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): December 22, 1998
-------------------
AMERICAN STANDARD COMPANIES INC.
(Exact name of registrant as specified in its charter)
Delaware 1-11415 13-3465896
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
One Centennial Avenue, P.O. Box 6820, Piscataway, NJ 08855-6820
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (732) 980-6000
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 2, 1999, American Standard Companies Inc. (the "Company" or
"American Standard") announced that it had acquired the Bathrooms Division of
Blue Circle Industries PLC, a manufacturer of ceramic sanitaryware, brassware
and integrated plumbing systems, for an aggregate purchase price of (pound)253
million (approximately $417 million) in cash. The transaction was structured as
a sale of all of the capital stock and related rights of four indirect
wholly-owned subsidiaries of the seller, Blue Circle Industries PLC, to three
indirect wholly-owned subsidiaries of American Standard. The acquisition was
paid for with the proceeds of borrowings under the Company's $1.75 billion
Credit Agreement (see Item 5 (a) below concerning the Credit Agreement and a
recent amendment thereto). The acquired business for 1997 had sales of
(pound)172 million (approximately $283 million at January 31, 1999 exchange
rates) and assets of (pound)141 million (approximately $232 million at January
31, 1999 exchange rates). The acquired business has 3 major facilities and 9
smaller facilities, located in the United Kingdom and Italy, and employs
approximately 3,200 people. The primary markets for its products are in the
United Kingdom, Italy, Ireland and Germany.
Temporary refinancing of $60 million of the indebtedness incurred to
fund the acquisition has been obtained pursuant to a short-term Credit Agreement
dated as of February 2, 1999 between American Standard Companies Inc., American
Standard Inc. and Goldman Sachs Credit Partners L.P. (the "Temporary Facility").
The indebtedness under the Temporary Facility is senior unsecured debt of
American Standard Inc., and is guaranteed by American Standard Companies Inc.
Interest accrues on the amount borrowed under the Temporary Facility at the rate
of 7-3/8% per annum until March 22, 1999 and at rates that increase on a
quarterly basis thereafter. It is anticipated that the outstanding principal
amount under the Temporary Facility will be repaid with proceeds from the sale
of debt securities to be offered to the public from time to time following the
effectiveness of a shelf registration statement covering such securities
currently on file with the Securities and Exchange Commission.
ITEM 5. OTHER EVENTS
(a) Amendment to Credit Agreement.
As of December 22, 1998, the Company completed an amendment (the
"Amendment") to its $1.75 billion Credit Agreement dated as of January 31, 1997
among American Standard Companies Inc., American Standard Inc., the Lenders and
Agents named therein and The Chase Manhattan Bank as Administrative Agent (the
"Credit Agreement"). The Amendment amends the Credit Agreement, among other
things, principally (i) to permit American Standard to issue up to an additional
$500 million in aggregate principal amount of senior or subordinated unsecured
debt securities and (ii) to lower the interest coverage ratios and increase the
debt coverage ratios applicable to the Company beginning for periods ending
December 31, 1998. The purpose of the Amendment was principally to accommodate
the refinancing of $150 million of American Standard's 10-7/8% senior notes due
May 15, 1999 and the financing of other proposed capital expenditures, including
the acquisition of Blue Circle Industries' Bathrooms Division. A copy of the
Amendment is filed as an exhibit to this Report.
<PAGE>
(b) 1998 Operating Results.
On February 4, 1999, American Standard Companies Inc. announced that for
the year ended December 31, 1998, income before extraordinary item was $34
million, or $.46 per diluted share. This result included restructuring charges
of $200 million ($186 million net of tax benefits, or $2.52 per diluted share).
This compares with 1997 income before extraordinary item of $120 million, or
$1.57 per diluted share, including a write-off of purchased research and
development costs of $90 million ($1.19 per diluted share) on which there was no
tax benefit. Excluding such restructuring charges and write-off, income before
extraordinary item increased 5% to $220 million in 1998 from $210 million in
1997.
These results were accomplished through strong performance by the
Automotive Products and Worldwide Unitary Air Conditioning businesses and
continued improvement in the Americas Plumbing Products business, despite
continued economic weakness in the Far East, global pricing pressure in Applied
Air Conditioning and an increase in our effective income tax rate.
In accordance with the segment disclosure requirements of Statement of
Financial Accounting Standards No. 131, the Company has changed its public
reporting to reflect its operating management reporting. Accordingly, items such
as restructuring charges in 1998 and the write-off of purchased research and
development in 1997 are excluded from segment operating income. The following
discussion reflects those changes.
Total sales for 1998 were a record $6.7 billion, up 11% from last year (13%
excluding $110 million unfavorable foreign exchange effect). To enhance
comparability, the following discussion describes the change in sales from the
prior year with and without foreign exchange effects.
o Air Conditioning Products sales increased 10% to $3.9 billion (12%
excluding foreign exchange effects). Excluding foreign exchange effects,
Worldwide Applied Systems sales increased 10% to $2.0 billion reflecting
strong growth in the U.S., driven by continued expansion of the commercial
sales and service operations and increased equipment sales, partly offset
by the effects of competitive pricing pressures on chillers. Overseas,
increased Applied Systems sales in most regions were substantially offset
by lower volumes in the Far East. Worldwide Unitary Systems sales increased
14% to $1.9 billion, primarily reflecting strong new construction and
increased replacement demand due to warmer than normal weather in the U. S.
Overseas, improved sales of unitary products were led by strong increases
in Europe and Latin America.
o Plumbing Products sales increased 5% to $1.5 billion (9% excluding foreign
exchange effects). Excluding foreign exchange effects, sales in the
Americas rose 17% due to strong U.S. markets and market share gains in both
the wholesale and expanding retail distribution channels as well as
increases in Mexico. Sales in Europe and the Far East increased 4%
principally because of the effect of consolidating the results of
operations in China since November 1997.
<PAGE>
o Automotive Products sales increased 16% to $1.1 billion (18% excluding
foreign exchange effects). This increase was driven by continued strong
European commercial vehicle production and higher product content per
vehicle. In addition, sales of anti-lock braking systems (ABS) to the
Company's U. S. joint venture with Meritor Automotive, Inc. doubled from
the prior year, reflecting both the phase-in of regulations requiring ABS
on all new heavy-duty trucks and trailers and strong commercial vehicle
production.
o Medical Systems sales were $98 million for the full year 1998 compared to
$50 million reported for the six months last year following the June 30,
1997 acquisition of the medical diagnostic businesses.
Operating income increased 4% to $637 million in 1998 from $612 million in
1997 (6% excluding a $10 million unfavorable foreign exchange effect). To
enhance comparability, the following discussion describes the change in
operating income from the prior year with and without the effects of foreign
exchange.
o Air Conditioning Products operating income was $386 million, the same level
as in 1997, but increased 1% excluding foreign exchange effects. Gains in
the Worldwide Unitary Systems were substantially offset by declines in
Worldwide Applied Systems. The performance improvement in Worldwide Unitary
Systems principally reflects U.S. volume and margin increases. The decline
in Worldwide Applied Systems reflects global pricing pressure, lower
volumes in the Far East and a strike at the Lexington air handling products
facility in the first quarter.
o Plumbing Products operating income was $119 million, the same level as in
1997, but increased 5% excluding foreign exchange effects. Operating income
increased in the Americas due to higher volume and the benefits of low-cost
sourcing. This was offset primarily by the continued economic weakness in
the Far East and restructuring related inefficiencies in Europe.
o Automotive Products operating income increased 17% to $153 million (22%
excluding foreign exchange effects). Significantly increased volume and
improved margins in European operations were partly offset by reduced
income in Brazil and start-up costs of a majority-owned joint venture in
the U.S.
o Medical Systems incurred an operating loss in 1998 of $21 million,
compared with an operating loss in 1997 of $20 million, reflecting
continued high development costs.
Equity in net income of unconsolidated joint ventures increased to $27
million from $12 million in 1997, primarily as a result of strong growth in
Automotive Products' U.S. joint venture and increased income from the Company's
financing joint venture.
In 1998 the Company committed to restructuring plans designed to achieve
lower product costs and improved operating efficiency. Accordingly, the Company
recorded charges totaling $200 million ($186 million net of tax benefits)
comprised of $185 for Plumbing Products and $15 million for its other
businesses. The Plumbing Products charge includes costs related to
<PAGE>
the closure of five plants in Europe and two in North America, a loss on the
sale of the French plumbing distribution operations and write-off of related
goodwill. The charges in the other businesses are principally for facility
closures and work force reductions.
Interest expense of $188 million was $4 million lower than the prior year,
due to lower average interest rates achieved through refinancings completed in
early 1998, which offset the effect of increased debt arising from share
repurchases and the acquisition of the medical diagnostic business in June 1997.
Corporate and other expenses of $110 million were $5 million greater than
the prior year mainly due to increased fees associated with selling U.S.
receivables to the Company's financial services joint venture.
Income taxes on income before extraordinary item reflect an unusually high
effective rate in 1998 and 1997 primarily because there is little tax benefit on
the restructuring charges in 1998 and no benefit on the write-off of purchased
research and development in 1997. Excluding the special charges, the effective
income tax rates were 40.0% in 1998 and 35.8% in 1997. The lower 1997 rate
resulted from the utilization of certain previously unrecognized tax benefits.
No similar benefits were available in 1998.
In connection with the retirement of debt in 1998, the Company incurred an
extraordinary charge of $50 million, net of income taxes, including call
premiums and the write-off of unamortized debt issuance costs.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN STANDARD COMPANIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
In millions except Year Ended December 31,
Per share data 1998 1997
------------ ----------
<S> <C> <C>
Sales
Air Conditioning Products $3,940 $ 3,567
Plumbing Products 1,510 1,439
Automotive Products 1,106 952
Medical Systems 98 50
---------- ---------
$ 6,654 $ 6,008
========== =========
Segment operating income (loss)
Air Conditioning Products (a) $ 386 $ 386
Plumbing Products 119 119
Automotive Products 153 127
Medical Systems (21) (20)
---------- ---------
637 612
Equity in net income of unconsolidated joint ventures 27 12
Restructuring expenses (b) 200 -
Write-off of purchased research and development (b) - 90
Interest expense 188 192
Corporate and other expenses 110 105
---------- ---------
Income before income taxes and extraordinary item 166 237
Income taxes 132 117
---------- ---------
Income before extraordinary item 34 120
Extraordinary loss on retirement of debt, net of tax 50 24
---------- ---------
Net income (loss) $ (16) $ 96
========== =========
Per common share:
Basic:
Income before extraordinary item $ 0.47 $1.62
Extraordinary loss on retirement of debt,
net of tax 0.70 0.32
---------- ---------
Net income (loss) $(0.23) $1.30
========== =========
Diluted:
Income before extraordinary item $ 0.46 $0.57
Extraordinary loss on retirement of debt,
net of tax 0.68 0.31
---------- ---------
Net income (loss) $(0.22) $1.26
========== =========
Average outstanding common shares - basic 71.7 73.8
Average outstanding common shares - diluted 73.7 76.2
<FN>
(a) Financing fees paid by Air Conditioning to the Company's financial
services joint venture of $23 in 1998 and $22 in 1997 have been
reclassified to Corporate expenses upon adoption of the new segment
reporting standard as of December 31, 1998.
(b) Restructuring expenses in 1998 include: Plumbing, $185; Air Conditioning,
$7; Automotive, $5; and Medical, $3. In 1997 purchased in-process research
and development was written off in connection with the acquisition of the
medical diagnostics business.
</FN>
</TABLE>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired. No financial statement
information is required to be reported by the Company with respect to the
business acquisition reported in Item 2 of this Report as the subject
acquisition does not meet any of the significance tests pursuant to Rule 3-05(b)
of Regulation S-X.
(b) Pro Forma Financial Information. No Pro Forma financial
information is required to be reported by the Company with respect to the
business acquisition reported in Item 2 of this Report as the subject
acquisition does not meet any of the significance tests pursuant to Article 11
of Regulation S-X.
(c) Exhibits.
2 Share Purchase Agreement dated February 2, 1999 among Blue
Circle Industries PLC; Blue Circle Bathrooms Limited; Blue
Circle Home Products BV; Blue Circle Home Products
Betteilligungs-GmbH and Ideal Standard Limited; Ideal Standard
S.r.l.; WABCO Standard GmbH and US Plumbing Products Inc.;
Ideal Standard IBV Limited; WABCO Standard Export Inc.
4 Fourth Amendment to Credit Agreement dated as of December 22,
1998 to the Amended and Restated Credit Agreement dated as of
January 31, 1997 among American Standard Companies Inc.,
American Standard Inc., certain subsidiaries of American
Standard Inc., the Lenders and Agents named therein and The
Chase Manhattan Bank as Administrative Agent.
Information Concerning Forward-Looking Statements. Certain of the
statements contained in this report (other than the historical financial data
and other statements of historical fact), including, without limitation,
statements as to management's expectations and belief are forward-looking
statements. Forward-looking statements are made based upon management's good
faith expectations and belief concerning future developments and their potential
effect upon the Company. There can be no assurance that future developments will
be in accordance with management's expectations or that the effect of future
developments on the Company will be those anticipated by management. Many
important factors could cause actual results to differ materially from
management's expectations, including the level of new construction activity in
the Company's Air Conditioning Products' and Plumbing Products' markets; the
timing of completion and success in the start-up of new production facilities;
changes in U. S. or international economic conditions, such as inflation or
interest rate fluctuations or recessions in the Company's markets; pricing
changes to the Company's products or those of its competitors, and other
competitive pressures on pricing and sales; integration of acquired businesses;
risks generally relating to the Company's international operations, including
governmental, regulatory or political changes; and transactions or other events
affecting the need for, timing and extent of the Company's capital expenditures.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN STANDARD COMPANIES INC.
By /s/ G. Ronald Simon
Name: G. Ronald Simon
Title: Vice President and Controller
DATE: February 12, 1999
THIS AGREEMENT is made the 2nd day of February, 1999
BETWEEN:-
1. Blue Circle Industries PLC of 84 Eccleston Square, London SW1V 1PX,
(Registered in England No. 66558) (the "Guarantor"), and
2. Blue Circle Bathrooms Limited of 84 Eccleston Square, London SW1V
1PX (Registered in England No. 605034), and
3. Blue Circle Home Products BV of Galvanistraat 20, 3861 NJ, Nijkerk,
Netherlands (Registered in The Netherlands No. 197076),
and
4. Blue Circle Home Products Beteilligungs-GmbH of August-Brotje-Strasse
17, D-26180 Rastede, Germany (Registered in the Federal Republic of
Germany No. HRB 6910),
(each (except the Guarantor) individually a "Seller" and together the
"Sellers"),
AND
5. Ideal Standard Limited of National Avenue, Kingston Upon Hull, HU5
4JE, England (Registered in England No. 1322814) and
6. Ideal Standard S.r.l., of Via Andrea Maria Ampere 102, 20131 Milan,
Italy (Registered in Italy No. 276392) and
7. WABCO Standard GmbH, of Euskirchener Strasse 80, 53121 Bonn, Germany
(Registered in the Commercial Register of the local
court in Bonn No. HRB 4432)
(each individually a "Purchaser" and together the "Purchasers"),
AND
8. US Plumbing Products Inc. of 15 West 54th Street, New York, NY 10019
(Registered in Delaware) and
9. Ideal Standard IBV Limited of 15 West 54th Street, New York, NY 10019
(Registered in Delaware) and
10. Wabco Standard Export Inc. of 15 West 54th Street, New York, NY 10019
(Registered in Delaware).
WHEREAS:-
(A) Particulars of each member of the Baltic Group (as defined in this
agreement) are set out in Schedule 6 (Basic Information about the
Companies) and Schedule 7 (Basic Information about the Subsidiaries).
(B) The Sellers have agreed to sell and the Purchasers have agreed to
purchase and pay for the Shares (as defined in this agreement) in each
case on the terms and subject to the conditions of this agreement.
WHEREBY IT IS AGREED as follows:-
<PAGE>
1. Interpretation
1.1 In this agreement and the Schedules to it:-
"1997 Accounts Date" means 31st December, 1997;
"1998 Accounts Date" means 31st December, 1998;
"Baltic Group" means together the Companies and the
Subsidiaries;
"Books and Records" has its common law meaning and
includes, without limitation, all
notices, correspondence, orders,
inquiries, drawings, plans, books of
account and other documents and all
computer disks or tapes or other
machine legible programmes or other
records;
"Business Day" means a day (other than a Saturday or
a Sunday) on which banks are
open for business in London;
"Business Information" means all information, know-how and
records (whether or not
confidential and in whatever form
held);
"Companies Acts" means the Companies Act 1985,
the Companies Consolidation
(Consequential Provisions) Act 1985,
the Companies Act 1989 and Part V of
the Criminal Justice Act 1993;
"Companies" means each of the Italian Companies,
the UK Company and the German
Company (and "Company" shall be
construed accordingly);
"Completion" means completion of the sale and
purchase of the Shares under this
agreement;
"Completion Date" means the date of this agreement;
"Confidential Business" means Business Information which is
not generally known concerning
Information" the Baltic Group's
business, customers,financial or
other affairs; "Covenantors" means
the covenantors named in the Tax
Covenant; "Disclosure Letter" means
the letter dated the same
date as this agreement written by
the Sellers to the Purchasers for the
purposes of sub-clause 7.1
(Purchasers' Remedies and Sellers
Limitations on Liability) and
delivered to the Purchasers'
Solicitors before the execution of
this agreement and shall be deemed to
include all documents listed in such
letter or listed in the index annexed
to such letter;
"Domination and Profit and Loss" means the agreement entered into
between Blue Circle Home Products
Transfer Agreement "Beteiligungs-
GmbH and Ceramica Dolomite GmbH
Sanitarkeramik dated with effectfrom
1st January, 1997;
"Employees" means all employees of each member
of the Baltic Group and "Employee"
shall be construed accordingly;
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
"Environment" has the meaning given in paragraph 19 of Schedule 2
(Warranties); "Environmental Laws" has the
meaning given in paragraph 19 of Schedule 2 (Warranties);
"Environmental Matters" has the meaning given in paragraph 19 of Schedule 2 (Warranties);
"Environmental Permits" has the meaning given in paragraph 19 of Schedule 2 (Warranties);
"German Company" means Ceramica Dolomite GmbH Sanitarkeramik, basic information
about which is set out in Schedule 6 (Basic information about the
Companies);
"German Purchaser" means WABCO Standard GmbH;
"German Seller" means Blue Circle Home Products Beteilligungs-GmbH;
"German Shares" means all of the issued shares in the German Company;
"Hazardous Material" has the meaning given in paragraph 19 of Schedule 2
(Warranties);
"ICTA 1988" means the Income and Corporation Taxes Act 1988;
"Information Memorandum" means the information memorandum dated
October 1998 entitled "Blue Circle Bathrooms" issued by
Lazard Brothers & Co. Limited;
"Intellectual Property" means patents, trade marks and service marks, rights in designs,
copyrights and topography rights (whether or not any of these is
registered and including applications for registration of any such
thing), rights in confidential information and know-how and all
rights or forms of protection of a similar nature or having
equivalent or similar effect to any of these which may subsist
anywhere in the world;
"IP Assignments" means (i) the written assignment executed on behalf of Markes &
Company Limited (formerly W. Markes & Company Limited) assigning
United Kingdom Registered Trade Marks Numbers 745572 and 745573
MARKLAB (word) and Number 922765 MARKESEAL to Ideal Standard Limited
and (ii) the written assignment executed on behalf of Blue Circle
Plumbing Fixtures Limited assigning United Kingdom Registered Trade
Marks Number 1482490 to Blue Circle Industries PLC, in the form set
out in Schedule 11;
"IT" means computer hardware and software;
"Italian Companies" means Ceramica Dolomite Spa and Ceramiche Senesi S.r.l. basic
information about which is set out in Schedule 6 (Basic information
about the Companies);
"Italian Shares" means all of the issued shares in Ceramica Dolomite S.p.a. and all
the issued shares in Ceramiche Senesi S.r.l. and "Shares" shall be
construed accordingly;
"London Stock Exchange" means the London Stock Exchange Limited;
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
"Management Accounts" means:-
(i) in respect of the Italian
Companies and the German
Company, unaudited
management accounts for
the year ended on the 1998
Accounts Date prepared on
a combined basis; and
(ii) in respect of the UK
Group, unaudited
management accounts for
the year ended on the 1998
Accounts Date prepared on
a combined basis;
"Net Debt" means the aggregate of (i) bank overdrafts (ii) the Blue Circle
intra-group Fluctuating Interest Bearing Loan Account (FIBLA) (iii)
debentures and loans and (iv) capitalised leasing obligations Less
the aggregate of (1) an amount of LIT 30,000,000,000 received by
Ceramica Dolomite SpA in respect of its investment in Blue Circle
Home Products Finance Limited, (2) loans from the Baltic Group to
the Retained Group; and (3) cash and deposits, in each case on a
combined basis for the Italian Companies and the German Company or,
as the case may be, the UK Group;
"Notarized Deed of Sale" means the short form
contract between Blue Circle Home
Products BV and Ideal Standard
S.r.l., dated February 1 1999,
certified by the Notary Calcagno in
Belluno, Italy, for the sole purpose
of giving effect to the sale of the
quotas of Ceramiche Senesi S.r.l.;
"Proceedings" means any proceeding, suit or action arising out of or in connection
with this agreement;
"Property" or "Properties" means freehold, leasehold or other immovable property in any part of
the world;
"Property Owner" means, in relation to any Relevant Property, the person referred to
as owner in Schedule 8 (Relevant Properties);
"Purchasers' Solicitors" means Clifford Chance;
"Relevant Property" means the Property or Properties referred to in Schedule 8 (Relevant
Properties);
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
"Retained Group" means, in relation to any
Seller, the Seller concerned, its
subsidiaries and subsidiary
undertakings from time to time, any
holding company of such Seller and
all other subsidiaries or subsidiary
undertakings of any such holding
company (except members of the Baltic
Group);
"Revenue Authority" means any government,
state, municipality or any local,
state, federal or other fiscal,
revenue, customs or excise authority,
body or official anywhere in the
world including, without limitation,
the Inland Revenue and H.M. Customs &
Excise and the revenue authorities of
Ireland, Italy and Germany;
"RTPA 1976" means the Restrictive Trade Practices Act 1976;
"Sellers' Solicitors" means Slaughter and May;
"Service Document" has the meaning given in sub-clause 26.6 (Agent for Service);
"Shared Intellectual Property" means any Intellectual Property used by any of the Companies or
the Subsidiaries in their business and owned by the Retained Group
immediately prior to the date of this agreement;
"Shares" means all the issued shares in the capital of the Italian Companies,
the UK Company and the German Company;
"Share Purchase Documents" has the meaning given to it in clause 15.2
(Entire Agreement);
"South African Sale and Purchase" means the Sale of Shares Agreement dated 5th March, 1998
made Agreement" between (1) Everite Limited; and (2)
Armitage Shanks International Limited;
"Statutory Accounts" means the statutory accounts of each member of the UK Group as that
term is used in Section 226 of the Companies Act 1985 and the
accounts of the Italian Companies as that term is used in the
Italian Civil Code and of the German Company as that term is used in
the German Commercial Code, for the accounting reference period
ended on the 1997 Accounts Date which financial statements comprise
a balance sheet, cash flow statement (except in the case of the
Italian Companies), profit and loss account, notes, auditors' and
directors' reports, a copy of which has for the purpose of
identification only been signed by the Sellers Solicitors and
delivered to the Purchasers or the Purchasers' Solicitors;
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
"Subsidiaries" means the subsidiaries of the UK
Company, basic information about
which is set out in Schedule 7 (Basic
Information about the Subsidiaries)
and "Subsidiary" shall be construed
accordingly;
"Supply Agreement" means an agreement for the
supply of certain bathroom products
to be entered into between Blue
Circle Plumbing Fixtures Limited and
Potterton Myson Limited;
"Tax" or "Taxation" has the meaning given to it in clause 1 of the Tax Covenant;
"Tax Covenant" means the tax covenant referred to in Schedule 1 (Completion
Arrangements) and referred to in Schedule 4 (Tax Covenant);
"TCGA 1992" means the Taxation of Chargeable Gains Act 1992;
"Transitional Services Agreement" means the transitional services agreement between Blue Circle
Industries PLC and the UK Company of even date;
"UK Company" means Blue Circle Plumbing
Fixtures Limited, basic information
about which is set out in Schedule 6
(Basic Information about the
Companies);
"UK GAAP" means accounting practices generally accepted in the United Kingdom;
(i) in respect of the Statutory Accounts as at the 1997 Accounts
Date; and
(ii) in respect of the Management Accounts, as at the 1998
Accounts Date;
"UK Group" means the UK Company and the Subsidiaries, details of which are set
out in Schedule 7 (Basic Information about the Subsidiaries);
"UK Shares" means all of the issued shares and deferred shares in the capital of
the UK Company;
"VATA 1994" means the Value Added Tax Act 1994;
"Warranties" means the warranties set out in Schedule 2 (Warranties) and Schedule
10 (Pensions) given by the Sellers and "Warranty" shall be construed
accordingly;
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
"Waste" has the meaning given in paragraph 19 of Schedule 2 (Warranties);
"Working Hours" means 9.30 a.m. to 5.30 p.m. on a Business Day; and
"Year 2000 Compliant" means that:-
(a) no value for current date causes or will cause any
interruption in operation;
(b) date-based functionality behaves and will behave
consistently for dates prior to, during and after the year
2000;
(c) in all data storage the
century in any date is and
will be specified either
explicitly or by unambiguous
algorithms or inferencing
rules; and
(d) the year 2000 is and will be
recognised as a leap year.
