<PAGE> 1
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): MAY 30, 1996
CABOT SAFETY HOLDINGS CORPORATION
(Exact name of Registrant as specified in charter)
DELAWARE 0-26942 13-3840450
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
ONE WASHINGTON MALL, EIGHTH FLOOR, BOSTON, MASSACHUSETTS 02108-2610
-------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 371-4200
--------------
(Registrant's telephone number, including area code)
There are 7 pages in this Report.
Page 1 of 7
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of Peltor
- ---------------------
On May 30, 1996, the Company, through one of its subsidiaries, acquired
all issued and outstanding capital stock of Peltor Holding AB, a Swedish
corporation ("Peltor"), from Active I Malmo AB of Malmo, Sweden, and certain of
its subsidiaries, for approximately $86.0 million, subject to possible decrease
based on changes in Peltor's net worth and working capital after December 31,
1995. The Company financed the Peltor acquisition using additional borrowings
under its bank facilities.
Peltor was founded in the early 1950s and is the world's leading
manufacturer of ear muff hearing protection devices, including specialty muffs
capable of two-way radio frequency communications. Peltor markets its products
worldwide through safety and industrial distributors to industry, government,
military and recreational markets. Its sales for the year ended December 31,1995
were approximately $41 million. Peltor is based in Varnamo, Sweden, has
manufacturing facilities in Sweden, Rhode Island and Germany and has sales
offices in Scandinavia, Germany, France, England, and the United States. Mr.
Leif Palmaer, the President of Peltor, and Mr. Leif Anderzon, the Executive Vice
President of Peltor, who have been the principal operating officers of Peltor
since 1981, will continue in the same capacities.
Peltor manufactures, assembles and sells a broad line of ear muffs,
hard caps/visors, noise attenuation headsets and wireless and hardwire
communication headsets. Peltor's products serve a variety of end user markets
where protection from harmful high and low frequency noise is sought or the need
for easy communication in noisy or remote environments exists, such as in the
construction, heavy machinery, airport, forestry, textile and mining industries.
Peltor has recently focused on the high-end communications market, which has
recently grown faster than the market for traditional ear muffs. Peltor's
leadership position in innovation and product quality was attested by the
selection of its ear muff products as the basis for the new, pan-European
standards for ear muff hearing protection.
ITEM 5. OTHER EVENTS
------------
Election of New Director
- ------------------------
On May 27, 1996, Samuel L. Hayes, III, was elected a director of the
Company and its wholly-owned subsidiary, Cabot Safety Corporation. Since 1971,
Professor Hayes has taught at the Harvard Business School, and he currently
holds the Jacob H. Schiff Chair in Investment Banking. His teaching and research
have focused on the capital markets and
Page 2 of 7
<PAGE> 3
corporate financial management. Professor Hayes is also a director of Tiffany &
Co., Ernst Home Centers, and certain Eaton Vance mutual funds.
Change of Name
- --------------
On May 29, 1996, the Company changed its name from Cabot Safety
Holdings Corporation to Aearo Corporation.
Amended and Restated Credit Agreement
- -------------------------------------
On May 29, 1996, the Company entered into an amended and restated
credit agreement (the "Amended Credit Agreement") with Bankers Trust Company, as
administrative agent, to provide for additional borrowings to finance the
acquisition of Peltor. The Amended Credit Agreement provides for (a) a secured
term loan facility consisting of an A tranche and a B tranche providing for up
to $90 million of A term loans and $50 million of B term loans (collectively,
the "Term Loans") (a portion of the A tranche is denominated in an equivalent
amount of foreign currencies) and (b) a secured revolving credit facility (the
"Revolving Credit Facility") providing for up to $25 million of revolving loans
(a portion of which may be denominated in foreign currencies) for general
corporate purposes and, as to $15 million thereof, to finance permitted
acquisitions. As part of the Revolving Credit Facility, the Amended Credit
Agreement provides for the issuance of letters of credit in an aggregate face
amount of up to $5 million. The full amount of the Term Loans and no advances
under the Revolving Credit Facility were outstanding immediately after giving
effect to the acquisition of Peltor. The Term Loans will amortize quarterly over
a seven-year period as follows: $2.0 million for the balance of fiscal 1996;
$8.2 million in fiscal 1997; $10.6 million in fiscal 1998; $13.0 million in
fiscal 1999; $16.0 million in fiscal 2000; $20.7 million in fiscal 2001; $34.4
million in fiscal 2002; and $35.25 million in fiscal 2003. Amounts repaid or
prepaid in respect of the Term Loans may not be reborrowed. Loans and letters of
credit under the Revolving Credit Facility will be available at any time prior
to the maturity of the Term Loans.
The Company will be required to make mandatory prepayments of loans,
and letters of credit will be mandatorily reduced, in amounts and at times
subject to exceptions to be agreed upon, (a) in respect of 75% of consolidated
excess cash flow, or 50% if there is no default and if a certain leverage ratio
is met (after giving effect to debt service on senior and subordinated debt),
(b) in respect of 100% of the net cash proceeds from the sale or other
disposition of certain assets by the Company and (c) in respect of 100% of the
net cash proceeds from the issuance of debt or equity securities by the Company,
provided: (i) that the Company may make permitted acquisitions and capital
expenditures, subject to certain dollar limits; (ii) that the proceeds received
from an offering of common stock occurring on or prior to December 31, 1996 may
be used either to pay down senior subordinated notes pursuant to the so called
Page 3 of 7
<PAGE> 4
"IPO clawback" provisions thereof or redeemable preferred stock, so long as the
first $25 million of such proceeds are used either to redeem senior subordinated
notes or to repay in part the Term Loans; (iii) that with respect to any other
equity issuance, $20 million may be used for permitted acquisitions; (iv) that
the Company may incur certain permitted indebtedness subordinated to the bank
debt of up to $25 million; and (v) that up to $15 million in excess cash flow
may be used to repay the senior subordinated notes. At the Company's option,
loans may be voluntarily prepaid, and revolving loan commitments and letter of
credit outstandings may be permanently reduced, in whole or in part, at any time
in certain minimum amounts.
At the Company's option, the interest rates per annum applicable to the
loans are either an adjusted rate based on the London Interbank Offered Rate
plus a margin of (x) 2.25% in the case of A Term Loans and Revolving Loans and
(y) 2.75% in the case of B Term Loans, or the Base Rate (as defined herein) plus
a margin of (x) 1.00% in the case of A Term Loans and Revolving Loans and (y)
1.50% in the case of B Term Loans (in the case of A Term and Revolving Loans,
these margins shall be decreased if the Company, on a consolidated basis,
achieves certain leverage ratios). The Base Rate is the higher of Bankers Trust
Company's announced prime lending rate and the Overnight Federal Funds rate plus
0.50%. The Company must pay certain fees in connection with the credit
facilities, including a commitment fee (ranging from 0.375% to 0.50%) on the
undrawn portion of the commitments in respect of the Revolving Credit Facility
based upon the Company's leverage ratio, and fees relating to the issuance of
letters of credit.
The Amended Credit Agreement contains a number of significant covenants
that, among other things, restrict the ability of the Company to dispose of
assets, incur additional indebtedness, repay other indebtedness or amend other
debt instruments, pay dividends, create liens on assets, enter into leases,
investments or acquisitions, engage in mergers or consolidations, make capital
expenditures, create subsidiaries, issue capital stock or engage in certain
transactions with subsidiaries and affiliates and otherwise restrict corporate
activities. In addition, under the Amended Credit Agreement the Company is
required to comply with specified financial ratios and tests, including a
minimum fixed charge coverage ratio, a minimum interest coverage ratio, a
maximum leverage ratio and a maximum capital expenditures test. The Amended
Credit Agreement also contains provisions that prohibit modifications to the
terms of the senior subordinated notes and prohibit the Company from refinancing
the senior subordinated notes, in each case, without the consent of the lenders
or as otherwise provided for in the Amended Credit Agreement.
Registration Statement with respect to Initial Public Offering of Common Stock
- ------------------------------------------------------------------------------
On June 3, 1996, the Company filed with the Securities and Exchange
Commission a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, with respect to the offering of 5,500,000 shares of common
stock (plus 825,000 shares to cover
Page 4 of 7
<PAGE> 5
over-allotments, if any) through an underwriting group led by Goldman, Sachs &
Co. and Donaldson, Lufkin, & Jenrette Securities Corporation. The net proceeds
from the proposed offering, estimated to be approximately $70.3 million, will be
used as follows: (i) approximately $39.4 million will be used to redeem up to
$35.0 million principal amount of 12 1/2% senior subordinated notes due 2005 of
the Company's wholly-owned subsidiary Cabot Safety Corporation, (ii)
approximately $25.3 million will be used to retire outstanding shares of the
Company's 12 1/2% redeemable preferred stock, and (iii) the balance will be used
to reduce bank debt.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
-----------------------------------------
At the time of filing of this Form 8-K it is impracticable for
the Company to provide financial statements of Peltor Holding
AB for the periods specified in Rule 3-05(b) of Regulation
S-X. Such financial statements will be filed by amendment not
later than August 13, 1996, in accordance with Item 7,
paragraph (a)(4) of Form 8-K.
(b) Pro Forma Financial Information
-------------------------------
At the time of filing of this Form 8-K it is impracticable for
the Company to provide the pro forma financial information
that would be required pursuant to Article 11 of Regulation
S-X with respect to the acquisition by the Company of Peltor
Holding AB. Such financial information will be filed by
amendment not later than August 13, 1996, in accordance with
Item 7, paragraph (b)(2) of Form 8-K.
Page 5 of 7
<PAGE> 6
(c) Exhibits
--------
2.1 Stock Purchase Agreement by and among Cabot Safety
Corporation, Peltor Holding AB, Leif Palmaer Invest
AB, Leif Anderzon AB and Active I Malmo AB, dated May
25, 1996, as amended May 15, 1996.
Page 6 of 7
<PAGE> 7
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.
Date: June 12, 1996 CABOT SAFETY HOLDINGS CORPORATION
/s/ Mark V.B. Tremallo
---------------------------------------------
Mark V.B. Tremallo
Vice President, General Counsel and Secretary
Page 7 of 7
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
by and among
CABOT SAFETY CORPORATION
("Buyer"),
PELTOR HOLDING AB
(the "Company"),
LEIF PALMAER INVEST AB
("LPAB"),
LEIF ANDERSSON INVEST AB
("LAAB")
and
ACTIVE I MALMO AB (publ.)
(the "Stockholder")
April 25, 1996
as amended May 15, 1996
STOCK PURCHASE AGREEMENT
<PAGE> 2
<TABLE>
<CAPTION>
INDEX Page
<S> <C> <C>
SECTION 1. SALE OF SHARES AND PURCHASE PRICE................................................ 1
- ---------- ---------------------------------
1.1 Transfer of Company Shares, LPAB Shares and LAAB
------------------------------------------------
Shares........................................................................... 1
------
1.2 Purchase Price................................................................... 2
--------------
1.3 Closing Statements; Purchase Price Adjustments................................... 2
----------------------------------------------
1.4 Closing.......................................................................... 4
-------
1.5 Further Assurances............................................................... 5
------------------
1.6 Non-Competition Agreement........................................................ 5
-------------------------
1.7 Non-Competition Payment.......................................................... 6
-----------------------
1.8 Transfer Taxes................................................................... 6
--------------
1.9 Escrow Arrangements.............................................................. 6
-------------------
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE
- ---------- -------------------------------------
COMPANIES AND THE STOCKHOLDER.................................................... 6
-----------------------------
2.1 Making of Representations and Warranties......................................... 6
----------------------------------------
2.2 Organization and Qualifications of the Company................................... 6
----------------------------------------------
2.3 Subsidiaries..................................................................... 7
------------
2.4 Capital Stock of the Companies................................................... 7
------------------------------
2.5 Authority of the Company and the Stockholder..................................... 8
--------------------------------------------
2.6 Real and Personal Property....................................................... 9
--------------------------
2.7 Financial Statements; Undisclosed Liabilities.................................... 10
---------------------------------------------
2.8 Taxes............................................................................ 11
-----
2.9 Absence of Certain Changes....................................................... 12
--------------------------
2.10 Banking Relations................................................................ 14
-----------------
2.11 Patents, Trade Names, Trademarks, Copyrights and
------------------------------------------------
Proprietary Rights............................................................... 14
------------------
2.12 Trade Secrets and Customer Lists................................................. 15
--------------------------------
2.13 Contracts........................................................................ 15
---------
2.14 Litigation....................................................................... 16
----------
2.15 Compliance with Laws............................................................. 17
--------------------
2.16 Insurance........................................................................ 17
---------
2.17 Warranty and Related Matters..................................................... 17
----------------------------
2.18 Investment Banking; Brokerage.................................................... 18
-----------------------------
2.19 Permits; Burdensome Agreements................................................... 18
------------------------------
2.20 Transactions with Interested Persons............................................. 18
------------------------------------
2.21 Employee Benefit Programs........................................................ 19
-------------------------
2.22 Environmental Matters............................................................ 20
---------------------
2.23 Employees; Labour Matters........................................................ 22
-------------------------
2.24 Customers and Distributors....................................................... 23
--------------------------
2.25 Disclosure....................................................................... 23
----------
2.26 Effect of Purchase of LPAB Shares or LAAB Shares................................. 24
------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3. COVENANTS OF THE COMPANY, LAAB, LPAB
- ---------- ------------------------------------
AND THE STOCKHOLDER.............................................................. 24
-------------------
3.1 Making of Covenants and Agreements............................................... 24
----------------------------------
3.2 Conduct of Business.............................................................. 24
-------------------
3.3 Consents and Approvals........................................................... 26
----------------------
3.4 Breach of Representations and Warranties......................................... 27
----------------------------------------
3.5 Acquisition Proposals............................................................ 27
---------------------
3.6 No Sales of Capital Stock........................................................ 28
-------------------------
3.7 Pre-Closing Cooperation on Transition Planning................................... 28
----------------------------------------------
3.8 Confidentiality.................................................................. 28
---------------
3.9 General Release.................................................................. 29
---------------
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
- ---------- ---------------------------------
BUYER............................................................................ 29
-----
4.1 Making of Representations and Warranties......................................... 29
----------------------------------------
4.2 Organization of Buyer............................................................ 29
---------------------
4.3 Authority........................................................................ 30
---------
4.4 Litigation....................................................................... 30
----------
4.5 Investment Banking; Brokerage.................................................... 30
-----------------------------
SECTION 5. COVENANTS OF BUYER............................................................... 31
- ---------- ------------------
5.1 Making of Covenants and Agreements............................................... 31
----------------------------------
5.2 Consents and Approvals........................................................... 31
----------------------
5.3 Confidentiality.................................................................. 31
---------------
SECTION 6. CONDITIONS....................................................................... 32
- ---------- ----------
6.1 Conditions to the Obligations of Buyer........................................... 32
--------------------------------------
6.2 Conditions to the Obligations of the Company and the
----------------------------------------------------
Stockholder...................................................................... 35
-----------
SECTION 7. TERMINATION OF AGREEMENT......................................................... 36
- ---------- ------------------------
7.1 Termination...................................................................... 36
-----------
7.2 Effect of Termination............................................................ 37
---------------------
7.3 Right to Proceed................................................................. 37
----------------
SECTION 8. SURVIVAL OF WARRANTIES; FEES AND
- ---------- --------------------------------
EXPENSES......................................................................... 38
--------
8.1 Survival of Warranties........................................................... 38
----------------------
8.2 Fees and Expenses................................................................ 38
-----------------
SECTION 9. INDEMNIFICATION.................................................................. 38
- ---------- ---------------
9.1 Claims by Buyer.................................................................. 38
---------------
9.2 Notification by Buyer............................................................ 38
---------------------
9.3 Time Limit for claims by Buyer................................................... 39
------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
9.4 Settlement of Claims by the Stockholder.......................................... 39
---------------------------------------
9.5 Claims by the Stockholder........................................................ 39
--------------------------
9.6 Notification by the Stockholder.................................................. 40
-------------------------------
9.7 Time Limit for claims by the Stockholder......................................... 40
----------------------------------------
9.8 Settlement of Claims by Buyer.................................................... 40
-----------------------------
9.9 Exclusive Remedy................................................................. 40
----------------
9.10 Dollar for Dollar Claims......................................................... 41
------------------------
SECTION 10. MISCELLANEOUS.................................................................... 41
- ----------- -------------
10.1 Law Governing.................................................................... 41
-------------
10.2 Notices.......................................................................... 41
-------
10.3 Entire Agreement................................................................. 42
----------------
10.4 Assignability.................................................................... 42
-------------
10.5 Publicity and Disclosures........................................................ 42
-------------------------
10.6 Captions and Gender.............................................................. 42
-------------------
10.7 Certain Definitions.............................................................. 42
-------------------
10.8 Execution in Counterparts........................................................ 43
-------------------------
10.9 Amendments; Waivers.............................................................. 43
-------------------
10.10 Dispute Resolution............................................................... 43
------------------
10.11 Certain Remedies; Severability................................................... 44
------------------------------
</TABLE>
EXHIBIT A Form of Appointment Letter
EXHIBIT B Form of Non-Competition Agreement
EXHIBIT C Form of Escrow Agreement
EXHIBIT D Form of General Release
EXHIBIT E Form of Confidentiality Agreement
EXHIBIT F Form of Company Counsel Opinion
EXHIBIT G Form of Buyer Counsel Opinion
EXHIBIT H Form of General Release
EXHIBIT I Forms of Press Releases
<PAGE> 5
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT entered into as of April 25, 1996 by and among Cabot Safety
Corporation, a Delaware corporation ("Buyer"), Peltor Holding AB, a Swedish
corporation (the "Company"), AB Leif Palmaer Invest AB, a Swedish corporation
("LPAB"), Leif Andersson Invest AB, a Swedish corporation ("LAAB"), (the
Company, LPAB and LAAB collectively referred to as the "Companies"), and Active
i Malmo (publ.) a Swedish corporation (the "Stockholder").
W I T N E S S E T H
WHEREAS, the Stockholder owns of record and beneficially 278.050 shares of
the outstanding and issued capital stock of the Company (the "Company Shares"),
LPAB owns of record and beneficially 300,000 shares of the outstanding and
issued capital stock of the Company and LAAB owns of record and beneficially
300,000 shares of the outstanding and issued capital stock of the Company, such
878,050 shares all having a par value of SEK 5 and constituting the entire
issued capital stock of the Company (said shares being referred to herein as the
"Common Stock"); and
WHEREAS, the Stockholder owns of record and beneficially all of the issued
and outstanding capital stock of (x) LPAB, consisting of 500 shares with a par
value per share of SEK100 (the "LPAB Shares") and (y) LAAB consisting of 500
shares with a par value per share of SEK100 (the "LAAB Shares"); and
WHEREAS, the Stockholder desires to sell all of the Company Shares, LPAB
Shares and LAAB Shares to Buyer, and Buyer desires to acquire all of the Company
Shares, LPAB Shares and LAAB Shares.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. SALE OF SHARES AND PURCHASE PRICE.
