Exhibit 10.26 EXECUTION VERSION
NN EUROBALL, ApS
SHAREHOLDER AGREEMENT
THIS AGREEMENT shall become effective as of the date when the Euroball
transaction closes, by and among NN, Inc. a Tennessee corporation ("NNBR"), AB
SKF, a Swedish company ("SKF"), and FAG Kugelfischer Georg Schafer AG, a German
company ("FAG").
RECITALS
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A. The parties have purchased NN Euroball, ApS., a Danish company (the
"Company") pursuant to the Joint Venture Formation Agreement among the
parties dated April 6, 2000 (the "Formation Agreement"), and desire to set
forth their mutual agreement as to certain matters related to the
ownership, governance and operation of the Company.
B. The capitalized terms used but not defined in this Agreement shall have the
meaning set forth in the Formation Agreement.
C. The initial shareholdings of the parties are as follows: NNBR - 54%, SKF -
23%, and FAG - 23%.
AGREEMENT
In consideration of the mutual promises made herein and in the
Formation Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Competition.
1.1 The business of the Company and its subsidiaries (together
the "Company") is to manufacture, buy and sell precision steel balls
using the Businesses previously owned by the parties to create
marketing and sales opportunities worldwide.
1.2 (a) For so long as either of SKF or FAG is a shareholder
of the Company NNBR shall be prohibited, and as long as SKF and FAG
respectively are shareholders and for a period of three (3) years
thereafter, SKF and FAG also shall be prohibited, directly or
indirectly, from (i) developing or, except as allowed by Section
1.2(b), below, acquiring any precision steel ball manufacturing
facility that competes, directly or indirectly, with the Company in
Europe (as defined in the Formation Agreement) (a "Competing
Facility"), (ii) soliciting for employment any person employed by the
Company and (iii) canvassing or soliciting customers of the Company.
(b) SKF and its Affiliates and FAG and its Affiliates shall
not be deemed to have acquired, directly or indirectly, any
Competing Facility solely by virtue of (i) the ownership of less
than fifty (50) percent of the outstanding voting stock or debt
securities of any publicly held company of which it does not have
voting or day-to-day operational control, so long as such company
is not engaged in the production of precision steel balls as its
primary business, or (ii) having acquired or otherwise
voluntarily having combined with a business owning a
Competing Facility if all production of balls at the Competing
Facility is (A) used only for bearings produced at the acquired
business, (B) not sold to customers located in Europe or (C) sold
to customers located within Europe at volumes not greater than
the historical volumes of the acquired business. It is
specifically understood that if SKF or FAG is acquired by another
company, the restrictions in this Section will be binding only on
SKF or FAG, respectively, and will not be binding on or apply to
the acquiring company.
(c) The parties agree that NNBR shall be free to manufacture
and sell precision steel balls everywhere in the world other than
Europe without regard to the business interests of the Company.
1.3 If a Shareholder purchases or acquires an interest in
additional ball manufacturing assets or operations in Europe, and if
the Shareholder decides to close or sell such assets or operations, the
Company shall have the first priority right to purchase such assets or
operations
1.4 Without limitation of Section 1.2(a)(iii), SKF and its
Affiliates and FAG and its Affiliates shall be entitled to sell
precision steel balls to third parties if done so in relation to sales
by them of finished bearings; provided that during the non-compete
period applicable to SKF or FAG under Section 1.2, if such balls are
available from the Company and historically purchased from the
Businesses, they must be purchased by SKF, FAG or their Affiliates from
the Company.
2. Organization and Ownership of the Company.
2.1 The parties agree that the Articles of Association of the
Company and of its initial subsidiaries shall be in the forms of
Exhibits 2.1-A, 2.1-B, 2.1-C and 2.1-D, respectively, hereto.
2.2 The Company has initially an issued and paid-up share
capital of 125,000 DKK, divided into 1250 shares which are owned as
follows:
Shareholder Shares Percent
----------- ------ -------
NNBR 675 54%
FAG 287.50 23%
SKF 287.50 23%
2.3 In the event of any conflict between the terms of this
Agreement and the Articles of Association of the Company or of any of
its subsidiaries, the terms of this Agreement shall, as among the
Shareholders, prevail and the Shareholders shall forthwith cause such
necessary alterations to be made to such Articles of Association as may
be required to solve such conflict.
