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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 1, 1997
PINKERTON'S, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-11841 13-5318100
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
15910 VENTURA BOULEVARD, SUITE 900, ENCINO, CALIFORNIA 91436-2810
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (818) 380-8800
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective on January 1, 1997, Pinkerton's, Inc. (the "Registrant") acquired
all of the capital stock of WKD Security GmbH, a German company with its
registered office in Bisingen, Germany and its principal business office in
Bisinger Berg, 72336 Bisingen, registered in the Commercial Register of
Hechingen under HRB 300 ("WKD"). The Registrant acquired the stock through a
German partnership organized for that purpose, the partners of which are German
subsidiary companies that are ultimately wholly owned by the Registrant. WKD
provides security officer services and transports cash and valuable goods and
will continue to conduct these businesses.
The Registrant paid consideration for the WKD capital stock of DM 35
million ($22.7 million). In addition, the acquisition agreement provides for the
sellers to receive a distribution from WKD of three fourths of WKD's 1996
profits. The amount of consideration was negotiated between the Registrant and
WKD's stockholders. In negotiating the consideration, the Registrant considered
projected rates of return on investment, the strategic significance of the
acquisition, the management experience of WKD personnel, the tax effects of the
transaction, and other factors. Of the DM 35 million paid by the Registrant, DM
17.5 million was from working capital and DM 17.5 million was borrowed under the
Registrant's unsecured revolving credit facility for which Citicorp USA Inc.
serves as agent.
The capital stock of WKD was acquired from its three stockholders: Ms.
Alexandra von Rohr, Dr. Alard von Rohr and the Stiftung fur Kriminalpravention -
Klaus Stullenberg - gemeinnutzige GmbH (a charitable trust or foundation).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The financial statements and pro forma financial information required by
this item are not included in this initial report. They will be provided by
filing an amendment to this report as soon as practicable after they become
available, but no later than March 18, 1997.
(c) Exhibits.
See Exhibit Index.
2
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SIGNATURES
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.
PINKERTON'S, INC.
Date: January 16, 1997 By: /s/ James P. McCloskey
----------------------
James P. McCloskey
Executive Vice President and
Chief Financial Officer
3
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EXHIBIT INDEX
2.1 Share Purchase and Assignment Agreement dated October 10, 1996 by and
among WKD Pinkerton Security Services GmbH & Co. KG and Ms. Alexandra
von Rohr, Dr. Alard von Rohr and Stiftung fur Kriminalpravention -
Klaus Stullenberg - gemeinnutzige GmbH.
23.1 Consent of KPMG Peat Marwick LLP.*
27.1 Financial Data Schedule.*
___________
* To be filed by amendment.
4
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EXHIBIT 2.1
TRANSLATION
-----------
A. Prot. 1996/254 Authentic Copy
- ----------------- --------------
NOTARIAL DEED
SHARE PURCHASE AND ASSIGNMENT AGREEMENT
Authenticated in Basel/Switzerland on October 10, 1996
Before me, the undersigned Notar
STEPHAN CUENI
with a principal place of business in Basel/Switzerland appeared before me:
1. Mr. Thomas Curtis Jones, born on June 17, 1939, businessman, U.S. Citizen,
-----------------------
with a business address of Frankfurterstrasse 92, D-65760 Eschborn,
resident at Wiesenau 18, D-61476 Kronberg, who identified himself with a
U.S. Passport (Mr. Jones is not appearing for his own account but as an
authorized signatory under a power-of-attorney which waives the German
statutory restriction of self-dealing ((S) 181 BGB)) for
WKD Pinkerton Security Services GmbH & Co. KG, a Kommanditgesellschaft
---------------------------------------------
(limited partnership) with its principal place of business of
Frankfurterstrasse 92, D-65760 Eschborn, registered with the commercial
register of the Amtsgericht (local court) in Frankfurt pursuant to the
excerpt from the commercial register presented in the original and
attached to this notarial document in copy with is authenticated as part of
this document, through its general partner, Pinkerton Security Services
GmbH, Berlin, as to which an excerpt from the commercial register of the
Amtsgericht Charlottenburg (Berlin) under HRB 36809, was delivered and a
copy of which is authenticated as part of this document together with an
application to the commercial register, Berlin dated September 27, 1996
which is also attached hereto,
2. Herr Dr. Frank Henry Walter-von Gierke, born on August 3, 1960, attorney,
--------------------------------------
with a principal place of business at Friedrichstrasse 78, D-10117 Berlin
and resident at Wielandstrasse 14, D-10629 Berlin, who identified himself
by a personal identification card,
not acting for himself but rather through the original power-of-attorney,
dated as of
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2
October 10, 1996, is attached to this notarial deed, and through a
certified copy of articles testamentary from the Amtsgericht (local court)
of Charlottenburg dated April 20, 1988, which were delivered and a copy of
which are attached hereto, acting for
Herr Dr. Alard von Rohr, born on October 19, 1945, opera director, German
-----------------------
citizen, resident at Tannenbergallee 30, D-14055 Berlin, acting
a) for himself and
b) as executor for the estate of the businessman Alard von Rohr, last
--------------
resident at Wandalenallee 10 in Berlin (zip code 19) and who died in
Ireland on December 24, 1987,
3. Herr Dr. Rainer Konig, born on April 13, 1953, attorney, German citizen,
---------------------
with a principal place of business at Griegstrasse 25, D-70145 Stuttgart
and residing at Weilimdorferstrasse 150, D-70469 Stuttgart, who identified
himself with a personal identification card,
not acting for himself but, disclaiming all personal liability, and subject
to receipt of a notarized ratification conferring authority to him, for
Stiftung fur Kriminalpravention - Klaus Stullenberg - gemeinnutzige GmbH, a
------------------------------------------------------------------------
Gesellschaft mit beschrankter Haftung (limited liability company) with its
principal place of business at Stettiner Strasse 45/1, D-88709 Meersburg,
registered with the commercial register of the Amtsgericht (local court) of
Uberlingen under HRB 1112.
The person appearing as 1. above speaks English as his mother tongue. I, the
Notar, have satisfied myself that he has sufficient command of the German
language to understand the proceedings below. After I expressly advised him of
the possibility of obtaining a translator or a preparing a certified translation
of this notarial deeds, he declined to request either one.