- ------------------------------------------------
1
<PAGE> 6
1.1 TRANSFER OF COMPANY SHARES, LPAB SHARES AND LAAB SHARES. At the
Closing, the Stockholder shall deliver or cause to be delivered to Buyer
certificates representing all of the Company Shares, LPAB Shares and LAAB
Shares. Such stock certificates shall be duly endorsed in blank for transfer or
shall be presented with stock powers duly executed in blank, with such signature
guarantees and such other documents as may be reasonably required by Buyer to
effect a valid transfer of such Company Shares, LPAB Shares and LAAB Shares by
the Stockholder, free and clear of any and all liens, encumbrances, charges or
claims of any nature whatsoever.
1.2 PURCHASE PRICE.
(a) In consideration of the sale by the Stockholder to Buyer of the Company
Shares, LPAB Shares and LAAB Shares and in reliance upon the representations and
warranties of the Company, LAAB, LPAB and the Stockholder herein contained and
made at the Closing and subject to the satisfaction of all of the conditions
contained herein, Buyer agrees to pay to the Stockholder a total aggregate
consideration (the "Purchase Price") equal to:
(i) Sixty Five Million Five Hundred Thousand Dollars ($65,500,000); less
any dividends, distributions, and redemptions declared by the Company LPAB or
LAAB after December 31, 1995, including without limitation the proposed dividend
of SEK 30,0 million described in the Company's annual report for the year ended
December 31, 1995 and disclosed in Schedule 3.2;
(ii) minus the Adjustment Amount (if any), to be determined in accordance
with Section 1.3.
(b) The Purchase Price shall be payable as follows:
(i) At the Closing, Buyer shall deliver to the Escrow Agent (as defined in
Section 1.9) Ten Million Dollars ($10,000,000) to be held as escrow funds (the
"Escrow Funds") as provided in the Escrow Agreement (as defined in Section 1.9);
(ii) At the Closing, Buyer shall pay to the Stockholder by wire transfer of
immediately available funds to an account of the Stockholder, written notice of
which account has been provided to Buyer not less than three (3) business days
prior to the Closing the difference between the amount set forth in clause
(a)(i) above and Ten Million Dollars ($10,000,000) delivered to the Escrow Agent
pursuant to clause (b)(i) above; and
2
<PAGE> 7
(iii) The amount set forth in clause (a)(ii) above shall be determined and
paid in accordance with Section 1.3.
1.3 CLOSING STATEMENTS; PURCHASE PRICE ADJUSTMENTS.
(a) As soon as practicable following the Closing, but in no event later
than 60 days following the Closing Date, the Company shall prepare in accordance
with generally accepted accounting principles in Sweden consistently applied by
the Company as if the Company were during all relevant periods an independent
entity ("Swedish GAAP"), to have reviewed by Arthur Andersen & Co., LLP ("AA")
and to have delivered to the Stockholder (i) a consolidated balance sheet as of
the Closing Date (the "Closing Balance Sheet") of the Company and its
subsidiaries, (ii) a calculation of working capital (determined in accordance
with Swedish GAAP) as of the Closing Date for the Company and its subsidiaries
on a consolidated basis (the "Closing Working Capital"), (iii) a calculation of
net worth (determined in accordance with Swedish GAAP) as of the Closing Date
for the Company and its subsidiaries on a consolidated basis (the "Closing Net
Worth") and (iv) a consolidated statement of operations and statement of cash
flows of the Company and its subsidiaries for the period from January 1, 1996
through the Closing Date (the "Closing Income Statement") (the Closing Balance
Sheet, calculation of Closing Working Capital, calculation of Closing Net Worth
and Closing Income Statement shall be referred to herein collectively as the
"Closing Statements"). On the basis of the Closing Statements, the Stockholder
shall pay to Buyer the Adjustment Amount, as defined below, if the Adjustment
Amount is a negative number; subject, however, to the rights of the Stockholder
as provided in Section 1.3(b). A negative "Adjustment Amount" shall be payable
by the Stockholder if and to the extent that either (i) the Closing Net Worth is
less than SEK 96,0 million or (ii) the Closing Working Capital is less than SEK
38,8 million. Such Adjustment should be made on a dollar for dollar basis
calculated as by the exchange rate US$ for SEK on the Closing Date.
(b) Within 30 days after Buyer's delivery of the Closing Statements, the
Stockholder may deliver written notice (the "Protest Notice") to Buyer of any
objections, and the basis therefor, which the Stockholder may have to the
Closing Statements. However, if the claimed Adjustment Amount exceeds US$
10,000,000 Stockholder shall, instead of delivering a Protest Notice, be
entitled to terminate this Agreement by delivering a Termination Letter within
the period of time stated above. If the Stockholder chooses to terminate this
Agreement it shall refund to Buyer such amount as stated in Section 7.1(f). The
failure of the Stockholder to deliver such Protest Notice within the prescribed
time period will constitute the Stockholder's acceptance of the Closing
Statements as delivered by Buyer. During the 10 business days following Buyer's
receipt of the Protest Notice, Buyer
3
<PAGE> 8
and the Stockholder shall attempt to resolve any disagreement with respect to
the Closing Statements and the appropriateness thereof. If at the end of the
period specified in the immediately preceding sentence, Buyer and the
Stockholder shall have failed to resolve the disagreement specified in the
Protest Notice, either party may for the purpose of resolving the dispute sign
and send an Appointment Letter in the form set out in EXHIBIT A (the
"Appointment Letter") to Ernst & Young in Malmo (the "Dispute Accountants") for
final determination within 45 days, which determination shall be limited to (i)
a review of the Closing Statements and the Protest Notice (together with
supplements or amendments thereto) for the purpose of determining whether the
Closing Statements were prepared in accordance with Swedish GAAP and (ii)
calculation of any adjustments required to be made to the Closing Statements to
make them conform to Swedish GAAP. This provision for arbitration shall be
specifically enforceable by the parties, and the determination of the Dispute
Accountants in accordance with the provisions hereof shall be final and binding
upon Buyer and the Stockholder with no right of appeal therefrom. Except as
otherwise provided in this Section 1.3, the arbitration shall be conducted in
accordance with the procedures set forth in Section 10.10. The fees and expenses
of the Dispute Accountants shall be paid by the party (i.e., Buyer, on the one
hand, or the Stockholder, on the other hand) whose last proposed offer for the
settlement of the items in dispute, taken as a whole, was farther away from the
final determination of the Dispute Accountants; PROVIDED HOWEVER, that if the
allocation of the Dispute Accountants' fees and expenses pursuant to this
paragraph is not feasible, the Dispute Accountants shall determine such
allocation among Buyer and the Stockholder in their discretion. If the
Adjustment Amount (exclusive of the Dispute Accountants' fees and expenses)
exceeds $50,000, interest shall accrue thereon and be payable therewith from the
date of the Closing to the day preceding the date of payment at the annual rate
of 8%.
(c) The Stockholder and Buyer agree that within 5 days after the final
determination of the Closing Statements and the Adjustment Amount, if any:
(i) If a negative Adjustment Amount is payable by the Stockholder, then the
Stockholder and Buyer shall execute an Escrow Release Letter (as defined in the
Escrow Agreement) instructing the Escrow Agent to immediately distribute the
Escrow Funds as follows: (x) to Buyer an amount equal to such Adjustment Amount,
including interest pursuant to Section 1.3(b), if any; (y) to the Dispute
Accountants such portion of their fees and expenses as is allocated to the
Stockholder; and (z) to the Stockholder the balance of the Escrow Funds, if any;
provided, however, that if the Adjustment Amount exceeds the available Escrow
Funds, the Stockholder shall immediately pay to Buyer the difference.
4
<PAGE> 9
(ii) If no Adjustment Amount is payable by the Stockholder, then the
Stockholder and Buyer shall execute an Escrow Release Letter instructing the
Escrow Agent to immediately distribute the Escrow Funds to the Stockholder.
1.4 CLOSING. The transactions contemplated by this Agreement shall be
consummated at the closing (the "Closing") which will take place at the offices
of Mannheimer Swartling, counsel for Buyer, in Malmo, Sweden, on the later of
May 15, 1996 or the date three (3) business days following the satisfaction or
waiver of the conditions set forth in Section 6.1. Notwithstanding the
foregoing, the Closing may take place at such other place, time or date as may
be mutually agreed upon in writing by the Stockholder and Buyer. The date of the
Closing is referred to herein as the "Closing Date". Notwithstanding anything in
Section 1.7 to the contrary, in the event all conditions to Closing (other than
conditions to be fulfilled at the Closing) have been satisfied or waived on or
prior to the Outside Closing Date (as defined in Section 7.1(b)), then no party
shall be entitled to exercise its right of termination as contemplated therein
by reason of the fact that this Section 1.4 contemplates Closing following
satisfaction of waiver of conditions, such provision being included for the
convenience of the parties and their counsel in connection with the Closing.
1.5 FURTHER ASSURANCES. The Stockholder from time to time after the Closing
at the request of Buyer and without further consideration shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Company Shares, LPAB Shares and LAAB Shares free and
clear of any and all liens, encumbrances, charges or claims and all rights
thereto, and to fully implement the provisions of this Agreement.
1.6 NON-COMPETITION AGREEMENT. As a material inducement to and a condition
precedent of Buyer's purchase of the Company Shares, LPAB Shares and LAAB
Shares, and associated goodwill, technology and know-how the Stockholder agrees
to execute and deliver at the Closing a Non-Competition Agreement in the form of
Exhibit B attached hereto (the "Non-Competition Agreement") whereby the
Stockholder agrees that during the period commencing on the date of the Closing
and ending on the date which is five (5) years after the date of the Closing,
the Stockholder will not, without the express written consent of the Company,
directly or indirectly, in the existing markets, engage in any activity which
is, or participate or invest in or assist (whether as owner, part-owner,
shareholder, partner, or in any other capacity) any business organization whose
activities, products or services include the manufacture, distribution or sale
anywhere in the existing markets of products of the kind currently manufactured
by the Company. Without implied
5
<PAGE> 10
limitation, the foregoing covenant shall include (i) hiring or attempting to
hire for or on behalf of any such competitor any officer, employee or consultant
named on Schedule 2.23(a), (ii) soliciting or encouraging any officer or
employee of the Company, Buyer or any of their respective affiliates to
terminate his or her relationship or employment with the Company, Buyer or any
of their respective affiliates, soliciting for or on behalf of any such
competitor any client of the Company, Buyer or any of their respective
affiliates, and diverting to any Person (as hereinafter defined) any client or
business opportunity of the Company, Buyer or any of their respective
affiliates. For purposes of this Agreement, the term "Person" shall mean an
individual, a corporation, an association, a partnership, an estate, a trust,
and any other entity or organization. For purposes of this Section 1.6, the term
"affiliate" shall mean, as to any Person, (i) each direct or indirect Subsidiary
(as defined in Section 2.3 below) of such Person, (ii) each other Person of
which such Person is a direct or indirect Subsidiary, and (iii) each other
direct or indirect Subsidiary of such other Person. The Stockholder also agrees
to use its best efforts to cause Mr. Leif Palmaer and Mr. Leif Andersson to
execute and deliver at the Closing a non-competition agreement substantially
equivalent to the Non-Competition Agreement, with such changes as may be
required to comply with Swedish law.
1.7 NON-COMPETITION PAYMENT. Subject in all events to the consummation of
the Closing (and provided that this Section 1.7 shall be of no effect in the
event the Closing does not occur for any reason), in consideration of the
execution and delivery by the Stockholder of the Non-Competition Agreement, at
the Closing Buyer shall make a cash payment to the Stockholder in the amount of
Twenty Million Dollars ($20,000,000).
1.8 TRANSFER TAXES. All transfer taxes, fees and duties under Swedish law
incurred in connection with the sale and transfer of the Company Shares, LPAB
Shares and LAAB Shares under this Agreement will be borne and paid by the
Stockholder, and all transfer taxes, fees and duties under the laws of the
United States incurred in connection with the sale and transfer of the Company
Shares, LPAB Shares and LAAB Shares under this Agreement will be borne and paid
by the Buyer.
1.9 ESCROW ARRANGEMENTS. The amount specified in Section 1.2(b)(ii) shall
be delivered to SE Banken, Malmo as escrow agent (the "Escrow Agent") under the
terms of an escrow agreement substantially in the form of EXHIBIT C hereto (the
"Escrow Agreement"). The Escrow Funds shall be held by the Escrow Agent in
accordance with and subject to the limitations set forth in the Escrow Agreement
to secure the payment of any Adjustment Amount by the Stockholder.
6
<PAGE> 11
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE
- ----------------------------------------------------
COMPANIES AND THE STOCKHOLDER.
-----------------------------
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby the Company, LPAB, LAAB and the Stockholder hereby make to Buyer and its
affiliates the representations and warranties contained in this Section 2.
Whenever in this Section 2 the "Company" is mentioned it shall also, unless
otherwise specifically stated, if applicable include LPAB and/or LAAB so that
all representations and warranties etc. in all subsections shall be applied to
LPAB and LAAB to the same extent as to the Company.
2.2 ORGANIZATION AND QUALIFICATIONS OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Sweden with full power and authority to own or lease its properties and to
conduct its business in the manner and in the places where such properties are
owned or leased and where such business is currently conducted or proposed to be
conducted, except where the failure to do so would not have a Material Adverse
Effect (as defined below). For purposes of this Agreement, (a) a "Material
Adverse Effect" means a material adverse effect on the properties, assets,
business, condition (financial or otherwise) and prospects of the Company; (b)
an adverse effect shall be deemed "material" if and only if it results in an
increase or prospective increase in liabilities or a decrease or prospective
decrease in assets of SEK 6,700,000 or more or in a decrease or prospective
decrease in earnings of SEK 670,000 or more; and (c) current circumstances or
presently known data or existing developments that a reasonable person similarly
situated would anticipate would have a materially unfavourable impact upon the
future properties, assets, business, condition (financial or otherwise) or
prospects of the Company shall be deemed to be within the scope of matters
encompassed by the term "Material Adverse Effect" regardless of the fact that
such circumstances, data or developments have not yet had a material adverse
effect on the properties, assets, business, condition (financial or otherwise)
or prospects of the Company. Material Adverse Effect should be referred to an
individual effect rather than aggregated unless specifically stated otherwise.
2.3 SUBSIDIARIES. The Company has no subsidiaries or investments in any
other corporation or business organization except as listed in SCHEDULE 2.3
(collectively, the "Subsidiaries" or individually, a "Subsidiary"). Each
Subsidiary of the Company is a duly organized, validly existing corporation in
good standing under the laws of the jurisdiction of its incorporation with full
power and authority to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
7
<PAGE> 12
such business is currently conducted or proposed to be conducted, except where
the failure to do so would not have a Material Adverse Effect. Except as
disclosed in SCHEDULE 2.3, all of the outstanding shares of capital stock of
each Subsidiary are owned beneficially and of record by the Company free of any
lien, restriction or encumbrance and said shares have been duly and validly
issued and are outstanding, fully paid and non-assessable. Except as disclosed
in SCHEDULE 2.3, there are no outstanding warrants, options or other rights to
purchase or acquire any of the shares of capital stock of any Subsidiary, or any
outstanding securities convertible into such shares or outstanding warrants,
options or other rights to acquire any such convertible securities.
2.4 Capital Stock Of the Companies.
------------------------------
(a) The total issued capital stock of the Company consists of 878,050
shares, with a par value of SEK 5 per share, which constitute the entire issued
capital stock (the "Common Stock"). As of the date hereof, Stockholder, LPAB and
LAAB lawfully owns their respective parts of the Common Stock, as set forth in
the preamble of this Agreement, free and clear of all pledges, liens,
encumbrances, charges, restrictions, voting agreements or trusts, rights,
claims, options or any other restrictions or commitments of any nature
("Claims"). There are no outstanding subscriptions, options, warrants, rights,
preemptive rights, agreements, arrangements or commitments of any kind for or
relating to the issuance, sale, registration or voting of, or outstanding
securities convertible into or exchangeable for, any shares of capital stock of
any class or other equity interests of the Company. Stockholder, LPAB and LAAB
have good and transferable title to their respective part of the Common Stock
and has the absolute right, power and capacity to sell, assign and deliver the
Common Stock to Buyer in accordance with the terms of this Agreement free and
clear of all Claims. Upon delivery to Buyer at the Closing of the certificates
representing the Common Stock, these certificates shall be duly endorsed in
favour of Buyer, free and clear of any Claims.
(b) The total issued capital stock of LPAB consists of 500 shares, with a
par value of SEK 100 per share, which constitute the entire issued capital stock
(the "LPAB Shares"). As of the date hereof, Stockholder lawfully owns the LPAB
Shares free and clear of all Claims. There are no outstanding subscriptions,
options, warrants, rights, preemptive rights, agreements, arrangements or
commitments of any kind for or relating to the issuance, sale, registration or
voting of, or outstanding securities convertible into or exchangeable for, any
shares of capital stock of any class or other equity interests of LPAB.
Stockholder has good and transferable title to the LPAB Shares and has the
absolute right, power and capacity to sell, assign and deliver the LPAB Shares
to Buyer in accordance with the terms of this Agreement free and clear of all
Claims. Upon delivery to Buyer at the
8
<PAGE> 13
Closing of the certificates representing the LPAB Shares, these certificates
shall be duly endorsed in favour of Buyer, free and clear of any Claims.
(c) The total issued capital stock of the LAAB consists of 500 shares, with
a par value of SEK 100 per share, which constitute the entire issued capital
stock (the "LAAB Shares"). As of the date hereof, Stockholder lawfully owns the
LAAB Shares free and clear of all Claims. There are no outstanding
subscriptions, options, warrants, rights, preemptive rights, agreements,
arrangements or commitments of any kind for or relating to the issuance, sale,
registration or voting of, or outstanding securities convertible into or
exchangeable for, any shares of capital stock of any class or other equity
interests of LAAB. Stockholder has good and transferable title to the LAAB
Shares and has the absolute right, power and capacity to sell, assign and
deliver the LAAB Shares to Buyer in accordance with the terms of this Agreement
free and clear of all Claims. Upon delivery to Buyer at the Closing of the
certificates representing the LAAB Shares, these certificates shall be duly
endorsed in favour of Buyer, free and clear of any Claims.
2.5 Authority of the Company and the Stockholder.
--------------------------------------------
(a) The Stockholder and the Company have full right, power and authority to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by them pursuant to or as contemplated by this Agreement
and to carry out the transactions contemplated hereby and thereby. Except as set
forth on SCHEDULE 2.5(a), the execution, delivery and performance by the
Stockholder and the Company of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary action of the
Company and the Stockholder and no other action on the part of the Company or
the Stockholder is required in connection therewith.
(b) This Agreement and each agreement, document and instrument to be
executed and delivered by the Stockholder or the Company pursuant to or as
contemplated by this Agreement constitute, or will when executed and delivered
constitute, valid and binding obligations of the Stockholder or the Company, as
the case may be, enforceable in accordance with their respective terms. Except
as set forth on SCHEDULE 2.5(b) the execution, delivery and performance by the
Stockholder and the Company of this Agreement and each such other agreement,
document and instrument do not and will not violate any provision of their
charter documents or any applicable laws or result in a breach of, constitute a
default under, cause a termination under, or give rise to a right of termination
of any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien,
9
<PAGE> 14
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award, whether written or oral, or otherwise have a
Material Adverse Effect.
