SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
--------------------------
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
--------------------------
Date of Report (Date of earliest event reported): December 31, 1995
TECH-SYM CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 1-4371 4-1509818
(State or Other Jurisdiction (Commission File No.) (IRS employer
of incorporation) identification no.)
10500 Westoffice Drive
Houston, Texas 77042
Address of principal executive offices)
(713) 785-7790
(Registrant's telephone number)
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ITEM 2. Acquisition or Disposition of Assets.
Effective as of 00:00 a.m. on January 1, 1996, Continental
Electronics Corporation, a wholly-owned subsidiary of Tech-Sym Corporation
("CEC"), acquired all of the outstanding capital stock of Telefunken
Sendertechnik GmbH ("TFS") from Daimler-Benz Aerospace AG ("Dasa"). TFS, located
in Berlin, Germany, is in the business of designing and producing radio
broadcast transmitting equipment. TFS's customers include European governments
and commercial organizations, the Voice of America, Radio Free Europe and other
governments and organizations worldwide. CEC intends to continue the existing
business of TFS in conjunction with CEC's existing business of designing and
producing radio broadcast transmitter equipment.
The purchase price for the acquisition is 13,200,000 Deutsche
Marks, subject to adjustment based on the completion of an audited balance sheet
of TFS as of December 31, 1995, of which (i) 10,000,000 Deutsche Marks are
payable by CEC to Dasa at the time of the payment of certain intercompany
amounts due from Dasa to TFS following the completion of such audited balance
sheet and (ii) the remaining 3,200,000 Deutsche Marks are payable no later than
January 31, 1997, the unpaid balance of which bears interest at the Frankfort
Interbank Offer Rate, as adjusted from time to time, plus one percent (1%),
payable quarterly within 15 days after the end of each calendar quarter. As of
December 31, 1995, the exchange rate between Deutsche Marks and U.S. dollars was
approximately 1.4315 Deutsche Marks to 1.0 U.S. dollar. The amount of the
consideration payable by CEC was determined by arms'-length negotiations between
CEC and Dasa. CEC financed the initial 10,000,000 Deutsche Mark payment through
bank borrowings from Nations Bank of Texas, N.A.
ITEM 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired. It is
impractical to provide the required historical financial statements
required with respect to this acquisition at the time of the filing of
this Report on Form 8-K. The required historical financial statements
will be filed on or prior to the date which is 60 days after the date of
the filing of this Report on Form 8-K.
(b) Pro forma financial information. It is impractical to
provide the required pro forma financial information required with
respect to this acquisition at the time of the filing of this Report on
Form 8-K. The required pro forma financial information will be filed on
or prior to the date which is 60 days after the date of the filing of
this Report on Form 8-K.
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of
September 26, 1995, between
Continental Electronics Corporation
and Daimler-Benz Aerospace AG
2.2 Amendment Number 1 to Stock Purchase
Agreement, dated as of December 29,
1995, between Continental
Electronics Corporation and
Daimler-Benz Aerospace AG
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
TECH-SYM CORPORATION
By: /s/ Wendell W. Gamel
Name: Wendell W. Gamel
Title: Chairman and President
Date: January 16, 1996
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</TEXT.
Exhibit 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
CONTINENTAL ELECTRONICS CORPORATION
AND
DAIMLER-BENZ AEROSPACE AG
September 26, 1995
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TABLE OF CONTENTS
PAGE
I. PURCHASE AND SALE OF STOCK......................................1
1.1 Purchase and Sale of Stock.................................1
I. PURCHASE PRICE......................................................2
2.1 Purchase Price.............................................2
2.2 Closing Balance Sheet......................................3
2.3 Intercompany Accounts......................................6
II. REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS................7
3.1 Representations, Warranties and Certain Covenants
of Seller................................................7
3.1.1 Organization and Good Standing....................7
3.1.2 Authorization and Effect of Agreement.............7
3.1.3 No Restrictions Against Sale of the Shares........7
3.1.4 Financial Statements..............................8
3.1.5 Applicable Laws...................................10
3.1.6 Title to Assets; Inventory and Tangible Personal
Property......................................11
3.1.7 Intellectual Property Rights......................12
3.1.8. Prepayments; Accounts Receivable; Backlog;
Bid Bonds......................................12
3.1.9 Insurance.........................................13
3.1.10 Litigation........................................13
3.1.11 Tax Matters.......................................13
3.1.12 Contractual Rights................................14
3.1.13 Employee Matters..................................15
3.1.14 Warranties........................................17
3.1.15 Assets............................................17
3.1.16 Absence of Certain Changes or Events..............17
3.1.17 Environmental Matters.............................17
3.1.18 No Interest in Properties, Competitors............18
3.1.19 Outstanding Capital Stock; Subsidiaries...........18
3.1.20 Group Relations...................................19
3.1.21 Officer Agreements................................19
3.1.22 Absence of Brokers................................19
3.1.23 Accuracy of Information Provided to Purchaser.....19
3.2 Representations and Warranties of Purchaser................19
3.2.1 Organization and Good Standing....................20
3.2.2 Authorization and Effect of Agreement.............20
HOU04:16668.1
(i)
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3.2.3 No Restrictions Against Purchase of the Assets....20
3.2.4 Absence of Brokers................................20
IV. CERTAIN COVENANTS OF PURCHASER AND SELLER......................21
4.1 Press Releases.............................................21
4.2 Investigation by Purchaser.................................21
4.3 Confidential Nature of Information.........................21
4.4 Maintain the Business......................................22
4.5 No Inconsistent Action.....................................23
4.6 Covenant Against Competition...............................23
4.7 Post-Retirement Benefits...................................24
4.8 Termination of Corporate Agreement.........................25
4.9 Bid Bonds..................................................25
4.10 Restructuring Plan Savings.................................26
4.11 Seller Involvement in TFS Restructuring Plan...............26
4.12 Lease Option...............................................26
V. CONDITIONS PRECEDENT TO THE CLOSING.............................27
5.1 Conditions Precedent to Obligations of Purchaser..........27
5.1.1 No Misrepresentation or Breach of Covenants
and Warranties................................27
5.1.2 No Legal Obstruction..............................27
5.1.3 No Damage or Destruction..........................27
5.1.4 Due Diligence.....................................28
5.1.5 Board of Directors' Approval......................28
5.1.6 Consents..........................................28
5.1.7 Receipt of Payment of Receivables from Related
....... Parties................................28
5.1.8 TFS Restructuring Plan............................28
5.1.9 Key Employees.....................................29
5.1.10 License to TFS Name, Tradenames and Trademarks....29
5.1.11 Termination of Corporate Agreement................29
5.1.12 Closing Documents.................................30
5.2 Conditions Precedent to Obligations of Seller..............30
5.2.1 No Misrepresentation or Breach of Covenants and
Warranties....................................30
5.2.2 Consideration.....................................30
5.2.3 No Legal Obstruction.............................30
5.2.4 Board of Directors Approval.......................31
5.2.5 TFS Restructuring Plan............................31
5.2.6 Environmental Assurances..........................31
5.2.7 Irrevocable Order from Purchaser..................31
5.2.8 Closing Documents.................................31
HOU04:16668.1
(ii)
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VI. CLOSING............................................................31
6.1 The Closing...............................................31
6.2 Seller's Obligations......................................32
6.2.1 Receipts.........................................32
6.2.2 Resolutions......................................32
6.2.3 Other............................................32
6.3 Purchaser's Obligations..................................32
6.3.1 Consideration....................................32
6.3.2 Receipts........................................32
6.3.3 Resolutions......................................32
6.3.4 Other............................................32
VII. INDEMNIFICATION ...................................................32
7.1 Indemnification. ........................................32
7.2 Certain Procedures........................................35
7.3 Arbitration. ............................................36
VIII. MISCELLANEOUS......................................................39
8.1 Termination...............................................39
8.2 Representations of Officers...............................39
8.3 Notices...................................................39
8.4 Expenses..................................................40
8.5 Successors and Assigns....................................40
8.6 Waiver....................................................41
8.7 Entire Agreement..........................................41
8.8 Amendments, Supplements, Etc..............................41
8.9 Limitations on Rights of Third Parties....................41
8.10 Further Assurance.........................................41
8.11 Applicable Law............................................42
8.12 Titles and Heading........................................42
8.13 Survival of Representations, Warranties and Covenants.....42
8.14 Use of English Language...................................43
HOU04:16668.1
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), is made and entered
into as of September 26, 1995, by and among Continental Electronics
Corporation, a Nevada corporation located at 4212 S. Buckner Blvd., Dallas,
Texas 75227-0879 ("Purchaser"), and Daimler-Benz Aerospace AG, a German
stock corporation located at 81663 Munich, Germany and having commercial
registration number HRB98.454 ("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns all of the outstanding shares of capital stock of
TELEFUNKEN Sendertechnik GmbH, a German limited liability company located
at 10502 Berlin, Germany and having commercial registration number HRB31290
("TFS");
WHEREAS, TFS presently operates a business which manufactures and
sells terrestrial broadcasting products that utilize analog and digital
transmission techniques and related products and provides services related
to such products (the "Business");
WHEREAS, Seller desires to sell and transfer to Purchaser, and
Purchaser desires to purchase and to acquire from Seller, all of the
outstanding stock of TFS; and WHEREAS, Seller, as the owner of all of the
outstanding stock of TFS, expects to benefit from the transactions
contemplated by this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
I.
PURCHASE AND SALE OF STOCK
1.1. Purchase and Sale of Stock. Subject to and upon the terms and
conditions hereof, Seller sells and Purchaser purchases two shares of
capital stock of TFS, one in the nominal amount of 9,950,000 Deutsche Mark
("DM") and one in the nominal amount of 50,000 DM (collectively, the
"Shares")
HOU04:16668.1
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effective as of 12:00 p.m./00:00 a.m. (Berlin time) on December 31,
1995/January 1, 1996 (the "Effective Closing Time"). Subject to the
fulfillment of the condition precedent set forth in the following sentence,
Seller hereby transfers, and Purchaser hereby accepts the transfer of, the
Shares effective as of the Effective Closing Time. The sale and transfer of
the Shares with effect as of the Effective Closing Time is subject to the
condition precedent that on or prior to December 31, 1995 (the "Closing
Date") the German law firm of PUNDER, VOLHARD, WEBER & AXSTER ("PVW&A")
delivers a written notice to Purchaser and Seller that (a) PVW&A have
received written confirmation from Seller that all conditions precedent to
the obligations of Seller have either been fulfilled or waived, (b) PVW&A
have received written confirmation from Purchaser that all conditions
precedent to the obligations of Purchaser have either been fulfilled or
waived, (c) PVW&A have received from Purchaser in a separate trust account
established for the benefit of Purchaser (the "Purchaser Escrow Account")
an amount of 10,000,000 DM (the "Escrow Cash Amount"), (d) PVW&A have in
their possession a written guarantee of Tech-Sym Corporation, a Nevada
corporation ("Tech-Sym"), providing for a guarantee by Tech-Sym of the
payment obligations of Purchaser set forth in the second sentence of
Section 2.1 hereof (the "Tech-Sym Guarantee"), (e) PVW&A have received
written confirmation from TFS that TFS has received payment in accordance
with Section 2.3 hereof, and (f) PVW&A have received irrevocable orders in
writing from Purchaser to pay the Escrow Cash Amount from the Purchaser
Escrow Account to an account designated by Seller and to deliver the
Tech-Sym Guarantee to Seller upon receipt of written confirmation from TFS
that TFS has received payment of the Adjustment Amount (as defined in
Section 2.2).
II.
PURCHASE PRICE
2.1. Purchase Price. In consideration of the transfer of the Shares
and the other agreements, covenants and undertakings of Seller hereunder,
Purchaser shall pay to Seller a purchase price (the "Purchase Price") equal
to 15,000,000 DM (Fifteen Million Deutsche Mark), subject to adjustment as
provided in
HOU04:16668.1 -2-
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Section 2.2 hereof. In the event that the Shares are transferred to
Purchaser pursuant to Section 1.1 hereof as of the Effective Closing Time,
Purchaser shall be obligated to pay the remaining 5,000,000 DM of the
Purchase Price (the "Remaining Purchase Price Amount") no later than
January 31, 1997, and Purchaser shall be obligated to pay interest on the
unpaid average principal balance thereof for each complete calendar quarter
until the entire principal amount is paid at the Frankfurt Interbank Offer
Rate, as adjusted from time to time, plus one percent (1%), with each
interest payment due and payable on the fifteenth (15th) day following the
end of each such calendar quarter; provided that Purchaser shall be
entitled to offset any amount otherwise due and payable pursuant to this
sentence (i) in accordance with the provisions of Section 2.2(e) hereof or
(ii) with respect to any Loss (as defined in the Stock Purchase Agreement)
for which Purchaser is entitled to payment or reimbursement pursuant to
Section 7.1 hereof, provided that, with respect to this clause (ii), such
offset shall be made only to the extent of the amount of Loss that (A) has
been agreed to in writing by Purchaser and Seller or (B) has been
determined by arbitration pursuant to the provisions of Section 7.3 hereof.
