UNITED STATES
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): March 13, 1998
(February 27, 1998)
Imo Industries Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9294 21-0733751
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification
Number)
1009 Lenox Drive,
Building Four West, Lawrenceville, NJ 08648-0550
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 896-7600
Not Applicable
(Former name or former address,
if changed since last report)
Item 2. Disposition of Assets.
On February 27, 1998, the Registrant sold all outstanding shares of capital
stock of its Roltra Morse S.p.A. subsidiary ("Roltra Morse"), to Magna
International Inc. ("Magna") for cash, subject to final adjustment (the "Stock
Sale") pursuant to an agreement dated January 30, 1998 (the "Stock Purchase
Agreement"). The Stock Sale resulted in a cash transfer to the Registrant of
$30.7 million. Additionally, Roltra Morse retained $18.4 million of its
debt. The Stock Purchase Agreement has been filed as an exhibit to this
Form 8-K and the foregoing is qualified in its entirety by reference to such
exhibit.
Substantially all of the cash proceeds have been used by the Registrant to pay
down its domestic senior debt. The transaction, which will be reflected in the
Registrant's financial statements in the first quarter of 1998, is not expected
to result in a significant after-tax gain or loss.
The purchase price was determined on the basis of arms length negotiations
between the Registrant and Magna. The Board of Directors of the Registrant
received an opinion from Schroder & Co., Inc. that the financial terms of the
Stock Sale, taken as a whole, were, as of February 27, 1998, fair from a
financial standpoint, to the Registrant and its stockholders.
The Registrant's press release announcing the Stock Sale is also filed herewith
as an exhibit.
Item 7. Financial Statements, Pro Forma Information and Exhibits.
(b) Pro Forma Financial Information
IMO INDUSTRIES INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma consolidated balance sheet as of September 30,
1997 and pro forma consolidated statements of income for the year ended
December 31, 1996 and the nine months ended September 30, 1997 give effect
to the sale of Roltra Morse. The pro forma consolidated balance sheet is
presented as if the transaction occurred at September 30, 1997. The pro
forma consolidated statements of income are presented as if the
transaction occurred at the beginning of the period presented.
These pro forma statements are not necessarily indicative of the results
that actually would have occurred if the sale had been in effect as of and
for the periods presented or that may be achieved in the future.
Imo Industries Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance
Sheet (Unaudited)
September 30, 1997
(Dollars in thousands)
Pro Forma
Imo Industries Roltra Morse Imo Industries
Inc. and Business Pro Forma Inc. and
Subsidiaries Segment(c) Adjustments Subsidiaries
ASSETS
Cash $ 16,807 $ (1,321) $ (1,579)(a)(b) $ 13,907
Trade Accounts Receivable,
net of allowance of $0 66,859 (19,654) - 47,205
Inventories 81,930 (12,872) - 69,058
Deferred income taxes 9,956 - - 9,956
Other Current Assets 11,342 (2,920) - 8,422
TOTAL CURRENT ASSETS 186,894 (36,767) (1,579) 148,548
Property, Plant and Equipment 82,943 (20,555) - 62,388
Intangible Assets,
Principally Goodwill 247,505 (23,638) (672)(b) 223,195
Net Assets of Discontinued
Operations 4,073 27,700 (27,700)(a) 4,073
Other Assets 15,552 (3,886) - 11,666
TOTAL ASSETS $536,967 $ (57,146) $(29,951) $ 449,870
LIABILITIES AND
SHAREHOLDERS' EQUITY
Notes Payable $ 19,180 $ (16,428) $ - $ 2,752
Trade Accounts Payable 46,493 (23,872) - 22,621
Accrued Expenses and Other
Current Liabilities 70,208 (5,849) 3,000 (a) 67,359
Current Portion of
Long-term Debt 5,709 (1,227) (400)(b) 4,082
TOTAL CURRENT LIABILITIES 141,590 (47,376) 2,600 96,814
Long-term Debt 219,631 (3,727) (29,340)(b) 186,564
Deferred Income Taxes 4,789 - - 4,789
Accrued Postretirement Benefits 17,113 - - 17,113
Accrued Pension Expense
and Other Liabilities 54,022 (5,050) - 48,972
TOTAL LIABILITIES 437,145 (56,153) (26,740) 354,252
Minority Interest of Imo
Subsidiary 818 (818) - -
SHAREHOLDERS' EQUITY
Preferred Stock - - - -
Common Stock 18,801 - - 18,801
Additional Paid-in Capital 112,641 - - 112,641
Retained Earnings (Deficit) (14,865) - (3,211)(b) (18,076)
Cumulative Foreign Currency
Translation Adjustments 447 (175) - 272
Minimum Pension Liability
Adjustment - - - -
Unearned Compensation - - - -
Treasury Stock (18,020) - - (18,020)
TOTAL SHAREHOLDERS'
EQUITY (DEFICIT) 99,004 (175) (3,211) 95,618
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIT) $ 536,967 $ (57,146) $ (29,951) $ 449,870
(a) Reflects the sale of the Roltra Morse subsidiary to Magna International Inc.
for cash proceeds of $30.7 million, which amount approximated the recorded
net book value of the business.
(b) Concurrent with the sale of Roltra Morse, $30 million of the proceeds from
the sale were used to paydown a portion of the Registrant's long-term debt.
An extraordinary charge of $3.2 million is recognized related to the early
extinguishment of debt.
(c) This column reflects the restatement of the Roltra Morse subsidiary out of
continuing operations and into discontinued operations.
Imo Industries Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
For the Nine Months Ended September 30, 1997
(Amounts in thousands, except per share data)
Pro Forma(b)
Imo Industries Roltra Morse
Inc. and Business Pro Forma Pro Forma
Subsidiaries Segment(c) Adjustments Consolidated
Net Sales $ 305,092 $ (68,125) $ - $ 236,967
Cost of Sales 225,137 (60,361) - 164,776
GROSS PROFIT 79,955 (7,764) - 72,191
Selling, General and
Administrative Expenses 60,804 (5,829) - 54,975
Research and Development 5,948 (1,812) - 4,136
Unusual Items 32,094 (750) - 31,344
INCOME FROM OPERATIONS (18,891) 627 - (18,264)
Interest Expense, Net 19,464 (2,511) (2,138)(a) 14,815
Other (Income) Expense (127) 656 - 529
Equity in Loss of
Unconsolidated Companies 44 435 - 479
LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES AND MINORITY
INTEREST (38,272) 2,047 2,138 (34,087)
Income taxes 2,188 (624) - 1,564
Minority Interest (29) 29 - -
LOSS FROM CONTINUING
OPERATIONS $ (40,431) $ 2,642 $ 2,138 $ (35,651)
EARNINGS (LOSS) PER
SHARE:
Loss from Continuing
Operations $ (2.35) $ 0.15 $ 0.12 $ (2.08)
Weighted Average
Number of Shares
Outstanding 17,126 17,126 17,126 17,126
(a) Interest savings calculated for the nine months ended September 30, 1997,
based on the Registrant's revised debt as a result of the transaction.
(b) Represents Imo Industries Inc. as reported and adjusted for the sale of the
Instrumentation Business Segment and adjusted for the following as a result
of the sale of the Registrant to II Acquisition Corp. on August 28, 1997,
as if both of these transactions took place on January 1, 1997.
- Reduced Selling, General and Administrative Expenses by $1.1 million
reflecting certain expenses for the first eight months of 1997 which
were eliminated.
- Increased Selling, General and Administrative Expenses by $4.1 million
reflecting additional goodwill amortization expense for the first eight
months of 1997 as a result of the net increase to goodwill of $247.1
million, amortized over 40 years.
(c) This column reflects the restatement of the Roltra Morse subsidiary out of
continuing operations and into discontinued operations.
Imo Industries Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
For the Year Ended December 31, 1996
(Amounts in thousands, except per share data)
Pro Forma(a)
Imo Industries Roltra Morse
Inc. and Business Pro Forma Pro Forma
Subsidiaries Segment Adjustments Consolidated
Net Sales $ 389,734 $ (80,223) $ - $ 309,511
Cost of Sales 290,524 (69,935) - 220,589
GROSS PROFIT 99,210 (10,288) - 88,922
Selling, General and
Administrative Expenses 74,444 (10,047) - 64,397
Research and Development 8,113 (3,658) - 4,455
Unusual Items 23,683 (6,243) - 17,440
INCOME FROM OPERATIONS (7,030) 9,660 - 2,630
Interest Expense, Net 25,167 (4,130) (2,850)(b) 18,187
Other (Income) Expense (813) 1,168 - 355
Equity in Loss of
Unconsolidated Companies 552 (520) - 32
LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES, MINORITY INTEREST
AND EXTRAORDINARY ITEM (31,936) 13,142 2,850 (15,944)
Income taxes 13,385 (722) - 12,663
Minority Interest (295) 295 - -
LOSS FROM CONTINUING
OPERATIONS $ (45,026) $ 13,569 $ 2,850 $ (28,607)
EARNINGS (LOSS) PER
SHARE:
Loss from Continuing
Operations $ (2.63) $ 0.79 $ 0.17 $ (1.67)
Weighted Average Number
of Shares Outstanding 17,100 17,100 17,100 17,100
(a) Represents Imo Industries Inc. as reported and adjusted for the sale of the
Instrumentation Business Segment and as a result of the sale of the
Registrant to II Acquisition Corp. on August 28, 1997. See attached
Footnote A.
(b) Interest savings calculated for the twelve months ended December 31, 1996,
based on the Registrant's revised debt as a result of the transaction.
(c) This column reflects the restatement of the Roltra Morse subsidiary out of
continuing operations and into discontinued operations.
Footnote A
The following exhibit presents the Pro Forma effect of the sale of the
Instrumentation Business on August 29, 1997 and the sale of the Registrant
to II Acquisition Corp. on August 28, 1997.
Imo Industries Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
For the Year Ended December 31, 1996
(Amounts in thousands, except per share data)
Pro Forma(a)
Imo Industries Instrumentation
Inc. and Business Pro Forma Pro Forma
Subsidiaries Segment Adjustments Consolidated
Net Sales $ 468,645 $ (78,911) $ - $ 389,734
Cost of Sales 336,017 (45,493) - 290,524
GROSS PROFIT 132,628 (33,418) - 99,210
Selling, General and
Administrative
Expenses 99,639 (25,195) - 74,444
Research and Development 9,290 (1,177) - 8,113
Unusual Items 24,573 (890) - 23,683
INCOME FROM OPERATIONS (874) (6,156) - (7,030)
Interest Expense, Net 31,793 (432) (6,194)(b) 25,167
Other (Income) Expense (444) (369) - (813)
Equity in Loss of
Unconsolidated Companies 552 - - 552
LOSS FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES, MINORITY
INTEREST AND
EXTRAORDINARY ITEM (32,775) (5,355) 6,194 (31,936)
Income taxes 13,700 (315) - 13,385
Minority Interest (295) - - (295)
LOSS FROM CONTINUING
OPERATIONS $(46,180) $(5,040) $ 6,194 $ (45,026)
EARNINGS (LOSS) PER
SHARE:
Loss from Continuing
Operations $ (2.70) $ (0.29) $ 0.36 $ (2.63)
Weighted Average Number
of Shares Outstanding 17,100 17,100 17,100 17,100
(a) Represents Imo Industries Inc. as reported and adjusted for the
following as a result of the sale of the Registrant to II Acquisition
Corp. on August 28, 1997:
- Reduced Selling, General and Administrative Expenses by $1.7
million reflecting certain expenses which were eliminated.