2.6 Real and Personal Property.
--------------------------
(a) REAL PROPERTY. All of the real property owned or leased by the Company
or any of its Subsidiaries is identified on SCHEDULE 2.6(a) (herein referred to
as the "Owned Real Property" or the "Leased Real Property", as the case may be,
or collectively as the "Real Property"). The Company or its Subsidiaries have
good, clear, record and marketable title to all Owned Real Property and
enforceable leasehold interests in all Leased Real Property, in each case free
and clear of all easements, covenants, restrictions, leases, mortgages, liens,
assessments, claims, rights, judgments, encroachments or other matters affecting
title other than as set forth on the Base Balance Sheet (as hereafter defined).
All of the leases of any of the Leased Real Property (collectively, the
"Leases") are currently in full force and effect. Each party to the Leases has
performed all of its obligations under each of such Leases in all material
respects and is not in default thereunder. Except as disclosed on SCHEDULE
2.6(a), the consummation of the transactions contemplated by this Agreement will
not result in any modification, termination, breach or default of any Lease or
require any consent from the other parties to any Lease, from the holder of any
encumbrance on any Owned Real Property, or from any governmental authority.
There are no material defects in the physical condition of any land, buildings
or improvements constituting part of the Real Property, and all such buildings
and improvements are in good operating condition and repair and have been well
maintained. All water, sewer, gas, electric, telephone, drainage and other
utilities required by law or necessary for the current or planned operation of
the Real Property have been connected under valid permits and pursuant to valid
easements where required, and are sufficient to service the Real Property and in
good operating condition. There are no pending or threatened requests,
applications or proceedings to alter or restrict the zoning or other use
restrictions applicable to the Real Property. The improvements and the present
uses of the Real Property are permitted, conforming structures and uses under
applicable zoning and building codes and ordinances and are in substantial
accordance with applicable Lease requirements.
(b) PERSONAL PROPERTY. A list (prepared from the Company's accounting
records with respect to fixed assets) and the location of the machinery,
equipment and other fixed assets ("Equipment") used in the operation of the
business of the Company or any of its Subsidiaries are set forth on SCHEDULE
2.6(b) hereto. Except as specifically disclosed in SCHEDULE 2.6(b) or in the
Base Balance Sheet (as hereinafter defined), the Company or one of its
Subsidiaries, as the case may be, has good and marketable title to all of the
Equipment and other personal property owned by it free of any mortgage, pledge,
lien, conditional sale
10
<PAGE> 15
agreement, security title, encumbrance or other charge. The Equipment is in
generally good repair, normal wear and tear excepted, has been well maintained,
and conforms in all material respects with all applicable ordinances,
regulations and other laws.
2.7 Financial Statements; Undisclosed Liabilities.
---------------------------------------------
(a) The Company has delivered to Buyer the following financial statements,
copies of which are attached hereto as SCHEDULE 2.7:
(i) Consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of December 31, 1993, 1994 and 1995 and statements of income,
retained earnings and cash flows for the fiscal years then ended, of which the
consolidated statements are certified by Deloitte & Touche LLP, independent
public accountants (the "Audited Financial Statements"); and
(ii) Consolidated and consolidating unaudited balance sheet of the Company
as of March 31, 1996 and statements of income, retained earnings and cash flows
for the three month period then ended, certified by the chief financial officer
of the Company and reviewed by Deloitte & Touche LLP, independent public
accountants (the "Unaudited Financial Statements").
The balance sheet as of December 31, 1995 included in the Audited Financial
Statements is referred to herein as the "Base Balance Sheet". All financial
statements set forth above have been prepared in accordance with Swedish GAAP
applied consistently during the periods covered thereby (except that the
Unaudited Financial Statements are not accompanied by footnotes and are subject
only to normal year-end audit adjustments), are complete and correct in all
material respects and present fairly in all material respects the financial
condition of the Company and its Subsidiaries at the dates of said statements
and the results of their operations for the periods covered thereby.
(b) As of the date of the Base Balance Sheet except as stated in SCHEDULE
2.7(b), neither the Company nor any of its Subsidiaries had any liabilities of
any nature, whether accrued, absolute, contingent or otherwise, asserted or
unasserted, known or unknown (including without limitation liabilities as
guarantor or otherwise with respect to obligations of others, or liabilities for
taxes due or then accrued or to become due or contingent or potential
liabilities relating to activities of the Company or any of its Subsidiaries or
the conduct of their respective businesses prior to the date of the Base Balance
Sheet regardless of whether claims in respect thereof had been asserted as of
such
11
<PAGE> 16
date), except liabilities stated or adequately reserved against on the Base
Balance Sheet or reflected in Schedules furnished to Buyer hereunder as of the
date hereof.
(c) As of the date hereof, neither the Company nor any of its Subsidiaries
has, and as of the Closing neither the Company nor any of its Subsidiaries will
have, any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including without
limitation liabilities as guarantor or otherwise with respect to obligations or
others, or liabilities for taxes due or then accrued or to become due or
contingent or potential liabilities relating to activities of the Company and
its Subsidiaries or the conduct of their respective business prior to the date
hereof or the Closing, as the case may be, regardless of whether claims in
respect thereof had been asserted as of such date), except liabilities (i)
stated or adequately reserved against on the Base Balance Sheet or the notes
thereto, (ii) reflected in Schedules furnished to Buyer hereunder on the date
hereof, or (iii) incurred after the date of the Base Balance Sheet in the
ordinary course of business of the Company and its Subsidiaries consistent with
the terms of this Agreement.
(d) All of the accounts receivable of the Company or any of its
Subsidiaries shown or reflected on the Base Balance Sheet or existing at the
date hereof or on the Closing Date (less the reserve for bad debts set forth on
the Base Balance Sheet) are or will then be valid and enforceable claims, fully
collectible and subject to no setoff or counterclaim. All inventory items shown
on the Base Balance Sheet or existing at the date hereof or on the Closing Date
are or will then be of a quality and quantity saleable in the ordinary course of
business of the Company and its Subsidiaries at profit margins consistent with
their experience in prior years (less the inventory reserve set forth on the
Base Balance Sheet) and reflect the normal inventory valuation policies of the
Company consistent with past practices. Purchase commitments for raw materials
and parts are not in excess of normal requirements and none is at a price
materially in excess of current market prices. All outstanding sales commitments
for the products of the Company and its Subsidiaries are at prices not less than
inventory values plus selling expenses and said profit margins.
2.8 TAXES. The Company and each of its Subsidiaries has paid or caused to
be paid all national, state, local, municipal, foreign and other taxes,
including without limitation income taxes, estimated taxes, alternative minimum
taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross receipts
taxes, franchise taxes, capital stock taxes, employment and payroll-related
taxes, withholding taxes, stamp taxes, transfer taxes and property taxes,
whether or not measured in whole or in part by net income, and all deficiencies,
or other additions to tax, interest, fines and penalties owed by it
(collectively, "Taxes"), required to be paid by it through the date hereof,
whether disputed or not. A list
12
<PAGE> 17
of all national, state, local and foreign income tax returns filed with respect
to the Company and its Subsidiaries after 1990 is set forth in SCHEDULE 2.8.
SCHEDULE 2.8 sets forth all tax elections under any taxing regimen that are in
effect with respect to the Company or any of its Subsidiaries or for which an
application by the Company or any of its Subsidiaries is pending to the best of
Stockholder's and the Company's knowledge. No governmental authority is now
asserting or threatening to assert against the Company or any of its
Subsidiaries any deficiency or claim for additional Taxes. No claim has ever
been made by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not file reports and returns that the Company or such
Subsidiary is or may be subject to taxation by that jurisdiction. Except as set
forth on SCHEDULE 2.8, there has not been any audit of any tax return filed by
the Company or any of its Subsidiaries, no such audit is in progress, and
neither the Company nor any of its Subsidiaries has been notified by any tax
authority that any such audit is contemplated or pending. Except as set forth in
SCHEDULE 2.8, no extension of time with respect to any date on which a tax
return was or is to be filed by the Company or any of its Subsidiaries is in
force.
2.9 ABSENCE OF CERTAIN CHANGES. Since December 31, 1995 up to Closing Date,
the Company and its Subsidiaries have conducted and will conduct their business
only in the ordinary course and consistently with past practices, and except as
disclosed in SCHEDULE 2.9 attached hereto and except as expressly permitted by
this Agreement there has not been:
(i) Any change in the properties, assets, liabilities, business,
operations, condition (financial or otherwise) or prospects of the Company or
any of its Subsidiaries which change, by itself or in conjunction with all other
such changes, whether or not arising in the ordinary course of business, has had
a Material Adverse Effect;
(ii) Any mortgage, encumbrance or lien placed on any of the properties of
the Company or any of its Subsidiaries which remains in existence on the date
hereof or will remain on the Closing Date;
(iii) Any contingent liability incurred by the Company or any of its
Subsidiaries as guarantor or otherwise with respect to the obligations of others
or any cancellation of any material debt or claim owing to, or waiver of any
material right of, the Company or any of its Subsidiaries;
(iv) Any obligation or liability of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, known or unknown (including
without limitation liabilities for Taxes due or to become due or contingent or
potential liabilities
13
<PAGE> 18
relating to products or services provided by the Company or any of its
Subsidiaries or the conduct of the business of the Company or any of its
Subsidiaries since the date of the Base Balance Sheet regardless of whether
claims in respect thereof have been asserted), incurred by the Company or any of
its Subsidiaries other than obligations and liabilities incurred in the ordinary
course of business consistent with the terms of this Agreement (it being
understood that product or service liability claims shall not be deemed to be
incurred in the ordinary course of business);
(v) Any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company or any of its Subsidiaries other than in the
ordinary course of business;
(vi) Any damage, destruction or loss, whether or not covered by insurance,
that would materially and adversely deteriorate the properties, assets or
business of the Company or any of its Subsidiaries;
(vii) Any declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any shares of any capital stock of any class of the Company or
any of its Subsidiaries or any options, warrants or other rights to acquire, or
securities convertible into or exchangeable for, any such capital stock, except
as set forth on SCHEDULE 2.9 and except that the Purchase Price shall be reduced
by the amount of such dividend, distribution or redemption;
(viii) Any material loss, destruction or damage to any property of the
Company or any of its Subsidiaries, whether or not insured, which would have a
material and adverse deteriorating effect;
(ix) Any labour disputes, troubles or work stoppages or claim of unfair
labour practices involving the Company or any of its Subsidiaries which has had
Material Adverse Effect; or any increase, direct or indirect, in the
compensation paid or payable to any officer, director, employee, agent or
stockholder other than normal merit increases in the ordinary course of business
consistent with past practice; or any bonus payment or arrangement made to or
with any of such officers, employees, agents or independent contractors;
(x) Any change with respect to the officers or management of the Company or
any of its Subsidiaries except as set forth on SCHEDULE 2.9;
14
<PAGE> 19
(xi) Any payment or discharge of a material lien or liability of the
Company or any of its Subsidiaries which was not shown on the Base Balance Sheet
or incurred in the ordinary course of business thereafter;
(xii) Any obligation or liability incurred by the Company to any of its
officers, directors, stockholders or employees, or any loans or advances made by
the Company to its officers, directors, stockholders or employees, except normal
compensation and expense allowances payable to officers or employees;
(xiii) Any change in accounting methods or practices, credit practices or
collection policies used by the Company or any of its Subsidiaries;
(xiv) Any agreement or understanding whether in writing or otherwise, for
the Company or any of its Subsidiaries to take any of the actions specified in
paragraphs (i) through (xiii) above.
2.10 BANKING RELATIONS. All of the arrangements which the Company or any of
its Subsidiaries has with any banking institution are described in SCHEDULE 2.10
attached hereto, indicating with respect to each of such arrangements the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect thereof.
2.11 PATENTS, TRADE NAMES, TRADEMARKS, COPYRIGHTS AND PROPRIETARY RIGHTS.
All patents, patent applications, trade names, trademarks, trademark
registration applications, copyrights, copyright registration applications and
other proprietary rights owned by the Company or any of its Subsidiaries or used
or to be used by the Company or any of its Subsidiaries in their respective
business as presently conducted or contemplated (the "Intellectual Property")
are listed in SCHEDULE 2.11. The Company and its Subsidiaries have taken all
steps required in accordance with applicable law and sound business practice to
establish and preserve their ownership of all Intellectual Property with respect
to their products, services and technology. Except as set forth in SCHEDULE
2.11, (a) the Company or its Subsidiaries have exclusive ownership or exclusive
license to use all Intellectual Property used or to be used by them in their
business as presently conducted free and clear of any attachments, liens,
encumbrances or adverse claims and (b) to the best of Stockholder's or the
Company's knowledge the present activities or products of the Company or any of
its Subsidiaries do not infringe any Intellectual Property of others, (c) no
other person has an interest in or right or license to use, or the right to
license others to use, any of said Intellectual Property, (d) there are no
claims or demands of any other person pertaining thereto and no proceedings have
been instituted, or are pending or
15
<PAGE> 20
threatened, which challenge the rights of the Company or any of its Subsidiaries
in respect thereof, and there is no basis for any such claims or demands, (e)
none of said Intellectual Property is subject to any outstanding order, decree,
judgment or stipulation, or to the best of the Stockholder's or the Company's
knowledge, is being infringed by others, (f) no proceeding charging the Company
or any of its Subsidiaries with infringement of any adversely held patent, trade
name, trademark or copyright has been filed or is threatened to be filed, and
(g) there exist no unexpired patent or patent application which includes claims
that would materially adversely affect the products or business of the Company
and its Subsidiaries. All licenses or other agreements under which (i) the
Company or any of its Subsidiaries is granted rights in Intellectual Property
owned by others or (ii) the Company or any of its Subsidiaries has granted
rights to others in Intellectual Property owned or licensed by the Company or
such Subsidiary are listed in SCHEDULE 2.11. All said licenses or other
agreements are in full force and effect and there is no default by any party
thereto.
2.12 TRADE SECRETS AND CUSTOMER LISTS. The Company and its Subsidiaries
have the right to use, free and clear of any claims or rights of others, all
trade secrets, inventions, customer lists and manufacturing and secret processes
required for or incident to the manufacture or marketing of all products
formerly or presently sold, manufactured, licensed, under development or
produced by them, including products licensed from others. Any payments required
to be made by the Company or any of its Subsidiaries for the use of such trade
secrets, inventions, customer lists and manufacturing and secret processes are
described in SCHEDULE 2.12. The Company is not using or in any way making use of
any confidential information or trade secrets of any third party, including
without limitation, a former employer of any present or past employee of the
Company or of any of the predecessors of the Company.
2.13 CONTRACTS. Except for contracts, commitments, plans, agreements and
licenses described in SCHEDULE 2.13 (complete and correct copies of which have
been delivered to Buyer), neither the Company nor any of its Subsidiaries is a
party to or subject to:
(a) any plan or contract providing for bonuses, pensions, options, stock
purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labour
union;
(b) any employment contract or contract for services which requires the
payment of SEK 350,000 or more annually or which is not terminable within 30
days by the Company or any of its Subsidiaries without liability for any penalty
or severance payment;
16
<PAGE> 21
(c) any contract or agreement for the purchase of any commodity or raw
material except purchase orders in the ordinary course of business for less than
SEK 350.000 or for the purchase of equipment for more than SEK 175,000;
(d) any other contracts or agreements creating any obligation of the
Company or any of its Subsidiaries of SEK 175,000 or more with respect to any
such contract or which by its terms is not terminable without penalty by the
Company within six months after the date hereof;
(e) any contract or agreement providing for the purchase of all or
substantially all of its requirements of a particular product from a supplier;
(f) any contract or agreement for the sale or lease of its products not
made in the ordinary course of business;
(g) any contract with any sales agent or distributor;
(h) any contract containing covenants limiting the freedom of the Company
or any of its Subsidiaries to compete in any line of business or with any person
or entity;
(i) any license agreement (as licensor or licensee);
(j) any indenture, mortgage, promissory note, loan agreement, guaranty or
other agreement or commitment for the borrowing of money and any related
security agreement; or
(k) any contract or agreement with any officer, employee, director or
stockholder of the Company or with any of their affiliates.
A written description of all oral contracts, agreements, arrangements or
understandings of the Company or any of its Subsidiaries is set forth on
SCHEDULE 2.13.
All contracts, agreements, and instruments to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is obligated are valid and are in full force and effect and constitute legal,
valid and binding obligations of the Company or such Subsidiary, as the case may
be, and the other parties thereto, enforceable in accordance with their
respective terms. Neither the Company nor any of its Subsidiaries nor any other
party to any such contract, agreement or instrument is in default
17
<PAGE> 22
in complying with any provisions thereof, and no condition or event or facts
exists which, with notice, lapse of time or both would constitute a default
thereof on the part of the Company or any of its Subsidiaries or on the part of
any other party thereto in any such case that could have a Material Adverse
Effect. There is no basis for the termination, expiration or modification of any
such agreements within one year from the date hereof (other than in accordance
with their respective terms), which termination, expiration or modification may
have a Material Adverse Effect.
2.14 LITIGATION. Except for matters described in SCHEDULE 2.14, there is no
litigation or governmental or administrative proceeding or investigation pending
or threatened against the Company or any of its Subsidiaries or any of their
respective officers, directors, stockholders, key employees or other affiliates
which may have a Material Adverse Effect or which would prevent or hinder the
consummation of the transactions contemplated by this Agreement, nor has there
to the best of Stockholder's or the Company's knowledge occurred any event or
does there exist any condition on the basis of which any such claim may be
asserted. With respect to each matter set forth therein, Schedule 2.14 sets
forth a description of the forums for the matter, the parties thereto and the
type and amount of relief sought.
2.15 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.15, the
Company and each of its Subsidiaries is currently in compliance and has
heretofore complied in all material respects with all applicable statutes,
ordinances, orders, rules and regulations promulgated by any governmental
authority of any applicable jurisdiction, and neither the Company nor any of its
Subsidiaries has received notice of a violation or alleged violation of any such
statute, ordinance, order, rule or regulation.
2.16 INSURANCE. The physical properties, assets, business, operations,
employees, officers and directors of the Company and its Subsidiaries are
insured to the extent disclosed in SCHEDULE 2.16 and all insurance policies and
arrangements of the Company or any of its Subsidiaries are disclosed in said
Schedule. Said insurance policies and arrangements are in full force and effect,
all premiums with respect thereto are currently paid, and the Company and each
of its Subsidiaries are in compliance in all material respects with the terms of
their respective policies. There is no claim by the Company or any of its
Subsidiaries pending under any such policies as to which coverage has been
questioned, denied or disputed by the insurer. Each such insurance policy shall
continue to be in full force and effect at and after the Closing. Such policies
of insurance are of the type and in amounts customarily carried by persons
conducting business similar to that of the Company and its Subsidiaries.