2.2 Closing Balance Sheet. (a) On or prior to December 22, 1995,
Seller shall deliver to Purchaser a balance sheet that reflects Seller's
estimate of the assets, liabilities and stockholder's equity of TFS as of
the Effective Closing Time (the "Estimated Closing Balance Sheet"). Seller
shall cause the Estimated Closing Balance Sheet to specifically reflect (i)
a provision equal to Seller's estimate of the full amount of all TFS
Restructuring Costs (as defined in Section 5.1.8 hereof), (ii) a provision
equal to Seller's estimate of the full amount of all reasonably anticipated
employee post-retirement costs, including pension liabilities, for which
TFS may be liable or responsible to present or former employees of TFS or
its predecessors (excluding, for purposes of this clause (ii),
post-retirement costs included in the provision specified in clause (i)
above), specifying the amount of the provision attributable to
post-retirement costs related to persons whose employment with TFS is
terminated prior to the Effective Closing Time, (iii) a provision equal to
Seller's estimate of the full amount of all liabilities required by German
Generally
HOU04:16668.1
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Accepted Accounting Principles to be reflected in the Estimated
Closing Balance Sheet, including liability for taxes relating to activities
or periods prior to the Effective Closing Time, (iv) stockholder's equity
of not less than 20,000,000 DM and (v) Seller's estimate of the amount of
the financial intercompany account receivable payable by Seller to TFS as
of the Effective Closing Time (as adjusted pursuant to the Corporate
Agreement (as defined in Section 3.1.20 hereof) to take into account the
matters referred to in clauses (i) through (iv) above and any other matters
required to be taken into account pursuant to the Corporate Agreement with
respect to the year ended December 31, 1995). Except as provided in the
preceding sentence, the Estimated Closing Balance Sheet shall be prepared
by Seller on a basis consistent with the Audited Financial Statements (as
that term is defined in Section 3.1.4), in each case including consistency
with the accounting principles and methodology used in preparing the
Audited Financial Statements.
(b) Within thirty (30) days following the Effective Closing Time
Purchaser shall cause TFS to prepare a balance sheet reflecting the assets,
liabilities and stockholder's equity of TFS as of the Effective Closing
Time (the "Closing Balance Sheet"). The Closing Balance Sheet shall
specifically reflect (i) a provision equal to the full amount of all TFS
Restructuring Costs, (ii) a reserve equal to the full amount of all
reasonable anticipated post-retirement costs, including pension
liabilities, for which TFS may be liable or responsible to present or
former employees of TFS or its predecessors (excluding, for purposes of
this clause (ii), post-retirement costs included in the provision specified
in clause (i) above), specifying the amount of the provision attributable
to post-retirement costs related to persons whose employment with TFS
terminated prior to the Effective Closing Time, (iii) a provision equal to
the full amount of all liabilities required by German Generally Accepted
Accounting Principles to be reflected in the Closing Balance Sheet,
including liability for taxes relating to activities or periods prior to
the Effective Closing Time, (iv) the actual inventory of TFS as of the
Effective Closing Time pursuant to the taking of a physical inventory
immediately after the Effective Closing Time, (v) stockholder's equity of
not less than 20,000,000 DM and (vi) the amount of the financial
intercompany account receivable payable by Seller as of the Effective
Closing Time
HOU04:16668.1 -4-
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(as adjusted to reflect any payment made pursuant to Section 2.3
hereof and as adjusted pursuant to the Corporate Agreement to take into
account the matters referred to in clauses (i) through (v) above). Except
as provided in the preceding sentence, the Closing Balance Sheet shall be
prepared by TFS on a basis consistent with the Audited Financial
Statements, in each case including consistency with the accounting
principles and methodology used in preparing the Audited Financial
Statements. On or before January 31, 1996, Purchaser shall cause TFS to
deliver a copy of the Closing Balance Sheet to Seller, and Seller shall be
entitled to discuss the Closing Balance Sheet with TFS until the time of
the delivery of the Audited Closing Balance Sheet (as defined below). On or
before February 15, 1996, Purchaser shall cause TFS to cause KPMG Deutsche
Treuhand-Gessellschaft (the "TFS Auditors") to audit the Closing Balance
Sheet (the audited Closing Balance Sheet referred to herein as the "Audited
Closing Balance Sheet"), with the costs thereof to be paid by TFS. Seller
and Purchaser shall cooperate with the TFS Auditors to enable such firm to
complete its audit within such time period. Purchaser shall cause TFS to
deliver the Audited Closing Balance Sheet to Seller and Purchaser on or
before February 15, 1996.
(c) In the event that either Purchaser or Seller believes that the
Audited Closing Balance Sheet was not prepared on the basis set forth in
paragraph (b) above, then such party shall give notice to the other party
of such deficiencies within fifteen (15) days following delivery of the
Audited Closing Balance Sheet to Seller and Purchaser. Seller and Purchaser
thereafter shall meet promptly for the purpose of resolving in good faith
any dispute relating thereto, and in the event that Seller and Purchaser
are able to resolve such dispute, Seller and Buyer shall jointly prepare a
revised Closing Balance Sheet that reflects the resolution of such dispute.
(d) In the event that Seller and Purchaser are unable to resolve
the dispute within ten (10) days from the date of any such notice given
pursuant to paragraph (c) above, all unresolved issues (and only the
unresolved issues) shall be submitted to an internationally recognized
independent public accounting firm (which shall not be the accounting firm
for either Purchaser or Seller) selected jointly by Purchaser and
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Seller ("Accountants"), with the costs thereof to be shared equally by
the parties. Accountants may revise the Audited Closing Balance Sheet only
on a basis upon which either Purchaser or Seller was entitled to and did
object pursuant to paragraph (c) above. Accountants shall prepare a revised
Closing Balance Sheet within thirty (30) days after the selection of the
Accountants based upon its resolution of the issues submitted to it and
otherwise in accordance with the form and substance of the Audited Closing
Balance Sheet prepared by TFS and shall deliver the revised Closing Balance
Sheet to Seller and Purchaser; provided, however, that Accountants may
determine and advise the parties that the issues submitted to it are not
accounting issues, in which case it shall decline to make any determination
with respect to such issues. In such event, such issues shall be submitted
to determination by arbitration in accordance with the procedures specified
in Section 7.3 hereof.
(e) The Audited Closing Balance Sheet shall be final and binding as
between Purchaser and Seller unless a revised Closing Balance Sheet is
jointly prepared pursuant to paragraph (c) above or a revised Closing
Balance Sheet is delivered by the Accountants pursuant to paragraph (d)
above, in which case such revised Closing Balance Sheet shall be final and
binding as between Purchaser and Seller (such final and binding balance
sheet is referred to herein as the "Final Closing Balance Sheet").
(f) In the event that the Final Closing Balance Sheet reflects a
financial intercompany account receivable payable by Seller, Seller shall
immediately pay to TFS the amount of such financial intercompany account
receivable (the "Adjustment Amount") by wire transfer of immediately
available funds to an account previously designated by TFS.
2.3. Intercompany Accounts. Prior to 10:00 a.m. (Berlin time) on
the Closing Date, Seller shall cause to be paid to TFS in cash an amount
equal to (i) the amount of the financial intercompany account receivable
owed by Seller or its affiliates to TFS as reflected on the Estimated
Closing Balance Sheet less (ii) the estimated amount of the adjustment to
the financial intercompany account receivable resulting solely
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from the application of the provisions of the Corporate Agreement with
respect to the activities of TFS during the year ended December 31, 1995.
III.
REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS
3.1. Representations, Warranties and Certain Covenants of
Seller. Seller represents and warrants to and covenants with Purchaser, as
of the date of this Agreement, as follows:
3.1.1. Organization and Good Standing. Each of Seller and TFS
is a German company with limited liability duly organized, validly existing
and in good standing under the laws of Germany and is duly qualified to do
business as a foreign corporation in each jurisdiction where such
qualification is required as a result of its ownership of property or the
nature of the activities carried on by it, except where the failure to be
so qualified would not have a material adverse effect on the Business.
3.1.2. Authorization and Effect of Agreement. TFS has all
requisite corporate power and authority to own or hold under lease the
properties and assets it purports to own or lease relating to the Business
and to carry on its business as presently conducted. Each of Seller and TFS
has all requisite corporate power and authority to enter into and to
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been or will be on or prior to the
Closing Date duly authorized by all necessary corporate action on the part
of Seller and TFS and their respective shareholders. This Agreement
constitutes a valid and binding agreement of Seller enforceable against it
in accordance with its terms.
3.1.3. No Restrictions Against Sale of the Shares. Neither
the execution and delivery of this Agreement by Seller or the related
agreements to which it is a party nor the consummation of the transactions
contemplated hereby or thereby will (a) conflict with or result in any
breach of any provision of the articles of incorporation or by-laws (or
other similar governing
HOU04:16668.1 -7-
<PAGE>
documents) of Seller or TFS; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority ("Governmental Agency"), except any
regulatory approvals or governmental consents which (A) are normally
acquired after the consummation of transactions such as transactions of the
nature contemplated by this Agreement or the related agreements, (B) are
reasonably expected to be obtained after the Closing Date and (C) if not
obtained would not, in the aggregate, have a material adverse effect on the
Business; (c) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, license, agreement or other
instrument or obligation to which Seller or TFS is a party or by which
Seller or TFS may be bound; or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Seller or TFS.
3.1.4. Financial Statements. (a) Schedule 3.1.4(a) of the
disclosure schedules provided by Seller to Purchaser immediately prior to
the execution of this Agreement (the "Disclosure Schedules") is a copy of
the balance sheets of TFS at December 31, 1993 and 1994, the statement of
operations of TFS for the years ended December 31, 1992, 1993 and 1994 and
related notes thereto (collectively, the "Audited Financial Statements"),
which have been audited by the TFS Auditors and are accompanied by the
opinion of the TFS Auditors to the effect that the Audited Financial
Statements fairly present, in accordance with German Generally Accepted
Accounting Principles applied on a consistent basis throughout the periods
involved (except for changes to such accounting principles, or the
application thereof, as described in the Audited Financial Statements), the
financial position and results of operations of TFS at December 31, 1993
and 1994 and for the years ended December 31, 1992, 1993 and 1994. All
fixed or contingent obligations, liabilities, or commitments of TFS as of
December 31, 1994 are reserved against or disclosed in the Audited
Financial
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Statements to the extent required to be reserved against or disclosed
therein by German Generally Accepted Accounting Principles.
(b) Schedule 3.1.4(b) of the Disclosure Schedules is a copy of the
unaudited balance sheets of TFS at June 30, 1995 and the unaudited
statement of operations of TFS for the six months then ended (the
"Unaudited Financial Statements"). All fixed or contingent obligations,
liabilities or commitments of TFS as of June 30, 1995 are reserved against
or disclosed in the Unaudited Financial Statements to the extent required
to be reserved against or disclosed therein by German Generally Accepted
Accounting Principles applied on a basis consistent with the Audited
Financial Statements.
(c) The Audited Financial Statements fairly present, in accordance
with German Generally Accepted Accounting Principles applied on a
consistent basis throughout the periods involved, the financial position
and results of operations of TFS at December 31, 1993 and 1994 and for the
years ended December 31, 1992, 1993 and 1994. The Unaudited Financial
Statements fairly present, in accordance with German Generally Accepted
Accounting Principles applied on a basis consistent with the Audited
Financial Statements, the financial position and results of operations of
TFS at June 30, 1995 and for the six months then ended, subject only to
normal recurring year-end adjustments. (d) The books of account and other
financial records from which the Audited Financial Statements and the
Unaudited Financial Statements were prepared have been kept and maintained
in the ordinary course of the operation of TFS which, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of assets
of TFS and which are complete and correct in all material respects. (e) TFS
has devised, and maintained from and after January 1, 1992, a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions have
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been executed in accordance with general or specific authorization of
TFS's management; (ii) transactions have been recorded as necessary (A) to
permit preparation of financial statements in conformity with general
accepted accounting principles or any other criteria applicable to such
statements, and (B) to maintain accountability for assets; (iii) access to
assets has been permitted only in accordance with general or specific
authorization of TFS's management; and (iv) the recorded accountability for
assets has been compared with existing assets at reasonable intervals and
appropriate action has been taken with respect to any differences.
(f) As of the date of this Agreement, TFS has no liabilities (absolute,
contingent or otherwise) other than (i) those set forth on the balance
sheet included in the Unaudited Financial Statements delivered to
Purchaser, (ii) those incurred since the date of such financial statements
in the ordinary course of business and (iii) those for which a provision
has been established that is adequate under German Generally Accepted
Accounting Principles. As of the Closing Date, TFS will have no liabilities
(absolute, contingent or otherwise) other than those reflected on the
Estimated Closing Balance Sheet and those for which a provision has been
established on the balance sheet that is adequate under German Generally
Accepted Accounting Principles. TFS has not disposed of any assets
reflected on the balance sheet included in the Unaudited Financial
Statements other than those assets disposed of since the date of such
balance sheet in the ordinary course of business.
3.1.5. Applicable Laws. TFS is, and has been during the preceding
five year period, in compliance with all applicable European Union ("EU"),
national, federal, state and local laws, rules, regulations, ordinances,
decrees and orders, including, but not limited to, building, zoning,
environmental, pollution, wage, working conditions, labor, political
contribution or related laws ("Laws"), and has all currently required
governmental approvals, authorizations, consents, licenses and permits
("Permits") required for the operation of the Business, to its employees or
to its Assets. TFS is in full compliance with the terms and conditions of
each Permit. Schedule 3.1.5
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of the Disclosure Schedules is a complete and accurate list of all
Permits in effect as of the date of this Agreement. TFS has not received
any written notification of any asserted present or past unremedied failure
by TFS to comply with any of such Laws or Permits. 3.1.6. Title to Assets;
Inventory and Tangible Personal Property.