- Increased Selling, General and Administrative Expenses by $6.1
million reflecting additional goodwill amortization expense as a
result of the net increase to goodwill of $247.1 million, amortized
over 40 years.
In connection with this transaction, the Registrant incurred $15.8
million of indirect expenses related to the acquisition.
This amount was not considered in this income statement presentation.
(b) Interest savings calculated for the twelve months ended December 31, 1996,
based on the Company's revised debt as a result of the transaction.
c) Exhibits
10.28 Stock Purchase Agreement dated as of January 30, 1998 between the
Registrant and Magna International Inc.
99.1 Press release dated February 27, 1998 issued by the Registrant.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
IMO INDUSTRIES INC.
Date: March 13, 1998 By: /s/ John A. Young
John A. Young
Vice President and Chief
Financial Officer
STOCK PURCHASE AGREEMENT
BETWEEN
MAGNA INTERNATIONAL INC.
AND
IMO INDUSTRIES INC.
_______________________
Dated as of January 30, 1998
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of January 30, 1998
(the "Agreement"), between MAGNA INTERNATIONAL INC., a corporation
existing under the laws of the Province of Ontario (the "Purchas-
er"), and IMO INDUSTRIES INC., a Delaware corporation (the "Sell-
er").
W I T N E S S E T H:
WHEREAS, the Seller owns an aggregate of 1,199,957
shares of the capital stock, Lit. 10,000 (10,000 Italian Lire) par
value per share ((the "Existing Shares") and together with any
additional shares of such capital stock owned by the Seller or its
designee on the Closing Date, the "Shares"), of ROLTRA-MORSE S.p.A.,
a company organized and existing under the laws of Italy, registered
in the Commercial Register of the Court of Isernia under Reference
No. 2261 and registered with the Chamber of Commerce of Isernia
under Reference No. 25773 (the "Company"); and
WHEREAS, the Seller desires to sell to Purchaser, and
Purchaser desires to purchase from the Seller, the Shares for the
purchase price and upon the terms and conditions hereinafter set
forth; and
WHEREAS, certain terms used in this Agreement are
defined in Section 10.1 hereof;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties hereby
agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
I.1 Sale and Purchase of Shares. Upon the terms and
subject to the conditions contained herein, on the Closing Date the
Seller shall sell, assign, transfer, convey and deliver to the
Purchaser, and the Purchaser shall purchase from the Seller, the
Existing Shares and the Bartoli's Shares.
ARTICLE II
PURCHASE PRICE AND PAYMENT
II.1 Purchase Price. The purchase price for the Shares
shall be the amount of $50.6 million U.S. dollars (the "Purchase
Price"), subject to any adjustment required by Article II.
II.2 Closing Date. Subject to the satisfaction of the
conditions set forth in Sections 7.1 and 7.2 hereof (or the waiver
thereof by the party entitled to waive that condition), the closing
of the sale and purchase of the Shares provided for in Section 1.1
hereof (the "Closing") shall take place at the offices of Baker &
McKenzie located at Piazza Meda, 3, Milan, Italy on February 27,
1998, or on such other date as the Seller and the Purchaser may
agree. The date on which the Closing shall be held is referred to
in this Agreement as the "Closing Date".
II.3 Payment of Purchase Price; Closing. On the
Closing Date, the Purchaser shall pay the full amount of the
Purchase Price (as adjusted in accordance with Article II) to such
accounts as may be specified by the Seller to the Purchaser not
later than the third business day prior to the Closing Date by wire
transfer of immediately available funds. At Closing, the Seller
shall duly endorse and notarize in favor of the Purchaser and shall
deliver to the Purchaser or its designee the share certificates
representing all the Existing Shares and the Bartoli's Shares, free
and clear of any Liens, as well as the shareholders' book of the
Company.
II.4 Net Equity Adjustment to Purchase Price. The
Purchase Price payable pursuant to Section 2.1 is based upon the
estimate that the Total Net Equity to be reflected on the Closing
Date Financial Statement is 51,758 million (Lit.). The Purchase
Price shall be increased or decreased on a dollar for dollar (based
on the $US/Italian Lira exchange rate as of the Closing Date) basis
on the Closing Date by the amount, if any, by which Total Net Equity
reflected on the Estimated Closing Date Financial Statement is more
or less, as the case may be, than 51,758 million (Lit.).
II.5 Debt Adjustment to Purchase Price. The Purchase
Price payable pursuant to Section 2.1 is based upon the assumption
that the Roltra Group Debt is fully discharged prior to the Closing.
The Purchase Price shall be decreased on a dollar for dollar (based
on the $US/Italian Lira exchange rate as of the Closing Date) basis
on the Closing Date by the amount, if any, by which Roltra Group
Debt is not discharged (together with any repayment costs in respect
of such undischarged Roltra Group Debt not otherwise booked in the
normal course of business).
II.6 Delivery of Financial Statements. The Seller
shall prepare and deliver, or cause to be prepared and delivered, to
the Purchaser the Estimated Closing Date Financial Statement three
business days prior to the Closing Date. As soon as reasonably
practical after the Closing Date and in any event not later than 45
days thereafter, the Seller shall prepare and deliver, or cause to
be prepared and delivered, to the Purchaser the Closing Date
Financial Statement. The Purchaser shall cooperate fully with the
Seller in the preparation of the Closing Date Financial Statement.
II.7 Payment of Adjustment Amount. Subject to Sections
2.8 and 2.9, within 30 days after delivery by the Seller to the Pur-
chaser of the Closing Date Financial Statement, the Seller shall pay
the Purchaser or the Purchaser shall pay the Seller, as the case may
be, the difference between (i) the Total Net Equity based on the
Closing Date Financial Statement and (ii) the Total Net Equity based
on the Estimated Closing Date Financial Statement (such difference
herein referred to as the "Adjustment Amount"), plus any such
further adjustment as may be necessary in respect of Roltra Group
Debt, in immediately available funds.
II.8 Objection to Closing Statement.
(a) Delivery of Objection Notice. In the event that
the Seller or Purchaser (the "Objecting Party") objects in good
faith to any significant aspect of the Closing Date Financial
Statement, the Objecting Party shall so advise the other party (the
"Recipient") by delivery to the Recipient of a written notice (the
"Objection Notice") within 30 days after the delivery to the Object-
ing Party of the Closing Date Financial Statement.
The Objection Notice shall set out the reasons details
of the calculation of such amount.
(b) Agreement of Parties. In the event that the
parties agree on a resolution of the dispute set out in the
Objection Notice, the parties shall confirm this resolution in
writing and shall thereafter be bound by such resolution.
(c) Arbitration. In the event that the parties are
unable to settle any dispute with respect to the Closing Date
Financial Settlement within 30 days after the delivery by the
Objecting Party to the Recipient of the Objection Notice, the
dispute shall forthwith and, in any event, within 60 days after the
delivery by the Objecting Party to the Recipient of the Objection
Notice, be referred to arbitration by a single arbitrator, if the
parties can agree upon one arbitrator, or otherwise by three arbi-
trators, of whom one shall be appointed by the Purchaser and one
shall be appointed by the Seller and the third shall be chosen by
the first two named arbitrators. In the event that either party
does not appoint its arbitrator within the permitted period, the
party that did not appoint its arbitrator shall have an arbitrator
appointed on its behalf by the other party. The arbitration and the
appointment of the arbitrator shall, except to the extent provided
for in this Section, be conducted in New York in accordance with the
International Arbitration Rules of the American Arbitration
Association. The Purchaser and the Seller shall cooperate in com-
pleting any arbitration as expeditiously as possible and the
arbitrators may hire such experts as may appear to be appropriate.
If a single arbitrator is used, all of the costs and expenses of the
arbitration shall be borne equally by the parties or in such other
manner as the arbitrator may determine to be appropriate in light of
the resolution of the dispute. If three arbitrators are used the
costs and expenses of the third arbitrator and of any experts
engaged by such arbitrator shall be borne equally by the parties and
each Party shall pay the costs and expenses of the arbitrator
appointed by it. Arbitration under this Section shall be in
substitution for and precludes the bringing of any action in any
court in connection with any objection made by the Objecting Party
pursuant to this Section.
(d) Determination of Arbitrator. The determination of
the arbitrator(s) shall be made within 30 days after the date on
which the dispute was referred to him, her or them, as the case may
be, and the determination of the arbitrator(s) shall be final and
binding on all parties. The Closing Date Financial Statement and
the Purchase Price shall be adjusted in accordance with the determi-
nation of the arbitrator(s).
(e) Payment in Accordance with Determination. Within
five days after resolution, by agreement of the parties, of the
dispute which was the subject of the Objection Notice or, failing
such resolution, within five days after the final determination of
the arbitration, the Seller or the Purchaser, as the case may be,
shall pay by wire transfer, certified cheque or bank draft the
amount by which the Purchase Price is to be adjusted as a result of
such resolution or final determination.
II.9 Interest. Any Adjustment Amount or other
adjustments to the Purchase Price payable under Sections 2.7 or 2.8
shall be paid together with interest thereon calculated monthly from
the Closing Date to the date of payment, at the rate per annum equal
to the rate quoted by the Bank of Nova Scotia on the Closing Date as
the reference rate of interest it uses for determining interest
rates on United States dollar commercial loans in Canada and
designated as such bank's U.S. dollar prime rate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as otherwise set forth in the Schedules hereto,
the Seller hereby represents and warrants to the Purchaser that:
III.1 Organization.
Each of the Company and the Seller is a corporation duly
organized and validly existing under the laws of the jurisdiction of
its incorporation as set forth above. The Company has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted. Neither
the nature of its business nor the location or character of the
property owned or leased by the Company requires it to be
registered, licensed or otherwise qualified as a foreign corporation
in any jurisdiction other than in those jurisdictions where it is
currently duly registered, licensed or otherwise qualified for such
purpose and other than jurisdictions where the failure to be so
registered, licensed or otherwise qualified would not have a Mate-
rial Adverse Effect on the Company. Seller has made available to
Purchaser complete and correct copies of the articles of associa-
tion, by-laws and other comparable charter or organizational docu-
ments of the Company and each Subsidiary. The minute books and,
where applicable, the books of the statutory auditors, of the Compa-
ny and each Subsidiary made available to the Purchaser include com-
plete and accurate minutes in all material respects of all meetings
of the directors or shareholders of the Company and each Subsidiary,
as applicable, held within the last 12 months or resolutions passed
by the directors or shareholders, on consent or pending, within the
last 12 months. To the Seller's Knowledge, the minute books of the
Company and each Subsidiary are complete and accurate in all
material respects. The share certificate book, register of share-
holders, register of transfers and register of directors of the
Company and each Subsidiary are complete and accurate in all
material respects. There are no pending applications with the
relevant commercial registers. Where necessary, all such reso-
lutions which have to be registered at the relevant commercial
registers (or equivalent registers) were so registered.