18
<PAGE> 23
2.17 WARRANTY AND RELATED MATTERS. There are no existing or threatened
product liability, warranty, failure to adequately warn or any other similar
claims against the Company or any of its Subsidiaries for products or services
provided by the Company or any of its Subsidiaries, except as disclosed in
SCHEDULE 2.17. The reserve for warranty and similar claims as set forth in the
Base Balance Sheet and in the latest balance sheet included in the Unaudited
Financial Statements is adequate to satisfy any and all such claims arising from
product sales prior to Closing. There are no statements, citations,
correspondence or decisions by any government or political subdivision thereof,
whether national, state, local or foreign, or any agency or instrumentality of
any such government or political subdivision, or any court or arbitrator
(collectively, "Governmental Bodies") stating that any product manufactured,
marketed or distributed at any time by the Company or any of its Subsidiaries
(the "Company Products") is defective or unsafe or fails to meet any product
warranty or any standards promulgated by any such Governmental Body. There have
been no recalls ordered by any such Governmental Body with respect to any
Company Product. Neither the Company nor the Stockholder knows or has any reason
to know of (a) any fact relating to any Company Product that may impose upon the
Company a duty to recall any Company Product or a duty to warn customers of a
defect in any Company Product, (b) any latent or overt design, manufacturing or
other defect in any Company Product, or (c) any material liability for warranty
or other claims or returns with respect to any the Company Product except in the
ordinary course of business consistent with the past experience of the Company
for such kind of claims and liabilities. No claim has been asserted against the
Company or any of its Subsidiaries for renegotiation or price redetermination of
any business transaction, and, there are no facts upon which any such claim
could be based.
2.18 INVESTMENT BANKING; BROKERAGE. Except as set forth in SCHEDULE 2.18,
there are no claims for investment banking fees, brokerage commissions, finder's
fees or similar compensation (exclusive of professional fees of lawyers and
accountants) in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of the Company or any
of its Subsidiaries or the Stockholder.
2.19 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 2.19 lists all permits,
authorizations, qualifications, registrations, licenses, franchises,
certifications and other approvals (collectively, the "Approvals") required from
any competent governmental authorities in order for the Company or any of its
Subsidiaries to conduct their businesses. The Company and each of its
Subsidiaries has obtained all the Approvals, which are valid and in full force
and effect, and is operating in compliance therewith, except for such
noncompliance which would not have a Material Adverse Effect. The Approvals
include, but are not limited to, those required under applicable statutes,
ordinances, orders,
19
<PAGE> 24
requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. None of the Approvals is subject to termination by their
express terms as a result of the execution of this Agreement or the consummation
of the transactions contemplated hereby, and no further Approvals will be
required in order to continue to conduct the business currently conducted by the
Company or any of its Subsidiaries subsequent to the Closing. Except as
disclosed in SCHEDULE 2.19 or in any other Schedule hereto, neither the Company
nor any of its Subsidiaries is subject to or bound by any agreement, judgment,
decree or order which may materially and adversely affect its properties,
assets, business, condition (financial or other) or prospects.
2.20 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in SCHEDULE
2.20, none of the Company, or any of its Subsidiaries, the Stockholder, or any
of their respective officers, supervisory employees or directors owns directly
or indirectly on an individual or joint basis any material interest in, or
serves as an officer or director or in another similar capacity of, any
competitor or supplier of the Company or any of its Subsidiaries, or any
organization (other than the Stockholder) which has a material contract or
arrangement with the Company or any of its Subsidiaries.
2.21 Employee Benefit Programs.
-------------------------
(a) SCHEDULE 2.21(a) sets forth all collective bargaining agreements,
profit sharing, stock option and material benefit plans or other similar
agreements or arrangements by which any of the Company or its Subsidiaries are
bound. All of these contracts and arrangements are in full force and effect, and
neither the Company, its Subsidiaries, nor any other party is in default under
them. Except as set forth in SCHEDULE 2.21(a), there are no claims of defaults
and there are no facts or conditions that with notice or the passage of time
would result in a default under these contracts or arrangements. The Company and
each of its Subsidiaries complies in all material respects with, and has no
future or contingent liability in respect of any past non-compliance with, all
applicable laws in connection with their respective employee benefit plans.
Except as set forth in SCHEDULE 2.21(a), neither the Company nor any of its
Subsidiaries has entered into any change of control, severance other than
ordinary course termination notice or indemnity rights or similar arrangements
in respect of any present or former employee that will result in any obligation,
absolute or contingent, of the Company, or any of the Subsidiaries, to make any
payment which individually or in the aggregate would result in a Material
Adverse Effect to any present or former employee following the Closing, except
as reserved in the Base Balance Sheet. All liabilities to all employees and
former employees for all periods prior to the Closing (except for accrued and
not yet due current remunerations), whether by virtue of
20
<PAGE> 25
laws, rules, regulations, contract or otherwise, have been fully satisfied and
discharged, including without limitation severance or other termination type
payments due to any former employees of any of the Company and/or the
Subsidiaries, and are adequately reserved for in the Base Balance Sheet.
(b) SCHEDULE 2.21(b) sets forth a list of every U.S. Employee Program (as
defined below) that has been maintained (as such term is further defined below)
by the Company at any time during the three-year period ending on the date
hereof. There has not been any failure of any party to comply with any laws
applicable with respect to the U.S. Employee Programs that have been maintained
by the Company. Neither the Company nor any Affiliate (as defined below) has
incurred any liability under Title IV of ERISA which will not be paid in full
prior to the Closing. There has been no event that may cause the Company or any
Affiliate to incur liability or have a lien imposed on its assets under Title IV
of ERISA. Neither the Company nor any Affiliate has ever maintained a
Multiemployer Plan (as defined below). None of the U.S. Employee Programs ever
maintained by the Company or any Affiliate has ever provided health care or any
other non-pension benefits to any employees after their employment was
terminated (other than as required by part 6 of subtitle B of title I of ERISA)
or has ever promised to provide such post-termination benefits. For purposes of
this Section 21:
(i) "U.S. Employee Program" means (x) all employee benefit plans within the
meaning of ERISA Section 3(3), including, but not limited to, multiple employer
welfare arrangements (within the meaning of ERISA Section 3(40)), plans to which
more than one unaffiliated employer contributes and employee benefit plans (such
as foreign or excess benefit plans) which are not subject to ERISA; and (y) all
stock option plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income arrangements,
vacation plans, and all other employee benefit plans, agreements, and
arrangements not described in (x) above for the benefit of any employees of the
Company or any Affiliate in the United States. In the case of a U.S. Employee
Program funded through an organization described in Code Section 501(c)(9), each
reference to such U.S. Employee Program shall include a reference to such
organization;
(ii) An entity "maintains" a U.S. Employee Program if such entity sponsors,
contributes to, or provides (or has promised to provide) benefits under such
U.S. Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under such U.S. Employee Program, or
if such U.S. Employee Program provides benefits to or otherwise covers employees
of such entity in the United States (or their spouses, dependents, or
beneficiaries);
21
<PAGE> 26
(iii) An entity is an "Affiliate" of the Company for purposes of this
Section 21 if it would have ever been considered a single employer with the
Company under ERISA Section 4001(b) or part of the same "controlled group" as
the Company for purposes of ERISA Section 302(d)(8)(C); and
(iv) "Multiemployer Plan" means a (pension or non-pension) employee benefit
plan to which more than one employer contributes and which is maintained
pursuant to one or more collective bargaining agreements.
(c) Neither the Company nor any of the Subsidiaries has any current, future
or contingent liability in respect of current or past employees in respect of
pension or related retirement benefits including but not limited to any employee
benefit plans that are not either fully insured by a third party, fully funded
or fully provisioned in the Base Balance Sheet.
2.22 Environmental Matters.
---------------------
(a) Except as set forth in SCHEDULE 2.22, (i) neither the Company nor any
of its Subsidiaries has ever generated, transported, used, stored, treated,
disposed of, or managed any Hazardous Waste (as defined below); (ii) no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned,
operated, leased, or used by the Company or any of its Subsidiaries, or has ever
come to be located in the soil or groundwater at any such site; (iii) no
Hazardous Material has ever been transported from any site presently or formerly
owned, operated, leased, or used by the Company or any of its Subsidiaries for
treatment, storage, or disposal at any other place; (iv) neither the Company nor
any of its Subsidiaries presently owns, operates, leases, or uses, or previously
owned, operated, leased, or used any site on which underground storage tanks are
or were located; and (v) no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used by the Company or any of its Subsidiaries in connection with the
presence of any Hazardous Material.
(b) Except as set forth in SCHEDULE 2.22, (i) neither the Company nor any
of its Subsidiaries has any liability under, nor has the Company or any of its
Subsidiaries ever violated in any respect, any Environmental Law (as defined
below); (ii) the Company and each of its Subsidiaries, any property owned,
operated, leased, or used by any of them, and any facilities and operations
thereon are presently in compliance in all respects with all applicable
Environmental Laws; (iii) neither the Company nor any of its Subsidiaries has
ever entered into or been subject to any judgment, consent decree, compliance
order, or
22
<PAGE> 27
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) neither the Company nor any Stockholder has any
reason to believe that any of the items enumerated in clause (iii) of this
paragraph will be forthcoming.
(c) Except as set forth in SCHEDULE 2.22, no site owned, operated, leased,
or used by the Company or any of its Subsidiaries contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
(d) The Company has provided to Buyer copies of all documents, records, and
information available to the Company concerning any environmental or health and
safety matter relevant to the Company, whether generated by the Company or any
of its Subsidiaries, or others, including, without limitation, environmental
audits, environmental risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials, spill control plans, and
reports, correspondence, permits, licenses, approvals, consents, and other
authorizations related to environmental or health and safety matters issued by
any governmental agency.
(e) For purposes of this Section 2.22, (i) "Hazardous Material" shall mean
and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, or contaminant, as defined
or regulated under any Environmental Law, or any other substance which may pose
a threat to the environment or to human health or safety; (ii) "Hazardous Waste"
shall mean and include any hazardous waste as defined or regulated under any
Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, national, state, or local level, whether existing as of the date
hereof, previously enforced, or subsequently enacted; and (iv) "the Company"
shall mean and include the Company and its Subsidiaries, its predecessors and
all other entities for whose conduct the Company is or may be held responsible
under any Environmental Law.
2.23 Employees; Labour Matters.
-------------------------
(a) SCHEDULE 2.23(a) contains a list of all current directors and officers
of the Company and its Subsidiaries and a list of all managers, employees and
consultants of the Company or any of its Subsidiaries who, individually, have
received or are scheduled to receive compensation from the Company and its
Subsidiaries for the twelve months ended
23
<PAGE> 28
December 31, 1995 in excess of SEK 500,000. In each case SCHEDULE 2.23(a)
includes the current job title and aggregate annual compensation of each such
individual, date of hire of each such individual and the date and amount of the
last compensation increase or decrease of such individual. Schedule 2.23(a)
further specifies the number of full time and part time employees in and outside
the United States. As of the date hereof the Company and its Subsidiaries
generally enjoy a good employer-employee relationship.
(b) Except as set forth in SCHEDULE 2.23(b) or either follows from the
collective bargaining agreements specified in Schedule 2.21(a) or under Swedish
Law, neither the Company nor any of its Subsidiaries (i) is obligated to provide
to any employee compensating time off or wages in lieu thereof, (ii) will upon
termination of the employment of any of employees, by reason of the consummation
of the transactions contemplated by this Agreement or due to anything done prior
to the Closing be liable to any of said employees for so-called "severance pay"
or any other payments or (iii) has, or within the last three years had, any
policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment of
employees.
(c) Neither the Company nor any of its Subsidiaries is delinquent in
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed to the date hereof or
amounts required to be reimbursed to such employees. The Company and its
Subsidiaries are in compliance in all material respects with all applicable laws
and regulations respecting labour, employment, fair employment practices, terms
and conditions of employment, and wages and hours. Except as set forth on
SCHEDULE 2.23(c), there are no (i) complaints, grievances, charges of employment
discrimination, wrongful termination, sexual harassment, breaches of express or
implied employment arrangements, or unfair labour practices, (ii) strikes,
slowdowns, stoppages of work, or other concerted interference with normal
operations existing, threatened against or involving the Company or any of its
Subsidiaries, (iii) collective bargaining agreements in effect or currently
being or about to be negotiated by the Company or any of its Subsidiaries and
(iv) changes pending or threatened with respect to (including, without
limitation, resignation of) the senior management or key supervisory personnel
of the Company and its Subsidiaries.
2.24 CUSTOMERS AND DISTRIBUTORS. Stockholder will in accordance Section
3.10 furnish Buyer with a list for (a) any customer (which in the case of chains
of affiliated retail outlets shall mean all such outlets considered as a whole,
though the list shall list separately each individual store or customer location
to which the Company and its Subsidiaries have shipped any products during the
past twelve calendar months),
24
<PAGE> 29
representative or distributor (whether pursuant to a commission, royalty or
other arrangement) who accounted for more than one percent (1%) of the
consolidated sales of the Company and its Subsidiaries for the twelve months
ended December 31, 1995 or, whichever gives the lower number, the 30 largest
customers of the Company and its Subsidiaries, showing for each such account for
such period the amount of net sales (defined as gross sales net of all
discounts, returns and allowances and all charges, such as cooperative
advertising or similar items) (collectively, the "Customers and Distributors")
and (b) any supplier to whom during the twelve months ended December 31, 1995
the Company and its Subsidiaries made payments aggregating SEK 1.500.000 or more
or who is the sole supplier to the Company or any of its Subsidiaries of a
particular raw material or other input or, whichever gives the lower number, the
30 largest suppliers of the Company and its Subsidiaries, showing for each such
supplier for such period the monetary volume involved (collectively, the "Key
Suppliers"). The relationships of the Company and its Subsidiaries with the
Customers and Distributors and Key Suppliers are good commercial working
relationships. No Customer or Distributor or Key Supplier has cancelled or
otherwise terminated its relationship with the Company or any of its
Subsidiaries, or has during the last twelve months decreased materially its
services or supply to the Company or any of its Subsidiaries or its usage,
purchase or distribution of the services or products of the Company or any of
its Subsidiaries. No Customer or Distributor or Key Supplier has to the best
knowledge of the Stockholder or the Company any plan or intention to terminate,
to cancel or otherwise materially and adversely modify its relationship with the
Company or any of its Subsidiaries or to decrease materially or limit its
services or supply to the Company or any of its Subsidiaries or its usage,
purchase or distribution of the services or products of the Company or any of
its Subsidiaries. The list lists for each Key Supplier all tools, molds, dies
and other equipment held by such Key Supplier and owned by the Company or any of
its Subsidiaries (the "Tooling"). The Company and its Subsidiaries own the
Tooling free of any rights or claims of the Key Suppliers (other than statutory
mechanics or materialman's liens) and have the right to demand that the Key
Suppliers return the Tooling to them without delay or penalty.
2.25 DISCLOSURE. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
the Company to Buyer pursuant to this Agreement do not contain any untrue
statement of a material fact with respect to the business conducted by the
Company and its Subsidiaries, and do not omit to state a material fact with
respect to the business heretofore conducted by the Company and its Subsidiaries
required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. There are no facts which presently or
may in the future have a Material Adverse Effect which has not been specifically
disclosed herein or in a Schedule
25
<PAGE> 30
furnished herewith, other than economic conditions affecting the industry of the
Company generally.
2.26 EFFECT OF PURCHASE OF LPAB SHARES OR LAAB SHARES. The purchase by
Buyer pursuant to this Agreement of the LPAB Shares or the LAAB Shares
(resulting in Buyer owning indirectly all of LPAB's and LAAP's shares of Common
Stock of the Company), as compared to a direct purchase by Buyer from LAAB and
LPAB of their respective shares of Common Stock of the Company, does not and
will not (a) have any material adverse effect on the properties, assets,
business, condition (financial or otherwise) and prospects of Buyer or (b) cause
Buyer to become obligated to pay any additional Taxes or discharge any
additional liabilities in connection with the ownership or transfer by Buyer of
the LAAB Shares, the LPAB Shares or the Common Stock of the Company.
SECTION 3. COVENANTS OF THE COMPANY, LAAB, LPAB AND THE
- -----------------------------------------------------------
STOCKHOLDER.
-----------
3.1 MAKING OF COVENANTS AND AGREEMENTS. The Company, LPAB, LAAB and the
Stockholder hereby jointly and severally covenant and agree as set forth in this
Section 3. The Stockholder shall not have any right of indemnity or contribution
from the Company, LAAB or LPAB with respect to the breach of any covenant or
agreement hereunder. Wherever in this Section 3 the "Company" is mentioned it
shall, unless otherwise specifically stated, if applicable include LPAB and LAAB
so that all covenants etc in all subsections shall be applied to LPAB and LAAB
to the same extent as to the Company.
3.2 CONDUCT OF BUSINESS. Between the date of this Agreement and the
Closing, the Stockholder will cause the Company to do and the Company will do
and will cause each of its Subsidiaries to do the following, unless Buyer shall
otherwise consent in writing:
(a) conduct their businesses only in the ordinary course consistent with
past practices, refrain from changing or introducing any method of management or
operations and maintain levels of working capital consistent with past
practices;
(b) refrain from making any change in its incorporation documents, by-laws
or authorized or issued capital stock or from acquiring any securities issued by
any other business organization other than short-term investments in the
ordinary course of business;
26
<PAGE> 31
(c) refrain from declaring, setting aside or paying any dividend except as
set forth on Schedule 3.2 and except that he Purchase Price shall be reduced by
the amount of such dividend, making any other distribution in respect of its
capital stock, making any direct or indirect redemption, purchase or other
acquisition of its capital stock or options, warrants, or other rights with
respect thereto, issuing, granting, awarding, selling, pledging, disposing of or
encumbering or authorizing the issuance, grant, award, sale, pledge, disposition
or encumbrance of any shares of, or securities convertible or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or any of its Subsidiaries
or entering into any agreement or commitment with respect to any of the
foregoing;
(d) refrain from prepaying any loans, including without limitation loans
from the Stockholder or other intercompany balances involving the Company or any
of its Subsidiaries and the Stockholder or any of its affiliates, making any
change in its borrowing arrangements or modifying, amending or terminating any
of its contracts except in the ordinary course of business, or waiving,
releasing or assigning any material rights or claims;
(e) use its best efforts to prevent any change with respect to its
management and supervisory personnel or banking arrangements;
(f) use its best efforts to keep intact its business organization and to
preserve the goodwill of and business relationships with all suppliers,
customers, distributors and others having business relations with it;
(g) pay all accounts payable in the ordinary course of business in a manner
consistent with past practice and in any event within sixty (60) days unless
they are being disputed in good faith, and otherwise refrain from paying,
discharging or satisfying any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business and in a manner
consistent with past practices of liabilities reflected or reserved against in
the Base Balance Sheet or incurred since the date of the Base Balance Sheet in
the ordinary course of business and in a manner consistent with past practices
(provided that the Company shall in no event prepay any long-term indebtedness);
(h) use its best efforts to have in effect and maintain at all times all
insurance of the kind, in the amount and with the insurers set forth in SCHEDULE
2.16 or equivalent insurance with any substitute insurers approved by Buyer;
27
<PAGE> 32
(i) refrain from changing accounting policies or procedures (including,
without limitation, procedures with respect to the payment of accounts payable
and collection of accounts receivable) or from making any tax election or
settling or compromising any national, state, local or foreign income tax
liability;
(j) refrain from entering into any executory agreement, commitment or
undertaking to do any of the activities prohibited by the foregoing provisions;
(k) not unreasonably deny Buyer and its authorized representatives
(including without limitation attorneys, accountants, investment bankers and
pension and environmental consultants) to upon request to the Stockholder have
access to all of the properties, assets, books, records, business files,
executive personnel, tax returns, contracts and documents of the Company and its
Subsidiaries and furnish to Buyer and its authorized representatives such
financial and other information with respect to its business or properties as
Buyer may from time to time reasonably request from the Stockholder;
(l) on a monthly basis provide to Buyer whatever internal reports are
produced and previously have been produced within the Company and its
Subsidiaries.