(a) TFS has good title to all of its assets, in each case free and clear
of any lien, encumbrance, mortgage, deed of trust, pledge or other similar
security interest ("Lien") except Liens for property and ad valorem taxes,
assessments and other applicable governmental charges, if such taxes,
assessments and charges shall not be due and payable, or if currently
payable, if TFS shall concurrently be contesting the validity thereof in
good faith.
(b) Schedule 3.1.6(b) of the Disclosure Schedules is a true and
correct list of lease agreements ("Leases") pursuant to which TFS leases
any real or tangible personal property. Each of the Leases is valid and
binding upon the lessor specified herein, and each Lease is in full force
and effect. TFS is not in default, and no notice of alleged default has
been received by TFS, under any such Lease, and no lessor under any such
Lease is in default or alleged to be in default thereunder. TFS enjoys
peaceful and undisturbed possession of all assets or property covered by
the Leases. None of the Leases will be terminated, and none of the rights
of TFS thereunder will be impaired as a result of the consummation of the
transactions contemplated hereby.
(c) TFS does not own any real property.
(d) Schedule 3.1.6(d) of the Disclosure Schedules is a complete
and accurate list of finished inventory, work-in-progress, stores and
supplies (collectively, "Inventory") of TFS as of the date of the balance
sheet included in the Unaudited Financial Statements. Each item of finished
Inventory of TFS is in good working condition and is usable for the purpose
for which it was designed. Each item of slow moving or obsolete Inventory
reflected on the balance sheet
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included in the Unaudited Financial Statements has been depreciated in
accordance with German Generally Accepted Accounting Principles. (e)
Schedule 3.1.6(e) of the Disclosure Schedules is a complete and accurate
list of machinery and equipment, material handling equipment, vehicles,
furniture, office equipment, business machines and other tangible personal
property (the "Tangible Personal Property") owned by TFS as of the date of
the balance sheet included in the Unaudited Financial Statements.
3.1.7. Intellectual Property Rights. Schedule 3.1.7 of the Disclosure
Schedules is a complete and accurate list of all patents, patent
applications, trademarks, copyrights, service marks and trade names owned
or licensed by TFS as of the date of this Agreement, in each case
reflecting whether such Intellectual Property is owned or licensed. TFS
owns or possesses adequate licenses or other rights to use (without making
any payment or granting rights to any person in exchange) all such patents,
patent applications, trademarks, copyrights, service marks and trade names
and all engineering and design information, unpatented inventions,
know-how, trade secrets and other intellectual property relating to the
Business (collectively, the "Intellectual Property") necessary to conduct
the Business. Neither the validity of the Intellectual Property nor the
title thereto or use thereof by TFS is being questioned in any dispute or
pending litigation, and the conduct of the Business, as now conducted, does
not conflict with licenses, copyrights, uncopyrighted works, trade marks,
service marks, trade names, trade name rights, patents, patent rights,
unpatented inventions or trade secrets of others. The AEG License (as
defined in Section 5.1.11 hereof), when delivered at the Closing, will
provide TFS with the rights specified therein, and such rights will not
infringe upon the rights of any other party.
3.1.8. Prepayments; Accounts Receivable; Backlog; Bid Bonds.
Schedule 3.1.8(a) of the Disclosure Schedules is a complete and accurate
list of all lease, security, utility, permit, tax or other bonds or
deposits, cash advances and similar prepayments made by TFS(collectively,
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"Prepayments") in existence as of the date of this Agreement. Schedule
3.18(b) of the Disclosure Schedules is a complete and accurate list of all
accounts receivable, notes receivable and other receivables, foreign and
domestic, of TFS, whether billed or unbilled, including any and all accrued
interest thereon (collectively, the "Accounts Receivable") of TFS as of the
date of this Agreement which sets forth the name and invoice number
relating thereto. Schedule 3.18(c) of the Disclosure Schedules is a
complete and accurate list of order backlog of TFS as of the date of this
Agreement, consisting only of orders that have not been cancelled, altered
or reduced as of such date. Schedule 3.18(d) of the Disclosure Schedules is
a complete and accurate list of all rights and incidents of interest in and
to all performance guaranties, letters of credit, performance and bid bonds
and similar arrangements of TFS ("Bid Bonds") in effect as of the date of
this Agreement.
3.1.9. Insurance. TFS maintains or participates in fire and casualty,
product and other liability insurance providing coverage that TFS deems to be
adequate for the operations of the Business as presently conducted, and TFS
shall use reasonable efforts to continue such coverage (or obtain insurance
providing substantially similar coverage) through the Closing Date.
Schedule 3.1.9 of the Disclosure Schedules is a complete and accurate
summary of all insurance coverage in effect as of the date of this
Agreement that indicates whether such coverage will terminate as of the
Closing Date as a result of the transfer of ownership of the Shares.
3.1.10. Litigation. Schedule 3.1.10 of the Disclosure Schedules is a
list of all actions, suits and proceedings (collectively "Lawsuits")
against TFS as of the date of this Agreement or against Seller that
question the legality of the transactions contemplated by this Agreement.
3.1.11. Tax Matters. All EU, national, federal, state and other tax
returns and reports required to be filed by or on behalf of TFS with
respect to the ownership of its assets or the operation of the Business
have been duly filed, except those for which extensions have been obtained.
All taxes and other assessments and levies (including all interest and
penalties) and all
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installments of estimated taxes required to be paid, withheld or
collected by TFS have been duly paid to the proper Governmental Agency,
withheld or collected, as the case may be, except for any such tax,
assessment or levy for which adequate provision has been made in the
balance sheet included in the Unaudited Financial Statements, and any
amount withheld or collected has been segregated and set aside for such
payment to the proper Governmental Agency and, if so segregated and set
aside, shall be so paid by TFS to the proper Governmental Agency prior to
the Closing, if required by law. TFS has not received any notice of an
assessment, deficiency notice, or similar notice with respect to income
tax, sales tax or any other taxes from any taxing authority with respect to
any taxable period ending on or before the Effective Closing Time, (ii) TFS
has not executed or filed with any taxing authority any agreement extending
the period for assessment or collection of any income or other taxes, and
(iii) TFS is not a party to any pending action or proceeding by any
governmental authority for assessment or collection of taxes and no claim
for assessment or collection of taxes has been asserted against it.
3.1.12. Contractual Rights. Schedule 3.1.12(a) of the Disclosure
Schedules is a complete and accurate list of each executory contract,
agreement and undertaking of TFS, including purchase orders, sales orders
and similar forward commitments, in effect as of the date of this Agreement
which either (i) extend for a period longer than one year after the
Effective Closing Time (unless the same may be terminated at the option of
TFS without penalty, on notice of 30 days or less), (ii) require future
payment by TFS of more than 5,000 DM, or (iii) are otherwise material to
the Business (collectively, the "Contracts"). All Contracts are in full
force and effect, TFS is not in default under the terms of any Contract,
and TFS does not have any knowledge of a default by the other party to any
such Contract. TFS (a) has not received payment under any Contract for any
product or service that will not be delivered or provided until after the
date of this Agreement except as set forth on Schedule 3.1.12(c), (b) has
not delivered under any Contract materially more products
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than any other party thereto is obligated to acquire, (c) is not
required to deliver any products or provide any services to any third party
under any Contract after the date of this Agreement for which such third
party is not obligated to pay the amounts specified in such Contract at the
time of delivering such products or providing such services or within a
prescribed time period thereafter and (d) there have not been delivered or
provided by TFS under any Contract materially less products or services
than any other party thereto paid for prior to the date of this Agreement.
None of the Contracts will be terminated, and none of the rights of TFS
thereunder will be impaired, as a result of the consummation of the
transactions contemplated by this Agreement.
3.1.13. Employee Matters.
(a) Except as set forth on Schedule 3.1.13(a), (i) there is no
unfair labor practice complaint against TFS threatened in writing or
pending before any Governmental Agency, (ii) there is no charge of
discrimination against TFS threatened in writing or pending by any employee
or former employee of TFS, (iii) there is no strike or similar labor action
actually pending or, to the best knowledge of Seller, threatened against
TFS, and (iv) TFS is not bound by any collective bargaining agreement with
any labor organization or other employee group relating to any of the
employees of TFS.
(b) Schedule 3.1.13(b) of the Disclosure Schedules is a complete
and accurate list of each material plan, program, agreement, contract,
policy or practice, that TFS maintains, contributes to, or is required to
contribute to or with respect to which TFS has any obligation or liability
(whether or not current, contingent or secondary) on behalf of any of its
current or former employees (or any beneficiary thereof) providing current
or deferred compensation or health, life insurance, disability, severance
or similar benefits to such persons (collectively, "Employee Plans").
HOU04:16668.1 -15-
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(c) Schedule 3.1.13(c)(i) of the Disclosure Schedules is a true
and correct list of all of the forms of TFS's standard employment
agreements and Seller has caused TFS to deliver to Purchaser prior to the
date of this Agreement true and correct copies of each such form. Schedule
3.13(c)(ii) of the Disclosure Schedules is a true and correct list of the
information provided to Purchaser by TFS reflecting, for each active
employee of TFS (identified by number and not by name) as of the date of
this Agreement, (i) the amount of aggregate annual base compensation to be
paid in 1995, (ii) the amount of annual bonus paid or scheduled to be paid
for 1995, (iii) a description of any wage, salary or bonus increases
scheduled to be made pursuant to the terms of any employment agreement,
collective bargaining agreement or otherwise, (iv) the amount of severance
pay or other compensation or benefits to be paid or provided upon
termination of employment, (v) age and years of employment with TFS,
including those prior years of service for other employers which are to be
accrued for purposes of the determination of the duration of service, and
(vi) a description of any deviation from or amendment to TFS's standard
employment agreement relating to such employee. The information provided to
Purchaser by TFS as described in the preceding sentence is true and
correct. Schedule 3.1.13(c)(iii) of the Disclosure Schedules is a true and
correct list of (i) agreements relating to employees of TFS that involve
labor unions or industry associations, (ii) the agreements and policies of
TFS relating to certain activities and assignments of employees of TFS
related to the Business and (iii) certificates and permits held by
employees of TFS with respect to activities performed by such employees in
connection with the Business.
(d) The estimate of TFS Restructuring Costs (as defined in Section
5.1.8) set forth in the TFS Restructuring Plan (as defined in Section
5.1.8) is a reasonable estimate of all costs, liabilities and expenses
associated with the restructuring and the reduction of the number of
employees of the Business as specified in the TFS Restructuring Plan.
HOU04:16668.1 -16-
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3.1.14. Warranties. Except as set forth on Schedule 3.1.14 of the
Disclosure Schedules, TFS does not have any warranties to third parties
with respect to any services performed or products sold by it.
3.1.15. Assets. Since December 31, 1993, TFS has not utilized any assets
of Seller or any of its affiliates with respect to the conduct of the
Business.
3.1.16. Absence of Certain Changes or Events. TFS has not, between
December 31, 1994 and the date of this Agreement taken any action of the
type described in clauses (a) through (f) of the third sentence of Section
4.4 hereof. Since December 31, 1994, there has not occurred any material
adverse change in the sales, operations, assets, financial condition or
results of operations of TFS or the incurrence by TFS of any material
liability or obligation except for such changes or incurrence of
liabilities directly related to the TFS Restructuring Plan.
3.1.17. Environmental Matters. There are no present or past
environmental conditions relating to the Business of or the assets owned,
leased or otherwise used by TFS resulting from a past or present spill,
discharge, leak, emission, injection, escape, disinterring, leaching,
migrating, disposing, or dumping, whether accidental or intentional, legal
or illegal at the time, (collectively, a "Release") of any hazardous
substances, including but not limited to, any substance regulated by any
applicable environmental protection Law from or onto any property covered
by any Lease to any medium, including, but not limited to, air, land,
surface waters or underground waters, including without limitation Releases
of such substances that constitute raw materials, intermediates or products
of TFS or the Business (a "Hazardous Substance"). No material citations,
fines or penalties have been assessed, threatened in writing or asserted
against TFS in connection with the conduct of the Business under any
applicable Laws relating to noise or to air, water or land pollution or
other environmental protection matters or to occupational safety or health
matters. TFS has not received any written notice from a Governmental Agency
of any material violation of any
HOU04:16668.1 -17-
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environmental protection Law or Permit, and there are no pending
formal offers to negotiate by any administrative agency, general or special
potentially responsible party notices, preliminary investigations,
underfunded closures, post-closure care or other financial assurances
required by any environmental protection Laws, remedial investigations,
feasibility studies, groundwater assessments, notices of deficiency,
unilateral administrative orders, administrative orders on consent,
administrative agency or tribunal proceedings, imminent endangerment
orders, corrective action orders, voluntary cleanups, or claims by third
parties for damages or environmental cleanups or restoration with respect
to the operation of the Business or the assets owned, leased or otherwise
used by TFS.
3.1.18. No Interest in Properties, Competitors. To the
knowledge of Seller, neither Mr. Jurgen Graaff nor any of the five
employees of TFS who report directly to Mr. Graaff, nor any spouse or child
of any of these persons, directly or indirectly (i) owns any interest in
any of the assets used by TFS in the conduct of the Business or (ii) owns
any interest in, controls, or is an employee, officer, director, or agent
of, or consultant to, any other entity which is a competitor, supplier,
customer, landlord or tenant of the Business.
3.1.19. Outstanding Capital Stock; Subsidiaries. TFS has no shares of
capital stock authorized, issued or outstanding except for the Shares. The
Shares have been validly authorized and issued and are fully paid and
nonassessable, and were not issued in violation of any preemptive right.