</TABLE>
<PAGE>
1.2 In this agreement, unless otherwise specified:-
(A) references to clauses, sub-clauses, paragraphs,
sub-paragraphs, and Schedules are to clauses, sub-clauses,
paragraphs, sub-paragraphs of, and Schedules to, this
agreement;
(B) a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or
may from time to time be, amended, modified or re-enacted
except to the extent that any amendment or modification made
after the date of this agreement would increase or alter the
liability of the Sellers under this agreement;
(C) references to a "company" shall be construed so as to include
any company, corporation or other body corporate, wherever and
however incorporated or established;
(D) references to a "person" shall be construed so as to include
any individual, firm, company, government, state or agency of
a state or any joint venture, association or partnership
(whether or not having separate legal personality);
(E) the expressions "accounting reference date", "accounting
reference period", "allotment", "body corporate", "current
assets", "debentures", "holding company", "paid up", "profit
and loss account", "subsidiary", "subsidiary undertaking" and
"wholly-owned subsidiary" shall have the meaning given in the
Companies Acts;
(F) a person shall be deemed to be connected with another if that
person is connected with another within the meaning of section
839 ICTA 1988;
(G) references to writing shall include any modes of
reproducing words in a legible and non-transitory form;
(H) references to times of the day are to London time;
(I) headings to clauses and Schedules are for convenience only
and do not affect the interpretation of this agreement;
(J) the Schedules and any attachments (but not the Tax Covenant)
form part of this agreement and shall have the same force and
effect as if expressly set out in the body of this agreement,
and any reference to this agreement shall include the
Schedules;
(K) references to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status,
court, official, or any legal concept or thing shall in
respect of any jurisdiction other than England be deemed to
include what most nearly approximates in that jurisdiction to
the English legal term; and
(L) references to the knowledge or awareness of the Sellers
(or similar phrases) shall be limited to the actual
knowledge of Richard Tapp, Michael Schofield, Barry
Cannings, Jeremy Watts, George Letham, Julian Whittaker,
Brian Bowes (but in the case of Brian Bowes, only with
regard to environmental matters in the UK), Peter Carruthers
(but in the case of Peter Carruthers, only with regard to
intellectual property matters) Luigi Arsellini, Valeria
Fant, Enzo Sacchiero, Marzio Serena, Fabio Mezzomo (but in
the case of Fabio Mezzomo, only with regard to environmental
matters in Italy), Kevin Short, Philip Trotman, Nelson
Poggiato and Mark Roberts (but in the case of Mark Roberts,
only with regard to pensions matters in the UK (having made
enquiries of E.N. Farr, the scheme actuary of both the Blue
Circle Retirement Plan and the Blue Circle Executive Plan)
and Ireland (having made enquiries of Aon Beech Hill,
consultant to the Irish Scheme, as defined in Schedule 10)).
2. Sale and Purchase
2.1 The parties have agreed that:
(A) Blue Circle Bathrooms Limited shall sell, or procure the sale
of, and Ideal Standard Limited shall purchase, or procure the
purchase of, the UK Shares with all rights attached or
accruing to them at Completion;
(B) Blue Circle Home Products BV shall sell, or procure the sale
of, and Ideal Standard S.r.l. shall purchase, or procure the
purchase of, the Italian Shares with all rights attached or
accruing to them at Completion; and
(C) Blue Circle Home Products Beteilligungs-GmbH shall sell, or
procure the sale of, and Wabco Standard GmbH shall purchase,
or procure the purchase of, the German Shares with all rights
attached or accruing to them at Completion.
2.2 The Shares shall be free from all charges and encumbrances and from
all other rights exercisable by or claims by third
parties.
2.3 The relevant Purchaser shall be entitled to exercise all rights
attached or accruing to the Shares including, without limitation, the
right to receive all dividends, distributions or any return of capital
declared, paid or made by each member of the Baltic Group in respect of
periods commencing on or after Completion.
2.4 For the avoidance of doubt, Part 1 Law of Property (Miscellaneous
Provisions) Act 1994 shall not apply for the purposes of
this clause.
3. Consideration
3.1 The total consideration for the sale of the Shares shall be the
payment by the Purchasers of the sum of(pound)159,375,000 payable
in accordance with clause 4 (Completion).
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3.2 The parties have agreed that the total consideration for the sale of
the Shares shall be allocated as follows:-
UK Shares: (pound)48,741,000
Italian Shares: (pound)109,634,000
German Shares: (pound)1,000,000
3.3 The parties have agreed that the total consideration for the
Guarantor's non-compete undertaking contained in clause 8
(Restrictions on Guarantor's Business Activities) shall be the payment
of
(A) (pound)10 million by U.S. Plumbing Products Inc.;
(B) (pound)10 million by Ideal Standard IBV Ltd.; and
(C) (pound)1 million by Wabco Standard Export Inc.
to the Guarantor.
3.4 If:
(i) the amount of the Net Debt of the Italian Companies and the
German Company and/or the UK Group in the Management Accounts
is understated by any amount, the total consideration referred
to in clause 3.1 shall be reduced by the amount of such
understatement; and
(ii) the amount of Net Debt of the Italian Companies and the German
Company and/or the UK Group in the Management Accounts is
overstated by any amount, the total consideration referred to
in clause 3.1 shall be increased by the amount of such
overstatement;
and any resulting decrease or increase in the amount of the total
consideration shall be paid in cash by the Sellers to the Purchasers
or, as the case may be, by the Purchasers to the Sellers as soon as
practicable after Completion. If any such payment falls to be made the
Sellers and the Purchasers will agree a reasonable apportionment of the
adjustment in the consideration between the UK Shares, the Italian
Shares and the German Shares.
3.5 If:
(i) the aggregate amount of the indebtedness of members of the
Baltic Group to members of the Retained Group stated in
paragraph 9(C) of schedule 1 to be outstanding as at the date
of this agreement is overstated the Sellers will as soon as
practicable following Completion procure the repayment of the
amount of such overstatement to the member of the Baltic Group
entitled thereto;
(ii) the aggregate amount of the indebtedness of members of the
Baltic Group to members of the Retained Group stated in
paragraph 9(C) of schedule 1 to be outstanding as at the date
of this agreement is understated the Purchasers will as soon
as practicable following Completion procure the repayment of
the amount of such understatement to the member of the
Retained Group entitled thereto; and
(iii) the aggregate amounts of cash and deposits of members of the
Baltic Group (calculated based on practices consistently
applied in producing management accounts during 1998 and, for
the avoidance of doubt, an exchange rate of (pound)1 = LIT
2743.43) as at the date of this agreement is less than
(pound)8,200,000 the Sellers will as soon as practicable
following Completion procure the payment of the amount of such
shortfall to the Purchasers;
Provided that if the Sellers or, as the case may be, the
Purchasers claim to be entitled to any payment under this
clause the party claiming to be so entitled shall produce such
evidence of its entitlement as the other party may reasonably
require and without prejudice to the generality of the
foregoing the Sellers shall be entitled to have access to the
Books and Records of the Baltic Group in accordance with
clause 6.7 for the purposes of verifying any such claim by the
Purchasers.
4. Completion
4.1 Completion shall take place at 12 noon on the Completion Date at the
offices of the Sellers' Solicitors at 35 Basinghall
Street, London, EC2V 5DB.
4.2 At Completion the Sellers and the Purchasers shall do those things
listed in Schedule 1 (Completion Arrangements).
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4.3 Neither the Purchasers nor the Sellers shall be obliged to complete
this agreement unless each Seller or, as the case may be, each
Purchaser complies with the requirements of sub-clause 4.2 and Schedule
1 (Completion Arrangements).
4.4 Neither the Purchasers nor the Sellers shall be obliged to complete the
sale and purchase of any of the Shares unless the sale and purchase of
the Shares is completed simultaneously. This sub-clause shall not limit
any other clause of this agreement and in particular clause 12
(Remedies and Waivers).
4.5 Payment by telegraphic transfer for the amounts stated in clause 3
(Consideration) in accordance with Schedule 1 paragraph 9
(Completion Arrangements) shall constitute payment of the
consideration for the Shares and for the Guarantor's
non-compete undertaking contained in clause 8 (Restrictions
on Guarantor's Business Activities) and shall discharge the
obligations of the Purchasers under clause 2 (Sale and
Purchase). --------
5. Sellers' Warranties and Undertakings
5.1 Subject to clauses 7.1 and 7.2 (Purchasers' Remedies and Sellers'
Limitations on Liability), the Sellers warrant to the Purchasers that
each of the Warranties is true and accurate in all respects at the date
of this agreement.
5.2 Each Purchaser acknowledges that it does not rely on and has not been
induced to enter into this agreement on the basis of any warranties,
representations, covenants, undertakings, indemnities or other
statements whatsoever, other than those expressly set out in this
agreement or the Tax Covenant or the Transitional Services Agreement
and acknowledges that neither the Sellers nor any member of the
Retained Group or the Baltic Group or any of their agents, officers or
employees, has given any such warranties, representations, covenants,
undertakings, indemnities or other statements.
5.3 The Sellers undertake (if any claim is made against them in connection
with the sale of the Shares to the Purchasers) not to make any claim
against any member of the Baltic Group or any director or employee of
any member of the Baltic Group on whom any of them may have relied
before agreeing to any terms of this agreement or of the Tax Covenant
or the Transitional Services Agreement or authorising any statement in
the Disclosure Letter.
5.4 Each of the Warranties shall be construed as a separate and independent
warranty and (except where expressly provided to the contrary) shall
not be limited or restricted by reference to or inference from the
terms of any other Warranty.
5.5 If in respect of or in connection with any breach of any of the
Warranties or any facts or matters warranted not being true any amount
payable to the Purchasers by the Sellers whether under this clause or
otherwise is subject to any deduction or withholdings required by law,
such payable amounts shall be paid to the Purchasers by the Sellers so
as to ensure that the net amount received by the relevant Purchaser is
equal to the full amount payable to the Purchasers under this
agreement.
5.6 The Purchasers shall be responsible for the recordal of the IP
assignment in respect of Trade Mark Numbers 745572, 745573 MARKLAB and
922765 MARKESEAL at the United Kingdom Trade Mark Registry but the
Sellers shall pay any stamp duty in relation to the IP Assignments and
any official Trade Marks Registry fees in relation to the recordal of
the IP Assignments at the United Kingdom Trade Marks Registry.
5.7 Blue Circle Home Products BV and Ideal Standard S.r.l. shall execute
the Notarized Deed of Sale in order to give effect to the sale of all
the quotas of Ceramica Dolomite S.r.l., it being understood that (i)
the Notarized Deed of Sale is executed solely for the purpose of
effecting the sale and that the provisions of this agreement are not
intended to be impaired or superseded by such execution, (ii) the
provisions of this agreement remain fully valid and enforceable and
(iii) in the event of a conflict between such Notarized Deed of Sale
and this agreement, the provisions of this agreement shall prevail.
6. Purchasers' Warranties and Undertakings
6.1 Each Purchaser warrants and undertakes to each Seller that neither the
execution of this agreement by the Purchaser nor the consummation of
the transaction as contemplated by this agreement will violate,
conflict with or result in the breach of any term, limitation in or
provision of, or constitute a default (or an event that, with the
giving of notice or the lapse of time or both, would constitute a
default) under the terms, provisions or conditions of the
constitutional documents of the Purchaser or violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Purchaser.
6.2 Each Purchaser undertakes to hold each Seller, for itself and as
trustee for its subsidiaries, indemnified and to keep it and them
indemnified from and against all actions, claims, proceedings, loss,
damage, all payments, costs or expenses incurred by any member of the
Retained Group in relation to or arising out of any guarantee,
indemnity or other contingent obligation given or undertaken by the
Sellers or any member of the Retained Group in relation to or arising
out of any obligations or liabilities of any member of the Baltic Group
but only to the extent that full details (including as to the maximum
amount of such liability) of such guarantees, indemnities and other
contingent obligations are set out in the Disclosure Letter.
6.3 The Sellers shall not be liable to make any payment under this
agreement nor shall the Purchasers exercise any right of set-off or
counter-claim against or otherwise withhold payment of any sums stated
to be payable by the Purchasers to the Sellers or under any other
agreement subsisting between them unless and until such liability has
been agreed or adjudged payable in legal or arbitration proceedings.
6.4 In the event that the Sellers, at any time after the date hereof,
should wish to take out insurance against liability under this
agreement, each Purchaser undertakes to provide such information as the
prospective insurer may reasonably require before effecting such
insurance subject to appropriate confidentiality undertakings being
received prior to disclosure of confidential information.
6.5 The Purchasers undertake that they will procure that Ceramica Dolomite
Spa will fully comply with the terms of the agreement dated 8th June,
1998 (as amended by a letter dated 14th December, 1998) between itself
and Giorgio Pitzurra and in particular the provisions relating to the
payment of compensation to Giorgio Pitzurra of Ceramica Dolomite Spa
arising as a result of the sale of Ceramica Dolomite Spa.
6.6 The Purchasers shall not, and shall procure that no member of the
Baltic Group shall, use any name or trading style or logo which
includes the name and/or device "Blue Circle" or the name "Curzon" or
any colourable imitation thereof, in any manner after the Completion
Date which may give rise to confusion.
6.7 The Purchasers agree that, as from the Completion Date, for the
purposes of the preparation and auditing of the statutory accounts of
the members of the Baltic Group for the accounting reference period
ended on the 1998 Accounts Date and the preparation of tax returns in
respect of such period or for the purpose specified in clause 3.5, the
Sellers and their professional advisers and any persons authorised by
them will from time to time on giving reasonable notice and during
normal working hours be given full access to the Books and Records of
each member of the Baltic Group and the directors and employees of each
member of the Baltic Group will be instructed to give as soon as
practicable all information and explanations to the Sellers or any such
persons as the Sellers may reasonably request.
6.8 The Purchasers agree that they will be liable for any Italian transfer
tax which may be levied in respect of this agreement by any Revenue
Authority and that they will hold each Seller, for itself and as
trustee for its subsidiaries, indemnified and will keep it and them
indemnified from and against any such liability levied on it or them by
any Revenue Authority.
7. Purchasers' Remedies and Sellers' Limitations on Liability
7.1 The Purchasers shall not be entitled to claim that any fact causes any
of the Warranties to be breached if fairly disclosed in the Disclosure
Letter or in any document listed in the index annexed to the Disclosure
Letter or delivered with it in the absence of any fraud or dishonesty
on the part of the Sellers.
7.2 The liability of the Sellers in respect of claims under the Warranties
shall be reduced if and to the extent that the limitations set out in
Schedule 3 (Limitations on the Sellers' Liability under the Warranties
and Undertakings) apply and the liability of the Covenantors in respect
of claims under the Tax Covenant shall be reduced if and to the extent
that the limitations set out in Schedule 3 (Limitations on Sellers'
Liabilities under the Warranties and Undertakings) are specifically
stated to apply to the Tax Covenant, in the absence of any fraud or
dishonesty on the part of any of the Sellers.
7.3 The Purchasers shall not be entitled to treat this agreement as
terminated if, following Completion, the Purchasers become aware that
there has been any material breach of the Warranties.
7.4 The Sellers and the Purchasers each acknowledge that the restrictions
contained in clause 17 (Announcements) and clause 18 (Confidentiality)
shall continue to apply after the termination of the sale and purchase
of the Shares under this agreement without limit in time.
7.5 Except as stated expressly in this clause, this clause and Schedule 3
(Limitations on the Sellers' Liability under the Warranties and
Undertakings) shall not limit any other clause of this agreement and in
particular clause 12 (Remedies and Waivers).
8. Restrictions on Guarantor's Business Activities
8.1 In consideration for the payments referred to in clause 3.3, the
Guarantor undertakes that it will not do, and will procure that no
member of the Retained Group does, any of the following things without
the prior written consent of (i) in respect of North America, U.S.