III.2 Authorization of Agreement; No Seller Conflicts.
(a) The Seller has all requisite power, authority and
legal capacity to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The Seller has all
requisite corporate power and authority to own the Shares. The exe-
cution, delivery and performance by the Seller of this Agreement has
been duly authorized by all necessary corporate action on behalf of
the Seller. This Agreement has been duly and validly executed and
delivered by the Seller and, assuming the due authorization, execu-
tion and delivery by the Purchaser, constitutes the legal, valid and
binding obligation of the Seller, enforceable against the Seller in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws, now or hereafter in ef-
fect, affecting creditors' rights and remedies and to general
principles of equity.
(b) The execution and delivery by the Seller of this
Agreement does not and the consummation of the transaction contem-
plated hereby, and the compliance by the Seller with the provisions
hereof will not:
(i) conflict with or result in the breach of,
any provision of the certificate of incorporation or by-
laws of the Seller;
(ii) conflict with, violate or result in the
breach or termination of or constitute a default under
any Material Contract or obligation to which the Seller,
the Company or any Subsidiary is a Party; or
(iii) violate any applicable Law or Order by
which the Seller is bound,
other than, in the case of clauses (ii) and (iii), any such
conflicts, violations or defaults that individually or in the
aggregate would not (x) impair in any material respect the ability
of the Seller to perform its obligations under this Agreement or (y)
prevent or impede, in any material respect, the consummation of the
transactions contemplated by this Agreement.
(c) Except as set forth on Schedule 3.2(c) hereto, no
permit or declaration or filing with, or notification to, any
Governmental Body is required on the part of the Seller, the Company
or any Subsidiary in connection with the execution and delivery of
this Agreement or the compliance by the Seller with any of the
provisions hereof.
(d) Except as set forth on Schedule 3.2(d) hereto, the
execution and delivery by the Seller of this Agreement and the
consummation of the transaction contemplated hereby, and the
compliance by the Seller with the provisions hereof, will not give
any party to any Contract set forth in Schedule 3.11 hereto the
right to terminate any such Contract or trigger an obligation on the
part of the Seller or the Company to dispose of its interest in the
Company or any Subsidiary or joint venture or any material asset of
the Company or any Subsidiary.
III.3 Capitalization; Ownership and Transfer of Shares.
(a) The authorized, issued and outstanding capital
stock of the Company consists of 1,200,000 ordinary shares, Lit.
10,000 par value per share, all of which are voting shares. On the
date hereof, the Seller owns an aggregate of 1,199,957 shares of the
capital stock of the Company and Mr. Corrado Bartoli owns an
aggregate of 43 shares of the capital stock of the Company
("Bartoli's Shares"). All of the issued and outstanding shares of
capital stock were duly authorized for issuance and are validly
issued, fully paid, non-assessable and free of any pre-emptive
rights in respect thereof.
(b) The Seller is the record owner of, and has good and
valid title to, the Existing Shares free and clear of any and all
Liens, except as set forth in Schedule 3.3(b) hereto. At the
Closing, the Seller will be the record owner of, and have good and
valid title to, the Shares free and clear of any and all Liens. At
the Closing, the delivery of the Shares will convey to the Purchaser
good and valid title to the Shares, free and clear of any and all
Liens.
(c) Except as set forth on Schedule 3.3(c) hereto,
there is no existing option, warrant, call, right, commitment or
other agreement of any character to which the Seller or the Company
is a party requiring, and there are no securities of the Company
outstanding or agreed to be issued which, upon conversion or ex-
change, would require the issuance, sale or transfer of any addi-
tional shares of capital stock or other equity interests or securi-
ties of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or
purchase shares of capital stock or other equity securities of the
Company. Neither the Seller nor the Company is a party to any
shareholders agreement, voting trust or other voting agreement with
respect to any of the shares of capital stock or, except as set
forth on Schedule 3.3(c) hereto, to any agreement relating to the
issuance, sale, redemption, transfer or other disposition of the
capital stock of the Company.
III.4 Subsidiaries and Equity Investments.
(a) Schedule 3.4(a) hereto sets forth the name of each
Subsidiary and, with respect to each Subsidiary, the jurisdiction in
which it is incorporated or organized, the number of shares of its
capital stock or other equity interests duly issued and outstanding,
the names of all stockholders or other equity owners and the number
of shares of stock owned by each stockholder or the amount of equity
owned by each equity owner. Schedule 3.4(b) hereto also sets forth
the name of each Person (other than a Subsidiary) of which the
Company holds, directly or indirectly, any capital stock or equity
security, together with the amount of capital stock or equity
security so owned and the name of each other record owner thereof.
The outstanding shares of capital stock or equity interests of each
Subsidiary are validly issued, fully paid and non-assessable, and
all such shares or other equity interests shown as being owned by
Company are owned by it free and clear of any and all Liens, except
as set forth in Schedules 3.4(a) and (b) hereto. There is no
existing option, warrant, call, right, commitment or agreement of
any character to which any Subsidiary or the Company is a party re-
quiring, and there are no convertible securities of any Subsidiary
outstanding or agreed to be issued which, upon conversion or
exchange, would require, the issuance, sale or transfer of any addi-
tional shares of capital stock or other equity interests or
securities of any Subsidiary or other securities convertible into
shares of capital stock or other equity interests or securities of
any Subsidiary or other securities convertible into, exchangeable
for or evidencing the right to subscribe for or purchase shares of
capital stock or other equity securities of any Subsidiary. Each
Subsidiary is a duly organized and validly existing corporation or
other entity under the laws of the jurisdiction of its organization.
Each Subsidiary has all requisite corporate power and authority to
own its properties and carry on its business as presently conducted.
Except, as set forth in Schedule 3.4(a) hereto, neither the Seller
nor the Company nor any Subsidiary is a party to any shareholders
agreement, voting trust or any other voting agreement with respect
to any of the shares of capital stock or other equity interest or to
any agreement relating to the issuance, sale, redemption, transfer
or other disposition of the capital stock of any Subsidiary.
(b) Except as disclosed in Schedule 3.4(b), neither the
Company nor any Subsidiary is a partner, beneficiary, trustee, co-
tenant, joint venturer or otherwise a participant in any
partnership, trust, joint venture, co-tenancy or other similar
jointly owned business undertaking, and neither the Company nor any
Subsidiary has any other investment interests in any business owned
or controlled by any third party which are material to the Company
or any Subsidiary.
III.5 No Company Conflicts; Consents of Third Parties.
(a) Except as set forth in Schedule 3.5(a) hereto, the
execution and delivery by the Seller of this Agreement, the
consummation of the transaction contemplated hereby, and the
compliance by the Seller with the provisions hereof will not (i)
conflict with, or result in the breach of, any provision of the
articles of incorporation or comparable organizational documents of
the Company or any Subsidiary, (ii) conflict with, violate, result
in the breach or termination of, or constitute a default under, any
Material Contract or obligation to which the Company or any
Subsidiary is a party or by which the assets of the Company or any
Subsidiary may be bound, (iii) violate any applicable Law or Order
by which the Company or any Subsidiary is bound, or (iv) result in
the creation of any Lien upon the properties or assets of the
Company or any Subsidiary; except, in the case of clauses (ii),
(iii) and (iv), for such violations, breaches or defaults as would,
individually or in the aggregate, have no Material Adverse Effect.
(b) Except as set forth in Schedule 3.5(b) hereto, no
Permit from or declaration or filing with, or notification to, any
Governmental Body is, to the Seller's Knowledge, required on the
part of the Company or any Subsidiary in connection with the
execution and delivery of this Agreement or the compliance by the
Seller with any of the provisions hereof or thereof.
III.6 Financial Statements. The Seller has delivered
to the Purchaser copies of (i) the audited consolidated balance
sheets of the Company and the Subsidiaries as at December 31, 1994,
1995 and 1996 and the related audited consolidated statements of
profit and loss and of cash flows for the years then ended, in each
case presented in Italian Lire (collectively, the "Italian Audited
Financials"), and (ii) the unaudited consolidated balance sheet of
the Company and the Subsidiaries as at October 31, 1997 and the re-
lated consolidated statements of profit and loss and cash flows for
the ten-month period then ended, in each case presented in Italian
Lire (the "Italian Interim Financials"). The Italian Audited
Financials were prepared in accordance with applicable provisions of
Italian Law and generally accepted accounting standards in Italy,
consistently applied, and fairly present the consolidated financial
position of the Company and its Subsidiaries as of the date thereof
and the consolidated results of their operations and cash flows for
the periods then ended. The Italian Interim Financials fairly
present, in all material respects, the consolidated financial
position of the Company and its Subsidiaries as of the date thereof
and the consolidated results of their operations and cash flows for
the period then ended and have been prepared to the extent
practicable, consistent with the past policies and practices of the
Seller used in the preparation of its Italian Audited Financials,
except that the Italian Interim Financials are unaudited, contain no
footnotes and are subject to normal year-end adjustments. There are
no material unreflected loss contingencies or contingent liabilities
that are not accrued or disclosed in the Italian Audited Financials
that were required to be accrued or disclosed pursuant to applicable
provisions of Italian Law or generally accepted accounting standards
in Italy. The unaudited consolidated balance sheet of the Company
and the Subsidiaries as at October 31, 1997 is referred to herein as
the "Balance Sheet" and October 31, 1997 is referred to herein as
the "Balance Sheet Date".
III.7 Absence of Certain Developments.
(a) Except as expressly contemplated by this Agreement
or as set forth in Schedule 3.7(a) hereto, since the Balance Sheet
Date:
(i) there has not been any declaration, setting
aside or payment of any dividend or other distribution in respect of
any shares of capital stock of the Company or any repurchase,
redemption or other acquisition by the Company or any Subsidiary of
any outstanding shares of capital stock or other securities of, or
other ownership interest in, the Company or any Subsidiary resulting
in a payment or distribution to a Person other than the Company or a
Subsidiary;
(ii) other than for normal payments and increases
in the ordinary course of business, consistent with past practice,
neither the Company nor any Subsidiary has granted any material
increase in the compensation, commissions or bonus opportunities
payable to any directors, officers, employees, consultants or
agents;
(iii) there has not been any change by the
Company or any Subsidiary in accounting or tax reporting principles,
methods or policies;
(iv) neither the Company nor any Subsidiary has
conducted its business other than in the ordinary course of
business, consistent with past practice;
(v) neither the Company nor any Subsidiary has
mortgaged, pledged or subjected to any other Lien any of its assets,
or acquired any assets or sold, assigned, transferred, conveyed,
leased or otherwise disposed of any assets of the Company or any
Subsidiary, except for assets acquired or sold, assigned, trans-
ferred, conveyed, leased or otherwise disposed of in the ordinary
course of business, consistent with past practice;
(vi) neither the Company nor any Subsidiary has
instituted, settled or been named as a defendant in any material
Legal Proceeding;
(vii) neither the Company nor any Subsidiary
has, except in the ordinary course of business, consistent with past
practice, incurred any indebtedness for borrowed money, modified the
terms of any indebtedness for borrowed money existing at the Balance
Sheet Date, or issued any guarantee or otherwise become liable for
the indebtedness for borrowed money of any other Person;
(viii) neither the Company nor any Subsidiary
has issued or sold any warrants, bonds, debentures or other
securities of the Company or any Subsidiary or issued, granted or
delivered any right, option or other commitment for the issuance of
any such securities or reduced or increased the stated capital of
any class of shares; and
(ix) neither the Company nor any Subsidiary has
authorized, agreed or otherwise become committed to do any of the
foregoing.