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3. Management of the Company.
3.1 General Meetings and Resolutions of Shareholders.
(a) General Meetings shall be held whenever required by the
laws of Denmark or the Articles of Association.
(b) The quorum required for a General Meeting of the
shareholders shall be shareholders representing, in person or by
proxy, at least fifty percent (50%) of the total number of issued
and outstanding shares of the Company; provided that at least 30
days prior written notice of any General Meeting has been given.
The quorum required for any General Meeting called upon less than
30 days prior written notice shall be one hundred percent (100%)
of the total number of issued and outstanding shares of the
Company.
(c) Unless otherwise required by the laws of Denmark or
otherwise explicitly provided herein, no shareholders'
resolutions shall be effective unless adopted by the affirmative
votes of shareholders holding more than fifty percent (50%) of
the shares present, in person or by proxy, at a General Meeting
of the shareholders.
(d) Interpreters may attend General Meetings of shareholders
upon the request of any party.
3.2 Election of Directors and Statutory Auditors.
(a) The Company shall be administered by a Board of
Directors composed of at least two (2) and not more than seven
(7) directors.
(b) The Company shall have one (1) Independent Accounting
Firm who shall be appointed by the Shareholders. Unless otherwise
agreed in writing by all Shareholders, KPMG shall be appointed.
The parties agree to exercise their respective voting rights as
shareholders of the Company and to take all other necessary
action so as to ensure that the persons nominated as statutory
auditor(s) by the Shareholders are elected.
3.3 Meetings and Resolutions of the Board of Directors.
(a) A regular meeting of the Board of Directors shall be
held semi-annually. Meetings will be held at such times and
locations as the Chairman shall reasonably determine. Written
notice of all regularly scheduled meetings shall be required.
Such notice shall be in English language and shall state the
time, place and agenda of the meeting and shall be sent to each
director at least fourteen (14) days prior to the meeting. Any
director may, at least five (5) days prior to a regularly
scheduled meeting provide written notice to the other directors
of any matter to be discussed at the meeting.
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(b) Any director shall have the right to call, from time to
time, a special meeting of the Board of Directors upon not less
than 10 days prior written notice.
(c) Resolutions of the Board of Directors shall require the
approval of the affirmative vote of a simple majority of the
members of the Board of Directors present at a meeting.
(d) Interpreters may attend meetings of the Board of
Directors upon the request of any party. Board meetings shall be
conducted in English.
3.4 Accounting and Reporting Obligations.
(a) The Company's fiscal year shall be the calendar year and
its financial statements shall be prepared in accordance with the
Danish Presentation of Accounts Act and shall, to the extent
permissible under Danish law, be adjusted for the purpose of U.S.
GAAP.
(b) The Company shall provide the following consolidated
reports and statements to the Shareholders in English within the
time periods set forth below:
(i) Within fifteen (15) days after the end of each
month, a monthly operations report, consolidated and for
each operating subsidiary, regarding the operating
parameters listed in Schedule 3.4(b)(i).
(ii) Within thirty (30) days after the closing of each
quarter, a business operations report will be provided
including at a minimum a balance sheet, profit and loss
statement, and a cash flow statement.
(iii) Within ninety (90) days after the end of each
fiscal year, an audited balance sheet, profit and loss
statement, and cash flow statement, a business operations
report, and a proposal governing appropriation of profits or
covering losses.
(c) The annual report of the Company on a consolidated basis
shall be audited at the expense of the Company by its Independent
Accounting Firm in accordance with applicable laws.
(d) The Company shall provide to each party full access to
the books and records of the Company, and shall provide to each
party the accounting information such party requires to comply
with its own financial reporting requirements, provided that any
cost involved in providing such information shall be paid by the
requesting party.
(e) Each party shall, upon reasonable written notice to the
Company and to the other parties, have reasonable access to the
Company's books concerning the Company's financial operations.