Plumbing Products Inc.; (ii) in respect of Europe, Ideal Standard IBV
Limited; and (iii) in respect of any other part of the world, Wabco
Standard Export Inc.:-
(A) within 60 months after the Completion Date, be engaged or
(except as the holder of shares in a listed company which
confer not more than five per cent. of the votes which could
normally be cast at a general meeting of the company) directly
interested in carrying on any business which competes with the
business of any members of the Baltic Group as it is carried
on at the Completion Date;
(B) except to the extent required by law, or any securities
exchange or regulatory or governmental body to which the
Sellers are subject or submit, wherever situated, including
(without limitation) the London Stock Exchange, whether or not
the requirement has the force of law, disclose to any other
person or use any information which is Confidential Business
Information for so long as that information remains
Confidential Business Information;
PROVIDED THAT:-
(i) the Guarantor and any member of the Retained Group
shall be entitled to disclose information which is
Confidential Business Information to their
professional advisers on obtaining an undertaking of
confidentiality from such advisers; and
(ii) this sub-clause shall not apply in respect of any
Confidential Business Information which is in or
becomes part of the public domain, other than through
a breach of the obligations of confidentiality set out
in this agreement;
(C) within 12 months after Completion, solicit the custom, in
relation to goods or services sold to any person by the Baltic
Group in the course of its business during the 12 months
before the Completion Date, of that person in respect of the
same goods or services; or
(D) within 12 months after Completion, solicit or entice away from
the employment of the Baltic Group any person at present an
employee of the Baltic Group who, as at the date of this
agreement earn a salary in excess of (pound)30,000 per annum
EXCEPT for those who answer a public advertisement or those
who are approached when they are no longer employed by the
Baltic Group and did not cease to be so employed as a result
of such solicitation or enticement.
8.2 Each undertaking contained in this clause shall be construed as a
separate undertaking and if one or more of the undertakings is held to
be against the public interest or unlawful or in any way an
unreasonable restraint of trade, the remaining undertakings shall
continue to bind the Guarantor.
8.3 Nothing in this clause 8 (Restrictions on Guarantor's Business
Activities) shall prevent the Guarantor or any member of the
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Retained Group from:-
(A) carrying on anywhere in the world their present business or
businesses (other than that of the Baltic Group) or any
natural development thereof;
(B) acquiring another company, business or undertaking which has
as a part of its business a business or businesses which are
competitive with a part of the businesses of the Baltic Group,
provided that such competitive businesses do not represent
more than 15% of the total turnover of the company, business
or undertaking acquired; or
(C) trading with its existing customers or any future customers provided it does
not do so in competition with the Baltic Group.
9. Other Agreements
9.1 The Sellers and the Purchasers hereby agree and undertake to take all
necessary steps to register with the competent commercial registries in
Germany (the "German Registry") the requisite forms of declaration in
respect of the termination of the Domination and Profit and Loss
Transfer Agreement forthwith on execution of this Agreement. The
Sellers shall indemnify and keep indemnified the German Purchaser (and
the Purchasers) against all costs, expenses and losses incurred by the
German Purchaser and the German Company as a result of the termination
of the Domination and Profit and Loss Transfer Agreement (except for
fees incurred in connection with the negotiation and preparation of
this Agreement).
9.2 Cancellation (Aufhebung): If the German Registry refuses to register
the termination of the Domination and Profit and Loss Transfer
Agreement or if for any reason whatsoever, such termination is not, or
is not deemed by anyone to be, effective at the date hereof then the
German Seller and the German Company hereby cancel the Domination and
Profit and Loss Transfer Agreement (hebeum auf) the Domination and
Profit and Loss Transfer Agreement with effect on 31st December, 1999
(24.00 hours).
9.3 The German Purchaser and the German Seller internally between
themselves agree that until the effective termination of the Domination
and Profit and Loss Transfer Agreement pursuant to 9.1 or 9.2 that:-
(A) the German Purchaser shall, with effect from the date of
Completion be the beneficial owner of the German Shares and
shall enjoy all rights including profits and shall bear all
risks (including losses) which result from its beneficial
ownership of the German Shares under this sub-clause 9.3(A);
(B) the German Seller shall:-
(i) not be entitled to any profits due to if under the
terms of the Domination and Profit and Loss Transfer
Agreement;
(ii) shall hold all profit declared and received by it on
trust for the German Purchaser and shall remit any
such profit to the German Purchaser forthwith upon
receipt.
(C) not be obliged under the terms of the Domination and Profit
and Loss Transfer Agreement to assume any losses of the German
Company in respect of any period following the date of this
agreement and the Purchasers shall indemnify and keep the
German Seller indemnified against all such losses and all
costs, claims, demands, losses and expenses incurred by the
German Seller in respect of all such losses; and
(D) not exercise any right to direct the management of the German
Company or any other right conferred on it by the Domination
and Profit and Loss Transfer Agreement unless so requested in
writing by the German Purchaser (and shall if so requested)
direct that the German Company pay any profit relating to any
period after the date of this agreement to the German
Purchaser provided that the Purchasers shall indemnify and
keep indemnified the German Seller from all costs, claims,
demands, losses and expenses incurred by the German Seller as
a result of the German Seller acting at the request of the
German Purchaser.
9.4 The Sellers and the Purchasers (subject to being reimbursed for all
reasonable expenses, costs or fees (including legal fees and
disbursements) and indemnified against all costs, damages and
liabilities incurred by them or any member of the Baltic Group) agree
that they will use reasonable endeavours to procure the novation of the
South African Sale and Purchase Agreement (other than the licensing
arrangement and restraints contained in clause 10 of the South African
Sale and Purchase Agreement) to a company outside the Baltic Group and,
in connection with such novation, will use reasonable endeavours to
procure that Armitage Shanks International Limited shall execute such
documents and do all such things as may be necessary to implement such
novation.
9.5 Notwithstanding clause 9.4 above, the Purchasers agree to account to
the Sellers for any benefit (other than the licensing arrangements and
restraints contained in Clause 10 of the South Africa Sale and Purchase
Agreement) which may accrue to the Purchasers or to any member of the
Baltic Group (including Armitage Shanks International Limited) under
the South African Sale and Purchase Agreement and, subject to clause
9.6 below, the Guarantor agrees to indemnify and hold the Purchasers
harmless against all costs, expenses, damages and liabilities incurred
by the Purchasers or any member of the Baltic Group (including Armitage
Shanks International Limited) in respect of any claims made against any
such person under or in connection with the South African Sale and
Purchase Agreement. The indemnity provided to the Purchasers under this
clause 9.5 shall not be subject to, or limited by, any of the
limitations on the Sellers' liability in Schedule 3 (Limitations on the
Sellers' Liability under the Warranties and Undertakings) of this
agreement or the Tax Covenant.
9.6 Upon any member of the Baltic Group becoming aware of any claim, action
or demand against it giving rise to a claim under the indemnity
pursuant to clause 9.5, the Purchasers shall and shall procure that the
appropriate member of the Baltic Group shall:-
(i) as soon as reasonably practicable notify the Sellers by
written notice of such matter;
(ii) take such action and give such information and access to
personnel, premises, chattels, documents and records to the
Sellers and their professional advisers as the Sellers may
reasonably request and the relevant member of the Baltic Group
shall use reasonable endeavours to provide to the Sellers, upon
the Sellers' request and at the Seller's cost, such information
and assistance in order to avoid, dispute, resist, mitigate,
settle, compromise, defend or appeal any claim in respect of such
matter or adjudication with respect to such matter;
(iii) at the request of the Sellers, allow the Sellers to take
the sole conduct of such actions as the Sellers may deem
appropriate in connection with any such matter or claim in the
name of the appropriate member of the Baltic Group and in that
connection the members of the Baltic Group shall give or cause to
be given to the Sellers all such assistance as the Sellers may
reasonably require in avoiding, disputing, resisting, settling,
compromising, defending or appealing any such claim and shall
instruct at the Sellers' cost such solicitors or other
professional advisers as the Sellers may nominate to act on
behalf of the appropriate member of the Baltic Group provided
that the Sellers shall keep the Purchasers informed of the status
of such matter or claim;
(iv) make no admission of liability, agreement, settlement or
compromise with any third party in relation to any such claim or
adjudication without the prior written consent of the Sellers
(such consent not to be unreasonably withheld or delayed); and
(v) take all reasonable action to mitigate any loss suffered by
it or any member of the Baltic Group in respect of such matter.
9.7 The parties agree that they will negotiate in good faith and use
reasonable endeavours to enter into the Supply Agreement within 30 days
after the Completion Date in accordance with the terms of such letter.
9.8 The Guarantor undertakes to the Purchasers to pay all amounts payable
to certain employees of the Baltic Group pursuant to the letters
referred to in Document 131 of the UK List in accordance with the terms
of such letters.
10. Pensions Each of the parties shall comply with the requirements
pertaining to that party set out in Schedule 10 (Pensions).
11. Effect of Completion
Any provision of this agreement and any other documents referred to in
it which is capable of being performed after but which has not been
performed at or before Completion and all Warranties and covenants and
other undertakings contained in or entered into pursuant to this
agreement shall remain in full force and effect notwithstanding
Completion.
12. Remedies and Waivers
12.1 No delay or omission on the part of any party to this agreement in
exercising any right, power or remedy provided by law or under this
agreement or any other documents referred to in it shall:-
(A) impair such right, power or remedy; or
(B) operate as a waiver thereof,
EXCEPT in respect of any right, power or remedy arising from the
Sellers' limitation of liability under the Warranties and Undertakings
as set out in Schedule 3 (Limitations on the Sellers' Liability under
the Warranties and Undertakings).
12.2 The single or partial exercise of any right, power or remedy provided
by law or under this agreement shall not preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
12.3 The rights, powers and remedies provided in this agreement are
cumulative and not exclusive of any rights, powers and remedies
provided by law unless stated expressly.
13. Assignment
Neither this agreement, nor any interest in it, including the benefit
of the Warranties, shall be assignable in whole or in part at any time
to any third parties and each of the parties undertakes that it will
not assign the whole or any part of any interest in the agreement at
any time to any person.
14. Further Assurance
Each of the parties shall from time to time, on being required to do so
by any other party to this agreement now or at any time in the future,
do or so far as each is able procure the doing of all such acts and/or
execute or procure the execution of all such documents in a form
satisfactory to the party concerned as is reasonably necessary for
giving full effect to this agreement and securing to them the full
benefit of the rights, powers and remedies conferred upon them in this
agreement.
15. Entire Agreement
15.1 For the purpose of this clause, "Pre-contractual Statement" means a
draft, agreement, undertaking, representation, warranty, promise,
assurance or arrangement of any nature whatsoever, whether or not in
writing, relating to the Share Purchase Documents or any of them (as
defined in sub-clause 15.2) made or given by a party to any of the
Share Purchase Documents or any other person at any time prior to
execution of the Share Purchase Documents.
15.2 This agreement, the Tax Covenant, the Disclosure Letter referred to in
sub-clause 7.1 (Purchasers' Remedies and Sellers' Limitations on
Liability), the Transitional Services Agreement and any other documents
referred to in this agreement (the "Share Purchase Documents")
constitute the whole and only agreement between the parties relating to
the sale and purchase of the Shares.
15.3 Except to the extent repeated in any of the Share Purchase Documents,
the Share Purchase Documents supersede and extinguish any prior
Pre-contractual Statement relating thereto.
15.4 Each party acknowledges that in entering into the Share Purchase
Documents or any of them on the terms set out therein, it is not
relying upon any Pre-contractual Statement which is not expressly set
out therein.
15.5 None of the parties shall have any right of action against any other
party to this agreement arising out of or in connection with any
Pre-contractual Statement (except in the case of fraud or dishonesty).
16. Notices
16.1 Any notice or other communication given or made under or in connection
with the matters contemplated by this agreement shall
be in writing.
16.2 Any such notice or other communication shall be addressed as provided
in sub-clause 16.3 and, if so addressed, shall be
deemed to have been duly given or made as follows:-
(A) if sent by personal delivery, upon delivery at the address of the
relevant party;
(B) if sent by first class post, two Business Days after the date of
posting; or
(C) if sent by facsimile, when despatched;
PROVIDED THAT if, in accordance with the above provisions, any such
notice or other communication would otherwise be deemed to be given or
made outside Working Hours, such notice or other communication shall be
deemed to be given or made at the start of Working Hours on the next
Business Day.
16.3 The relevant addressee, address and facsimile number of each party for
the purposes of this agreement, subject to
sub-clause 16.4, are:-
---------------
<TABLE>
<CAPTION>
<S> <C> <C>
Name of party Address Facsimile No.
Blue Circle Industries PLC 84 Eccleston Square, 00 44 171-245 8272
London, SW1V 1PX, England.
Blue Circle Bathrooms 84 Eccleston Square, 00 44 171-245 8272
limited London,
SW1V 1PX,
England.
Blue Circle Home Products BV Galvanistraat, 00 31 3324 60057
3861 Nijkerk,
The Netherlands.
Blue Circle Home Products August-Brotje-Strasse 17, 00 49 4402 80560
Beteilligungs-GmbH D-26180 Rastede,
Germany.
Ideal Standard Limited National Avenue, 00 44 1482 445886
Kingston upon Hill,
HU5 4JE.
Ideal Standard S.r.l. Via Andrea Maria Amepere 102, 00 39 228 88257
20131 Milan,
Italy.
WABCO Standard GmbH Euskirchener Strasse 80, 00 49 228 521 241
53121 Bonn,
Germany.
</TABLE>
16.4 A party may notify the other parties to this agreement of a
change to its name, relevant addressee, address or facsimile
number for the purposes of sub-clause 16.3 PROVIDED THAT such
notification shall only be effective on:-
(A) the date specified in the notification as the date on
which the change is to take place; or
(B) if no date is specified or the date specified is less
than five clear Business Days after the date on which notice
is given, the date falling five clear Business Days after
notice of any such change has been given.
16.5 For the avoidance of doubt, the parties agree that the
provisions of this clause shall not apply in relation to the
service of Service Documents.
17. Announcements
17.1 Subject to sub-clause 17.2, no announcement concerning the
sale of the Shares or any ancillary matter shall be made by any
--------------- party without the prior written approval of the
others.
17.2 Any party may make an announcement concerning the sale of
the Shares or any ancillary matter if required by:-
(A) the law of any relevant jurisdiction; or
(B) any securities exchange or regulatory or governmental
body to which any party is subject or submits, wherever
situated, including (without limitation) the London Stock
Exchange whether or not the requirement has the force of
law, in which case the party concerned shall take all such
steps as may be reasonable and practicable in the
circumstances to agree the contents of such announcement
with the other parties before making such announcement.
17.3 The restrictions contained in this clause shall continue to
apply after Completion without limit in time.
18. Confidentiality
18.1 Subject to sub-clause 18.2, each of the parties shall treat
as strictly confidential all information received or obtained as
a result of entering into or performing this agreement which
relates to:-
(A) the provisions of this agreement;
(B) the negotiations relating to this agreement;
(C) the subject matter of this agreement; or
(D) the other party.
18.2 Any party may disclose information which would otherwise be
confidential if and to the extent:-
(A) required by the law of any relevant jurisdiction;
(B) required by existing contractual obligations;
(C) required by any securities exchange or regulatory or
governmental body to which any party is subject or submits,
wherever situated, including (without limitation) the London
Stock Exchange whether or not the requirement for
information has the force of law;
(D) required to vest the full benefit of this agreement in
any party;
(E) disclosed to the professional advisers, auditors and
bankers of each party;
(F) the information has come into the public domain through
no fault of that party; or
(G) the other parties have given prior written approval to
the disclosure,
PROVIDED THAT any such information disclosed pursuant to paragraph (A),
(B) or (C) shall be disclosed only after consultation with the other
parties and if such information is in the form of an announcement, then
the parties concerned shall take all such steps as may be reasonable
and practicable in the circumstances to agree the contents of such
announcement with the other parties before making such announcement.
18.3 The restrictions contained in this clause shall continue to
apply after Completion of the sale and purchase of the Shares
under this agreement without limit in time.
19. Guarantee
19.1 In consideration of the Purchasers agreeing to enter into
and perform their obligations under the Share Purchase Documents,
the Guarantor hereby irrevocably and unconditionally as principal
obligor guarantees to the Purchasers the due and punctual
performance and observance by the Sellers of all of their
obligations, commitments and undertakings under or pursuant to
the Share Purchase Documents. The Guarantor shall pay to the
Purchasers from time to time on demand a sum of money which is
due for payment by the Sellers to the Purchasers under or
pursuant to the terms of the Share Purchase Documents and which
has not been paid at the time the demand is made. The liability
of the Guarantor under this agreement shall not be released or
diminished by any variation of the terms of the Share Purchase
Documents, any forbearance, neglect or delay in seeking
performance of the obligations hereby imposed or any granting of
time for such performance unless the parties otherwise agree in
writing. If any obligations of the Sellers become void, voidable
or unenforceable for any reason, the Guarantor's obligations
under clause 19.1 are unaffected and the Guarantor shall perform
the Sellers' obligations as if it were primarily liable for the
performance thereof.
19.2 If and whenever any of the Sellers default in the
performance of any obligation, commitment or undertaking
undertaken or expressed to be undertaken under or pursuant to the
Share Purchase Documents the Guarantor shall as soon as
reasonably practicable after receiving from the Purchasers notice
of such default, perform (or procure performance of) and satisfy
(or procure satisfaction of) the obligation, commitment or
undertaking in regard to which such default has been made.
19.3 This guarantee is to be a continuing guarantee and
accordingly is to remain in force until all the obligations of
the Sellers referred to in sub-clause 19.1 shall have been
performed or satisfied in accordance with this agreement
notwithstanding the winding-up, liquidation, dissolution or other
incapacity of a Seller or any change in the status, control or
ownership of a Seller.
19.4 The Guarantor shall not be liable under this clause 19
(Guarantee) in relation to the obligations of any Seller under
the Share Purchase Documents to the extent that the relevant
Seller is not obliged under the terms of the Share Purchase
Documents to perform such obligations or a limitation on such
Seller's liability applies.
20. Costs and Expenses
Except as otherwise stated in any other provision of this
agreement, each party shall pay its own costs and expenses in
relation to the negotiations leading up to the sale of the Shares
and to the preparation, execution and carrying into effect of
this agreement and all other documents referred to in it and the
Sellers confirm that no expense of whatever nature relating to
the sale of the Shares has been or is to be borne by any member
of the Baltic Group.
21. Counterparts
21.1 This agreement may be executed in any number of
counterparts, and by the parties on separate counterparts, but
shall not be effective until each party has executed at least one
counterpart.
21.2 Each counterpart shall constitute an original of this
agreement, but all the counterparts shall together constitute but
one and the same instrument.
22. Invalidity
If at any time any provision of this agreement is or becomes
illegal, invalid or unenforceable in any respect under the law of
any jurisdiction, that shall not affect or impair:-
(A) the legality, validity or enforceability in that
jurisdiction of any other provision of this agreement; or
(B) the legality, validity or enforceability under the law
of any other jurisdiction of that or any other provision of
this agreement.
23. Alternative Dispute Resolution
23.1 In the event of any dispute, controversy, claim or
difference arising between the parties out of or in connection
with this agreement, senior representatives of the parties shall,
within 10 Business Days of a written request from either party to
the other, meet in a good faith effort to resolve the dispute
without recourse to legal proceedings.
23.2 If the dispute or difference is not resolved as a result of
such meeting, either party may (at such meeting or within 14 days
from its conclusion) propose to the other in writing that
structured negotiations be entered into with the assistance of a
mediator or neutral advisor ("Mediator").
23.3 If the parties are unable to agree on a Mediator or if the
Mediator agreed upon is unable or unwilling to act, either party
shall, within 14 days from the date of the proposal to appoint a
Mediator or within 14 days of notice to either party that the
original Mediator is unable or unwilling to act, apply to the
Centre for Dispute Resolution ("CEDR") to appoint a Mediator.
23.4 The parties shall, within 14 days of the appointment of the
Mediator, meet with the Mediator in order to agree a programme
for the exchange of any relevant information and the structure to
be adopted for the negotiations to be held. The mediation shall
be conducted in accordance with the CEDR model mediation
procedure.
23.5 Unless concluded with a written legally binding agreement,
all negotiations connected with the dispute shall be conducted in
confidence and without prejudice to the rights of the parties in
any future proceedings.
23.6 If the parties accept the Mediator's recommendations or
otherwise reach agreement on the resolution of the dispute, such
agreement shall be reduced to writing and, once it is signed by
their duly authorised representatives, shall be binding on the
parties. Such agreement shall be implemented in full within 90
days of signature, failing which it shall be rendered null and
void (and may not be referred to any subsequent legal
proceedings) unless legal proceedings have been initiated to
enforce it by either party within a further 90 days.
23.7 Failing agreement, either of the parties may invite the
Mediator (who shall be under no obligation to comply with such
invitation) to provide a non-binding but informative opinion in
writing on the matter. Any such opinion shall not be an attempt
to anticipate what a court might order but rather the Mediator's
suggestions as to the settlement terms which are considered
appropriate in all the circumstances. Such opinion shall be
provided on a without prejudice basis and shall not be used in
evidence in any proceedings arising in connection with this
agreement without the prior written consent of both parties.
23.8 If the parties fail to reach agreement in the structured
negotiations within 60 days of the Mediator being appointed then
any dispute or difference between them may be referred to the
Courts.
24. Choice of Governing Law
This agreement shall be governed by and construed in accordance with
English law.
25. Jurisdiction
For the exclusive benefit of the other parties hereto, the
parties to this agreement irrevocably agree that any Proceedings
against it may be brought in the courts of England. Nothing
contained in this clause shall limit any party's rights to take
Proceedings against any other in any other court of competent
jurisdiction, nor shall the taking of Proceedings in one or more
jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not, to the extent
permitted by the law of such other jurisdiction.
