein and in
consideration of the aforesaid sale and transfer of the
Company Capital Stock indicated next to such Selling
Stockholder's name on SCHEDULE 1.2 hereto, the Purchaser shall
pay to the Selling Stockholders an aggregate purchase price of
DEM 270,000,000 (in words: Deutschmarks
twohundredandseven-tymillion) ("Purchase Price") as set out in
more detail in SCHEDULE 1.2 pursuant to Section 1.5(c).
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The Purchase Price shall bear interest at a rate of
one-month-FIBOR plus 100 basis points per annum (based on a
year of 365 days) as published by the Frankfurter Allgemeine
Zeitung (FAZ) on the Closing Date or if there is no published
FIBOR on such date on such date following the Closing Date on
which such FIBOR is first published by the FAZ from January 2,
1998 until Closing Date.
(b) The Purchase Price shall be increased or reduced, as the case
may be, on a DEM for DEM basis, by the amount by which the
consolidated net equity (including minority interest, but
excluding any goodwill) ("CNE") of the Schoeller & Hoesch
Group as evidenced by the audited consolidated financial
statements agreed upon by the parties or finally determined in
accordance with this Section 1.3 (b) for the business year
ending on December 31, 1997 is higher or lower than the
estimated consolidated net equity of the Schoeller & Hoesch
Group as at December 31, 1997 as shown in SCHEDULE 1.3 (B)
hereto (the "Estimate"), provided that (i) an increase of the
Purchase Price shall only be made if and to the extent that
the deviation of the CNE from the Estimate exceeds DEM
2,700,000,- and (ii) the adjustment (increase or reduction)
shall not exceed DEM 13,500,000,-. The CNE shall be increased
by any provision for real estate transfer taxes caused by this
Agreement and the Closing thereof shown in the audited
consolidated balance sheet as at December 31, 1997. The
consolidated financial statements of the Schoeller & Hoesch
Group for the business year ending on December 31, 1997, (i)
shall be prepared by the Company and the Company will work in
cooperation with two representatives, including but not
limited to third parties, designated by the Selling
Stockholders whereby said designated persons shall be given
full but reasonable access to all information and
documentation and shall be provided with appropriate support
by the Company and its Subsidiaries, necessary and in
existence for said preparation and the audit thereof, in
accordance with the generally accepted accounting principles
of the Federal Republic of Germany or the country of residence
of the respective Subsidiary, applied on a basis consistent
with the financial statements for the business year ending on
December 31, 1996, and in any event consistent with the
consolidating method by which the Estimate was prepared, (ii)
shall be audited by Deloitte & Touche (the "First Auditor")
and (iii) shall then be forwarded to the Selling Stockholders
without undue delay. The Selling Stockholders shall have the
right to have them reviewed by an auditor of their choosing
(the "Second Auditor") within a period of two (2) months after
receipt. Any disagreement between the results of the audit
conducted by the First Auditor and the Second Auditor shall be
resolved amicably within a period of further two (2) months,
whereby upon failing an agreement each of the parties shall
have the right to instruct Arthur Andersen (the "Third
Auditor") to resolve any such disagreement. If the
determination of the CNE by the Third Auditor lies between the
determination of the CNE by the First Auditor and the
determination of the CNE by the Second
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Auditor, then the determination of the CNE by the Third
Auditor shall be final and binding. If it is outside, then the
determination of the CNE of the First Auditor or Second
Auditor which is closest to the determination of the CNE of
the Third Auditor shall prevail. The cost of the First Auditor
shall be borne by the Purchaser and the cost of the Second
Auditor shall be borne by the Selling Stockholders. The cost
of the Third Auditor shall be equally shared between the
Selling Stockholders on the one side and the Purchaser on the
other side. Each of the parties shall ensure that each of the
auditors shall have access to the work papers of the other
auditors. If the Purchase Price is increased or reduced in
accordance with the foregoing provisions, the amount of such
increase or decrease shall bear interest at a rate of one-
month-FIBOR plus 100 basis points as per annum (based on a
year of 365 days) published by the Frankfurter Allgemeine
Zeitung (FAZ) on the Closing Date or if there is no published
FIBOR on such date on such date following the Closing Date on
which such FIBOR is first published by the FAZ for the period
from January 2, 1998, to actual payment thereof to the party
entitled to it.
1.4 CLOSING. The Closing of the Acquisition (the "Closing") shall occur
at the offices of Baker & McKenzie located at BethmannstraBe 50-54,
60311 Frankfurt am Main, at the later of January 2, 1998, or three
business days after the clearance under German merger control
legislation for the transaction as set out in Section 1.5 (a) (iii).
The date on which the Closing shall occur is referred to herein as the
"Closing Date".
1.5 CLOSING PROCEDURES
(a) At the Closing, the Selling Stockholders shall deliver to the
Purchaser
(i) a legal opinion of the legal counsel of Selling
Stockholders, covering the matters set forth in
Sections 2.1, 2.2 and 2.4 in the form to be agreed
between the Selling Stockholders and Purchaser prior
to the Closing,
(ii) letters of resignation duly executed and taking legal
effect as of the Closing Date, at no cost to the
Company, Papierfabrik GmbH and any of the
Subsidiaries, of all managing directors and the
members of the advisory board of the Company and of
the supervisory board members of Papierfabrik GmbH
appointed by the shareholders requested by the
Purchaser to resign,
(iii) a written confirmation by the German Federal Cartel
Office ("FCO") that the transaction contemplated by
this Agreement is not in
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violation of applicable merger control laws, unless
the statutory period of one month after filing of the
FCO approval request has expired and the FCO has not
notified any of the parties within such period that
it has decided to investigate the transaction under
applicable merger control laws, and
(iv) letters of resignation of the auditors of the
Company, Papierfabrik GmbH and the German
Subsidiaries duly executed and taking legal effect as
of the Closing Date requested by the Purchaser to
resign, at no cost other than such reasonable
remuneration already earned.
(b) At the Closing, the Purchaser shall
(i) deliver to the Selling Stockholders a legal opinion
of the legal counsel of the Purchaser, covering the
matters set forth in Sections 3.1, 3.2 and 3.3 in the
form to be agreed between the Selling Stockholders
and the Purchaser prior to the Closing; and
(ii) pay the Purchase Price pursuant to Section 1.5(c).
(c) At the Closing, the Purchaser shall wire the Purchase Price to
the bank account indicated on SCHEDULE 1.5 (C) 1, provided,
however, that the Purchaser shall pay a portion of the
Purchase Price constituting the Escrow Amount into the escrow
account for the Selling Stockholders and the Purchaser,
respectively, pursuant to Section 5.8 below. The portion of
the Escrow Amount contributed on behalf of each Selling
Stockholder shall be as set forth on SCHEDULE 1.5 (C) 2 (the
"Contributed Escrow Amount"). The Purchase Price and the
Escrow Amount shall be deemed to be paid once they have been
credited to the bank accounts specified in SCHEDULE 1.5 (C) 1
AND 2 respectively.
If for any reason the provisions of this Section 1.5 (b) are
not complied with by the Purchaser, the Selling Stockholders
may elect, in addition and without prejudice to any other
rights or remedies available to them as to compensate for
reasonable frustrated transaction costs, to rescind this
contract or to fix a new date for Closing. If for any reason
the provisions of this Section 1.5 (a) are not complied with
by the Selling Stockholders, the Purchaser may elect, in
addition and without prejudice to any other rights or remedies
available to it as to compensate for reasonable frustrated
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transaction costs, to rescind this contract or to fix a new
date for Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDERS
Each of the Selling Stockholders, severally but not jointly, hereby represents
and warrants to the Purchaser, except as disclosed to the Purchaser in the
Company Disclosure Letter that at the date of this Agreement and of the Closing
Date each of the statements set out in Article II is true, complete and
accurate.
2.1 ORGANIZATION. The Schoeller & Hoesch Group is structured and owned as
set out in SCHEDULE 2 hereto. The Company, Papierfabrik GmbH and the
Subsi-diaries are duly organized, validly existing and in good
standing under the laws of the residence of the respective company.
Each of the Selling Stockholders has the right to sell and transfer
the full legal title and beneficial interest in the shares owned by
it. The Company, Papierfabrik GmbH and the Subsidiaries have the
corporate power to lease or own their respective properties and assets
and to carry on their respective businesses as now being conducted.
The Purchaser or its counsel was provided with a true and complete
copy extract from the relevant local commercial register (where
existing) with respect to each of the Company, Papierfabrik GmbH and
the Subsidiaries and a true and complete copy of the charters of each
of the Company, Papierfabrik GmbH and the Subsidiaries (the
"Charters").
2.2 CAPITAL STRUCTURE.
(a) The Company Capital Stock of the Company currently amounts to
DEM 50,000.- and will amount to DEM 100,000,- upon
registration of the capital increase resolved by the
shareholders' meeting on September 19, 1997 (URNr. 246/1997 of
the notary public Dr. Joachim Treeck in Frankfurt/Main) and
the capital stock of Papierfabrik GmbH amounts to DEM
22,000,000.-. The Company Capital Stock is solely held by the
persons and in the amounts set forth in SCHEDULE 1.2. The
Company Capital Stock constitutes the whole of the issued and
outstanding share capital of the Company and the capital stock
of Papierfabrik GmbH constitutes the whole of the issued and
outstanding capital of Papierfabrik GmbH. The Shares that are
to be sold hereunder are duly authorized, validly issued,
fully paid and non-assessable and not subject to any
preemptive rights whether created by the charters or any
agreement to which the Company or Papierfabrik GmbH or any of
their
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stockholders are parties or by which they are bound. The
Selling Stockholders are not parties to any voting trust,
proxy or other agreement or understanding with respect to the
voting of any Company Capital Stock or any of the capital
stock of Papierfabrik GmbH.
(b) There are no options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other similar
rights, no commitments or agreements of any nature, written or
oral, obligating the Company, Papierfabrik GmbH, the
Subsidiaries or the Selling Stockholders to issue, sell,
repurchase or redeem, or cause to be issued, sold, repurchased
or redeemed, any shares of the Company Capital Stock or the
capital stock of Papierfabrik GmbH or the Subsidiaries or
obligating the Company, Papierfabrik GmbH or the Subsidiaries
or their stockholders to grant, extend, accelerate the vesting
of, change the price of, otherwise amend or enter into any
such option, warrant, call, right, commitment or agreement,
including without limitation in favor of employees of the
Company, Papierfabrik GmbH or the Subsidiaries.