(m) in connection with any filings to be made by Buyer under the Securities
Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (i) provide for inclusion therein or
filing therewith the financial and other information and documents required by
applicable laws and regulations, (ii) consider promptly Buyer's reasonable
requests for any additional information or documents and use commercially
reasonable efforts to make such available, (iii) use its best efforts to cause
its independent public accountants to deliver such consents, reports and comfort
letters in connection therewith as Buyer may reasonably request, provided that
all such consents, reports and comfort letters shall be at the expense of Buyer,
and (iv) generally cooperate with Buyer and its representatives and agents in
connection therewith, provided that all expenses relating thereto shall be paid
directly and promptly by Buyer.
3.3 CONSENTS AND APPROVALS. The Company and the Stockholder will use their
best efforts to cause all conditions to the obligations of the parties hereunder
to be satisfied and to obtain or cause to be obtained prior to the Closing Date
all necessary consents and approvals to the performance of the obligations of
the Stockholder under this Agreement, including, without limitation, the
consents and approvals described in Schedule 3.3. The Company and the
Stockholder will cooperate in all respects with Buyer with a view toward
obtaining timely satisfaction of the conditions to the Closing set forth herein.
28
<PAGE> 33
The Stockholder shall cause the Company and each of its Subsidiaries to make all
filings, document submissions, applications, statements and reports to all
applicable government agencies or entities which are required to be made by them
prior to the Closing Date pursuant to any applicable statute, rule or regulation
in connection with this Agreement and the transactions contemplated hereby, it
being understood that the required filing fees in connection therewith shall be
paid in accordance with Section 1.8 hereof. The Company and the Stockholder
shall (i) furnish to Buyer copies of all filings and such necessary information
and assistance as may be requested by Buyer in connection with its preparation
of required filings or submissions to any governmental agency and (ii) keep
Buyer informed of the status of any inquiries made of any of them by any
applicable governmental agency or authority with respect to this Agreement or
the transactions contemplated hereby. Not later than 10 business days after the
execution of this Agreement, the Stockholder shall, if required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and shall cause the Company to, and the Company will file complete and
accurate notification and report forms with respect to the transactions
contemplated hereby, pursuant to the HSR Act and the rules and regulations
promulgated thereunder, and will file on a timely basis such additional
information and documentary materials as may be requested pursuant to the HSR
Act. The Company shall promptly inform Buyer of any inquiries or communications
from or to such governmental agencies and provide copies of any written
communications relating thereto.
3.4 BREACH OF REPRESENTATIONS AND WARRANTIES. Promptly upon the occurrence
of, or promptly upon the Company or the Stockholder becoming aware of the
impending or threatened occurrence of any event which would cause or constitute
a breach, or would have caused or constituted a breach had such event occurred
or been known prior to the date hereof, of any of the representations and
warranties of the Company or the Stockholder contained in or referred to in this
Agreement or in any Schedule hereto, the Company and the Stockholder shall give
detailed written notice thereof to Buyer, and the Company and the Stockholder
shall use their best efforts to prevent or promptly remedy the same.
3.5 ACQUISITION PROPOSALS. Unless and until this Agreement shall have been
terminated pursuant to Section 7, neither the Company nor the Stockholder shall,
nor will they permit any of their directors, officers, employees or agents to,
directly or indirectly, (i) take any action to solicit, initiate submission of
or encourage, proposals or offers from any person relating to any acquisition or
purchase of all or (other than in the ordinary course of business) a portion of
the assets of, or any equity interest in, the Company or any of its
Subsidiaries, any merger or business combination with the Company or any of its
Subsidiaries or any public or private offering of shares of the capital stock or
29
<PAGE> 34
financing or joint venture involving the Company or any of its Subsidiaries (an
"Acquisition Proposal"), (ii) participate in any discussions or negotiations
regarding an Acquisition Proposal with any person or entity other than Buyer and
its representatives, (iii) furnish any information or afford access to the
properties, books or records of the Company or any of its Subsidiaries to any
person or entity that may consider making or has made an offer with respect to
an Acquisition Proposal other than Buyer and its representatives, or (iv)
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do any of the foregoing.
The Company and the Stockholder will promptly notify Buyer upon receipt of any
offer or indication that any person is considering making an offer with respect
to an Acquisition Proposal or any request for information relative to the
Company or any of its Subsidiaries or for access to the properties, books and
records of the Company, and will keep Buyer fully informed of the status and
details of any such offer, indication or request.
3.6 NO SALES OF CAPITAL STOCK. Between the date of this Agreement and the
Closing, the Stockholder shall not sell, exchange, deliver, assign, pledge,
encumber or otherwise transfer or dispose of any shares of capital stock of the
Company, nor grant any right of any kind to acquire, dispose of, vote or
otherwise control in any manner such shares of capital stock of the Company.
3.7 PRE-CLOSING COOPERATION ON TRANSITION PLANNING. Between the date of
this Agreement and the Closing, the Stockholder shall cooperate with Buyer in
the implementation of steps designed to facilitate the transition of the
Company's operations after the Closing in accordance with Buyer's business plan.
3.8 Confidentiality.
---------------
(a) The Company and the Stockholder agree that, unless and until the
Closing has been consummated, each of the Company, its Subsidiaries, the
Stockholder and their officers, directors, agents and representatives will hold
in strict confidence, and will not use, any confidential or proprietary data or
information obtained from Buyer with respect to its business or financial
condition except for the purpose of evaluating, negotiating and completing the
transaction contemplated hereby. Information generally known in Buyer's industry
or which has been disclosed to the Company, any Subsidiary or the Stockholder by
third parties which have a right to do so shall not be deemed confidential or
proprietary information for purposes of this agreement. If the transaction
contemplated by this Agreement is not consummated, the Company, its Subsidiaries
and the Stockholder will return to Buyer (or certify that they have destroyed)
all copies of such data and information, including but not limited to financial
information, customer lists, business and
30
<PAGE> 35
corporate records, worksheets, test reports, tax returns, lists, memoranda, and
other documents prepared by or made available to the Company, its Subsidiaries
or the Stockholder in connection with the transaction.
(b) The Stockholder has had, and may from time to time have, access to
confidential records, data, customers lists, trade secrets and similar
confidential information owned or used by the Company and its Subsidiaries in
the course of their respective businesses (the "Confidential Information").
Accordingly, subject in all events to the consummation of the Closing (and
provided that this Section 3.8(b) shall be of no effect if this Agreement is
terminated in accordance with its terms for any reason and the Closing does not
occur), each Stockholder agrees (a) to hold the Confidential Information in
strict confidence, (b) not to disclose Confidential Information to any Person,
and (c) not to use, directly or indirectly, any of the Confidential Information
for any competitive or commercial purpose; PROVIDED, HOWEVER, that the
limitations set forth above shall not apply to any Confidential Information
which (i) is then generally known to the public other than by reason of a breach
of this Section 3.8(b); or (ii) is disclosed in accordance with an order of a
court or competent jurisdiction or applicable law. Upon request by Buyer, all
data, memoranda, customer lists, notes, programs and other papers and items, and
reproductions thereof relating to the foregoing matters in the Stockholder's
possession or control shall be returned to the Company.
3.9 GENERAL RELEASE. The Stockholder agrees to deliver at the Closing a
general release in the form of Exhibit D attached hereto releasing all claims
which the Stockholder has or may have through the Closing Date other than such
claims and rights referred to in such general release which shall survive the
Closing and remain in effect (including rights arising under this Agreement).
3.10 DELIVERY OF SCHEDULES. Stockholder and the Company shall use its best
efforts to deliver all Schedules as soon as possible and not later than ten
calendar days after the date hereof, the Company and the Stockholder shall
deliver to Buyer all Schedules referred to in Section 2 hereof, which schedules
when so delivered shall become part of this Agreement and be deemed to have been
delivered upon the signing hereof for all purposes. If no such Schedules are
delivered by the Company or the Stockholder on or before such time, the Company
and the Stockholder shall be deemed to have delivered Schedules disclosing no
exceptions whatsoever to the representations and warranties set forth in Section
2 hereof. Until May 10, 1996 the Stockholder and the Company may amend the
Schedules delivered pursuant to this Section 3.10.
31
<PAGE> 36
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
- ------------------------------------------------------
4.1 MAKING OF REPRESENTATIONS AND WARRANTIES. Buyer hereby represents and
warrants to the Stockholder and the Company as follows:
4.2 ORGANIZATION OF BUYER. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
corporate power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted.
4.3 AUTHORITY. Except as set forth on SCHEDULE 4.3, all necessary corporate
action has been taken by Buyer to authorize the execution, delivery and
performance of this Agreement and each agreement, document and instrument to be
executed and delivered by Buyer pursuant to this Agreement. This Agreement and
each agreement, document and instrument to be executed and delivered by Buyer
pursuant to this Agreement (to the extent it contains obligations to be
performed by Buyer) constitutes, or when executed and delivered by Buyer will
constitute, valid and binding obligations of Buyer enforceable in accordance
with their respective terms. The execution, delivery and performance by Buyer of
this Agreement and each such agreement, document and instrument:
(a) do not and will not violate any provisions of the Certificate of
Incorporation or By-Laws of Buyer;
(b) do not and will not violate any United States laws or laws of the
jurisdiction of incorporation of Buyer or of any other jurisdiction, or require
Buyer to obtain any approval, consent or waiver of, or to make any filing with,
any person or entity that has not been obtained or made; and
(c) except as set forth on SCHEDULE 4.3, do not and will not result in a
breach of, constitute a default under, accelerate any obligation under, require
a consent under, cause a termination under or give rise to a right of
termination of any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, order, writ, judgment, injunction, decree,
determination or arbitration award to which Buyer is a party or by which the
property of Buyer is bound or affected, or result in the creation or imposition
of any mortgage, pledge, lien, security interest or other charge or encumbrance
on any property or asset owned by Buyer. All consents or approvals listed in
Schedule 4.3 not completed as of this day shall be completed prior to or on May
15, 1996.
32
<PAGE> 37
4.4 LITIGATION. There is no litigation pending or threatened against Buyer
which would prevent or hinder the consummation of the transactions contemplated
by this Agreement.
4.5 INVESTMENT BANKING; BROKERAGE. There are no claims for investment
banking fees, brokerage commissions, finder's fees or similar compensation
(exclusive of professional fees of lawyers and accountants) in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Buyer or its affiliates.
33
<PAGE> 38
SECTION 5. COVENANTS OF BUYER.
- ---------------------------------
5.1 MAKING OF COVENANTS AND AGREEMENTS. Buyer makes the covenants and
agreements set forth in this Section 5.
5.2 CONSENTS AND APPROVALS. Buyer will use its best efforts to obtain all
necessary consents and approvals to the performance of its obligations under
this Agreement and the transactions contemplated hereby (including approval
under the HSR Act) and will cooperate in all respects with the Company and the
Stockholder with a view toward obtaining timely satisfaction of conditions to
the Closing set forth herein. Buyer shall promptly inform the Company of any
inquiries or communications from any such governmental agencies and provide
copies of any written communication relating thereto.
5.3 CONFIDENTIALITY. From the date of this Agreement until the Closing, or
for a period of five years from the date of this Agreement if the Closing does
not take place for any reason, all confidential business and related information
furnished to Buyer and its affiliates and representatives by the Company, LPAB,
LAAB or the Stockholder shall be kept confidential by Buyer and its affiliates
and representatives; PROVIDED, HOWEVER, that the foregoing shall be inapplicable
(a) with respect to information which (i) is or becomes available to the public
without breach of this confidentiality obligation, or (ii) is or becomes
available to Buyer from a third party, PROVIDED that the third party did not
receive the same, directly or indirectly, from the Company, LPAB, LAAB or the
Stockholder and was not under an obligation of confidentiality to the source of
such information at the time it was disclosed to Buyer, (b) to the extent
disclosure is required in filings contemplated by this Agreement and (c) to the
extent disclosure is required by any applicable law or regulation, by any
authorized administrative or governmental agency or, in the opinion of counsel
to Buyer, in connection with applicable requirements of the securities laws or
any stock exchange or self-regulatory organization. In addition to the
foregoing, prior to the Closing (and if the Closing does not occur, forever),
except as contemplated by this Section 5.3, Buyer shall not, and shall
communicate to its employees, agents, representatives and advisors that they are
not authorized to and must not use any confidential or related business
information of the Company, LPAB or LAAB for any purpose other than the
consummation of the transactions contemplated hereby, and if this Agreement is
terminated for any reason Buyer shall return or certify the destruction of all
documents and materials obtained from (or reflecting information obtained from)
the Company, LPAB, LAAB or the Stockholder under this Agreement. Notwithstanding
the above, the existing Confidentiality Agreement in form of EXHIBIT E (the
"Confidentiality Agreement") will continue in effect.
34
<PAGE> 39
5.4 Buyer hereby covenants and agrees as set forth in Section 3.1 - 3.6
mutatis mutandis for the period from Closing to thirty (30) days after Company's
delivery of Closing Statements or Release of Escrow Funds, whichever occurs
first.
SECTION 6. CONDITIONS.
- -------------------------
6.1 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfilment, prior to or at the Closing, of the following conditions (any
one or more of which may be waived in whole or in part by Buyer): provided,
however, that if Buyer does not notify the Stockholder on or before May 15, 1996
that Buyer elects to terminate this Agreement pursuant to Section 7.1(e), then
the conditions set forth in Section 6.1(e) and (f) shall be deemed to have been
waived by Buyer.
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations and
warranties of the Company, LPAB, LAAB and the Stockholder contained in Section 2
hereof shall be true and correct in all material respects (except with respect
to the representations and warranties contained in Sections 2.4 and 2.5, which
shall be true and correct in each and every respect) on and as of the Closing
Date, with the same effect as though made on and as of the Closing Date (it
being understood that representations and warranties made "as of the date
hereof" shall be deemed to have been made as of the Closing Date); the Company,
LPAB, LAAB and the Stockholder shall, on or before the Closing Date, have
performed and satisfied all agreements and conditions hereunder which by the
terms hereof are to be performed and satisfied by the Company, LPAB, LAAB or the
Stockholder on or before the Closing Date; the Company, LPAB, LAAB and the
Stockholder shall have delivered to Buyer a certificate dated the Closing Date
signed on its behalf by its President and by its chief financial officer to the
foregoing effect; PROVIDED HOWEVER, that Buyer shall not have the right to claim
this condition has not been satisfied if (i) all such breaches of
representations, warranties and covenants in the aggregate can not reasonably be
expected, if the Closing occurs, to give rise to claims for Losses pursuant to
Section 9.1 in excess of SEK 13,400,000 or (ii) such breaches of
representations, warranties and covenants are based on facts or circumstances
which occurred or were in existence before May 15, 1996 and he Stockholder can
prove that Buyer had actual conscious knowledge of such events or circumstances
before May 15, 1996.
(b) OPINIONS OF COUNSEL. On the Closing Date, Buyer shall have received an
opinion of Vinge KB Advokat Firman, counsel for the Company and the
35
<PAGE> 40
Stockholder, dated as of the Closing Date and addressed to Buyer, substantially
in the form of EXHIBIT F hereto.
(c) Approvals and Consents.
----------------------
(i) All required filings under the HSR Act shall have been completed and
all applicable time limitations under the HSR Act shall have expired or have
been earlier terminated without a request for further information by the
relevant U.S. federal authorities under the HSR Act, or in the event of such a
request for further information, the expiration of all applicable time
limitations under the HSR Act without the objection of such U.S. federal
authorities and no action or proceeding by the U.S. Justice Department or
Federal Trade Commission to prevent consummation of the transactions
contemplated hereby shall be pending or threatened.
(ii) Buyer shall have made all filings with and notifications of
governmental authorities, regulatory agencies and other entities required to be
made by it in connection with the execution and delivery of this Agreement and
the performance by it of the transactions contemplated hereby and Buyer shall
have received all required authorizations, waivers, consents and permits to
permit the consummation of the transactions contemplated by this Agreement, in
form and substance reasonably satisfactory to Buyer, from all third parties
provided that no consent or approval as required under Section 4.3 will be a
condition after May 15, 1996.
(iii) The Company and its Subsidiaries, LPAB, LAAB and the Stockholder
shall have made all filings with and notifications of governmental authorities,
regulatory agencies and other entities required to be made by them in connection
with the execution and delivery of this Agreement, the performance of the
transactions contemplated hereby and the continued operation of the business of
the Company and such Subsidiaries subsequent to the Closing Date, and the
Company and its Subsidiaries, LPAB, LAAB and the Stockholder shall have received
all required authorizations, waivers, consents and permits to permit the
consummation of the transactions contemplated by this Agreement, in form and
substance reasonably satisfactory to Buyer, with any conditions or limitations
contained therein or imposed thereby to be approved by Buyer, from all third
parties, including, without limitation, applicable governmental authorities,
regulatory agencies, lessors, lenders and contract parties, required in
connection with transactions contemplated by this Agreement or by the Company or
any of its Subsidiaries', LPAB's or LAAB's permits, leases, licenses and
franchises, to avoid a breach, default, termination, acceleration or
modification of any agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award
36
<PAGE> 41
as a result of the execution or performance of this Agreement, or otherwise in
connection with the execution and performance of this Agreement.
(d) NO ACTIONS OR PROCEEDINGS. No action or proceeding by or before any
court, administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or might result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions contemplated by this Agreement, and which would in the
reasonable judgment of Buyer make it inadvisable to consummate such
transactions, and no law or regulation shall be in effect and no court order
shall have been entered in any action or proceeding instituted by any party
which enjoins, restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
(e) PROCEEDINGS SATISFACTORY TO BUYER. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Goodwin, Procter & Hoar as counsel
for Buyer, and such counsel shall have received on behalf of Buyer such other
certificates, opinions, and documents in form satisfactory to such counsel, as
Buyer may reasonably require from the Company, LPAB, LAAB and the Stockholder.
(f) DUE DILIGENCE REVIEW. Buyer and its representatives, as well as, to the
extent they may reasonably request, Buyer's bankers, shall have had the
opportunity to conduct a Due Diligence review and examination of the Company and
its Subsidiaries, LPAB and LAAB. The Due Diligence shall be conducted off site
except as otherwise requested by Buyer and reasonably permitted by Stockholder
and for one or more visits to the Company's manufacturing plant in Sweden on a
time and manner mutually convenient to Buyer and Stockholder in order to satisfy
Buyer's demands of conducting a satisfactory Due Diligence review. Stockholder
shall not unreasonably withhold access to financial and other records, books,
operations or personnel of the Company or its Subsidiaries, LPAB or LAAB upon
request by Buyer. The results of such Due Diligence Review shall be satisfactory
to Buyer in its sole and absolute discretion. However, if Buyer has not at the
latest on May 15, 1996, given the Seller notice that the Due Diligence Review
has been unsatisfactory, such Due Diligence Review shall be deemed to be
satisfactory to Buyer.
(g) NO MATERIAL ADVERSE CHANGE. There shall not have been any change or
series of changes, whether or not in the ordinary course of business, since
December 31, 1995 that, individually or in the aggregate, in the reasonable
business judgment of Buyer acting in good faith, have a Material Adverse Effect;
provided, however, that events or
37
<PAGE> 42
circumstances which occurred or were in existence before May 15, 1996 will not
be deemed to constitute "changes" if the Stockholder can prove that Buyer had
actual conscious knowledge of such events or circumstances before May 15, 1996.