Seller owns the Shares free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements and voting trusts.
There is no commitment, plan or arrangement to issue or sell any shares of
capital stock of TFS, and there are no outstanding options, warrants or
other securities that are convertible, exchangeable or exercisable for
shares of capital stock of TFS. TFS does not have any subsidiaries, and no
aspect of the Business is conducted by or through any entity except TFS.
HOU04:16668.1 -18-
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3.1.20 Group Relations. Schedule 3.1.20 of the Disclosure Schedules is
a true and correct copy of the Subordination and Profit and Loss Transfer
Agreement initially between Telefunken Systemtechnik GmbH ("TST") and TFS
dated November 11/13, 1991, and currently between Seller and TFS as a
result of a merger of TST into Seller, and of each and every amendment
thereof (the "Corporate Agreement"). Seller has provided Purchaser a true
and correct copy of all documents relating to a loan from Seller to TFS in
the principal amount of 1,300,000 DM as of June 30, 1995 (the "Berlin Loan
Documents"). Except for the Corporate Agreement and the Berlin Loan
Documents, there have been no contractual or factual arrangements between
Seller and TFS which (a) constitute a singular or permanent change of TFS's
Articles of Association or by-laws, (b) would give any of Seller's
shareholders or creditors any claim against TFS or its assets, (c)
constitute a hidden profit distribution or (d) give Seller or any third
party any claim against TFS or Purchaser after the Closing Date.
3.1.21 Officer Agreements. As of the Closing Date, each agreement
between Seller (or any of its affiliates) and any person who is actively
involved in the Business of TFS will be effectively terminated without TFS
incurring any obligation, cost or expenses.
3.1.22 Absence of Brokers. Neither Seller nor TFS has engaged any
broker, agent or finder, or incurred any brokerage fee, agent's commission,
finder's fee or other similar charge, which would result in liability cost
or obligation to TFS or Purchaser.
3.1.23. Accuracy of Information Provided to Purchaser. All of the
written information previously provided to Purchaser or its representatives
by TFS or its representatives on or after May 1, 1995 is accurate and
complete in all material respects. 3.2. Representations and Warranties of
Purchaser. Purchaser represents and warrants to Seller, as of the date of
this Agreement, as follows:
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3.2.1. Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada.
3.2.2. Authorization and Effect of Agreement. Purchaser has all
requisite corporate power and authority (a) to purchase the Share
and (b) to enter into and perform its obligations under this Agreement. No
event has occurred that would cause the dissolution of Purchaser, nor has
any action or meeting been taken or called for the purpose of dissolving
the Purchaser. Upon approval of the consummation of the transactions
contemplated by this Agreement by the Board of Directors of Purchaser, the
execution, delivery and performance of this Agreement will have been duly
authorized by all necessary corporate action on the part of Purchaser and
its shareholder and this Agreement will constitute a valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with
its terms.
3.2.3. No Restrictions Against Purchase of the Assets. The
execution and delivery of this Agreement by Purchaser and the performance
by it of the transactions contemplated hereby do not violate or conflict
with the Certificate of Incorporation or Bylaws of Purchaser or conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any material instrument, agreement, lease,
mortgage, judgment, order or decree to which Purchaser is a party. No
filing with or approval or authorization of any court or Governmental
Agency is required for Purchaser to enter into and perform its obligations
under this Agreement.
3.2.4 Absence of Brokers. Purchaser has not engaged any broker, agent
or finder, or incurred any brokerage fee, agent's commission, finder's
fee or similar charge, which would result in liability to Seller.
HOU04:16668.1 -20-
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IV.
CERTAIN COVENANTS OF PURCHASER AND SELLER
4.1. Press Releases. The parties hereto agree that neither Seller nor
Purchaser shall, and Seller and Purchaser shall cause their respective
affiliates not to, issue or cause publication of any press release or other
announcement or public communication with respect to this Agreement or the
transactions contemplated hereby without the consent of the other, which
consent shall not unreasonably be withheld; provided that nothing herein
shall prohibit either party from issuing or causing publication of any such
press release, announcement or public communication to the extent that such
party reasonably determines that such action is required by applicable law.
4.2. Investigation by Purchaser. From the date of this Agreement until
the Effective Closing Time, upon reasonable notice from Purchaser, Seller
shall provide, or cause to be provided, to the employees and authorized
representatives of Purchaser (including Purchaser's independent
accountants, attorneys and any other independent professionals deemed
desirable by Purchaser), such access during usual business hours to the
offices, properties, assets and the corporate and financial records of TFS
as Purchaser shall request, and shall furnish to Purchaser or its
authorized representatives such additional financial and operating data as
shall be reasonably requested by Purchaser for purposes of this Agreement.
Any and all investigation and information obtained thereby shall not affect
or diminish Seller's warranties, representations or covenants given or
undertaken in this Agreement nor shall such investigation or information
affect the right of the Purchaser to rely on such warranties,
representations or covenants and to seek indemnification for any untruth,
misstatement or breach thereof. Nothing herein shall obligate Seller to
take actions that would unreasonably disrupt the normal course of business
of TFS.
4.3. Confidential Nature of Information. Each of the parties hereto
shall treat in confidence all documents, materials and other information
which it shall have obtained regarding the other during the course of the
negotiations leading to the execution of this Agreement, in the
investigation of the other, and
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in the preparation of agreements and other documents relating to the
consummation of such transactions, provided, however, that from and after
the Effective Closing Time, the foregoing prohibition shall not apply to
the Purchaser with respect to documents, materials and other information
relating to the Business or the assets of TFS. In the event the
transactions contemplated hereby are not consummated, each of the parties
hereto shall return to the other all originals and copies of non-public
documents and materials relating to the other which have been furnished or
acquired in any manner in connection therewith.
4.4. Maintain the Business.
Between the date of this Agreement and the Effective Closing Time, Seller
shall use reasonable efforts to cause TFS to (i) maintain the Business
intact and to preserve its goodwill with its customers, suppliers,
employees and others having business relations with it and (ii) operate the
Business in a prudent, businesslike manner consistent with past practices.
Between the date of this Agreement and the Effective Closing Time Seller
shall cause TFS not to, without the prior written approval of Purchaser,
(a) sell or lease, or enter into any agreement to sell or lease, any of
TFS's assets other than the sale of Inventory in the ordinary course of
business; (b) incur any indebtedness for borrowed money; (c) enter into any
lease for any property for which TFS would become obligated for payments in
excess of 10,000 DM over the term of such lease; (d) make any increases in
wages, salaries, employee benefits or other compensation payable or to
become payable to any employee of TFS or pay or commit to pay any bonuses,
except in accordance with any employment agreement or collective bargaining
agreement existing on the date of this Agreement, or change any provision
of any existing Employee Plan; (e) make or enter into any written
employment contract or any Employee Plan; or (f) enter into any amendment
to any Lease or Contract required to be listed on Schedule 3.1.6(b) or
3.1.12(a) hereof. Between the date of this Agreement and the Effective
Closing Time, Seller shall (i) notify Purchaser of any material loss of,
damage to or disposition of any of the assets of TFS (other than the sale
of Inventory in the ordinary course of business); (ii) promptly after
obtaining knowledge thereof, give notice to Purchaser of any material claim
or litigation, threatened or instituted, against TFS; (iii) take all
actions and make all filings which are reasonably
HOU04:16668.1 -22-
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necessary to lawfully transfer the Shares to Purchaser at the
Effective Closing Time as provided in this Agreement except for routine
filings in connection with approvals or consents of third parties and
Governmental Agencies customarily made or obtained subsequent to transfer
of title; (iv) to the extent within the control of Seller, Seller will
refrain from doing any act or omitting to do any act which would cause any
of the representations or warranties of Seller contained in this Agreement
not to be true and correct in any material respect on the Effective Closing
Time; (v) cause TFS to comply in all material respects with all Laws
applicable to the Business and the assets of TFS; (vi) cause TFS to
maintain its books of accounts and records in the usual, regular and
ordinary manner and consistent with past practice; and (vii) not, without
the consent of Purchaser, permit TFS to enter into any material agreement,
contract, commitment or undertaking applicable to the Business or the
assets of TFS, except in the ordinary course of business.
4.5. No Inconsistent Action. Unless and until this Agreement has been
terminated as provided herein, neither Purchaser nor Seller will undertake
any course of action inconsistent with the provisions or intent of this
Agreement. Without limitation of the foregoing, unless and until this
Agreement has been terminated as provided herein, Seller shall not (except
as otherwise contemplated by the terms hereof) (a) encourage, solicit,
discuss, or otherwise entertain, directly or indirectly, any offer, bid or
proposal to acquire, directly or indirectly, any of the assets of TFS or
the Business or (b) hold discussions with or furnish to any other person
information, materials or any other data concerning the assets of TFS or
the Business for the purpose of evaluating or investigating the purchase
thereof.
4.6. Covenant Against Competition. As an essential consideration
for the obligations of Purchaser under this Agreement, Seller hereby agrees
and covenants that, for a period of five years following the Effective
Closing Time, Seller shall not engage, directly or indirectly, in any
manner in the manufacture, sale, distribution, buying, brokering, leasing
or marketing of products of the same general type as those produced or
marketed by TFS, and shall not engage, directly or indirectly, in any
manner in providing services of the same general type as those provided by
TFS, in each case in the geographic areas in which
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TFS has marketed products or services since Seller's formation. In
addition, Seller shall not directly or indirectly solicit for employment
any employees of TFS or of Purchaser for a period of five years following
the Effective Closing Time. If Purchaser believes Seller has violated the
provisions of this Section 4.6, Purchaser shall have the right to seek
relief from any court of competent jurisdiction. Seller acknowledges that
money damages alone will not adequately compensate Purchaser in the event
of a breach of the covenants of this Section. Therefore, Seller agrees that
in addition to all remedies available at law, in equity or under this
Agreement, Purchaser shall be entitled to injunctive relief for the
enforcement of this covenant. Seller agrees that the covenants in this
Section are reasonable with respect to their duration, scope and
geographical area. If, at the time of enforcement of this Section, a court
should hold that the restrictions herein are unreasonable under the
circumstances then existing or otherwise, the parties agree that the
maximum duration, scope or geographical area legally permissible under such
circumstances will be substituted for the duration, scope or area stated
herein.
4.7 Post-Retirement Benefits. (a) Seller shall, prior to the
Closing Date, make an offer to each former employee of TFS, and each other
person who is not currently an employee of TFS but for whom TFS is
responsible for post-retirement benefits, to transfer responsibility for
post-retirement benefits, including pension liabilities but excluding
severance pay related to terminated employees and other costs and expenses
directly resulting from the TFS Restructuring Plan other than pension
liabilities, from TFS to Seller. From and after the Closing Date, Seller
shall make such offer to each employee of TFS whose employment is
terminated pursuant to the TFS Restructuring Plan or otherwise terminated
prior to December 31, 1996. With respect to each person who accepts such
offer and as a result thereof TFS is no longer legally responsible for such
post-retirement benefits with respect to such person, TFS shall promptly
make a payment to Seller, by wire transfer of immediately available funds
to an account designated by Seller, of an amount equal to the sum of (i)
the amount of the provision for such liabilities for such person as
reflected in the Final Closing Balance Sheet plus (ii) accrued interest
thereon at an annual rate of 8%.
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(b) Within the 90 days following the fifth anniversary of the Closing
Date, TFS shall redetermine the amount of the provision for liability for
post-retirement benefits reflected on the Final Closing Balance Sheet with
respect to each former employee of TFS (or any of its predecessors) as of
the Closing Date and each person whose employment is terminated pursuant to
the TFS Restructuring Plan after the Closing Date, in each case for whom
TFS remains legally responsible for such benefits as of such date,
utilizing the same actuarial assumptions and accounting principles utilized
in preparing the Final Closing Balance Sheet, and to the extent that the
redetermined amount of the provision for liability for post-retirement
benefits for such persons exceeds the actual amount of the provision for
such liability for such persons (as adjusted to reflect the accrual of
interest thereon at an assumed annual rate of 8%), Seller shall promptly
make a payment to TFS, by wire transfer of immediately available funds to
an account designated by TFS, of such excess amount.
4.8 Termination of Corporate Agreement. Seller undertakes to (i)
procure the termination of the Corporate Agreement effective as of the
Effective Closing Time and (ii) use all reasonable efforts to enable the
publication in the Official Gazette (Bundesanzeiger) announcing the
termination thereof. All fees, costs and expenses relating to such
termination shall be borne by Seller. Seller hereby waives any right
arising from the Corporate Agreement for any time after Closing.
4.9 Bid Bonds. Purchaser shall (i) reimburse Seller for any amounts
required by any third party to be paid by Seller with respect to any
performance guaranty, letter of credit, performance bond or bid bond in
effect at the Effective Time that have been established by Seller to
support the obligations of TFS with respect to the Business (the "Seller
Bonds") and (ii) use commercially reasonable efforts to provide substitute
performance guaranties, letters of credit, performance bonds or bid bonds
to replace the Seller Bonds, provided that the obligations of Purchaser
with respect to clause (ii) above shall not require Purchaser to replace a
Seller Bond if the replacement thereof would have an adverse effect on the
business or financial condition of TFS.