26. Agent for Service
26.1 The Purchasers irrevocably agree that any Service Document
may be sufficiently and effectively served on them in connection
with Proceedings in England and Wales by service on their agent
Ideal Standard Limited, if no replacement agent has been
appointed and notified to the Sellers pursuant to sub-clause
26.4, or on the replacement agent if one has been appointed and
notified to the Sellers.
26.2 Any Service Document served pursuant to this clause shall be
marked for the attention of:-
(A) the Company Secretary of Ideal Standard Limited at
National Avenue, Kingston Upon Hull, HU5 4JE, England or
such other address within England or Wales as may be
notified to the Sellers by the Purchasers; or
(B) such other person as is appointed as agent for service
pursuant to sub-clause 26.4 at the address notified pursuant
to --------------- sub-clause 26.4. ---------------
26.3 Any document addressed in accordance with sub-clause 26.2
shall be deemed to have been duly served if:- ---------------
(A) left at the specified address, when it is left; or
(B) sent by first class post, two Business Days after the
date of posting.
26.4 If the agent referred to in sub-clause 26.2 (or any
replacement agent appointed pursuant to this sub-clause) at any
time ceases for any reason to act as such, the Purchasers shall
appoint a replacement agent to accept service having an address
for service in England or Wales and shall notify the Sellers of
the name and address of the replacement agent; failing such
appointment and notification, shall be entitled by notice to the
Purchaser to appoint such a replacement agent to act on the
Purchaser's behalf.
26.5 A copy of any Service Document served on an agent pursuant
to this clause shall be sent by post to the Purchasers at its
address for the time being for the service of notices and other
communications under clause 16 (Notices), but no failure or delay
in so doing shall prejudice the effectiveness of service of the
Service Document in accordance with the provisions of sub-clause
26.1.
26.6 "Service Document" means a writ, summons, order, judgment or
other process issued out of the courts of England and
Wales/document relating to or in connection with any Proceedings.
<PAGE>
Schedule 1
(Completion Arrangements)
At Completion:-
1. the Sellers shall deliver to the Purchasers or the Purchasers' Solicitors:-
(A) duly executed transfers in respect of the UK Shares in favour of the
Purchasers or such person as the Purchasers may nominate and share
certificates (if any) for the UK Shares in the name of the relevant
transferors and any power of attorney under which any transfer is executed
on behalf of any Sellers or nominee;
(B) such waivers or consents as the Purchasers may require to enable the
Purchasers or their nominees to be registered as holders of the Shares;
(C) the IP Assignments;
(D) the duly executed counterpart of the Transitional Services Agreement;
(E) the duly executed counterpart of the Car Fleet Services Agreement; and
(F) the Disclosure Letter;
2. the Sellers shall procure that a Tax Covenant in the form set out or referred
to in Schedule 4 (Tax Covenant) is executed and delivered to the Purchasers by
the Covenantors and the Purchasers shall duly execute and deliver a counterpart
of it to the Sellers;
<PAGE>
3. the Sellers shall deliver to the Purchasers (or to any person whom the
Purchasers may nominate) the following:-
(A) the statutory books for the UK Group (except for Armitage Shanks
(Ireland Limited) and Armitage Shanks (Dublin) Limited), (which shall be
written up to but not including the Completion Date), the certificate of
incorporation (and any certificate of incorporation on change of name) and
common seal (if any) of each member of the Baltic Group and share
certificates or other documents of title in respect of all the issued share
capital of each Subsidiary which is owned directly or indirectly by the
Baltic Group (together with duly executed transfers in respect of any
shares in any of the Subsidiaries not held by a member of the Baltic
Group), insofar as they are not held by or to the order of the relevant
member of the Baltic Group;
(B) the title deeds relating to each Relevant Property;
(C) a copy of the minutes of duly held meetings of the directors of the
Sellers and the Guarantor authorising the execution of this agreement and
the Tax Covenant; and
4. the Sellers shall procure the present directors and secretary of each member
of the Baltic Group (other than any director or secretary whom the Purchasers
may wish should continue in office) to resign their offices as such
directors/secretary, such resignations to be tendered at the board meetings
referred to in paragraph 5, provided that if such director or secretary is to
continue in the employment of any member of the Baltic Group they will not be
required to relinquish any such rights under such contract of employment; UK
Company
5. the Sellers shall procure a board meeting of the UK Company to be held at
which:-
<PAGE>
(A) it shall be resolved that each of the transfers relating to the Shares
shall be approved for registration and (subject only to the transfer being
duly stamped) each transferee registered as the holder of the Shares
concerned in the register of members;
(B) each of the persons nominated by the Purchasers shall be appointed
directors and/or secretary, as the Purchasers shall direct such
appointments to take effect on the Completion Date;
(C) the resignations of the directors and secretary referred to in
paragraph 4 above shall be tendered and accepted so as to take effect at
the close of the meeting provided that if such director or secretary is to
continue in employment of any member of the Baltic Group they will not be
required to relinquish any rights under the contract of employment;
(D) all existing instructions authorising any person to sign on behalf of
existing bank accounts nominated by any member of the Retained Group shall
be revoked and new instructions shall be given in favour of Alberto Loreti
and Herbert Ruecker; and
(E) the situation of the registered office shall be changed to such address
as the Purchasers may nominate; the Sellers shall procure that minutes of
the duly held board meeting, certified as correct by the secretary of the
relevant company, and the resignations and acknowledgements referred to are
delivered to the Purchaser's Solicitors;
Italian Companies
6. the Sellers shall procure that:-
<PAGE>
(A) Michael Schofield, Richard Tapp, and Gordon Franklin resign as
directors of the Italian Companies of which they are directors; and
(B) (i) the Notarized Deed of Sale and (ii) the transfer form (girata) of
the shares of Ceramica Dolomite SpA are duly executed in Italy at
Completion; and
(C) those members of the board of directors and members of the audit
committee (Collegio Sindacale) of each of the Italian Companies designated
by the Purchasers have resigned by tendering their letter of resignation
duly signed.
German Company
7. the Sellers shall procure that a duly executed notarial deed for the transfer
of the German Shares is executed and delivered to the Purchasers representative
in Germany;
8. the Sellers shall procure that Andrew Cooksey and Otto Greipel resign as
directors of the German Company.
8A The Sellers shall procure that a duly executed copy of the termination of the
Domination and Profit and Loss Transfer Agreement is delivered to the
Purchasers.
General
9. the Purchasers shall:-
<PAGE>
(A) pay to the Sellers (or as they may otherwise direct) by way of
telegraphic transfer the total consideration payable in respect of the
Shares;
(B) procure the payment to the Sellers (or as they may otherwise direct) by
way of telegraphic transfer by U.S. Plumbing Products Inc., Ideal Standard
IBV Limited and Wabco Standard Export Inc. of the amounts referred to in
clause 3.3;
(C) procure the repayment to the Sellers (or as they may otherwise direct)
on behalf of the relevant member of the Retained Group by or on behalf of
the following members of the Baltic Group of the amounts set opposite their
name below (being amounts outstanding at the date of this agreement)
Company Amount
UK Company (pound)75,476,000
Italian Companies (pound) 7,662,000
and for such purpose the Purchasers shall pay to the Sellers or as they may
direct by way of telegraphic transfer the aggregate of such amounts;
(D) deliver to the Sellers, duly executed by the Purchasers, a counterpart
original of the Tax Covenant;
(E) deliver to the Sellers, a duly executed counterpart of the IP
assignment between Markes & Company Limited and Ideal Standard Limited; and
(F) deliver to the Sellers a copy (certified by the secretary of the
relevant Purchaser to be a true copy of a resolution in force at
Completion) of the resolution of the directors of Ideal Standard Limited
which authorised the purchase of the UK Shares for the consideration and
upon the terms set out in this agreement.
<PAGE>
Schedule 2
(Warranties)
Referred to in clause 5 (Sellers Warranties)
The Sellers warrant to the Purchasers as follows except as disclosed in the
Disclosure Letter:-
1. Ownership of the Shares
Each of the members of the Retained Group is the sole legal and
beneficial owner of the Shares set opposite its name in Schedule 5
(Ownership of the Shares).
2. Capacity of the Sellers
2.1 (A) The Sellers have the requisite power and authority to enter into and
perform this agreement; and
(B) each member of the Baltic Group has the requisite power and authority to
conduct its business as conducted at the date of this agreement.
2.2 This agreement constitutes and the other documents executed by the Sellers
which are to be delivered at Completion will, when executed, constitute binding
obligations of the Sellers enforceable in accordance with their respective
terms; and
2.3 The execution and delivery of, and the performance by the Sellers of their
obligations under, this agreement will not:-
(A) violate, conflict with or result in a breach of any term, limitation in
or provision of, or constitute a default (or an event that would, with the
giving of notice or the lapse of time constitute a default) under the
terms, provisions or conditions of the memorandum or articles of
association of any member of the Retained Group or the Sellers or any
member of the Baltic Group or violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Retained Group, the Sellers
or any member of the Baltic Group;
(B) result in a material breach of, or constitute a default under, any
instrument to which any member of the Retained Group or any member of the
Baltic Group is a party or by which any member of the Retained Group or any
member of the Baltic Group is bound; or
(C) result in a breach of any order, writ, injunction, statute, rule,
regulation, judgment or decree of any court or governmental agency to which
any member of the Baltic Group or any member of the Retained Group is a
party or by which any member of the Baltic Group is bound; or
(D) require the consent of any Sellers' shareholders.
3. Arrangements between the Baltic Group and the Retained Group
No material contract or arrangement other than contracts in the ordinary course
of business on arm's length terms is outstanding between any member of the
Baltic Group and any member of the Retained Group or any person who is a
director of or connected with any Sellers or with any such member.
4. Group Structure, etc.
4.1 The Shares comprise the whole of the issued and allotted share capital of
the Companies and all of them are fully paid up.
4.2 There is no agreement or commitment outstanding which calls for the
allotment, issue or transfer of, or accords to any person the right to call for
the allotment or issue of, any shares (including the Shares) or debentures in or
securities of the Companies.
4.3 Each of the companies in respect of which basic information is given in
Schedule 7 (Basic Information about the Subsidiaries) is a Subsidiary.
4.4 Each member of the Baltic Group has in all material respects complied with
all statutory and other requirements in respect of accounting and corporate
filings and records and no member of the Baltic Group is liable for fines or
other penalties as a result of late compliance with any such requirements.
5. Options, Mortgages and Other Encumbrances
5.1 There is no option, right to acquire, mortgage, charge, pledge, lien or
other form of security or encumbrance or equity on, over or affecting the Shares
or any of them and there is no agreement or commitment to give or create any
and, so far as the Sellers are aware, no claim has been made by any person to be
entitled to any.
5.2 So far as the Sellers are aware no option, right to acquire, mortgage,
charge, pledge, lien (other than a lien arising by operation of law in the
ordinary course of trading) or other form of security or encumbrance or equity
on, over or affecting the whole or any part of the undertaking or assets of any
member of the Baltic Group (including any investment in any other member of the
Baltic Group) is outstanding and there is no agreement or commitment to give or
create any and no claim has been made by any person to be entitled to any.
6. Accounts
6.1 The Statutory Accounts:-
(A) were prepared in all material respects in accordance with the law and
accountancy practices generally accepted in the jurisdiction in which the
relevant member of the Baltic Group is incorporated at the time they were
audited and commonly adopted by companies carrying on businesses similar to
those carried on by the respective members of the Baltic Group and in a
manner consistent with accounting policies used by the members of the
Baltic Group for the two preceding financial years;
(B) showed a true and fair view of the assets and liabilities of the
members of the Baltic Group to which they relate as at the 1997 Accounts
Date and the profits of the members of the Baltic Group to which they
relate for the financial period ended on that date.
6.2 The Management Accounts:-
(A) have been compiled in accordance with UK GAAP on a basis consistent
with the equivalent management accounts prepared for the financial year
ended on the 1997 Accounts Date, a copy of each of which is attached to the
Disclosure Letter. There have been no changes in the basis of preparing the
Management Accounts arising from any Financial Reporting Standard or other
pronouncement issued since 1 January 1998; and
(B) showed a true and fair view of the assets and liabilities of the Baltic
Group as at the 1998 Accounts Date and of the profits of the Baltic Group
for the financial year ended on that date.
7. Events Since the 1998 Accounts Date
7.1 Since the 1998 Accounts Date:-
(A) there has been no material adverse change in the financial position of
the Baltic Group;
(B) the business of the Baltic Group has, in all material respects, been
carried on in the ordinary and usual course;
(C) no member of the Baltic Group has, other than in the usual course of
its business:
(i) acquired or disposed of, or agreed to acquire or dispose of, an
asset for an amount exceeding(pound)100,000; or
(ii) assumed or incurred, or agreed to assume or incur, a liability,
obligation or expense (actual or contingent) for an amount exceeding
(pound)100,000;
(D) no member of the Baltic Group has made, or agreed to make, capital
expenditure exceeding in total (pound)250,000 (or its equivalent at the
time) or incurred, or agreed to incur, a commitment or commitments
involving capital expenditure exceeding in total (pound)250,000 (or its
equivalent at the time);
(E) no member of the Baltic Group has declared, paid or made a dividend or
distribution (including, without limitation, a distribution within the
meaning of the Taxes Act) except as disclosed in the Disclosure Letter;
(F) no member of the Baltic Group has changed its accounting reference
period;
(G) no resolution of the shareholders of any member of the Baltic Group has
been passed;
(H) no member of the Baltic Group has created, allotted, issued, acquired,
repaid or redeemed any share or loan capital, or made an agreement or
arrangement or undertaken an obligation to do any of those things; and
(I) so far as the Sellers are aware, the Baltic Group has not suffered a
material loss (including, for the avoidance of doubt, an amount receivable
having been written off on the basis that it is irrecoverable) of or damage
to its assets.
8. Contracts and Commitments
8.1 So far as the Sellers are aware there is no material breach of, or any
invalidity, or grounds for determination, rescission, avoidance or repudiation
of, any material contract (not being a lease, licence or contract conferring a
right of occupation in relation to a Relevant Property) to which any member of
the Baltic Group is a party.
8.2 No member of the Baltic Group is a party to any material joint venture or
other agreement or arrangement under which it is to participate with any other
person in any business.
8.3 No member of the Baltic Group is a party to any material contract which
falls within any of the cases specified below:-
(A) it is of a value which is likely to have material consequences on the
business of the Baltic Group in terms of expenditure or revenue; or
(B) it (1) relates to matters not within the ordinary business of that
member of the Baltic Group, or (2) is of one year or greater duration, or
(3) can be terminated in the event of any change in the underlying
ownership or control of that member of the Baltic Group or would be
materially affected by such change, or (4) restricts the relevant member of
the Baltic Group from carrying on its business in any part of the world or
(5) establishes any guarantee or indemnity in respect of the obligations of
a third party (except for any guarantee or indemnity implied by law or
contained in its standard terms of business) or (6) was entered into
otherwise than by way of a bargain at arm's length.
8.4 The Disclosure Letter lists the top 10 customers and suppliers of the
Italian Companies and the UK Group ranked according to aggregate value of sales
(in the case of customers) and purchases (in the case of suppliers) in each case
during 1998.
8.5 During the year ended on the date of this agreement, no substantial customer
or supplier of the Baltic Group has ceased trading or supplying the Baltic Group
and, so far as the Sellers are aware, no substantial customer or supplier of the
Baltic Group has specifically stated an intention to cease trading with the
Baltic Group.
8.6 A copy of the standard terms of business of the UK Group is annexed to the
Disclosure Letter.
9. Licences
9.1 All licences, consents and other permissions and approvals (the absence of
which would individually or in the aggregate have a material adverse effect on
the business of the Baltic Group taken as a whole) required for the carrying on
of the business now being carried on by the Baltic Group are in full force and
effect.
9.2 So far as the Sellers are aware, there is no circumstance which indicates
that any licence, consent, permission or approval is likely to be revoked.
9.3 So far as the Sellers are aware, each action required for the renewal or
extension of such licence, permission and approval has been taken.
10. Insolvency
10.1 No order has been made and no resolution has been passed for the winding up
of any member of the Baltic Group or for a provisional liquidator to be
appointed in respect of any member of the Baltic Group and no petition has been
presented and no meeting has been convened for the purpose of winding up any
member of the Baltic Group.
10.2 No administration order has been made and no petition for such an order has
been presented in respect of any member of the Baltic Group.
10.3 No receiver (which expression shall include an administrative receiver) has
been appointed in respect of any member of the Baltic Group or all or any of
their assets.
10.4 No member of the Baltic Group is insolvent, or unable to pay its debts
within the meaning of section 123 Insolvency Act 1986, or has stopped paying its
debts as they fall due.
10.5 No voluntary arrangement has been proposed under section 1 Insolvency Act
1986 in respect of any member of the Baltic Group.
10.6 No event analogous to those specified in paragraphs 10.1 to 10.5 above has
occurred in relation to any member of the Baltic ----------------------- Group
which is incorporated outside England and Wales.
10.7 No member of the Baltic Group has stopped paying its debts as they fall
due.
10.8 No distress, execution or other process has been levied on an asset of any
member of the Baltic Group. 10.9 No action is being taken by the registrar of
companies to strike any member of the Baltic Group off the register under
Section 652 of the Companies Act 1985 or similar Italian or German
legislation.
11. Litigation
11.1 No member of the Baltic Group and no person for whose acts or defaults any
member of the Baltic Group is vicariously liable is engaged in any material
litigation or arbitration, administrative or criminal proceedings and no such
litigation or arbitration, administrative or criminal proceedings by or against
any member of the Baltic Group is pending or, so far as the Sellers are aware,
threatened or expected and so far as the Sellers are aware having made due and
careful inquiry of each member of the Baltic Group, there is no fact or
circumstance likely to give rise to any such litigation or arbitration,
administrative or criminal proceedings or to any proceedings against any
director or employee (past or present) of any member of the Baltic Group in
respect of any act or default for which that member might be vicariously liable.
11.2 There is no outstanding material judgment, order, decree, arbitral award or
decision of a court, tribunal or arbitrator in any jurisdiction against any
member of the Baltic Group or, so far as the Sellers are aware, any person for
whose acts or defaults any member of the Baltic Group is vicariously liable.
12. Ownership and Condition of Assets
12.1 Each of the material assets (other than Property and leased assets)
included in the Management Accounts or acquired by any member of the Baltic
Group since the 1998 Accounts Date (other than current assets sold, realised or
applied in the normal course of trading) is owned both legally and beneficially
by a member of the Baltic Group and all material leased assets are the subject
of valid leases in favour of the relevant member of the Baltic Group and each
such material asset is free from any encumbrance.
12.2 The plant, machinery, vehicles and equipment owned or used by any member of
the Baltic Group are in reasonable condition, having regard to their present
use, age and written down value.
12.3 The Baltic Group has conducted its business and dealt with its material
assets in accordance with all material legal requirements of the jurisdiction in
which the Baltic Group carries on business.
12.4 The value of stocks in the Management Accounts has been properly calculated
in accordance with the accounting policy set out in the Disclosure Letter.
12.5 The aggregate liability of the Baltic Group for the sale of goods which
were defective or unsafe or which were not in compliance with the terms of sale
is not materially greater than the provision for such matters in the Management
Accounts and specified in the Disclosure Letter.
13. Ownership of Land
13.1 The Properties referred to in Schedule 8 (Relevant Property) are the only
Properties owned, used or occupied by any member of the Baltic Group or in
respect of which any member of the Baltic Group has any estate, interest, right
or liability (contingent or otherwise).
13.2 In relation to each of the Relevant Properties:-
(A) a member of the Baltic Group is solely legally and beneficially
entitled to the Relevant Property;
(B) the Property Owner has under its control all of the title deeds and
documents listed in the Disclosure Letter which documents are original
documents or properly examined abstracts;
(C) the Property Owner holds the Relevant Property subject to the leases,
underleases, tenancies or licences particulars of which are set out in the
Disclosure Letter and the Property Owner and/or a member of the Baltic
Group is otherwise in physical possession and actual occupation of the
Relevant Property;
(D) the replies to preliminary enquiries provided by the Seller's
Solicitors to the Purchasers' Solicitors are true and accurate in all
material respects.
13.3 Encumbrances
(A) There are no mortgages or charges, legal or equitable, fixed or
floating, affecting the Relevant Properties.
(B) There are no agreements for sale, estate contracts, options or rights
of pre-emption affecting the Relevant Properties.
(C) The Property Owner is not aware of any agreement, obligation or matter
affecting the Relevant Property which, although not registered, is capable
of registration as a local land charge.
(D) The Property Owner has not received any written notice alleging breach
of any covenants, restrictions and other encumbrances affecting the
Relevant Property which remains outstanding.
13.4 Planning Matters
There are no outstanding enforcement notices, stop notices or breach of
condition notices and so far as the Property Owner is aware no enforcement
action has been threatened in respect of the Relevant Property.