(h) GENERAL RELEASE. The Stockholder shall have executed and delivered to
Buyer a General Release in substantially the form of Exhibit D hereto.
(i) RESIGNATIONS. The Company, LPAB and LAAB shall have delivered to Buyer
the resignations of all of the Directors of the Company, LPAB and LAAB and of
such officers of the Company, LPAB and LAAB as may be requested by Buyer at
least five days prior to the Closing, such resignations to be effective at the
Closing.
6.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER. The
obligations of the Company, LPAB and LAAB and the Stockholder to consummate this
Agreement and the transactions contemplated hereby are subject to the
fulfilment, prior to or at the Closing Date, of the following conditions (any
one or more of which may be waived in whole or in part by the Stockholder):
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations and
warranties of Buyer contained in Section 4 shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date (it being understood that representations and
warranties made "as of the date hereof" shall be deemed to have been made as of
the Closing Date); Buyer shall, on or before the Closing Date, have performed
and satisfied all agreements and conditions hereunder which by the terms hereof
are to be performed and satisfied by Buyer on or before the Closing Date; and
Buyer shall have delivered to the Company a certificate signed on its behalf by
its President and Chief Financial Officer and dated as of the Closing Date
certifying to the foregoing effect.
(b) OPINION OF COUNSEL. At the Closing Date, the Stockholder shall have
received an opinion of Goodwin, Procter & Hoar counsel for Buyer, dated as of
the Closing Date and addressed to the Stockholder substantially in the form of
Exhibit G hereto.
(c) NO ACTIONS OR PROCEEDINGS. No action or proceeding by any court,
administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or might result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions as contemplated by this Agreement, and which would in the
reasonable judgment of the Stockholder make it inadvisable to consummate such
transactions, and no law or regulation shall be in effect and
38
<PAGE> 43
no court order shall have been entered in any action or proceeding instituted by
any party which enjoins, restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
(d) PROCEEDINGS SATISFACTORY TO THE STOCKHOLDER. All proceedings to be
taken by Buyer in connection with the consummation of the Closing on the Closing
Date and the other transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transaction
contemplated hereby reasonably requested by the Stockholder will be reasonably
satisfactory in form and substance to the Stockholder.
(e) GENERAL RELEASE Buyer shall have executed and delivered to the
directors of the Company a General Release in substantially the form of EXHIBIT
H hereto.
SECTION 7. TERMINATION OF AGREEMENT.
- ---------------------------------------
7.1 TERMINATION. This Agreement may be terminated any time prior to the
Closing Date as follows:
(a) With the mutual consent of Buyer and the Stockholder on behalf of the
parties to this Agreement.
(b) By either Buyer or the Stockholder, if the Closing has not occurred on
or before June 30, 1996, provided, however, that notwithstanding anything to the
contrary in this Agreement, if the only reason that the Closing has not occurred
by such date, is that the conditions to Closing set forth in Section 6.1(c) with
respect to approvals or related matters have not been satisfied, then the
foregoing termination date shall be automatically extended to June 30, 1996
(such date, as so extended if applicable, the "Outside Closing Date").
(c) By Buyer, if there has been a material misrepresentation or breach of
warranty on the part of the Company, LPAB, LAAB or the Stockholder in the
representations and warranties contained herein or a material breach of
covenants on the part of the Company, LPAB, LAAB or the Stockholder, which
misrepresentation or breach of warranty or covenant would give Buyer the right
to claim that the condition to Closing set forth in Section 6.1(a) has not been
satisfied, and the same has not been cured within 30 days after notice thereof.
In the event of any termination pursuant to this Section 7.1(c), written notice
setting forth the reasons therefor shall forthwith be given by Buyer to the
Company and the Stockholder.
39
<PAGE> 44
(d) By the Stockholder, if there has been a material misrepresentation or
breach of warranty on the part of Buyer in the representations and warranties
contained herein or a material breach of covenants on the part of Buyer and the
same has not been cured within 30 days after notice thereof. In the event of any
termination pursuant to this Section 7.1(d), written notice setting forth the
reasons therefor shall forthwith be given by the Stockholder to Buyer.
(e) By Buyer not later than May 15, 1996 based on the results of Buyer's
due diligence review in accordance with Section 6.1(f) or Buyer's review of the
Schedules produced by the Company and the Stockholder pursuant to Section 3.10
in Buyer's sole and absolute discretion.
(f) This Agreement may be terminated by Stockholder if the Closing
Statements produced by Buyer under Section 1.3(a) results in a reduction of the
Purchase Price exceeding US$ 10,000,000 and Stockholder delivers a Termination
Letter to Buyer within thirty (30) days from receiving the Closing Statements.
In the event that Stockholder terminates this Agreement pursuant to this Section
7.1(f), Stockholder shall refund to Buyer US$ 90,000,000 less any dividends,
distributions and redemptions declared by the Company, LPAB or LAAB after
December 31, 1995, and in addition, pay to Buyer SEK 6,700,000 in liquidated
damages to cover Buyer's costs and expenses.
Notwithstanding anything herein to the contrary, the right to terminate
this Agreement under this Section 7.1 shall not be available to any party to the
extent such party's breach of its obligations under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date (as a result, for example, of an action or failure to act causing a failure
of a condition precedent).
7.2 EFFECT OF TERMINATION. All obligations of the parties hereunder shall
cease upon any termination pursuant to Section 7.1, provided, however, that (i)
the provisions of Section 5.3, this Section 7, Section 8.2 and Section 10.5
hereof shall survive any termination of this Agreement in any event; (ii)
nothing herein shall relieve any party from any liability for a material error
or omission in any of its representations or warranties contained herein or a
material failure to comply with any of its covenants, conditions or agreements
contained herein and (iii) any party may proceed as further set forth in Section
7.3 below.
7.3 RIGHT TO PROCEED. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 6.1 hereof have
not been
40
<PAGE> 45
satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of their respective rights hereunder,
and if any of the conditions specified in Section 6.2 hereof have not been
satisfied, the Company, LPAB, LAAB and the Stockholder shall have the right to
proceed with the transactions contemplated hereby without waiving any of its or
their rights hereunder. Anything in this Agreement to the contrary
notwithstanding, if the Stockholder at least two business days prior to the
Closing gives written notice to Buyer setting forth with reasonable specificity
facts or other matters which would give Buyer the right to terminate this
Agreement pursuant to Section 7.1(c) above and Buyer does not exercise such
right to terminate, then no indemnification shall be payable by the Stockholder
pursuant to Section 9 of this Agreement to Buyer Indemnified Parties with
respect to claims relating to such facts or matters unless they constituted a
deliberate or wilful error, omission or breach on the part of the Stockholder,
LPAB, LAAB or the Company, in which event Buyer shall have the right to proceed
with this Agreement and the transactions contemplated hereby without waiving any
of its rights hereunder.
SECTION 8. SURVIVAL OF WARRANTIES; FEES AND EXPENSES.
- --------------------------------------------------------
8.1 SURVIVAL OF WARRANTIES. All representations, warranties, agreements,
covenants and obligations herein or in any Schedule or certificate delivered by
any party incident to the transactions contemplated hereby are material and may
be relied upon by the party receiving the same and shall survive the Closing
regardless of any investigation by or knowledge of such party and shall not
merge into the performance of any obligation by any party hereto, subject to the
provisions of Section 9 hereof.
8.2 FEES AND EXPENSES. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of the Company, LPAB, LAAB or
the Stockholder relating in any way to the purchase and sale of the Company
Shares, LPAB Shares and LAAB Shares hereunder and the transactions contemplated
hereby, including without limitation legal, accounting or other professional
expenses of the Company, LPAB, LAAB or the Stockholder, shall be charged to or
accrued or paid by the Company, LPAB, LAAB or Buyer.
SECTION 9. INDEMNIFICATION.
- ------------------------------
9.1 CLAIMS BY BUYER. In the event of a breach of any representation or
warranty or covenant made by the Company or Stockholder in Section 2 or 3, of
this
41
<PAGE> 46
Agreement, the provisions of this Section 9 shall apply. Buyer shall be entitled
to make claims against the Stockholder for losses, harm or damage (including
liabilities, penalties, costs and expenses, and whether or not arising out of
third party claims) based upon or suffered as a result of the inaccuracy of such
representations or warranties or the failure to comply with such covenants
("Losses"), except that the Stockholder shall not be liable for a particular
Loss if the Stockholder can prove that (a) such Loss is based on facts and
circumstances accurately disclosed in this Agreement or the schedules hereto or
specifically advised by the Stockholder to Buyer in writing at least two
business days prior to the Closing or which would give Buyer the right to
terminate this Agreement pursuant to Section 7,1(c) or claim that the condition
to Closing set forth in Section 6.1(a) has not been satisfied (b) Buyer has
already been compensated for such Loss through payment of the Adjustment Amount.
9.2 NOTIFICATION BY BUYER. If an event has occurred within the period set
forth in Section 9.3 (the "Claim Period") which could constitute an inaccuracy
of representations or warranties or a failure to comply with covenants as
provided in Section 9.1, Buyer shall notify the Stockholder thereof in writing
without delay and in such case the parties shall promptly consult with respect
to such misrepresentation or breach and related Losses, it being understood that
if prior to the end of the Claim Period Buyer notifies the Stockholder of
specific facts which may reasonably be expected to give rise to a claim pursuant
to Section 9.1, then Buyer's rights under this Section 9 shall remain in effect
until such matter shall have been finally determined and disposed of, even if no
actual Loss had been suffered at the time of the initial notification by Buyer.
Buyer shall afford the Stockholder an opportunity to assume full liability for
Losses or otherwise hold Buyer harmless against such Losses at the Stockholder's
own cost, subject to Buyer being reasonably assured of Stockholder's ability
(financial and otherwise) to do so, provided that the Stockholder shall not,
without the consent of Buyer (which consent shall not be unreasonably withheld)
settle claims by third parties involving Buyer or the Company.
9.3 TIME LIMIT FOR CLAIMS BY BUYER. Claims for Losses pursuant to Section
9.1 shall be made by Buyer not later than December 31, 1997 (subject to the last
sentence of Section 9.2), except that claims with respect to misrepresentations
or breaches concerning (a) Taxes can be made until six months after the
termination of the applicable statute of limitation, (b) environmental matters
and product liability matters can be made until the fifth anniversary of the
Closing Date.
9.4 SETTLEMENT OF CLAIMS BY THE STOCKHOLDER. The Stockholder shall satisfy
its liability for Losses in cash. If the Losses are allowable as tax deductions
by Buyer or otherwise decrease Buyer's taxable income, the Stockholder shall
have satisfied its
42
<PAGE> 47
obligations under this Section 9 it if pays cash in the amount of 72% of such
Losses, provided that the Stockholder shall be obligated to pay 100% of such
Losses to the extent that Buyer is not entitled to claim or otherwise loses the
benefit of such tax deduction or decrease in taxable income. In all other cases,
the cash payment shall be equal to 100% of the Losses. However, subject to the
exceptions set forth in Section 9.10, the Stockholder shall not be liable for
Losses (a) until the cumulative amount of all Losses exceeds SEK 1,675,000,
whereupon the full amount of Losses shall be recoverable by Buyer in accordance
with this Section 9, or (b) after the cumulative amount paid by the Stockholder
pursuant to this Section 9 exceeds $90,000,000, decreased by any negative
Adjustment Amount paid by the Stockholder.
9.5 CLAIMS BY THE STOCKHOLDER. In the event of a breach of any
representation or warranty or covenant made by Buyer in Section 4 or 5 of this
Agreement, the provisions of this Section 9 shall apply. The Stockholder shall
be entitled to make claims against the Buyer for losses, harm or damage
(including liabilities, penalties, costs and expenses, and whether or not
arising out of third party claims) based upon or suffered as a result of the
inaccuracy of such representations or warranties or the failure to comply with
such covenants ("Losses"), except that Buyer shall not be liable for a
particular Loss if Buyer can prove that such Loss is based on facts and
circumstances accurately disclosed in this Agreement or the schedules hereto or
specifically advised by the Buyer to Stockholder in writing at least two
business days prior to the Closing.
9.6 NOTIFICATION BY THE STOCKHOLDER. If an event has occurred within the
period set forth in Section 9.7 (the "Claim Period") which could constitute an
inaccuracy of representations or warranties or a failure to comply with
covenants as provided in Section 9.5, the Stockholder shall notify Buyer thereof
in writing without delay and in such case the parties shall promptly consult
with respect to such misrepresentation or breach and related Losses, it being
understood that if prior to the end of the Claim Period the Stockholder notifies
Buyer of specific facts which may reasonably be expected to give rise to a claim
pursuant to Section 9.5, then the Stockholder's rights under this Section 9
shall remain in effect until such matter shall have been finally determined and
disposed of, even if no actual Loss had been suffered at the time of the initial
notification by the Stockholder. The Stockholder shall afford Buyer an
opportunity to assume full liability for Losses or otherwise hold the
Stockholder harmless against such Losses at Buyer's own cost, subject to the
Stockholder being reasonably assured of Buyer's ability (financial and
otherwise) to do so, provided that Buyer shall not, without the consent of the
Stockholder (which consent shall not be unreasonably withheld) settle claims by
third parties involving the Stockholder.
43
<PAGE> 48
9.7 TIME LIMIT FOR CLAIMS BY THE STOCKHOLDER. Claims for Losses pursuant to
Section 9.5 shall be made by the Stockholder not later than December 31, 1997
(subject to the last sentence of Section 9.6), except that claims with respect
to misrepresentations or breaches concerning a. Taxes can be made until six
months after the termination of the applicable statute of limitation, b.
environmental matters and product liability matters can be made until the fifth
anniversary of the Closing Date.
9.8 SETTLEMENT OF CLAIMS BY BUYER. Buyer shall satisfy its liability for
Losses in cash. If the Losses are allowable as tax deductions by the Stockholder
or otherwise decrease the Stockholder's taxable income, Buyer shall have
satisfied its obligations under this Section 9 it if pays cash in the amount of
72% of such Losses, provided that Buyer shall be obligated to pay 100% of such
Losses to the extent that the Stockholder is not entitled to claim or otherwise
loses the benefit of such tax deduction or decrease in taxable income. In all
other cases, the cash payment shall be equal to 100% of the Losses. However,
subject to the exceptions set forth in Section 9.10, Buyer shall not be liable
for Losses c. until the cumulative amount of all Losses exceeds SEK 1,675,000,
whereupon the full amount of Losses shall be recoverable by the Stockholder in
accordance with this Section 9, or d. after the cumulative amount paid by Buyer
pursuant to this Section 9 exceeds $90,000,000.
9.9 EXCLUSIVE REMEDY. Payments for settlement of claims as stipulated in
this Section 9 shall be the exclusive remedy for any misrepresentation or breach
of any of the representations, warranties or covenants given by Stockholder or
the Company in Sections 2 and 3 or by Buyer in Sections 4 or 5.
9.10 DOLLAR FOR DOLLAR CLAIMS. Notwithstanding anything herein to the
contrary, neither Buyer nor the Stockholder shall be subject to any limitation
whether pursuant to this Section 9 or otherwise and shall be entitled to
dollar-for-dollar recovery in seeking indemnification from the Stockholder or
Buyer as applicable with respect to Losses arising from fraud or an intentional
misrepresentation or breach of covenant on the part of the Stockholder or the
Company or on the part of the Buyer as applicable.
SECTION 10 MISCELLANEOUS.
- ----------------------------
10.1 LAW GOVERNING. This Agreement and all Exhibits hereto shall be
construed under and governed by the internal laws of Sweden without regard to
its conflict of laws provisions.
44
<PAGE> 49
10.2 NOTICES. Any notice, request, demand other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
(i) if delivered or sent by facsimile transmission, upon receipt, or (ii) if
sent by registered or certified mail upon the sooner of receipt or the
expiration of three days after deposit in United States post office facilities
properly addressed with postage prepaid. All notices will be sent to the
addresses set forth below or to such other address as such party may designate
by notice to each other party hereunder:
TO BUYER:
- --------
with a copy to:
Cabot Safety Corporation Goodwin, Procter & Hoar
One Washington Mall, 8th Floor Exchange Place
Boston, MA 02108-2610 Boston, MA 02109-2881
Attn: Mark V.B. Tremallo Attn: Richard E. Floor, P.C.
Facsimile: (617) 371 42 43 Facsimile: (617) 523-1231
TO THE COMPANY, LPAB, LAAB
- --------------------------
OR THE STOCKHOLDER:
- ------------------
with a copy to:
ACTIVE i Malmo AB Advokatfirman Vinge KB
Stora Nygatan 61 Box 4255
211 37 MALMO 203 13 MALMO
Attn: Bo Hakansson Attn: advokat Jan Ortenholm
Facsimile: +40 97 43 58 Facsimile: +40 97 27 72
Any notice given hereunder may be given on behalf of any party by its
counsel or other authorized representative.
10.3 ENTIRE AGREEMENT. This Agreement, including the Schedules and Exhibits
referred to herein and the other writings specifically identified herein or
contemplated hereby or delivered in connection with the transactions
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings other than the Confidentiality Agreement.
10.4 ASSIGNABILITY. This Agreement shall be assignable by Buyer to a
corporation or partnership controlling, controlled by or under common control
with Buyer
45
<PAGE> 50
although no such assignment shall relieve Buyer of any liabilities or
obligations under this Agreement, but this Agreement may not be assigned or
delegated by the Stockholder, the Company, LPAB or LAAB without the prior
written consent of Buyer. This Agreement and the obligations of the parties
hereunder (including specifically but without limitation the Indemnification
obligations of the Stockholder set forth in Section 9) shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors, executors, administrators, estates, heirs and permitted
assigns, and no others.
10.5 PUBLICITY AND DISCLOSURES. Until the Closing, so long as this
Agreement is in effect, neither the Stockholder, the Company, LPAB, LAAB or
Buyer nor any of their respective subsidiaries or affiliates shall issue or
cause the publication of any press release or other announcement or disclosure
(including, without limitation, any such announcement or disclosure to employees
or customers of the Company) with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of Buyer, in the case of a
desired press release or announcement by the Stockholder, or the Stockholder, in
the case of a desired press release or announcement by Buyer, in any such case
which consent shall not be unreasonably withheld, except to the extent
disclosure by Buyer is required by any applicable law or regulation, by any
authorized administrative or governmental agency or, in the opinion of counsel
to Buyer, by virtue of Buyer's status as a publicly reporting company pursuant
to applicable requirements of the securities laws or any stock exchange or
self-regulatory organization. Notwithstanding what is stated above both the
parties shall on the execution of this Agreement make Press Releases in the form
of EXHIBIT I (the "Press Releases" to the public.
10.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
10.7 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliate" of a person shall mean a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
policies of a
46
<PAGE> 51
person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise;
(c) "Dollars" or "$" means U.S. dollars;
(d) "person" means an individual, corporation, partnership, association,
trust or any unincorporated organization; and
(e) "SEK" means Swedish krona.