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4.10 Restructuring Plan Savings. In the event that (a) the difference
obtained by (i) subtracting the amount of the provision for the remaining
TFS Restructuring Costs reflected on the balance sheet of TFS as of
December 31, 1996, as audited by an internationally recognized accounting
firm, from (ii) the amount of the provision for the TFS Restructuring Costs
reflected on the Final Closing Balance Sheet exceeds (b) the actual amount
of the costs associated with the restructuring contemplated by the TFS
Restructuring Plan for the year ended December 31, 1996 (including all
wages, salaries, termination expenses, severance expenses, pension
expenses, expenses of health and benefit plans, legal expenses related to
legal proceedings, payments for unemployment benefits and replenishment
fees, other post-retirement or post-termination costs and any other costs
incurred on or after the respective dates of notice of termination of
employees termination in connection with the TFS Restructuring Plan,
whether or not such costs relate directly or indirectly from such
terminations), then Purchaser shall cause TFS to make a payment to Seller
on or before March 31, 1997 in an amount equal to fifty percent (50%) of
such difference.
4.11 Seller Involvement in TFS Restructuring Plan. In order to assure
the expeditious implementation of the TFS Restructuring Plan, Seller shall
assign a representative to steer, control, and support the implementation
of the TFS Restructuring Plan during 1996 in close cooperation with and
subject to the direction of TFS management.
4.12. Lease Option. Seller shall use its bests efforts to obtain an
agreement from AEG Anlagenvermietung GmbH & Co. Frankfurt OHG ("AEG Lease")
providing that, in the event that the Lease Agreement between TFS and AEG
Mobile Communication GmbH ("AEG Mobile") dated December 22/23, 1993, as
amended by the First Amendment dated March 21, 1995 (collectively, the "AEG
Lease Agreement") is terminated prior to December 31, 2004 due to any
notice given or other action by either AEG Lease or AEG Mobile, TFS shall
have the option to rent the premises specified in the AEG Lease Agreement
directly from AEG Lease upon the same terms and conditions as specified in
the AEG Lease Agreement.
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V.
CONDITIONS PRECEDENT TO THE CLOSING
5.1. Conditions Precedent to Obligations of Purchaser. The
obligations of Purchaser under this Agreement to consummate the
transactions contemplated hereby shall be subject to the satisfaction, on
or prior to the Closing Date, of all of the following conditions, any one
or more of which may be waived at the option of Purchaser:
5.1.1. No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no breach by Seller in the
performance of any of Seller's covenants herein, the representations and
warranties of Seller contained in this Agreement shall be true and correct
in all material respects on the Closing Date as if made on and as of the
Closing Date and there shall have been delivered to Purchaser certificates
to that effect, dated the Closing Date, and signed on behalf of Seller by
duly authorized officers.
5.1.2. No Legal Obstruction. There shall be no
Law and no judicial decision or judgment, or any preliminary or permanent
injunction, temporary restraining order or other judicial or administrative
order or decree, on the Closing Date, the effect of which would restrain,
enjoin or otherwise question the validity or legality of this Agreement or
the transactions contemplated hereby or seek damages therefrom. All
approvals of, and consents by, all applicable EU, national, federal, state,
local and foreign governmental agencies and authorities, and all filings
with and submissions to all such agencies and authorities as may be
required for the consummation of the transactions contemplated by this
Agreement shall have been made or obtained (except for such approvals,
consents, filings or submissions, the failure of which to obtain or make
would not have a material adverse effect on the consummation of the
transactions contemplated by this Agreement).
5.1.3. No Damage or Destruction. Prior to the Closing
Date, there shall not have occurred any damage, destruction or other casualty
to any facility, property, machinery or equipment
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owned or used by TFS which would materially interfere with the
operation of the Business or materially diminish the value of the assets of
TFS.
5.1.4. Due Diligence. Purchaser shall have received for
review all documents and other information requested in accordance with
Section 4.2 hereof.
5.1.5. Board of Directors' Approval. Purchaser shall have
received approval by its Board of Directors of the transactions contemplated
by this Agreement.
5.1.6. Consents. Seller shall have received all consents
and approvals from third parties and given all notices necessary to
consummate the transactions contemplated by this Agreement, including any
consent or approval or notice required to be obtained or given under any of
the Contracts or Leases to prevent a breach of the representation and
warranty of Seller in either Section 3.1.6(b) or Section 3.1.12(a) hereof.
5.1.7. Receipt of Payment of Receivables from Related
Parties. Purchaser shall have received from Seller, or any of its
subsidiaries or affiliates, in immediately available funds, an amount
equal to the aggregate amount of the financial intercompany account
receivable reflected on the Estimated Closing Balance Sheet as provided in
Section 2.3 hereof.
5.1.8. TFS Restructuring Plan. TFS shall have been successful
in obtaining a written agreement from the applicable employee unions
or other representatives of the employees of TFS (the "TFS Restructuring
Plan") with respect to TFS's proposal to reduce the current number of
employees of the Business to a level acceptable to TFS by December 31,
1996. TFS shall have provided to Purchaser a copy of the TFS Restructuring
Plan, along with (i) a written estimate of the aggregate amount of all
reasonably anticipated costs associated with such restructuring and
employee reductions (including all wages, salaries, termination expenses,
severance expenses, pension expenses, expenses of health and benefit plans,
legal expenses related to legal proceedings, payments for unemployment
benefits and replenishment fees, other post-retirement or post-termination
costs and any other costs to be incurred on or after the respective dates
of notice of termination of employees to be terminated in connection
therewith, whether or not such costs related directly or indirectly from
such terminations (collectively, the "TFS Restructuring Costs"), and (ii) a
written itemization of each category of such costs, and Purchaser shall
have consented in writing to the TFS Restructuring Plan and the estimate of
TFS Restructuring Costs.
5.1.9. Key Employees. None of the key employees of
the Business shall have terminated their employment with TFS, or given
notice of their intention to terminate their employment with TFS, and
Jurgen Graaff will have agreed to continue as a Geschaftsfuhrer (managing
director) pursuant to an employment agreement that is in form and substance
acceptable to Purchaser.
5.1.10. License to TFS Name, Tradenames and Trademarks.
Without the payment of any fee or charge by Purchaser, TFS shall have
received a royalty-free license from AEG Aktiengesellschaft (the "AEG
License"), in form and substance satisfactory to Purchaser, providing TFS
(i) the exclusive right to use the name "Telefunken Sendertechnik" together
as the corporate name of TFS for a period, including renewal options, of
not less than 90 years, but not the right to use the name "Telefunken" as a
corporate name without the word "Sendertechnik" following the word
"Telefunken" and (ii) the right to use the name "Telefunken Sendertechnik"
together and any and all related tradenames, trademarks and logos for
purposes of product identification and marketing, including the use thereof
on any product manufactured or marketed by TFS, in any product literature
or with respect to any product advertisement materials or information.
5.1.11. Termination of Corporate Agreement. Seller and
TFS shall have terminated the Corporate Agreement by executing such
instruments or documents for such purpose as may be reasonably
satisfactory to Purchaser.
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5.1.12. Closing Documents. The documents specified
in Section 6.2 shall have been delivered to Purchaser.
5.2. Conditions Precedent to Obligations of Seller.
The obligations of Seller under this Agreement shall be subject to the
fulfillment on or prior to the Closing Date of all the following
conditions, any one or more of which may be waived at the option of Seller:
5.2.1. No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by Purchaser
in the performance of any of its covenants herein, the
representations and warranties of Purchaser contained or referred
to in this Agreement shall be true and correct in all material
respects on the Closing Date as if made on and as of the Closing
Date and there shall have been delivered to Seller a certificate
to that effect, dated the Closing Date, and signed on behalf of
Purchaser by a duly authorized officer.
5.2.2. Consideration. Purchaser shall have delivered to
PVW&A the Cash Escrow Amount in the manner provided in Section 2.1 hereof.
5.2.3. No Legal Obstruction. There shall be no Law and
no judicial decision or judgment, or any preliminary or permanent
injunction, temporary restraining order or other judicial or
administrative order or decree, on the Closing Date, the effect
of which would restrain, enjoin or otherwise question the
validity or legality of this Agreement or the transactions
contemplated hereby or seek damages therefrom. All approvals of,
and consents by, all applicable EU, national, federal, state,
local and foreign governmental agencies and authorities, and all
filings with and submissions to all such agencies and authorities
as may be required for the consummation of the transactions
contemplated by this Agreement shall have been made or obtained
(except for such approvals, consents, filings or submissions, the
failure of which to obtain or make would not have a material
adverse effect on the consummation of the transactions
contemplated by this Agreement).
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5.2.4. Board of Directors Approval. The Management Board
(Vorstand) of Seller shall have approved the consummation of the
transactions contemplated by this Agreement.
5.2.5. TFS Restructuring Plan. TFS and the applicable
employee unions or other representatives of the employees of TFS shall have
agreed in writing to the TFS Restructuring Plan, and TFS shall have
provided to Purchaser a written estimate of the aggregate amount of TFS
Restructuring Costs.
5.2.6. Environmental Assurances. Prior to the Closing Date,
Seller shall have either obtained (i) an indemnification agreement from one
or more of its affiliates, in form and substance reasonably satisfactory to
Seller, with respect to Losses (as defined in Section 7.1(a) hereof)
related to Environmental Matters (as defined in Section 7.1(a) hereof)
involving actions or activities of TFS prior to the ownership of TFS by
Seller or (ii) an environmental audit relating to the properties and
operations of TFS which includes conclusions with respect to such matters
that are reasonably satisfactory to Seller.
5.2.7. Irrevocable Order from Purchaser. Purchaser shall
have delivered to PVW&A the irrevocable order described in clause (f) of
the second sentence of Section 1.1 hereof. 5.2.8. Closing Documents. The
documents specified in Section 6.3 shall have been delivered to Seller. VI.
CLOSING 6.1. The Closing. The consummation of the transactions contemplated
hereby (the "Closing") shall take place following the satisfaction or
waiver of all conditions precedent of Seller on or before December 31,
1995. The Closing shall take place at the offices of TFS or such other
place as Purchaser may designate.
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VI.
CLOSING
6.1 The Closing. The consummation of the transactions
contemplated hereby (the "Closing") shall take place following the
satisfaction or waiver of all conditions precedent of Seller on or before
December 31, 1995. The Closing shall take place at the offices of TFS or
such other place as Purchaser may designate.
6.2. Seller's Obligations. At the Closing, Seller
shall deliver or cause to be delivered to Purchaser the following:
6.2.1. Receipts. Appropriate receipts.
6.2.2. Resolutions. Copies of the resolutions adopted
by the Management Board (Vorstand) of Seller authorizing the execution and
delivery of this Agreement and the performance of the transactions
contemplated hereby and thereby, certified by appropriate officers of Seller.
6.2.3. Other. All other documents and papers required to be
delivered by Seller as conditions to the Closing.
6.3. Purchaser's Obligations. At the Closing, Purchaser shall
deliver or cause to be delivered to Seller the following:
6.3.1. Consideration. The payment to PVW&A of the Cash
Escrow Amount in the manner provided in Section 2.1 hereof.
6.3.2. Receipts. Appropriate receipts.
6.3.3. Resolutions. Copies of the resolutions adopted by the
Board of Directors of Purchaser authorizing the execution and delivery of
this Agreement and the performance of the transactions contemplated hereby
and thereby, certified by an appropriate officer of Purchaser.
6.3.4. Other. All other documents and papers required to be
delivered by Purchaser as conditions to the Closing.
VII.
INDEMNIFICATION
7.1. Indemnification. (a) Subject to the conditions and limi-
tations hereinafter set forth, including the limitations set forth in
Section 8.13 hereof, from and after the Effective Closing Time Seller shall
indemnify and hold harmless Purchaser and TFS from and against any and all
loss, cost, damage, liability or expense.
HOU04:16668.1 -31-
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(including court costs and reasonable attorneys' and other experts' fees
and expenses) (collectively, "Loss") to Purchaser or TFS, as the case may
be, whatsoever resulting from or arising out of (i) any breach of any
representation, warranty, covenant or agreement of Seller contained in
Section 3.1 of this Agreement, (ii) the failure of Seller to perform any of
its obligations contained in Section 4.6 or Section 4.7 of this Agreement,
(iii) the failure of Seller to perform any of its other obligations
contained in this Agreement, (iv) any environmental condition relating to
the Business or the assets of TFS resulting from a Release of any Hazardous
Substance, any violation of any environmental protection Law or Permit or
any claims by third parties against TFS for damages or environmental
cleanup or restoration with respect to the assets of TFS or the Business
(collectively, "Environmental Matters"), (v) claims by any employee or
former employee of TFS whose employment is terminated, or to be terminated,
pursuant to the TFS Restructuring Plan, for the right to be employed by
TFS, for lost salary, wages or other compensation, for health or medical
benefits, for severance benefits or for post-retirement benefits, including
pension benefits, to the extent that the actual aggregate amount of Losses
relating thereto exceeds the amount of the provision for such Losses
reflected on the Final Closing Balance Sheet and (vi) any liability or
obligation, other than a liability or obligation specifically referred to
in any of clause (iv) or (v) above, resulting from the ownership of assets
of TFS or the operation of the Business by TFS or any of its predecessors
prior to the Effective Closing Time that is not reflected on the Final
Closing Balance Sheet (excluding the amounts of the provision reflected on
the Final Closing Balance Sheet for the liabilities and obligations
referred to in any of clause (iv) or (v) above); provided, however, that
(x) indemnification payments made by Seller in the aggregate pursuant to
this Agreement shall in no event exceed the amount of the Purchase Price
and (y) with respect to clause (iv) above, Seller shall not be liable or
responsible to TFS or Purchaser for any Loss relating to any Environmental
Matter to the extent, but only to the extent, of any such Loss that is
caused exclusively by TFS or Purchaser after the Effective Closing Time, it
being understood and agreed that, in order for Seller
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to avail itself of the limitation of liability afforded by this clause (y),
Seller shall have the burden of proving that TFS or Purchaser exclusively
caused such Loss after the Effective Closing Time.