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(f) Upon reasonable written notice to the Company and the
other parties, but not more often than once every twelve (12)
months, each party shall have the right to perform a special
audit of the Company by independent outside auditors, at that
party's own cost. In addition, upon reasonable notice each party
shall have the right to perform or have performed, at that
party's own cost, such audits as are necessary to meet such
party's financial reporting obligations.
(g) The Company shall have the right, and each party hereto
shall have the right to compel the Company, and the Company shall
have the obligation upon request to compel any of its
subsidiaries, to have independent outside auditors, upon
reasonable written notice to any other party and not more than
once each twelve (12) months, at the Company's cost, examine the
books and records of that other party that relate to the business
of the Company for the purpose of auditing the calculation of
sales proceeds or any amounts due to the Company.
4. Tax Distributions. The Company may distribute to each Shareholder,
within ninety (90) days after the end of each fiscal year of the Company, an
amount equal to any income tax payable by such Shareholder that is attributable
to the income of the Company upon receipt by the Company of a certification from
the principal financial officer of such Shareholder stating the amount of such
income tax payable by Shareholder. If such distributions are made, distributions
shall be made to all other Shareholders in proportion to their ownership
interests.
5. Rights and Obligations of the Parties.
5.1 Additional Financing. Any additional financing that may be
determined by the Board of Directors as reasonably required by the
annual Budget of the Company may be provided by the Shareholders or by
third parties. No party shall have any obligation whatsoever to provide
the Company with any additional financing. Any agreement to provide
additional financing shall be in writing.
5.2 Transfer of Shares.
(a) No share of the Company owned by a Shareholder, or any
interest therein, shall be validly sold, transferred or otherwise
disposed of and no security interest shall be granted therein for
consideration or otherwise, and no purported transferee shall be
recognized as a shareholder of the Company for any purpose
whatsoever unless such transfer is approved by all Shareholders
or in accordance with this Section 5.
(b) No party shall pledge or otherwise encumber any of its
shares or any interest therein in the Company at any time without
the prior written consent of the other parties, provided however
that no such consent shall be required for a blanket lien on all
assets of a party pursuant to a commercial bank financing.
5.3 Put Option. SKF and FAG (each a "Holder", collectively the
"Holders") each shall have the independent right to sell to NNBR and
NNBR shall be required to purchase all but not less than all of the
shares held by such Holder, subject to the following terms and
conditions (such right is hereinafter referred to as the "Put Right"):
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(a) Put Exercise Period. The Put Right may not be exercised
until after December 31, 2002 and then may only be exercised by
written notice given to NNBR (the "Put Notice"). The Put Notice
shall state the place, the time and the date (a "Put Closing
Date") of the closing of such purchase (a "Put Closing"), which
date shall not be less than 60 days from the date the Put Notice
is received.
(b) Put Closing. At a Put Closing, (i) the Holder exercising
such right shall deliver to NNBR all of the shares to be
purchased by delivery of a certificate or certificates evidencing
such shares so purchased by NNBR, free and clear of any liens,
encumbrances or any interests of any other party and (ii) NNBR
will make payment to the Holder exercising such right of the
Purchase Price (as defined under 5.3(c) below) for the shares
being purchased upon exercise of the Put Right by wire transfer
of immediately available funds to an account designated by the
Holder.
(c) Purchase Price. Subject to 5.3(d), below, the purchase
price of the shares (the "Purchase Price") shall be calculated
using the same accounting principles used to prepare the Closing
Balance Sheet as defined in Section 5.5(a)(ii) of the Formation
Agreement and determined in Euros by the following formula:
A + B times 0.23
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Where A Equals (1) The average of the Company's net income for each of the 36
months preceding the month in which the Put is exercised (or
such fewer number of months as the Company shall have been
in operation) (the "Measurement Period"), multiplied by 12,
and
(2) multiplied by 9.8.
Where B Equals (1) The average of the Company's EBITDA for the Measurement
Period, multiplied by 12, and
(2) multiplied by 4.3, and
(3) minus the short and long term bank loans of the Company
existing at the end of the Measurement Period.
(d) Purchase Price Adjustment. The Purchase Price formula in
Section 5.3(c) shall be adjusted if a party exercises its Put
Right after June 30, 2006 by using the actual percentage
ownership in the Company of the Holder instead of 0.23.
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6. Termination. This Agreement shall terminate (a) when both SKF and FAG
are no longer shareholders in the Company or (b) as to any party at the time
such party is no longer a shareholder.
7. Liquidation. The Company shall not voluntarily be liquidated or
dissolved during the two (2) year period following its effective date without
the unanimous approval of the parties. Provided that, in any event, if there is
a material breach by SKF or FAG of the Supply Agreement, the Company may be
dissolved and liquidated notwithstanding the preceding sentence.
8. Technology Transfers.
8.1 Each of the parties hereby agrees to license to the
Company, on a non-exclusive, nontransferable, fully paid up basis, any
and all technology, know how, software, operating practices and similar
intangible assets held by such party that are used exclusively in the
Business of the Company and that were not previously transferred to the
Company or a subsidiary of the Company and to execute and deliver all
documents reasonably necessary to effect or memorialize such license
agreement.
8.2 The parties shall cause the Company to license to NNBR on
a non-exclusive, non-transferable, fully paid basis, any and all
technology, know how, software, operating practices and similar
intangible assets now or hereafter held by the Company that are used in
the manufacture of precision steel balls and to execute and deliver all
documents reasonably necessary to effect or memorialize such agreement.
9. Dispute Resolution; Arbitration.
9.1 Prior to pursuing arbitration with respect to any dispute
hereunder, the chief executive officers or general managers of SKF, FAG
and NNBR (or a direct subordinate officer or general manager appointed
by them) shall meet to seek an amicable resolution to such dispute. No
party shall be entitled to commence arbitration proceedings unless it
has attempted for a period of forty-five (45) days from written notice
of a dispute to reach such amicable resolution.
9.2 After expiration of the forty-five (45) day period
referred to in the prior section, any and all disputes, controversies
or claims arising out of or relating to this Agreement, or the
transactions contemplated hereby, or the breach, termination or
invalidity thereof, shall be settled by final and binding arbitration
by three (3) arbitrators in accordance with the UNCITRAL Arbitration
Rules as at present in effect. The appointing authority shall be the
International Chamber of Commerce in Paris, France. The place of
arbitration shall be Copenhagen, Denmark or such other location as may
be agreed among the parties. The arbitration proceedings shall be
conducted in the English language. Among the remedies available to
them, the arbitrators shall be authorized to order the specific
performance of provisions of this Agreement and of the Associated
Agreements. The award rendered by the arbitrators may include costs of
arbitration, reasonable counsel's fees, and reasonable costs for expert
and other witnesses.
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9.3 All papers, documents or evidence, whether written or
oral, filed with or presented to the panel of arbitrators shall be
deemed by the parties and by the arbitrators to be Confidential
Information. No party or arbitrator shall disclose in whole or in part
to any other person any Confidential Information submitted in
connection with the arbitration proceedings, except to the extent
reasonably necessary to assist counsel in the arbitration or
preparation for arbitration of the dispute. Confidential Information
may be disclosed (i) to a Party's attorneys, (ii) to another Party,
(iii) to courts for purpose of interim measures of protection,
enforcement or similar proceedings, (iv) to outside experts requested
by either party's counsel to furnish technical or expert services or to
give testimony at the arbitration proceedings, subject, in the case of
such experts, to execution of a legally binding written statement that
such expert is fully familiar with the terms of this Section, agrees to
comply with the confidentiality terms of this Section, and will not use
any Confidential Information disclosed to such expert for personal or
business advantage, or (v) as required by law or any applicable stock
regulations.
9.4 The written decisions and conclusions of a majority of the
arbitration panel shall be final and binding on the JV Parties and
enforcement thereof may be rendered thereon by any court having
jurisdiction upon application of any JV Party.
10. Miscellaneous.
10.1 Governing Law. This Agreement is governed by and shall be
construed in accordance with, the laws of Denmark excluding any choice of
law rules that would refer the matter to the laws of another jurisdiction.
10.2 Force Majeure. No party shall be liable for failure to perform,
in whole or in material part, its obligations under this Agreement if such
failure is caused by an event or condition not existing as of the date of
this Agreement and not reasonably within the control of the affected party,
including without limitation, by fire, flood, typhoon, earthquake,
explosion, strikes, labor troubles or other industrial disturbances,
unavoidable accidents, war (declared or undeclared), acts of terrorism,
sabotage, embargoes, blockage, acts of Governmental Authorities, riots,
insurrections, or any other cause beyond the control of the parties the
consequences of which could not reasonably have been avoided; provided,
that the affected party promptly notifies the other party in writing of the
occurrence of the event of force majeure and takes all reasonable steps
necessary to resume performance of its obligations so interfered with.
10.3 Notices. All notices and communications required, made or
permitted hereunder shall be in writing and shall be delivered by hand or
by messenger, or by recognized courier service (with written receipt
confirming delivery), or by postage prepaid, return receipt requested,
registered or certified airmail or telecopy, addressed:
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If to NNBR: NN, Inc.
800 Tennessee Road
Erwin, TN 37650
USA
Attn: David L. Dyckman
Fax: 423.743.8870
with a copy to: Blackwell Sanders Peper Martin LLP
2300 Main St., Suite 1000
Kansas City, MO 64108
USA
Attn: James M. Ash
Fax: 816.983.9137
If to SKF: AB SKF
SKF Group Business Development
SE-415 50 Gothenberg
Sweden
Att: the Director
Fax No. 46-31-337-2077
With a copy to: AB SKF Group Headquarters
SE-415 50 Gothenberg
Sweden
Att: General Counsel
Fax No. 46-31-3371691
If to FAG: FAG Kugelfischer Georg Schaefer AG
Georg-Schaefer-Strasse 30
D-97421 Schweinfurt
Germany
Attn: Rechtsabteilung-FR
Fax: 49-97-21 91 31 21
With a copy to: FAG Kugelfischer Georg Schaefer AG
D-97421 Schweinfurt
Germany
Att: Technische Koordination - VT
Fax: 49-97-21-91-34-17
Each such notice or other communication shall for all purposes
hereunder be treated as effective or as having been given as follows:
(i) if delivered in person, when delivered, (ii) if sent by airmail, at
the earlier of its receipt or at 5 p.m. local time of the recipient, on
the seventh day after deposit in a regularly maintained receptacle for
the deposit of airmail, (iii) if sent by a recognized courier service,
on the date shown in the written confirmation of delivery issued by
such delivery service and (iv) on the next
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business day after the date of the transmission in case of telecopy
with a telecopy receipt. Either party may change the addresses and/or
addressees to whom notice may be given by giving notice pursuant to
this section at least seven (7) days prior to the date the change
becomes effective.
10.4 Waiver. No delay or omission by a party in exercising any
of its rights hereunder shall operate as a waiver of that or any other
right. Unless otherwise expressly stated, a waiver given by a party on
any one occasion shall be effective only in that instance and shall not
be construed as a waiver of that right on any other occasion.
10.5 Amendment. The parties may amend, modify, and supplement
this Agreement, but such amendment, modification or supplement shall be
valid only if made in writing signed by all parties.
10.6 Entire Agreement. This Agreement (of which the Exhibits
and Schedules attached hereto form an integral part), the Company
organizational documents, and the Formation Agreement embody the entire
agreement among the parties hereto with respect to the formation of the
Company and its governance and supersede all prior agreements and
understandings relating to such subject matter.
10.7 Successors. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and permitted assigns.
10.8 Headings. The headings used in this Agreement are for
convenience only, do not constitute a part of this Agreement, and shall
not be used as an aid to the interpretation of this Agreement.
10.9 Severability.
(a) If due to a change in any applicable law or due to
a decision or other act (including failure to act) by any
competent authority one or more of the provisions of this
Agreement can no longer be enforced or any amendment of one
or more of the provisions of this Agreement is required, the
parties agree that they shall endeavor to find an alternate
solution approaching as near as possible the contractual
situation existing prior to such a change, decision or act.
(b) If any provision of this Agreement is determined to
be invalid or unenforceable, the remaining provisions shall
not be effected thereby, and this Agreement shall be
administrated as though the invalid or unenforceable
provision was not a part of this Agreement
10.10 Confidentiality.
(a) Limited Use. Except as expressly authorized by any
other party, each party agrees not to disclose, use or
permit the disclosure or use by others of any trade secrets,
know-how, data, formulas, processes, tools and techniques,
software algorithms and routines, intellectual property or
other information tangible or intangible ("Confidential
Information") of such other party unless and
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to the extent such Confidential Information (i) is not
marked or designated in writing as confidential and is
provided for a purpose that reasonably contemplates
disclosure to or use by others; provided, however, that
information disclosed orally that is later designated in
writing as confidential shall be treated as Confidential
Information except to the extent it has already been
disclosed or used by the receiving party, (ii) becomes a
matter of public knowledge through no action or inaction of
the party receiving the Confidential Information, (iii) was
in the receiving party's possession before receipt from the
party providing such Confidential Information, (iv) is
rightfully received by the receiving party from a third
party without any duty of confidentiality, (v) is disclosed
to a third party by the party providing the Confidential
Information without a duty of confidentiality on the third
party, (vi) is disclosed with the prior written approval of
the party providing such Confidential Information, or (vii)
is independently developed by the receiving party without
any use of either of the other parties' Confidential
Information. Information shall not be deemed to be available
to the general public for the purpose of the exclusion (ii)
above with respect to each party merely because it is
embraced by more general information in the prior possession
of recipient or others.
(b) Treatment. In furtherance, and not in limitation of
the foregoing Section 10.10(a), each party agrees to do the
following with respect to any such Confidential Information:
(i) exercise the same degree of care to safeguard the
confidentiality of, and prevent the unauthorized use of,
such information as that party exercises to safeguard the
confidentiality of its own Confidential Information; (ii)
restrict disclosure of such information to those of its
employees and agents who have a need to know, and (iii)
instruct and require such employees and agents to maintain
the confidentiality of such information and not to use such
Confidential Information except as expressly permitted
herein. Each party further agrees not to remove or destroy
any proprietary or confidential legends or markings placed
upon any documentation or other materials.
(c) Agreement Confidential. The foregoing
confidentiality obligation shall also apply to the contents
of this Agreement.
(d) Disclosure. The obligations under this Section
10.10 shall not prevent the parties from disclosing the
Confidential Information or terms of this Agreement to any
governmental authority as required by law or applicable
stock regulations (provided that the party intending to make
such disclosure in such circumstances has given the
appropriate other party prompt notice prior to making such
disclosure so that other party may seek a protective order
or other appropriate remedy prior to such disclosure and
cooperates fully with that party in seeking such order or
remedy).
(e) Survival. The provisions of this Section shall
survive the expiration and any termination of this
Agreement.
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10.11 Further Assurances. Each party will do all acts and
things and execute all documents and instruments which the other party
reasonably requests in order to carry out or give further effect to the
provisions of this Agreement.
10.12 Counterparts. This Agreement may be executed in three or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute but one and the same instrument.
10.13 Relationship of Parties and the Company.
(a) The relationship between NNBR, SKF and FAG is that
of independent contractors and co-owners of the Company, and
nothing in this Agreement shall be construed to constitute
one as an employee, partner, or agent of the other. Without
limiting the foregoing, neither NNBR, SKF nor FAG shall have
the authority to act for or to bind the other in any way.
(b) All transactions between NNBR and the Company shall
be on an arms-length basis and on market conditions. The
Company will notify SKF and FAG whenever the Company enters
into a transaction with NNBR. SKF and FAG shall have the
right to audit the books and records of the Company to
ensure compliance with this subsection.
Signature Page Follows
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Signature Page
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
signed as of the date first written above.
NNBR
By: /s/ David L. Dyckman
-------------------------------------------
David L. Dyckman
AB SKF
[publ]
By: /s/ Kaj Thoren
-------------------------------------------
Kaj Thoren
FAG
By: /s/ Dr. Uwe Loos /s/ Dr. Gerhard Vogel
-------------------------------------------
Dr. Uwe Loos Dr. Gerhard Vogel
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