10.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
10.9 AMENDMENTS; WAIVERS. This Agreement may not be amended or modified,
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer, the Company and the
Stockholder, or, in the case of a waiver, the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, or any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
10.10 Dispute Resolution.
------------------
(a) Buyer and the Stockholder mutually encourage the prompt, efficient and
equitable settlement of disputes and disagreements arising out of or relating to
this Agreement, any Exhibits hereto or any of the transactions contemplated
hereby. Any such dispute or disagreement between or among any of the parties to
this Agreement shall be determined as set forth in this Section 10.10, except as
otherwise specifically provided in Section 1.3 with respect to the determination
of the Adjustment Amount, unless the manner of resolution of the matter is
otherwise specifically provided for in this Agreement or otherwise agreed by all
parties to the dispute.
(b) Any dispute, controversy or claim arising out of or in connection with
this Agreement or any Exhibits hereto, or the breach, termination or invalidity
thereof, shall be finally settled by arbitration in accordance with the Rules of
the Arbitration Institute of the Stockholm Chamber of Commerce. The arbitral
tribunal shall be
47
<PAGE> 52
composed of three arbitrators. The place of arbitration shall be Stockholm. The
language to be used in the arbitral proceedings shall be English.
10.11 CERTAIN REMEDIES; SEVERABILITY. In case any of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, any such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had been limited or modified (consistent with its general intent) to
the extent necessary to make it valid, legal and enforceable, or if it shall not
be possible to so limit or modify such invalid, illegal or unenforceable
provision or part of a provision, this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or part of a provision had never
been contained in this Agreement.
[Remainder of page intentionally left blank]
48
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date set forth above by their duly authorized representative.
BUYER
-----
CABOT SAFETY CORPORATION
ATTEST:
By:
- ---------------------------------- ---------------------------
[ ], secretary PELTOR HOLDING AB
ATTEST:
By:
- ---------------------------------- ---------------------------
[ ], secretary ACTIVE I MALMO AB (publ.)
ATTEST:
By:
- ---------------------------------- ---------------------------
[ ], secretary LEIF PALMAER INVEST AB
ATTEST:
By:
- ---------------------------------- ---------------------------
[ ], secretary LEIF ANDERSSON INVEST AB
49
<PAGE> 54
ATTEST:
By:
- ---------------------------------- --------------------------
[ ], secretary
EXHIBIT A
---------
FORM OF APPOINTMENT LETTER
Ernst & Young is hereby requested to solve the dispute described in EXHIBIT
hereto between the parties to the Stock Purchase Agreement dated April 25, 1996,
all in accordance with SECTION 1.3(b) of the Stock Purchase Agreement. A copy of
the Stock Purchase Agreement is enclosed hereto. For this purpose Ernst & Young
shall have full access to all working papers, records and books relating to the
audit and drawing up of the Closing Statements (as defined in the Stock Purchase
Agreement).
Place:
Date:
- ------------------------------ ---------------------------------
CABOT SAFETY CORPORATION PELTOR HOLDING AB
- ------------------------------ ---------------------------------
ACTIVE I MALMO AB (publ.) LEIF PALMAER INVEST AB
- ------------------------------
LEIF ANDERSSON INVEST AB
1
<PAGE> 55
EXHIBIT B
---------
FORM OF NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT dated this 25 day of April, 1996 by and among
Cabot Safety Corporation, a Delaware corporation ("Buyer"), Peltor Holding AB, a
Swedish corporation (the "Company"), Leif Palmaer Invest AB, a Swedish
corporation ("LPAB"), Leif Andersson Invest AB, a Swedish corporation ("LAAB"),
(the Company, LPAB and LAAB collectively referred to as the "Companies"), and
Active i Malmo AB, a Swedish corporation (the "Stockholder") executed and
delivered pursuant to a certain Stock Purchase Agreement dated as of April 25,
1996 pursuant to which Buyer is purchasing from the Stockholder shares of the
capital stock of the Company, all of the outstanding shares of the capital stock
of LPAB and all of the outstanding shares of the capital stock of LAAB (the
"Stock Purchase Agreement"). Capitalized terms used in this Agreement and not
defined herein shall have the respective meanings ascribed to them in the Stock
Purchase Agreement.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Stockholder owns of record and beneficially 278.050 shares of
the outstanding and issued capital stock of the Company (the "Company Shares"),
LPAB owns of record and beneficially 300.000 shares of the outstanding and
issued capital stock of the Company and LAAB owns of record and beneficially
300.000 shares of the outstanding and issued capital stock of the Company, such
878.050 shares all having a par value of SEK 5 and constituting the entire
issued capital stock of the Company (said shares being referred to herein as the
"Common Stock"); and
WHEREAS, the Stockholder owns of record and beneficially all of the issued
and outstanding capital stock of (x) LPAB, consisting of 500 shares with a par
value per share of SEK100 (said shares being referred to herein as the "LPAB
Shares") and (y) LAAB consisting of 500 shares with a par value per share of
SEK100 (said shares being referred to herein as the "LAAB Shares"); and
WHEREAS, the Stockholder desires to transfer to Buyer all of the Company
Shares, LPAB Shares and LAAB Shares and the execution and delivery by the
Stockholder of this Agreement is a condition precedent to the obligations of
Buyer under the Stock Purchase Agreement.
1
<PAGE> 56
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. NON-COMPETITION
- ------------------------------
(a) NON-COMPETITION AGREEMENT. The Stockholder hereby agrees that during
the period commencing on the date of the Closing and ending on the date which is
five (5) years after the date hereof, the Stockholder will not, without the
express written consent of Buyer, directly or indirectly, in the existing
markets, engage in any activity which is, or participate or invest in or assist
(whether as owner, part-owner, shareholder, partner, or in any other capacity)
any business organization whose activities, products or services include the
manufacture, distribution or sale in the existing markets of products of the
kind currently manufactured by the Company. Without implied limitation, the
foregoing covenant shall include (i) hiring or attempting to hire for or on
behalf of any such competitor any officer, employee or consultant named on
Schedule 2.23(a) in the Stock Purchase Agreement, (ii) soliciting or encouraging
any officer or employee of the Company, Buyer or their respective affiliates to
terminate his or her relationship or employment with the Company, Buyer or any
of their respective affiliates, soliciting for or on behalf of any such
competitor any client of the Company, Buyer or any of their respective
affiliates, and diverting to any Person (as hereinafter defined) any client or
business opportunity of the Company, Buyer or any of their respective
affiliates. For purposes of this Agreement, (x) the term "Person" shall mean an
individual, a corporation, an association, a partnership, an estate, a trust,
and any other entity or organization and (y) the term "affiliate" shall mean, as
to any Person, (i) each direct or indirect Subsidiary (as defined in Section 2.3
below) of such Person, (ii) each other Person of which such Person is a direct
or indirect Subsidiary, and (iii) each other direct or indirect Subsidiary of
such other Person.
(b) GEOGRAPHIC AREA. The provisions of Section 1(a) of this Agreement shall
apply in the following geographic areas:
(i) All countries in which the Company is currently conducting any business
activities;
(ii) All countries in which the Company is currently contemplating the
commencement of business activities;
SECTION 2. SCOPE OF AGREEMENT
- ---------------------------------
2
<PAGE> 57
The parties acknowledge that the time, scope, geographic area and other
provisions of this Agreement have been specifically negotiated by sophisticated
commercial parties and agree that (a) all such provisions are reasonable under
the circumstances of the transactions contemplated by the Stock Purchase
Agreement, (b) are given as an integral and essential part of the transactions
contemplated by the Stock Purchase Agreement and (c) but for the covenants of
the Stockholder contained in this Agreement, the parties to the Stock Purchase
Agreement would not enter into the Stock Purchase Agreement or consummate the
transactions contemplated thereby. The Stockholder has independently consulted
with his counsel and has been advised in all respects concerning the
reasonableness and propriety of the covenants contained herein, with specific
regard to the business conducted by the Company.
SECTION 3. SPECIFIC PERFORMANCE; SEVERABILITY
- -------------------------------------------------
It is specifically understood and agreed that any breach of the provisions
of this Agreement by the Stockholder will result in irreparable injury to Buyer
and the Company, that the remedy at law alone will be an inadequate remedy for
such breach and that, in addition to any other remedy it may have, Buyer and the
Company shall be entitled to enforce the specific performance of this Agreement
by the Stockholder through both temporary and permanent injunctive relief
without the necessity of proving actual damages. In the event that any covenant
contained in this Agreement shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too great a
period of time or over too great a geographical area or by reason of its being
too extensive in any other respect, it shall be interpreted to extend only over
the maximum period of time for which it may be enforceable and/or over the
maximum geographical area as to which it may be enforceable and/or to the
maximum extent in all other respect as to which it may be enforceable, all as
determined by such court in such action. The existence of any claim or cause of
action which the Stockholder may have against Buyer or the Company shall not
constitute a defense or bar to the enforcement of any of the provisions of this
Agreement and shall be pursued through separate court action by the Stockholder.
SECTION 4. MISCELLANEOUS
- ----------------------------
(a) All notices, requests, demands and other communications hereunder shall
be given in accordance with Section 10.2 of the Stock Purchase Agreement.
(b) The failure of any of the parties to require the performance of a term
or obligation or to exercise any right under this Agreement or the waiver of any
breach hereunder shall not prevent subsequent enforcement of such term or
obligation or exercise of such right or the
3
<PAGE> 58
enforcement at any time of any other right hereunder or be deemed a waiver of
any subsequent breach of the provision so breached, or of any other breach
hereunder. This Agreement shall inure to the benefit of, and be binding upon,
successors of Buyer or the Company by way of merger, consolidation or transfer
of substantially all the assets of Buyer or the Company, and may not be assigned
by the Stockholder. This Agreement supersedes all prior understandings and
agreements between the parties relating to the subject matter hereof (without
limitation of the Stock Purchase Agreement).
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date first set forth above.
ACTIVE I MALMO AB (publ.)
By:________________________________
CABOT SAFETY CORPORATION
By:________________________________
PELTOR HOLDING AB
By:________________________________
4
<PAGE> 59
EXHIBIT C
---------
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of April 25, 1996, by and among Cabot Safety
Corporation, ("Buyer"), and ACTIVE i Malmo AB (publ), ("Stockholder") and SE
Banken ("Escrow Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Stockholder and Buyer entered into that certain Stock Purchase
Agreement, dated as of April 25, 1996 (the "Stock Purchase Agreement");
WHEREAS, as contemplated by the Stock Purchase Agreement, upon the closing
of the transactions contemplated by the Stock Purchase Agreement, Buyer will
deposit the sum of U.S.$10.0 million in cash (the "Escrow Funds") in escrow for
the purpose of providing security for the payments of any Adjustment Amount in
accordance with Section 1.3 of the Stock Purchase Agreement;
WHEREAS, the parties hereto desire that Escrow Agent be appointed as escrow
agent to act in accordance with the terms and conditions hereof;
NOW, THEREFORE, Stockholder and Buyer agree with Escrow Agent as follows:
ARTICLE 1. APPOINTMENT
- --------------------------
1.1 Stockholder and Buyer hereby appoint Escrow Agent to act as escrow agent in
accordance with the terms thereof, and Escrow Agent hereby accepts such
appointment.
1.2 As contemplated by the Stock Purchase Agreement, upon the closing of the
transactions contemplated by the Stock Purchase Agreement, Buyer will deposit
the Escrow Funds in the name of Escrow Agent at a bank or similar financial
institution agreed on by Stockholder and Buyer (the "Bank"). Escrow Agent hereby
agrees to hold and dispose of the Escrow Funds in accordance with the provisions
of this Agreement.
1.3 Escrow Agent will hold the Escrow Funds, in the name of Escrow Agent, at the
Bank. Neither Buyer, Stockholder, nor Escrow Agent will be responsible for any
losses resulting from
1
<PAGE> 60
investments of the Escrow Funds or failure or insolvency of the Bank. Any
interest or other income earned on any investment of the Escrow Funds shall be
handled by Escrow Agent as provided for in Section 2.3.
ARTICLE 2. RELEASE AND INVESTMENT OF ESCROW FUNDS
- -----------------------------------------------------
2.1 The Provisions of this Section 2.1 shall apply from the date hereof with
respect to payments required to be made under Sections 1.3 of the Stock Purchase
Agreement. Escrow Agent will release the Escrow Funds from escrow and deliver
the Escrow Funds as provided in Section 2.1(a).
(a) Escrow Agent shall release the Escrow Funds or parts thereof to Buyer,
Stockholder and/or the Dispute Accountants in the amounts stated in the Escrow
Release Notice upon receipt of
(i) an Escrow Release Notice executed by authorized officers of both Buyer
and Stockholder in accordance with Section 1.3(c)(i) of the Stock Purchase
Agreement, or
(ii) an Escrow Release Notice executed by an authorized officer of Buyer
and including a final determination by the Dispute Accountants stating the
amount of the Adjustment Amount, or
(iii) an Escrow Release Notice executed by an authorized officer of the
Buyer and including a Termination Letter from Stockholder entitling Buyer to
liquidated damages of SEK 6,700,000.
2.2 The Escrow Agent agrees to invest and reinvest as directed from time-to-time
at the joint written direction of the Buyer and Stockholder. The parties shall
select investments that can be readily converted into US$10.0 million in cash.
The Escrow Agent may hold all investments in nominee name. The Escrow Agent
shall not be liable to Buyer, the Stockholder, or the Stockholder for any claim
related to the investment or management of the Escrow Funds, provided that the
Escrow Agent complies with the joint written directives of Buyer and
Stockholder.
2.3 All interest or other income earned with respect to the investment of the
Escrow Funds by the Escrow Agent during the period of this escrow arrangement
shall accrue and be held by the Escrow Agent for the benefit of the parties, in
the proportion as each party finally receives the Escrow Funds as if they were
Escrow Funds. All such interest or other income shall be disbursed pursuant to
this Section 2.3.
2.4 If Buyer and Stockholder cannot resolve any dispute relating to the release
from escrow of the Escrow Funds, then such dispute shall be solved in the manner
stated for dispute resolution in
2
<PAGE> 61
Section 10.10 of the Stock Purchase Agreement. Escrow Agent shall deliver the
Escrow Funds as may be determined in such arbitration.
3
<PAGE> 62
ARTICLE 3. CONCERNING THE AGENT
- -----------------------------------
3.1 Escrow Agent may confer with legal counsel in the event of any dispute or
question as to the construction of the provisions hereof, or its duties
hereunder, and it shall incur no liability and it shall be fully protected in
acting in accordance with the opinions of such counsel.
3.2 (a) Subject to the provisions of Section 3.2(b), in the event of any
conflicting or inconsistent claims or demands being made in connection with the
subject matter of this Agreement, or in the event that Escrow Agent is in doubt
as to what action it should take hereunder, Escrow Agent may, at its option,
refuse to comply with any claims or demands on it, or refuse to take any other
action hereunder so long as such disagreement continues or such doubt exists,
and in any such event, Escrow Agent shall be entitled to continue to refrain
from acting until (i) the rights of all parties have been fully and finally
adjudicated in accordance with Section 10.10 in the Stock Purchase Agreement, or
(ii) all differences shall have been settled and all doubt resolved by agreement
among all of the interested parties, and Escrow Agent shall have been notified
thereof in writing signed by all such parties.
(b) Escrow Agent, Buyer and Stockholder acknowledge and agree that Escrow
Agent is not entitled to exercise any rights under Section 3.2(a) in the event
that a proper Escrow Release Notice has been delivered to Escrow Agent pursuant
to Section 2.1(a).
3.3 Escrow Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement, except for its own negligence or
wilful misconduct. The Buyer and Stockholder jointly and severally agree to
indemnify Agent for, and to hold it harmless against, any loss, liability or
expense (including, without limitation, reasonable attorney's fees) incurred by
it without negligence or wilful misconduct on its part arising out of or in
connection with its entering into this Agreement and the carrying out of its
duties hereunder, including the costs and expenses of defending itself against
any claim of liability in the premises.
3.4 Escrow Agent may resign for any reason, upon thirty (30) days written notice
to the parties to the Agreement. Upon expiration of such thirty (30) day notice
period, Escrow Agent may deliver all cash and other property in its possession
under this Agreement to any successor escrow agent appointed by the Buyer and
Stockholder. Upon such delivery, Escrow Agent shall be released from any and all
liability under this Agreement. A termination under this Section shall in no way
discharge Sections 3.2, 3.3 and 3.5 of this Article 3 affecting reimbursement of
expenses, indemnity, and fees. Escrow Agent shall have the right to deduct from
the property to be transferred to any successor agent any unpaid fees.
4
<PAGE> 63
3.5 Buyer and Stockholder will each be jointly and severally liable to Escrow
Agent for the fees of the Escrow Agent and the expenses, if any, reasonably
incurred by Escrow Agent pursuant to this Agreement. Buyer and Stockholder
hereby agree, as between themselves, that each will pay a proportion of such
fees and expenses incurred by Escrow Agent pursuant to this Agreement as
corresponds to the proportion of the Escrow Funds that finally is paid to the
other party. Escrow Agent shall be entitled to retain from any disbursements
requested hereunder any outstanding fees and/or expenses due to it hereunder.
Escrow Agent is hereby granted a lien on the Escrow Funds for all indebtedness
that may become owing to Escrow Agent pursuant to this Agreement, which may be
enforced by Escrow Agent within thirty (30) days after Escrow Agent makes demand
therefore from the parties, Escrow Agent may charge such fee against the Escrow
Funds, either against the corpus of the Escrow Funds or interest earned thereon.
3.6 It is strictly understood that Escrow Agent has no duty to disburse any
funds to any person until such funds have been collected by Escrow Agent and
those funds are available.
ARTICLE 4. MISCELLANEOUS
- ----------------------------
4.1 Escrow Agent is authorized to accept this Agreement and to take any and all
actions hereunder as it shall, in its reasonable discretion, determine to be
appropriate to effectuate this Agreement.
4.2 Escrow Agent will be protected in acting upon any written notice, request,
waiver, consent, certificate, receipt, authorization, power or attorney, or
other paper or document that Escrow Agent in good faith reasonably believes to
be genuine and reasonably believes to be what it purports to be.
4.3 This Agreement will be binding upon the parties hereto and their respective
successors and assigns.
4.4 This Agreement, and the agreements referred to herein, constitute the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby.
4.5 This agreement will be governed by, and construed and enforced in accordance
with, the internal laws of Sweden.
4.6 This agreement may be amended only by a written agreement executed by all of
the parties hereto.
5
<PAGE> 64
4.7 As concerns notices etc to be given under this Agreement Section 10.2 of the
Stock Purchase Agreement shall apply. Such notice etc shall be sent to the
following address of the Escrow Agent:
4.8 Each party executing this Agreement warrants that it has authority to
execute this Agreement.
4.9 This Agreement may be executed in several counterparts, and it will not be
necessary for each party to execute each of such counterparts, but when all of
the parties have executed and delivered one or more of such counterparts, the
several parts, when taken together, will be deemed to constitute one and the
same instrument, enforceable against each party in accordance with its terms.
4.10 This Agreement may be terminated upon the written agreement of Stockholder
and Buyer at any time and shall terminate when there are no remaining Escrow
Funds. Upon termination of this Agreement, Escrow Agent shall be discharged of
all responsibility hereunder at such time as Escrow Agent shall have completed
its duties hereunder; PROVIDED HOWEVER, Escrow Agent's rights to indemnify and
to receive payment of its fees and expenses shall survive any termination of
this Agreement.