13.5 Compulsory Purchase
The Property Owner has received no compulsory purchase order, notice to treat or
notice of entry in respect of the Relevant Property and so far as the Property
Owner is aware no proposals have been published for the compulsory acquisition
of the Relevant Property.
13.6 Disputes, Notices and Claims
There are no material outstanding disputes, actions or complaints in respect of
the Relevant Properties.
13.7 Adverse Interests
So far as the Property Owner is aware the Relevant Property is not subject to
any of the over-riding interests referred to in section 70 of the Land
Registration Act 1925.
13.8 Leasehold Property
In relation to each of the Relevant Properties which is leasehold:-
(A) the Relevant Property is held under the terms of the lease (the
"Lease") briefly referred to in Schedule 8 and no collateral
assurances, undertakings or concessions have been made or given;
(B) there are no rent reviews outstanding or exercisable by the lessor
from a date prior to the Completion Date; and
(C) the Property Owner has received no notice alleging any material
breach of any covenant contained in the Lease which remains
outstanding.
13.9 Properties Subject to Tenancies
In relation to each of the Relevant Properties all material details of the
leases, tenancies, licences and agreements to which the Relevant Property is
subject are referred to in the Disclosure Letter and the Property Owner has not
served written notice alleging any material breach of those provisions which
remains outstanding.
14. Intellectual Property
14.1 Details of all registered Intellectual Property (including applications
therefor) owned by any member of the Baltic Group are set out in Schedule 9 and
all such Intellectual Property is owned both legally and beneficially by a
member of the Baltic Group.
14.2 So far as the Seller is aware, all Intellectual Property required for the
operation of the business of the Baltic Group as carried out at the date of this
agreement is owned (both legally and beneficially) by, or validly licensed to, a
member of the Baltic Group.
14.3 All renewal fees and steps required for the maintenance of the Intellectual
Property set out in Schedule 9 have been paid or taken .
14.4 Details of all material Intellectual Property licences granted to or by the
members of the Baltic Group are set out in the Disclosure Letter.
14.5 No member of the Baltic Group has materially breached or is in material
breach of any Intellectual Property licence referred to at 14.3 above, nor so
far as the Seller is aware has any other party materially breached or is in
material breach of any such licences.
14.6 So far as the Seller is aware, no third party is infringing or is at the
date of this Agreement threatening to infringe the Intellectual Property rights
owned by any member of the Baltic Group.
14.7 So far as the Seller is aware, no member of the Baltic Group is infringing
or has in the 4 years prior to the date of this Agreement infringed the
Intellectual Property rights of any third party.
14.8 So far as the Seller is aware, except for the Intellectual Property
relating to the services supplied under the Transitional Services Agreement,
there is no Shared Intellectual Property.
14.9 So far as the Seller is aware the Intellectual Property owned by the Baltic
Group is valid and enforceable and so far as the Seller is aware nothing has
been done or omitted to be done by which it may cease to be valid and
enforceable.
14.10 No encumbrances, liens or charges have been granted or created over any
Intellectual Property owned by the Baltic Group which are still in force at the
date of this Agreement save for any floating charge disclosed pursuant to clause
5 of Schedule 2 (Options, Mortgages and other Encumbrances).
14.11 So far as the Seller is aware there is no material breach of, or any
invalidity, or grounds for determination, rescission, avoidance or repudiation
of any material contract relating to Intellectual Property to which any member
of the Baltic Group is a party.
14.12 Except as disclosed in the Disclosure Letter, no member of the Baltic
Group is a party to any material contract relating to Intellectual Property
licence which falls within any of the cases specified below:-
(A) it is of a value which is likely to have material consequences on
the business of the Baltic Group in terms of expenditure or revenue;
or
(B) it (1) relates to matters not within the ordinary business of the
member of the Baltic Group or (2) is of one year or greater duration,
or (3) can be terminated in the event of any change in the underlying
ownership or control of that member of the Baltic Group or would be
materially affected by such change, or (4) materially restricts the
relevant member of the Baltic Group from carrying on its business in
any part of the world or (5) establishes any guarantee or indemnity in
respect of the obligations of a third party (except for any guarantee
or indemnity implied by law or contained in its standard terms of
business or (6) was entered into otherwise than by way of a bargain at
arm's length.
15. Information Technology
15.1 Details of the Baltic Group's Year 2000 compliance programme are set out in
the Disclosure Letter. Documents 159 (UK List) and 9 and 72 (Italian/German
List) of the Disclosure Letter are a set of schedules which identifies all IT
items tested on or before the relevant compilation date of each schedule which
so far as the Sellers are aware, are not Year 2000 Compliant. Details of letters
and replies received from customers of and suppliers to the Baltic Companies
regarding Year 2000 compliance issues are set out in the Disclosure Letter.
15.2 Details of the Baltic Group's euro compliance programme are set out in the
Disclosure Letter.
15.3 So far as the Seller is aware and except for the IT used in the provision
of the services supplied under the Transitional Services Agreement, the same
items of IT used by the Baltic Group are not also used by the Retained Group in
their businesses immediately prior to the date of this agreement.
15.4 Details of the Baltic Group's current registrations under the Data
Protection Act 1984 and under law no. 675/1996 implemented in Italy are set out
in the Disclosure Letter.
16. Competition and Trade Regulation Law
16.1 So far as the Sellers are aware no member of the Baltic Group is or has
been a party to any agreement in a manner which:-
(A) has been or is required to be registered under RTPA 1976;
(B) contravenes the provisions of the Resale Prices Act 1976; or
(C) infringes Article 85 or 86 of the Treaty establishing the European
Economic Community.
16.2 (A) So far as the Sellers are aware, no member of the Baltic Group is
a party to any agreement in respect of which any undertaking has been
given by or any order made against any member of the Baltic Group
pursuant to the RTPA 1976 or in respect of which an undertaking has
been given by or an order made against any member of the Baltic Group
pursuant to the Resale Prices Act 1976; and
(B) So far as the Sellers are aware, no member of the Baltic Group has
given an undertaking to, or is subject to any order of or
investigation by, or has received any request for information from the
Office of Fair Trading, the Monopolies and Mergers Commission or the
Commission of the European Community under English or EC competition
legislation where such undertaking, order, investigation or request
for information is likely to cause a material loss or liability to the
Baltic Group. 17. Insurances
A summary of the insurance policies in respect of which any member of
the Baltic Group has an interest have been disclosed in writing to the
Purchasers and, so far as the Sellers are aware, all such policies are
in full force and effect and are not void or voidable, and no claims
are outstanding.
18. Employment
18.1 A list of the names, jobs and full details of the terms of employment
(including the emoluments) of each Employee who is entitled to
emoluments at a rate, or (in the case of fluctuating amounts) an
average annual rate over the last three financial years, in excess of
(pound)30,000 per annum (or its equivalent in local currency at
exchange rates prevailing at the date of this agreement), and of every
director who is also an employee (together "Senior Employees") and the
date of commencement of employment of that employee, are set out in the
Disclosure Letter.
18.2 Details of the terms of all material consultancy agreements between
each member of the Baltic Group and any person (whether or not an
Employee ) are contained in the Disclosure Letter.
18.3 Material details of any benefit received by any Senior Employee
otherwise than in cash, and of any benefit received by any such
employee in cash which is related in whole or in part to sales,
profits, turnover or performance, or which is otherwise variable (other
than normal overtime), are set out in the Disclosure Letter.
18.4 Any contract of employment with any Employee to which any member of the
Baltic Group is a party can be terminated by the employing company
without damages or compensation (other than that payable by statute or
other similar payment required by the equivalent provisions of the laws
of any other relevant jurisdiction) by giving at any time not more than
6 months notice or such longer period as may be required by law.
18.5 No Senior Employee of any member of the Baltic Group has given notice
terminating his contract of employment or is under notice of dismissal
and no amount is due to or in respect of any such Senior Employee is in
arrears and unpaid other than his salary for the month current at the
date of this agreement.
18.6 Since the 1998 Accounts Date no change has been made in the emoluments
or other terms of employment of any Senior Employee of any member of
the Baltic Group except for increases in emoluments made in accordance
with normal industry practice, and no such change, and except as
aforesaid no negotiation or request for such a change, is due or
expected within six months from the date of this agreement.
18.7 There is no dispute between any member of the Baltic Group and any
trade union or other organisation formed for a similar purpose
existing, or (so far as the Sellers are aware) pending or threatened in
writing to any member of the Baltic Group and so far as the Sellers are
aware there is no fact or circumstance is likely to give rise to such a
dispute. There is no collective bargaining agreement or union
membership agreement (whether binding or not) to which any member of
the Baltic Group is a party.
18.8 The Disclosure letter contains material details of any bonus,
commission, and incentive scheme and any share incentive, share option,
profit sharing, or any other similar scheme (including details of any
trusts which hold shares in Blue Circle PLC for the benefit of
Employees) and any redundancy or severance scheme (or arrangement
whether or not in writing) in existence for any of the Employees and no
Employee will become entitled to any benefit or payment as a
consequence of this Agreement.
18.9 All persons working in the business of the Baltic Group are engaged
under a contract for service with a member of the Baltic Group and all
such persons who are also active members of the Sellers' Scheme (as
defined in Part A of Schedule 10 of this Agreement) (including life
assurance only members) have an employment contract with a member of
the UK Group.
19. The Environment
19.1 In this paragraph 19:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
"Blue Circle Group" means any direct or indirect subsidiary of the Guarantor;
"Environment" means all or any part of the air (including, without
limitation, the air within buildings and the air within
other natural or man-made structures above or below ground),
water and land;
"Environmental Agreement" means any written warranty, covenant, guarantee, assurance,
undertaking or indemnity or other form of contractual
protection under which any member of the Baltic Group has
assumed duties or obligations to a third party in respect of
Environmental Matters as at Completion in relation to
Relevant Properties or Former Properties;
"Environmental Laws" means all or any applicable international, European,
national or local, civil or criminal law, common law,
statute, statutory instrument, regulation, directive,
statutory guidance and regulatory code of practice, order,
decree, injunction or judgment which relate to Environmental
Matters and which are in force and binding on the relevant
member of the Baltic Group as at Completion or which were in
force or enacted at an earlier date, are no longer in force
but under which any member of the Baltic Group still has
obligations and liabilities and, for the purposes of
Warranties 19.6, 19.7 and 19.11 only, the New Contaminated
Land Powers;
"Environmental Matters" means: (i) pollution or contamination of the
Environment; or
(ii) the release, spillage, deposit, escape, discharge,
leak, emission or presence of Hazardous Material or
Waste; or
(iii) the creation of noise, vibration,
radiation, odour, dust, common law or
statutory nuisance;
(iv) other matters relating to the
protection of the Environment arising
out of the manufacturing,
processing, treatment, keeping,
handling, use (including as a
building material), possession, supply,
receipt, sale, purchase, import,
export or transportation of
Hazardous Material or Waste; or
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
(v) the exposure of any worker to Hazardous Material;
"Environmental Permits" means any permit,
licence, consent or
authorisation required by
Environmental Laws as at the
date of this agreement in
relation to the operation of
the business of any member of
the Baltic Group or the use
of any of the Relevant
Properties;
"Former Properties" means any
Properties previously owned,
leased or occupied by any
member of the Baltic Group at
any time since such member of
the Baltic Group or such
Property, as the case may be,
was owned directly or
indirectly by a member of the
Blue Circle Group prior to
the Completion Date;
"Hazardous Material" means anything
which alone or in combination
with other things is capable
of causing harm to man or to
the Environment or any other
organism supported by the
Environment;
"New Contaminated Land Powers" means the new powers enacted by section 57 and section 162
of Schedule 22 of the Environment Act (but not yet brought
into force), including the first set of guidance and
regulations under those powers, but excluding any amendments
to sections 57 or 162 (as enacted) or to such regulations or
guidance (as they exist in draft as at the Completion Date);
and
"Waste" means any waste including
anything which is abandoned,
unwanted or surplus
irrespective of whether it is
capable of being recovered or
recycled or has any value.
</TABLE>
<PAGE>
19.2 All Environmental Permits are in force, are being complied with and have
been complied with in all material respects.
19.3 Complete and accurate copies of all material Environmental Permits have
been disclosed to the Purchaser.
19.4 No member of the Baltic Group has received any written notification from
the relevant regulatory authority that any Environmental Permit it holds will or
is likely to be revoked, suspended or not renewed.
19.5 In relation to the Relevant Properties and the Former Properties, each
member of the Baltic Group (and each of its officers, employees and agents in
the course of its business) complies and has complied with all applicable
Environmental Laws and Environmental Agreements and has not received any written
notification under any Environmental Laws or Environmental Agreements requiring
it to take or omit to take any action (except for any such notification which
has been fully complied with).
19.6 No works or other upgrading are planned or being carried out or, so far as
the Sellers are aware, will in the next three years be necessary at any Relevant
Property in relation to Environmental Matters by any member of the Baltic Group
to secure compliance with any Environmental Laws or to maintain or obtain any
Environmental Permits.
19.7 There is no pollution or contamination of soil or groundwater at any of the
Relevant Properties or Former Properties in circumstances which are likely to
give rise to any material liability of any member of the Baltic Group under
Environmental Laws.
19.8 In relation to the Relevant Properties and the Former Properties, no member
of the Baltic Group nor a person for whose acts or defaults any member of the
Baltic Group may be vicariously liable is involved, or has during the two years
ending on the date of this agreement been involved, in a civil, criminal,
arbitration, or administrative or other proceeding in relation to Environmental
Matters. So far as the Sellers are aware, no such civil, criminal, arbitration,
administrative or other proceeding is pending or threatened by or against any
member of the Baltic Group or any person for whose acts of defaults any member
of the Baltic Group may be vicariously liable.
19.9 No member of the Baltic Group has received any written claim or notice from
any relevant authority under Environmental Laws that such member of the Baltic
Group has any material liability under Environmental Laws in respect of the
operation of its business or the condition of the Relevant Properties or, so far
as the Sellers are aware Former Properties, at or prior to the date of this
agreement or that any additional Environmental Permits are required in respect
of the operation of the business as at the date of this agreement.
19.10 Copies of all material environmental audits, reports or assessments in
relation to the operation of the business or the condition of the Relevant
Properties which are in the possession of any member of the Baltic Group have
been provided to the Purchaser.
19.11 There have not been and there are not now any releases or emissions or, so
far as the Sellers are aware, imminent threats of any releases or emissions into
the Environment of any Hazardous Material by any member of the Baltic Group from
or at any of the Relevant Properties which have or are likely to have given rise
to any material liability under Environmental Laws and, no member of the Baltic
Group has caused or knowingly permitted any such release or emission from or at
any of the Former Properties which have or are likely to have given rise to any
material liability under Environmental Laws.
19.12 Copies of all Environmental Agreements (or relevant extracts from such
Environmental Agreements) which are in the possession of any member of the
Baltic Group have been disclosed to the Purchaser and, so far as the Sellers are
aware, no fact or circumstance exists which might give rise to any liability
under any such Environmental Agreements.
20. The Accounts and Tax
20.1 No member of the Baltic Group has any liability in respect of Taxation
(whether actual or contingent) that is not disclosed or provided for in the
Management Accounts and, in particular, has no outstanding liability for:-
(A) Taxation in any part of the world assessable or payable by reference to
profits, gains, income or distributions earned, received or paid or arising
or deemed to arise on or at any time prior to the 1998 Accounts Date or in
respect of any period starting before the 1998 Accounts Date; or
(B) for purchase, value added, sales or other similar tax in any part of
the world referable to transactions effected on or before the 1998 Accounts
Date that is not provided for in the Management Accounts.
20.1 The amount of the provision for deferred Taxation in respect of each member
of the UK Group contained in the Management Accounts was, at the 1998 Accounts
Date adequate and in accordance with accountancy practices generally accepted in
the United Kingdom and commonly adopted by companies carrying on businesses
similar to those carried on by that member of the UK Group.
21. Tax Events Since the 1998 Accounts Date
Since the 1998 Accounts Date:
(A) no member of the Baltic Group has declared, made or paid any
distribution within the meaning of ICTA 1988;
(B) there has been no disposal of any asset (including trading stock)
or supply of any service or business facility of any kind (including a
loan of money or the letting, hiring or licensing of any property
whether tangible or intangible) in circumstances where the
consideration actually received or receivable for such disposal or
supply was materially less than the consideration which could be
deemed to have been received for tax purposes;
(C) no event has occurred which will give rise to a tax liability on
any member of the Baltic Group calculated by reference to deemed (as
opposed to actual) income, profits or gains or which will result in
any member of the Baltic Group becoming liable to pay or bear a tax
liability directly or primarily chargeable against or attributable to
another person, firm or company (other than any other member of the
Baltic Group);
(D) no disposal has taken place or other event occurred which will or
may have the effect of crystallising a liability to Taxation which
should have been included in the provision for deferred Taxation
contained in the Management Accounts if such disposal or other event
had been planned or predicted at the 1998 Accounts Date;
(E) no member of the Baltic Group has made any material payment or
incurred any material obligation to make a payment other than in the
ordinary course of business which will not be deductible in computing
trading profits for the purposes of corporation tax, or be deductible
as a management expense of an investment company; and
(F) no member of the Baltic Group has paid or become liable to pay any
interest or penalty in connection with any tax, has otherwise paid any
tax after its due date for payment or owes any tax the due date for
payment of which has passed or will arise in the 30 days after the
date of this agreement.
22. Tax Returns, Disputes, Records and Claims, etc.
22.1 So far as the Sellers are aware each member of the Baltic Group has made or
caused to be made all proper returns required to be made, and has supplied or
caused to be supplied all material information required to be supplied, to any
revenue authority within the last six years, including (but without limitation)
the Inland Revenue and the Customs and Excise.
22.2 So far as the Sellers are aware, there is no dispute or disagreement
outstanding nor is any contemplated at the date of this agreement with any
revenue authority regarding liability or potential liability to any tax or duty
(including in each case penalties or interest) recoverable from any member of
the Baltic Group or regarding the availability of any relief from tax or duty to
any member of the Baltic Group and there are no circumstances which make it
likely that any such dispute or disagreement will commence.
22.3 One or more other members of the Baltic Group has sufficient records
relating to past events, including any elections made, to calculate the tax
liability or relief which would arise on any disposal or on the realisation of
any asset owned at the 1998 Accounts Date by any member of the Baltic Group or
acquired by any such member since that date but before Completion.
22.4 Each member of the Baltic Group has duly submitted all claims, elections
and disclaimers which have been assumed to have been made for the purposes of
the Management Accounts.
22.5 The amount of tax chargeable on any member of the Baltic Group during any
accounting period ending on or within six years before the 1998 Accounts Date
has not, to any material extent, depended on any concession, agreement or other
formal or informal arrangement with any revenue authority, including (without
limitation) the Inland Revenue or Customs & Excise.
22.6 No member of the Baltic Group has received any notice from any revenue
authority, including the Inland Revenue, which required or will require such
member to withhold tax from any payment made since the 1998 Accounts Date or
which will or may be made after the date of this agreement.
27. Value Added Tax
27.1 Each member of the UK Group has, throughout the three years ending on 2nd
February, 1999 (the "Severance Date"), been treated for the purposes of section
43 VATA 1994 as a member of a group of companies ("the VAT Group") of which the
representative member is Blue Circle Industries PLC ("the Representative
Member").
27.2 Each member of the UK Group ceased to be a member of the VAT Group on the
Severance Date and has, since that date, been independently registered for the
purposes of VATA 1994 and has, in all material respects, made, given, obtained
and kept up-to-date returns, records, invoices and other documents required for
the purposes thereof and no member of the UK Group is in arrears with any
material payments or returns due or has been required by the Commissioners of
Customs and Excise to give security under paragraph 4 of Schedule 11 VATA 1994.
27.3 The Representative Member has, in all material respects, made, given,
obtained and kept up-to-date returns, records, invoices and other documents
required for the purposes of VATA 1994 and is not in arrears with any material
payments or returns due and has not been required by the Commissioners of
Customs and Excise to give security under paragraph 4 of Schedule 11 VATA 1994.
27.4 So far as the Sellers are aware the Representative Member has not, since
the date 12 months before the 1998 Accounts Date, been in material default in
respect of any prescribed accounting period as mentioned in section 59 or
section 59A VATA 1994.
27.5 Within the last three years, no member of the UK Group has been registered
for the purposes of VATA 1994 otherwise than as part of the VAT Group referred
to in paragraph 34.1 above or, since the Severance Date, as an independently
registered company and no such member has, within that three-year period, been a
member of any other group for the purposes of VATA 1994.
27.6 Details of any claim made by a member of the UK Group for bad debt relief
under section 36 VATA 1994 within the last three years have been disclosed in
writing to the Purchaser.
27.8 No member of the UK Group has made an election to waive exemption in
relation to any land in accordance with paragraph 2 of Schedule 10 VATA 1994.
27.9 The Disclosure Letter contains details of any assets of each member of the
UK Group to which the provisions of Part XV Value Added Tax Regulations 1995
(the Capital Goods Scheme) apply and in particular:-
(A) the identity (including, in the case of leasehold property, the term of
years), date of acquisition and cost of the asset; and
(B) the proportion of input tax for which credit has been claimed (either
provisionally or finally in a tax year and stating which).