(b) Subject to the conditions and limitations hereinafter set forth,
including the limitations set forth in Section 8.13 hereof, from and after
the Effective Closing Time Purchaser shall indemnify and hold harmless
Seller from and against any and all Loss to Seller whatsoever resulting
from or arising out of (i) any breach of any representation, warranty,
covenant or agreement of Purchaser contained in this Agreement, (ii) the
failure of Purchaser to perform any of its obligations under this Agreement
or (iii) any claim of any third party against TFS which is related
exclusively to any activity, event or condition occurring after the
Effective Closing Time but prior to the date of publication of the
termination of the Corporate Agreement, except for such claims for which
Seller is otherwise liable or responsible in accordance with the terms of
this Agreement; provided, however, that indemnification payments made by
Purchaser in the aggregate pursuant to this Agreement shall in no event
exceed the amount of the Purchase Price. (c) The sole and exclusive
remedies for breach of the representations, warranties, covenants and
agreements of Seller and Purchaser shall be (i) the payment of monetary
compensation pursuant to the indemnification provisions set forth in
Sections 7.1 and 7.2 and (ii) specific performance and injunctive relief of
the covenants and agreements of Seller and Purchaser set forth in this
Agreement. Each of Purchaser and Seller hereby waive any right to
rescission with respect to the transactions contemplated by this Agreement.
The sole and exclusive method of obtaining any of the remedies set forth in
the preceding sentence shall be an arbitration conducted in accordance with
Section 7.3 hereof, provided that (i) a party hereto that is granted an
arbitral award pursuant thereto shall be entitled to enforce such award in
any court of competent jurisdiction as provided in Section 7.3(f) hereof
and (ii) in the event that any party to this Agreement challenges the
enforceability of the provisions of Section 7.3 hereof in a court of
competent jurisdiction and such court determines that such provisions are
not enforceable, then either
HOU04:16668.1 -33-
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Purchaser or Seller may seek any of the remedies set forth in the preceding
sentence in any court of competent jurisdiction.
7.2. Certain Procedures. In the event that either party to this
Agreement (the "Claimant") desires to make a claim against the other (the
"Indemnitor") under this Article VII, the Claimant shall give prompt
written notice to the Indemnitor of any actions, suits, proceedings and
demands at any time instituted against or made upon the Claimant and for
which the Claimant claims a right to indemnification hereunder. The
Claimant shall, at the time of giving such notice, if the Indemnitor shall
agree that it would have responsibility to indemnify under this Article
VII, give the Indemnitor full authority to defend, adjust, compromise or
settle the action, suit, proceeding or demand on which such notice is
based, in the name of the Claimant or otherwise as the Indemnitor shall
elect unless, in the reasonable judgment of the Claimant, there is a
conflict or potential conflict of interest between the Claimant and the
Indemnitor in such action, suit or proceeding, in which event each of the
Claimant and the Indemnitor (a) shall each have the right at its own
expense and with counsel of its choosing to participate in the defense,
adjustment, compromise or settlement thereof and (b) shall cooperate fully
with the other in the defense, adjustment, compromise or settlement
thereof. Without limiting the generality of the provisions of Section 7.1
hereof, in the event of any claims under Article VII hereof for
indemnification, the Claimant shall advise the Indemnitor in writing of the
amount (if known) and circumstances surrounding said claim; provided, that
the failure by the Claimant to include an amount that is not known shall
not prejudice the right to recover any amounts which the Claimant would
otherwise be entitled to recover hereunder. With respect to liquidated
claims, if within 30 calendar days the Indemnitor has not contested said
claim in writing, the Indemnitor shall pay the full amount thereof in cash
within 30 calendar days after the expiration of such period. With respect
to any Loss for which Seller is obligated to pay or reimburse Purchaser
pursuant to this Section 7.2, Purchaser may, at its option, elect to offset
against the Remaining Purchase Price Amount and accrued interest thereon in
accordance with the provisions specified in Section 2.1 hereof.
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7.3 Arbitration. (a) In the event that any dispute arises under
Section 7.1 or Section 7.2 with respect to any claim for indemnification
and such dispute has not been resolved by either agreement of the parties
or by a final and nonappealable judgment of a court of competent
jurisdiction, then any party may initiate an arbitration proceeding to
resolve such dispute by giving written notice to the other party hereto and
to the American Arbitration Association ("AAA"), 140 West 51st Street, New
York, New York. Following the giving of such notice, the parties hereto
shall arbitrate such dispute in an expeditious manner in accordance with
(i) the Arbitration Rules of the AAA (the "AAA Rules"), (ii) Articles 15
through 37 of the Arbitration Rules of the United Nations Commission on
International Trade Laws (the "UNCITRAL Arbitration Rules") and (iii) the
rules and procedures set forth below, it being acknowledged and agreed that
the UNCITRAL Arbitration Rules and the rules and procedures set forth below
modify and supplement the AAA Rules and, to the extent of any conflict
among the AAA Rules, the UNCITRAL Arbitration Rules and the rules and
procedures set forth, the following priority of application shall govern
and control the subject matter of such conflict: first, the rules and
procedures set forth below shall be applied in the event of any conflict
with the AAA Rules or the UNCITRAL Arbitration Rules and, second, the
UNCITRAL Arbitration Rules shall be applied in the event of any conflict
with the AAA Rules.
(b) Following notice of an initiation of arbitration as provided in
Section 7.3(a), one or more arbitrators shall be appointed as provided
below. In the event that the amount of the dispute (as determined by the
amount of the claim made by the initiating party pursuant to the procedures
set forth in the UNCITRAL Arbitration Rules) is less than 1,500,000 DM,
then the arbitration shall be conducted by a single arbitrator appointed by
the AAA who shall be neither a resident or citizen of either the United
States or Germany and who shall be independent with respect to Purchaser
and Seller. In the event that the amount of the dispute (as determined in
the same manner as provided above) is equal to or in excess of 1,500,000
DM, then the arbitration shall be conducted by three arbitrators appointed
in accordance with the following
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procedures. Seller and Purchaser shall each designate one arbitrator, each
of whom shall be independent with respect to the party appointing such
arbitrator. Within thirty (30) days of notice of arbitration, Purchaser and
Seller shall each notify the other of its chosen arbitrator. If either
party shall refuse or neglect to appoint an arbitrator within thirty (30)
days of notice of arbitration, the other party shall have the right to
appoint the arbitrator that such party would have otherwise been entitled
to appoint. The two arbitrators so chosen shall designate a third impartial
arbitrator, who shall be neither a resident or citizen of either the United
States or Germany and who shall be independent with respect to Purchaser
and Seller, and the parties shall promptly proceed to arbitration. In the
event that such impartial arbitrator is not designated within sixty (60)
days after notice of arbitration, either party may request that the AAA
designate such impartial arbitrator and, following such request, any
arbitrator designated by the AAA shall act as the third arbitrator. Any
such arbitration shall take place in Berlin, Germany and shall be conducted
in the English language. The merits of any such dispute shall be construed
in accordance with the substantive laws of the State of New York (without
regard to principles of conflicts of laws thereof).
(c) Prior to the arbitration hearing, each party to such proceeding
shall have the right to discovery of any and all relevant evidence,
including documents, witnesses and other types of evidence, which such
party requests be produced. The arbitrators shall take such action to cause
the production of such requested evidence within their power and authority
(including issuing or obtaining subpoenas of documents, witnesses or other
evidence), and any party to the proceeding that has the ability to produce
such evidence shall cause such evidence to be produced, except in any case
in which the arbitrators fairly determine such requested evidence is
irrelevant to a determination of the merits of the dispute. Each party
shall have the right to cross-examine any witness presented by the other
party in a manner determined by the arbitrators to be sufficient to
adequately challenge or verify, as the case may be, evidence presented by any
such witness.
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(d) At any arbitration hearing, each party may make written and ora
presentations to the arbitrators, present testimony, examine witnesses, and
otherwise reasonably present its case. A stenographic record shall be made
of any arbitration hearing. (e) All rulings, orders, and decisions in
arbitration shall be in writing, and, in the case of an arbitration
conducted by three arbitrators, shall be in accordance with the decision of
the majority of the arbitrators with respect thereto. All such rulings,
orders, and decisions shall contain full written justification therefor
which shall include, as applicable, (i) written findings of fact in
accordance with the evidence and the applicable provisions of this
Agreement and (ii) a written decision in accordance with, and citing, such
findings of fact and governing law. Any written decision of the arbitrator
or arbitrators shall be signed by the arbitrator (in the case of a single
arbitrator) or by a majority of the arbitrators (in the case of an
arbitration conducted by a panel of three arbitrators). (f) Any written
decision in arbitration issued in accordance with the foregoing rules and
procedures, and any arbitral award made in connection therewith, may be
entered and enforced in any court of competent jurisdiction. Any such
decision shall be final and binding upon the parties, any arbitral award or
awards granted pursuant to such decision shall be the only and exclusive
remedy between the parties, and each party hereto hereby waives any right
to appeal such decision insofar as such right may be waived by applicable
law. Any arbitration award consisting of monetary amounts shall be made in
German Marks and shall bear interest at 10% per annum until paid in full.
Any arbitral award shall be paid or performed promptly by the party
designated to so pay or perform such award. Any costs, fees or taxes
involved in enforcing the award shall be fully assessed against the party
resisting enforcement of such award. (g) The expenses of witnesses for
either party shall be paid by the party producing such witnesses. All other
expenses of the arbitration, including required travel and other expenses
of the arbitrators, AAA representatives, and any witness and the cost of
any proof produced at the direct request
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of the arbitrator, shall be borne by the nonprevailing party in the
arbitration unless the arbitrators assess such expenses or any part thereof
against any specified party or parties in connection with the grant of an
award.
VIII.
MISCELLANEOUS
8.1. Termination. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement may be terminated
at any time prior to the Effective Closing Time:
(a) by the mutual written consent of Purchaser and Seller; or
(b) by either Purchaser or Seller if the Closing shall not have
occurred on or before December 31, 1995. In the event of termination of
this Agreement under this Section 8.1, there shall be no further liability
hereunder (other than as expressly provided by Section 4.3 and Section 8.4
hereof) on the part of either party hereto except liability arising out of
a breach of this Agreement. The termination of this Agreement pursuant to
this Section 8.1 shall become effective (A) in the case of a termination
pursuant to Section 8.1(a), on the date the consent is executed by
Purchaser and Seller and (B) in the case of a termination pursuant to
Section 8.1(b) on the date notice is given by the
terminating party to the other parties hereto.
8.2. Representations of Officers. Any representation made on behalf of
a corporation which is a party hereto by an officer thereof specified on
Exhibit 8.2 attached hereto in any closing certificate or closing document
shall be deemed to be a representation of such party.
8.3. Notices. All notices and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in
this Agreement, shall be deemed to have been duly given when delivered in
person or when dispatched by telegram or electronic facsimile transfer
(confirmed in writing by mail simultaneously dispatched) or five business
days after being mailed by registered or certified mail, return receipt
requested, to the addressees at the addresses specified below:
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(a) If to Purchaser:
Continental Electronics Corporation
P.O. Box 270879
Dallas, Texas 75227-0879
Attn: President
Facsimile Number: (214) 388-2845
with a copy to:
Tech-Sym Corporation
10500 Westoffice Drive, Suite 200
Houston, Texas 77042-5391
Attn: General Counsel
Facsimile Number: (713) 780-3524
(b) If to Seller:
Daimler-Benz Aerospace AG Sensorsystems
89070
Ulm Germany
Attn: Kai Siegfried
Facsimile Number: (049) 731-392-4963
or to such other address or addresses as any such party may from time to
time designate as to itself by like notice.
8.4. Expenses. Except as otherwise expressly provided herein, each
party hereto shall pay any expenses incurred by it incident to this
Agreement and in preparing to consummate the transactions provided for
herein, regardless of whether the transactions contemplated by this
Agreement are consummated, except that Seller and Purchaser agree to each
pay one-half of all costs associated with notarization of this Agreement
and any related documents required to be delivered at Closing. In addition,
Seller hereby acknowledges that Mr. Gary Von Kampen is acting as financial
advisor to Seller and Seller shall be responsible for any and all fees
payable to Mr. Von Kampen.
8.5. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Seller, Purchaser and their respective successors,
but neither Purchaser nor Seller may assign its rights or delegate its
duties hereunder in whole or in part without the prior written consent of
the other parties
HOU04:16668.1 -39-
<PAGE>
hereto, which consent shall not be unreasonably withheld. No such
assignment shall relieve the assigning party of its obligations or
liabilities hereunder.
8.6. Waiver. No action taken pursuant to this Agreement shall be
deemed to constitute a waiver of compliance with any representations,
warranties, covenants or agreements contained in this Agreement and shall
not operate or be construed as a waiver of any subsequent breach, whether
of a similar or dissimilar nature. No waiver of compliance with any
representation, warranty, covenant or agreement contained in this Agreement
shall be effective unless such waiver is in writing and is signed by all of
the parties hereto.
8.7. Entire Agreement. This Agreement supersedes any other
agreement, whether written or oral that may have been made or entered into
by Purchaser or Seller (or by any director, officer, representative or
affiliate of such parties) relating to the matters contemplated hereby.
This Agreement constitutes the entire agreement by and among the parties
and there are no agreements or commitments except as expressly set forth
herein.
8.8. Amendments, Supplements, Etc. This Agreement may be amended
or supplemented at any time by additional written agreements, as may
mutually be determined by the parties hereto to be necessary, desirable or
expedient to further the purposes of this Agreement, or to clarify the
intention of the parties hereto, and the parties hereto shall cause any
such additional written agreement to be promptly notarized.
8.9. Limitations on Rights of Third Parties. Nothing expressed
or implied in this Agreement is intended or shall be construed to confer
upon or give any person, firm or corporation other than the parties hereto
any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby.
8.10. Further Assurance. After the Closing, Seller shall
from time to time, at Purchaser's reasonable request and at Purchaser's
expense, execute and deliver to Purchaser such other instruments of
HOU04:16668.1 -40-
<PAGE>
conveyance and transfer and take such other action as Purchaser may
reasonably request so as more effectively to sell, transfer, assign and
deliver and vest in Purchaser title to and possession of the Shares in
accordance with the terms of this Agreement.
8.11. Applicable Law. This Agreement and the legal relations
among the parties hereto shall be governed by and construed in accordance
with the substantive laws of the State of New York, without giving effect
to the principles of conflict of laws thereof.
8.12 Titles and Heading. Titles and headings to sections herein are
inserted for convenience of reference only, and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
8.13. Survival of Representations, Warranties and Covenants. The
indemnification obligations of Seller shall continue (i) for a period of
three (3) years after the Effective Closing Time with respect to the
matters covered by Section 7.1(a)(i), (ii) for a period of six (6) years
after the Effective Closing Time with respect to the matters covered by
Section 7.1(a)(ii), (iii) for a period of three (3) years after the
Effective Closing Time with respect to the matters covered by Section
7.1(a)(iii), (iv) for a period ending on the later to occur of (a) the
tenth (10th) anniversary of the Effective Closing Time or (b) the first
(1st) anniversary of the date that TFS vacates the premises currently
leased by TFS pursuant to the AEG Lease Agreement with respect to the
matters covered by Section 7.1(a)(iv), (v) for a period of four (4) years
after the Effective Closing Time with respect to the matters covered by
Section 7.1(a)(v) and (vi) for a period of five (5) years after the
Effective Closing Time with respect to the matters covered by Section
7.1(a)(vi); provided, however, that notwithstanding the foregoing, the
indemnification obligations of Seller with respect to a breach or violation
of the representations and warranties contained in Sections 3.1.11
(relating to tax matters) and 3.1.17 (relating to environmental matters)
shall survive until the expiration of the statute of limitations applicable
with respect to actions or proceedings that may be initiated or prosecuted
by any third party or Governmental Agency; provided further that a specific
claim for Losses pursuant to Section 7.1(a)
HOU04:16668. -41-
<PAGE>
shall survive the expiration of the applicable limitation period set forth
above if Purchaser asserts such claim for any such Losses, by giving
written notice to Seller of such claim, prior to the expiration of the
applicable limitation set forth above with respect to the subject matter of
such claim. The indemnification obligations of Purchaser shall continue for
a period of five (5) years after the Closing Date with respect to the
matters covered by Section 7.1(b); provided that a specific claim for
Losses pursuant to Section 7.1(b) shall survive the expiration of such
five-year period if Seller asserts such claim for any such Losses, by
giving written notice to Purchaser of such claim, prior to the expiration
of such period. 8.14 Use of English Language. All certificates, reports,
notices and other documents and communications given or delivered pursuant
to this Agreement shall be in the English language or accompanied by a
certified English translation thereof, except for any document or report
not prepared specifically for purposes of this Agreement that was in
existence on or prior to July 21, 1995.
HOU04:16668.1 -42-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives as of the day and year first
above written.
SELLER:
DAIMLER-BENZ AEROSPACE AG
By:
Name:
Title:
PURCHASER:
CONTINENTAL ELECTRONICS CORPORATION
By:
Name:
Title:
HOU04:16668.1
-43-
Exhibit 2.2
AMENDMENT NUMBER 1
TO
STOCK PURCHASE AGREEMENT
This Amendment Number 1 to the Stock Purchase Agreement (this
"Amendment") is made and entered this 29th day of December, 1995 by and
between Continental Electronics Corporation, a Nevada corporation located
at 4212 S. Buckner Blvd., Dallas, Texas 75227-0879 ("Purchaser"), and
Daimler-Benz Aerospace AG, a German stock corporation located at 81663
Munich, Germany and having commercial registration number HRB98.454
("Seller").
WHEREAS, the Purchaser and the Seller have previously entered
into a Stock Purchase Agreement dated as of September 26, 1995 (the "Stock
Purchase Agreement") relating to the purchase by the Purchaser of all the
outstanding capital of Telefunken Sendertechnik GmbH, a German limited
liability company located at 10502 Berlin, Germany and having commercial
registration number HRB31290 ("TFS");
WHEREAS, the Purchaser and the Seller desire to amend the Stock
Purchase Agreement as set forth below;
NOW, THEREFORE, for the mutual covenants and promises set forth
below and other good and valuable consideration, the suffiency of which is
hereby acknowledged, the Seller and the Purchaser hereby agree as follows:
1. Section 1.1 of the Stock Purchase Agreement is hereby
amended in its entirety to read as follows:
1.1. Purchase and Sale of Stock. Subject to and upon the terms
and conditions hereof, Seller sells and Purchaser purchases two shares of
capital stock of TFS, one in the nominal amount of 9,950,000 Deutsche Mark
("DM") and one in the nominal amount of 50,000 DM (collectively, the
"Shares") effective as of 12:00 p.m./00:00 a.m. (Berlin time) on December
31, 1995/January 1, 1996 (the "Effective Closing Time"). Subject to the
fulfillment of the condition precedent set forth in the following sentence,
Seller hereby transfers, and Purchaser hereby accepts the transfer of, the
Shares effective as of the Effective Closing Time. The sale and transfer of
the Shares with effect as of the Effective Closing Time is subject to the
condition precedent that on or prior to December 31, 1995 (the "Closing
Date") the German law firm of PUNDER, VOLHARD, WEBER & AXSTER ("PVW&A")
delivers a written notice to Purchaser and Seller that (a) PVW&A have
received written confirmation from Seller that all conditions precedent to
the obligations of Seller have either been fulfilled or waived, (b) PVW&A
have received written confirmation from Purchaser that all conditions
precedent to the obligations of Purchaser have either been fulfilled or
waived,(c) PVW&A have received from Purchaser in a separate trust account
established for the
HOU04:21204.1
<PAGE>
benefit of Purchaser (the "Purchaser Escrow Account") an amount of
10,000,000 DM (the "Escrow Cash Amount"), (d) PVW&A have in their
possession a signed written guarantee of Tech-Sym Corporation, a Nevada
corporation ("Tech-Sym"), in the form set forth in Schedule 1.1 attached
hereto (the "Tech-Sym Guarantee"), (e) PVW&A have received written
confirmation from TFS that TFS has received payment in accordance with
Section 2.3 hereof, and (f) PVW&A have received irrevocable orders in
writing from Purchaser to pay the Escrow Cash Amount from the Purchaser
Escrow Account to an account designated by Seller and to deliver the
Tech-Sym Guarantee to Seller upon receipt of written confirmation from TFS
that TFS has received payment of the Adjustment Amount (as defined in
Section 2.2).
2. Section 2.1 of the Stock Purchase Agreement is hereby amended
in its entirety to read as follows:
2.1. Purchase Price. In consideration of the transfer of the
Shares and the other agreements, covenants and undertakings of Seller
hereunder, Purchaser shall pay to Seller a purchase price (the "Purchase
Price") equal to 13,200,000 DM (Thirteen Million Two Hundred Thousand
Deutsche Marks), subject to adjustment as provided in Section 2.2 hereof.
In the event that the Shares are transferred to Purchaser pursuant to
Section 1.1 hereof as of the Effective Closing Time, Purchaser shall be
obligated to pay the remaining 3,200,000 DM (Three Million Two Hundred
Thousand Deutsche Marks) of the Purchase Price (the "Remaining Purchase
Price Amount") no later than January 31, 1997, and Purchaser shall be
obligated to pay interest on the unpaid average principal balance thereof
for each complete calendar quarter until the entire principal amount is
paid at the Frankfurt Interbank Offer Rate, as adjusted from time to time,
plus one percent (1%), with each interest payment due and payable on the
fifteenth (15th) day following the end of each such calendar quarter;
provided that Purchaser shall be entitled to offset any amount otherwise
due and payable pursuant to this sentence (i) in accordance with the
provisions of Section 2.2(f) hereof or (ii) with respect to any Loss (as
defined in the Stock Purchase Agreement) for which Purchaser is entitled to
payment or reimbursement pursuant to Section 7.1 hereof, provided that,
with respect to this clause (ii), such offset shall be made only to the
extent of the amount of Loss that (A) has been agreed to in writing by
Purchaser and Seller or (B) has been determined by arbitration pursuant to
the provisions of Section 7.3 hereof.
3. Subsections (a) and (b) of Section 2.2 of the Stock Purchase
Agreement is hereby amended in its entirety to read as follows:
2.2 Closing Balance Sheet. (a) On or prior to December 22, 1995,
Seller shall cause TFS to provide Purchaser a balance sheet that reflects
Seller's estimate of the assets, liabilities and stockholder's equity of
TFS as of the Effective Closing Time (the "Estimated Closing Balance
Sheet"). Seller shall cause the Estimated Closing Balance Sheet to
specifically reflect (i) a provision equal to Seller's estimate of the full
amount of all TFS Restructuring Costs (as defined in Section 3.1.13(d)
hereof), (ii) a provision equal to Seller's estimate of the full amount of
all reasonably anticipated employee post-retirement costs, including
pension liabilities, for which TFS may be liable or responsible to present
or former employees of TFS or its predecessors (excluding,
HOU04:21204.1 -2-
<PAGE>
for purposes of this clause (ii), post-retirement costs included in the
provision specified in clause (i) above), specifying the amount of the
provision attributable to post-retirement costs related to persons whose
employment with TFS is terminated prior to the Effective Closing Time,
(iii) a provision equal to Seller's estimate of the full amount of all
liabilities required by German Generally Accepted Accounting Principles to
be reflected in the Estimated Closing Balance Sheet, including liability
for taxes relating to activities or periods prior to the Effective Closing
Time, (iv) the receipt of the AEG License (as defined in Section 5.1.10
hereof) and the payment to AEG Aktiengesellschaft of 1,500,000 DM therefor,
(v) a reduction in the book value of the equipment listed on Schedule
4.4(a) attached hereto in the amount of 120,000 DM, (vi) stockholder's
equity of not less than 20,000,000 DM and (vii) Seller's estimate of the
amount of the financial intercompany account receivable payable by Seller
to TFS as of the Effective Closing Time (as adjusted pursuant to the
Corporate Agreement (as defined in Section 3.1.20 hereof) to take into
account the matters referred to in clauses (i) through (vi) above and any
other matters required to be taken into account pursuant to the Corporate
Agreement with respect to the year ended December 31, 1995). Except as
provided in the preceding sentence, the Estimated Closing Balance Sheet
shall be prepared by Seller on a basis consistent with the Audited
Financial Statements (as that term is defined in Section 3.1.4), in each
case including consistency with the accounting principles and methodology
used in preparing the Audited Financial Statements. (b) Within thirty (30)
days following the Effective Closing Time Purchaser shall cause TFS to
prepare a balance sheet reflecting the assets, liabilities and
stockholder's equity of TFS as of the Effective Closing Time (the "Closing
Balance Sheet"). The Closing Balance Sheet shall specifically reflect (i) a
provision equal to the full amount of all TFS Restructuring Costs, (ii) a
reserve equal to the full amount of all reasonable anticipated
post-retirement costs, including pension liabilities, for which TFS may be
liable or responsible to present or former employees of TFS or its
predecessors (excluding, for purposes of this clause (ii), post-retirement
costs included in the provision specified in clause (i) above), specifying
the amount of the provision attributable to post-retirement costs related
to persons whose employment with TFS terminated prior to the Effective
Closing Time, (iii) a provision equal to the full amount of all liabilities
required by German Generally Accepted Accounting Principles to be reflected
in the Closing Balance Sheet, including liability for taxes relating to
activities or periods prior to the Effective Closing Time, (iv) the actual
inventory of TFS as of the Effective Closing Time pursuant to the taking of
a physical inventory immediately after the Effective Closing Time, (v) the
receipt of the AEG License (as defined in Section 5.1.10 hereof) and the
payment to AEG Aktiengesellschaft of 1,500,000 DM therefor, (vi) a
reduction of the book value of the equipment listed on Schedule 4.4(a)
attached hereto in the amount of 120,000 DM, (vii) stockholder's equity of
not less than 20,000,000 DM and (viii) the amount of the financial
intercompany account receivable payable by Seller as of the Effective
Closing Time (as adjusted to reflect any payment made pursuant to Section
2.3 hereof and as adjusted pursuant to the Corporate Agreement to take into
account the matters referred to in clauses (i) through (vii) above). Except
as provided in the preceding sentence, the Closing Balance Sheet shall be
prepared by TFS on a basis consistent with the Audited Financial
Statements, in each case including consistency with the accounting
principles and methodology used in preparing the Audited Financial
Statements. On or before January 31, 1996, Purchaser shall cause TFS to
deliver a copy of the Closing Balance Sheet
HOU04:21204.1 -3-
<PAGE>
to Seller, and Seller shall be entitled to discuss the Closing Balance
Sheet with TFS until the time of the delivery of the Audited Closing
Balance Sheet (as defined below). On or before February 15, 1996, Purchaser
shall cause TFS to cause KPMG Deutsche Treuhand-Gessellschaft (the "TFS
Auditors") to audit the Closing Balance Sheet (the audited Closing Balance
Sheet referred to herein as the "Audited Closing Balance Sheet"), with the
costs thereof to be paid by TFS. Seller and Purchaser shall cooperate with
the TFS Auditors to enable such firm to complete its audit within such time
period. Purchaser shall cause TFS to deliver the Audited Closing Balance
Sheet to Seller and Purchaser on or before February 15, 1996.