-----------------------
6
<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
CABOT SAFETY CORPORATION
By:_______________________________
Its:______________________________
ACTIVE I MALMO AB (publ)
By:_______________________________
Its:______________________________
SKANDINAVISKA ENSKILDA BANKEN
By:_______________________________
Its:______________________________
1
<PAGE> 66
EXHIBIT D
---------
FORM OF GENERAL RELEASE
This General Release is delivered pursuant to that certain Stock Purchase
Agreement (the "Stock Purchase Agreement") dated as of April 25, 1996 by and
among Cabot Safety Corporation, a Delaware corporation ("Buyer"), Peltor Holding
AB, a Swedish corporation (the "Company"), Leif Palmaer Invest AB, a Swedish
corporation ("LPAB"), Leif Andersson Invest AB, a Swedish corporation ("LAAB"),
(the Company, LPAB and LAAB collectively referred to as the "Companies"), and
Active i Malmo AB, a Swedish corporation (the "Stockholder") pursuant to which
Buyer is purchasing from the Stockholder shares of the capital stock of the
Company, all of the outstanding shares of the capital stock of LPAB and all of
the outstanding shares of the capital stock of LAAB (the "Stock Purchase
Agreement"). Capitalized terms used in this Agreement and not defined herein
shall have the respective meanings ascribed to them in the Stock Purchase
Agreement.
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the undersigned, the undersigned (the "Stockholder")
hereby releases and discharges Buyer, the Company, LPAB, LAAB and their
respective subsidiaries, each of the present and former directors, officers,
employees and agents of Buyer, the Company, LPAB, LAAB or their respective
subsidiaries, affiliates of any of the foregoing and their respective successors
and assigns (each a "Released Party") of and from any and all commitments,
indebtedness, suits, demands, obligations and liabilities of every kind and
nature, including claims and causes of action both at law and in equity, which
the Stockholder and/or the Stockholder's subsidiaries, affiliates, successors or
assigns ever had, now has or, to the extent arising from or in connection with
any act, omission or state of facts taken or existing on or prior to the Closing
Date, may have after the date hereof, against any Released Party, whether
asserted, unasserted, absolute, contingent, known or unknown, or in any role or
capacity, other than claims or causes of action arising under or pursuant to the
Stock Purchase Agreement and each document executed in connection therewith.
The Stockholder hereby represents to the Released Parties that (i) it has
not assigned any claim or possible claim against any Released Party, (ii) it
fully intends to release all claims against the Released Parties including
without limitation unknown and contingent claims (other than those specifically
reserved above), and (iii) it has consulted with counsel with respect to the
execution and delivery of this general release and has been fully apprised of
the consequences hereof.
-----------------------------
2
<PAGE> 67
This Stockholder's Release shall be governed by and construed in accordance
with the internal laws of Sweden.
EXECUTED as of the ___ day of May, 1996.
ACTIVE I MALMO AB (publ.)
By:____________________________________
3
<PAGE> 68
EXHIBIT E
---------
CONFIDENTIALITY AGREEMENT
This Agreement is in reference to the proposed disclosure by ACTIVE I MALMO
AB ("ACTIVE") and PELTOR HOLDING AB (hereinafter collectively referred to as
"PELTOR") to and for evaluation by representatives of CABOT SAFETY CORPORATION
(hereinafter referred to as "CABOT SAFETY") of certain information (hereinafter
referred to as "INFORMATION") to be delivered in written form and in meetings
with representatives of ACTIVE and PELTOR and relating to CABOT SAFETY's
evaluation of a potential acquisition (the "Acquisition") of the stock of
PELTOR. This INFORMATION may include information regarding technology, new
products, modifications to existing products, development plans, financial data,
and the general business affairs of PELTOR. PELTOR considers such INFORMATION to
be proprietary and confidential and accordingly, requires that this INFORMATION
be received and handled by CABOT SAFETY on the following basis:
CABOT SAFETY shall retain in strict confidence for a period of five (5)
years from the date hereof all of the INFORMATION and shall not disclose any
portion of the information to any third party, except that CABOT SAFETY may
disclose the INFORMATION in strict confidence to those employees, officers,
directors, advisors, representatives and agents of CABOT SAFETY who require
access to the INFORMATION for the purpose of evaluating the Acquisition, and
then only to such individuals who have been advised of this Agreement and have
agreed to maintain the strict obligation of confidence thereunder.
CABOT SAFETY shall not use any of the INFORMATION for any purpose other
than to evaluate the same as hereinabove stated.
CABOT SAFETY shall not have any obligation of confidence to PELTOR in
respect of:
1. INFORMATION which was known to CABOT SAFETY prior to any disclosure
thereof to CABOT SAFETY by PELTOR which prior knowledge on the part of CABOT
SAFETY shall be called to the attention of PELTOR within thirty (30) days after
disclosure of the INFORMATION to CABOT SAFETY by PELTOR and the existence of
which prior knowledge shall be provable only by written documents or other
tangible evidence bearing dates earlier than the date of disclosure by PELTOR.
If prior knowledge by CABOT SAFETY is not brought to the
1
<PAGE> 69
attention of PELTOR as hereinabove provided, it shall be conclusively resumed
that CABOT SAFETY had no such prior knowledge.
2. INFORMATION which is now in the public domain, or which in the future
enters the public domain through no fault of CABOT SAFETY (in which event CABOT
SAFETY's obligation of strict confidence in respect thereto shall terminate on
the date of entry of the INFORMATION into the public domain). INFORMATION in a
form other than a printed publication or other tangible form will not be deemed
to be in the public domain. INFORMATION shall not be deemed to be in the public
domain merely because individual elements thereof are separately found in the
public domain. INFORMATION shall not be deemed to be in the public domain merely
because it is, or parts of it are, embraced by general disclosures in the public
domain.
3. INFORMATION which is disclosed to CABOT SAFETY at any time by a third
party having right to make such disclosure to CABOT SAFETY, and without any
obligation of confidence on the part of CABOT SAFETY to third party in respect
of said disclosure.
4. INFORMATION which is released from its confidential status by the prior
written consent of PELTOR.
5. This Agreement shall be governed by and construed in accordance with the
laws of Sweden.
6. Any dispute in connection with this Agreement shall be finally settled
by arbitration in accordance with the Rules of the Arbitration Institute of the
Stockholm Chamber of Commerce. The arbitral tribunal shall be composed of three
members. The arbitration proceedings shall be conducted in the English language.
7. It is specifically understood and agreed that any breach of the
provisions of this Agreement by CABOT SAFETY will result in irreparable injury
to PELTOR, that the remedy at law alone will be an inadequate remedy for such
breach and that, in addition to any other remedy it may have, PELTOR shall be
entitled to enforce the specific performance of this Agreement by CABOT SAFETY
through both temporary and permanent injunctive relief without the necessity of
proving actual damages. The existence of any claim or cause of action which
PELTOR may have against CABOT SAFETY shall not constitute a defense or bar to
the enforcement of any of the provisions of this Agreement and shall be pursued
through separate court action by PELTOR.
CABOT SAFETY shall, promptly after it has completed its evaluation of the
INFORMATION or promptly after request by PELTOR return all INFORMATION in its
possession and at its expense to PELTOR, and shall retain no copies thereof.
2
<PAGE> 70
Nothing herein shall be deemed a grant of license directly or indirectly to
CABOT SAFETY under any patent application or patent of PELTOR.
IN WITNESS WHEREOF the parties have set their hand as of this 12th day of
April, 1996.
ACTIVE I MALMO AB and
PELTOR HOLDING AB
By: _____________________________
Bo Hakansson
Duly Authorized
CABOT SAFETY CORPORATION
By: _____________________________
John D Curtin, Jr
Chairman
3
<PAGE> 71
EXHIBIT F
---------
FORM OF COMPANY COUNSEL OPINION
We have acted as counsel for Peltor Holding AB (the "Company"), Leif
Palmaer Invest AB ("LPAB"), Leif Andersson Invest AB ("LAAB") (the Company, LPAB
and LAAB collectively referred to as the "Companies") and ACTIVE i Malmo AB
(publ) ("Seller") in connection with the sale of the shares pursuant to the
Stock Purchase Agreement between Seller, each of the Companies and Cabot Safety
Corporation ("Buyer") dated as of April [ ], 1996, (the "Stock Purchase
Agreement"). This opinion is furnished pursuant to Section 6.2(b) of the
Agreement.
1. Each of the Companies and each of the Subsidiaries is a corporation duly
organized and validly existing and in good standing if applicable under relevant
law under the laws of the jurisdiction of its incorporation.
2. The Stockholder is a corporation duly organized and validly existing and in
good standing under the laws of Sweden.
3. Each of the Companies has full right, power and authority to execute, deliver
and perform the Stock Purchase Agreement and each agreement, document and
instrument to be executed and delivered by it, as the case may be, pursuant to
the Stock Purchase Agreement (the "Related Agreement") and to consummate the
transactions contemplated thereby. The execution, delivery and performance by
each of the Companies of the Stock Purchase Agreement and each Related Agreement
has been duly and validly authorized by all necessary corporate action of each
of the Companies and the Stockholder and no further corporate proceedings on the
part of each of the Companies or the Stockholder are required in connection
therewith.
4. The Stockholder has full right, power and authority to execute, deliver and
perform the Stock Purchase Agreement and Related Agreements and to consummate
the transactions contemplated thereby. The execution, delivery and performance
by the Stockholder of the Stock Purchase Agreement and each Related Agreement
has been duly and validly authorized by all necessary corporate action of the
Stockholder and no further corporate proceedings on the part of the Stockholder
or its shareholders are required in connection therewith.
5. The Stock Purchase Agreement and each Related Agreement has been duly
executed and delivered by the Stockholder and each of the Companies. The Stock
Purchase Agreement and each
1
<PAGE> 72
Related Agreement constitutes the legal, valid and binding obligation of the
Stockholder and each of the Companies enforceable against such party in
accordance with its terms, except to the extent that the enforcement of any such
agreement or any right or remedy thereunder is subject to bankruptcy,
insolvency, reorganization, fraudulent conveyance, preferential transfer,
moratorium or similar laws of general application affecting creditors' rights
and to equitable principles (regardless of whether enforceability is considered
in a proceeding at law or in equity) limiting the right to obtain specific
performance or other equitable relief provided.
6. The execution and delivery by the Stockholder and each of the Companies of
the Stock Purchase Agreement and each Related Agreement ant the consummation of
the transactions contemplated thereby: (i) do not violate any provision of the
charter of the Stockholder, each of the Companies or any of their respective
subsidiaries; (ii) do not violate any statute, rule or regulation applicable to
any of the Stockholder, each of the Companies or any of its Subsidiaries or
their respective properties or, require any of the Stockholder, each of the
Companies or any of their respective subsidiaries to obtain any approval,
consent or waiver of, or to make any filing with, any governmental or regulatory
agency or administrative body or any other person or entity, in each case that
has not been obtained or made; and (iii) does not result in a breach of,
constitute a default under, accelerate any obligation under or give rise to a
right of termination of any contract or agreement known to us or any order,
writ, judgment, injunction, decree, determination or arbitration award known to
us to which any of the Stockholder, each of the Companies or any of their
respective Subsidiaries is a party or by which the property of any of the
Stockholder, each of the Companies or any of their respective Subsidiaries (as
applicable) is bound or affected, or, to our knowledge, result in the creation
or imposition of any mortgage, pledge, lien security interest or other charge or
encumbrance on any of the Company Shares or any property or asset owned by the
Stockholder, each of the Companies or any of their respective Subsidiaries;
7. To our knowledge, after due inquiry, there are no actions, suits, claims or
proceedings pending or overtly threatened in writing against any of the
Stockholder, each of the Companies or any of their respective Subsidiaries,
whether by law or in equity, or before or by any federal, state, municipal or
other governmental body, which seek to enjoin, restrain or prohibit or might
result in damages in respect of, the Stock Purchase Agreement or the complete
consummation of the transactions contemplated by the Stock Purchase Agreement;
8. Delivery of certificates for the Company Shares in registered form, issued or
endorsed to Buyer and payment therefore by Buyer as provided in the Stock
Purchase Agreement will pass to Buyer all of the rights of the Stockholder in
the Company Shares, free and clear of any and all liens, encumbrances, charges
or claims;
2
<PAGE> 73
9. The total authorized capital stock of the Company consists of 878.050 shares
of Common Stock of which 878.050 shares are issued and outstanding. All of the
shares of the Company's Common Stock were duly authorized and validly issued.
There are no outstanding options, warrants, rights, commitments, agreements,
understandings or preemptive rights to which the Stockholder, the Company or any
of their respective Subsidiaries are a party or by which any of them are bound
relating to the issuance or sale by the Company or any of its Subsidiaries of,
or outstanding securities convertible into or exchangeable for, any shares of
capital stock of any class of the Company or any of its Subsidiaries. The
Stockholder owns of record and beneficially 278.050 shares of the outstanding
and issued capital stock of the Company (the "Company Shares"), LPAB owns of
record and beneficially 300.000 shares of the outstanding and issued capital
stock of the Company and LAAB owns of record and beneficially 300.000 shares of
the outstanding and issued capital stock of the Company.
10. The total authorized capital stock of LPAB consists of 500 shares of Common
Stock of which 500 shares are issued and outstanding. All of the shares of
LPAB's Common Stock were duly authorized and validly issued. There are no
outstanding options, warrants, rights, commitments, agreements, understandings
or preemptive rights to which the Stockholder, LPAB or any of their respective
Subsidiaries are a party or by which any of them are bound relating to the
issuance or sale by LPAB or any of its Subsidiaries of, or outstanding
securities convertible into or exchangeable for, any shares of capital stock of
any class of LPAB or any of its Subsidiaries. The Stockholder is the owner of
all outstanding shares of LPAB.
11. The total authorized capital stock of LAAB consists of 500 shares of Common
Stock of which 500 shares are issued and outstanding. All of the shares of
LAAB's Common Stock were duly authorized and validly issued. There are no
outstanding options, warrants, rights, commitments, agreements, understandings
or preemptive rights to which the Stockholder, LAAB or any of their respective
Subsidiaries are a party or by which any of them are bound relating to the
issuance or sale by LAAB or any of its Subsidiaries of, or outstanding
securities convertible into or exchangeable for, any shares of capital stock of
any class of LAAB or any of its Subsidiaries. The Stockholder is the owner of
all outstanding shares of LAAB.
3
<PAGE> 74
EXHIBIT G
---------
FORM OF BUYER COUNSEL OPINION
We have acted as counsel for Cabot Safety Corporation ("Buyer") in
connection with the sale of the shares pursuant to the Stock Purchase Agreement
between Buyer and Peltor Holding AB (the "Company"), Leif Palmaer Invest AB
("LPAB"), Leif Andersson Invest AB ("LAAB") (the Company, LPAB and LAAB
collectively referred to as the "Companies") and ACTIVE i Malmo AB (publ)
("Seller") dated as of April [ ], 1996, (the "Stock Purchase Agreement"). This
opinion is furnished pursuant to Section 6.2(b) of the Agreement.
1. Buyer is a corporation organized, validly existing and in good standing
under the laws of the State of Delaware.
2. Buyer has full corporate power and corporate authority to execute and
deliver the Stock Purchase Agreement and each other agreement, document and
instrument executed and delivered by it pursuant to the Stock Purchase Agreement
(the "Related Agreements"), to perform its obligations thereunder and to
consummate the transactions contemplated thereby. The execution, delivery and
performance by Buyer of the Stock Purchase Agreement and each Related Agreement
have been duly and validly authorized by all necessary corporate action of Buyer
and no further corporate proceedings on the part of Buyer are required in
connection therewith.
3. The Stock Purchase Agreement and each Related Agreement have been duly
executed and delivered by Buyer. The Stock Purchase Agreement and each related
Agreement constitutes the legal, valid and binding obligation of Buyer
enforceable against such party in accordance with its terms, except to the
extent that the enforcement of any such agreement or any right or remedy
thereunder is subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, preferential transfers, moratorium or similar laws of general
application affecting creditor's rights and to equitable principles limiting the
right to obtain specific performance or other equitable relief.
4. The execution, delivery and performance by Buyer of the Stock Purchase
Agreement and each related Agreement: (i) does not violate any provisions of the
charters or by-laws of Buyer; (ii) does not violate any law, statute. rule or
regulation applicable to Buyer or its properties or require Buyer to obtain any
approval, consent or waiver of, or make any filing with, any governmental or
regulatory agency or administrative body or, to our knowledge, to obtain other
1
<PAGE> 75
approval, consent, waiver of, or to make any filing with, any other person or
entity, in each case that has not been obtained or made; and (iii) does not and
will not result in a breach of, constitute a default under, accelerate any
obligation under or give rise to a right of termination of any contract or
agreement included as an Exhibit to Buyer's Registration Statement on Form S-4
filed with the United States Securities and Exchange Commission on _____, 1996,
or any order, writ of judgment, injunction, decree, determination or arbitration
award known to us to which Buyer is a party or by which the property of Buyer is
bound or affected, or, to our knowledge, result in the creation or imposition of
any mortgage, pledge, lien, security interest or other charge or encumbrance on
any of the capital stock of Buyer or any property or asset owned by Buyer.
2
<PAGE> 76
EXHIBIT H
---------
FORM OF BUYER'S GENERAL RELEASE
This General Release is delivered pursuant to that certain Stock Purchase
Agreement (the "Stock Purchase Agreement") date as of April 25, 1996 by and
among Cabot Safety Corporation, a Delaware corporation ("Buyer"), Peltor Holding
AB, a Swedish corporation (the "Company"), Leif Palmaer Invest AB ("LPAB"), a
Swedish corporation, Leif Andersson Invest AB ("LAAB"), a Swedish corporation
and Active i Malmo AB, a Swedish corporation (the "Stockholder") pursuant to
which Buyer is purchasing form the Stockholder all of the outstanding shares of
the capital stock of the Company, all of the outstanding shares of the capital
stock of LPAB and all of the outstanding shares of the capital stock of LAAB.
Capitalized terms used in this Agreement and not defined herein shall have the
respective meanings ascribed to them in the Stock Purchase Agreement.
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the undesigned, the undersigned (the "Buyer") hereby
releases and discharges each of the present and former directors the Company and
their respective successors and assigns (each a "Released Party") of and from
any and all commitments, indebtedness, suits, demands, obligations and
liabilities of every kind and nature, including claims and causes of action both
at law and equity, which the Buyer and/or the Buyer's subsidiaries, successors
or assigns ever had, now has or, to the extent arising from or in connection
with any act, omission or state of facts taken or existing on or prior to the
Closing Date, may have after the date hereof, against any Released Party,
whether asserted, un-asserted, absolute, contingent, known or unknown, or in any
role or capacity, other than (i) claims or causes of action arising under or
pursuant to the Stock Purchase Agreement and each document executed in
connection therewith and (ii) claims or causes of action arising from wilful
misconduct or gross negligence on the part of any Released Party.
The Buyer hereby represents to the Released Parties that (i) it has not
assigned any claim or possible claim against any Released Party, (ii) it fully
intends to release all claims against the Released Parties including without
limitation unknown and contingent claims (other than those specifically reserved
above), and (iii) it has consulted with counsel with respect to the execution
and delivery of this general release and has been fully apprised of the
consequences hereof.
This Buyer's Release shall be governed by and construed in accordance with
the internal laws of Sweden.
1
<PAGE> 77
EXECUTED as of the [ ] day of May, 1996,
CABOT SAFETY CORPORATION
By: _____________________________
2