(c) There are no claims, pledges, security interests or any other
encumbrances over or affecting any of the Shares to be sold
hereunder or any of the shares, stock or participation in
Papierfabrik GmbH or in any of the Subsidiaries, nor is there
any commitment to give or create any of the foregoing and no
person has claimed to be entitled to any of the foregoing.
2.3 SUBSIDIARIES. Except as with regard to Papierfabrik GmbH and the
Subsidiaries listed in Section 2.3 of the Company Disclosure Letter,
the Company does not own any shares of capital stock or any interest
in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity.
2.4 AUTHORITY. The Selling Stockholders have all requisite corporate
power and authority to enter into this Agreement, the Escrow Agreement
and the Arbitration Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement, the Escrow Agreement and the Arbitration Agreement have
been duly authorized by all necessary corporate action on the part of
Selling Stockholders, and no further action is required on the part of
the Selling Stockholders or any of their stockholders to authorize the
Acquisition, this Agreement, the Escrow Agreement and the Arbitration
Agreement and the transactions contemplated hereby and thereby. These
Agreements have been duly executed and delivered by the Selling
Stockholders and, assuming due authorization, execution and delivery
by the Purchaser, constitute valid and binding obligations of
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the Selling Stockholders, in each case enforceable in accordance with
its terms, except as such enforceability may be limited by principles
of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules
of law governing specific performance, injunctive relief or other
equitable remedies.
2.5 NO CONFLICT. Except as set forth in Section 2.5 of the Company
Disclosure Letter, the execution and delivery of this Agreement by the
Selling Stockholders does not, and, as of the Closing Date, the
consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right
of termination, cancellation, modification or acceleration of any
obligation or loss of any benefit under (any such event, a "Conflict")
(i) any provision of the Company's, Papierfabrik GmbH's or the
Subsidiaries' Charters, (ii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company,
Papierfabrik GmbH or the Subsidiaries, or (iii) any provision of
Material Contracts.
2.6 CONSENTS. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission ("Governmental Entity") or any third party,
including a party to any agreement with the Selling Stockholders, the
Company, Papierfabrik GmbH or the Subsidiaries (so as not to trigger
any Conflict), is required by or with respect to the Company,
Papierfabrik GmbH, the Subsidiaries or the Selling Stockholders in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable antitrust
law.
2.7 COMPANIES FINANCIAL STATEMENTS.
(a) The Selling Stockholders have provided to the Purchaser the
balance sheet of the Company as of September 30, 1997, and
Papierfabrik GmbH's and the Subsidiaries', subject to the
following, audited consolidated and unconsolidated financial
statements as of and for the fiscal year ending December 31,
1996. Such financial statements (including balance sheets,
income statements, Lagebericht, Anhang, if applicable, and
long-form audit reports) are referred to collectively as the
"Financial Statements." The Financial Statements of Schoeller
& Hoesch N.A., Inc., Summerville are as of and for the fiscal
year ending November 30, 1996. The Financial Statements
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for Papcel-Kiew, Kiew, are not existing. The Financial
Statements for Schoeller & Hoesch S.A.R.L. is an unaudited
financial statement. The consolidated and non-consolidated
Financial Statements are complete and correct and have been
prepared in accordance with generally accepted accounting
principles in Germany ("AAP") or of the country of residence
of the respective company, applied on a consistent basis. The
Financial Statements present fairly the consolidated and
non-consolidated financial condition and the results of the
operations of the Company, Papierfabrik GmbH and the
Subsidiaries as of the dates and during the periods indicated
therein.
(b) Since the date of the Financial Statements and, as to (xiv)
and (xv) since signing, none of the Company, Papierfabrik GmbH
or the Subsidiaries has, with respect to any third party
outside the Schoeller & Hoesch Group:
(i) sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair
consideration in the ordinary course of business;
(ii) entered into any contract, lease or license (or
series of related contracts, leases and licenses)
other than with customers, maintenance contractors
and suppliers of the Company, Papierfabrik GmbH or
the Subsidiaries either involving more than DEM
500,000 or outside the ordinary course of business;
(iii) accelerated, terminated, modified, or cancelled, or
received notice of acceleration, termination,
modification or cancellation of, any contract, lease
or license (or series of related, contracts, leases
and licenses) involving more than DEM 500,000 to
which any of them are a party or by which any of them
are bound;
(iv) made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
person (or series of related capital investments,
loans and acquisitions) outside the ordinary course
of business;
(v) issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease
obligation involving more than DEM 500.000,- in
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each case or outside the ordinary course of business;
(vi) guaranteed or otherwise become liable for any
liability or obligation of any person or entity;
(vii) delayed or postponed the payment of accounts payable
and other liabilities outside the ordinary course of
business;
(viii) cancelled, compromised, waived, or released any right
or claim (or series of related rights and claims)
outside the ordinary course of business;
(ix) granted any license or sublicense of any rights under
or with respect to any Company Intellectual Property;
(x) issued, sold, or otherwise disposed of any of its
capital stock, or granted any options, warrants, or
other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital
stock;
(xi) declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased,
or otherwise acquired any of its capital stock;
(xii) experienced any material damage, destruction or loss
to its property;
(xiii) made any loan to, or entered into any other
transaction with, any of its directors, officers, and
employees;
(xiv) adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such
action with respect to any other employee benefit
plan);
(xv) made any other change in employment terms for any of
its directors, officers, and employees outside the
ordinary course of business;
(xvi) made or pledged to make any charitable or other
capital contribution outside the ordinary course of
business; or
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(xvii) committed to any of the foregoing,
except as disclosed in Section 2.7 (b) of the Company
Disclosure Letter.
2.8 NO UNDISCLOSED LIABILITIES. Except as set forth in Section 2.8 of the
Company Disclosure Letter or reflected or reserved against in the
Financial Statements, the Company, Papierfabrik GmbH and its
Subsidiaries do not have any liability, indebtedness, obligation,
expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other on
the respective balance sheet dates which in the aggregate exceeded DEM
100,000.-.
2.9 TAX MATTERS; PUBLIC GRANTS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes," means any and all federal,
state, local and foreign taxes, including taxes based upon or
measured by gross receipts, profits, sales and value, and
value added, ad valorem, transfer, capital stock, franchise,
withholding, payroll, recapture, employment, social security
and property taxes, solidarity surcharges and excise and
customs duties.
(b) TAX RETURNS AND AUDITS.
(i) The Company, Papierfabrik GmbH and the Subsidiaries,
as of the Closing Date, will have prepared and timely
filed or made a timely request for extension for all
required federal, state, local and foreign returns
("Returns") relating to any and all Taxes concerning
or attributable to the Company, Papierfabrik GmbH and
the Subsidiaries. All Taxes owed by Papierfabrik GmbH
and any of the Subsidiaries on or before December 31,
1996, have been fully and timely paid when due or, to
the extent such Taxes have not yet been due at that
date, properly accrued to in the relevant Financial
Statements as of December 31, 1996. All Taxes owed by
the Company, Papierfabrik GmbH and any of the
Subsidiaries due and payable on or before December
31, 1997, have been fully and timely paid. None of
the transactions made or caused to be made by the
Selling Stockholders prior to the Closing Date,
including, without limitation, the sale and transfer
of the interest in Schoeller & Hoesch GmbH & Co.KG
under the "Kauf- und Ubertragungsvertrag" of May 10,
1997, and the transfer of shares of Papierfabrik GmbH
from Schoeller & Hoesch GmbH &
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Co. KG to Gizeh-Werk GmbH and from Gizeh-Werk GmbH to
the Company in 1997 caused any real estate transfer
tax. The parties agree that if any claim under the
foregoing sentence is made then the Selling
Stockholders shall outside the scope and mechanism of
the Escrow Agreement set out in Section 5.8 et seq.
hereof or in the Escrow Agreement indemnify and hold
harmless the Purchaser, or at the request of the
Purchaser, the Company, Papierfabrik GmbH or the
Subsidiaries, as the case may be, from any and all
liabilities and expenses in connection therewith. The
foregoing provision of Section 2.9 (b) i sentence 5
shall survive the Closing Date hereunder for 30 years
and shall not be subject to any limitations under
Sections 5.4 through 5.6 of this Agreement.
(ii) No audit or other examination other than the tax
audit regarding the period from 1989 to 1993 and
regarding wage taxes ordered on September 22, 1997,
and commenced on October 28, 1997,
(LohnsteuerauBenprufung) regarding the German
subsidiaries and the examination ordered by the
Internal Revenue Service of the tax year(s) ending
November 30, 1995, regarding Schoeller & Hoesch N.A.,
Inc. on June 17, 1997, of any Return of the Company,
Papierfabrik GmbH or the Subsidiaries is presently in
progress or pending, or, to the best knowledge of the
Selling Stockholders, threatened.
(iii) The Company, Papierfabrik GmbH and the Subsidiaries
have provided to Purchaser or its legal counsel true
and complete copies of all Returns filed within the
last three years.
(iv) The Selling Stockholders have the right to
participate in any tax audit regarding the Company,
Papierfabrik GmbH and the Subsidiaries with respect
to Taxes owed and payable on or before December 31,
1997 mentioned under Section 2.9 (b) (i). The
Purchaser shall notify the Selling Stockholders in
due course of any proposed or ordered tax audit and
give the Selling Stockholder full but reasonable
access to all information and documentation necessary
to prepare and participate in the respective tax
audit.
(c) The Company, Papierfabrik GmbH and the Subsidiaries have
applied for, received and used public grants and subsidies, if
any, strictly in accordance with applicable laws and in full
compliance with all regulatory orders or
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conditions imposed on such grants and subsidies. No such
grants and subsidies will have to be repaid or reduced solely
as a result of the consummation of this Agreement or the
transactions contemplated thereby.
2.10 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in Section
2.10 of the Company Disclosure Letter there is no agreement, judgment,
injunction, order or decree to which the Company, Papierfabrik GmbH or
the Subsidiaries are a party or otherwise binding upon the Company,
Papierfabrik GmbH or the Subsidiaries that has the effect of
prohibiting or impairing any business practice of the Company,
Papierfabrik GmbH or the Subsidiaries, any acquisition of property
(tangible or intangible) by the Company, Papierfabrik GmbH or the
Subsidiaries or the conduct of business by the Company or Papierfabrik
GmbH or the Subsidiaries.
2.11 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT.
(a) Section 2.11(a) of the Company Disclosure Letter sets forth a
list of all real property currently owned or leased by the
Company, Papierfabrik GmbH and the Subsidiaries and, in the
case of leased property, the name of the lessor, the date of
the lease and each amendment thereto and the aggregate annual
rental and/or other fees payable under any such lease. All
such leases are in full force and effect, are valid and
effective as against the Company, Papierfabrik GmbH and the
Subsidiaries and, to the best knowledge of the Selling
Stockholders, the lessors thereto, in accordance with their
respective terms, and there is not, under any of such leases,
any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default)
by the Company, Papierfabrik GmbH and the Subsidiaries, which
could have a material adverse effect on their respective
businesses.
With respect to each parcel of owned real property:
(i) the identified owner has good and marketable title to
the parcel of real property, free and clear of any
security interest or other material restrictions on
its possession or use;
(ii) there are no pending or threatened condemnation
proceedings, lawsuits, or administrative actions
relating to the property or other matters affecting
adversely the current use, occupancy, or value
thereof;
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(iii) the buildings and improvements are located within the
boundary lines of the described parcels of land, are
not in violation of applicable setback requirements,
zoning laws, and ordinances, and the land does not
serve any adjoining property for any purpose
inconsistent with the use of the land, and the
property is not located within any flood plain or
subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have
not been obtained;
(iv) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral,
granting to any party or parties the right of use or
occupancy of any portion of the parcel of real
property;
(v) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or
any portion thereof or interest therein; and
(vi) there are no parties (other than the Company,
Papierfabrik GmbH and the Subsidiaries) in possession
of each parcel of real property, other than tenants
under any leases disclosed in the Company Disclosure
Letter who are in possession of space to which they
are entitled;
except as disclosed in Section 2.11 (a) of the Company
Disclosure Letter.
(b) Except for customary retention of title (whereby title is not
transferred until payment is made for an asset), the Company,
Papierfabrik GmbH and the Subsidiaries have good and
marketable title to, or, in the case of leased properties and
assets, valid leasehold interests in, all of the tangible
properties and assets other than real property used or held
for use in its business, free and clear of any liens, except
as reflected in the Financial Statements and except for liens
for Taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially
detract from the value, or materially interfere with the
present use, of the property subject thereto or affected
thereby.
(c) The equipment and other tangible personal property owned or
leased by the Company, Papierfabrik GmbH and the Subsidiaries
is, to the best knowledge of the Selling Stockholders (i)
adequate for the conduct of the business of the Company,
Papierfabrik GmbH and the Subsidiaries as currently conducted,
(ii) is in good operating condition, subject to normal wear
and tear, (iii) has been reasonably maintained in accordance
with normal industry practice.
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(d) Each of the Company, Papierfabrik GmbH and the Subsidiaries
owns or has valid and continuing rights to use all of the
properties and assets (including without limitation all
Company Intellectual Property) necessary to conduct its
business as currently conducted in all material respects.
2.12 MATERIAL CONTRACTS. Except as set out in Section 2.12 of the Company
Disclosure Letter, neither the Company, Papierfabrik GmbH nor the
Subsidiaries are a party to any contract, arrangement, or obligation
which, individually or in the aggregate, whether by reason of its
nature, term, scope, price or otherwise is or is likely to be of
material importance to its business, profits or assets, and which:
(i) is not in the ordinary course of its business;
(ii) is to the best knowledge of the Selling Stockholders expected
to result in a loss to the respective company on closing of
performance unless provision is made for such loss in the
relevant audited balance sheet of the respective company
included in the Financial Statements; or
(iii) is of an onerous nature or cannot be fulfilled or performed by
the respective company on time and without undue or unusual
expenditure of money and effort.
2.13 INTELLECTUAL PROPERTY.
(a) For purpose of this Agreement, "Company Intellectual Property"
means (i) all inventions (whether patentable or unpatentable
and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and
reexaminations thereof, (ii) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and
combinations thereof all applications, registrations, and
renewals in connection therewith, (iii) all copyrightable
works, and all applications, registrations, and renewals in
connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection
therewith, (v) all trade secrets and confidential business
information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans
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and proposals), (vi) all computer software (including data and
related documentation), (vii) all other proprietary rights,
and (viii) all copies and tangible embodiments thereof (in
whatever form or medium) used or useful in the business of the
Company, Papierfabrik GmbH and the Subsidiaries as currently
conducted.
(b) The Company, Papierfabrik GmbH and the Subsidiaries own all
Company Intellectual Property free from any encumbrances, or
are licensed or otherwise possess legally enforceable rights
to use, all Company Intellectual Property that is used in the
business of the Company, Papierfabrik GmbH and the
Subsidiaries as currently conducted. All payment of fees and
other measures needed to maintain the Company Intellectual
Property have been undertaken fully and in a timely manner.
(c) The Company Intellectual Property is the unencumbered and
unlimited property of the Company or Papierfabrik GmbH or the
Subsidiaries and no rights of third parties to the Company
Intellectual Property or its use exist. To the best knowledge
of the Selling Stockholders none of the Company Intellectual
Property or the use of it nor the business of the Company or
Papierfabrik GmbH or the Subsidiaries infringes upon,
misappropriates or otherwise conflicts with the intellectual
property rights of third parties.
(d) Section 2.13 of the Company Disclosure Letter identifies each
patent or registration which has been issued to the Company,
Papierfabrik GmbH and the Subsidiaries with respect to any
Company Intellectual Property, identifies each pending patent
application or application for registration which the Company,
Papierfabrik GmbH and the Subsidiaries has made with respect
to any of the Company Intellectual Property, and identifies
each license, agreement, or other permission which the
Company, Papierfabrik GmbH and the Subsidiaries has granted to
any third party with respect to any of the Company
Intellectual Property (together with any exceptions). Correct
and complete lists of all such patent, registrations,
applications, licenses, agreements, and permissions (as
amended to date) have been made available to the Purchaser.
Section 2.13 of the Company Disclosure Letter also identifies
each trade name or unregistered trademark used by the Company,
Papierfabrik GmbH and the Subsidiaries in connection with any
of its businesses. With respect to each item of Company
Intellectual Property required to be identified in the Company
Disclosure Letter:
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(i) the Company, Papierfabrik GmbH and the Subsidiaries
possess all right, title, and interest in and to the
item, free and clear of any security interest,
license, or other restriction or encumbrance of any
kind;
(ii) the item is not subject to any outstanding
injunction, judgement, order, decree, ruling, or
charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is
threatened in writing which challenges the legality,
validity, enforceability, use, or ownership of the
item; or
(iv) none of the Company, Papierfabrik GmbH and the
Subsidiaries have ever agreed to indemnify any person
for or against any interference, infringement,
misappropriation, or other conflict with respect to
the item;
except as disclosed in Section 2.13 of the Company Disclosure
Letter.
2.14 BREACH OF AGREEMENTS.
(a) The Company or Papierfabrik GmbH or the Subsidiaries have not
breached, violated or defaulted under, or received notice that
they have breached, violated or defaulted under, any of the
material terms or conditions of any material agreement to
which any of them is a party or by which any of them is bound
(any such agreement a "Material Contract"), nor is there to
the best knowledge of the Selling Stockholders any event that
would constitute such a breach, violation or default with the
lapse of time, giving of notice or both. Each Material
Contract is in full force and effect as against the Company or
Papierfabrik GmbH or the Subsidiaries.
(b) The Sale and Purchase Option Agreement between Papierfabrik
GmbH and Bollore Technologies S.A., France ("Bollore") dated
February 1, 1995/April 4, 1995 with respect to the shares in
Papeteries de Cascadec S.A., France ("Cascadec") is in full
force and effect as against Papierfabrik GmbH and Bollore and
is enforceable in accordance with its terms and conditions.
2.15 INTERESTED PARTY TRANSACTIONS. No managing director
("Geschaftsfuhrer") of the Selling Stockholders, the Company,
Papierfabrik GmbH and the Subsidiaries, nor any
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parent, sibling, descendant or spouse of any of such persons, nor any
trust, partnership or corporation in which any of such persons or the
Selling Stockholders have an interest, has or in the past three
accounting years has had directly or indirectly, (i) an interest in any
entity which furnished or sold, or furnishes or sells, services or
products to the Company or Papierfabrik GmbH or the Subsidiaries, or
(ii) any interest in any entity that purchased or purchases from the
Company or Papierfabrik GmbH or the Subsidiaries, any goods or
services; provided that ownership of less than five percent (5%) of the
outstanding stock (or equivalent ownership interests) of a corporation
or other entity shall not be deemed an "interest in any entity" for
purposes of this Section 2.15.
2.16 GOVERNMENTAL AUTHORIZATION. The Company and Papierfabrik GmbH and the
Subsidiaries have obtained, and comply in all material respects with
the terms of, all consents, licenses, permits, grants or other
authorizations to be issued to the Company or Papierfabrik GmbH or the
Subsidiaries by a Governmental Entity and which is material for the
operation of the Company's or Papierfabrik GmbH's or the Subsidiaries'
business as presently conducted. Neither the Company, Papierfabrik
GmbH nor the Subsidiaries have received, and to the best knowledge of
the Selling Stockholders have been threatened to receive or have
reason to expect any revocation, cancellation, or onerous modification
of any governmental authorization mentioned above.
2.17 LITIGATION. There is no action, suit, claim, proceeding or arbitration
of any nature pending or threatened in writing against the Company or
Papierfabrik GmbH or the Subsidiaries; there is no investigation
pending or threatened in writing against the Company or Papierfabrik
GmbH or the Subsidiaries by or before any governmental entity in the
excess of DEM 50,000.-. To the best knowledge of the Selling
Stockholders there is no event which is likely to give rise to any
litigation or arbitration proceedings by or against the Company or
Papierfabrik GmbH or the Subsidiaries. To the best knowledge of the
Selling Stockholders no governmental entity or other body has at any
time challenged or questioned the legal right of the Company or
Papierfabrik GmbH or the Subsidiaries to conduct their respective
businesses or to offer or sell any of its products in the present
manner or style thereof.
2.18 ACCOUNTS RECEIVABLE / INVENTORY.
(a) All accounts receivable of Papierfabrik GmbH and Cascadec
("Accounts Receivable") (i) arose in the ordinary course of
business, (ii) represent bona fide indebtedness incurred by
the applicable account debtors in the amounts
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invoiced by the Company, Papierfabrik GmbH and the
Subsidiaries and stated on their books and records, subject to
collection and (iii) are carried at values determined in
accordance with GAAP or the general accepted accounting
principles of the country of residence of the respective
company consistently applied. The reserves against the
Accounts Receivable have been established in accordance with
GAAP or the general accepted accounting principles of the
country of residence of the respective company and based upon
a review of such Accounts Receivable, to the best knowledge of
the Selling Stockholders such reserves are adequate. No person
has any lien on any of such Accounts Receivable and no request
or agreement for deduction or discount has been made with
respect to any of such Accounts Receivable. To the best
knowledge of the Selling Stockholders, none of such Accounts
Receivable is owed by a person or entity that has sought the
protection of any bankruptcy or insolvency law or is the
subject of any dispute as to payment.
(b) The inventory of the Company, Papierfabrik GmbH and the
Subsidiaries were purchased, acquired or produced in the
ordinary and regular course of business. The reserves against
such inventory have been established in accordance with GAAP
or the general accepted accounting principles of the country
of residence of the respective company. To the best knowledge
of the Selling Stockholders inventory reserves as reflected on
the Financial Statements are adequate with respect to
inventories that are obsolete, defective or in excess of the
needs of the business of the Company, Papierfabrik GmbH and
the Subsidiaries reasonably anticipated for the normal
operation of the business consistent with past practices and
outstanding customer contracts. The presentation of inventory
on the Financial Statements conforms to GAAP or the general
accepted accounting principles of the country of residence of
the respective company. The inventory 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, and none of which is obsolete, damaged, or
defective, subject only to such exceptions as are reflected in
the audited Financial Statements.
2.19 BROKERS' AND FINDERS' FEES. The Company, Papierfabrik GmbH and the
Subsidiaries have not incurred, nor will they incur, directly or
indirectly, any liability for brokerage or finders' fees, agents'
commissions or legal fees in connection with this Agreement or any
transaction contemplated hereby. Should any claims for commissions
fees, or expenses of any kind be made by any other person claiming an
interest in this Agreement, or in the underlying transactions, by
reason of any agreement,
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understanding or other arrangement with the Company, Papierfabrik GmbH
or the Subsidiaries, or their respective agents, servants, employees,
or other representatives, then the Selling Stockholders shall outside
the scope and mechanism of the Escrow Agreement set out in Section 5.8
et seq. hereof or in the Escrow Agreement indemnify and hold harmless
the Purchaser, or at the request of the Purchaser, the Company,
Papierfabrik GmbH or the Subsidiaries, as the case may be, from any
and all liabilities and expenses in connection therewith. The
foregoing provisions of this Section 2.19 shall survive the Closing
Date hereunder or any earlier termination of this Agreement for 30
years and shall not be subject to any limitations under Sections 5.4
through 5.6 of this Agreement.
2.20 EMPLOYEES. Section 2.20 of the Company Disclosure Letter sets forth a
list of all managing directors and consultants to the Company,
Papierfabrik GmbH and the Subsidiaries including for each managing
director and consultant, age, time of employment, salary and bonus.
Such list is complete and accurate in all material respects. Selling
Stockholders have previously provided the Purchaser with a list of all
employees which sets forth age, time of employment, function and
salary. To the best knowledge of the Selling Stockholders, no key
employee, or group of employees of any of the Company, Papierfabrik
GmbH or the Subsidiaries has any plans to terminate employment with
any of them. To the best knowledge of the Selling Stockholders (i)
none of the Company, Papierfabrik GmbH and Subsidiaries has committed
any unfair labour practice; and (ii) none of the Selling Stockholders
or officers of the Company, Papierfabrik GmbH and the Subsidiaries has
any knowledge of any organizational effort presently being made or
threatened by or on behalf of any labour union with respect to
employees of any of them.
2.21 EMPLOYEE BENEFIT PLANS; COMPLIANCE WITH LABOUR LAW.
(a) For purposes of this Section 2.21, the following terms shall
have the meanings set forth below:
(i) "Company Benefit Plan" shall refer to any plan,
program, policy, practice, contract, agreement or
other arrangement providing for pensions and other
fringe benefits - other than those disclosed under
Section 2.20 or required by mandatory law, whether or
not legally binding, including without limitation,
any plan which is or has been maintained, contributed
to, or required to be contributed to, by the Company,
Papierfabrik GmbH and the Subsidiaries for the
benefit of any Employee (as defined below), and
pursuant to which the Company,
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Papierfabrik GmbH and the Subsidiaries have or may
have any material liability, contingent or otherwise;
(ii) "Employee" shall mean any current, former or retired
employee, officer or director or their beneficiary of
the Company, Papierfabrik GmbH or the Subsidiaries.
(b) Section 2.21(b) of the Company Disclosure Letter contains an
accurate and complete list of each Company Benefit Plan. The
Company, Papierfabrik GmbH or the Subsidiaries do not have any
plan or commitment, whether legally binding or not, to
establish any new Company Benefit Plan, to modify any Company
Benefit Plan (except to the extent required by law or to
conform any such Company Benefit Plan to the requirements of
any applicable law, in each case as previously disclosed to
the Purchaser in writing, or as required by this Agreement),
or to enter into any Company Benefit Plan, nor does it have
any intention or commitment to do any of the foregoing.
(c) The Company, Papierfabrik GmbH and the Subsidiaries have
performed all obligations required to be performed by them
under each Company Benefit Plan, and (i) each Company Employee
Plan has been established and maintained in accordance with
its terms and in compliance with all applicable laws,
statutes, orders, rules and regulations; (ii) there are no
actions, suits or claims pending, or, to the knowledge of the
Selling Stockholders threatened (other than routine claims for
benefits) against any Company Benefit Plan or against the
assets of any Company Benefit Plan; and (iii) each Company
Benefit Plan can be amended, terminated or otherwise
discontinued after the Closing Date in accordance with its
terms and applicable law, without liability to the Company,
Papierfabrik GmbH and the Subsidiaries (other than ordinary
administration expenses typically incurred in a termination
event).
(d) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events)
constitute an event under any Company Benefit Plan or
agreement that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(e) To the best knowledge of the Selling Stockholders, the
Company, Papierfabrik
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GmbH and the Subsidiaries (i) are in compliance in all
material respects with all applicable laws, rules and
regulations respecting employment, employment practices, terms
and conditions of employment, including, but not limited to,
safety requirements, wages and hours, in each case, with
respect to Employees; (ii) have withheld all amounts required
by law or by agreement to be withheld from the wages, salaries
and other payments to Employees and (iii) are not liable for
any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing.
2.22 COMPLIANCE WITH LAWS. To the best knowledge of the Selling
Stockholders, the Company, Papierfabrik GmbH and the Subsidiaries have
complied in all material respects with, are not in violation in any
material respect of, and have not received any notices of any material
violation with respect to, any laws with respect to the conduct of
their respective business in the jurisdictions where they conduct
operations, are subject to governmental oversight or regulation or are
resident.
2.23 INSURANCES. To the best knowledge of the Selling Stockholders the
Company, Papierfabrik GmbH and the Subsidiaries have insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the
Company, Papierfabrik GmbH and the Subsidiaries and such insurance
policies are customary for similarly situated companies and adequate
and satisfactory to insure the Company, Papierfabrik GmbH and the
Subsidiaries against the risks associated with their business. There
is no claim by the Company, Papierfabrik GmbH and the Subsidiaries
pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such
policies and bonds have been paid, and the Company, Papierfabrik GmbH
and the Subsidiaries are otherwise in material compliance with the
terms of such policies and bonds (or other policies and bonds
providing substantially similar insurance coverage). To the best
knowledge of the Selling Stockholders there is no threatened or
pending termination of, or material premium increase with respect to,
any of such policies, and all such policies shall survive the Closing
and remain in full force and effect.
2.24 ENVIRONMENTAL MATTERS.
(a) In this paragraph:
(i) "Environmental Law" means all statutes and other
legal authority, including but not limited to local,
regional, national, and supranational
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laws, regulations in Germany or in the country of
residence of the respective company concerning the
protection of human health or the environment or the
conditions of the workplace or the generation,
transportation, storage, treatment or disposal of a
Dangerous Substance;
(ii) "Environmental License" means any permit, license,
authorization, consent or other approval required for
any of the operations of the Company, Papierfabrik
GmbH or any of the Subsidiaries under or in relation
to any Environmental Law;
(iii) "Dangerous Substance" means any natural or artificial
substance (whether in the form of solid, liquid, gas
or vapour, alone or in combination with any other
substance) capable of causing harm to man or any
other living organism, or capable of damaging the
environment or public health or welfare, including
but not limited to controlled, special, hazardous,
toxic or dangerous waste and any substance regulated
by any Environmental Laws; and
(iv) "Relevant Property" means any premises now or at any
time owned, leased or occupied by the Company,
Papierfabrik GmbH, or any of the Subsidiaries and any
premises at which the Company, Papierfabrik GmbH or
any of the Subsidiaries disposed of any Dangerous
Substance.
(b) The Company, Papierfabrik GmbH and the Subsidiaries have
obtained all requisite Environmental Licenses (all of which
are valid and existing) and have to the best knowledge of the
Selling Stockholders at all times complied in all material
respects with all applicable Environmental Law and with the
terms and conditions of all Environmental Licenses.
(c) To the best knowledge of the Selling Stockholders no
Environmental License may be revoked, modified or suspended as
a result of the acquisition by the Purchaser of the Company
Capital Stock.
(d) Neither the Company, nor Papierfabrik GmbH, nor any of the
Subsidiaries nor any of the Selling Stockholders have received
any notice or other communication from which it appears that
it is or may be in violation of any Environmental Law or
Environmental License or that any further Environmental
License may be required or that any Environmental License may
be subject to modification, suspension or revocation and there
are no
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circumstances likely to give rise to any such violation or
modification, suspension or revocation.
(e) Neither the Company, nor the Papierfabrik GmbH, nor any of the
Subsidiaries nor any of the Selling Stockholders have been
requested or ordered to undertake to clean up or to do other
corrective action in relation to any Relevant Property by any
regulatory authority nor is any such entity subject to any
investigation or inquiry by any regulatory authority
concerning any Relevant Property.
(f) Each Relevant Property is free from contamination by Dangerous
Substances affecting soil or ground water at or near such
property.
2.25 ABSENCE OF SENSITIVE PAYMENTS
The Company, Papierfabrik GmbH and the Subsidiaries have complied in
all respects with the United States Foreign Corrupt Practices Act of
1977 and all comparable local laws applicable to any of them. Neither
the Company, Papierfabrik GmbH, the Subsidiaries nor any Selling
Stockholder, nor any representative of the Company, Papierfabrik GmbH,
the Subsidiaries or the Selling Stockholders, has made any
contributions, payments or gifts to or for the private use of any
governmental official, employee or agent in any material amount where
either the payment or the purpose of such contribution, payment or
gift is illegal under the laws of the United States or any other
jurisdiction. Neither the Company, Papierfabrik GmbH, the Subsidiaries
nor any Selling Stockholder has established or maintained any
unrecorded fund or asset for any purpose.
2.26 COMPLETENESS; NO MISREPRESENTATIONS
The copies of all instruments, agreements, and written information,
including without limitation the Company Disclosure Letter hereto,
delivered pursuant to this Agreement or otherwise furnished or made
available to the Purchaser by the Company, Papierfabrik GmbH, the
Subsidiaries, the Selling Stockholders or any representatives of any
of them are complete and correct in all material respects as of the
date hereof. The representations and warranties made by the Selling
Stockholders in this Agreement, the Company Disclosure Letter or in
any Schedule or other document furnished by the Company, Papierfabrik
GmbH, the Subsidiaries, the Selling Stockholders or any representative
or any of them do not contain any untrue statement of a material fact,
or omit to state a material fact necessary to make the
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statements or facts contained herein or therein not misleading.
2.27 COMPLIANCE WITH U.S. INTERNAL REVENUE CODE
Schoeller & Hoesch N.A., Inc., has timely filed all information
returns required to be filed under Section 638A of the Internal
Revenue Code of 1986, as amended, with the United States Internal
Revenue Service and has maintained permanent books of account or
records sufficient to establish the correctness of such returns under
all applicable Treasury regulations. With respect to each transaction
with a related party reportable on such returns, Schoeller & Hoesch
N.A., Inc. has obtained the agreement of each such related party to
designate Schoeller & Hoesch N.A., Inc. to act as such party's agent
with respect to any request to examine records or produce testimony
that may be relevant to the U.S. income tax treatment of any
transaction between Schoeller & Hoesch N.A., Inc. and such related
party or with respect to any summons for such records or testimony,
and to execute any and all documents required by applicable Treasury
regulations to evidence such agency relationship. No penalty has been
proposed or assessed against Schoeller & Hoesch N.A., Inc. for failure
to comply with any requirements of the federal income tax laws of the
United States.
2.28 BEST KNOWLEDGE
(a) The term "best knowledge" wherever used in this Agreement or
in the Company Disclosure Letter exclusive of its Exhibits,
means knowledge obtained after due inquiry and the term "best
knowledge of the Selling Stockholders" wherever used in this
Agreement or in the Company Disclosure Letter exclusive of its
Exhibits shall also refer to, and include, the knowledge
(after due inquiry) of Messrs. Christoph Sieber-Rilke, Gerhard
Federer, Dr. Eckart Kussner, Werner Ruckenbrod, Hans-Joachim
Leichnitz, Jiri Voronecky.
(b) Subject to the facts disclosed in the body of the Company
Disclosure Letter exclusive of its Exhibits, no due diligence
exercise conducted by the Purchaser or its advisers shall
relieve or discharge any of the Selling Stockholders from the
representations and warranties contained in this Agreement or
any obligation or liability assumed thereunder and the legal
principles expressed by Sections 460, 464 of the German Civil
Code shall not apply.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each Purchaser represents and warrants to the Selling Stockholders that at the
date of this Agreement and at the date of Closing:
3.1 ORGANIZATION, STANDING AND POWER. Each Purchaser is a company with
limited liability duly organized, validly existing and in good
standing under the laws of the Federal Republic of Germany.
3.2 AUTHORITY. Each Purchaser has all requisite corporate power and
authority to enter into this Agreement, the Escrow Agreement and the
Arbitration Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement, the
Escrow Agreement and the Arbitration Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of each
Purchaser, and no further action is required on the part of each
Purchaser to authorize the Acquisition, this Agreement and the
transactions contemplated hereby and thereby except as expressly set
forth elsewhere herein. This Agreement has been duly executed and
delivered by each Purchaser and, assuming due authorization, execution
and delivery by the Company and the Selling Stockholders, constitutes
the valid and binding obligation of each Purchaser, in each case
enforceable in accordance with its terms, except as such
enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.3 CONSENTS. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission or other Governmental Entity or any third party,
including a party to any agreement with the Company (so as not to
trigger any Conflict), is required by or with respect to the Purchaser
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except as may be
required under any applicable antitrust laws or the rules of the
American Stock Exchange or the Securities and Exchange Commission.
3.4 FINANCING. The Purchaser shall have as at Closing sufficient funds to
pay the Purchase Price and any increase to be paid pursuant to Section
1.3 (b) hereof. On the date hereof the Purchaser has submitted to the
Selling Stockholders a commitment letter issued by Bankers Trust
Company and duly executed by PHG to finance the
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transactions contemplated hereunder.
ARTICLE IV
PROTECTIVE COVENANTS
4.1 CONDUCT OF BUSINESS. The Selling Stockholders shall cause that the
Company, Papierfabrik GmbH and the Subsidiaries to conduct their
respective businesses between signing of this Agreement and the
Closing Date in the ordinary course of business. From signing until
Closing Date the Selling Stockholders shall provide the Purchaser with
reasonable access to the facilities, management, books and records of
the Company, Papierfabrik GmbH and the Subsidiaries to assist in the
preparation of post-closing integration of the Schoeller & Hoesch
Group provided that the Agent has consented thereto in advance. The
Selling Stockholders shall use their best efforts to obtain letters of
resignation of the auditors of the non-German subsidiaries on or
before Closing Date.
4.2 FCO. The Purchaser and the Selling Stockholders shall work
expeditiously and in good faith to secure the clearance of the FCO on
or before December 31, 1997 through the voluntary filing of the
pre-notification application to the FCO. The respective filing shall
be made on the date of signing of this Agreement.
4.3 ANNOUNCEMENTS. Except as required by the rules of the American Stock
Exchange or the Securities and Exchange Commission, no party shall
make or permit any person connected with it or him to make any
announcement concerning this sale and purchase or any ancillary matter
on or before Closing except as required by law or any competent
regulatory body or with the written approval of the other parties,
such approval not to be unreasonably withheld or delayed.
4.4 EXPENSES. All fees, expenses and taxes incurred in connection with
the Acquisition, including but not limited to all legal, accounting,
financial advisory, consulting fee, expenses and taxes of third
parties ("Third Party Expenses") incurred by a party in connection
with the negotiation of the terms and conditions of this Agreement and
the consummation of the transactions contemplated hereby, shall be the
obligation of the respective party incurring such fees and expenses
(and none of the Third Party expenses shall be charged to or assumed
by the Company, Papierfabrik GmbH or any of the Subsidiaries),
provided, however, that all Third Party Expenses incurred in
connection with consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under
applicable antitrust laws, any
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notarial fees and any real estate transfer tax related to the
Acquisition shall be borne by the Purchaser.
4.5 LEGAL REQUIREMENTS. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable
endeavors to take promptly, or cause to be taken, all reasonable
actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations
to (i) consummate and make effective the transactions contemplated
hereby, (ii) to obtain all necessary waivers, consents and approvals
and to effect all necessary registrations and filings and (iii) to
remove any injunctions or other impediments or delays, legal or
otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.
4.6 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each of the Selling
Stockholders, at the request of the Purchaser, and the Purchaser, at
the request of the Selling Stockholders, shall execute and deliver, or
cause to be executed and delivered, such other instruments and do and
perform, or cause to be done and performed, such other acts and things
as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated
hereby.
ARTICLE V
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNITY; ESCROW
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Selling Stockholders in this Agreement shall survive the
Closing for a period ending on the date eighteen (18) months after the Closing
Date, except as provided for in Section 2.9 (b) (i) fifth sentence and in
Section 2.19 and except as follows:
(a) The representations and warranties of the Selling Stockholders
contained in Sections 2.1 and 2.2 of this Agreement shall be
subject to the statutory period of limitation under German
law.
(b) The representations and warranties of the Selling Stockholders
contained in Section 2.9(b)(i) second to fourth sentences
shall with respect to the Company, Papierfabrik GmbH and the
German Subsidiaries survive the Closing Date for a period
ending on the date four (4) weeks after the date on which the
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respective tax assessments following a tax audit have been
issued or deemed to be issued (e.g. VAT assessments) against
the Company, Papierfabrik GmbH and the German Subsidiaries
relating to periods prior to and ending on the December 31,
1997, provided, however, that such representations and
warranties shall not survive the Closing Date beyond December
31, 2001.
(c) The representations and warranties of the Selling Stockholders
contained in Section 2.24 shall survive the Closing Date for a
period ending on the date twentyfour (24) months after the
Closing Date.
5.2 AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations set forth herein, the Selling
Stockholders, severally but not jointly, agree to indemnify,
defend and hold harmless the Purchaser from and against any
and all losses, expenses, liabilities or other damages,
including interest and penalties (collectively, "Damages") by
reason of or otherwise arising out of any breach of any
representation, warranty or covenant made or given by the
respective Selling Stockholder in Article II and IV provided,
however, that a claim for Damages is made by the Purchaser
within the applicable period set forth in Section 5.1 hereof
and provided further however that any indemnification for any
breach of representations, warranties or covenants including
under Section 2.9 and 2.19 shall be excluded if and to the
extent the underlying facts and circumstances which caused
Damages have been taken into account for the adjustment of the
Purchase Price under Section 1.3(b) hereof.
(b) Any tax benefit of the Company, PapierfabrikGmbH or the
Subsidiaries arising out of items which triggered tax
liabilities under Section 2.9 hereof shall be discounted to
present value at the time of making the claim (discount rate
10 %) and set off against such liability.
5.3 COSTS INCLUDED. The amounts for which the Selling Stockholders may
have to indemnify under this Article V shall extend to, and as used
herein the term "Damages" shall include, attorneys' fees, accountants'
fees, costs of litigation and other expenses actually incurred in the
defense of any claim asserted against them and any amounts paid in
settlement or compromise of any claim asserted against them, but only
to the extent that the claim asserted is or would have been subject to
the indemnification provisions of Section 5.2.
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5.4 LIMITATION ON INDEMNITY. With respect to any breach of the
representations and warranties of Article II or the covenants
contained in Article IV of any of the Selling Stockholders the
indemnification shall be limited under all circumstances to the
Contributed Escrow Amount of such Selling Stockholder who made such
breach. All further recourses and claims of the Purchaser as to its
and the Company's benefit for whatsoever reason and under any
applicable law in particular, but not limited thereto the right to
rescind this Agreement and all further liabilities for whatsoever
reason and under any applicable law in particular, but not limited to
"culpa in contrahendo" of the Selling Stockholders are herewith
expressly excluded. This limitation does not apply with respect to the
representations and warranties contained in Sections 2.1 and 2.2 and
the covenants contained in Section 4.1, 1. sentence of this Agreement
and does not apply with respect to any representation, warranty or
covenant under Article II or IV in the event of willful
misrepresentation or fraud.
5.5 DE MINIMIS LIMITATION. Notwithstanding the other sections of this
Article V, the Selling Stockholders shall have no liability with
respect to the inaccuracy of any representations or the breach of any
of the warranties of Article II for the Damage equal to twenty percent
(20 %) of its Contributed Escrow Amount ("Basket"), but shall be
liable (not, however, including the aggregate Damages equal to twenty
percent (20 %) of this Contributed Escrow Amount) for any such Damages
beyond the aggregate Damages equal to twenty percent (20 %) of this
Contributed Escrow Amount with respect to any breach of any
representations and warranties of Article II.
This limitation does not apply with respect to the representations and
warranties contained in Sections 2.1 and 2.2 of this Agreement and the
covenants contained in Section 4.1, 1. sentence of this Agreement and
does not apply with respect to any representation, warranty or
covenant under Article II or IV in the event of willful
misrepresentation or fraud.
5.6 FURTHER LIMITATION. Prior to taking recourse to the Escrow Fund or to
requiring indemnification, the Purchaser shall use reasonable efforts
to consult with the Selling Stockholders' Agent (as defined hereunder)
regarding the subject matter of the potential claim and shall provide
to the Agent on behalf of the Selling Stockholders a reasonable
opportunity to remedy the subject of the potential claim provided that
such breach must be remedied to the Purchaser's satisfaction within
thirty (30) days of the Purchaser notifying the Selling Stockholders'
Agent of the breach. Notwithstanding the foregoing, nothing in this
Section 5.6 shall limit the ability of Purchaser to take recourse to
the Escrow Fund or to require indemnity under this Article V. The
Selling Stockholders agree with the Purchaser to waive and hereby do
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waive any rights or claims which they may have in respect of any
misrepresentation, inaccuracy or omission in or from any information
or advice supplied or given by the Company, Papierfabrik GmbH or the
Subsidiaries or their employees in connection with the giving of the
representations and warranties and the preparation of the Company
Disclosure Letter.
5.7 INDEMNIFICATION PROCEDURES. Purchaser agrees to give the Agent on
behalf of the Selling Stockholders, within 30 days of actual becoming
aware of the facts of a possible claim written notice of any event or
assertion of which it has knowledge concerning any claim for Damages
as to which it may request indemnification hereunder. Failure to so
notify the Agent shall not relieve the Selling Stockholders of any
liability they may have to the Purchaser except to the extent that the
defense of any claim or demand asserted by a third party is materially
prejudiced by such failure to notify, and only so long as the Agent
and the Selling Stockholders did not receive or otherwise have actual
notice thereof. Each party will co-operate with the other in
determining the validity of any such third party claim or assertion.
If the Damages relate to a claim or demand asserted by a third party,
the Agent on behalf of the Selling Stockholders shall have the right
at its expense to participate in the defense of any such claim or
demand, and the Purchaser agrees not to settle such claim or demand
without the Agent =s consent, which consent shall not be withheld
unreasonably.
5.8 ESCROW ARRANGEMENTS
(a) At the Closing Date, Purchaser shall wire to the Escrow Agent
appointed in accordance with the Escrow Agreement (the "Escrow
Agent") to the account determined by the parties hereof on or
before Closing Date (the "Escrow Account") the Escrow Amount,
such deposit to constitute an escrow fund (the "Escrow Fund")
to be held in the Escrow Account for the benefit of each of
the Selling Stockholders pursuant to an Escrow Agreement
substantially in the form attached hereto as SCHEDULE 5.8.
(b) To the extent the Purchaser becomes entitled to any Damages,
Purchaser shall be entitled to apply against such Damages an
amount equal to such Damages from the Escrow Fund in
accordance with the terms of the Escrow Agreement and this
Article V. Any such payment shall be applied on such
Contributed Escrow Amount on a pro rata basis of such Selling
Stockholder which has to indemnify. The Escrow Agreement shall
provide that any portion of the Escrow Amount still remaining
shall be released not later than twentyfour (24)
31
<PAGE> 35
months after Closing Date, subject to continual maintenance in
the Escrow Fund of any portion of the Escrow Amount necessary
to cover any substantiated claims for Damages made by the
Purchaser in writing prior to the release date and provided
that the Escrow Amount remaining after the lapse of 24 months
after the Closing Date such amount not to be in excess of 10 %
of the Contributed Escrow Amount shall remain in Escrow to
cover Damages due to breaches of Section 2.9 (b) (i) and be
released not later than January 1, 2002. [For the avoidance of
doubt: Any portion of the Escrow Amount necessary to cover any
substantiated claims for Damages made by the Purchaser in
writing prior to the expiry of the 24 months mentioned above
shall be maintained in the Escrow Fund beyond January 1,
2002.]
5.9 MECHANICS OF MAKING CLAIMS . The mechanics of making claims and
payments from the Escrow Fund shall be determined pursuant to the
Escrow Agreement.
ARTICLE VI
APPOINTMENT OF
AGENT FOR SELLING STOCKHOLDERS
6.1 APPOINTMENT OF AGENT.
(a) Power of Attorney. Upon execution of this Agreement, and
without further act of any Selling Stockholder, Mr. Reinhard
Loffler and in the event that he is hindered Mr. Torsten Grede
c/o Deutsche Beteiligungs Aktiengesellschaft
Unternehmensbeteiligungsgesellschaft, Emil-von-Bering-StraBe
2, 60439 Frankfurt am Main shall be appointed as agent and
attorney-in-fact (the "Agent") for each Selling Stockholder on
whose behalf funds are to be deposited into the Escrow Fund,
to give and receive notices and communications, to authorize
delivery to Purchaser of monies from the Escrow Fund in
satisfaction of claims by Purchaser, to object to such
deliveries, to agree to, negotiate, enter into settlements and
compromises of, and to comply with orders of courts and awards
of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of Agent for
the accomplishment of any action required or permitted to be
taken by the Selling Stockholders hereunder or under the
Escrow Agreement. Such agency may be changed by the Selling
Stockholders from time to time upon not less than thirty (30)
days prior written notice to Purchaser and Escrow Agent;
provided that the Agent may not be removed unless holders of
32
<PAGE> 36
a two-thirds interest of the Escrow Amount agree to such
removal and to the identity of the substituted agent. No bond
shall be required of the Agent, and the Agent shall not
receive compensation for his or her services. Notices or
communications to or from the Agent shall constitute notice to
or from each of the Selling Stockholders.
(b) Limitation of Liability. The Agent shall not be liable for
any act done or omitted hereunder as Agent while acting in
good faith and in the exercise of reasonable judgment. The
Selling Stockholders on whose behalf the Escrow Amount was
contributed to the Escrow Fund shall severally indemnify the
Agent and hold the Agent harmless against any loss, liability
or expense incurred without negligence or bad faith on the
part of the Agent and arising out of or in connection with the
acceptance or administration of the Agent's duties hereunder,
including the reasonable fees and expenses of any legal
counsel retained by the Agent.
(c) Actions of the Agent. A decision, act, consent or instruction
of the Agent shall constitute a decision of all the Selling
Stockholders for whom a portion of the Escrow Amount otherwise
issuable to them are deposited in the Escrow Fund and shall be
final, binding and conclusive upon each of such Selling
Stockholders. In connection with any such decision, act,
consent, notice, or instruction, the Agent shall be entitled
to rely upon the written consent or instruction by holders of
a majority in interest of the Escrow Amount on behalf of all
such holders. The Escrow Agent and Purchaser may rely upon any
such decision, act, consent, notice, or instruction of the
Agent as being the decision, act, consent or instruction of
each of such stockholder of the Company. The Escrow Agent and
Purchaser are hereby relieved from any liability to any person
for any acts done by them in accordance with such decision,
act, consent or instruction of the Agent.
ARTICLE VII
AMENDMENT AND WAIVER
7.1 AMENDMENT. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each
of the parties hereto, provided, however, no notarial deed shall be
required. For purposes of this Section 7.1, the Selling Stockholders
agree that any amendment of this Agreement signed by the Agent shall
be binding upon and effective against all Selling Stockholders whether
33
<PAGE> 37
or not they have signed such amendment.
7.2 EXTENSION; WAIVER. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an
instrument in writing signed by or on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered by hand, mailed
by registered air mail (return receipt requested), postage prepaid, or
delivered by recognized air courier, freight prepaid, or sent via
facsimile (with acknowledgment of complete transmission) to the
parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Purchaser, to: P.H. Glatfelter Company
Attn.: Mr. Thomas C. Norris
228 S. Main Street
Spring Grove
PA 17362
U.S.A.
with a copies to:
Bruckhaus Westrick Stegemann
Attn.: Ralph Kastner
Taunusanlage 11
60329 Frankfurt
Ballard Spahr Andrews & Ingersoll
Attn.: Morris Cheston, Jr., Esq.
1735 Market Street
51st Floor
Philadelphia
PA 19103-7599
U.S.A.
and
(b) if to the Agent or any of the Selling Stockholders, to:
Deutsche Beteiligungs Aktien-gesellschaft
Unternehmens-beteiligungsgesellschaft
Attn.: Reinhard Loffler and
34
<PAGE> 38
Torsten Grede
Emil-von-Bering-StraBe 2
60439 Frankfurt
with a copy to:
Doser Amereller Noack
Baker & McKenzie
Attn.: Dr. Uwe Steininger and
Lutz Zimmer
OttostraBe 8
80333 Munchen
such notice or other communication shall for all purposes of this
Agreement be treated as effective when received, and shall in any
event be deemed to have been received (i) when delivered, if delivered
personally or (ii) sent by telecopy and confirmed in writing.
8.2 INTERPRETATION. The table of contents and headings contained in this
Agreement are for reference purposes only, and shall not affect in any
way the meaning or interpretation of this Agreement.
8.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Company Disclosure
Letter and the SCHEDULES hereto and thereto, and the documents and
instruments and other agreements among the parties hereto and thereto
referenced herein:
(a) constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, and
(b) shall not be assigned, by operation of law or otherwise
without the prior written consent of the Agent on behalf of
the Selling Stockholders and of the Purchaser, except to a
wholly owned subsidiary of PHG provided the obligation under
the guarantee under Article 9.2 shall not be transferred and
affected thereby.
8.4 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and effect,
and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to give effect to
the intent of the parties hereto. The
35
<PAGE> 39
parties further agree to replace such void or unenforceable provision
of this Agreement with a valid and enforceable provision that will
achieve, to the extent reasonably possible, the economic, business and
other purposes of such void or unenforceable provision.
8.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Federal Republic of Germany, without
regard to applicable principles of conflicts of laws thereof.
8.6 ENGLISH LANGUAGE. The parties hereto agree that the transactions
contemplated by this Agreement shall be conducted in the English
language, that this Agreement and the SCHEDULES hereto, and the
documents and instruments and other agreements among the parties
hereto referenced herein shall be written in English and that all
notices provided by the parties pursuant to this Agreement and the
SCHEDULES hereto, and the documents and instruments and other
agreements among the parties hereto referenced herein shall be in
English.
8.7 ARBITRATION. All disputes, controversies or differences arising
out of or in connection with this Agreement shall be settled by
arbitration under the Arbitration Agreement attached hereto as
SCHEDULE 8.7.
ARTICLE IX
GUARANTEES
9.1 DBAG GUARANTEE. DBAG hereby unconditionally and irrevocably guarantees
any and all obligations of the Selling Stockholders under Section 2.9
(b) (i) sentences 4 and 5 (Real Estate Transfer Tax), Section 2.19
(Brokers' and Finders' Fee) and Section 5.2 in connection with Section
5.4 last sentence and Section 5.5 last sentence (Organization, Capital
Structure, willful misrepresentation, fraud and covenants as to
Section 4.1, 1. sentence) and any repayment to be made under Section
1.3 (b) (Purchase Price Adjustment).
9.2 PHG GUARANTEE. PHG hereby unconditionally and irrevocably guarantees
any and all obligations of the Purchaser under this Agreement.
IN WITNESS WHEREOF, the Purchaser, Selling Stockholders and the Guarantors have
caused this Stock Purchase Agreement to be signed by their duly authorized
respective
36
<PAGE> 40
officers, all as of the date first written above.
<TABLE>
<S> <C>
PURCHASER PURCHASER
Raboisen Zweihundertneunte Vermo- Raboisen Zweihundertzehnte
gensverwaltungsgesellschaft mbH Vermogensverwaltungsgesellschaft mbH
/s/ Hans-Jorg Stadtler /s/ Hans-Jorg Stadtler
- ------------------------------------ ------------------------------------
By: By:
Name: Name:
Title: Title:
SELLING STOCKHOLDERS
RQPO Beteiligungs GmbH & Co. EVOBESTRA Vermogensverwaltungs-
Papier KG gesellschaft mbH
/s/ Lutz Zimmer /s/ Lutz Zimmer
- ----------------------------------- -----------------------------------
By: By:
Name: Name:
Title: Title:
GUARANTORS
P. H. Glatfelter Company Deutsche Beteiligungs Aktiengesellschaft
Unternehmensbeteiligungsgesellschaft
/s/ Hans-Jorg Stadtler /s/ Lutz Zimmer
- ------------------------------------ -----------------------------------
By: By:
Name: Name:
Title: Title:
</TABLE>
37
<PAGE> 41
SCHEDULE 1.2
<TABLE>
<CAPTION>
SHARES
SELLING STOCKHOLDER (DM) % OF
<S> <C> <C> <C> <C>
1. RQPO Beteiligungs GmbH & Co. 50,000* 50 Company
Papier KG 49,500 49,5 Company
2. EVOBESTRA 500 0,5 Company
Vermogensverwaltungsgesellschaft mbH
TOTAL 1000,000 100,000%
</TABLE>
<TABLE>
<CAPTION>
SHARES (DM) PURCHASE PRICE
PURCHASERS PURCHASED DM
<S> <C> <C> <C>
1. Raboisen Zweihundertneunte 50,000*
Vermogensverwaltungsgesellschaft 49,500 268,650,000
mbH
2. Raboisen Zweihundertzehnte 500 1,350,000
Vermogensverwaltungsgesellschaft
mbH
TOTAL 100,000 270,000,000-
</TABLE>
* The share in the nominal amount of DEM 50,000,- will come into existence upon
registration of the capital increase resolved by the shareholders' meeting on
September 19, 1997 (URNr. 246/1997 of the notary public Dr. Joachim Treeck in
Frankfurt/Main).
<PAGE> 42
SCHEDULE 1.3 (b)
Estimated
Consolidated Balance Sheet
S&H Papier-Holding GmbH
(December 31, 1997)
<TABLE>
<S> <C>
Fixed Assets 77.1
Current and Other Assets 98.0
Total Assets 175.1
Equity 66.2
Provisions (Pension, Tax and Others) 26.0
Net Bank Debt 67.9
Liabilities to Shareholders 2.2
Other Liabilities 12.5
Total Liabilities and Shareholders' Equity 175.1
</TABLE>
<PAGE> 43
SCHEDULE 1.5 (c) 1 - WIRE TRANSFER INSTRUCTIONS
[Intentionally Omitted;
will be furnished supplementally to the
Commission upon request]
<PAGE> 44
SCHEDULE 1.5 (c) 2
<TABLE>
<CAPTION>
SELLING STOCKHOLDERS CONTRIBUTED ESCROW AMOUNT
<S> <C>
1. RQPO Beteiligungs GmbH & Co. 26,865,000
Papier KG (RQPO)
2. EVOBESTRA Vermogens-
verwaltungsgesellschaft mbH (EVOBESTRA) 135,000
TOTAL 27,000,000
</TABLE>
<PAGE> 45
SCHEDULE 2 - ORGANIZATIONAL CHART
[Intentionally Omitted;
will be furnished supplementally to the
Commission upon request]
<PAGE> 46
SCHEDULE B
[Exhibits 2.3, 2.11, 2.13, 2.20 and 2.21 to Schedule B Intentionally Omitted;
will be furnished supplementally to the Commission upon request]
COMPANY DISCLOSURE LETTER
of
S & H Papier-Holding GmbH
regarding
Representations and Warranties under Article II
of
the Stock Purchase Agreement
by and among
Raboisen Zweihundertneunte Vermogensverwaltungsgesellschaft mbH,
Raboisen Zweihundertzeunte Vermogensverwaltungsgesellschaft mbH,
and
the Selling Stockholders of S & H Papier-Holding GmbH
The disclosures set forth herein are made with reference to
the representations and warranties made by the Selling Stockholders in Article
II of the Stock Purchase Agreement dated as of November 14, 1997 (the
"Agreement") between Raboisen Zweihundertneunte
Vermogensverwaltungsgesellschaft mbH and Raboisen Zweihundertzeunte
Vermogensverwaltungsgesellschaft mbH and the Selling Stockholders of S & H
Papier-Holding GmbH. Except as otherwise stated herein, all capitalized terms
used herein shall have the meanings
<PAGE> 47
given to them in the Agreement. Section numbers used herein correspond to
section numbers in the Agreement. Disclosures made in any section of the
Disclosure Letter shall constitute disclosure for the purposes of all other
sections of the Agreement. Exhibits to the Company Disclosure Letter are
provided for informational purposes only and do not qualify or otherwise affect
the representations and warranties made in the Agreement. In referencing any
information in this Disclosure Letter, including legal proceedings, the Selling
Stockholders do not necessarily take a position that such matters are or are
not material for purposes of the Agreement or for any other purpose whatsoever.
ARTICLE II
REPRESENTATION AND WARRANTIES OF THE
SELLING STOCKHOLDERS
2.2 CAPITAL STRUCTURE
Pursuant to an agreement dated April 4, 1995 between
Papierfabrik GmbH and Bollore Technologies S.A. ("Bollore")(the "Option
Agreement") Papierfabrik GmbH is entitled to require the sale of the shares in
Cascadec held by Bollore from September 1 to December 31, 1998. Bollore may
require from Papierfabrik GmbH to purchase such stock held by Bollore from
February 1 to May 31, 1999. The purchase price in the event of the exercise of
the option shall amount to FF 65,000,000.00 or FF 45,000,000.00 such amounts
being subject to the respective choice by Papierfabrik GmbH. If the purchase
price amounts to FF 45,000,000.00 investments shall be made in the aggregate
amount of FF 30,000,000.00 within a period of 36 months from the exercise of
the option or an employment
<PAGE> 48
guarantee shall be given for 70 employees for a period of 36 months from the
exercise of the option. In case of a breach of such provisions the purchase
price of FF 45,000,000.00 shall be increased by the difference between FF
30,000,000.00 and the actual investments.
2.3 SUBSIDIARIES
EXHIBIT 2.3 contains a list of all subsidiaries of the Company
and Papierfabrik GmbH.
2.5 NO CONFLICT
The consummation of the transactions contemplated hereby may
give rise to a right of termination, cancellation, modification or acceleration
of the agreements with:
- Kreditanstalt fur Wiederaufbau on the granting of
loans in the aggregate amount of DEM 24,700,000.00;
- the government of the Federal Republic of Germany on
the extension of guarantees No. GKE 3136 in the
amount of DEM 2,225,000.00 and No. GKE 3137 in the
amount of DEM 2,375,237.00 both dated February 24,
1994 for capital investments in foreign countries;
- Deutsch Bank AG on the granting of credit lines in
connection with loans extended by Kreditanstalt fur
Wiederaufbau;
- a credit line with Sparkasse Rastatt-Gernsbach in the
amount of DEM
<PAGE> 49
5,000,000.00 may be cancelled at any time.