4. Subsection (d) of Section 3.1.13 of the Stock Purchase
Agreement is hereby amended in its entirety to read as follows: (d) Set
forth as Schedule 3.1.13(d) hereto is (i) is a true and correct copy of the
social plan, dated as of November 21, 1995, adopted by the decision of the
Einigungsstelle committee with respect to the restructuring of the work
force of TFS (the "TFS Restructuring Plan") and (ii) a true and correct
copy of the supplemental restructuring agreement, dated as of November 21,
1995, between the Geschaeftsfuehrung (management) and the Betriebsrat (work
council) of TFS (the "Supplemental Restructuring Agreement"). On or before
December 22, 1995, Seller shall cause TFS to provide Purchaser a
preliminary written estimate of the aggregate amount of all costs and
expenses to be paid or incurred after December 31, 1995 with respect to the
restructuring and employee reductions contemplated by the TFS Restructuring
Plan and the Supplemental Restructuring Agreement (including all wages,
salaries, termination expenses, severance expenses, pension expenses,
expenses of health and benefit plans, legal expenses related to legal
proceedings, payments for unemployment benefits and replenishment fees,
other post-retirement or post-termination costs and any other costs to be
incurred on or after the respective dates of notice of termination of
employees to be terminated in connection therewith, whether or not such
costs related directly or indirectly from such terminations, including,
without limitation, all costs, payments and other expenses paid or incurred
by TFS pursuant to (i) the TFS Restructuring Plan (or any successor social
plan or restructuring plan to which TFS becomes subject following any court
decision that renders ineffective or inoperative the TFS Restructuring
Plan) or (ii) the Supplemental Restructuring Agreement (collectively, the
"TFS Restructuring Costs").
5. Section 4.4 of the Stock Purchase Agreement is hereby amended
in its entirety to read as follows:
4.4. Maintain the Business. Between the date of this Agreement
and the Effective Closing Time, Seller shall use reasonable efforts to
cause TFS to (i) maintain the Business intact and to preserve its goodwill
with its customers, suppliers, employees and others having business
relations with it and (ii) operate the Business in a prudent, businesslike
manner consistent with past practices. Between the date of this Agreement
and the Effective Closing Time Seller shall cause TFS not to, without the
prior written approval of Purchaser, (a) transfer, sell or lease, or enter
into any agreement to transfer, sell or lease, any of TFS's assets, other
than the sale of Inventory in the
HOU04:21204.1 -4-
<PAGE>
ordinary course of
business and other than the transfer of assets specifically identified in
Schedule
4.4(a) attached hereto to AQB Arbeitnehmerqualifizierungsgesellschaft
Berlin mbH (the "Qualification Company") pursuant to a transfer document in
substantially the form attached hereto as Schedule 4.4(b); (b) incur any
indebtedness for borrowed money; (c) enter into any lease for any property
for which TFS would become obligated for payments in excess of 10,000 DM
over the term of such lease; (d) make any increases in wages, salaries,
employee benefits or other compensation payable or to become payable to any
employee of TFS or pay or commit to pay any bonuses, except in accordance
with any employment agreement or collective bargaining agreement existing
on the date of this Agreement, or change any provision of any existing
Employee Plan; (e) make or enter into any written employment contract or
any Employee Plan; or (f) enter into any amendment to any Lease or Contract
required to be listed on Schedule 3.1.6(b) or 3.1.12(a) hereof. Between the
date of this Agreement and the Effective Closing Time, Seller shall (i)
notify Purchaser of any material loss of, damage to or disposition of any
of the assets of TFS (other than the sale of Inventory in the ordinary
course of business); (ii) promptly after obtaining knowledge thereof, give
notice to Purchaser of any material claim or litigation, threatened or
instituted, against TFS; (iii) take all actions and make all filings which
are reasonably necessary to lawfully transfer the Shares to Purchaser at
the Effective Closing Time as provided in this Agreement except for routine
filings in connection with approvals or consents of third parties and
Governmental Agencies customarily made or obtained subsequent to transfer
of title; (iv) to the extent within the control of Seller, Seller will
refrain from doing any act or omitting to do any act which would cause any
of the representations or warranties of Seller contained in this Agreement
not to be true and correct in any material respect on the Effective Closing
Time; (v) cause TFS to comply in all material respects with all Laws
applicable to the Business and the assets of TFS; (vi) cause TFS to
maintain its books of accounts and records in the usual, regular and
ordinary manner and consistent with past practice; and (vii) not, without
the consent of Purchaser, permit TFS to enter into any material agreement,
contract, commitment or undertaking applicable to the Business or the
assets of TFS, except in the ordinary course of business and except for a
sublease agreement in substantially the form attached hereto as Schedule
4.4(c) to be entered into between TFS, the Qualification Company and Emotec
AG Elektrik Mechanik Oberflaechentechnik (the "Working Company") providing
for the sublease of the space identified in Schedule 4.4(d) attached hereto
in the building leased by TFS pursuant to the AEG Lease Agreement.
6. Section 4.7 of the Stock Purchase Agreementis hereby amended
in its entirety to read as follows:
4.7 Post-Retirement Benefits. (a) Effective as of December 31,
1996 or such earlier time as TFS completes the restructuring of its
employee work force as contemplated by the TFS Restructuring Plan and the
Supplemental Restructuring Agreement, Seller shall assume the obligations
of TFS for pension, health and other post-retirement benefits, excluding
severance pay and other costs and expenses directly resulting from the TFS
Restructuring Plan or the Supplemental Restructuring Agreement other than
pension, health and other post-retirement benefits, with respect to all
present and former employees of TFS other than those persons whose
employment with TFS will continue after December 31, 1996 or such earlier
date as TFS completes such restructuring of its employee work force, as the
case may be (such obligations referred to herein as the "Former
HOU04:21204.1 -5-
<PAGE>
Employee Pension Liabilities" or "FEPL") pursuant to a corporate split-off
arrangement permitted by German law Section 123 et. sec. UmwG (or any
similar or successor provision that would permit such a corporate
split-off) that provides for the continuation of TFS as the same legal
entity but without (i) the continuation, as a liability of TFS, of the
FEPL, which FEPL will be transferred to and assumed by Seller (or an
affiliate of Seller as to which Seller has unconditionally and irrevocably
guaranteed the payment of its obligations), and (ii) the continuation, as
an asset of TFS, of the cash amount corresponding to the FEPL shown as a
liability of TFS on the Final Closing Balance Sheet, which amount Purchaser
will cause to be transferred to Seller (or, if an affiliate of Seller will
assume the FEPL, to such entity), in each case as set forth in more detail
in one or more written agreements or resolutions to be executed and adopted
by Seller and TFS in accordance with the provisions of German law Section
123 et. sec. UmwG (or any similar or successor provision that would permit
such a corporate split-off) and, in connection therewith, Seller shall
indemnify TFS from any and all liability related to the FEPL. If Purchaser
and Seller determine by written agreement between them on or before
December 31, 1996 that German law 123 et. sec. UmwG (or any similar or
successor provision that would permit such a corporate split-off) does not
permit the foregoing transactions, then, without any further action on the
part of TFS or Purchaser, Purchaser shall not be obligated to transfer such
cash amount to Seller (or any of its affiliates) and Seller shall not be
obligated to assume the FEPL, provided that, in such event, as of the last
day of each fiscal year of TFS thereafter, commencing December 31, 1996,
the amount of the FEPL will be redetermined by TFS as of each such date
utilizing the same methodology with respect to actuarial assumptions and
the same accounting principles utilized in preparing the Final Closing
Balance Sheet, and to the extent that the redetermined amount of the FEPL
as of such date exceeds the actual amount of the provision for such
liability as of such date, Seller shall make a payment to TFS, by wire
transfer of immediately available funds to an account designated by TFS, of
such excess amount within 60 days after such date.
7. Section 4.10 of the Stock Purchase Agreement is hereby
amended in its entirety to read as follows:
4.10 TFS Restructuring Costs. In the event that the actual
TFS Restructuring Costs (excluding, for purposes of this sentence, any
payment made by TFS, without the prior written approval of Seller, to an
employee of TFS as an inducement for such person to terminate employment
with TFS that is in excess of the amount of the severance payment specified
with respect to such employee in the TFS Restructuring Plan) exceeds the
provision for the TFS Restructuring Costs included in the Final Closing
Balance Sheet, then the Seller shall promptly pay to TFS the difference
between the actual TFS Restructuring Costs and such provision for the TFS
Restructuring Costs included in the Final Closing Balance Sheet. In the
event that (a) the difference obtained by (i) subtracting the amount of the
provision for the remaining TFS Restructuring Costs reflected on the
balance sheet of TFS as of December 31, 1996, as audited by an
internationally recognized accounting firm, from (ii) the amount of the
provision for the TFS Restructuring Costs reflected on the Final Closing
Balance Sheet exceeds (b) the actual amount of the TFS Restructuring Costs
for the year ended December 31, 1996, then Purchaser shall cause TFS to
make a payment to Seller on or before March 31, 1997 in an amount equal to
fifty percent (50%) of such difference.
HOU04:21204.1 -6-
<PAGE>
8. Section
5.1.7. of the Stock Purchase Agreement is hereby amended in its entirety to
read as follows:
5.1.7. Receipt of Payment of Receivables from Related
Parties. TFS shall have received from Seller, or any of its subsidiaries or
affiliates, in immediately available funds, an amount equal to the
aggregate amount of the financial intercompany account receivable reflected
on the Estimated Closing Balance Sheet as provided in Section 2.3 hereof.
9. Section 5.1.8. of the Stock Purchase Agreement is hereby amended
in its entirety to read as follows:
5.1.8. TFS Restructuring Plan. Purchaser shall have consented
in writing to the TFS Restructuring Plan and the Supplemental
Restructuring Agreement.
10. Subsection (a) of Section 7.1 of the Stock Purchase Agreement
is hereby amended in its entirety to read as follows:
(a) Subject to the conditions and limitations hereinafter
set forth, including the limitations set forth in Section 8.13 hereof, from
and after the Effective Closing Time Seller shall indemnify and hold
harmless Purchaser and TFS from and against any and all loss, cost, damage,
liability or expense (including court costs and reasonable attorneys' and
other experts' fees and expenses) (collectively, "Loss") to Purchaser or
TFS, as the case may be, whatsoever resulting from or arising out of (i)
any breach of any representation, warranty, covenant or agreement of Seller
contained in Section 3.1 of this Agreement, (ii) the failure of Seller to
perform any of its obligations contained in Section 4.4, Section 4.6,
Section 4.7, Section 4.10 or Section 4.12 of this Agreement, (iii) the
failure of Seller to perform any of its other obligations contained in this
Agreement, (iv) any environmental condition relating to the Business or the
assets of TFS resulting from a Release of any Hazardous Substance, any
violation of any environmental protection Law or Permit or any claims by
third parties against TFS for damages or environmental cleanup or
restoration with respect to the assets of TFS or the Business
(collectively, "Environmental Matters"), (v) any claim against TFS or
Purchaser by any third party relating to any liability or obligation of the
Qualification Company or the Working Company and (vi) any liability or
obligation (excluding, for purposes of this clause (vi), any liability or
obligation specifically referred to in clause (iv) above) resulting from
the ownership of assets of TFS or the operation of the Business by TFS or
any of its predecessors prior to the Effective Closing Time that is not
reflected on the Final Closing Balance Sheet (excluding, for purposes of
this clause (vi), the amounts of the provision reflected on the Final
Closing Balance Sheet for the liabilities and obligations referred to in
clause (iv) above); provided, however, that (x) indemnification payments
made by Seller in the aggregate pursuant to this Agreement shall in no
event exceed the amount of the Purchase Price and (y) with respect to
clause (iv) above, Seller shall not be liable or responsible to TFS or
Purchaser for any Loss relating to any Environmental Matter to the extent,
but only to the extent, of any such Loss that is caused exclusively by TFS
or Purchaser after the Effective Closing Time, it being understood and
agreed that, in order for Seller to avail itself of the limitation of
liability afforded by this clause (y), Seller shall have the
HOU04:21204.1 -7-
<PAGE>
burden of proving that TFS or Purchaser exclusively caused such Loss after
the Effective Closing Time. IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be signed by their duly authorized representatives
as of the day and year first above written.
SELLER:
DAIMLER-BENZ AEROSPACE AG
By:____________________________________
Name:__________________________________
Title:_________________________________
PURCHASER:
CONTINENTAL ELECTRONICS CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
HOU04:21204.1 -8-