27.10 No agreement or arrangements have been made or are in place under which
any member of the UK Group is or could become liable (except as provided for in
the Management Accounts) to make any payment to the Representative Member (or
any other past or present member of the VAT Group) in respect of some or all of
the Representative Member's liability to account to H.M. Customs and Excise for
VAT.
28. Stamp Duty
All documents which are required to be stamped, which are in the possession of
any member of the Baltic Group and by virtue of which any member of the Baltic
Group has any right, have been duly stamped.
29. Residence
The country which is given in Schedule 6 (Basic Information about the Companies)
and in Schedule 7 (Basic Information about the Subsidiaries) as the tax
residence of any member of the Baltic Group is the only country whose tax
authorities seek to charge tax on the world-wide profits or gains of that member
of the Baltic Group.
30. Miscellaneous Tax
31.1 Except in relation to the Italian Companies, or on a disposal of an asset
by any member of the Baltic Group for a consideration equal to the value
attributed to the asset in the Management Accounts, no liability to Taxation
will arise or any liability which would arise would not exceed the amount taken
into account in respect of that asset in computing the maximum liability to
deferred Taxation as stated in the Management Accounts.
31.2 The Disclosure Letter contains details of each claim under Section 152 or
153 TCGA 1992 made before the date of this agreement to which Section 154 TCGA
1992 applies and which affects any asset owned by any member of the Baltic Group
on or after the 1998 Accounts Date (except where the held-over gain is treated
as having accrued prior to the 1998 Accounts Date).
31.3 No member of the UK Group will incur a liability to tax under Section 179
TCGA 1992 as a result of the parties hereto entering into this agreement.
31.4 The Italian Companies and the German Company will not incur any liability
to taxation as a result of the parties hereto entering into this agreement.
31.5 No member of the Baltic Group has any obligation to make payments to any UK
company within the Retained Group in respect of any surrenders of group relief,
advance corporation tax or tax refund and no UK company has any obligation to
make any such surrender to any member of the Retained Group (save as provided in
the Tax Covenant).
31.6 No member of the UK Group has without the prior consent of H.M. Treasury
caused, permitted or entered into a transaction specified in Section 765 ICTA
1988.
31.7 No liability to tax will arise on the repayment of any debt owed by any
member of the Baltic Group at the value at which such debt is recorded or
reflected in the Management Accounts.
31.8 Since 6 April 1965, no member of the UK Group has made a repayment of share
capital to which Section 210 ICTA 1988 applies or issued share capital as
paid-up other than by a receipt of new consideration within the meaning of Part
VI ICTA 1988.
31.9 So far as the Sellers are aware, no Seller has nor has any member of the
Baltic Group been subject to tax in the United States.
<PAGE>
Schedule 3
(Limitations on the Sellers' Liability under the Warranties and Undertakings)
Referred to in clause 7 (Purchaser's Remedies and Sellers' Limitations on
Liability)
1. Agreements to which this Schedule is Applicable
The parties intend that the provisions in this schedule apply both to
this agreement and, where expressly stated in this schedule, to the Tax
Covenant (in addition to the limitations (if any) set out in that
document). Accordingly, for the purposes of this schedule,
"Undertakings" shall mean any undertaking given by or on behalf of the
Sellers in or pursuant to this agreement but unless expressly stated in
this Schedule shall not include any undertaking given in accordance
with paragraph 8 of Part A of Schedule 10 (Penison) or any other
undertaking by the Covenantors in the Tax Covenant.
2. Warranties and Undertakings
Notwithstanding anything in this agreement to the contrary, the
provisions of this schedule shall operate to limit the liability of the
Sellers and where relevant the Covenantors both in respect of any claim
by the Purchasers for any breach of or inaccuracy in the Warranties or
in respect of the Undertakings and where expressly stated in this
Schedule the provisions of the Tax Covenant.
For the avoidance of doubt, "Damages" includes any payment under any
Undertaking including where expressly stated in this Schedule the
provisions of the Tax Covenant.
3. Limitations on Liability under Warranties and Undertakings
3.1 Limitation on Quantum
(A) Subject to sub-paragraph 3.1 (B) the Purchasers shall not be
entitled in any event to damages or other amount in respect of
any claim or claims:-
(i) under any of the Warranties or Undertakings (but
excluding claims under the Tax Covenant) unless and
until the aggregate amount of all such substantiated
claims exceeds (pound)10,000,000 (and, for the
avoidance of doubt, once this limit has been reached,
the Purchasers shall be entitled to the whole amount
of the substantiated claims and not merely the
excess); and
(ii) under the Tax Covenant unless and until the aggregate
amount of all such substantiated claims exceeds
(pound)150,000 (and, for the avoidance of doubt, once
this limit has been reached, the Purchasers shall be
entitled to the whole amount of the claims and not
merely the excess).
(B) For the purposes of paragraph 3.1(A)(i) only "substantiated"
means a claim for which the Sellers may be liable which is
admitted or proved in a court of competent jurisdiction.
(C) The total aggregate liability of the Sellers under or pursuant
to this agreement (whether for breach of the Warranties or
under the Undertakings or otherwise but excluding claims under
the Tax Covenant) shall not in any event exceed
(pound)126,500,000.
(D) The total aggregate liability of the Sellers under or pursuant
to this agreement (whether for breach of the Warranties or
under the Undertakings or otherwise including claims under the
Tax Covenant) shall not in any event exceed
(pound)253,000,000.
(E) For the purpose of sub-paragraph 3.1(A), where a claim relates
to more than one event, circumstance, act or omission which
event, circumstance, act or omission would separately
constitute a breach of or give rise to a claim for breach of
any of the Warranties or under the Undertakings, such claim
shall be treated as a separate claim in respect of each such
event, circumstance, act or omission.
3.2 Time Limits for Bringing Claim
No claim shall be brought against the Sellers in respect of any breach
of the Warranties or under any of the Undertakings or the Tax Covenant
unless the Purchasers shall have given to the Sellers and/or the
Covenantors written notice of such claim specifying (in reasonable
detail) the matter which gives rise to the breach or claim, the nature
of the breach or claim and the amount claimed in respect thereof
(detailing the Purchasers' calculation of the loss thereby alleged to
have been suffered by it):-
(A) on or before the expiry of a period of seven years and one month from
the 1998 Accounts Date in respect of claims relating to taxation; or
(B) on or before the expiry of a period of 10 years from the 1998 Accounts
Date in respect of claims relating to Italian Social Security payments
; or
(C) on or before the date falling 26 months after the date of Completion
in respect of any other matters
PROVIDED that the liability of the Sellers and/or the Covenantors under
this sub-paragraph shall absolutely determine (if such claim has not
been previously satisfied, settled or withdrawn) if legal proceedings
in respect of such claim shall not have been commenced within six
months of the service of such notice and for this purpose proceedings
shall not be deemed to have been commenced unless they shall have been
properly issued and validly served upon any of the Sellers and/or the
Covenantors.
3.3 Conduct of Litigation
(A) Upon any Purchaser becoming aware of any claim, action or
demand against it or matter likely to give rise to any of
these in respect of the Warranties and Undertakings, the
Purchasers shall and shall procure that the appropriate member
of the Baltic Group shall:-
(i) as soon as practicable notify any of the Sellers by
written notice after it appears to any Purchaser that such
Seller may become liable under the Warranties or
Undertakings or any assessment or claim of a third party
received by or coming to the notice of any Purchaser may
result in a claim under the Warranties or Undertakings;
(ii) subject to the Sellers indemnifying the relevant
Purchaser to its reasonable satisfaction against any
liability, costs, damages or expenses (including reasonable
legal fees and out-of-pocket expenses) which may be incurred
thereby take such action and give such information and
access upon reasonable notice and during normal working
hours to personnel, premises, chattels, documents and
records to the Sellers and their professional advisers as
the Sellers may reasonably request and the relevant member
of the Baltic Group to take such action and give such
information and assistance in order to avoid, dispute,
resist, mitigate, settle, compromise, defend or appeal any
claim in respect thereof or adjudication with respect
thereto as the Sellers may reasonably request;
(iii) at the request of the Sellers, allow the Sellers to
take the sole conduct of such actions as the Sellers may
deem appropriate in connection with any such assessment or
claim in the name of the Purchasers or the appropriate
member of the Baltic Group and in that connection the
Purchasers shall give or cause to be given to the Sellers
all such assistance as the Sellers may reasonably require in
avoiding, disputing, resisting, settling, compromising,
defending or appealing any such claim and shall at the
Sellers' cost instruct such solicitors or other professional
advisers as the Sellers may nominate to act on behalf of the
Purchasers or the appropriate member of the Baltic Group, as
appropriate, but to act in accordance with the Sellers' sole
instructions Provided that the Sellers shall keep the
Purchasers fully and promptly informed of the details of the
action;
(iv) make no admission of liability, agreement, settlement
or compromise with any third party in relation to any such
claim or adjudication without the prior written consent of
the Sellers (not to be unreasonably withheld or delayed);
and
(v) take all reasonable action to mitigate any loss suffered
by it or any member of the Baltic Group in respect of which
a claim could be made under the Warranties or the
Undertakings.
(B) In any event, the Sellers shall be entitled at any stage and at
their sole discretion to settle any such third party assessment or
claim. The Sellers shall notify the Purchasers of any decision so to
settle such assessment or claim.
3.4 No Liability if Loss is Otherwise Compensated For
(A) Purchasers can only claim once
(i) The Purchasers and those deriving title from the
Purchasers on or after Completion shall not be
entitled to recover damages or otherwise obtain
reimbursement or restitution more than once between
them in respect of any individual breach of the
Warranties or claim under the Undertakings or the Tax
Covenant.
(ii) No liability shall attach to the Sellers by reason of
any breach of the Warranties if the same loss
occasioned to the Purchasers by reason of such breach
has been recovered under the Undertakings or the Tax
Covenant and no liability shall attach to the Sellers
under the Undertakings if the same loss has been
recovered by a claim under the Warranties or the Tax
Covenant given by them.
(iii) The Sellers shall not be liable for breach of any of
the Warranties nor under any of the Undertakings to
the extent that the subject of the claim has been or
is made good or is otherwise compensated for without
cost to the Purchasers or any member of the Baltic
Group.
(B) Taxation
In calculating the liability of the Sellers for any breach of
the Warranties or any of the Undertakings there shall be taken
into account the amount by which any taxation for which any
member of the Baltic Group is now, or in the future,
accountable or liable to be assessed is reduced or
extinguished as a result of the matter giving rise to such
liability.
(C) Insurances
If, in respect of any matter which would give rise to a breach
of the Warranties or a claim under the Undertakings, any
member of the Baltic Group is entitled (or would have been so
entitled had the Purchasers maintained in force or but for any
change in the terms of the policies of insurance maintained by
or on behalf of any member of the Baltic Group immediately
prior to Completion or policies providing equivalent cover
thereto, provided that such insurance is available in the
market at a cost which is not materially greater than its cost
at the date of this agreement) to claim under any policy of
insurance, then any such insurance claim (or any claim which
could have been made had such policies or their equivalents
been maintained as aforesaid) shall then reduce by the amount
recovered or extinguish any such claims for breach of the
Warranties or under the Undertakings.
(D) Recovery from Third Parties
(i) Where any Purchaser and/or any member of the Baltic
Group is at any time entitled to recover from some other
person any sum in respect of any matter giving rise to a
claim under the Warranties and/or the Undertakings or under
any of the other provisions of this Agreement (whether
before or after any amount has been paid by the Sellers to
the Purchasers in respect of such claim), subject to the
Sellers indemnifying the Purchasers or, as the case may be,
the relevant member of the Baltic Group, to its reasonable
satisfaction against any liability, costs, damages or
expenses (including reasonable legal fees and out-of-pocket
expenses), the Purchaser shall, and shall procure that the
relevant member of the Baltic Group shall, undertake all
reasonable steps to enforce such recovery and if any
Purchaser or the relevant member of the Baltic Group
recovers any amount from such other person, the amount of
the claim against the Sellers shall be reduced by the amount
recovered or, as the case may be, the Purchaser shall
forthwith repay to the Sellers so much of the amount paid by
the Sellers to the Purchasers or the relevant member of the
Baltic Group as does not exceed the sum recovered from such
other person.
(ii) If any amount is repaid to the Sellers by any Purchaser
or the relevant member of the Baltic Group pursuant to
sub-paragraph (D)(i) above, an amount equal to the amount so
repaid shall be deemed never to have been paid by the
Sellers to the Purchasers for the purposes of paragraph 3.1.
3.5 Acts of the Purchasers
(A) No claim shall lie against the Sellers under the Warranties or
Undertakings to the extent that such claim is attributable
to:-
(i) any voluntary act, omission, transaction or arrangement
carried out at the request of or with the consent of any
Purchaser before Completion;
(ii) any voluntary act, omission, transaction or arrangement
carried out by any Purchaser or on its behalf or by persons
deriving title from any Purchaser on or after Completion
except for acts, omissions, transactions or arrangements
done by any Purchaser or on their behalf or by persons
deriving title from any Purchaser in the ordinary course of
carrying on the business of the Baltic Group as such
business was carried on as at Completion; or
(iii) any admission of liability made after the date hereof
by any Purchaser or on their behalf or by persons
deriving title from any Purchaser on or after
Completion.
3.6 Allowance, Provision or Reserve in the Management Accounts
No matter shall be the subject of a claim for breach of any of the
Warranties or under the Undertakings to the extent that allowance,
provision or reserve in respect of such matter shall have been made in
the Management Accounts or has been included in calculating creditors
or deducted in calculating debtors in the Management Accounts and (in
the case of creditors or debtors) is identified in the records of the
relevant member of the Baltic Group and such allowance, provision or
reserve has not otherwise been utilised in respect of matters to which
it related at the time it was made.
3.7 Future Legislation
Save as provided for in the definition of Environmental Laws, no
liability shall arise in respect of any breach of any of the Warranties
or under the Undertakings if and to the extent that liability for such
breach occurs or is increased wholly or partly as a result of any
legislation not in force at the date of this agreement.
3.8 Taxation
(A) The Sellers shall not be liable in any event in respect of any
breach of the Warranties or claim under the Undertakings if
such breach or claim would not have occurred or arisen but
for:-
(i) any change in the basis of, method of calculation of,
or increase in the rate or rates of taxation or
changes in the practice of the Inland Revenue made or
coming into effect after the date hereof but with
retrospective effect or the withdrawal of any
extra-statutory concession currently granted by any
Revenue Authority; or
(ii) any assessment of taxation arising as a result of a
transaction in the ordinary course of business of the
Baltic Group (which expression should include
disposals of any capital assets in the ordinary course
of business) since the 1998 Accounts Date.
(B) The Sellers shall not be liable for any claim to the extent
that it arises wholly or partly out of or is increased by
virtue of a withdrawal or amendment of a claim regarding
capital allowances and disregarding non-trading deficits
available to any member of the Baltic Group after Completion
of any capital allowances available to it.
(C) The Sellers shall not be liable in respect of any tax claims if and to the
extent to which:-
(i) such tax claim is a claim in respect of corporation
tax upon actual (but not deemed) income, profits or
gains of any member of the Baltic Group since the 1998
Accounts Date or in respect of any tax which would not
have arisen but for transactions (not including
distribution) entered into by any member of the Baltic
Group since the 1998 Accounts Date in the ordinary
course of its business or in the ordinary course of
acquiring or disposing of its capital assets; or
(ii) any pre-completion relief is available to relieve or
otherwise mitigate prior liability of any member of
the Baltic Group for tax which is the subject matter
for such tax claim; or
(iii) such tax claim arises or is increased by virtue of the
failure or omission by any member of the Baltic Group
to make any claim, election, surrender or disclaimer
or give any notice or consent to any other thing after
Completion, the making, giving or doing of which was
taken into account in computing the provision for tax
or deferred tax in the Management Accounts; or
(iv) such tax claim arises or is increased by virtue of a
withdrawal or amendment by any member of the Baltic
Group after Completion of a claim relating to capital
or other allowances available to and claimed by any
member of the Baltic Group in respect of any period
ending on or before the 1998 Accounts Date; or
(v) such tax claim arises or is increased by virtue of any
claim, disclaimer or election made or notice of
consent given by any member of the Baltic Group after
Completion.
3.9 Purchasers' Knowledge
The Purchasers confirm that they are not aware of any matter which
would entitle them to bring a claim under the Warranties or
Undertakings at the date of this agreement and for this purpose the
Purchasers shall be deemed to be aware only of the information within
the actual knowledge of Richard Kalaher, George Kerckhove, Robert
Wellbrock, Kevin Tubbs, Peter Rogers, Adrian Deshotel and Thomas
Battaglia.
3.10 No Liability for Contingent or Non-Quantifiable Claims
If any breach of the Warranties or claim under the Undertakings arises
by reason of some liability of any member of the Baltic Group which, at
the time such breach or claim is notified to the Sellers, is contingent
only or otherwise not capable of being quantified, then the Sellers
shall not be under any obligation to make any payment in respect of
such breach or claim unless and until such liability ceases to be
contingent or otherwise becomes capable of being quantified, as the
case may be.
3.11 Information Memorandum and Independent Advice of the Purchasers
Each Purchaser acknowledges and agrees with the Sellers (for itself and
for the benefit of its officers, employees and advisers and as trustees
for such officers, employees and advisers) that:-
(A) the invitation to it by the Sellers to consider the purchase of
the Shares and the provision of information relating to the Company,
its undertaking, financial position or prospects (including, in
particular but without limitation, the information contained in the
Information Memorandum) was made by the Sellers and accepted by the
Purchasers, and this agreement is entered into, on the basis and
condition that neither the Sellers nor any of their subsidiaries nor
any of the Sellers or subsidiaries' officers, employees and advisers
has made or makes any representation or warranty as to the accuracy or
completeness of such information, or accepts any duty of care in
relation to the Purchasers in respect of the provision of such
information and that none of such persons shall be under any liability
to the Purchasers in the event that, for whatever reason, such
information (including, in particular but without limitation, the
information contained in the Information Memorandum referred to above)
is or becomes inaccurate, incomplete or misleading in any particular;
and
(B) the Purchasers have had independent legal and financial advice
relating to the purchase of the Shares and to the terms of this
agreement and the documents to be executed pursuant to it, including
the terms of this paragraph.
The provisions of this paragraph 3.11 apply to limit the liability of
the Covenantors under the Tax Covenant.
3.12 Payment of Claim to be Reduction in Purchase Price
Any payment made by the Sellers in respect of any claim under the
Warranties or under the Undertakings or under the Tax Covenant shall be
deemed to be a reduction in the total consideration payable under
clause 3 (Consideration) of this agreement in respect of the sale of
the shares of the company in respect of which the liability to pay
arose or, where the liability to pay arose in respect of a subsidiary,
it shall be deemed to be a reduction in the total consideration payable
for the shares of the company of which that subsidiary is a subsidiary.
3.13 Environmental Matters
(A) Each Purchaser agrees that it will only carry out an
environmental assessment of a Relevant Property required (in
each case in its reasonable judgement) in any of the following
situations:
(i) a Phase I or Phase II environmental assessment conducted
pursuant to the American Standard Corporate Policy on Due
Diligence (a copy of which, together with ASTM Designation
E1527 - 97 Standard Practice for Environmental Assessments:
Phase I Environmental Site Assessment Process, ASTM
Designation E1903 - 97 Standard Practice for Environmental
Assessments: Phase II Environmental Site Assessment Process
and ASTM Designation E1528 - 96 Standard Practice for
Environmental Site Assessments: Transaction Screen Process
(each as amended from time to time), referred to therein,
are attached as Annex I hereto), as such Policy or Standard
Practice may be implemented in order to conform to the laws
(from time to time in force), governmental requirements or
standard practices (where such standard practices are more
comprehensive or stringent) of the jurisdiction in which the
Relevant Property is located; or
(ii) an environmental assessment required under any
Environmental Laws (as they may be amended from time to
time), Environmental Agreements (as they may be entered into
or varied from time to time) or Environmental Permits (as
they may be obtained or varied from time to time); or
(iii) an environmental assessment which would be carried out
by a reasonably prudent owner, lessee or occupier acting in
accordance with sound environmental practices; or
(iv) an environmental assessment required for the purpose of
any sale, transfer, lease or other disposal of (i) the
Relevant Property or (ii) the member of the Baltic Group
which is the direct or indirect owner thereof; or
(v) an environmental assessment required in connection with
an application for a planning consent or for the purposes of
deciding whether any redevelopment, extension or improvement
of the Relevant Property or any facility thereon could be
made or whether all or any part of the Relevant Property or
any facility thereon could be closed, no longer used or
demolished; or
(vi) an environmental assessment required for the purposes
of deciding whether there could be a change of use or
operations at the Relevant Property or any part of it; or
(vii) an environmental assessment resulting from the
Purchaser's receipt of or reaction to information that
suggests that pollution or contamination is present at, or
has migrated or been released or discharged from, or may be
released, discharged or migrate from, or spread within, the
Relevant Property; or
(viii) an environmental assessment required for any funder,
lender, trustee or agent in connection with any financing or
funding arrangement; or
(ix) an environmental assessment required for the purposes
of obtaining, maintaining or increasing insurance; or
(x) an environmental assessment required in connection with
any actual or pending civil or criminal litigation or
arbitration, administrative or other proceeding.