(b) Except as expressly contemplated by this Agreement
or as set forth in Schedule 3.7(b) hereto, since December 31, 1997
(if Italian audited financials are available for such period on the
Closing Date) or August 31, 1997 (if such Italian audited financials
are not available on the Closing Date) there has not been any
Material Adverse Change nor has there occurred any event which is
reasonably likely to result in a Material Adverse Change.
(c) Except as set forth in Schedule 3.7(c) hereto, to
the Seller's Knowledge, since January 1, 1997, there has not been
any Material Adverse Change and, since August 31, 1997, there has
not been any Material Adverse Effect.
III.8 Taxes.
(a) Except as set forth in Schedule 3.8 hereto, (A) all
material Tax Returns required to be filed by or on behalf of the
Company or any Subsidiary have been timely filed with the
appropriate taxing or social security authorities in all juris-
dictions in which such Tax Returns are required to be filed (after
giving effect to any valid extensions of time in which to make such
filings), and, to the Seller's Knowledge, all such Tax Returns were
properly prepared, true, complete and correct in all material
respects; (B) all amounts shown on such Tax Returns (including
interest and penalties) as due from the Company or any Subsidiary
have been fully and timely paid; and (C) neither the Company nor any
Subsidiary has executed or filed with any taxing authority any
agreement, waiver or other document or arrangement extending or
having the effect of extending the period for assessment or
collection of Taxes (including any applicable statute of limita-
tion), and no power of attorney with respect to any Tax Matter is
currently in force.
(b) Each of the Company and any Subsidiary has duly and
timely paid all material Taxes, including all installments on
account of Taxes for the current year, that are due and payable by
it and the Company or the relevant Subsidiary has established
reserves that are reflected on the Balance Sheet (and that will be
reflected in the Closing Date Financial Statement) that are adequate
for the payment by the Company and all Subsidiaries of all Taxes
that are not yet due and payable (and that will not be due and
payable by the Closing Date) and that relate to periods ending on or
prior to the Closing Date.
(c) There are no suits, actions, proceedings,
investigations, challenges, disputes, audits or claims now pending
or, to the Seller's Knowledge, threatened, against the Company or
any Subsidiary in respect of any Taxes and there are no matters
under discussion, audit or appeal with any taxing or other Govern-
mental Body relating to Taxes which, if decided against the Company
or any Subsidiary, would have a Material Adverse Effect.
III.9 Real Property.
(a) Schedule 3.9(a) hereto sets forth a complete list
of (i) all real property owned by the Company or any Subsidiary
(individually, an "Owned Property" and collectively, the "Owned
Properties"), and (ii) all real property leased by the Company or
any Subsidiary as lessee or lessor (each such lease being, individu-
ally, a "Real Property Lease" and the real properties specified in
such leases, together with the Owned Properties, being referred to
herein individually as a "Company Property"). The Company and the
Subsidiaries have good and marketable title to all Owned Property,
free and clear of all Liens of any nature whatsoever except (A)
Liens set forth in Schedule 3.9(a) hereto and (B) Permitted
Encumbrances.
(b) Except as set forth in Schedule 3.9(b) hereto, the
Company Properties constitute all interests in real property
currently owned, occupied, used or leased in connection with the
business of the Company and the Subsidiaries and which are necessary
for the continued operation of the business of the Company and the
Subsidiaries as the business is currently conducted. All buildings,
fixtures and improvements owned or leased by the Company or a
Subsidiary, which are material to the conduct of the business of the
Company and its Subsidiaries taken as a whole, are in good operating
condition and repair (subject to normal wear and tear).
(c) The Company and its Subsidiaries have a valid
leasehold interest under each of the Real Property Leases. Except
as set forth in Schedule 3.9(c) hereto, each of the Company and its
Subsidiaries has complied in all material respects with the terms of
all Real Property Leases to which it is a party and under which it
is in occupancy, and all Real Property Leases are in full force and
effect.
(d) Except as set forth in Schedule 3.9(d), all of the
material assets of the Company and each Subsidiary are located on a
Company Property.
(e) The Company has such rights of entry and exit to
and from each Company Property as are reasonably necessary to carry
on its business upon the Company Property substantially in the
manner in which such business is currently carried on.
(f) To the Seller's Knowledge, no expropriation or
similar proceeding is pending or threatened against any Company
Property.
(g) There are no matters affecting the right, title and
interest of the Company or any Subsidiary in and to the Company
Property which would have a Material Adverse Effect on the ability
of the Company or any Subsidiary to carry on its business upon the
Company Property substantially in the manner in which it is
currently being carried on upon the Company Property.
III.10 Intellectual Property.
(a) Schedule 3.10 sets forth a list of all registered
trademarks and service marks, industrial designs, registered
copyrights, patents and patent applications owned by or validly
licensed to the Company or a Subsidiary which are material to the
business of the Company and its Subsidiaries taken as a whole (the
"Intellectual Property"). Schedule 3.10 also sets forth, for each
such patent, the number of the patent, the inventors, the title and
issue date and the country in which such patent has been issued,
licenses issued in respect of such patents, and for each trademark,
the trademark class of goods covered and the trademark registration
date for each country in which a trademark has been registered. The
Company and its Subsidiaries have acted in a commercially
responsible manner and with due care in regard to the maintenance
and protection of the Intellectual Property.
(b) Except as disclosed in Schedule 3.10, the Company
or the applicable Subsidiary has the sole and exclusive right to use
and is the sole and exclusive owner of all right, title and interest
in and to the Intellectual Property (with no breaks in the chain of
title). The Intellectual Property which is not owned by the Company
or a Subsidiary is being used by the Company or such Subsidiary only
with the consent of or license from the rightful owner thereof and
all such licenses are in full force and effect.
(c) Except as disclosed in Schedule 3.10, to the
Seller's Knowledge, there is no claim of adverse ownership,
invalidity or other opposition to or conflict with any Intellectual
Property nor of any pending or threatened suit, proceedings, claim,
demand, action or investigation of any nature or kind against the
Company or any Subsidiary relating to the Intellectual Property.
(d) Except as disclosed in Schedule 3.10, to the
Seller's Knowledge, neither the Company nor any Subsidiary, any
activity in which the Company or any Subsidiary is engaged or any
product which the Company or any Subsidiary manufactures, uses or
sells or any process, method, packaging, advertising, or material
that the Company or any Subsidiary employs in the manufacture,
marketing or sale of any such product, or the use of any of the
Intellectual Property breaches, violates infringes or interferes
with any significant intellectual property rights of any third party
or requires significant payment for the use of any patent, trade-
name, trade secret, trademark, copyright or other intellectual
property right or technology of another.
III.11 Material Contracts. Schedule 3.11 hereto sets
forth all Contracts (other than Real Property Leases listed in
Schedule 3.9(a) and licenses with respect to Intellectual Property
listed in Schedule 3.10) to which the Company or any Subsidiary is a
party or by which it is bound which is a: (i) financing or security
agreement (including factoring or installment sale agreements); (ii)
agreement with the Seller or any Affiliate of the Seller or any
current officer or director of the Company or any Subsidiary; (iii)
agreement which involves the expenditure or receipt of more than
$250,000 in the aggregate or $75,000 annually or requires
performance by any party more than one year from the date hereof;
(iv) lease pertaining to personal property providing for monthly
rental payments in excess of $75,000 per annum; or (v) Contract
which contains any exclusivity or non-competition clauses or lan-
guage having a substantially similar effect (collectively, the
"Material Contracts"). There have been made available to the Pur-
chaser true and complete copies of all the Material Contracts.
Except as provided in the Material Contracts, neither the Company
nor any Subsidiary is a party to or bound or affected by any
commitment, agreement or document containing any covenant expressly
limiting the freedom of the Company or such Subsidiary to compete in
any line of business, transfer or move any of its assets or
operations or which materially or adversely affects the business
practices, operations or conditions of the Company or such Sub-
sidiary to compete in any line of business, transfer or move any of
its assets or operations or which materially or adversely affects
the business practices, operations or conditions of the Company or
such Subsidiary or the continued operation of its business after the
Closing on substantially the same basis as its business is presently
carried on. Except as set forth in Schedule 3.11 hereto, all of the
Material Contracts are in full force and effect and are the legal,
valid and binding obligation of the Company and/or one or more of
the Subsidiaries, enforceable against them in accordance with their
respective terms and all payments due under the Material Contracts
have been duly and punctually paid. Except as set forth on Schedule
3.11 hereto, neither the Company or any Subsidiary is in default in
any material respect under any Material Contract nor, to the
Seller's Knowledge, is any other party to any Material Contract in
default thereunder in any material respect.
III.12 Employee Benefits.
(a) Other than contributions to mandatory statutory
plans, the Company or any Subsidiary does not contribute and is not
obligated to contribute to any pension plan or other employee bene-
fit arrangements. All contributions required to be made by the
Company or any Subsidiary to a mandatory statutory plan have been
paid or fully accrued on the Balance Sheet.
(b) Neither the Company nor any Subsidiary is a party,
either directly or by operation of law, to any collective agreement,
letters of understanding, letters of intent or other written
communication with any trade union or association which may qualify
as a trade union.
(c) To the Seller's Knowledge, there are no outstanding
labor tribunal proceedings of any kind, including any proceedings
which could result in certification of a trade union as bargaining
agent for employees or dependent contractors of the Company or any
of the Subsidiaries, and there have not been any such proceedings
within the last two years.
(d) Other than national industrial actions not specifi-
cally directed against the Company or any of its Subsidiaries or as
disclosed on Schedule 3.12(d) hereto, there are, and since January
1, 1997, there have been, no (i) strikes, work stoppages, slowdowns,
lockouts or arbitrations or (ii) material grievances or other
material labor disputes pending or, to the Seller's Knowledge,
threatened against or involving the employees of the Company or of
any of its Subsidiaries.
(e) Schedule 3.12(e) provides for the complete list of
all agents who/which render services in favor of Company or any of
the Subsidiaries (the "Agents"). All of the agency agreements
pertaining to the Agents are in full force and effect. The Company
or any of the Subsidiaries has duly paid all the contributions due
to the relevant agencies as well as any other amount due to the
Agents. None of the Company or any of the Subsidiaries is a party
to any agency agreement except as indicated under Schedule 3.12(e).
(f) Any and all consulting agreements entered into
between the Company or the Subsidiaries and any of its consultants,
advisors and accountants comply with all applicable laws.
III.13 Litigation. Schedule 3.13 hereto lists each
Legal Proceeding or investigation or claim asserted and pending
against the Company or any Subsidiary, other than those which would,
individually or in the aggregate, not have a Material Adverse
Effect. Except as set forth in Schedule 3.13, there is no Legal
Proceeding or investigation or claim asserted or pending against the
Company which would: (i) enjoin, restrict or prohibit the transfer
of all or any part of the Shares as contemplated by this Agreement;
or (ii) prevent the Seller from fulfilling all of its obligations
set forth in this Agreement or arising from this Agreement. Neither
the Company nor any Subsidiary is subject to any Order other than
those which would not, individually or in the aggregate, have a
Material Adverse Effect.
III.14 Compliance with Laws; Permits. The Company and
each Subsidiary is in compliance with all Laws applicable to it or
to the conduct of its business or operations or the use of its
properties (including any leased properties) and assets, except for
such non-compliances as would not, individually or in the aggregate,
have a Material Adverse Effect. The Company and each Subsidiary has
all Permits which are required for the Company or such Subsidiary to
operate its business, except for those the absence of which would
not, individually or in the aggregate, have a Material Adverse
Effect and all such Permits are in full force and effect.
III.15 Environmental Matters.
(a) The Seller has made available to the Purchaser all
written environmental audits, studies, reports, analyses, and
results of investigations in its possession that have been performed
by or on behalf of the Company since January 1, 1994 with respect to
any currently owned property of the Company or any Subsidiary.
(b) Except as disclosed in Schedule 3.15, all
operations of the Company and each Subsidiary conducted on Company
Property and the Company Property itself while occupied by the
Company or a Subsidiary, as applicable, and, to the Seller's
Knowledge, while occupied by any predecessors in title, have been
and are now, in compliance in all material respects with all
Environmental Laws.
(c) None of the Company or any Subsidiary has been
prosecuted for or convicted of any offence under Environmental Laws,
nor has the Company or any Subsidiary been found liable in any
proceeding to pay any material fine or judgment to any person as a
result of any release or threatened release of any hazardous
substance into the environment or the breach of any Environmental
Law and, to the Seller's Knowledge, there is no basis for any such
proceedings.
III.16 Insurance. Schedule 3.16 hereto sets forth a
complete and accurate list of all policies of insurance of any kind
or nature covering the Company or any Subsidiary or any of their
respective employees, properties or assets, including policies of
life, disability, fire, theft, workers compensation, employee fi-
delity and other casualty and liability insurance. All such
policies are in full force and effect and, neither the Company nor
any Subsidiary is in default of any provision thereof, except for
such defaults as would not, individually or in the aggregate, have a
Material Adverse Effect.
III.17 Related Party Transactions.
(a) Except as set forth in Schedule 3.17(a) hereto,
neither the Seller nor any of its Affiliates has outstanding any
indebtedness for borrowed money to the Company or any Subsidiary.
(b) Except as set forth in Schedule 3.17(b) hereto,
neither the Company nor any Subsidiary has outstanding any
obligation to, indebtedness for borrowed money or guarantees from
the Seller or any of its Affiliates or any shareholders, employees,
officers or directors of any of the foregoing.
III.18 Banks. Schedule 3.18 hereto contains a complete
and correct list of the names and locations of all banks in which
the Company or any Subsidiary has accounts or safe deposit boxes and
the names of all persons authorized to draw thereon or to have
access thereto. Except as set forth in Schedule 3.18 hereto, no
Person holds a power of attorney to act on behalf of the Company or
any Subsidiary regarding any banking transactions.
III.19 Financial Advisors. With the exception of
Schroder & Co. Inc. which has been retained by the Seller as its fi-
nancial advisor, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of the Sellers, the
Company or any Subsidiary in such manner as to give rise to any
valid claim against the Purchaser or its Affiliates, the Company or
any Subsidiary for any broker's or finder's fee or similar compen-
sation in connection with the transaction contemplated hereby.
III.20 Absence of Guarantees. Neither the Company nor
any Subsidiary has given or agreed to give, or is a party to or
bound by, any guarantee or indemnity in respect of indebtedness, or
other obligations, of any Person (other than the Company or any
Subsidiary), or any other commitment by which the Company or any
Subsidiary is, or is contingently, responsible for such indebtedness
or other obligations.
III.21 Warranty.
(a) Except for a condition or warranty implied by law
or contained in its standard terms of sale or otherwise given in the
ordinary course of business, neither the Company nor any Subsidiary
has given, within the last 12 months, a condition or warranty or in-
demnity or made, within the last 12 months, a representation in re-
spect of goods or services supplied or agreed to be supplied by it
to an original equipment manufacturer or other customer, or accepted
an obligation which could give rise to a contractual liability after
the goods or services have been supplied by it.
(b) Neither the Company nor any Subsidiary has, since
January 1, 1997, recalled, or intends to recall, any goods
manufactured or supplied by such Company or Subsidiary, as the case
may be, to a customer, and to the Seller's Knowledge, there are no
facts which exist that may result in any recall or proposed recall.
(c) Neither the Company nor any Subsidiary has received
within the last 12 months any written notification of any claim, or
any oral notification of any material claim (in each case whether
actual or contingent, pending or threatened), by a customer in any
jurisdiction in respect of any goods manufactured or supplied by the
Company or any Subsidiary to such customer thereof alleging that
such goods are defective or fail to comply in any material respect
with their terms of sale (except to the extent that either (i) such
claims are covered by a valid and binding product liability
insurance maintained by the Company or such Subsidiary, and to the
extent the Purchaser can enjoy the benefit of such product liability
insurance in respect of any such claim or (ii) such claim was not
material and has been resolved to the reasonable satisfaction of the
customer (both as to substance and promptness)).
III.22 Government Grants. Schedule 3.22 contains a
complete list of all contracts or agreements relating to grants or
other forms of assistance including, without limitation, loans with
interest at below market rates, received by the Company from any
government, governmental department, agency, commission, board,
bureau or instrumentality, domestic or foreign. This Agreement and
the consummation of the transactions contemplate by this Agreement
will have no impact on any of the aforesaid governmental grants,
governmental subsidies or governmental loans.
III.23 Directors and Officers. Schedule 3.23 sets
forth a true and complete list of the names and titles of all of the
directors and officers of the Company and each Subsidiary, and of
all personnel employed or engaged by the Company or any Subsidiary
whose annual rate of remuneration exceeds US$100,000.
III.24 Negotiation Expenses. Except as set forth in
Schedule 3.24, on or before the Closing Date, none of the Company or
any Subsidiary shall have paid or incurred any liability to pay any
expenses relating to the negotiation, completion or implementation
of this Agreement, including the fees and disbursements of counsel
to the Seller.
III.25 Schedules. To the Seller's Knowledge, the
schedules and exhibits attached hereto are true and correct in all
material respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the
Seller that:
IV.1 Organization and Good Standing. The Purchaser is
a corporation, validly existing and in good standing under the laws
of the jurisdiction of its organization.
IV.2 Authorization of Agreement. The Purchaser has
full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by the Purchaser of this
Agreement has been duly authorized by all necessary corporate action
on behalf of the Purchaser. This Agreement has been duly and
validly executed and delivered by the Purchaser and (assuming the
due authorization, execution and delivery by each other party
thereto), constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally from
time to time in effect and to general equitable principles.
IV.3 Conflicts; Consents of Third Parties.
(a) The execution and delivery by the Purchaser of this
Agreement, the consummation of the transaction contemplated hereby
and the compliance by the Purchaser with the provisions hereof will
not (i) conflict with, or result in the breach of, any provision of
the certificate of incorporation, by-laws or other constitutional
documents of the Purchaser, (ii) conflict with, violate, result in
the breach of, or constitute a default under any material contract
to which the Purchaser is a party or (iii) violate any Law or Order
by which the Purchaser is bound.
(b) Except as set forth in Schedule 4.3(b) hereto, no
Permit or declaration or filing with, or notification to, any
Governmental Body is required on the part of the Purchaser in
connection with the execution and delivery of this Agreement or the
compliance by the Purchaser with any of the provisions hereof.
IV.4 Litigation. There are no Legal Proceedings pend-
ing or, to the Purchaser's Knowledge, threatened that are reasonably
likely to prohibit the Purchaser from consummating or to restrain
the ability of the Purchaser to consummate the transactions contem-
plated hereby.
IV.5 Investment Intention. The Purchaser is acquiring
the Shares for its own account, for investment purposes only and not
with a view to the distribution (as such term is used in Section
2(11) of the Securities Act of 1933, as amended (the "Securities
Act") thereof. The Purchaser understands that the Shares have not
been registered under the Securities Act and cannot be sold unless
subsequently registered under the Securities Act or an exemption
from such registration is available.
IV.6 Financial Advisors. All negotiations relating to
this Agreement and the transactions contemplated hereby have been
carried on without the intervention of any person acting on behalf
of the Purchaser in such manner as to give rise to any valid claim
against the Seller or any of its Affiliates for any broker's or
finder's fee or similar compensation in connection with the transac-
tions contemplated hereby.
ARTICLE V
COVENANTS
V.1 Access to Information. Prior to the Closing Date,
the Purchaser shall be entitled, through its officers, employees and
representatives (including its legal advisors and accountants), to
make such investigation of the properties, businesses and operations
of the Company and the Subsidiaries and such examination of the
books, records and financial condition of the Company and the
Subsidiaries as the Purchaser reasonably requests and to make
extracts and copies of such books and records, to the extent permit-
ted by applicable law. Any such investigation and examination shall
be conducted during regular business hours and under reasonable cir-
cumstances, and the Seller shall cooperate, and shall cause the
Company and the Subsidiaries to cooperate fully therein. In order
that the Purchaser may have full opportunity to make such physical,
business, accounting and legal review, examination or investigation
as it may reasonably request of the affairs of the Company and the
Subsidiaries, the Seller shall use reasonable efforts to cause the
officers, employees, consultants, agents, accountants, attorneys and
other representatives of the Company and the Subsidiaries to
cooperate fully with the Purchaser in connection with such review,
examination and investigation. All information obtained through
such access shall remain subject to the terms of the Confidentiality
Agreement.
V.2 Conduct of the Business Pending the Closing.
(a) Except as otherwise expressly contemplated by this
Agreement or with the prior written consent of the Purchaser,
through the Closing Date the Seller shall cause the Company and the
Subsidiaries to conduct the respective businesses of the Company and
the Subsidiaries in the ordinary course, consistent with past
practice; provided, however, that the Seller shall (i) discharge, in
whole or in part, any loans by the Seller or its Affiliates to the
Company or its Subsidiaries and (ii) terminate any keep well letters
and similar instruments from the Seller and its Affiliates in favour
of the Company or its Affiliates.
(b) Except as otherwise expressly contemplated by this
Agreement or with the prior written consent of the Purchaser,
through the Closing Date the Seller shall cause the Company and the
Subsidiaries not to:
(i) other than as set forth on Schedule 5.2(b)
hereto with respect to permitted dividends by the
Company, declare, set aside, make or pay any dividend or
other distribution in respect of the capital stock of
the Company or repurchase, redeem or otherwise acquire
any of their outstanding shares of capital stock, other
securities or other ownership interests;
(ii) transfer, issue, sell or dispose of any
shares of capital stock or other securities or material
assets of the Company or any of the Subsidiaries or
grant any option, call or other right to purchase or
otherwise acquire shares of the capital stock or other
securities or material assets of the Company or any Sub-
sidiary;
(iii) amend their respective certificates of in-
corporation or by-laws or similar constitutional docu-
ments; or
(iv) agree to do anything prohibited by this
Section 5.2 or anything which would make any of the rep-
resentations and warranties of the Seller in this Agree-
ment untrue or incorrect as of any time through and in-
cluding the Closing Date.
V.3 Approvals and Consents; Cooperation. Upon the
terms and subject to the conditions set forth in this Agreement,
each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, and
to assist and cooperate with the other party in doing, all things
necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the transactions con-
templated by this Agreement, including (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals
from any Governmental Body and the making of all necessary
registrations and filings (including filings with Governmental
Bodies) and the taking of all reasonable steps as may be necessary
to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Body, including any antimonopoly or
similar Government Body in any jurisdiction where the Company or its
Subsidiaries carries on business (including Poland), (ii) the ob-
taining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceed-
ings, whether judicial or administrative, investigating or challeng-
ing this Agreement or the consummation of any of the transactions
contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Govern-
mental Body vacated or reversed and (iv) the execution and delivery
of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes
of, this Agreement. If, prior to the Closing Date, either party is
informed by any Governmental Body that the transactions contemplated
by this Agreement are, in whole or in part, in violation of any
applicable law, rule or regulation, then the parties agree to
negotiate in good faith a resolution of the issue.
V.4 Bartoli's Shares. The Seller shall cause Bartoli's
Shares to be transferred to the Seller or its designee on or before
the Closing Date.
V.5 No Solicitation. The Seller will not, and will not
cause or permit the Company or any of the Company's directors,
officers, employees, representatives or agents (collectively, the
"Representatives") to, directly or indirectly (i) negotiate, under-
take, authorize, propose or enter into, any transaction involving a
business combination, purchase or disposition of any significant
amount of the assets of or capital stock or other equity interest in
the Company or any Subsidiary other than as contemplated by this
Agreement (any such other transaction being "Acquisition Transac-
tion"), (ii) solicit or initiate negotiations or submissions of pro-
posals or offers in respect of an Acquisition Transaction, (iii)
furnish or cause to be furnished any information in connection with
an Acquisition Transaction, or (iv) otherwise cooperate in any way
with any effort or attempt by any Person to do or seek any of the
foregoing. The Seller will inform the Purchaser following the
receipt by the Seller, the Company or any of the Representatives of
any proposal or inquiry in respect of any Acquisition Transaction.
V.6 Preservation of Records. The Seller and the Pur-
chaser agree that each of them shall preserve and keep the records
held by it relating to the business of the Company and the
Subsidiaries for a period of two (2) years from the Closing Date (or
such longer period as may be required by any Governmental Body or
Legal Proceeding or applicable Law) and shall make such records and
personnel available to the other as may be reasonably required by
such party in connection with, among other things, any insurance
claim by or Legal Proceeding involving or governmental investigation
of the Seller or the Purchaser or any of their respective Affiliates
or in order to enable the Seller or the Purchaser to comply with its
obligations under this Agreement. In the event the Seller or the
Purchaser wishes to destroy such records after the applicable record
retention period, such party shall first give ninety (90) days prior
written notice to the other and such other party shall have the
right at its option and expense, upon prior written notice given to
such party within that ninety (90) day period, to take possession of
the records within one hundred and eighty (180) days after the date
of such notice.
V.7 Publicity. Neither the Seller nor the Purchaser
shall issue any press release or public announcement concerning this
Agreement or the transaction contemplated hereby without obtaining
the prior written approval of the other party hereto, which approval
will not be unreasonably withheld or delayed; provided, however,
that if, in the sole judgement of the disclosing party, disclosure
is required by applicable Law or by the rules of any stock exchange
on which the Purchaser, if it is the disclosing party, or the Sell-
er, if it is the disclosing party, lists securities, the party
intending to make such disclosure may make the required disclosure
so long as it shall use reasonable efforts to consult with the other
party with respect to the text thereof.
V.8 Use of Names. No interest in or right to use the
name "IMO", "Roltra-Morse" or "Morse", any name containing "Morse"
or any variant of the foregoing (collectively, the "Morse Logos") is
being transferred hereunder. The Purchaser agrees that it will, as
promptly as practicable but in any event within nine months
following the Closing Date, cease to use the "Morse Logos" and
remove or obliterate all such logos from all signs, purchase orders,
invoices, sales orders, packaging stock, labels, letterheads,
shipping documents and other materials used by it. Notwithstanding
anything herein to the contrary, the Purchaser may continue to use
existing supplies or marketing materials until such supplies are
exhausted. The Purchaser will use its best efforts to not misap-
propriate, misrepresent or otherwise infringe, abuse or diminish the
value of said names. For the avoidance of doubt, nothing in this
Section 5.8 shall limit or restrict the Purchaser's interest in or
right to use the name "Roltra" after the Closing Date.
V.9 Audited Financial Statements. Each of the
Purchaser and the Seller shall use their reasonable efforts to have
the audited consolidated balance sheets of the Company and the
Subsidiaries as at December 31, 1997 and the related audited
consolidated statements of profit and loss and of cash flows for the
year then ended, presented in Italian Lire, prepared by the Auditor
prior to the Closing Date.
V.10 Financial Statements of the Seller. Prior to the
Closing Date, the Seller shall provide to the Purchaser the most
recent audited consolidated financial statements of the Seller and,
for a period of two years from the Closing Date, shall provide
annual and quarterly consolidated financial statements of the Seller
as promptly as possible after such statements have been prepared by
the Seller.
ARTICLE VI
INDEMNIFICATION
VI.1 Indemnification by the Seller.
(a) The Seller shall indemnify and fully defend, save
and hold the Purchaser harmless for any claims, losses, damages,
liabilities, costs, expenses, amounts paid in settlement and
reasonable attorneys' fees and disbursements (a "Loss") suffered by
the Purchaser as a result or arising out of any material inaccuracy
in any representation of the Seller or the breach of any warranty or
covenant of the Seller made in this Agreement; provided, however,
that the Seller shall have no obligation to make any payment under
this Section 6.1 except to the extent that the aggregate amount of
the Losses hereunder exceed $1,000,000.
(b) Notwithstanding Section 6.1(a), except as otherwise
provided in this Section 6.1(b), in the event that there is a final
ruling, decision or award in the Kiekert Arbitration in favor of
Kiekert that requires, in whole or in part, the Company or any
Subsidiary to pay Kiekert royalties in connection with the prod-
uction, manufacture or distribution of latches (an "Adverse Ruling")
during any period up to and including the Closing Date (the "Pre-
Closing Period") and during any periods commencing after the Closing
Date (the "Post-Closing Period"), then the Seller shall indemnify
the Purchaser for only 90% of the amount of any such royalties
attributable to the Pre-Closing Period that are actually paid by the
Purchaser to Kiekert. In the event of an Adverse Ruling, the Seller
shall have the right to require the Purchaser to appeal such ruling
and the Seller shall have the right, but not the obligation, to par-
ticipate at its own expense in such appeal and shall in any event
cooperate with and assist the Purchaser to the extent reasonably
possible. Notwithstanding anything to the contrary in this Section
6.1(b) or contained in the Adverse Ruling, in the event of an Ad-
verse Ruling, the Purchaser and the Seller agree that any amounts
payable under this Section 6.1(b) shall be fairly apportioned
between the Pre-Closing and the Post-Closing Periods based on a
methodology to be agreed to by the Purchaser and the Seller within
30 days of the Adverse Ruling. In the event that the Purchaser and
the Seller cannot agree on such a methodology within such period,
the parties agree to settle the dispute in the manner set out in
Section 2.8. The Purchaser agrees not to settle or compromise the
Kiekert Arbitration without the written consent of the Seller, which
consent shall not be unreasonably withheld or delayed after such
time as the Purchaser and the Seller have reached agreement on such
apportionment.
(c) In no event shall the payments required of the
Seller under Section 6.1(a) exceed twenty-five percent (25%) of the
Purchase Price in the aggregate.
VI.2 Procedures for Indemnification by the Seller. If
the Purchaser asserts that the Seller has become obligated to the
Purchaser pursuant to Section 6.1(a), or if any suit, action,
investigation, claim or proceeding is begun, made or instituted as a
result of which the Seller may become obligated to the Purchaser
hereunder, the Purchaser shall give prompt written notice to the
Seller specifying in reasonable detail the facts upon which the
Purchaser's claim is based. The Seller will have the right, at any
time and at its election, to assume the defense of such suit,
action, investigation, claim or proceeding. If the Seller assumes
such defense, the Seller shall, with the prior consent of the
Purchaser, have the right to make any commercially reasonable
compromise or settlement thereof. The Purchaser shall have the
right, but not the obligation, to participate at its own expense in
the defense of any suit, action, investigation, claim or proceeding,
the defense of which the Seller shall have assumed and shall in any
event cooperate with and assist the Seller to the extent reasonably
possible. If the Seller elects not to assume the defense of any
such suit, action, investigation, claim or proceeding, the Purchaser
shall have the obligation to do so at the Seller's expense, shall
conduct the defense in a commercially reasonable manner and shall,
with the prior consent of the Seller, have the right to make any
commercially reasonable compromise or settlement thereof.
VI.3 Sole and Exclusive Remedy. Except for the
Purchase Price adjustment provided in Article II, Article VI sets
forth the sole and exclusive remedy available to the Purchaser for
any Losses suffered by the Purchaser, the Company or a Subsidiary as
a result or arising out of any material inaccuracy in any repre-
sentation of the Seller or the breach of any warranty or covenant of
the Seller made in this Agreement and with respect to the Kiekert
Arbitration.
ARTICLE VII
CONDITIONS TO CLOSING
VII.1 Conditions Precedent to Obligations of Purchaser.
The obligation of the Purchaser to consummate the transaction
contemplated by this Agreement is subject to the fulfillment on the
Closing Date of each of the following conditions (any or all of
which may be waived by the Purchaser in whole or in part to the
extent permitted by applicable law):
(a) all representations and warranties of the Seller
contained herein shall be true and correct in all material respects
at and as of the Closing Date, with the same force and effect as if
made at and as of the Closing Date, and the Purchaser shall have re-
ceived a certificate of the Seller to such effect;
(b) the Seller shall have performed and complied in all
material respects with all obligations and covenants required by
this Agreement to be performed or complied with by it on or prior to
the Closing Date and the Purchaser shall have received a certificate
of the Seller to such effect;
(c) there shall not be in effect any Order by a
Governmental Body of competent jurisdiction restraining, enjoining
or otherwise prohibiting the consummation of the transaction contem-
plated hereby;
(d) all material consents, the granting of which is
required for the consummation of the transactions contemplated
hereby and the absence of which would cause a Material Adverse
Effect, shall have been obtained, other than any governmental
consents or approvals required by any regulatory, antimonopoly or
similar authority (including in Italy and Poland);
(e) the Purchaser shall have received the written
resignations of the statutory auditor and each director and
supervisory board member of the Company and the Subsidiaries other
than those individuals who the Purchaser has identified to the
Seller not later than 15 days prior to the Closing Date, effective
as of the Closing Date; the Ordinary Shareholders' Meeting of the
Company and of each of the Subsidiaries shall have completed all
corporate formalities in order to appoint the new Board of Directors
and the new Board of Auditors of the Company and any of the
Subsidiaries, as designated by the Purchaser, effective as of the
Closing Date;
(f) the Purchaser shall have received an opinion of
counsel to the Seller dated the Closing Date that addresses, among
other matters, authorization, execution, enforceability, capitaliza-
tion, and governmental consents and approvals required by the
Seller;
(g) Messrs. Rizzi and Beica shall have agreed, as of
the Closing Date, to continue their current employment with the
Company on terms that are reasonably satisfactory to the Purchaser;
(h) except as may be agreed by the Purchaser acting
reasonably and excluding the intercompany debt discharged pursuant
to Section 5.2(a) and any Roltra Group Debt discharged by the Seller
prior to Closing in its sole discretion, as of the Closing, all
other consolidated assets and liabilities of the Company and the
Subsidiaries set out in the Disclosed Balance Sheet remaining
substantially unchanged, except for changes incurred in the ordinary
course of the business of the Company and the Subsidiaries prior to
Closing consistent with the historical business practices of the
Company and the Subsidiaries;
(i) the Seller shall have provided the Purchaser a
letter of credit, in a form reasonably satisfactory to the Purchas-
er, which guarantees the financial obligations of the Seller arising
under Articles II or VI of this Agreement in the event that the
Seller becomes insolvent or is otherwise unable to satisfy any such
financial obligations to the Purchaser. Such letter of credit shall
be for a duration of 24 months from the Closing Date in an amount
equal to (i) for the period commencing from the Closing Date until
12 months from the Closing Date, 15% of the Purchase Price and (ii)
for the period commencing 12 months from the Closing Date until 24
months from the Closing Date, 7.5% of the Purchase Price; provided,
however, that the amount of such letter of credit shall not be
reduced to an amount less than the amount of any claim outstanding
made by the Purchaser against the Seller and the duration of the
letter of credit shall be extended until such claim is settled by
the parties;
(j) any amendment to the schedules to this Agreement as
contemplated by Section 10.7 shall not include any materially
adverse development.
VII.2 Conditions Precedent to Obligations of the
Seller. The obligations of the Seller to consummate the transaction
contemplated by this Agreement are subject to the fulfillment, prior
to or on the Closing Date, of each of the following conditions (any
or all of which may be waived by the Seller in whole or in part to
the extent permitted by applicable law):
(a) all representations and warranties of the Purchaser
contained herein shall be true and correct in all material respects
at and as of the Closing Date, with the same force and effect as if
made at and as of the Closing Date, and the Seller shall have
received a certificate of the Purchaser to such effect;
(b) the Purchaser shall have performed and complied in
all material respects with all obligations and covenants required by
this Agreement to be performed or complied with by Purchaser on or
prior to the Closing Date and the Seller shall have received a
certificate of the Purchaser to such effect;
(c) there shall not be in effect any Order by a
Governmental Body of competent jurisdiction restraining, enjoining
or otherwise prohibiting the consummation of the transaction
contemplated hereby; and
(d) all material consents, the granting of which is
required for the consummation of the transaction contemplated
hereby, shall have been obtained.
ARTICLE VIII
DOCUMENTS TO BE DELIVERED
VIII.1 Documents to be Delivered by the Seller. At the
Closing, the Seller shall deliver, or cause to be delivered, to the
Purchaser the following:
(a) the endorsed share certificates representing the
Shares, and the Bartoli's Shares, free and clear from any Liens,
duly recording the transfer in favor of the Purchaser, together with
the shareholders' book of the Company;
(b) copies of all corporate resolutions or appropriate
corporate powers of the Seller approving the entering into of this
Agreement and the completion of all transactions contemplated
hereunder;
(c) all shareholders' books and all share certificates
of the Subsidiaries;
(d) the certificates referred to in Section 7.1(a) and
(b) hereof;
(e) copies of all consents referred to in Section
7.1(e) hereof;
(f) written resignations of each of the directors and
statutory auditors of the Company, referred to in Section 7.1(d)
hereof;
(g) letter of credit referred to in Section 7.1(h);
(h) an opinion of counsel to the Seller referred to in
Section 7.1(e); and
(i) such other documents as the Purchaser shall
reasonably request.
VIII.2 Documents to be Delivered by the Purchaser. At
the Closing, the Purchaser shall deliver to the Seller the
following:
(a) confirmation of a successful wire transfer to the
account designated by the Seller;
(b) the certificates referred to in Section 7.2(a) and
(b) hereof; and
(c) such other documents as the Seller shall reasonably
request.
ARTICLE IX
TERMINATION
IX.1 Termination of Agreement. This Agreement may be
terminated prior to the Closing as follows:
(a) At the election of the Seller or the Purchaser on
or after March 31, 1998, if the Closing shall not have occurred by
the close of business on such date, provided that the terminating
party is not in breach of any of its obligations or its representa-
tions or warranties in this Agreement;
(b) by mutual written consent of the Seller and the
Purchaser; or
(c) by the Seller or the Purchaser if there shall be in
effect a final nonappealable Order of a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transaction contemplated hereby,
it being agreed that the parties hereto shall promptly appeal any
adverse determination which is not nonappealable (and pursue such
appeal with reasonable diligence), unless Seller is advised by legal
counsel that such appeal has no reasonable probability of success.
IX.2 Procedure Upon Termination. In the event of
termination by the Purchaser or the Seller, or both, pursuant to
Section 9.1 hereof, written notice thereof shall forthwith be given
to the other party, and this Agreement shall terminate, and the
purchase of the Shares hereunder shall be abandoned, without further
action by the Purchaser or the Seller. If this Agreement is
terminated as provided herein each party shall redeliver all
documents, work papers and other material of the other party
relating to the transaction contemplated hereby, whether obtained
before or after the execution hereof, to the party furnishing the
same.
IX.3 Effect of Termination. In the event that this
Agreement is terminated as provided herein, then each of the parties
shall be relieved of its duties and obligations arising under this
Agreement after the date of such termination and such termination
shall be without liability to the Purchaser or the Seller; provided,
however, that the obligations of the parties set forth in Sections
10.2 and 10.4 hereof shall survive any such termination and shall be
enforceable hereunder; and provided further, that nothing in this
Section 9.3 shall relieve the Purchaser or the Seller of any lia-
bility for a breach of any of its obligations under, or its
representations or warranties made in, this Agreement.
ARTICLE X
MISCELLANEOUS
X.1 Certain Definitions.
For purposes of this Agreement, the following terms have the
meanings specified in this Section 10.1:
"Adverse Ruling" shall have the meaning ascribed to such term
in Section 6.1(b) hereof.
"Affiliate" means, with respect to any Person, any other
Person controlling, controlled by or under common control with such
Person.
"Auditor" means Ernst & Young LLP.
"Balance Sheet" shall have the meaning ascribed to such term
in Section 3.6 hereof.
"Balance Sheet Date" shall have the meaning ascribed to such
term in Section 3.6 hereof.
"Claims" means any claim, demand, action, cause of action,
damage, loss, costs, liability or expense, including, without
limitation, reasonable professional fees and all costs incurred in
investigating or pursuing any of the foregoing or any proceeding
relating to any of the foregoing.
"Closing Date" shall have the meaning ascribed to such term in
Section 2.2 hereof.
"Closing Date Financial Statement" means the statement of
consolidated assets and consolidated liabilities of the Company as
at the Closing Date, showing all of the assets of the Company and
the current liabilities, and shall also include a statement of the
Total Net Equity as at the Closing Date, together with an unquali-
fied opinion of the Auditor to the effect that the Closing Date
Financial Statement has been prepared in accordance with generally
accepted accounting principals consistently applied with those used
in the Italian Audited Financials and presents fairly in all
material respects the consolidated assets and liabilities of the
Company and the Subsidiaries as at the Closing Date.
"Company Property" shall have the meaning ascribed to such
term in Section 3.9(a) hereof.
"Confidentiality Agreement" means the agreement dated as of
September 30, 1997 between the Purchaser and the Seller.
"Contracts" means all contracts, licenses, leases, agreements,
commitments, entitlements and engagements and includes all
quotations, orders or tenders for contracts which remain open for
acceptance any manufacturers' or suppliers' warranty, guarantee or
commitment (express or implied).
"Disclosed Balance Sheet" means the consolidated historical
balance sheet for the Company and the Subsidiaries contained in the
confidential memorandum prepared by Schroder & Co. Inc. on behalf of
Seller delivered to the Purchaser under cover of a letter dated No-
vember 24, 1997, as amended by the December 12, 1997 letter from
Schroder & Co. Inc. to the prospective purchasers.
"Environment" means the environment or natural environment as
defined in any Environmental Law and includes, without limitation,
air, surface, water, ground water, land surface, soil, subsurface
strata, sewer system and the environment in the workplace.
"Environmental Approvals" means all permits, certificates,
licenses, authorizations, consents, instructions, registrations,
directions or approvals issued or required by Governmental Body
pursuant to Environmental Laws with respect to the operation of the
Company or any Subsidiary or their respective assets.
"Environmental Laws" means all Laws relating in full or in
part to the protection of the Environment, product liability, and
employee and public health and safety, and includes, without
limitation, those Environmental Laws relating to the storage,
generation, use, handling, manufacture, processing, labelling,
advertising, sale, display, transportation, treatment, release and
disposal of hazardous substances.
"Estimated Closing Date Financial Statement" means an
estimated statement of consolidated assets and consolidated
liabilities of the Company prepared by the Company which estimates
such amounts as at the Closing Date and shall also include an
estimated statement of the Total Net Equity as at the Closing Date.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether
federal, state, local or foreign, or any agency, instrumentality or
authority thereof, or any court or arbitrator (public or private).
"Italian Audited Financials" has the meaning set forth in
Section 3.6 hereof.
"Italian Interim Financials" has the meaning set forth in
Section 3.6 hereof.
"Kiekert Arbitration" means the arbitration between the
Company and Kiekert referenced in Schedule 3.13.
"Law" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation
or other requirement of a Governmental Body.
"Legal Proceeding" means any judicial, administrative or
arbitral action, suit, complaint, grievance or proceeding (public or
private), including appeals and applications for review.
"Lien" mens any lien, security interest, claim, lease, charge,
option, right of first refusal, easement, servitude, transfer
restriction under any shareholder or similar agreement, encumbrance
or other similar restriction or limitation.
"Material Adverse Change" means any material adverse change in
the assets, financial condition, results of operations or business
of the Company and the Subsidiaries, taken as a whole. For the
avoidance of doubt, a Material Adverse Change shall not include any
adverse changes or developments with respect to the Kiekert
Arbitration or any other threats or claims by Kiekert with respect
to the Company or its Subsidiaries, business, or operations.
"Material Adverse Effect" means an adverse effect in the
assets, financial condition, results of operations or business of
the Company and the Subsidiaries in excess of US$250,000, except
with respect to Section 3.7(c), in which case such amount shall be
US$500,000. For the avoidance of doubt, a Material Adverse Effect
shall not include any adverse changes or developments with respect
to the Kiekert Arbitration or any other threats or claims by Kiekert
with respect to the Company or its Subsidiaries, business, or opera-
tions.
"Material Contracts" shall have the meaning ascribed to such
terms in Section 3.11.
"Order" means any order, injunction, judgment, decree, ruling,
writ or arbitration award.
"Owned Properties" shall have the meaning ascribed to such
term in Section 3.9.
"Permit" means an approval, authorization, consent, license,
order, permit or certificate of a Governmental Body.
"Permitted Encumbrances" means (i) defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in
polices of title insurance which have been made available to
Purchaser; (ii) statutory liens for current taxes, assessments or
other governmental charges not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate
proceedings, provided an appropriate reserve is established
therefor; (iii) mechanics', carriers', workers', repairers' and
similar Liens arising or incurred in the ordinary course of business
that are not material to the property so encumbered or the business,
operations and financial condition of the Company; (iv) zoning,
entitlement and other land use regulations; and (v) such other
imperfections in title, charges, easements, restrictions and encum-
brances which do not materially detract from the value of or
interfere with the present proposed use of any Company Property
subject thereto or affected thereby.
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, Governmental Body or
other entity.
"Purchaser's Knowledge" means the knowledge of the executive
officers of the Purchaser.
"Real Property Lease" shall have the meaning ascribed to such
term in Section 3.9.
"Roltra Group Debt" means the consolidated debt of the Company
and the Subsidiaries being the sum of: (i) the current portion of
the long term debt; (ii) long term debt; (iii) notes payable to the
bank; and (iv) any other bank debt or debt of a similar nature
(excluding intercompany advances or loans), the whole as determined
in accordance with Italian generally accepted accounting principles;
minus cash and cash equivalents on the Closing Date.
"Seller's Knowledge" means the knowledge of the executive
officers of the Seller and the senior officers of the Company.
"Subsidiary" means any Person of which a majority of the
outstanding voting securities are owned, directly or indirectly, by
the Company and including those Persons listed in Schedules 3.4(a)
and (b).
"Taxes" means (i) all foreign or domestic taxes, charges,
fees, imposts, levies or other assessments, including all net
income, gross receipts, capital, sales, use, ad valorem, value
added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever and (ii) all interest, penalties, fines,
additions to tax or additional amounts imposed by any taxing
authority in connection with any item described in clause (i) and
(ii) and any transferee liability in respect of such item.
"Tax Return" means all returns, declarations, reports,
estimates, information returns and statements required to be filed
in respect of any Taxes.
"Total Net Equity" means total assets less total liabilities
excluding all third party indebtedness, intercompany accounts and
minority interests, calculated on a consolidated basis for the
Company and its Subsidiaries. For illustrative purposes, attached
as Exhibit A is a calculation of Total Net Equity as at October 31,
1997.
X.2 Confidentiality. The Purchaser shall continue to
be bound by the provisions of the Confidentiality Agreement, except
as otherwise agreed by the parties hereto.
X.3 Survival. The representations and warranties of
the Seller set forth in Article III of this Agreement shall survive
the Closing for a period terminating twenty four (24) months after
the Closing Date, except for the representations set forth in
Sections 3.2(a) (Authorization of Agreement) and Section 3.3
(Capitalization; Ownership and Transfer of Shares) which shall
survive the Closing for a period terminating ten years after the
Closing Date. Except with respect to matters of actual knowledge on
the part of the Purchaser, no investigations made by or on behalf of
the Purchaser at any time shall have the effect of waiving,
diminishing the scope of or otherwise affecting any representation
or warranty made by the Seller in or pursuant to this Agreement.
X.4 Expenses.
(a) Except as otherwise provided in this Agreement,
the Seller and the Purchaser shall each bear its own expenses in-
curred in connection with the negotiation and execution of this
Agreement and each other agreement, document and instrument contem-
plated by this Agreement and the consummation of the transaction
contemplated hereby.
(b) The Purchase Price is exclusive of all sales or use
tax, value added taxes, registration duties or taxes, transfer
taxes, stamp duty and stamp duty reserve taxes incurred in
connection with the sale, document or excise taxes, recordation or
notary fees, and any other fees incident to perfection and registra-
tion of the transfer of ownership of the Shares or which are
otherwise payable (collectively, the "Transfer Taxes"). All
Transfer Taxes arising out of the transaction contemplated in this
Agreement shall be born by the Purchaser and Purchaser shall file
all necessary documentation with respect to such Transfer Taxes.
X.5 Further Assurances. The Seller and the Purchaser
each agrees to execute and deliver such other documents or
agreements and to take such other action as may be reasonably
necessary or desirable for the implementation of this Agreement and
the consummation of the transaction contemplated hereby.
X.6 Submission to Jurisdiction; Consent to Service of
Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of the United States District Court for
the Southern District of New York and, if that court does not for
any reason have or take jurisdiction of the matter, a state court
located within the State of New York in respect of any dispute
arising out of or relating to this Agreement or the transaction
contemplated hereby and each party hereby irrevocably agrees that
all claims in respect of such dispute or any suit, action or
proceeding related thereto may be heard and determined in any such
court. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in
such court or any defense of inconvenient forum for the maintenance
of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to
process being served on it in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of
Section 10.11.
X.7 Entire Agreement; Amendments and Waivers. This
Agreement (including the schedules and exhibits thereto), and the
Confidentiality Agreement (collectively, the "Transaction
Documents") represent the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof and can
be amended, supplemented or changed, and any provision hereof can be
waived, only by written instrument making specific reference to such
Transaction Documents signed by the party against whom enforcement
of any such amendment, supplement, modification or waiver is sought.
Notwithstanding the foregoing, the Seller may amend or update the
schedules and exhibits to this Agreement from the date hereof until
the Closing Date to reflect events subsequent to the date hereof,
and to make the relevant representations and warranties true as of
the Closing Date, provided, that such amendments do not result in a
Material Adverse Effect.
X.8 Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a
Section of, or a Schedule to, this Agreement unless otherwise
indicated. All terms used herein in a singular shall be deemed to
include the plural, and vice versa, as the context may require. 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. Whenever the words "include",
"includes", or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
X.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of New York,
without giving effect to conflict of law principles.
X.10 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not
sign the same counterpart.
X.11 Notices. Any notice or other communication
hereunder may be given to a party at its address set forth below or
to such other address as such party shall given notice of pursuant
hereto. Any notice shall be in writing and sent by registered or
certified mail, postage prepaid, return receipt requested, by
facsimile, by personal delivery or reputable overnight courier.
Notices shall be deemed to have been given in case of personal
delivery when receipt has been confirmed; in the case of delivery to
a reputable overnight courier, on the next day, in the case of mail;
on the fifth business day following deposit in the mail; and in the
case of facsimile, when telecopied with confirmation of
transmission.
If to the Seller, to:
Imo Industries Inc.
9211 Forest Hill Avenue, Suite 109
Richmond, Virginia 23235
Telephone: (804) 560-4070
Facsimile: (804) 560-4076
Attention: John Young
Vice President
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Canada Square
Canary Wharf
London E14 5DS
England
Telephone: 44 171 519 7000
Facsimile: 44 171 519 7070
Attention: Scott V. Simpson
If to the Purchaser, to:
337 Magna Drive
Aurora OW LHG 7KI
Canada
Telephone: (905) 725-7099
Facsimile: (905) 726-2585
Attention: President
X.12 Severability. If any provision of this Agreement
is invalid or unenforceable, the balance of this Agreement shall
remain in effect.
X.13 Binding Effect; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns. No assignment of this
Agreement or of any rights or obligations hereunder may be made by
either the Seller or the Purchaser (by operation of law or
otherwise) without the prior written consent of the other party
hereto and any attempted assignment without the required consent
shall be void; provided, however, that the Purchaser may assign this
Agreement and any or all rights or obligations hereunder to any
Affiliate of the Purchaser; and provided, further, that no such
assignment by the Purchaser shall relieve it of any of its liabil-
ities hereunder. Upon any such permitted assignment, the references
in this Agreement to the Purchaser shall also apply to any such
assignee unless the context otherwise requires.
X.14 No Third Party Beneficiaries. Nothing in this
Agreement shall create or be deemed to create any third party
beneficiary rights in any person or entity not a party to this
Agreement.
X.15 Currency. Unless otherwise noted, all dollar
values related to this Agreement are deemed to be in the United
States currency and all payments shall be made in United States
dollars. For greater certainty, (Lit.) shall denote the currency of
Italy and (US$) shall denote United States dollars. For purposes of
this Agreement, unless otherwise noted, all amounts referred to in
this Agreement, claims brought under this Agreement or arising out
of the transactions contemplated in this Agreement, and any debt of
the Company or its Subsidiaries that are not in US$ shall be con-
verted into US$ based on the average of the high and low spot rates
quoted in the Wall Street Journal on one business day prior to the
Closing Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agree-
ment to be executed by their respective officers thereunto duly
authorized, as of the date first written above.
MAGNA INTERNATIONAL INC.
By:___________________________
Name:
Title:
IMO INDUSTRIES INC.
By:_____________________________
Name:
Title:
EXHIBIT A
FOR IMMEDIATE RELEASE Contact: John Young
Chief Financial Officer
(804) 560-4070
Imo Industries Announces Completion of Sale
of Roltra Morse Subsidiary
To Magna International
Lawrenceville, NJ, February 27, 1998 - Imo Industries Inc. (NYSE: IMD)
announced today that it had completed its previously announced
transaction to sell its Roltra Morse S.p.A. subsidiary to Magna
International Inc. (TSE: MG.A, MG.B; ME: MG.A; NYSE: MGA).
Roltra Morse is a manufacturer of automotive components based in Turin,
Italy. Roltra Morse's products include latches, window regulators,
cable systems and gear shift mechanisms. Manufacturing operations are
located in Altare, Pisa and Pozilli, Italy and Sosnowiec, Poland.
Roltra Morse also maintains joint venture operations in Belo Horizonte,
Brazil and Istanbul, Turkey.
Terms of the transaction were not disclosed. Schroder & Co. advised Imo
on the transaction.
Imo Industries is a leading manufacturer of pumps, power transmission
components and remote control systems.