2.7 COMPANIES FINANCIAL STATEMENTS
a. Any information disclosed in the Company Disclosure
Letter shall serve as a disclosure of information
under this section regardless of the context of which
such disclosure is placed to the extent such
information relates to the financial years 1997 and
1998.
b. Papierfabrik GmbH has entered into the following
contracts with an estimated volume of more than DEM
500,000.00:
- Stora Cell AB on the supply of cellulose
(gebleichter Nadelholz
Sulfatzellstoff)(approximately DEM
3,800,000.00);
- Stora Celbi on supply of cellulose
(Eukalyptus-Zellstoff)(approximately DEM
3,300,000.00);
- Wiessner GmbH (paper machine PM 10 phase 3
maintenance/refurbishing)(approximately DEM
547,000.00);
- Goebel GmbH on supply of equipment (DEM
2,800,000.00);
- Voith Sulzer Papiermaschinen GmbH on supply
of equipment for paper machine PM 1
(Hydroformer) (approximately DEM 630,000.00);
- Gebr. Bellmer GmbH (paper machine PM 10 phase
3 maintenance/refurbishing)
<PAGE> 50
(approximately DEM 805,780.00);
- Busch (maintenance/refurbishing of equipment
[Lackieranlage]) (approximately DEM
2,650,000.00)
c. Reemtsma, one of Papierfabrik's material customers, has
terminated its long-term business relationship to Papierfabrik
GmbH and will not continue to purchase cigarette paper after
June 1997.
d. By shareholders' resolution dated September 19, 1997
Papierfabrik GmbH has declared dividends for 1996 in the
amount of DEM 13,241,532.00 of which DEM 3,550,082.63 have
been distributed from profit reserves and advance dividends
regarding the fiscal year 1997 in the amount of DEM
12,783,974.00 DEM 4,367,435.00 of such dividends are
immediately payable, the remainder shall be payable on
December 31, 1998.
e. On September 19, 1997 Papierfabrik GmbH assigned to Gizeh-Werk
GmbH its claims for corporate income tax credit
(Korperschaftsteuererstattungsanspruch) against German tax
authorities in the aggregate amount of DEM 3,667,368.00 plus
applicable solidarity surcharge (Solidaritatszuschlag) in the
aggregate amount of DEM 275,053.00 of which DEM 212,507.00 and
DEM 15,938.00 (solidarity surcharge) had previously been
assigned to Papierfabrik GmbH from Papcel - Papier and
Cellulose, Technologie
<PAGE> 51
and Handels-GmbH. Additionally, at the same date Papierfabrik
GmbH assigned to Gizeh-Werk GmbH a claim for corporate income
tax credit (Korperschaftsteueranrechnungsguthaben) in the
amount of DEM 425,014.00
2.8 NO UNDISCLOSED LIABILITIES
Regarding sufficient pension reserves see 2.21.
2.10 RESTRICTIONS ON BUSINESS ACTIVITIES
Pursuant to the agreement between Papierfabrik GmbH and
Bollore date March 7, 1994 regarding the transfer of the business in the field
of "flat wire" and "inclined wire" of the "electrolytic capacitor paper
business" Papierfabrik GmbH is subject to a prohibition of competition in such
fields of business for a period of ten years.
2.11 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES;
CONDITION OF EQUIPMENT
a. EXHIBIT 2.11 attached hereto contains a list of all real
property owned or leased by the Company, Papierfabrik GmbH or
the Subsidiaries. The parcel of land registered in the land
register of the local court of Gernsbach is subject to the
easements and security
<PAGE> 52
interests specified in the land register; the parcel of land
owned by Schoeller & Hoesch N.A., Inc. is subject to a
mortgage in the amount of USD 500,000.00.
b. The lease agreement between Schoeller & Hoesch S.A.R.L. and
Alsabail provides for a call option pursuant to which
Schoeller & Hoesch S.A.R.L. may buy the leased real property
for FF 1.00 at the end of the term, i.e. within six (6) months
as of October 1, 2007 (according to the lease-back agreement)
which date was subsequently postponed by the amendment to the
lease-back agreement as of January 1, 2008. Papierfabrik GmbH
has given a firm offer to Alsabail for the first eight years
of the lease-back agreement to buy the leased real property in
the event that Schoeller & Hoesch S.A.R.L. should become
insolvent. The purchase price will then be the remaining lease
payments plus interest.
c. Bollore has a right of first refusal to purchase all parcel of
land of Cascadec.
d. The employees of Bollore are entitled to pass the site of
Cascadec for the purpose of visiting the cantine.
e. Papierfabrik GmbH has entered into a security agreement with
Raiffeisenbank Ochsenfurth on September 4, 1990 on the
transfer of title to products that shall be delivered to a
customer; Papierfabrik GmbH is not a debtor of Raiffeisenbank
<PAGE> 53
Ochsenfurth.
2.12 MATERIAL CONTRACTS
a. Regarding the Option Agreement see 2.2. above.
b. Papierfabrik GmbH has entered into:
- supply-/lease agreement with Schaefer Kalk,
Diez dated as of January 16, 1996 (annual
lease payment DEM 1.00),
- an agreement with Firma Topfer, Kulmbach, on
the delivery of metallized paper which
provides for a fixed price and therefore may
result in a future loss. The estimated annual
sales volume amounts to DEM 30,000,000.00.
c. Under the loan agreements between Schoeller & Hoesch S.A.R.L.
and Deutsche Bank AG, Papierfabrik GmbH is jointly and
severally liable with Schoeller & Hoesch S.A.R.L. for any
claims of Deutsche Bank AG.
d. Under the agreement dated June 11, 1991 Papierfabrik GmbH sold
and transferred the
<PAGE> 54
title to a piece of real property (land register of Gernsbach
No. 726) to Mr. and Mrs. Sieber-Rilke for a purchase price of
DEM 375,000.00 payable on August 31, 1998.
2.13 INTELLECTUAL PROPERTY
The patents, trade names and trademarks are contained in the lists
attached hereto as EXHIBIT 2.13.
The patent contained in the lists and designated as such is also held by a
party other than the Company, Papierfabrik GmgH or the Subsidiaries and
therefore is not the unlimited property of the Company, Papierfabrik GmbH
or the Subsidiaries.
2.20 EMPLOYEES
EXHIBIT 2.20 contains a list of all managing directors and consultants of
the Schoeller & Hoesch Group. The list does not include any legal counsel,
auditor or tax counsel.
<PAGE> 55
2.21 EMPLOYEE BENEFIT PLANS; COMPLIANCE WITH LABOUR LAW
a. EXHIBIT 2.21 contains a list of each Company Benefit Plan.
b. With regard to present recipients of pensions necessary adjustments of
pension claims have not been made as required by law. According to a
sample calculation additional reserves in the amount of DEM 524,733.00
should have been made with regard to eight recipients of such pension
schemes as of January 1, 1996 in order to comply with legal requirements.
Since there exist pension obligations towards an aggregate of 33
beneficiaries, this amount will most likely be higher.
c. The reserves set up for future pension payments do not sufficiently
consider early retirements of the current managing directors Dr. Kussner
and Sieber-Rilke. If both managing directors had entered into retirement
as of December 31, 1995 additional reserves in the amount of DEM
937,834.00 would have been necessary according to calculations by Schitag,
Ernst & Young, such amount will be respectively lower in case of an early
retirement by December 31, 1997.
d. As to the special benefits granted to Dr. Gert Hoesch and to Dr. Klaus
Hoesch referred to under c. of EXHIBIT 2.21 any increase in such special
benefits is not reflected in the provision made for that purpose.
<PAGE> 56
2.24 ENVIRONMENTAL MATTERS
The reconstruction/renovation of the main sewer on the site in Gernsbach
pursuant to the examination/analysis in accordance with the "Verordnung
des Umweltministeriums uber die Eigenkontrolle von Abwasseranlagen
(Eigenkontrollverordnung)" dated August 9, 1989 presented by the
Ingenieurburo fur Kanalinstandhaltung GmbH, Leonberg, dated August 19,
1997 has not been commenced. Such reconstruction/renovation will cost
from approximately DEM 850,000.00 up to DEM 1,550,000.00 such estimate
being subject to the specific plan implemented. The
reconstruction/renovation shall be performed until the end of 1999.
Reserves have not been set up yet. The remaining sewer system has not been
examined.
<PAGE> 57
EXHIBIT 2.3
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE COMPANY
<S> <C>
Papierfabrik Schoeller & Hoesch GmbH, Gernsbach* 100.00%
</TABLE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF PAPIERFABRIK GMBH
<S> <C>
Papcel - Papier and Cullulose, 100.00%
Technologie and Handels-GmbH, Gernsbach ("Papcel")
Papierfabrik Schoeller & Hoesch 100.00%
Auslandsbeteiligungen GmbH, Gernsbach
("S&H Auslandsbeteiligungen")
Unicon - Papier - und Kunststoffhandels -
GmbH, Gernsbach 100.00%
Papcel - Kiew, Kiew 100.00%
(held by Papcel)
Newtech Pulp Inc., Manila** 100.00%
(held by Papcel)
Balo-I - Industrial, Inc., Manila** 100.00%
(held by Papcel)
Schoeller & Hoesch S.A.R.L., Wisches** 100.00%
</TABLE>
<PAGE> 58
<TABLE>
<S> <C>
Papeteries de Cascadec S.A., Odet** 50.00%
Schoeller & Hoesch N.A., Inc., Summerville 100.00%
(held by S&H Auslandsbeteiligungen)
</TABLE>
* Subject to the shares held by EVOBESTRA Vermogensverwaltungsgesellschaft
mgH.
** Subject to shares held in trust.
Furthermore, Papierfabrik GmbH holds shares in
- Gesellschaft fur Papier - und Recycling (GesPaRec) GmbH (DEM 6,000.00)
- Versicherungsstelle Zellstoff und Papier GmbH (DEM 500.00)
which do not constitute a shareholding of 50% or more.
<PAGE> 59
SCHEDULE 5.8 - ESCROW AGREEMENT
[Intentionally Omitted;
will be furnished supplementally to the
Commission upon request]
<PAGE> 60
SCHEDULE 8.7 - ARBITRATION AGREEMENT
[Intentionally Omitted;
will be furnished supplementally to the
Commission upon request]