Each Purchaser shall consult the Guarantor before carrying
out a Phase 2 environmental assessment at a Relevant
Property and shall upon request keep the Guarantor informed
of the results and findings of such assessment.
(B) The Sellers shall have no liability to the Purchasers in
respect of Environmental Matters under the Warranties except
under paragraph 19 (The Environment) of Schedule 2
(Warranties).
(C) For the purposes of the Warranties contained in paragraphs 19.5
and 19.12 of Schedule 2, Clause 6.2 shall not apply to any
Environmental Agreement.
3.14 Intellectual Property Matters
The Sellers shall have no liability to the Purchasers in respect of
Intellectual Property matters under the Warranties except under
paragraph 14 (Intellectual Property) of Schedule 2 (Warranties).
3.15 Information Technology
The Sellers shall have no liability to the Purchasers in respect of
Information Technology under the Warranties except under paragraph 15
(Information Technology) of Schedule 2 (Warranties).
<PAGE>
Schedule 4
(Tax Covenant)
The Tax Covenant shall be in the form of the deed prepared by the Sellers'
Solicitors which has (for the purposes of identification only) already been
signed by the Purchasers' Solicitors.
<PAGE>
<TABLE>
<CAPTION>
Schedule 5
(Ownership of the Shares)
Part A
Name and address of, and numbers of Shares beneficially owned by the relevant member of the Retained Group
<S> <C> <C>
(1) (2) (3)
Registered Number of
Full name address Shares owned
Blue Circle Bathrooms Limited 84 Eccleston Square, 32,019,398 deferred ordinary and
London SW1V 1PX 626,735,898 ordinary shares in Blue
Circle Plumbing Fixtures Limited
Blue Circle Home Products BV Galvanistraat 20, 3861 30,000,000 ordinary shares in
NJ, Nijkerk, Ceramica Dolomite Spa
The Netherlands
Blue Circle Home Products BV Galvanistraat 20, 3861 All the parts in Ceramiche Senesi
NJ, Nijkerk, S.r.l.
The Netherlands
Blue Circle Home Products Beteilligungs GmbH August Brotje Strasse 17, Share in Ceramica Dolomite GmbH
D-26180, Rastede, Sanitarkeramik in the nominal amount
Germany of DM50,000
</TABLE>
<TABLE>
<CAPTION>
Part B
Details of above shares registered in the names of persons other than the
relevant member of the Retained Group.
Each member of the Retained Group is the registered holder of the Shares set
opposite his name above, with the exception of the following Shares which are
held by the registered holders whose names are set opposite them as nominee for
the member of the Retained Group whose name is set opposite them:-
<S> <C> <C>
Number and class
of Shares not
registered in name Name of Name of Sellers who
of beneficial owner nominee holder is beneficial owner
100 ordinary Gordon Francis Franklin Blue Circle Bathrooms Limited
</TABLE>
<PAGE>
Schedule 6
(Basic Information about the Companies)
1. Companies
1.1 Blue Circle Plumbing Fixtures Limited
(A) Registered number : 00091891
(B) Date of incorporation : 31.01.1907
(C) Place of incorporation : United Kingdom
(D) Address of registered office : Armitage Rugeley, Staffordshire, WS15
4BT
(E) Class of company : Private Limited
(F) Authorised share capital :(pound)18,000,000 divided into 32,024,718
deferredordinary shares of 25p each and 999,382,050 ordinary shares of 1p
each
(G) Issued sharecapital: 32,019,398 deferred ordinary shares of 25p each
and 626,735,898 ordinary shares of 1p each (H) Members Number of Full name
Registered address Shares held Blue Circle Bathrooms 84 Eccleston Square,
32,019,398 deferred Limited London SW1V 1PX ordinary Blue Circle Bathrooms
84 Eccleston Square, 626,735,798 ordinary Limited London SW1V 1PX Gordon
Francis Franklin 100 ordinary (I) Directors:
<TABLE>
<CAPTION>
<S> <C> <C>
Full name Usual residential address Nationality
George John Letham 27 Weeping Cross British
Stafford ST17 0DS
England
Michael Richard Schofield 10 Minster Close British
Knowle
Solihull
West Midlands B93 9LZ
Jeremy Christopher Watts Uplands British
Flitton
Bedfordshire MK45 5ED
(J) Secretary:
Full name Usual residential address
Peter Gilbert Carruthers 4 Truro Close
Lichfield
Staffordshire WS13 7SR
(K) Accounting reference date : 31st December
(L) Auditors : Ernst & Young
(M) Tax residence : UK
(N) Business activities : Manufacture and supply of Bathroom equipment
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1.2 Ceramica Dolomite Spa
(A) Registered number : 7165
(B) Date of incorporation : 20.07.1990
(C) Place of incorporation : Italy
(D) Address of registered office : via Cavassco Inferiore 160, 32028, Trichiana,
BL, Italy
(E) Class of company : Societa per azioni
(F) Authorised share capital : IL 30,000,000,000 divided into IL 30,000,000
of IL 1,000 each
(G) Issued share capital : IL30,000,000,000
(H) Members
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Number of
Full name Registered address Shares held
Blue Circle Home Products BV Galvanistraat 20, 30,000,000 ordinary shares
3861 NJ, Nijkerk,
The Netherlands.
(I) Directors:
Full name Usual residential address Nationality
Dr Luigi Arsellini 33100 Udine Via Alessandro Volta 52
Italia.
Mr Gordon F. Franklin The Cottage, British
Hunningham,
Leamington Spa
Warwickshire CV33 9DT
Mr Michael R. Schofield 10 Minster Close, British
Knowle,
Solihull,
W. Midlands B93 9LZ
(J) Accounting reference date : 31st December
(K) Auditors : Ernst & Young
(L) Tax residence : Italy
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1.3 Ceramiche Senesi S.r.l
(A) Company ID : 9073
(B) Date of incorporation : 11th December, 1990
(C) Place of incorporation : Italy
(D) Address of registered office : via Cavassco Inferiore 160, 32028 Trichiana
(Bellino) Italy
(E) Class of company : Societa responsabilita limitata
(F) Authorised share capital : IL 2,000,000,000
(G) Issued share capital : IL 2,000,000,000
(H) Members
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of
Full name Registered address Shares held
Blue Circle Home Products BV Galvanistraat 20, all the parts
3861 NJ, Nijkerk,
The Netherlands.
(I) Directors:
Full name Usual residential address Nationality
Mrs Valeria Fant 32020 Limana. Italy Italian
Mr Pietro Ranon 32028 Trichiania. Italy Italian
Mr Enzo Sacchiero 21014 Lavano Mombello VA. Italy Italian
Mr Michael R. Schofield 10 Minster Close, British
Knowle,
Solihull,
W. Midlands B93 9LZ
(J) Accounting reference date : 31st December
(K) Auditors : Ernst & Young
(L) Tax residence : Italy
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1.4 Ceramica Dolomite GmbH Sanitarkeramik
<S> <C> <C>
(A) Registered number : HRB 105849
(B) Date of incorporation : 22nd April, 1994
(C) Place of incorporation : Germany
(D) Address of registered office : Mulhauser Feld 3, 85664 Hohenlinden, Germany
(E) Class of company : Private Company limited by shares
(F) Authorised share capital : DM 50,000
(G) Issued share capital : DM 50,000
(H) Members
Number of
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Full name Registered address Shares held
Blue Circle Home Products August Brotje Strasse 17, shares in the nominal
Beteiligungs GmbH D-261 80, Rastede, value of DM50,000
Germany.
(I) Directors:
Full name Usual residential address Nationality
Mr Andrew Cooksey August Brotje Strasse 17
Mr Claudio Furmenti 32100 Belluno via Riveabella
Mr Gunnar E Kruger 84405 Dorfen (D) Via Polding 2
(J) Accounting reference date : 31st December
(K) Auditors : Ernst & Young
(L) Tax residence : Germany
</TABLE>
FOURTH AMENDMENT (this "Amendment") dated as
of December 22, 1998 to the Amended and Restated
Credit Agreement dated as of January 31, 1997 (as
amended, the "Credit Agreement"; capitalized terms
used and not otherwise defined herein shall have the
meanings assigned to them in the Credit Agreement, as
amended hereby), among American Standard Companies
Inc. ("Holding"); American Standard Inc. ("ASI"); the
Subsidiaries of ASI listed in Schedule I thereto (the
"Subsidiary Borrowers" and, together with ASI, the
"Borrowers"); the financial institutions party
thereto (the "Lenders"); The Chase Manhattan Bank, as
administrative agent for the Lenders (in such
capacity, the "Administrative Agent"); Citibank,
N.A., as Documentation Agent (the "Documentation
Agent"); and The Bank of Nova Scotia and Nationsbank,
N.A., as Co-Syndication Agents (the "Co-Syndication
Agents" and, together with the Documentation Agent
and the Administrative Agent, the "Agents").
ASI, Holding and the Subsidiary Borrowers have requested that
the Credit Agreement be amended to (a) to permit ASI to issue and sell up to
$500,000,000 aggregate principal amount of its senior unsecured and/or
subordinated unsecured debt securities to be unconditionally guaranteed by
Holding, (b) permit proceeds of Loans to be used to make optional sinking fund
payments in an aggregate principal amount not to exceed $15,000,000 in any
fiscal year in respect of the 9-1/4% Sinking Fund Debentures, (c) modify certain
financial covenants and (d) provide for the introduction of the euro by
participating member states of the European Union. ASI, Holding and the
Subsidiary Borrowers have further requested that the Credit Agreement be amended
to permit the Reorganization (as defined in Article I below). The Lenders and
the Agents have agreed to such amendments upon the terms and subject to the
conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
For purposes of this Fourth Amendment, the following terms shall
have the meanings set forth below:
"Reorganization" shall mean a series of transactions, all of
which shall be completed no later than January 15, 2000, pursuant to
which (a) ASI will effect the following transfers in the following
order: (i) first, to ASINC, all of its trademarks, tradenames, service
marks and other similar intellectual property and related rights, (ii)
following the completion of the transactions described in clause (i),
to ASB, territorial licenses to use all of the foregoing in the United
States, (iii) following the completion of the transactions described in
clause (ii), the capital stock of The Trane Company, Trane Export Inc.,
WABCO Company, Standard Sanitary Manufacturing Company, WABCO Standard
Trane Holdings, Inc. and the foreign subsidiaries listed on Schedule I
hereto to ASII and (iv) following the completion of the transactions
described in clause (iii), the capital stock of ASII to Holding, all
with the result that the corporate structure of Holding and its
subsidiaries will be as set forth in Schedule II hereto and (b) all
Liens on any capital stock existing under the Security Documents and
all Guarantees under the Guarantee Documents will remain in full force
and effect notwithstanding the transfer of the capital stock of any
Guarantor, grantor or pledged entity."
"Restricted Group" shall mean each of ASII and Trane Export
Inc., The Trane Company, WABCO Company, Standard Sanitary Manufacturing
Company, WABCO Standard Trane Holdings, Inc., American Standard
Incorporated and American Standard Trane Brands, Inc.
<PAGE>
"Spin-Off" shall mean the consummation of the transaction
described in clause (a) (iv) of the definition of Reorganization.
ARTICLE II. MISCELLANEOUS AMENDMENTS
SECTION 2.01. Amendment of Article I. The following new
definition is hereby inserted in its proper alphabetical position in Article I
of the Credit Agreement:
"1998 Debt Securities" shall mean senior unsecured and/or
subordinated unsecured debt securities of ASI in an aggregate principal
amount not greater than $500,000,000, not maturing or subject to any
sinking fund or any mandatory redemption, prepayment, repurchase or
defeasance requirement prior to February 1, 2002, and unconditionally
guaranteed by Holding but not by any Subsidiary of ASI.
SECTION 2.02. Amendment of Section 3.04(a). Section 3.04(a) of
the Credit Agreement is hereby amended by the insertion of the following
sentence at the end of such Section:
"Notwithstanding the foregoing, ASI may use the proceeds of
borrowings hereunder in an aggregate amount not to exceed $15,000,000
in any fiscal year to make optional sinking fund payments with respect
to its 9-1/4% Sinking Fund Debentures."
SECTION 2.03. Amendment of Article III. Article III of the
Credit Agreement is hereby amended by adding a new Section 3.21 that reads in
its entirety as follows:
"SECTION 3.21. Year 2000. ASI and its Subsidiaries have
undertaken a good faith effort, and made such inquiries as in their
judgment are prudent, to identify and provide for the correction of and
all reprogramming required to permit the proper functioning, in and
following the year 2000, of (i) each Credit Party's computer systems
and equipment containing embedded microchips (including systems and
equipment supplied by others or with which such Credit Party's systems
interface) with the intent, as of December 22, 1998, of providing that
the testing of all such systems and equipment, as so corrected or
reprogrammed, will be completed by September 30, 1999. Neither ASI nor
any other Credit Party has reason to believe that the cost to any
Credit Party of such correction or reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 computer readiness to
such Credit Party (including, without limitation, correction and
reprogramming errors and the failure of others' (excluding the Lenders)
systems or equipment) will result in a Default or a Materially Adverse
Effect. To the best knowledge of ASI and each other Credit Party,
except for such of the correction and reprogramming referred to in the
preceding sentence as may be necessary, the computer and management
information systems of each Credit Party and its Subsidiaries are and,
with ordinary course upgrading and maintenance, will continue for the
term of this Agreement to be, sufficient to permit such Credit Party to
conduct its business without a Materially Adverse Effect."
SECTION 2.04. Amendment to Section 6.04(d). Section 6.04(d) of
the Credit Agreement is hereby amended to read in its entirety as follows:
<PAGE>
"(d) (i) the 1998 Debt Securities and the guarantee thereof by
Holding; (ii) the New Debt Securities and the guarantee thereof by
Holding; provided that any Net Cash Proceeds thereof in excess of
$150,000,000 are used on or prior to December 31, 1998, and such
remaining $150,000,000 of Net Cash Proceeds are used on or prior to
June 1, 1999, in either case to purchase pursuant to a tender offer or
to redeem the 10-1/2% Senior Subordinated Discount Debentures, the
10-7/8% Senior Notes or ASI's 9-7/8% Senior Subordinated Notes due 2001
and, pending any such redemption, to temporarily prepay Revolving
Credit Loans outstanding under the Credit Agreement and (iii) other
Indebtedness of ASI the Net Cash Proceeds of which are used (x) to
finance the acquisition, redemption or prepayment of Indebtedness or
(y) to refinance any Indebtedness issued to finance the acquisition or
prepayment of the 10-7/8% Senior Notes; so long as (A) if the
Indebtedness so acquired, redeemed or prepaid is outstanding under any
revolving credit or similar commitment other than the Credit Agreement,
such commitment is permanently reduced by an amount equal to the amount
of such acquisition, redemption or prepayment, and (B) any such new
Indebtedness referred to in this clause (iii) is subordinated to the
Obligations to at least the same extent, if any, and is otherwise on
terms (including maturity, interest rate, amortization and prepayment
and redemption requirements, and, in the good faith judgment of ASI,
covenants and events of default) at least as favorable to ASI and the
Lenders as the Indebtedness being acquired, redeemed or prepaid and, in
the case of Indebtedness permitted under clause (iii)(y), such
Indebtedness is issued no later than June 30, 1998;".
SECTION 2.05. Amendment of Section 6.10. Section 6.10 of the
Credit Agreement is hereby amended by amending the table to read in its entirety
as follows:
"Measuring Date Ratio
Last day of March in the year 1997 4.25:1
Last day of December in the year 1997 3.50:1
Last day of June in the year 1998 3.25:1
Last day of December in the year 1998 3.50:1
Last day of March in the year 1999 3.75:1
Last day of September in the year 1999 3.5:1
Last day of December in the year 1999 3.25:1
Last day of December in the year 2000 3.00:1
Last day of December in the year 2001 2.75:1
and last day of each fiscal quarter thereafter"
SECTION 2.06. Amendment of Section 6.11. Section 6.11 of the
Credit Agreement is hereby amended by amending the table to read in its entirety
as follows:
"Measuring Date Ratio
Last day of March in the year 1997 1.75:1
Last day of December in the year 1997 2.00:1
Last day of June in the year 1998 2.25:1
Last day of December in the year 1998 2.25:1
Last day of March in the year 1999 2.10:1
Last day of September in the year 1999 2.20:1
Last day of December in the year 1999 2.50:1
Last day of December in the year 2000 2.75:1
Last day of June in the year 2001 3.25:1
and last day of each fiscal quarter thereafter"
<PAGE>
SECTION 2.07. Amendment of Article X. Article X of the Credit
Agreement is hereby amended by adding a new Section 10.21 that reads in its
entirety as follows:
"SECTION 10.21. European Economic and Monetary Union. (a)
Definitions. In this Section 10.21 and in each other provision of
this Agreement to which reference is made in this Section 10.21
expressly or impliedly, the following terms have the meanings
given to them in this Section 10.21:
"commencement of the third stage of EMU" means the date of
commencement of the third stage of EMU (at the date of this Agreement
expected to be January 1, 1999) or the date on which circumstances
arise which (in the opinion of the Administrative Agent) have
substantially the same effect and result in substantially the same
consequences as commencement of the third stage of EMU as contemplated
by the Treaty on European Union.
"EMU" means economic and monetary union as contemplated in
the Treaty on European Union.
"EMU legislation" means legislative measures of the European
Council for the introduction of, changeover to or operation of a single
or unified European currency (whether known as the euro or otherwise),
being in part the implementation of the third stage of EMU;
"euro" means the single currency of participating member
states of the European Union;
"euro unit" means the currency unit of the euro;
"national currency unit" means the unit of currency (other
than a euro unit) of a participating member state;
"participating member state" means each state so described
in any EMU legislation;
"Target Operating Day" means any day that is not (i) a
Saturday or Sunday, (ii) Christmas Day or New Year's Day or (iii) any
other day on which the Trans European Automated Real-Time Gross
Settlement Express Transfer System ("Target") (or any successor
settlement system) is not operating (as determined by the
Administrative Agent; and
"Treaty on European Union" means the Treaty of Rome of March
25, 1957, as amended by the Single European Act 1986 and the Maastricht
Treaty (which was signed at Maastricht on February 7, 1992, and came
into force on November 1, 1993), as amended from time to time.
(b) Effectiveness of Provisions. The provisions of paragraphs
(c) to (j) below (inclusive) shall be effective at and from the commencement of
the third stage of EMU, provided, that if and to the extent that any such
provision relates to any state (or the currency of such state) that is not a
participating member state on the commencement of the third stage of EMU, such
provision shall become effective in relation to such state (and the currency of
such state) at and from the date on which such state becomes a participating
member state.
<PAGE>
(c) Redenomination and Alternative Currencies. Each obligation
under this Agreement of a party to this Agreement which has been denominated in
the national currency unit of a participating member state shall be
redenominated into the euro unit in accordance with EMU legislation, provided,
that if and to the extent that any EMU legislation provides that following the
commencement of the third stage of EMU an amount denominated either in the euro
or in the national currency unit of a participating member state and payable
within that participating member state by crediting an account of the creditor
can be paid by the debtor either in the euro unit or in that national currency
unit, each party to this Agreement shall be entitled to pay or repay any such
amount either in the euro unit or in such national currency unit.
(d) Loans. Any Loan in the currency of a participating member
state shall be made in the euro unit.
(e) Business Days. (i) With respect to any amount denominated
or to be denominated in the euro or a national currency unit, any reference to a
"Business Day" shall be construed as a reference to a day (other than a Saturday
or Sunday) on which banks are generally open for business in
(A) London, New York City and, in the case of any Loan or
Borrowing, any other financial center in which funding or
payment of such Loan or Borrowing is to occur in accordance
with the terms of this Agreement, and
(B) Frankfurt am Main, Germany (or such principal financial
center or centers in such participating member state or
states as the Administrative Agent may
from time to time nominate for this purpose).
(ii) For purposes of determining any date on which the LIBO
Rate is determined under this Agreement for any Loan denominated in the euro (or
any national currency unit) for any Interest Period therefor and for purposes of
determining the first and last day of any Interest Period, references in this
Agreement to "Business Days" shall be deemed to be references to "Target
Operating Days".
(f) Payments to the Administrative Agent. Sections 2.02 and
2.17 shall be construed so that, in relation to the payment of any amount of
euro units or national currency units, such amount shall be made available to
the Administrative Agent in immediately available, freely transferable, cleared
funds to such account with such bank in Frankfurt am Main, Germany (or such
other principal financial center in such participating member state as the
Administrative Agent may from time to time nominate for this purpose) as the
Administrative Agent shall from time to time nominate for this purpose.
(g) Payments by the Administrative Agent to the Lenders. Any
amount payable by the Administrative Agent to the Lenders under this Agreement
in the currency of a participating member state shall be paid in the euro unit.