The person appearing as 2. declared as follows:
Pursuant to the testament dated December 9, 1987 before the Notar Helmut Kilger,
Hechingen (UR-Nr. 27171987), which is attached to this notarial deed as EXHIBIT
1, the sole heir of Alard von Rohr is his daughter Alexandra von Rohr. The
person I am representing is
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3
appointed as executor by the above mentioned document. The administration of
the estate ends on December 24, 1997. Insofar as Alexandra von Rohr is obligated
after this time, she is also validly represented by the executor. Included in
the estate of the deceased Alard von Rohr are the capital shares of Frau
Alexandra von Rohr set forth under Section 1.1 below.
Then, the persons appearing, acting in the capacity set forth above, requested
the authentication of the following
SHARE PURCHASE AND ASSIGNMENT AGREEMENT
among
WKD Pinkerton Security Services GmbH & Co. KG, having its registered office
in Eschborn
- hereinafter referred to collectively as the "Purchaser" -
and
Ms. Alexandra von Rohr, resident at GuntzelstraBe 44, 10717 Berlin;
Dr. Alard von Rohr, resident at Tannenbergallee 30, 14055 Berlin;
Stiftung fur Kriminalpravention - Klaus Stullenberg - gemeinnutzige GmbH,
having its registered office in Meersburg and its principal business office
in Stettener StraBe 45/1, 88709 Meersburg, registered in the Commercial
Register of Uberlingen under HRB 1112;
- hereinafter referred to collectively as the
"Sellers" -
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4
P R E A M B L E
A. The Sellers own a total of DM 700,000 registered capital of WKD Security
GmbH, having its registered office in Bisingen and its principal business
office in Bisinger Berg, 72336 Bisingen, registered in the Commercial
Register of Hechingen under HRB 300 (the "Company"). These shares
constitute the entire stated capital of the Company. All capital shares are
fully paid-in.
B. The Company is in the business of providing guardian and security services
and transporting cash and valuable goods.
C. The Sellers desire to sell and transfer all of the capital of the Company
to Purchaser on the terms set forth herein.
NOW THEREFORE, the parties enter into the following agreement:
1 SUBJECT MATTER OF PURCHASE AND TRANSFER
1.1 Subject to the condition subsequent set forth in Section 11.1, the Sellers
hereby sell, and, subject to the condition precedent in Section 11.2 of
this Agreement, transfer to the Purchaser their shares in the Company as
set forth below (collectively, the "Shares") with economic effect as of
January 1, 1997, 00:01:
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5
Shareholder Share Capital in the Company
----------- ----------------------------
Ms. Alexandra von Rohr DM 11,300
DM 10,900
DM 33,400
DM 341,900
DM 25,000
Dr. Alard von Rohr DM 24,900
Stiftung fur Kriminalpraven- DM 183,800
tion - Klaus Stullenberg - DM 49,800
gemeinnutzige GmbH DM 19,000
("Stiftung")
TOTAL DM 700,000
1.2 The Purchaser shall be entitled to 1/4 of the earnings reflected in the
Company's financial statements for the fiscal year ended December 31, 1996.
1.3 The Purchaser hereby accepts the sale and transfer.
2 CLOSING DATE AND DATE OF ECONOMIC EFFECT
The transfer of shares shall take place as of January 1, 1997 ("Closing
Date"). The economic effect of the transfer (benefits and burdens of
ownership) shall take effect as of the Closing Date.
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6
3 PURCHASE PRICE
3.1 The purchase price for the Shares shall be DM 35,000,000 (the "Purchase
Price") to be allocated among the Sellers in proportion to their capital
shares in the Company pursuant to Section 1.1 above.
3.2 The Purchase Price shall be allocated among the Sellers in proportion to
their capital shares in the Company as set forth in Section 1.1 above:
<TABLE>
<S> <C>
Ms. Alexandra von Rohr DM 21,125,000
Dr. Alard von Rohr DM 1,245,000
Stiftung DM 12,630,000
</TABLE>
3.3 The payment of the Purchase Price pursuant to Section 3.2 shall be made to
the Sellers at the date of the signing of this Agreement by hand delivery
to each Seller of a bank certified check or bank check of Citibank AG or a
large German bank by the Notar authenticating this document or one of his
partners on January 2, 1997, provided that the Notar has received these
checks in time to deliver them. The check to Alexandra von Rohr is to be
to the order of Dr. Alard von Rohr as executor and shall be delivered to
him. The amount of the individual checks shall be the amount set forth in
Section 3.2 and 10.3 of this Agreement.
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7
3.4
3.4.1 The Purchaser is obligated to cause the Company to deliver to the
Sellers by March 31, 1997, internally prepared financial statements of
the Company for its fiscal year ending December 31, 1996 representing
fairly the financial condition, assets, liabilities (including
contingent or limited liabilities in an appropriate amount), equity
and results of operations of the Company; such financial statements
shall be correct and complete, and shall be prepared in accordance
with generally accepted accounting principles as applicable in Germany
and applied on a consistent basis with prior fiscal years and in
compliance with the relevant statutory provisions and consistent with
prior periods. In particular, all elections as to accounting methods
shall be exercised consistently with prior periods. The financial
statements shall be prepared on the basis that all earnings will be
distributed.
3.4.2 The Sellers may object to the financial statements within 21 days
from the date of receipt of the financial statements. If no
objections are forthcoming or if they are made after expiration of the
aforesaid period, the financial statements shall be deemed to be
accepted by the parties. If the Sellers timely object, after the
failure of good faith efforts of the parties to come to an amicable
solution for a maximum of 14 days, the Company's auditors shall be
called to decide on the controversial items in the course of auditing
the statements. The scope of this audit can be limited to the
respective objections at the Parties' discretion.
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8
The Sellers shall give notice to the Purchaser within 21 days of the
receipt of the audit results specifying the specific detailed points
as to which they disagree with the audit by the Company's auditors.
3.4.3 If the parties cannot agree those points in the following 14 days, a
CPA appointed by the chairman of the Stuttgart Chamber of Commerce
shall be charged with the responsibility of deciding the remaining
points on which the parties could not agree. The conclusions of this
CPA shall be final and binding on all parties. The costs of the CPA
shall be borne by the Sellers and Purchaser in proportion to the
amount as to which the parties were successful with the respective
claims.
3.4.4 If the operating profit determined in accordance with the above
procedure (= profit before advance distribution minus profit-related
bonuses, but before any tax based on earnings) for the year ending
December 31, 1996 is less than DM 5.8 Million, then the Purchase Price
shall be reduced by 1/4 of the difference between DM 5.8 Million and
the actual earnings. The Sellers shall repay the purchase price pro
rata in proportion to their respective share of the Purchase Price,
with interest at 6% from the Closing Date.
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9
3.5 Before the Closing Date, the Sellers shall have adopted a shareholders
resolution which provides that
(a) 3/4 of the profit from the fiscal year 1996 shall be distributed to
the Sellers and
(b) an advance distribution of the amount of fiscal 1996 earnings of the
Company to which the Sellers are entitled pursuant to Section 1.2, but
in no event more than DM 2.4 Million shall be distributed to the
Sellers before the Closing Date.
If the share of fiscal 1996 earnings finally determined pursuant to
Section 3.4 to be due to the Sellers is higher than the amount of the
advance distribution, the Purchaser shall cause the Company to
distribute the remaining difference to the Sellers as former
shareholders of the Company within 30 days of the final determination
of the earnings pursuant to Section 3.4. If the share of fiscal 1996
earnings finally determined pursuant to Section 3.4 to be due to the
Sellers is lower than the amount of the advance distribution paid to
the Sellers, the Sellers shall, pro rata, repay the difference to the
Purchaser, together with 6% interest from the Closing Date within 30
days of the final determination of the earnings as of December 31,
1996 pursuant to Section 3.4.
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10
4 REPRESENTATIONS AND WARRANTIES
The Sellers hereby make the following representations and warranties as of
the date hereof and guaranty that there will be no adverse changes between
the date hereof and the Closing Date:
4.1 Legal Status
4.1.1 Existence of the Company
The Company is a duly organized and validly existing GmbH with the
power to conduct its business, including branch, as it is presently
conducted. The statements in the recitals to this contract as to the
legal situation are accurate. The stated capital of the Company has
been fully paid in. The Company has made no distributions which have
resulted in a diminution of such stated capital (as defined by (S)30
(1) GmbHG).
4.1.2 Constitutive Documents of the Company
The articles of association (Gesellschaftsvertrag) of the Company in
its version last submitted to the Commercial Register as of December
3, 1993 remain unchanged. There are no other arrangements in existence
between the shareholders and/or between them and the Company, except
as delivered in the course of due diligence, which delivery must be
proved by Sellers.
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11
4.1.3 Related Enterprises
The Company has no legal relationship with affiliated persons, in
particular no participation or sub-participation in another company,
an enterprise agreement within the meaning of (S)(S)291, 292 Stock
Corporation Act (Aktiengesetz), nor any cooperation or any joint
venture agreements, and the Company has not issued any letter of
comfort (Patronatserklarung) in favor of any third party. The
Purchaser acknowledges that the Company is a member of trade
associations (Berufsverbande).
4.1.4 No Third Parties Consents or Encumbrances
Except for the shares held by Ms. Alexandra von Rohr being subject to
the administration, none of the shares in the Company are subject to
any limitations on their disposition or to any rights of third
parties. The statements of the person appearing as (2) in the preamble
are accurate. In particular:
4.1.4.1 the Shares and/or rights arising therefrom are neither
pledged nor encumbered as security or otherwise to third
parties and no option or other third party acquisition rights
exist;
4.1.4.2 each of the Sellers hereby expressly waive their mutual right
of first refusal for the benefit of the Purchaser pursuant to
the Articles of Association;
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12
4.1.4.3 the Shares are not the subject of a trust relationship with
third parties;
4.1.4.4 the Shares or rights arising therefrom are not the subject of
third party usufructs (NieBbrauchrechte), subparticipations,
silent partnerships or similar relationships;
4.1.4.5 no bankruptcy or judicial composition proceedings concerning
the assets of Sellers or the Company have been applied for
and no circumstances exist (including the insolvency or
inability to pay its debts as they become due of any Sellers)
pursuant to the Bankruptcy or Reorganization Code or the
Fraudulent Conveyance Law (Anfechtungsgesetz) which could
justify the avoidance of the contemplated transfer.
4.1.5 (S)(S) 419 and 1365 of the German Civil Code (BGB)
The transfer of the interests in the Company does not constitute an asset
transfer within the meaning of (S) 419 BGB for any of the Sellers or,
alternatively, there exist no debts, as to which the Purchaser could be
held liable under (S)419 BGB. The Sellers Alexandra von Rohr and Dr. Alard
von Rohr are not married; alternatively, they will deliver the consent of
their spouses pursuant to (S) 1365 BGB.
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13
4.2 Agreements
4.2.1 Customer Contracts
The Company has not entered into any contracts or other
arrangements with customers, which over the long term (1 year
average) do not have a positive contribution to gross margin.
4.2.2 Purchasing
The Company normally satisfies its requirements for purchasing and
consulting through individual orders. The only exceptions thereto
are (1) supply agreements with automobile manufacturers whereby the
failure to purchase the automobiles which are required to be
purchased under the supply contracts would not have a negative
impact on the Company and (2) a consulting agreement with the law
firm Fuchs, Haberer & Partner in Villingen-Schwenningen.
4.2.3 Finance Leasing
EXHIBIT 4.2.3 (LEASING CONTRACTS) sets forth all finance leasing
contracts as to which the initial purchase price of the respective
leased property is more than DM 100,000.
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14
4.2.4 Other Leases
The Company has not entered into any other leases except as such as
to which the Sellers have been delivered in connection with the due
diligence review.
4.2.5 Retirement Plans
The Company has made no commitments to employees in connection with
retirement benefits except for direct life insurance contracts which
have been paid for deduction from the employee's respective wages.
The Company has no social benefits for employees/1/. The only
payments made to employees (other than the general manager) which
depend on sales or profits are sales bonuses to sales employees who
close new customer contracts. The highest payment made to such sales
employees is 3% of the first year sales under such contracts.
4.2.6 Employment Agreements
Different standard employment agreements for different types of
employees were delivered in connection with the due diligence
review. There are no employment agreements with a remaining term of
more than 2.5 years after the Closing Date. In addition to the
standard contracts, there are individual
/1/ e. g., child care, etc.
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15
contracts with white-collar employees. These contracts contain only
valid provisions which are usual in the line of business in which
the Company is engaged. All contracts with general agents
(Prokuristen), including the raise which they received by
shareholder resolution, have been disclosed to the Purchaser in the
course of due diligence. The number of employees as of August 31,
1996 - including employees with the right to return to the Company
after completion of military service, maternity leave, etc. - was
725. As of the date of signing, the Sellers are not aware of any
employees who intend to terminate their employment as a result of
an acquisition.
4.2.7 License Agreements
The Company has not entered into any license agreements or other
agreements in connection with industrial property rights.
4.2.8 Loans Agreements, Guaranty Agreements
The Company has a credit line with the Sparkasse Zollernalb which
is secured by a mortgage on its principal place of business. The
Company does not utilize the credit line on a continuous basis. The
Company gives its blue-collar and white-collar workers loans up to
a maximum amount of DM 5,000 which are secured by a pledge of their
respective salaries or wages. The total amount of
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16
such loans is not more than DM 50,000. The Company has not given
any guarantees or comfort letters.
4.2.9 Sales and Commission Agents
The Company has no sales agents or commission agents.
4.2.10 Insurance
The insurance policies of the Company were delivered in connection
with the due-diligence review. They are all in force.
4.2.11 Non-Compete Agreements
The Company has not entered into any non-compete agreements.
4.2.12 Agreements with Affiliated Persons
There is a shareholder's resolution calling for Dr. von Rohr to
receive director's compensation of DM 18,000 per year and a per
diem for meetings of DM 2,000. In addition, the cost of attendance
which is properly documented are reimbursed by the Company. There
is a managing director contract which contains a bonus agreement
which was delivered in connection with the due diligence. In
addition, Frau Alexandra von Rohr is entitled to the incoming
payments from Mr. Bernd Schulze in the amount of approximately DM
50,000.
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17
Except for the above, neither the Company nor the Sellers nor the
affiliates of the Sellers within the meaning of (S) 15 of the AO
(tax procedure law) have any claims or rights against each other
except for those set forth in this Contract.
4.2.13 Subsidiaries
The Company has no investments in other companies and no
cooperation or joint-venture agreements.
4.2.14 Other Agreements
Except for the contracts expressly set forth in Sections 4.2.1-13
and except for contracts which the Sellers can prove have been
delivered to the Purchaser in the course of due diligence, there
are no contractual relationships outside the ordinary course of
business. The Purchaser confirms that it has received the binder
with the disclosure schedule from the Seller which contains
receipts for the contracts and other agreements delivered in
connection with the due diligence.
4.3 Performance of Agreements
The Company has performed or taken all action reasonably necessary to
perform all due liabilities. None of the contractual parties of the
Company has the right to terminate or modify its obligations thereunder
solely as a result of the transactions contemplated in this Agreement. The
Company has complied with each provision of
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18
such agreements. To the Sellers' knowledge, no event has occurred which
does now or will in the future constitute a breach of any such agreements
other than customer complaints in the ordinary course of business.
4.4 Intellectual Property Rights
4.4.1 The Company does not own or use any service marks or trademarks in
its business. No party is infringing any such service mark or
trademark.
4.4.2 The Company has no licenses to any copyrights, other than licenses
to standardized computer software.
4.5 Insurance
The insurance policies of the Company have been subject to a specific
insurance review by the Purchaser prior to the signing of this Purchase
Agreement. To the Sellers' knowledge, and, as reflected in the Purchaser's
insurance review, the insurance policies, taken as a whole, provide
sufficient insurance coverage in light of the properties and business of
the Company in accordance with industry practice for companies similarly
situated. There is no insurance policy covering business interruption.
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19
4.6 Permits and Licenses
The Company has shown all public law approvals for the business performed
by the Company, as well as concessions, building and operating approvals,
as well as all other approvals, permits and licenses which are necessary or
material to the present business of the Company. All of these approvals,
concessions, permits and licenses have been correctly applied for and there
are no administrative orders according to which they are not valid and
enforceable. The Sellers have no knowledge of any circumstances which
justify a revocation or a limitation of these approvals, concessions,
permits and licenses or a change as a consequence of the transactions
contemplated by this Agreement.
4.7 Litigation and Compliance
The Company is a party to litigation with employees or former employees,
which, all cases taken together, do not have an aggregate amount at issue
in excess of DM 50,000. The Company has collection lawsuits against
customers with an aggregate amount at issue of not more than DM 25,000.
Except for the foregoing and except for (i) traffic violations and (ii) in
the procedures for determination of tax owed by the Company by tax
authorities, there is no litigation or administrative procedure (including
any proceeding before an arbitral body or court) against the Company and
none is pending and, to the Seller's knowledge, none is threatened. There
is no judgement or administrative order which would prohibit the Company
from or limit it in taking any actions. With regard to their business
activities, the Company has complied with all relevant laws, including the
laws of places in which the Company or
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20
its representatives render the services with respect to bribery, aiding and
abetting tax evasion and other prohibited business practices. The Company
has not been notified that they violate any law, except where such
violation has been cured, and no penalty remains unpaid or remedial action
has omitted to be undertaken, except that there is a preceding against the
Managing Director which may result in a fine for a working-hours violation.
4.8 Real Estate
The Company's real estate has been disclosed in the course of due
diligence.
4.9 Environmental Compliance, Cleanup, Permits and Licenses
The Company is, to the best knowledge of Sellers, in respect of the
business of the Company including its branch offices, in full compliance
with any law or rules and regulations promulgated thereunder relating to
their respective properties, facilities and businesses. The Company has
not received any notice of noncompliance with any laws or regulations
promulgated thereunder, and, to the Sellers' knowledge, has not caused or
permitted the businesses or the real estate under its control to be used to
generate, manufacture, refine, transfer, produce or process hazardous
substances, or other toxic substances or solid waste, except in compliance
with all applicable laws and regulations. The Company has not received
notice, nor do the Sellers have any knowledge, after using due care
(including due inquiry and investigations), of any facts which could give
rise to any notice that the Company is potentially responsible for an
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21
environmental cleanup of any site under any application law or regulations
or at the request of any water authority or environmental agency.
4.10 Ownership of Assets
To the extent they were not sold or became unusable in the ordinary course
of business since December 31, 1995 or became unusable during the fiscal
year, the assets of the Company shown in the Financial Statements for the
fiscal year ended December 31, 1995 continue to be an unrestricted property
of the Company. There are no third party rights including security
interests to the assets of the Company other than retention of title to the
inventory of the Company made in the ordinary course of business and the
mortgage as set forth in Section 4.2.8 of this Agreement.
4.11 Financial Statements
The Financial Statements of the Company, for the fiscal year 1994
(including the audit report of April 5, 1995) and 1995 (including the audit
report of April 4, 1996) have been forwarded to the Purchaser. These
represent fairly the financial conditions, assets, liabilities (also to the
extent there are contingent or limited), equity and results of operations
of the Company; they are correct and complete, and have been prepared in
accordance with generally accepted accounting principles as applicable in
Germany and applied on a consistent basis and in compliance with the
relevant statutory provisions.
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22
The internally prepared monthly report of the management of the Company to
the advisory board (Beirat) through August 31, 1996, which has been
delivered to the Purchaser, represents fairly the sales, breakdown of
sales, personnel costs, and monthly operating earnings for the period from
January 1, 1996 through August 31, 1996. Adjustments of certain provisions
and calculation of certain deferred items, which the Company normally
reviews only in connection with annual statements, will not be completely
reflected in these monthly statements. The Sellers are required to deliver
monthly reports for September through November 1996 to the Purchaser on or
before the 20th of the following month.
In particular:
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23
4.11.1 Absence of Undisclosed Liabilities
Since December 31, 1995, the Company has incurred no liabilities,
including liabilities which are contingent in amount or
existence, except in the ordinary course of business. The
reserves ("Ruckstellungen") on the December 31, 1995 balance
sheet in the amount of DM 2,382,900 will be adequate, together
with insurance maintained at existing levels, to cover all
liability expense which the Company will incur in connection with
the conduct of the Company's business prior to January 1, 1996
and which have not been reflected in the balance sheet as of
December 31, 1995 as liabilities.
4.12 Tax Returns; Tax Accounting
The Company's income tax returns have been audited by the tax authorities
(Finanzamter) through fiscal years ending December 31, 1992. The Company
has filed or has caused to be filed with the appropriate authorities all
required tax returns. As of the date hereof, they are not in default in
paying any taxes or levies or social security contributions, including
interest and penalties thereon, claimed to be due by any authority. The
balance sheet of the Company as of December 31, 1995 made adequate
provisions or reserves for all taxes and social security contributions,
including interest and penalties thereon, (insofar as the same may be
reflected on the balance sheet in accordance with German generally accepted
accounting principles) payable by the Company and attributable to periods
prior to or ending on December 31, 1995.
<PAGE>
24
The balance sheet and income statement for German income tax purposes of
the Company for December 31, 1992, 1993, 1994 and 1995 and the fiscal years
ending on that date, respectively, which are the same for tax and financial
reporting purposes have been forwarded to the Purchaser. The breakdown of
shareholders equity for tax purposes (Eigenkapitalgliederung) as of
December 31, 1995 have been forwarded to the Purchaser. There is no basis
for assessment of any deficiency in income or non-income taxes of the
Company for tax periods prior to December 31, 1995 except in the amount of
the tax provisions on the December 31, 1995 balance sheet of the Company.
In the financial statements for the Company for the fiscal year ended
December 31, 1995, there are no reserves for ad valorem tax or the trade
tax on capital.
4.13 Condition of Assets
The property used by the Company, whether owned or leased, is in good and
usable condition taking into account regular maintenance and usual wear and
tear and have been regularly maintained and is suitable for the business of
the Company. The real estate of the Company in Bisingen, Pforzheim and
Walddorfhaslach have been visited in the course of due diligence.
4.14 Certain Changes
Except for the changes, which are either:
- listed in EXHIBIT 4.14 -- CERTAIN CHANGES, or
- disclosed to the Purchaser in the course of due diligence, or
<PAGE>
25
- approved in writing by the Purchaser after the date hereof,
the following applies for the period commencing October 1, 1995:
4.14.1 the operations of the Company have been conducted in the ordinary
course of business of the Company consistent with past practice
only,
4.14.2 no material agreements of the Company have been entered into
amended or terminated outside the ordinary course of business,
4.14.3 compensation payable to directors and management employees has been
increased and disclosed to the Purchaser in the course of due
diligence;
4.14.4 existing pension benefits and profit sharing for employees of the
Company have not been increased or introduced;
4.14.5 other bonuses over DM 1,000 have not been paid in 1996 with
exception of the bonus paid to Frau Stubbe and disclosed during due
diligence;
4.14.6 the Company has not incurred any liabilities in excess of DM
100.000 in the individual case or disposed or written down assets
except in the ordinary course of business,
<PAGE>
26
4.14.7 there has not been any material adverse change in the financial
situation, the liabilities or the results of operations of the
Company, whereby changes due to distributions shall be disregarded;
4.14.8 to the Sellers' best knowledge, no damage or losses have occurred,
which may have a material adverse effect on the Company or on its
profitability,
4.14.9 no circumstances exist, which would have a material adverse effect
on the Company or its profitability,
4.14.10 no payments to the Sellers or to their relatives within the meaning
of (S) 15 AO (tax procedure law) have been made, except for
distributions of profits as resolved by the shareholders and shown
in the respective annual financial statements or on account of
contracts set forth in this Agreement, or on account of the advance
distribution set forth in Section 3.5 b) of this agreement,
4.14.11 there has not been any material adverse change in the
accounting/tax accounting policies and the related bookkeeping
practices and other matters affecting taxation, and there have not
been transactions, facts, actions or omissions which cause any tax
related liabilities for the
<PAGE>
27
company and which, contrary to generally accepted accounting
principles applicable in Germany, will not be adequately reflected
as liabilities or reserved in the Company's December 31, 1996
balance sheet, as finally binding on the parties in accordance with
Section 3.4.
The Sellers shall not be liable for changes in the business if and to
the extent that the Purchaser has approved such changes in writing
after the date hereof.
5 LIABILITY OF THE SELLERS
5.1 The Sellers shall be liable to the Purchaser pro rata, in proportion to the
capital share which each sells pursuant to Section 1.1, for the
representations and warranties and all other obligations arising under this
Agreement. Notwithstanding the foregoing, each Seller shall only be liable
for the representation/warranty under Section 4.1.5 for the claims of its
own respective creditors. Sellers shall be jointly and severally liable
for the repayment of the purchase price pursuant to Section 3.4.4.
5.2 For purposes of this section, the knowledge of the Purchaser shall be
deemed to be only the actual knowledge of Mr. C. Michael Carter and the
knowledge Mr. C. Michael Carter would have but for his gross negligence,
as well as the knowledge of the factual statements in the due diligence
report of the Purchaser dated June 11, 1996
<PAGE>
28
(with changes in the addendum dated September 20, 1996) and the documents
which can be proved by the Disclosure Schedule to have been disclosed to
the Purchaser.
5.3 To the extent that any obligations, representations or warranties of the
Sellers are limited by the knowledge of the Sellers, the Sellers will be
imputed with the actual knowledge of Herr Stullenberg and Frau Stubbe and
the knowledge Herr Stullenberg and Frau Stubbe would have had but for gross
negligence.
5.4 Except as set forth in Section 5.2, (S)(S) 460 and 464 German Civil Code
(BGB) are not applicable to this Agreement. (S)377 German Commercial Code
(HGB) shall not be applicable to this Agreement.
6 INDEMNIFICATION
6.1 Should it appear that any of the representations and warranties for which
the Sellers are responsible pursuant to this Agreement are not correct or
have not been complied with by the Sellers, the Sellers shall put the
Purchaser in such position in which the Purchaser would be if the
representations and warranties had been correct or the obligation had been
complied with after taking into account any advantages to the Purchaser
from the circumstances giving rise to the breach. If the circumstances
<PAGE>
29
resulting in a violation of a representation or warranty result in an
ongoing decrease in the Company's earnings before taxes after taking into
account any advantages to the Purchaser from the circumstances giving rise
to the breach, the amount necessary to put the Company in the position as
if the representation or warranty had been correct shall be deemed to be
six times the annual effect of such item on the Company's earnings before
taxes. Ongoing decreases which trigger this multiplier shall be loss of
customer orders, increase of rent, increase of employment compensation,
increase of property, real property, and trade capital tax and all other
matters which result in a deterioration of the Company's pre-tax profit
situation which lasts (or is projected to last) for at least six years.
6.2 If there is a breach of a representation/warranty contained in Section 4.12
or 4.14.11 of this Agreement, the taxes, levies of all kinds and social
security contributions (including interest and penalties) arising from tax
audits by authorities for periods up to the Closing Date which have not
been provided for, or for which the provisions for taxes as a whole in the
financial statements as at December 31, 1996 are inadequate, will be borne
by the Sellers. In the case of taxes arising from hidden distributions or
from nondeductible expenses, knowledge of the Purchaser shall not be a bar
to recovery notwithstanding Section 5.2.
The amount of Sellers' liability for increased taxes assessed by tax audit
(and not otherwise provided for) shall be reduced by the net present value
(based on a discount rate of 6%) of any advantage or benefit to the
Purchaser corresponding with such
<PAGE>
30
additional tax assessment, such as tax savings due to prolongation of the
depreciation period or requalification of business expenses as deductible
costs. Tax refunds for tax periods up to the Closing Date shall be netted
with tax assessments.
The Sellers may, in accordance with the above provisions, set off any
increased earnings for prior periods determined upon a tax audit against
their obligations under other representations and warranties. The Sellers
shall reimburse the purchaser, or at the Purchaser's direction, the
Company, for all additional tax payments which must be made on account of
the additional earnings as stated above.
6.3 Irrespective of the provisions in Section 6.1 above, the Sellers will hold
the Company harmless from any liabilities if such liabilities have been
caused by business transactions, facts, actions or omissions in the period
up to December 31, 1996 and which, contrary to generally accepted
accounting principles applicable in Germany are not, or are not adequately
reflected as liabilities or reserves in the Company's December 31, 1996
balance sheet or have not been or were not completely accrued therein.
6.4 In the event that receivables shown in the Company's balance sheet as at
December 31, 1996 are not paid by the respective debtor by June 30, 1997,
the Sellers shall reimburse the Company for the deficiency and interest
against assignment of the individual receivables to the Sellers against
payment of the net book value by the
<PAGE>
31
Sellers to the Purchaser if the accruals on such balance sheet related to
accounts receivables have been exhausted.
6.5 In the case of third-party claims, the Purchaser shall give the Sellers
timely opportunity to defend the claims and protect their interests. At
the request of the Sellers and at the Sellers' expense, the Purchaser shall
cause the company to take legal action against suppliers and government
agencies. This requirement shall not apply to customers and employees of
the Company. If the Purchaser's notice is not timely, the Sellers may
deduct the damages, if any, occasioned by the delay from damages payable to
the Purchaser.
6.6 The Purchaser and/or the Company shall not be entitled to any claim for
breach or nonfulfillment of representations or warranties pursuant to the
above provisions, if the amount of damage or disadvantage of the aggregate
of such individual claims does not exceed DM 50,000. If the aggregate
amount does exceed DM 50,000 and the operating earnings as finally
determined pursuant to Section 3.4 are less than DM 5.95 Million, the claim
for the full amount of all such claims shall be permissible. If the
operating earnings as finally determined pursuant to Section 3.4 are 5.95
Million or more, a claim for the amount by which all claims in the
aggregate exceeding DM 50,000 shall be permissible.
<PAGE>
32
6.7 If the operating profit finally determined pursuant to Section 3.4 is in
excess of DM 5.8 Million, the Sellers may set off any such excess against
their liabilities for breach of representations and warranties.
6.8 The total of all such claims shall not exceed DM 15 Million.
6.9 Sections 6.1 - 6.8 above shall not operate as a limitation or exclusion of
the statutory claims and rights of the Purchaser. Section 5.2 shall apply
accordingly.
6.9.1 Prior to the Closing Date, the Purchaser shall only be entitled to
rescind or cancel this Agreement if there is a material adverse
change respecting the Company. The following shall comprise a
material adverse change:
a) a change in the legal circumstances affecting the Company or
the shareholders within the meaning of Section 4.1;
b) a change in the contractual circumstances within the meaning
of Section 4.2, such that there is a diminution of operating
profit of the Company of at least DM 500,000;
<PAGE>
33
c) the termination or withdrawal for any reason of the managing
director;
d) entering into contracts with affiliates withing the meaning
of Section 4.2.12;
e) acquisition of participations within the meaning of Section
4.2.13;
f) the loss of concessions or permits within the meaning of
Section 4.6;
g) lawsuits against the Company with an amount at issue totaling
more than DM 5 Million, except as to vexatious suits (the
burden of proof as to the vexatious nature of such suits
resting on the Sellers) or to the extent covered by
insurance;
h) sale of real estate within the meaning of Section 4.8;
i) violation of contractual duties by the Sellers which amount
to fraud.
The Sellers shall promptly notify the Purchaser in writing of the
occurrence of any of the forgoing circumstances. The failure to so
notify shall be deemed to be fraud within the meaning of this
Agreement.
If the conditions for rescission pursuant to Sections 6.9.1 b), c)
(solely in the case of the death or cessation of employment due to
disability of the managing
<PAGE>
34
director) or g), the Sellers may give notice to the Purchaser
requiring the Purchaser to elect whether to rescind in the 14 days
following the notice. If the Purchaser does not exercise its right of
rescission within such period, the Purchaser may not make a claim for
breach of representations and warranties on such circumstances.
6.9.2 After the Closing Date, the Purchaser may only rescind the
agreement if the violation of contractual duties amounts to
fraud.
6.10 The above obligations of the Sellers vis-a-vis the Company shall be deemed
an agreement for the benefit of third party beneficiaries (echter Vertrag
zugunsten Dritter).
6.11 The Purchaser agrees to pay a contractual penalty of DM 3.5 Million in the
event the Purchase Price pursuant to Sections 3.1 - 3.3 is not paid (except
in the case of rescission), which shall be payable without the requirement
of proving further damages. To secure the penalty, the Purchaser shall on
or before October 25, 1996 deliver to the Sellers an Original of the bank
guaranty from Citibank AG in substantially the form of EXHIBIT 6.11 - BANK
GUARANTY in the amount of DM 3.5 Million. If this bank guaranty is not
timely delivered, the Sellers shall have a right of rescission until
November 5, 1996. The bank guaranty shall be delivered to the Notar
<PAGE>
35
authenticating this contract against payment of the purchase price pursuant
to Section 3.3.
7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.1 All representations and warranties and obligations of the Sellers contained
herein and all rights of the Purchaser and the Company against the Sellers
under this Agreement for nonperformance or noncompliance with
representations and warranties under this Agreement shall survive as
follows:
7.1.1 Rights of the Purchaser against the Sellers with respect to tax
liabilities shall be subject to a limitation period ending
("verjahren") 6 months after the date of the final non-appealable
assessment of each particular tax liability, which may arise as a
result of an investigation by the tax authorities and any potential
subsequent litigation. All other rights of the parties against each
other shall terminate ("verjahren") on September 30, 1998.
7.1.2 Expiration of expressly asserted concrete rights of the parties
against each other shall be interrupted by a written request for
performance and/or a written notification of those rights, provided
however, that the
<PAGE>
36
claiming party must commence litigation pursuant to Section 12.9
against the other party in order to retain the claim within a period
of 6 months from the date the request for performance has been made.
8 NON-COMPETE
8.1 The Sellers agree that for a period of 5 years from the Closing Date, they
will refrain from competing with the Company in their current geographical
and business areas of activities, in particular from taking any direct or
indirect interests in any competing enterprise or furthering the activities
of any competing enterprise by any act. Excluded therefrom shall be the
acquisition for purposes of investment of not more than 5% of the issued
shares of any company or companies quoted on a stock exchange. The Sellers
will in particular refrain from advising existing or future customers of
the Company in their dealings with the Company for a period of 5 years from
the date of this Agreement.
8.2 In the event of any contravention of the restrictions not to compete
pursuant to Sec. 8.1, the respective Sellers violating the Non-Compete
shall pay to the Purchaser a contractual penalty of DM 100,000 in respect
of each contravention.
<PAGE>
37
8.3 Should the contravention continue despite written demand to desist from the
Purchaser, a further contractual penalty of DM 500,000 shall be payable for
each month in which the contravention continues. Claims of the Purchaser
for further damages or for an order restraining future contravention shall
not be affected thereby.
9 MERGER CONTROL
The parties shall without undue delay after the authentication of this
Agreement notify the Federal Cartel Office of the merger contemplated
herein according to (S) 23 of the Act against Restriction of Competition
(GWB). Each party shall furnish the information and responses as required.
10 BANK GUARANTY
10.1 The Sellers shall provide the Purchaser at Sellers' sole expense with their
individual irrevocable bank surety bond/2/ or guaranty from a German
bank in the total face amount of DM 1.5 Million (in each case proportional
to the amount of purchase price they receive) which shall be in force from
the Closing Date until December 31, 2001 guarantying the full and punctual
payment of any amounts due by Sellers, or any of the
- -------------------
/2/ Translator's note: the German term is Burgschaft, roughly comparable to a
surety bond, in that the bank can assert defenses from the underlying
transaction. Cf. the guaranty in Section 6.11, which calls for an
independent guaranty of the bank.
<PAGE>
38
Sellers, to Purchaser, including, without limitation, any amounts payable
by reason of a breach of the representations and warranties or other
contractual duties. The costs of the surety bond or guaranty shall be borne
by Sellers. Before calling the guaranties, or surety bonds, as the case may
be, the Purchaser shall use good faith efforts to come to an amicable
solution with the Sellers. After expiration of the warranty period, the
Sellers are entitled to reduce the amount of the bank guaranties and surety
bonds to a total of DM 750,000, except to the extent that pending claims
which are the subject of a lawsuit or are about to be the subject of a
lawsuit, exceed DM 750,000.
10.2 The Stiftung has delivered to the purchaser a letter from the Sparkasse
Zollernalb dated as of September 26, 1996, pursuant to which the Stiftung
has irrevocably ordered the Sparkasse Zollernalb to issue a surety bond for
the Stiftung, which conforms the requirements of Section 10.1. The Stiftung
is required to cause the original surety bond in the amount of DM 550,000
pursuant to Section 10.1 to be delivered to the Purchaser no later than
January 15, 1997.
10.3 The Seller Alexandra von Rohr and Herr Dr. Alard von Rohr shall, on or
before December 20, 1996, deliver original bank guaranties/3/ meeting
the requirements of Section 10.1. If the Purchaser has not received such
original bank guaranties by December 20, 1996, the Purchaser may deduct pro
rata the face amount of the guaranty pursuant to Section 10.1 from the
purchase price payable pursuant to
- --------------
/3/ In this case, a guaranty, not a Burgschaft.
<PAGE>
39
Sections 3.1 - 3.3 to the Sellers Alexandra von Rohr and Dr. Alard von
Rohr. If the original bank guarantees are later delivered by the Sellers
Alexandra von Rohr and Dr. Alard von Rohr or if no claims for
representations and warranties have been set off against such amount, at
the latest on December 31, 2001, the Purchaser shall promptly pay the
amount of the Purchase Price so held back.
11 CONDITIONS
11.1 Condition Subsequent
Except for the provision for the contractual penalty in the amount of DM
3.5 Million pursuant to Section 6.11, which is not subject to a condition,
this contract is made subject to the condition subsequent that the Purchase
Price pursuant to Section 3.1 is paid no later than January 15, 1997. The
condition subsequent shall only fail if the Purchaser is in default.
11.2 Condition Precedent
The transfer of shares of the Company to the Purchaser is subject to the
condition precedent that the Purchase Price pursuant to Sections 3.1 - 3.3
is paid. If the Sellers are in default in accepting payment, (S) 162 (1)
BGB shall apply.
<PAGE>
40
12 COSTS AND OTHER MISCELLANEOUS PROVISIONS
12.1 After the Closing Date and satisfaction of the condition precedent pursuant
to Section 11.2 of this agreement, the parties shall inform the employees
(and subsequently the business partners of the Company and the public) of
the forthcoming changes of the ownership in the Company. Prior to this
date, the fact of the execution of this agreement and the upcoming transfer
of shares may only be publicized to the extent required by law or mandatory
stock exchange rules or procedures. Except as so required or for
communications within the Pinkerton group and its advisers under a
professional duty to maintain confidentiality, the Purchaser and its group
companies shall in no case make any statements concerning the execution of
this agreement, the purchase price, sales and earnings of the Company. The
Purchaser shall cause other members of the Pinkerton group and their
advisers to comply with this provision, and the Sellers shall be
responsible for insuring that the publication does not occur through
employees of the company.
12.2 In addition to the foregoing, the Sellers agree to provide to the Purchaser
all necessary information and to cooperate with respect to business matters
and transactions which are necessary for the carrying out of this
Agreement. The Sellers undertake in particular to deliver to the Purchaser
all the business documents and files relating to the Company and answer
fully all questions of the Purchaser with respect to the business of the
Company relating to the periods prior to the Closing Date. The Purchaser
undertakes to provide the Sellers with all information and the right to
<PAGE>
41
inspect all records insofar as such is necessary for handling of tax
matters of the Sellers and/or rights and obligations of the Sellers under
this Agreement.
12.3 The Notar authenticating this Agreement shall notify the parties of the
satisfaction of the conditions set forth in Section 11 of this Agreement.
In addition, the Notar shall advise the Sellers promptly when the certified
checks or bank checks of the Purchaser for the purpose of paying the
Purchase Price within pursuant to Sections 3.1 - 3.3 arrive. The parties
hereby irrevocably instruct the Notar to deliver the checks against return
by the Sellers of the Purchaser's bank guaranty.
12.4 The costs and expenses of authentication ("Beurkundung") of the Notar
authenticating this Agreement shall be borne by the Purchaser. In all
other respects, unless this Agreement provides otherwise, each party shall
bear its own costs and expenses; this shall apply in particular to the
costs and expenses of its advisors and brokers.
12.5 Any notices and other communications in connection with this Agreement
shall be in writing and shall be delivered or sent by messenger (with
receipt), registered mail or telefax (with confirmation copy per registered
mail or messenger, if the messenger provides a receipt) to the following
addresses or such other addresses as the parties may hereinafter notify
each other:
<PAGE>
42
12.5.1 If to Sellers
Dr. Alard von Rohr
Tannenbergallee 30
14055 Berlin
FAX: 030-34 38 44 57
and
Stiftung fur Kriminalpravention -
Klaus Stullenberg - gemeinnutzige GmbH
Regerstr. 2/2
72336 Balingen
FAX: 07433-22 192
12.5.2 If to Purchaser and/or the Company
Pinkerton's GmbH
Geschaftsfuhrung
Frankfurter StraBe 92
65760 Eschborn
FAX: 06196-92 93 10
and to
Pinkerton, Inc.
World Headquarters
15910 Ventura Boulevard
Suite 900
Encino, CA 91436 - 2810
USA
Attention: General Counsel
FAX: 001 818-380 8530
The parties agree that notice by the Purchaser or the Company in connection
with this contract to the Sellers set forth above is deemed to be notice to all
Sellers.
<PAGE>
43
12.6 To the extent that the Company has rights under this Agreement they shall
be exercised by the Purchaser in its own name.
12.7 All Exhibits and Annexes to this Agreement constitute an integral part of
this Agreement and were read aloud.
12.8 Change of and amendments to this Agreement shall be invalid unless made
in writing or by notarial form.
12.9 This Agreement shall be governed by the laws of the Federal Republic of
Germany. The sole jurisdiction for resolution of disputes hereunder is
Berlin.
12.10 In the event that one or several provisions of this Agreement shall be
invalid or unenforceable, or if this Agreement is incomplete, the
validity of and enforceability of the other provisions of this Agreement
shall not be affected thereby. In such case the parties hereto shall
agree on a valid and enforceable provision or on provisions coming as
close as possible in fulfilling the intent of this Agreement. If this
agreement contains a gap, the gap shall be filled by the provisions which
the parties would have intended, had they considered the matter.
<PAGE>
44
IN WITNESS WHEREOF, this Share Purchase and Assignment Agreement, together with
all exhibits, was read aloud by me, was approved by the undersigned in Basel
this 10th of October, 1996, and was thereafter signed by them and by me and
bears by notarial seal.
[signatures + seal]