(h) Payments by the Administrative Agent Generally. With
respect to the payment of any amount denominated in the euro or in a national
currency unit, the Administrative Agent shall not be liable to any Borrower or
any of the Lenders in any way whatsoever for any delay, or the consequences of
any delay, in the crediting to any account of any amount required by this
Agreement to be paid by the Administrative Agent if the Administrative Agent
shall have taken all relevant steps to achieve, on the date required by this
Agreement, the payment of such amount in immediately available, freely
transferable, cleared funds (in the euro unit or, as the case may be, in a
national currency unit) to the account with the bank in the principal financial
center in the participating member state which any Borrower or, as the case may
be, any Lender shall have specified for such purpose. In this paragraph (h),
"all relevant steps" means all such steps as may be prescribed from time to time
by the regulations or operating procedures of such clearing or settlement system
as the Administrative Agent may from time to time determine for the purpose of
clearing or settling payments of the euro.
<PAGE>
(i) Basis of Accrual. If the basis of accrual of interest or
Fees expressed in this Agreement with respect to the currency of any state that
becomes a participating state shall be inconsistent with any convention or
practice in the London Interbank Market or, as the case may be, the Paris
Interbank Market for the basis of accrual of interest or fees in respect of the
euro, such convention or practice shall replace such expressed basis effective
as of and from the date on which such state becomes a participating member
state; provided, that if any Loan in the currency of such state is outstanding
immediately prior to such date, such replacement shall take effect, with respect
to such Loan, at the end of the then current Interest Period.
(j) Rounding and Other Consequential Changes. Without
prejudice and in addition to any method of conversion or rounding prescribed by
any EMU legislation and without prejudice to the respective liabilities for
indebtedness of any Borrower to the Lenders and the Lenders to any Borrower
under or pursuant to this Agreement:
(i) each reference in this Agreement to a minimum amount (or
an integral multiple thereof) in a national currency unit to be paid to
or by the Administrative Agent shall be replaced by a reference to such
reasonably comparable and convenient amount (or an integral multiple
thereof) in the euro unit as the Administrative Agent may from time to
time specify; and
(ii) except as expressly provided in this Section 10.21, each
provision of this Agreement shall be subject to such reasonable changes
of construction as the Administrative Agent may from time to time
specify to be necessary or appropriate to reflect the introduction of
or changeover to the euro in participating member states.
(k) Increased Costs. Each Borrower shall from time to time, at
the request of the Administrative Agent, pay to the Administrative Agent for the
account of each Lender the amount of any cost or increased cost incurred by, or
of any reduction in any amount payable to or in the effective return on its
capital to, or of interest or other return foregone by, such Lender or any
holding company of such Lender as a result of the introduction of, changeover to
or operation of the euro in any participating member state.
(l) Section 2.02(c). The phrase "the financial center of the
country of the currency of such Loan" in Section 2.02(c) of the Agreement will
be deemed, with respect to any Loan denominated in the euro, to read "the
financial center of any county that has adopted the currency of such Loan."
ARTICLE III. CONSENT AND AMENDMENTS RELATING TO REORGANIZATION
The undersigned Lenders hereby consent to, and agree that
nothing in Section 6.02 shall prohibit, the completion of the Reorganization,
and ASI agrees that the Reorganization, if commenced, will be completed in
accordance with the definition thereof not later than January 15, 2000. At such
time the Spin-Off has been completed, the Credit Agreement shall be amended
without further action on the part of the parties thereto as set forth in the
succeeding paragraphs of this Article III:
(a) Each reference to "ASI" (other than any such reference
referred to in Section 1.03 of the Credit Agreement added pursuant to
paragraph (e) below) will be changed to a reference to "each of ASI and
ASII" in the definitions of:
Cash Available for Principal Payments; Change in Control;
Domestic Obligations; Guarantor; Materially Adverse Effect;
Net Joint Venture Investments; and Working Capital and in
Sections 2.11(d) (third and sixth references); 3.04(b);
3.08(b); 3.08(d) ; 3.09 (first and third references); 3.20
(second reference); 3.21; 4.01; Article V, paragraph A (second
reference only); 5.11(a)(ii); 6.05(c) (first reference),
6.07(a); 6.08(d); 6.09(b); Article VI, paragraph B and 10.01
(and any reference in any of the foregoing sections to "ASI
and its Subsidiaries" will be changed to a reference to "ASI
and ASII and their respective Subsidiaries").
(b) Each reference to "ASI" (other than any such reference
referred to in Section 1.03 of the Credit Agreement added pursuant to
paragraph (e) below) will be changed to a reference to "either of ASI
or ASII" in the definitions of:
<PAGE>
Applicable Rate (first reference); Capital Expenditures;
Designated Subsidiary; Domestic Subsidiary; Excluded
Subsidiary; Foreign Subsidiary; Guarantee; Indebtedness;
Intercompany Indebtedness; Intercompany Merger and Transfer
Conditions, clause (B),(C) and (D); Investment; LDC Holding
Company; Net Cash Proceeds; Non-Material Subsidiary; Pension
Plan; Perfection Certificate; Permitted Encumbrances, clauses
(v) and (vi); Prepayment Event; Real Property; Reporting
Divisions; Restricted Junior Payment and Subsidiary and in
Sections 3.01; 3.04(a)(clause E only); 3.08(e); 3.09 (second
reference); 3.13; 3.19; 3.20 (first reference); 5.01(e);
5.01(f); 5.01(g); 5.01(h); 5.11(a)(i); 5.11(b)(ii) (other than
the first reference); Article VI, paragraph A, second
reference only; 6.01; 6.02(a); 6.03(f), (i), (j), (n), 6.04
(d), (e), (g), (h), (l), (n), (o) through (s), (u);
6.05(b),(c) (second reference), (f), (g), (l), (m); 6.07(c);
6.08(a), (e), (i), (f) and the two sentences following clause
(h); 6.09 lead-in; last sentence of 6.10 (first reference);
6.13; 6.14; 6.15; 6.17; 7.03 (second reference); 7.04 (other
than the second reference which will be deemed to be a
reference to "ASI and ASII "); Article VII, first two
references in final paragraph (i) and 10.10(c) (second and
third references).
(c) the definition of "EEIG" is hereby amended to read as
follows:
"EEIG" shall mean Standard Europe, a European
Economic Interest Grouping initially organized by French and
Italian Subsidiaries of ASI to act as a Borrower hereunder.
(d) the definition of "Index Debt" is hereby amended to read
as follows:
"Index Debt" shall mean the senior unsecured
non-credit enhanced (with any guarantee by Holding not deemed
to be credit enhancement for this purpose) long-term public
indebtedness for borrowed money of ASI.
(e) the definition of "Subsidiary" is hereby amended to read
as follows:
"Subsidiary" shall mean, with respect to any
Borrower, any subsidiary of such Borrower. Unless otherwise
specified, references to Subsidiaries generally shall be
deemed to refer to subsidiaries of ASI and subsidiaries of
ASII.
(f) the following definitions are added in the appropriate
alphabetical order in Article I:
"ASB" shall mean American Standard Trane Brands,
Inc., a Delaware corporation and a wholly owned subsidiary of
ASINC.
"ASINC" shall mean American Standard Incorporated, a
Delaware corporation and a wholly owned subsidiary of ASII.
"Fourth Amendment" shall mean the Fourth Amendment
dated as of December 22, 1998 to this Agreement.
"Reorganization" shall have the meaning assigned to such
term in the Fourth Amendment.
"Restricted Group" shall have the meaning assigned to
such term in the Fourth Amendment.
"Spin-Off" shall have the meaning assigned to such term in
the Fourth Amendment.
<PAGE>
(g) Article I of the Credit Agreement is hereby amended by
adding a new Section 1.03 that reads in its entirety as follows:
"SECTION 1.03. Financial Terms Following Reorganization. All
references in financial terms or definitions, financial covenants and
financial statement delivery requirements to consolidated statements of
ASI or consolidated amounts of ASI (or to amounts of ASI and its
Subsidiaries or Consolidated Subsidiaries) will be deemed to be
references to combined consolidated statements of ASI and ASII or
combined consolidated amounts of ASI and ASII, as the case may be;
provided that all numbers and financial baskets will remain unchanged
as in effect prior to the Spin-Off and will apply in the aggregate to
ASI and ASII."
(h) Section 6.02(a)(i)(C) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(C) ASI or any Subsidiary may transfer assets to any
Designated Subsidiary or to ASI; and"
(i) Section 6.08(g) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(g) (i) advances made or cash dividends paid by ASI or ASII
to Holding to the extent the amounts received by Holding are paid by
Holding to ASII or ASI, respectively, within 5 Business Days of its
receipt thereof and (ii) advances made or cash dividends paid to
Holding which advances or dividends are used to exercise rights or to
satisfy liabilities or pay expenses of Holding incurred in compliance
with Article VI.B, including any payments due under agreements and
arrangements permitted by Article VI.B, taxes, liabilities incurred in
connection with the registration or issuance of its capital stock or
compliance with reporting obligations arising therefrom, or customary
indemnification obligations to officers and directors; and
(j) The following new Section 6.18 is hereby inserted at the
end of Article VI of the Credit Agreement:
"SECTION 6.18. Restricted Group. Holding covenants and agrees
that it shall cause each member of the Restricted Group (a) to engage
only in those activities in which such member was engaged immediately
prior to the Spin-Off; provided, that such member may also serve as a
holding company for Foreign Subsidiaries engaged in businesses not
inconsistent with Section 6.1, (b) to continue at all times to be at
least a direct Designated Subsidiary of ASII with the remaining capital
stock owned by another Designated Subsidiary and (c) not to incur,
create, assume or permit to exist any Indebtedness other than (i)
Indebtedness outstanding on the date of the Fourth Amendment (including
the Obligations) and (ii) Indebtedness owed to Holding, ASI or a
Domestic Subsidiary of ASI that is evidenced by one or more promissory
notes that are pledged as security for the Obligations under a Pledge
Agreement in form and substance satisfactory to the Administrative
Agent."
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
<PAGE>
Each of Holding, ASI and the other Borrowers hereby represents
and warrants (but, in the case of representations and warranties relating to
Credit Parties and their Subsidiaries, only as to itself and its Subsidiaries,
it being understood that Holding and ASI make all representations and warranties
as to all parties) to each Lender and the Administrative Agent that this
Amendment (a) has been duly authorized, executed and delivered by Holding, ASI
and each other Borrower or Credit Party and constitutes the legal, valid and
binding obligation of each such person enforceable against it in accordance with
its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally and by general
principles of equity, and (b) will not conflict in any respect material to the
rights or interests of the Lenders with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute (with notice or
lapse of time or both) a default under, or result in a required prepayment of,
or (other than as permitted by the Credit Agreement as amended hereby or as
contemplated by the Security Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the properties or
assets of any Credit Party or any of its Subsidiaries pursuant to the terms of,
any indenture, mortgage, deed of trust, agreement or other instrument to which
any Credit Party is a party or by which it may be subject.
ARTICLE V. EFFECTIVENESS
SECTION 5.01. Effectiveness of Article II Amendments. The
Amendments provided for in Article II of this Fourth Amendment shall become
effective on a date (the "Article II Effective Date") when the following
conditions precedent shall have been satisfied:
(a) the Administrative Agent shall have received, on behalf of
the Lenders, an Officer's Certificate of ASI, dated the Article II
Effective Date, confirming compliance with the conditions precedent set
forth in paragraphs (b) and (c) of Section 4.01 of the Credit Agreement
insofar as such conditions precedent relate to ASI and its
subsidiaries;
(b) all legal matters incidental to this Amendment shall be
satisfactory to the Administrative Agent and to Cravath, Swaine &
Moore, counsel for the Administrative Agent; and
(c) the signature lines at the foot of this Amendment shall
have been executed by Lenders sufficient to effect this Amendment under
the terms of the Credit Agreement; and
(d) ASI shall have paid to the Administrative Agent, for the
account of each Lender, a non-refundable amendment fee in an amount
equal to .20%of such Lender's Total Commitment as of the Article II
Effective Date; provided that ASI shall have no liability for any such
amendment fee if this Amendment does not become effective. Such
amendment fee shall be payable in immediately available funds on the
Article II Effective Date.
SECTION 5.02. Effectiveness of Article III Amendments. The
consent provided for in Article III of this Fourth Amendment shall become
effective on the date hereof and the amendments provided for in Article III of
this Fourth Amendment shall become effective on a date (the "Article III
Effective Date") when the following conditions precedent shall have been
satisfied:
(a) the Administrative Agent shall have received, on behalf of
the Lenders, an Officer's Certificate of ASI, dated the Article III
Effective Date, confirming compliance with the conditions precedent set
forth in paragraphs (b) and (c) of Section 4.01 of the Credit Agreement
insofar as such conditions precedent relate to ASI and its
subsidiaries;
(b) all legal matters incidental to this Amendment shall be
satisfactory to the Administrative Agent and to Cravath, Swaine &
Moore, counsel for the Administrative Agent;
(c) the 10-7/8% Senior Notes shall have been redeemed in full;
(d) pursuant to Section 5.11 of the Credit Agreement, each of
ASINC and ASB shall have executed and delivered to the Administrative
Agent a Supplemental Guarantee, substantially in the form of Exhibit
H-1 to the Credit Agreement;
<PAGE>
(e) pursuant to Section 5.11 of the Credit Agreement, each of
ASII and ASINC shall have executed and delivered to the Administrative
Agent a Supplemental Securities Pledge Agreement pursuant to which (x)
ASII shall have granted to the Administrative Agent for the benefit of
the Lenders a perfected security interest in the capital stock of ASINC
and (y) ASINC shall have granted to the Administrative Agent for the
benefit of the Lenders a perfected security interest in the capital
stock of ASB, together with undated stock powers;
(f) pursuant to Section 6.18 of the Credit Agreement, each
member of the Restricted Group shall have executed and delivered to the
Administrative Agent a Pledge Agreement in form and substance
satisfactory to the Administrative Agent pursuant to which such member
shall have granted to the Administrative Agent for the benefit of the
Lenders a perfected security interest in any Indebtedness owed to
Holding, ASI or a Domestic Subsidiary of ASI, together with a
promissory note evidencing such Indebtedness and undated instruments of
assignment;
(g) the Article II Effective Date shall have occurred;
(h) the Spin-Off shall have occurred;
(i) Each Guarantor or Pledgor involved in the Reorganization
shall have executed and delivered an instrument satisfactory to the
Administrative Agent acknowledging the continued effectiveness
commencing upon the completion of the Spin-Off and at all times
thereafter of all its existing pledges and guarantees of the
Obligations, including any future advances under the Credit Documents ;
and
(j) the Administrative Agent shall have received a legal
opinion of Richard A. Kalaher, addressed to the Issuing Banks, the
Administrative Agent and the Lenders, as to such matters as the
Administrative Agent may reasonably request.
ARTICLE VI. MISCELLANEOUS
SECTION 6.01. Further Assurances Relating to the
Reorganization. (a) Holding agrees that promptly upon the consummation of the
Spin-Off and pursuant to Section 5.11 of the Credit Agreement, it will grant to
the Administrative Agent for the benefit of the Lenders a perfected security
interest in the capital stock of ASII pursuant to a Supplemental Securities
Pledge Agreement, together with undated stock powers.
(b) Each of Holding, ASII and ASI confirms that, pursuant to
Section 5.11 of the Credit Agreement, it will, and that it will cause any
Subsidiary to, pledge to the Administrative Agent all shares of capital stock of
any subsidiary that it did not own prior to the commencement of the
Reorganization and that it owns upon completion of the Spin-Off.
(c) Each of Holding, ASI and ASII agrees that, from time to
time at the request of the Administrative Agent or the Required Lenders, it will
promptly deliver a detailed, written report on the status of the Reorganization
and take such actions as the Administrative Agent or the Required Lenders may
request to perfect or maintain the Liens or maintain the Guarantees contemplated
by the Credit Agreement, as amended by the Fourth Amendment.
SECTION 6.02. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6.03. Expenses. ASI shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation, negotiation, execution, delivery and enforcement of this
Amendment, including, but not limited to, the reasonable fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent.
The agreement set forth in this Section 6.02 shall survive the termination of
the Credit Agreement.
<PAGE>
SECTION 6.04. Counterparts. This Amendment may be executed
in any number of counterparts, each of which shall constitute an
original but all of which when taken together shall constitute
but one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their duly authorized officers,
all as of the date first above written.
AMERICAN STANDARD COMPANIES INC.,
by
Name:
Title:
AMERICAN STANDARD INC.,
by
Name:
Title:
AMERICAN STANDARD CREDIT INC.,
by
Name:
Title:
WABCO STANDARD GMBH,
by
Name:
Title:
AMERICAN STANDARD (UK) CO.,
by
Name:
Title:
STANDARD EUROPE, a European Economic
Interest Grouping,
by
Name:
Title:
WABCO STANDARD TRANE INC.,
by
Name:
Title:
<PAGE>
WABCO STANDARD TRANE B.V.,
by
Name:
Title:
THE CHASE MANHATTAN BANK, individually and as
Administrative Agent,
by
Name:
Title:
CITIBANK, N.A., individually and as
Documentation Agent,
by
Name:
Title:
THE BANK OF NOVA SCOTIA, individually and as
Co-Syndication Agent,
by
Name:
Title:
BANK OF AMERICA NT & SA, individually and as
Co-Syndication Agent,
by
Name:
Title:
BANKERS TRUST COMPANY,
by
Name:
Title:
NATIONSBANK, N.A., individually and as
Co-Syndication Agent,
by
Name:
Title:
<PAGE>
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCH,
by
Name:
Title:
by
Name:
Title:
THE BANK OF NEW YORK,
by
Name:
Title:
BANQUE PARIBAS,
by
Name:
Title:
by
Name:
Title:
CIBC INC.,
by
Name:
Title:
CIBC WOOD GUNDY plc,
by
Name:
Title:
<PAGE>
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE,
by
Name:
Title:
by
Name:
Title:
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
by
<PAGE>
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY,
by
Name:
Title:
THE LONG TERM CREDIT BANK OF JAPAN, LIMITED,
by
Name:
Title:
THE SANWA BANK LIMITED, NEW YORK BRANCH,
by
Name:
Title:
THE SUMITOMO BANK, LTD.,
by
Name:
Title:
THE TORONTO-DOMINION BANK,
by
Name:
Title:
ABN AMRO BANK N.V., NEW YORK BRANCH,
by
Name:
Title:
by
Name:
Title:
<PAGE>
ALLIED IRISH BANK plc, CAYMAN ISLANDS BRANCH,
by
Name:
Title:
by
Name:
Title:
ARAB BANKING CORPORATION,
by
Name:
Title:
BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH,
by
Name:
Title:
by
Name:
Title:
BANK OF MONTREAL,
by
Name:
Title:
BANK OF SCOTLAND,
by
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH,
by
Name:
Title:
<PAGE>
CREDIT AGRICOLE,
by
Name:
Title:
UNICREDITO ITALIANO, SpA,
by
Name:
Title:
by
Name:
Title:
FLEET NATIONAL BANK,
by
Name:
Title:
LLOYDS BANK, PLC,
by
Name:
Title:
by
Name:
Title:
MERITA BANK LTD.,
by
Name:
Title:
by
Name:
Title:
NATIONAL CITY BANK,
by
Name:
Title:
<PAGE>
THE ROYAL BANK OF SCOTLAND plc,
by
Name:
Title:
THE SAKURA BANK, LIMITED,
by
Name:
Title:
SOCIETE GENERALE, NEW YORK BRANCH,
by
Name:
Title:
COMERICA BANK,
by
Name:
Title:
ERSTE BANK,
by
Name:
Title:
FIRST UNION NATIONAL BANK,
by
Name:
Title:
STANDARD CHARTERED BANK,
by
Name:
Title:
by
Name:
Title:
<PAGE>
THE SUMITOMO TRUST AND BANKING CO., LTD., NEW YORK BRANCH,
by
Name:
Title:
THE TOKAI BANK, LIMITED, NEW YORK BRANCH,
by
Name:
Title:
UNITED STATES NATIONAL BANK OF OREGON,
by
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.,
by
Name:
Title:
BAYERISCHE HYPO -- und VEREINSBANK AG, New York Branch,
by
Name:
Title:
DAI-ICHI KANGYO BANK, LIMITED,
by
Name:
Title:
FUJI BANK LIMITED,
by
Name:
Title:
<PAGE>
TOYO TRUST & BANKING CO., LTD.,
by
Name:
Title:
NATEXIS BANQUE BFCE,
by
Name:
Title:
MARINE MIDLAND BANK, N.A.
by
Name:
Title:
Accepted and Acknowledged as of the date first above written:
AMERICAN STANDARD INTERNATIONAL, INC.,
by
Name:
Title:
STANDARD SANITARY
MANUFACTURING COMPANY,
by
Name:
Title:
THE TRANE COMPANY,
by
Name:
Title:
TRANE EXPORT INC.,
by
Name:
Title:
<PAGE>
TRANE WABCO COMPANY,
by
Name:
Title:
WABCO STANDARD TRANE
HOLDINGS INC.,
by
Name:
Title:
