1
EXHIBIT 10.5
PURCHASE AGREEMENT
between
1. KEIPER GmbH & Co., Remscheid, registered in the commercial register of
the local court in Remscheid under HR A 424,
- hereinafter "KRC" -
2. Putsch GmbH & Co. KG, Rockenhausen, registered in the commercial
register of the local court of Kaiserslautern for Rockenhausen under HR
A 1206,
- hereinafter "PKG" -
3. KEIPER RECARO GmbH, Kaiserslautern, registered in the commercial
register of the local court of Kaiserslautern under HR B 1388
- hereinafter "KRG" -
4. KEIPER Car Seating Verwaltungs-GmbH, Remscheid,
registered in the commercial register of the local court
of Remscheid under HR B 2024
- hereinafter "KV";
(KRC, PKG, KRG and KV are
hereinafter collectively
referred to as "Sellers" or
individually as "Seller")
5. KEIPER Car Seating GmbH & Co., Bremen, registered in the commercial
register of the local court of Bremen under HR A 21337
- hereinafter "KCS" -
6. LEAR Corporation GmbH & Co. Kommanditgesellschaft,
Ginsheim-Gustavsburg, registered in the commercial
register of the local court of GroB-Gerau under HR A
3091
- hereinafter the "Purchaser" -
7. LEAR Corporation, with its principle place of business
at 21557 Telegraph Road, Southfield, Michigan 48034
- hereinafter "LEAR" -
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Preamble
(A) KV is the sole general partner (Komplementar) and KRC is the sole
limited partner (Kommanditist) of KCS, a limited partnership under
German law which is registered in the commercial register of the local
court (Amtsgericht) of Bremen under HR A 21337.
(B) KCS was founded on December 20, 1996. By virtue of a contribution
agreement (Einbringungsvertrag) which was also entered into on
December 20, 1996 KRC contributed to KCS with effect as of January 1,
1997 KRC'S business of developing, producing and distributing complete
vehicle seats for the just-in-time production under the trademark
"KEIPER" or under other trademarks (the "Just-in-Time Business"). In
addition, also effective as of January 1, 1997 KRC contributed (i) to
a limited partnership named RECARO GmbH & Co., Kirchheim, its business
of developing, designing, producing and manufacturing seats under the
trademark "RECARO" and (ii) to a limited partnership named RECARO
Aircraft Seating GmbH & Co., Schwabisch Hall, its business named
AIRCOMFORT in which air passenger seats are developed, produced and
distributed. The business remaining within KRC is the business of
developing, producing and distributing hardware components; further,
via its so-called technical centre (Technisches Zentrum) in
Kaiserslatern KRC continues to develop but not to produce and/or
distribute vehicle seats after the Closing subject to the limitations
set forth in this Agreement.
(C) The Purchaser is a limited partnership under German law and is
engaged in the business of developing, producing and distributing
complete vehicle seats and other parts for the automotive industry.
LEAR, a corporation organised under the laws of Delaware, is the
ultimate parent company of the Purchaser.
(D) Sellers desire to sell to Purchaser in accordance with the terms
and conditions of this Agreement their respective interests in KCS and
the shares and/or interests in certain other companies.
Therefore, the parties enter into the following agreement:
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ARTICLE 1
OWNERSHIP OF KCS
1.1 KCS has a total capital (Kommanditkapital) in the amount of DM
33,000,000 which is held by KRC. The nominal value of KRC's
interest in KCS in the amount of DM 33,000,000 is credited to
the capital account (Kapitalkonto) kept by KCS as a fixed
account (Festkonto). KV does not hold any interest in the
capital of KCS.
1.2 An amount of DM 25,000,000 is registered in the commercial
register as the maximum amount of KRC's personal liability as
limited partner of KCS (Hafteinlage).
ARTICLE 2
PARTICIPATIONS HELD BY KCS AND
OTHER PARTICIPATIONS TO BE SOLD
2.1 KCS holds or will hold as of the Closing Date or, in the event
that a transfer must be registered, will have taken all actions
necessary for the registration of ownership of the following
participations which are all part of the sale pursuant to this
Agreement:
2.1.1 all issued and outstanding shares in KEIPER RECARO
Hungary KFT, Mester Utca 2, 8060 Mor, Hungary, ("KCS
Hungary") which has a fully paid in share capital of DM
3,337,122; on December 31, 1996 such share capital was
increased by an amount of DM 174,780, which capital
increase has been filed with the commercial register for
registration, but has not yet been registered; KRC has
subscribed to and has fully paid in the nominal value of
all newly issued shares;
2.1.2 65% of all issued and outstanding shares in KEIPER Car
Seating Italia S.p.A., Via Cristoforo Colombo 21, 20060
Pozzo d'Adda, Italy, ("KCS Italy") which has a fully
paid in share capital of Lire 4,000,000,000 divided into
80,000 shares with a nominal value of Lira 50,000 per
share; the other shareholder being Mr. A. Brizzolara,
Via Borgonuova 10, Milan, holding 28,000 shares or 35%
of all outstanding shares;
2.1.3 51% of all issued and outstanding shares or 102 shares
in KRC TRIM PRODUCTS (PTY) LTD, Greenfields, P.O. Box
5003, 5208 East London,
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South Africa, ("KCS TRIM") which has an authorized share
capital of Rand 1,000, of which 200 shares with a
nominal value of Rand 1 per share have been issued; the
other shareholder being Dorbyl Automotive Products, a
division of Dorbyl Ltd., Bedfordview, South Africa,
holding 98 shares or 49% of all issued and outstanding
shares;
2.1.4 51% of all issued and outstanding shares or 102 shares
in KRC SEWING COMPANY (PTY) LTD, Greenfields, P.O. Box
5402, 5208 East London, South Africa, ("KCS SEWING")
which has an authorized share capital of Rand 1,000, of
which 200 shares with a nominal value of Rand 1 per
share have been issued; the other shareholder being
Automotive Leather Company (PTY) LTD, 53 Hendrik van Eck
St., Rosslyn Pretoria, South Africa, holding 98 shares
or 49% of all issued and outstanding shares.
2.2 PKG holds the following participations which are also part of
the sale pursuant to this Agreement:
2.2.1 All shares in RR LEDER Verwaltungs GmbH,
Kaiserslautern, a company with limited liability
registered in the commercial register of the local
court (Amtsgericht) of Kaiserslautern under HR B 2817
and having a fully paid in share capital of DM 50.000
("RR-Leder GmbH");
2.2.2 100% of the capital (Kommanditkapital) in the amount of
DM 4,500,000 of RR LEDER GmbH & Co., Kaiserslautern, a
limited partnership which is registered in the
commercial register of the local court (Amtsgericht) of
Kaiserslautern under HR A 2294 ("RR-Leder"). The sole
general partner of such limited partnership without an
interest in the capital is RR LEDER Verwaltungs GmbH.
2.3 KRG holds 15% of all issued and outstanding shares in Johnson
Controls Automotive Mexico, Tlaxala, Mexico (hereinafter "JCA
Mexico"), the other shareholder being Johnson Controls Holding
Company, Inc. Plymouth, Michigan, USA. The shares held by KRG
in JCA Mexico are subject of the sale pursuant to this
Agreement.
2.4 The following participations which are held by subsidiaries of
KRC will also be part of the sale pursuant to this Agreement:
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2.4.1 the interest in EURO American Seating, LLC, Wilmington,
USA, ("EAS") which is held by KEIPER RECARO Enterprises
Inc., Clawson, USA ("KRE"); the other shareholder in EAS
is Magna-Lomason Corporation, USA ("MLC");
2.4.2 100% of all issued and outstanding shares in KEIPER CAR
SEATING do Brasil LTDA, Cacapava, Brazil, held by KEIPER
RECARO do Brazil LTDA, Sao Paulo, Brazil ("KRB") which
company has a fully paid in share capital of RS
2.341.000 ("KCS Brazil").
2.5 The entities stated in Section 2.1, 2.2, and 2.4.2 are
hereinafter collectively referred to as the "Subsidiaries". The
shares and interests held by KRE in EAS and by KRB in KCS Brazil
in accordance with Section 2.4 are hereinafter collectively
referred to as the "Subsidiary Shares".
ARTICLE 3
SALE OF INTERESTS IN KCS
3.1 In accordance with the provisions set forth in this Agreement
KRC and KV hereby sell to Purchaser and Purchaser hereby
purchases the partnership interests of KRC and KV in KCS as
described in Article I together with all partners' accounts
(Gesellschafterkonten) with all amounts credited to the capital
account and the transaction account (Verrechnungskonto) as of
the Closing Date (the "Sold Interests"). The sale and purchase
in accordance with this Section 3.1 shall include all rights
for the issuance of the new shares and to the new shares in KCS
Hungary arising from the increase of the share capital which is
referred to in Section 2.1.1.
3.2 The Sold Interests will be transferred to Purchaser at the
Closing Date in accordance with the transfer agreement which is
attached to this Agreement in draft form as Annex 8.3.1.
ARTICLE 4
SALE OF OTHER PARTICIPATIONS
4.1 In accordance with the provisions set forth in this Agreement
PKG hereby sells to Purchaser and Purchaser hereby purchases the
share in RR-Leder GmbH including all dividend rights accruing
thereon through the Closing Date and a partnership interest with
anominal value of DM 4,500,000 equal to 100% of the capital in
RR-Leder
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including 100% of the amounts booked to the partners' accounts
(Gesellschafterkonten). The interests will be transferred in
accordance with the transfer agreement which is attached to this
Agreement in draft form as Annex 8.3.3.1.
4.2 In accordance with the provisions set forth in this Agreement
KRG hereby sells to Purchaser and Purchaser hereby purchases
the shares in JCA Mexico referred to in Section 2.3 including
all dividend rights accruing through the Closing Date. The
shares will be transferred as set forth in Section 8.3.4.
4.3 In accordance with the provisions set forth in this Agreement
Sellers hereby sell and Purchaser hereby purchases the
Subsidiary Shares including all dividend rights accruing through
the Closing Date. As regards EAS the sale shall include any
rights KRE may have for the transfer of MLC's interest in EAS
against payment of the purchase price payable therefor. Sellers
shall procure that the respective owner of the Subsidiary Shares
will take at the Closing (as defined in Section 8.1)
all actions which are required by the owner in order to
transfer the Subsidiary Shares to Purchaser or its nominee in
accordance with all requirements of applicable laws.
ARTICLE 5
PROFIT AND LOSSES FOR THE BUSINESS YEAR 1997
The consolidated profits and losses for the business year 1997 will be
allocated between Sellers and Purchaser on the basis of the Final Pro
Forma Consolidated Profit and Loss Statement and the Final Pro Forma
Consolidated Closing Balance Sheet as defined in Section 9.7 only by
adjusting the Purchase Price as provided for in Section 9.9 - 9.11.
Sellers shall not be entitled to withdraw (entnehmen) any monies from
KCS or the Subsidiaries and undertake to ensure that no dividend or any
other distribution of profits or assets is declared between the
execution of this Agreement and the Closing Date.
ARTICLE 6
REAL PROPERTY
6.1 PKG is the owner of the following real property (hereinafter the
"Real Property"):
6.1.1 The court of Besigheim, land register of Besigheim,
folio 9260, map of Ottmars-
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heim 4811, lot No. 586/31, Ferdinand-Porsche-StraBe 2, building
and land, size 28,798 square metres (the "Besigheim Property").
The land register shows the following encumbrances for the
Besigheim Property:
Section II easement for the benefit of the Zweckverband
Industriegebiet Besigheim, Besigheim, granting
the right to obtain a de-watering pipe.
Section III
Current No. 1 mortgage in the amount of DM 1,000,000 plus 16%
interest per annum and single supplementary
payment in the amount of 2% for the benefit of
Allianz-Versicherungs Aktiengesellschaft,
Munich
Current No. 2 mortgage over DM 4,000,000 plus 16% interest per
annum and a single supplementary payment in the
amount of 2% for the benefit of
Allianz-Versicherungs Aktiengesellschaft,
Munich, ranking equally with the mortgage
referred to under current No. 1
Current No. 3 mortgage over DM 1,000,000 plus 15% interest per
annum for the benefit of Dresdner Bank
Aktiengesellschaft, Remscheid branch
Current No. 4 mortgage over DM 4,000,000 plus 15% interest per
annum for the benefit of Dresdner Bank
Aktiengesellschaft, Remscheid branch
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6.1.2 Local Court Bremen, land register of Vorstadt
R 270, folio 2087, lot 275
Current Lot Description Size in
Number Number square
metres
- --------------------------------------------------------
8 53/134 Holzweide 5, 56,000
industrial
land
53/269 Bruchweide 3, 22,834
building and
land/commer-
cial and in-
dustrial
53/295 Bruchweide 3, 471
building and
land/commer-
cial and in-
dustrial
(the "Bremen Property")
The land register shows the following encumbrances for the Bremen Property:
Section II: No encumbrances
Section III:
Current No. 1 mortgage over DM 1,000,000 plus 16% interest
p.a. and a single supplementary payment in the
amount of 2% for the benefit of Allianz Versicherungs-
Aktiengesellschaft, Munich
Current No. 2 mortgage over DM 6,000,000 plus 16% interest p.a. and
a single supplementary payment in the amount of 2% for
the benefit of Allianz Versicherungs-Aktienge-
sellschaft, Munich
Current No. 3 mortgage over DM 1,000,000 plus 16% interest for
benefit of IKB Deutsche Industriebank Aktiengesellschaft,
Dusseldorf and Berlin
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Current No 4 mortgage over DM 2,000,000 plus 16% interest
for the IKB Deutsche Industriebank
Aktiengesellschaft, Dusseldorf and Berlin
6.2 PKG and Purchaser hereby agree that the Real Property shall be
sold by PKG to Purchaser together with all fixtures
(Zubehor). PKG does not warrant the exact size of the Real
Property.
The encumbrances in Section III of the land registers
where the Real Property is registered shall not be taken over
by the Purchaser. For the purpose of having these encumbrances
deleted PKG shall provide Purchaser on the Closing Date (as
defined in Section 8.1) with a certified declaration from the
respective creditor in respect of each mortgage stating that
the relevant mortgage shall be deleted (cf. Section 8.3.6)
(notariell beglaubigte Loschungsbewilligungen)
6.3 PKG and Purchaser will enter on the Closing Date into a
separate transfer agreement (Auflassung) in which PKG
and Purchaser will agree upon the transfer of title to the Real
Property sold in accordance with this Article 6.
6.4 PKG grants and PKG and Purchaser apply for the registration of
priority notices (Auflassungsvormerkungen) with respect
to the Bremen and the Besigheim Property for the purpose of
securing Purchaser's claim to have title to the Real Property
transferred to it. The priority notice shall have in each case
the next rank after the encumbrances referred to in Section
6.1.1 and 6.1.2 or a better rank.
Purchaser grants in advance the deletion (Loschung) of
the priority notices which will be registered for its benefit
in the land register of the Besigheim Property and the Bremen
Property and applies for the registration of such deletion
provided, however, that the notary may file the application for
deletion with the land register only if PKG demands such
deletion because of the termination of this Agreement and
Purchaser has not moved for and obtained a preliminary
injunction against PKG's demand within a period of six weeks
after he was properly notified by the notary of such demand and
has evidenced to the notary the granting of such preliminary
injunction.
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6.5 To the extent, applications to the land register have been made jointly
by PKG and Purchaser, they shall be deemed to have been made
independent from each other.
The notary is instructed to obtain all governmental and other approvals
and permits and declarations required under statutory law which will
be useful in the context of implementing the sale of the Real Property
including, without limitation, the approvals, declaration or negative
certifications provided in the Construction Act (Baugesetzbuch) and in
the Law on the Transfer of Real Estate (Grundstucksverkehrsgesetz) and
to receive service of such approvals or, as the case may be, the
refusal to grant such approval, negative declarations or negative
certifications with effect for PKG and the Purchaser. PKG and
Purchaser grant power of attorney to the notary to represent them in
the land register proceedings, in particular they authorise the notary
to waive any rights to appeal against decisions of the land registry
and to file registrations with the land register in the name of one or
both.
6.6 PKG and Purchaser hereby irrevocably authorise the notarial clerks
Peter Volk and Jurgen Jungst, both having their main business address at
Kaiserstr 66, 60329 Frankfurt am Main, each of them acting alone
by waiving the restriction set forth in Section 181 of the German
Civil Code (Burgerliches Gesetzbuch) to make and to receive all
statements required for the implementation of the sale of the Real
Property as well as for any supplements and corrections of the provision
in this Agreement regarding the sale of the Real Property. Supplements,
however, to the extent that they affect the internal legal relationship
between PKG and Purchasers only be made if the notary has been
instructed accordingly by PKG and Purchaser. The proxies are authorised
to grant sub-power of attorney.
6.7 Attached hereto as Annex 6 is a German translation of Section 6.1 - 6.6
to be filed with the land registers for the purpose of having the
priority notices (Auflassungsvormerkungen) referred to in Section 6.4
registered. The Parties hereby agree that the German translation
shall be binding upon them and that in case of any conflict between
this English version of Article 6 and the German translation thereof
the German translation shall prevail.
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Article 7
Purchase Price
7.1 Amount of the Purchase Price
The purchase price payable by Purchaser for the Sold Interests,
the interests in RR-Leder, the shares in RR-Leder GmbH,
the Subsidiary Shares, the shares in JCA Mexico and for the
Real Property sold in accordance with Article 6 shall amount
to DM 400,000,000 (in words: Deutsche Mark four hundred
million) in total (hereinafter the "Purchase Price"). The
Purchase Price may be increased or decreased in accordance with
Section 9.9. The Purchase Price after such adjustment will be
hereinafter referred to as the "Adjusted Purchase Price".
LEAR agrees to be jointly and severally liable for the payment
of the Purchase Price, as adjusted in accordance with Section
9.9.
7.2 Allocation of Purchase Price
The Purchase Price payable pursuant to Section 7.1 will be
allocated as follows:
7.2.1 DM 312,873,214.69 to the sale of the Sold Interest by
KRC;
7.2.2 DM 1 to the sale of the Sold Interest by KV;
7.2.3 DM 66,784.31 to the sale of the shares in RR-LEDER GmbH
sold by PKG;
7.2.4 DM 5,000,000 to the sale of the interest in RR-Leder
sold by PKG;
7.2.5 DM 6,000,000 to the sale of the interest in EAS;
7.2.6 DM 32,500,000 to the sale of the shares in KCS Brazil;
7.2.7 DM 3,060,000 to the sale of the shares in JCA Mexico
sold by KRG;
7.2.8 DM 40,500,000 to the Real Property.
When the Purchase Price will be adjusted pursuant to
Section 9.9, the above amounts will be adjusted in
accordance with the Final Financial Statements.
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7.3 Maturity / Payment of the Purchase Price
7.3.1 The Purchase Price shall become due and payable as
follows:
(i) an amount of DM 355,000,000 (in words: Deutsche Mark
three hundred and fifty-five million) at the Closing Date;
(ii) an amount of DM 22,500,000 (in words: Deutsche Mark
twenty-two million five hundred thousand) one year after the
Closing Date;
(iii) an amount of further DM 22,500,000 (in words: Deutsche
Mark twenty-two million five hundred thousand) two years after
the Closing Date.
7.3.2 The Purchase Price shall be paid as follows:
(i) an amount of DM 32,500,000 (in words: Deutsche Mark
thirty-two million five hundred thousand) to KRB's account at
Dresdner Bank Lateinamerika, Rua Verbo Divino 1488, Sao Paulo,
bank no. 210, account-no. 0021930004, bank code (Agencia) 0940,
as such part of the Purchase Price which is allocable to KCS
Brazil in accordance with Section 7.2.6.;
(ii) an amount of DM 6,000,000 (in words: Deutsche Mark six
million) to KRE's account at National Bank of Detroit, 611
Woodward, Detroit, MI 48226, account-no. 0685223, routing no.
072000326, swift-code: NBDDUS33xxx, as such part of the
Purchase Price which is allocable to EAS in accordance with
Section 7.2.5.
(iii) the remaining part of the Purchase Price to PKG's
account at Deutsche Bank Filiale Remscheid, account-no.
573104702, bank code 340 700 93,
unless PKG notifies Purchaser in accordance with Section 23.6
that the Purchase Price shall be paid in total or in part to a
different bank account stated in the notice. Purchaser will be
discharged in full from its obligation to pay the Purchase
Price once the Purchase Price has been credited to the
aforementioned accounts. Purchaser is not responsible for the
allocation of the Purchase Price among Sellers.
7.3.3 Purchaser shall deliver to Sellers at Closing two notes
(Wechsel) in proper form each over an amount of DM 22,500,000
(in words: Deutsche Mark twenty-two million five hundred
thousand) issued by Purchaser and
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signed on the front by LEAR (cf. Art. 31 (3) of the
German Code on Notes - Wechselgesetz) which are due and payable
at the order of Sellers on the due dates which are specified
under Section 7.3.1 (ii) and (iii) (the "Notes"). The Notes
must be honoured in accordance with normal market conditions as
eligible paper (diskontfahiger Wechsel) by any major credit
institution in Germany. For the avoidance of doubt it is
hereby expressly agreed that the Notes shall not affect
Purchaser's obligation to pay the Purchase Price as provided in
Section 7.1 through Section 7.3.2 (Zahlung erfullungshalber).
However, Purchaser and LEAR shall only be obliged to pay the
instalments of the Purchase Price referred to under Section
7.3.1 (ii) and (iii) against return of the Notes.
7.4 No set-off
Purchaser shall not be entitled to exercise any
right of retention or set-off against Sellers' claim for
payment of the Purchase Price, unless the legal basis and the
amount of any counter-claim which Purchaser intends to
set-off against Sellers' claim for payment of the Purchase
Price are not disputed by Sellers.
ARTICLE 8
CLOSING
8.1 Closing Date / Closing
After the date on which the conditions set forth in
Section 8.2 below have been satisfied and Sellers and
Purchaser hereto are informed thereof they will meet at the
offices of Hengeler Mueller Weitzel Wirtz, Bockenheimer
Landstr. 51-53, Frankfurt am Main (or at any other place agreed
between Sellers and Purchaser after this Agreement has been
signed), to close the transactions contemplated in this
Agreement (the "Closing"). The Closing shall take place within
a period of 10 Banking Days after the date referred to in the
preceding sentence on a date (the "Closing Date") specified by
Sellers by giving Purchaser at least five Banking Days' prior
written notice, but in no event prior to July 5, 1997.
"Banking Day" shall mean a day on which banks at the place
where the Closing will take place are open during regular
business hours.
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8.2 Conditions to Closing
8.2.1 Closing shall not take place before the sale and
transfer of the Sold Interests has been
declared to be or is deemed to be in compliance with
the rules set forth in the EU Merger Control Regulation
No. 4064/89 (the "Regulation") by the Commission of the
European Union (the "Commission"). If the Commission
issues its declaration of compliance subject to certain
modifications as set forth in Article 8 of the
Regulation the condition to Closing stated in this
Section 8.2 shall be deemed to be satisfied only if
(i) Sellers and Purchaser agree that the modifications
imposed by the Commission shall be implemented in order
to proceed with the Closing, or (ii) Sellers agree to
fully indemnify Purchaser against any financial
disadvantages arising from the implementation of such
modifications. Should none of the alternatives
referred to in (i) or (ii) be applicable, Section
8.4.2 shall apply mutatis mutandis.
If the Commission issues its declaration of compliance
with respect to the sale and transfer of the
Sold Interests, but requires with respect to Article 16
of this Agreement an exemption from or a negative
certificate with respect to Article 85 of the EEC
Treaty, the Parties shall nevertheless proceed with the
Closing without amending any other provisions of this
Agreement including Article 7 (Purchase Price). If
Article 16 is deemed to be inconsistent with Article 85
of the EEC Treaty, Sellers and Purchaser shall in good
faith negotiate a valid and enforceable provision in
accordance with the principles laid down in
Section 23.7 second sentence.
8.2.2 Closing shall only take place if
(i) the representations and warranties stated in
Section 10.1.1 and - limited, however,
to circumstances warranted in respect of KCS -
the representations and warranties set forth in
Section 10.1.2, Section 10.1.3 with Section
1.1 and Section 10.1.4 are true and correct;
(ii) neither KCS's plant in Besigheim nor its plant
in Bremen has been fully destroyed
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by an act of God, e.g. fire or explosion.
8.3 Actions on Closing Date
On the Closing Date Sellers and Purchaser shall take the
following actions. All actions are deemed to take place
simultaneously.
8.3.1 KRC, KV and Purchaser sign a transfer agreement
regarding the transfer of the Sold Interests
substantially in the form attached hereto as Annex
8.3.1.;
8.3.2 KRC and KV deliver to Purchaser (i) an application to
the commercial register of the local court in
Bremen substantially in the form attached hereto as
Annex 8.3.2 for the registration of Purchaser as the
legal successor of KRC and KV into the Sold Interests
such application being duly executed by KRC and KV in
notarial form and (ii) a letter undersigned by KRC and
KV in which they irrevocably instruct the notary who
has certified the signatures under the application or
any other notary denominated by Purchaser to submit the
application to the commercial register of KCS;
8.3.3 PKG and Purchaser or its nominee have notarized a
transfer agreement regarding the transfer of
the share in RR-Leder GmbH and the partnership interest
in RR-Leder substantially in the form attached hereto
as Annex 8.3.3.1, and PKG and RR-Leder GmbH deliver to
Purchaser (i) an application to the commercial register
of the local court in Kaiserslautern substantially
in the form attached hereto as Annex 8.3.3.2 for the
registration of Purchaser as the legal successor of PKG
into the partnership interest sold in accordance with
Section 4.1 such application being duly executed by PKG
an RR-Leder GmbH in notarial form and (ii) a letter
undersigned by PKG and RR-Leder GmbH in which they
irrevocably instruct the notary who has certified the
signatures under the application or any other notary
denominated by Purchaser to submit the application to
the commercial register of RR-Leder;
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8.3.4 KRG hands over to Purchaser or its nominee the share
certificates representing the shares in JCA
Mexico sold in accordance with this Agreement and takes
all actions which Purchaser reasonably asks Sellers to
take in order to transfer title thereto to Purchaser;
8.3.5 the respective owners of the Subsidiary Shares take all
actions required by the respective owner in
order to transfer the Subsidiary Shares to Purchaser or
its nominee in accordance with all requirements of
applicable laws;
8.3.6 PKG and Purchaser sign and have notarized a transfer
agreement regarding the transfer of the Real
Property sold in accordance with Article 6
substantially in the form attached hereto as Annex
8.3.6;
PKG provides Purchaser with a certified declaration
(notariell beglaubigte Loschungsbewilligung)
from the respective creditor in respect of each
mortgage which is provided in Section III of the land
registers where the Real Property is registered stating
that the relevant mortgage shall be deleted or,
alternatively PKG provides Purchaser with a bank
guarantee from a bank of national standing which can be
called if and to the extent any mortgages listed in
Section 6.1.1 and Section 6.1.2 are foreclosed;
8.3.7 Purchaser pays an amount equal to the aggregate amount
of all loans granted through the Closing Date
by KEIPER RECARO Verwaltungsgesellschaft mbH,
Kaiserslaugtern, ("KRV") to KCS, by PKG to RR Leder and
by KRE to EAS as stated in Annex 8.3.7 hereto plus
interest accrued thereon in accordance with the loan
agreements between the respective Seller and borrower.
Purchaser shall pay such amount so that it will be
credited in full as at the Closing Date to the German
bank account stated in Section 7.3.2. To the extent
any amounts payable by Purchaser hereunder in respect
of loans granted by KRV to KCS cannot be finally
determined as of the Closing Date for bookkeeping or
similar reasons such amounts will not be paid as of the
Closing Date but as soon as Sellers can finally
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determine such amounts and prove them to Purchaser.
8.3.8 Purchaser shall take all actions necessary to substitute
the security which KRC and PKG have granted to secure
loans taken out by Subsidiaries prior to the date when
this Agreement is notarized with effect from the
Closing Date or, if the respective lender does not
consent to such substitution, repay to the respective
lender the full amount of the loans not assumed plus
interest accrued thereon; a list of such loans is
attached to this Agreement as Annex 8.3.8;
8.3.9 Purchase pays the first instalment of the Purchase
Price as provided in Section 7.3.1 (i) so that the full
amount of DM 355,000,000 (in words: Deutsche Mark three
hundred and fifty-five million) is credited as of
the Closing Date to the bank accounts stated in Section
7.3.2 (i) through (iii).
In the event that the priority notices referred to in
Section 6.4 and/or the necessary approvals,
certifications or negative notifications provided
for in the Construction Act (Baugesetzbuch) and in
the Law on the Transfer of Real Estate
(Grundstuckverkehrsgesetz) should not have been
obtained by the Closing Date, Purchaser and PKG already
hereby instruct the recording notary to open a notarial
escrow account (Notaranderkonto) and Purchaser shall
pay the portion of the Purchase Price allocated to the
Real Property in accordance with Section 7.2.8 to such
escrow account so that the full amount of such portion
is credited as of the Closing Date to that account. In
respect of such event Purchaser and PKG already hereby
irrevocably instruct the recording notary to pay the
portion of the Purchase Price credited to the notarial
escrow account including all interest accrued thereon
to PKG as soon as the priority notices referred to in
Section 6.4 have been registered and the aforementioned
approvals, certifications or negative certifications
have been obtained. The costs arising in connection
with the opening and maintaining the notarial escrow
account shall be borne by Purchaser.
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8.10 Purchaser delivers to Sellers the Notes duly executed by
Purchaser and LEAR as provided in Section 7.3.3.
8.4 Best Efforts / Withdrawal from Contract
8.4.1 Sellers and Purchaser will use their best efforts to have the
condition to Closing stated in Section 8.2.1 satisfied as
soon as practicable after the date of this Agreement. If,
however, this condition to Closing should not have been
satisfied by November 3, 1997 or earlier or if the competent
authority prohibits the acquisition of the Sold Interests
Sellers shall have the right to withdraw (zurucktreten) from
this Agreement. Sellers may only jointly exercise the
aforementioned right by notifying Purchaser accordingly. If
Sellers withdraw from this Agreement they shall not be liable
to Purchaser for any damages or for the fulfilment of any
other obligations under this Agreement or in connection
therewith irrespective of the legal basis on which any claim
of Purchaser is based.
8.4.2 Purchaser shall have the right to withdraw from this Agreement
if the competent antitrust authority prohibits the acquisition
of the Sold Interests for reasons other than those described
in Section 8.2.1., 2nd paragraph, or if the conditions
described in Section 8.2.2 have occurred; unless Purchaser has
failed to use its best efforts to have the condition to
Closing stated in Section 8.2.1 satisfied, Purchaser shall
not be liable to Sellers for any damage or for the fulfilment
of any other obligations under this Agreement or in
connection therewith irrespective of the legal basis of
Sellers' claim.
ARTICLE 9
FINANCIAL STATEMENTS
9.1 Sellers undertake to deliver to Purchaser within ten weeks
after the Closing Date:
A balance sheet for KCS as of January 1, 1997 ( the "KCS Opening
Balance Sheet") and for each of the Subsidiaries (collectively
the "Subsidiaries' Balance Sheets" and individually a
"Subsidiary Balance Sheet") all as of
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December 31, 1996. The KCS Opening Balance Sheet shall be in
accordance with the generally accepted accounting principles
(Grundsatze ordnungsgemaser Buchfuhrung - "German GAAP") under
the German Commercial Code (HGB) as consistently applied for KRC
as the former owner of the Just-in-Time Business. The
Subsidiaries' Balance Sheets shall be in accordance with the
accounting principles which are generally accepted under the
jurisdiction of the respective Subsidiary as consistently
applied by such Subsidiary. Consistent application shall mean
that similar circumstances have been accounted for in the same
manner as in the balance sheet as of December 31, 1995. For the
avoidance of doubt the correct application of the aforesaid
accounting principles shall not be over-ruled by principles of
consistency.
Sellers further undertake to conduct a physical inventory
(Vorratsvermogen) count and prepare and to have their auditors
audit within a period of 10 weeks after the Closing Date;
(i) A pro forma balance sheet on a consolidated basis
including KCS and the Subsidiaries as of January 1, 1997
(the "Pro Forma Consolidated Opening Balance Sheet");
(ii) a pro forma consolidated balance sheet including KCS and
the Subsidiaries as of the Closing Date (the "Pro Forma
Consolidated Closing Balance Sheet") together with a pro
forma consolidated profit and loss statement for the
period between January 1, 1997 and the Closing Date (the
"Pro Forma Consolidated Profit and Loss Statement").
The two aforementioned balance sheets shall hereinafter be
collectively referred to as the "Consolidated Balance Sheets".
The parties agree that consolidation shall be carried out in
accordance with the pro forma consolidation and the evaluation
principles which are set forth in Annex 9.1 to this Agreement
and in accordance with German GAAP as specified by Annex 9.1.
The neutral auditor which may be appointed in accordance with
Section 9.5 shall also be bound by such principles. Sellers'
auditors and the neutral auditor shall only audit whether the
Consolidated Balance Sheets and the Pro Forma Consolidated
Profit and Loss Statement were prepared in accordance with this
Section 9.1 and Annex 9.1 hereto. For the avoidance of doubt,
the Real Property shall not be included in the consolidation.
Moreover, Sellers undertake to deliver to Purchaser within ten
weeks after the Closing Date a statement
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showing the pro forma net debt of KCS and of the Subsidiaries on a
consolidated basis (the "Pro Forma Consolidated Net Debt") as
of January 1, 1997 (the "Pro Forma Consolidated Net Debt Statement").
The Pro Forma Consolidated Net Debt shall be equal to the consolidated
amount of all bank debt (Verbindlichkeiten gegenuber Kreditinstituten),
promissory notes (Eigenwechsel) and of all inter company debt of KCS
and the Subsidiaries including interest accrued thereon to be paid-off
at the Closing by Purchaser in accordance with Section 8.3.7 minus the
consolidated amount of all cash and cash equivalents in the meaning of
Section 266 (2) B.IV of the German Commercial Code (HGB), all as shown
in the Pro Forma Consolidated Opening Balance Sheet.
The KCS Opening Balance Sheet, the Subsidiaries' Balance Sheets, the
Consolidated Balance Sheets, Pro Forma Consolidated Profit and Loss Statement
and the Pro Forma Consolidated Net Debt Statement shall hereinafter be
collectively referred to as the "Financial Statements".
9.2 Purchaser undertakes to give Sellers and the auditors of Sellers all
assistance necessary to prepare and to audit the Financial Statements,
respectively.
9.3 Purchaser is entitled to have its own auditors audit the Financial
Statements and review the working papers of Sellers' auditors
in the presence of Sellers' auditors. Purchaser's auditors shall
attend the physical inventory count referred to in Section 9.1. Within
six weeks after Purchaser has received the Financial Statements
Purchaser's auditors may raise objections against the Financial
Statements by stating that any of the Financial Statements were not set
up in accordance with Section 9.1 including Annex 9.1. Any objection
by Purchaser's auditors shall only be deemed valid and to be raised in
time if Sellers are notified thereof in accordance with Section 23.6
within the aforementioned period and if the notification specifies any
item of any Financial Statement as to which the objection is raised and
the amount by which the assessment of Purchaser's auditors deviates
from the amount for the particular item which is stated on the
respective Financial Statement.
9.4 If Purchaser raises objections in accordance with Section 9.3 and if
Purchaser and Sellers do not agree on the merit of the objections
within a period of two weeks after Sellers have been notified of
Purchaser's objections, the outstanding issues will be decided with
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binding effect for both parties by a neutral auditor to be appointed
in accordance with Section 9.5.
9.5 Within a period of further two weeks after Purchaser and Sellers have
failed to reach agreement on Purchaser's objections in accordance
with Section 9.4 the parties will appoint a neutral auditor.
If the Parties cannot agree on the appointment of a neutral auditor
within the aforementioned period each party may apply for the
appointment of a neutral auditor by the Institut der Wirtschaftsprufer
e.V. in Dusseldorf; the Institut der Wirtschaftsprufer e.V. in
Dusseldorf shall select as neutral auditor only an audit firm of
international reputation with offices in the jurisdiction where KCS and
the Subsidiaries are registered.
9.6 The neutral auditor appointed in accordance with Section 9.5 shall audit
the specific items against which Purchaser has raised objections in
accordance with Section 9.3 and shall determine the amount
attributable to the relevant disputed item provided, however,
that the amount fixed by the neutral auditor in respect of any such
item must be in the range of the deviating opinions of Purchaser and
Sellers. The neutral auditor shall not take any decision before the
Parties have been given the opportunity to present their views in
writing. In any event, however, the neutral auditor shall render a
written report including its decision within a period of six weeks after
it has been appointed. The neutral auditor shall act as arbitrary
(Schiedsgutachter) and its decisions shall be binding upon both
Parties. The costs of the neutral auditor shall be borne by the
parties in accordance with Section 91 et seq. of the German Code of
Civil Procedure (ZPO).
9.7 If Purchaser does not raise any objections in accordance with Section
9.3 the Financial Statements will be binding upon all Parties. If
Purchaser raises objections in accordance with Section 9.3 the
Financial Statements as adjusted by mutual agreement between the Parties
or by the neutral auditor will be binding upon both Parties.
As soon as the Financial Statements have become binding upon
both parties they shall become the "Final Financial Statements" and,
further, the Pro Forma Consolidated Opening Balance Sheet shall become
the "Final Pro Forma Opening Consolidated Balance Sheet", the Pro Forma
Consolidated Closing Balance Sheet shall become the "Final Pro Forma
Consolidated Closing Balance Sheet" and the Pro Forma Consolidated
Profit and Loss Statement appertaining thereto the "Final Pro Forma
Consolidated Profit and Loss Statement", the KCS Opening Balance
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Sheet shall become the "Final KCS Opening Balance Sheet", the
Subsidiaries' Balance Sheet shall become the "Final
Subsidiaries' Balance Sheet", and the Net Debt Statement shall
become the "Final Net Debt Statement" within the meaning of this
Agreement.
9.8 For the purposes of the Financial Statements circumstances
which already existed on the Closing Date but become known
thereafter (valuation enlightening circumstances -
wertaufhellende Tatsachen) shall be taken into account by the
Parties and their auditors as well as by the neutral auditor in
accordance with German GAAP. However, valuation enlightening
circumstances becoming known after the period during which
Purchaser may have raised objections in accordance with Section
9.3 may only be taken into account by the neutral auditor to the
extent the valuation enlightening circumstance affects the
valuation of any items which are subject to the neutral
auditor's review in accordance with Section 9.6 and refer to
circumstances which are not under the control of Sellers or
Purchaser.
9.9 The Purchase Price will be adjusted in accordance with the
following provisions:
9.9.1 If the Final Pro Forma Consolidated Profit and Loss
Statement and the Final Pro Forma Consolidated Closing
Balance Sheet show a profit (JahresuberschuB - within
the meaning of Sections 275(2), 307(2), 266(3) German
Commercial Code - HGB) for the period between the
balance sheet date of the Final Consolidated Opening
Balance Sheet (i.e. January 1, 1997) and the Closing
Date, the Purchase Price will be increased by an amount
equal to the profit after deduction of such portion of
the profit which is allocable to minority shareholders
or partners.
9.9.2 If the Final Pro Forma Consolidated Closing Profit
and Loss Statement and the Final Pro Forma
Consolidated Closing Balance Sheet show a loss
(Jahresfehlbetrag within the meaning of Sections
275(2), 307(2), 266(3) German Commercial Code - HGB)
the Purchase Price will be decreased by such amount
after deduction of such portion of the loss which is
allocable to minority shareholders or partners.
9.10 If the Purchase Price is increased in accordance with Section
9.9.1, the balance between the Purchase Price
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and the Adjusted Purchase Price will become due and payable to PKG's
account specified in Section 7.3.2(iii) five Banking Days after the
date on which the Pro Forma Consolidated Closing Balance Sheet has
become the Final Pro Forma Consolidated Closing Balance Sheet in
accordance with Section 9.7.
9.11 If the Purchase Price is decreased in accordance with Section
9.9.2, Sellers shall pay within five Banking Days the amount by which
the Purchase Price exceeds the Adjusted Purchase Price to an account
specified by Purchaser after the date on which Purchaser notified
Sellers of such account in accordance with Section 23.6.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
Each of the Sellers hereby gives the following warranties (Garantien)
to Purchaser and represents that the statements set forth below are
true and correct as of the date when this Agreement is executed and,
unless expressly provided otherwise in this Article 10, as of the
Closing Date:
10.1 Organizational Matters
10.1.1 Sellers have all necessary authority to enter into
this Agreement and implement the transactions
contemplated herein.
10.1.2 KCS, the Subsidiaries, JCA Mexico and EAS are legal
entities duly organized and validly existing under
the laws of their respective jurisdiction.
10.1.3 Subject to Annex 10.1.3 the statements set forth in
Article 1 and 2 are correct. It is, however,
understood between the parties that KRG's
shareholding in JCA Mexico may be diluted or
reduced before the Closing Date below 15% if KRG
does not participate in a capital increase or in
an additional financing of capital investments
approved by the Board of Directors of JCA Mexico.
Any such dilution or reduction of the shareholding
shall not be deemed to constitute a breach of this
warranty.
10.1.4 KCS, the Subsidiaries, JCA Mexico and EAS are
qualified to transact business in all locations in
which they transact business and have the power to
carry on their business as now being conducted.
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10.1.5 Subject to Annex 10.1.5 the Sold Interests, as well
as the shares in the Subsidiaries, JCA Mexico and EAS
which are sold by Sellers in accordance with this
Agreement are fully paid in and have not been repaid and
no obligation to repay exists.
10.1.6 KCS and the Subsidiaries are not a party to any
joint-venture agreements or silent partnership
agreements nor to a contract between business
enterprises within the meaning of Sections 291 and 292
Stock Corporation Act or similar agreements, including
but not limited to control agreements, agreements to
transfer profits, profit pool agreements, agreements to
transfer a portion of profit, company lease agreements
and operational leases except as set forth in Annex
10.1.6.
10.1.7 Except as set forth in Annex 10.1.7 KCS and the
Subsidiaries do not directly or indirectly own or hold
any shares or interests in any companies other than the
Subsidiaries.
10.1.8 In respect of JCA Mexico, except as provided in the
stock purchase agreement dated February 8, 1996, there
are no obligations being transferred to Purchaser
regarding the shares in this company other than those
provided under applicable law.
10.2 Contributions by KRC
KRC made a contribution (Einlage) to KCS the value of which
exceeds the amount which is registered for KRC in the commercial
register as the maximum amount for which they can be held
personally liable (cf. Section 1.2). The contributions made by
KRC have not been repaid or withdrawn (entnommen) in total or in
part and no obligation to repay exists.
10.3 Ownership
10.3.1 Each of the Sellers is the sole owner of the respective
Sold Interest sold by it in accordance with Section 3.1,
and the Sold Interests together constitute all interests
in KCS. The Sold Interests are freely transferable and
not subject to any option or preemptive rights, liens or
encumbrances or any other rights
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restricting the transfer or the ownership of
the Sold Interests.
10.3.2 KCS is the owner of the shares and interests referred
to in Section 2.1. Unless provided otherwise in Annex
10.3.2, such shares and interests are freely
transferable and are not subject to any option or
pre-emptive rights, liens, encumbrances or any other
rights restricting the transfer or the ownership of
such shares and interests.
10.3.3 The respective Seller is the sole owner of the shares
and interests sold by it in accordance with Section 4.1
or, as the case may be, Section 4.2. Unless provided
otherwise in Annex 10.3.3., the shares are freely
transferable and are not subject to any option
or pre-emptive rights, liens or encumbrances and are
free of any other rights or claims of third parties.
10.3.4 The respective company which shall transfer the
Subsidiary Shares at Closing in accordance with Section
4.3 is the sole owner of the respective shares. Unless
provided otherwise in Annex 10.3.4, the Subsidiary
Shares are freely transferable and are not subject to
any option or pre-emptive rights, liens or encumbrances
and are free of any other rights or claims of third
parties.
10.3.5 Unless provided otherwise in Annex 10.3.5, to the
extent KCS or the respective Subsidiary has not
disposed of its assets in the ordinary course of
business since January 1, 1997, KCS and the
Subsidiaries are the sole owner of all assets and
rights shown in the Contribution Balance Sheet
(Einbringungsbilanz) as of January 1, 1997 prepared in
connection with the transfer of the Just-in-Time
Business by KRC to KCS and audited by Sellers' auditors
(the "Contribution Balance Sheet") and in the
Subsidiaries' Balance Sheets, respectively. Such
assets and rights are not subject to any rights of
third parties with the exception of statutory landlord
liens (Vermieterpfandrechte), bankers' liens resulting
from general banking conditions (AGB-Pfandrecht der
Banken) and retention of title (Eigentumsvorbehalt)
imposed by suppliers within the ordinary course of
business or with respect to
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Subsidiaries similar rights and are adequate and
sufficient for the continuing conduct of the business
as now conducted by KCS and the Subsidiaries.
10.4 Fixed Assets (Sachanlagen)/Inventory
(Vorratsvermogen)/Accounts Receivable (Forderungen)
10.4.1 The fixed assets owned or leased by KCS and the
Subsidiaries have been properly maintained and are in
good condition taking into account ordinary wear and
tear.
10.4.2 The quality of the inventory of KCS and the Subsidiaries
complies with the usual quality of the products which
are traded in the market in which KCS or the respective
Subsidiary does business except for any obsolete item of
the inventory which has been written off or written down
in accordance with the principles set forth in Annex
9.1.
10.4.3 Unless provided otherwise in Annex 10.4.3, all notes and
accounts receivable recorded on the Final Pro Forma
Consolidated Closing Balance Sheet (i) are bona fide
claims against debtors for sales or other charges and
(ii), to the Sellers' best knowledge, they are not
subject to any valid defences, set-offs, or
counterclaims, except to the extent of the reserves
therefor recorded on the Final Pro Forma Consolidated
Closing Balance Sheet.
10.5 Real Property
Sections 6.1.1 and 6.1.2 accurately reflect all encumbrances
existing in respect of the Real Property which are to be
registered in the land register in section (Abteilung) II and
III. There are no duties payable for the development of the
Real Property (ErschlieBungsbeitrage) which are due for payment
and no works have been carried out which entitle any authority
to impose any such duties upon the owner of the Real Property.
10.6 Financial Situation
10.6.1 Equity of KCS and Subsidiaries as of December 31, 1996/
January 1, 1997
The Final KCS Opening Balance Sheet and the Final
Subsidiaries' Balance Sheets will show
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equity (as defined in accordance with applicable law) at least in the
following amounts:
Subsidiary total equity equity held by Sellers
("Sellers' Equity
Amount")
KCS DM 33,000,000 33,000,000 (100%)
KCS Hungary DM 3,444,709 3,444,709 (100%)
KCS Italy Lira 7,539,104,906 4,900,418,188.9 (65%)
KCS Trim Rand 5,684,355 2,899,021.1 (51%)
KCS Sewing Rand 2,232,299 1,138,472.4 (51%)
RR Leder DM 1,163,479 1,163,479 (100%)
KCS Brazil R$ 3,170,670 3,170,670 (100%)
10.6.2 Consolidated Net Debt
The consolidated net debt as of the Closing Date calculated in
accordance with Section 9.1 will not exceed the amount set forth in
Annex 10.6.2 due to transactions outside the ordinary course of
business.
10.6.3 Contribution Balance Sheet
The Contribution Balance Sheet has been prepared in accordance
with generally accepted accounting principles under the German
Commercial Code (Sections 238 et seq., 243 German Commercial
Code - HGB) as consistently applied for KRC as the former owner
of the Just-in-Time Business and in accordance with the
evaluation principles set forth in Annex 9.1.
10.6.4 Subsidiaries' Balance Sheets
The Subsidiaries' Balance Sheets have been prepared in
accordance with generally accepted accounting principles in the
respective jurisdiction as consistently applied for the
respective Subsidiary, i.e. similar circumstances have been
accounted for in the same manner as in the balance sheets as of
December 31, 1995. For purposes of preparing the Pro Forma
Consolidated Balance Sheets the Subsidiaries' Balance Sheets
will be adjusted in accordance with the consolidation
principles set forth in Annex 9.1.
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10.6.5 Intercompany Finance
As of the Closing Date KCS or any of the Subsidiaries is not
liable for any obligations of Sellers or those corporations
or entities affiliated with them within the meaning of Section
15 et seq. Stock Corporation Act (Aktiengesetz) (the
"Affiliates" or individually "Affiliate") and KCS Brazil
neither borrows nor lends any money to KRB, or to AUTO
COMERCIO E INDUSTRIA ACIL LTDA.
10.7 Employees / Shop Agreements, Collective Bargaining
Agreements / Pensions
10.7.1 The employment contracts of all employees listed in Annex
10.7.1 were transferred to KCS in connection with the
contribution of the Just-in-Time Business from KRC to KCS.
Unless stated otherwise in Annex 10.7.1(A), no employee has
objected to the assignment of his or her employment contract to
KCS and except for the employees listed in Annex 10.7.1 there
are no employees whose employment agreements have been
transferred from KRC to KCS.
10.7.2 Unless provided otherwise in Annex 10.7.2, KCS and the
Subsidiaries have not made any pension promises to its
employees and have neither with their employees nor with the
works council (Betriebsrat) of KCS or KRC as the former owner
of the Just-in-Time Business or any other body representing
employees' interests entered into any agreements providing for
profit sharing, Christmas gratification (Weihnachtsgeld),
holiday contributions (Urlaubsgeld), severance payments or
special remunerations (Sondervergutungen). Moreover KCS and
the Subsidiaries are not a party to a shop agreement
(Betriebsvereinbarung) or a collective bargaining agreement
(Tarifvertrag) which is not expressly listed in Annex 10.7.2.
To the best of Sellers' knowledge no working place guarantees
have been given other than those given in the shop agreements
or collective bargaining agreements listed in Annex 10.7.2.
The pension reserves (Pensionsruckstellungen) shown in
the Contribution Balance Sheet of KCS as of January 1, 1997
have been properly made
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in accordance with Section 6a of the German Income Tax Code
(Einkommensteuergesetz); notwithstanding the foregoing in
respect of pensions granted to the employees of KCS and any of
the Subsidiaries KCS and the Subsidiaries have taken all
actions required under any pension promise and applicable law.
10.8 Environmental Law
10.8.1 The real property, plants and buildings owned by PKG, KCS, if
any, and the Subsidiaries are free from and do not cause
Environmental Damage. Environmental Damage shall mean any
pollution of or the condition of, air, ground, soil, ground-
and surface-water and buildings which violates any provision
of applicable private or public law or does not comply with
legal requirements, taking into account local standards.
10.8.2 None of KCS or the Subsidiaries have any actual or contingent
liability with respect to clean up, remediation, removal or
abatement of any facility into which any waste or by-product
of such company has been directly or indirectly sent for
storage, disposal or recycling.
10.8.3 The current business operations of KCS and the Subsidiaries
have not resulted in the commencement of proceedings against
KCS or KRC as its predecessor or any of the Subsidiaries for
violation of any legal provisions in respect of environmental
protection. KCS and the Subsidiaries have taken adequate
measures to comply in all material respects with the legal
provisions applicable to them in respect of environmental
protection laws.
10.9 Compliance with Law
KCS and the Subsidiaries do not materially violate any
administrative laws or regulations or rights of third parties
in a way which is likely to impair, taking into account local
standards, the ability to continue their respective business
as presently conducted.
10.10 Governmental Approvals, Licenses and Permits
KCS and the Subsidiaries are in possession of all governmental
approvals, licences and permits necessary for
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the operation of their respective business as it is currently
conducted. These approvals, licences and permits are in full force and
effect. To the best of Sellers' knowledge the business of KCS and its
Subsidiaries have been conducted in all material respects in
compliance therewith.
10.11 Product Liability
All products manufactured and distributed by KCS and the Subsidiaries
were manufactured in a way which does and will not result in product
liability. Unless provided otherwise in Annex 10.11, third parties
have not asserted or threatened to assert any claims based on a
contractual or non-contractual product liability against KCS or
Sellers as partners of KCS or any of the Subsidiaries, and to the best
of Sellers' knowledge there are no circumstances which could lead to
any such claims.
10.12 Litigation
Except for the lawsuits listed in Annex 10.12 and except for lawsuits
with a value (Gegenstandswert) of less than DM 50,000 in any
individual case and no more than DM 500,000 in the aggregate, neither
KCS nor any of the Subsidiaries is as of the execution of this
Agreement involved in court proceedings (including arbitration) either
as plaintiff or defendant. Except for the proceedings listed in Annex
10.12 Sellers are not aware of any pending administration proceedings
or investigations of public authorities against KCS or any of the
Subsidiaries.
10.13 Intellectual Property Rights
10.13.1 To the best of Sellers' knowledge, neither KCS nor any
of the Subsidiaries infringes any intellectual property
rights of third parties and, to the best of Sellers'
knowledge, there is no unauthorised use by any person of any
intellectual property rights or confidential information
owned or used by any of the Subsidiaries. However, KCS Italy
has infringed in the past the trademark "RECARO". Sellers
will ensure that Purchaser will not be held liable by
Sellers or any of their Affiliates for any such infringement
which has accrued prior to the Closing Date.
10.13.2 Unless provided otherwise in Annex 10.13.2, the intellectual
property rights transferred
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in accordance with Article 18 are sufficient for the continuing
conduct of the business as now conducted by KCS and its
Subsidiaries and there are no licenses including sub-licenses
granted to third parties with regard to these intellectual
property rights.
10.13.3 The patents transferred in accordance with Section 18.1 by KRC
are:
(a) validly existing and registered or applied for
registration as set forth in Annex 18.1.1 and 18.1.2
hereto;
(b) owned by KRC which has full power to transfer or to
license them;
(c) to the best of Sellers' knowledge free of any legal
defects such as, e.g., the dependency on a patent owned
by a third party or a third party's right of prior use;
(d) to the best of Sellers' knowledge free of any technical
deficiencies of the inventions of which they are based;
(e) to the best of Sellers' knowledge free of any validly
existing patent protection obtained by a third party
for any of the inventions on which they are based;
(f) to the best of Sellers' knowledge free of
dependencies, i.e. overlapping in the scope of
protection, to other patents and patent applications
which are presently owned by KRC and which are not to
be transferred to KCS;
(g) to the best of Sellers' knowledge not infringed by any
third party.
10.13.4 Annex 10.13.4 contains full details of all licenses and other
agreements relating to intellectual property rights to which
KCS or any of the Subsidiaries is a party (whether as licensor
or licensee) or which relate to any intellectual property right
owned by any of the Subsidiaries and those licenses and
agreements are in full force and effect and are, to the best of
Sellers' knowledge, not in
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jeopardy and sufficient for the continuing
conduct of the business as now conducted by the
Subsidiaries.
10.13.5 The current projects which are listed in Annex
1 to the Framework Services Supply Agreement in
the Areas of Research and Development (Annex
19.2 to this Agreement):
(i) constitute to the best of Sellers'
knowledge all research and development programs
which are necessary to satisfy all current
commitments to customers;
(ii) are based upon contracts the performance
of which has already commenced or upon
contracts which have been awarded by a
customer;
(iii) have been negotiated at arm's length and
in accordance with customary industry practice;
(iv) have been performed and administered in a
prudent and diligent manner.
10.13.6 Nothing contained in the agreements mentioned
in Article 19 shall be construed in such a
manner as to override the warranties given in
this Article 10.13.
10.14 INSURANCE
KRC, as the former owner of the Just-in-Time Business,
and the Subsidiaries have taken out insurance customary
in the business conducted by KCS or the Subsidiaries.
KCS and the Subsidiaries have been included in the
existing insurance policies which are adequate to meet
the risks insured and are customary for the business
conducted by KCS. The policies listed in Annex 10.14
which are material for the business of KCS and the
Subsidiaries are in full force and effect.
10.15 Changes Since January 1, 1997
None of the following events have occurred since January
1, 1997 until Closing Date (except for events listed in
Annexes 10.15.1 to 10.15.6):
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10.15.1 material adverse change in the financial situation
of KCS or the Subsidiaries;
10.15.2 extraordinary damages or losses outside the ordinary
course of business which exceed DM 500,000 in any
individual case or DM 1,000,000 in the aggregate;
10.15.3 subject to the reservation provided in Section 10.19,
2nd paragraph, extraordinary termination of a contract
having a material adverse effect on the business
or the financial situation of KCS or any of the
Subsidiaries;
10.15.4 transactions outside the ordinary course of business,
in particular
(a) KCS and each of the Subsidiaries have not paid
its creditors within the times agreed with them;
(b) no asset of a value or price in excess of DM
500,000 has been acquired or disposed of or
agreed to be acquired or disposed of by
KCS or any of the Subsidiaries, and no contract
involving expenditure by KCS or any of the
Subsidiaries in excess of DM 500,000 annually
has been entered into by KCS or any of the
Subsidiaries;
(c) no event has occurred which is likely to give
rise to a tax liability to KCS or any of the
Subsidiaries on deemed (as opposed to actual)
income, profits or gains or which results in
KCS or any of the Subsidiaries becoming
liable to pay or bear a tax liability directly
or primarily chargeable against or attributable
to another person disregarding events within
the ordinary course of business;
(d) no event has occurred which would entitle any
third party (with or without the giving of
notice) to call for the repayment of
indebtedness of KCS or any of the Subsidiaries
prior to its normal maturity date;
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(e) KCS or any of the Subsidiaries has suffered
any labor dispute and there are not pending or
threatened labor disputes, strikes or work
stoppages or slowdowns;
10.15.5 No monies have been withdrawn (entnommen) from KCS or
RR-Leder. No dividend or other distribution of profits
or assets has been declared, made or paid or
agreed to be declared, made or paid by any Subsidiary
with respect to profits generated since January 1,
1997;
10.15.6 KCS has not granted employees who have been hired
since January 1, 1997 protection against termination in
excess of statutory law; further, any such newly hired
employees have not been granted a gross salary
(excluding social security contributions) in excess of
DM 100,000 (in words: Deutsche Mark one hundred
thousand).
10.16 Taxes and Social Security Contributions
KCS and the Subsidiaries have filed all necessary tax returns
in time and have paid all Taxes assessed by the competent
authorities in the past when due. All social security
contributions due and payable with respect to the period until
the Closing Date have been paid or have been sufficiently
provided for in the Final Financial Statements. "Taxes" shall
mean any direct and/or indirect charges by the governmental
authorities and/or any direct or indirect fiscal and/or
financial public burdens (i.e., Zolle, Steuern, Abgaben,
Gebuhren) on the respective company's business, respective
company's assets and respective company's income.
10.17 Material Contracts
Subject to Section 12.2 Annex 10.17 includes a complete and
correct list of all customers with which KCS or the
Subsidiaries have a customer relationship as of the date when
this Agreement is notarized and, further, a list of all
contracts with third parties other than customers and suppliers
(the "Material Contracts") with an annual value of DM 500,000
or an equivalent value in foreign currency or a total value of
DM 1,000,000 or an equivalent value in foreign currency. The
total value of a contract with an indefinite term shall be
determined under the assumption that the contract will be
terminated with effect to the next possible date by giving
notice in accordance with the terms and provi-
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sions of the relevant Material Contract. To the extent any of the
Material Contracts have been concluded by KRC prior to January
1, 1997, the respective Material Contract has been effectively
transferred to KCS prior to the notarization of this Agreement. All
Material Contracts are in full force and effect. No counterparty to a
Material Contract has threatened as of the date when this Agreement is
notarized to terminate the Material Contract and no customer has
threatened as of the date when this Agreement is notarized to terminate
the existing customer relationship.
10.18 No Brokers and Finders
Except for Drueker & Co. whose fee shall be borne by Sellers in
accordance with Section 21.1 Sellers have not retained the services of
any broker or finder in connection with the transactions contemplated
herein.
10.19 No further Warranties
Sellers do not give any explicit or implied warranty in respect of KCS,
the Subsidiaries, EAS or JCA Mexico other than those given in Section
10.1 through Section 10.18. Purchaser has been given the opportunity
to inspect the business of KCS and the Subsidiaries, and the condition
of the assets which are owned by KCS.
For the avoidance of doubt nothing stated in Section 10.1 through
Section 10.18 or in any other provision of this Agreement shall be
construed to the effect that Sellers warrant the continuity of the
relationships of KCS and the Subsidiaries to any of its customers
beyond the date when this Agreement is notarized. Section 10.17 last
sentence shall remain unaffected.
ARTICLE 11
REMEDIES
11.1 Upon written demand of Purchaser, Sellers will hold Purchaser, subject
to the limitations provided in this Agreement, harmless from any damage
Purchaser suffers as a result of any incorrect or incomplete warranty
given by Sellers in Article 10 of this Agreement.
11.2 In case of a demand by Purchaser in accordance with Section 11.1
Sellers shall, at their option, either hold Purchaser harmless
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11.2.1 by way of restitution in kind, i.e. by establishing
the situation corresponding to the warranty or the
provision which was breached, provided, however, that
such restitution in kind does not interfere with the
ordinary conduct of the business of KCS or, as the
case may be, any Subsidiary, or
11.2.2 by way of payment of damages.
If Sellers elect to pay damages in accordance with Section
11.2.2 such damages shall be determined and calculated on the
basis of the amount necessary to put Purchaser in the position
it would have been in had the warranty been correct and
complete.
In case of a breach of Section 10.8.1 the amount necessary to
remediate the Environmental Damage and in case of a breach of
Section 10.8.2 the amount necessary to hold KCS or any of the
Subsidiaries harmless against any liability referred to in such
Section shall be payable as damages. The aforementioned
obligations of Sellers exist irrespective of whether or not any
authority or other third party have required Purchaser to
remediate the Environmental Damage or to take any actions which
are described in Section 10.8.2.
Purchaser may not claim from Sellers damages for lost profit
(entgangener Gewinn).
Damages will not be paid to the extent that Purchaser or any
of its Affiliates (including KCS or any of the Subsidiaries)
is entitled to receive payment under an insurance policy or
indemnification from third parties. In addition, damages will
not be paid to the extent any circumstances which may otherwise
constitute a breach of a warranty are expressly reserved for or
otherwise provided for in the Final Pro Forma Consolidated
Closing Balance Sheet, or to the extent they are not reserved
for or otherwise provided for in the Final Pro Forma
Consolidated Closing Balance Sheet in accordance with the
principles set forth in Annex 9.1 if the lack of such reserve
or provision has been unsuccessfully raised by the Purchaser as
an objection in accordance with Section 9.3.
11.3 Purchaser shall only be entitled to assert claims under this
Article 11 if they exceed the amount of DM 50,000 in each
individual case. This de minimis exception does not apply to
claims referring to the same breach of warranty which are less
than DM 50,000 (in words: Deutsche Mark fifty thousand) in an
individual case, but
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more than DM 50,000 in the aggregate provided that the
circumstances on which any such claims are based are similar in
nature. Purchaser shall furthermore only be entitled to assert
claims once the aggregate amount of all claims asserted by
Purchaser - de minimis claims of up to DM 50.000 only to be
included in accordance with the foregoing provision - exceeds DM
300.000 (in words: Deutsche Mark three hundred thousand). In
this case all claims including de minimis claims may be asserted
in full provided, however, that the maximum amount for which
Sellers may be held liable under this Agreement amounts to 40%
(in words: fourty percent) of the Purchase Price.
11.4 In addition to Section 11.3 the following limitations apply to
damages resulting from a breach of the warranties set forth in
Section 10.6.1 and 10.6.2:
11.4.1 Any amounts resulting from an excess or a shortfall of
the portion of the equity held by Sellers in KCS and/or
any of the Subsidiaries with respect to the Sellers'
Equity Amounts guaranteed in Section 10.6.1 shall be
converted into DM at the currency rates stated in Annex
11.4.1 ("Final exchange rates per 31.12.1996") and
subsequently set off against one another. If the
resulting net amount is positive, Purchaser shall not be
entitled to any damages, and Sellers shall not be
entitled to demand an increase of the Purchase Price.
If the net amount is negative, such amount shall be
payable as damages. If Sellers claim damages under this
Section 11.4.1 the equity shown in the KCS Opening
Balance and/or the Subsidiaries' Balance Sheet and the
consolidated equity in the Pro Forma Consolidated
Opening Balance Sheet shall be adjusted accordingly for
the purposes of adjusting the Purchase Price as provided
for in Sections 9.9.1 and 9.9.2.
11.4.2 In case of a breach of the warranty given in Section
10.6.2 Purchaser shall only be entitled to damages if it
is able to show that
(i) it has suffered a damage within the meaning of
Section 249 German Civil Code et.seq., in
particular that the disadvantages or detriments
resulting from the increase in debt are not
offset by benefits resulting from the
acquisition of assets financed with such
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additional debt (Vorteilsausgleichung);
and
(ii) the damage resulting from such breach will not
be remedied under any other provisions of this
Agreement, in particular Section 9.9.2.
11.5 Purchaser is aware that Johnson Controls Holdings, Inc. as the
other shareholder in JCA Mexico (cf. Section 2.3) and the other
shareholders in KCS Trim and in KCS Sewing may acquire the
shares held by the respective Seller in such company by virtue
of exercising the preemptive right provided for it in the
respective agreement. In case any of the shareholders in any
of the aforementioned companies exercises its preemptive right
and is entitled to exercise such preemptive right in accordance
with applicable law, the damages which can be claimed by
Purchaser against Sellers shall be equal and limited
(i) in respect of JCA Mexico to the amount of such part of
the Purchase Price which is allocated to the sale of
the shares in JCA Mexico in accordance with Section
7.2.7,
(ii) in respect of KCS Trim and in respect of KCS Sewing to
the amount which the other shareholders must pay in
connection with the exercise of the aforementioned
preemptive right pursuant to the relevant joint venture
agreement as of the date of the notarization of this
Agreement.
Any amount owed by any of the shareholders in any of the
aforementioned companies to KCS in connection with or as result
of the exercise of the preemptive right shall be credited
against the relevant aforementioned amount.
Any damage suffered by Purchaser in connection with the above
shall not be included into the calculation of the maximum
amount for which Sellers may be held liable under this
Agreement in accordance with Section 11.3, last sentence.
11.6 If any competent antitrust authority interdicts the transfer of
any of the Subsidiary Shares to Purchaser by a final and
unappealable decision, the damages which Purchaser is entitled
to claim shall be equal to and limited to the amount of the
Purchase Price allocated to such Subsidiary Shares in Section
7.2. Such damages shall not be included into the calculation
of the maximum amount for which Sellers may be held liable
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under this Agreement in accordance with Section 11.3, last
sentence.
11.7 With respect to circumstances which are known to
Purchaser at the date on which this Agreement is notarized,
all claims shall be excluded. The contents of all documents
which were available for inspection in the data room of KCS in
Kaiserslautern as well as all documents passed on to Purchaser,
its representatives and its advisors in form of a CD-Rom or
otherwise are deemed to be known to Purchaser. Purchaser was
given the opportunity to inspect such documents. The list of
documents which were available for inspection in the data room
and on the CD-Rom as well as a list of all other documents
which are deemed to be known to Purchaser are attached to this
Agreement as Annex 11.6. In addition to the documents forming
part of Annex 11.6, the two letters from Dorbyl Ltd. both dated
May 9, 1997, the letter of Automotive Leather Company Rosslyn
sent on May 5, 1997 (all of which letters were sent to Mr.
Konstantinou) as well as the list of documents attached as
Exhibit I to this agreement are deemed to be known by the
purchaser. At the date of execution of this Purchase Agreement
Purchaser is not aware of any matter or event which would give
rise to a claim because of a breach of warranty or untrue
representation of Sellers.
11.8 To the extent that representations and warranties are
qualified by reference to the best of Sellers' knowledge,
exclusively the Knowledge of Mr. Ulrich Putsch and G.
Konstantinou, and the Knowledge of the following persons,
however, limited to the area of competence specified in each
case in the parenthesis shall be attributed to the respective
Seller: Dr. Karl-Heinz Nattland (Finance), Dr. Volkmar Schneider
(Legal and Insurance), A. Schwarz (KCS Hungary), H.-S. Bull
(Personnel), H. Roschmann (Sourcing and Inventory), K. Ackermann
(Distribution and Marketing), J. Walerowski
(Controlling/Finance), KuBmann (Research and Development), J.
Kratzmann (Plant Bremen), F. Duck (Plant Besigheim). "Knowledge"
shall mean all circumstances which Sellers know or should have
known after due inquiry.
11.9 Sellers shall be jointly and severally liable for all claims
of Purchaser arising under this Agreement. Sellers can be held
liable exclusively for breaches of any obligation, warranty or
undertaking contained or given in this Agreement and, to the
extent explicitly provided for in this Agreement, exclusively in
accordance with the provisions of this Agreement. Any other
claims in accordance with statutory law and claims based upon
precontractual duties including, without limitation, claims for
rescission (Wandelung), reduction of the Purchase Price
(Miderung) as well as claims based on torts (unerlaubte
Handlung) or precontractual liability (culpa in contrahendo) are
excluded, unless
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they are based on wilful (vorsatzlich) misconduct of Sellers.
11.10 The statute of limitations (Verjahrung) for claims under this
Article 11 shall run as follows:
11.10.1 claims for legal defects within the meaning of Section
434 German Civil Code (BGB) relating to the Sold
Interests shall be barred (verjahrt) 10 years from the
date of signing of this Agreement;
11.10.2 claims with respect to a breach of the warranty stated
in Section 10.16 (Taxes and Social Security
Contributions) or based on the indemnity given in
Section 13.2 shall be barred after a period of six
months beginning with the date on which the relevant
assessment of Taxes becomes final and unappealable;
11.10.3 claims with respect to a breach of the warranty stated
in Section 10.8 (Environmental Law) shall be barred six
months after the Closing Date;
11.10.4 claims with respect to a breach of the warranty stated
in Section 10.11 (Product Liability) shall be barred
five years after the Closing Date;
11.10.5 all other claims shall be barred on May 31, 1999;
11.10.6 the statute of limitations shall be interrupted
(unterbrochen) or extended (gehemmt) in accordance with
the applicable provisions of German law. If Purchaser
notifies Sellers in accordance with Section 23.6, the
statute of limitations applicable to the respective
claim in accordance with Sections 11.10.1 - 11.10.4
shall not continue to run until a period of six months
has expired beginning with the date when Sellers have
received the notification.
ARTICLE 12
UNDERTAKINGS OF SELLERS AND PURCHASER
12.1 Subject to applicable statutory and contractual provisions
Sellers undertake to ensure that the businesses of
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KCS and of the Subsidiaries will be continued in the normal
course of business during the period between the date when
this Agreement is signed and the Closing Date, and that
Purchaser has appropriate access to the management of KCS
and the Subsidiaries during this period of time.
12.2 Sellers undertake that, during the period between the date when
the Agreement is signed and the Closing Date, without the prior
consent of Purchaser which shall, however, not unreasonably be
withheld:
12.2.1 None of the Subsidiaries shall (i) declare any dividend
or make any distribution with respect to its capital
stock or (ii) sell, lease, transfer, encumber or
dispose of any of its properties or assets, otherwise
than in the ordinary course of business;
12.2.2 neither KCS nor any Subsidiary shall enter into joint
venture, partnership or other similar agreements;
12.2.3 neither KCS nor any Subsidiary shall (i) enter into an
agreement with a term of more than three years and with
a value of more than DM 1 Mio. or (ii) change, amend,
terminate or otherwise modify any material contract
with a value of more than DM 10 Mio.;
12.2.4 neither the Sellers themselves nor KCS nor any of the
Subsidiaries shall take any action which would not
allow Sellers to make a representation set forth in
Article 10 at the Closing Date.
12.3 Sellers undertake to have KRV transfer the employment contract
of the person listed in Annex 12.3 to KCS with effect as from
the Closing Date together with all rights and obligations
outstanding thereunder as of the Closing Date; Purchaser hereby
agrees to such transfer.
12.4 Sellers undertake to submit to Purchaser on the Closing Date a
status report specifying which of the subsidiaries referred to
in Section 2.1.1 to 2.1.4 have been transferred to KCS and,
with respect to those which have not yet been transferred,
specifying the actions which still have to be taken. Sellers
undertake to take all actions necessary to complete such
transfers.
12.5 Sellers and their Affiliates will not reclaim tools of which
they are the owner but which were leased to KCS Italy by giving
less than six months' notice to the end
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of twelve months after the Closing Date, unless KCS Italy
increases the prices charged to Sellers or any of their
Affiliates for products manufactured with the help of such tools
or unless KCS Italy repeatedly supplies to Sellers or their
Affiliates products which do not meet the standards customary in
the market. In the event that the tools are still needed for
the manufacturing of products sold by KCS Italy they may only be
reclaimed if KCS Italy is offered the supply of the components
which it used to manufacture with the help of the tools on terms
and conditions then prevailing in the market.
12.6 Purchaser undertakes to terminate the subcontract with RECARO
GmbH & Co., Kirchheim, ("REC") regarding the manufacturing of
the seats for the 986, 996 Porsche models in REC's plant in
Kirchheim only with six months' notice and not effective prior
to April 1, 1998. During the term of the subcontract REC and
KCS shall have reasonable access to all data and information
which are relevant for the performance of the subcontract and
are in the possession or known only to either of them.
12.7 Purchaser undertakes neither to move the registered office of
KCS from Bremen to Kaiserslautern nor to set up any office of a
company or a division which has "KEIPER" in its name in
Kaiserslautern or within 70 (seventy) kilometers of the city
limits of Kaiserslautern for a period of five years beginning
with the Closing Date provided, however, that
12.7.1 Purchaser is granted a period of six months beginning
with the Closing Date to have KCS's employees currently
working in the technical center of KCS in Kaiserslautern
move to new office premises in Kaiserslautern if
Purchaser elects to set up an office under a name not
containing "KEIPER" in Kaiserslautern;
12.7.2 Purchaser is granted a period of one year beginning with
the Closing Date to have KCS's employees currently
working in the technical center of KCS in Kaiserslautern
move to new office premises if Purchaser elects to set
up an office under a name containing "KEIPER" in an area
more than 70 (seventy) kilometers off the city limits of
Kaiserslautern.
12.8 Purchaser undertakes that either Purchaser itself or, as the
case may be, its nominee assumes all rights and obligations
under the stock purchase agreement with JCA Mexico.
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12.9 Purchaser undertakes to take all actions required or useful to
have the name "RECARO" removed from the name of KCS Hungary and
KCS Italy, unless such name change has already been effected as
of the Closing Date.
12.10 Purchaser undertakes to cause KCS and any of the Subsidiaries
not to distribute without a licence any product under the
trademark "RECARO" or "KEIPER" after the Closing Date, unless
compliance with this undertaking would require the modification
or substitution of any tools used in the production of KCS or
any of the Subsidiaries in which case a grace period of six
months will be granted.
12.11 Purchaser shall grant Sellers and KRE free of charge for the
time period until the Closing Date all reasonable support which
is required to manage the business of EAS if such support is
necessary and requested by Sellers.
12.12 For a period of five years from the Closing Date KRC shall fill
orders from KCS for the supply of products of the kind offered
by KRC to its customers subject to KRC's production capacity for
prices to be negotiated between KRC and KCS from time to time.
However, KRC shall not arbitrarily (willkurlich) increase prices
or arbitrarily refuse to supply any products ordered by KCS.
12.13 Purchaser undertakes to procure insurance for product liability
risks arising in respect of products manufactured after the
Closing Date. Sellers shall have the right to inspect
Purchaser's insurance policy. If Sellers should come to the
conclusion that the insurance policy does not provide for
sufficient protection in respect of products manufactured
through the Closing Date Sellers and Purchaser shall
cooperate in good faith enabling Sellers to take out insurance
for such time period at their cost at a premium which is as low
as reasonably possible; this includes the transfer of Sellers'
existing insurance to Purchaser against reimbursement of
premiums payable under the insurance policy transferred.
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ARTICLE 13
TAX AUDITS AND TAX INDEMNITY
13.1 Sellers and their auditors are entitled to participate in tax
audits of KCS and the Subsidiaries, to the extent that such tax
audits refer to fiscal years through December 31, 1997.
Purchaser will inform Sellers duly in advance of any tax audits
of the aforementioned kind. Purchaser shall assist Sellers in
filing remedies (Einspruch) with the tax authorities or in
filing an action against the tax authorities in the tax court
(Finanzgericht) in respect of tax assessments (Steuerbescheide)
referring to fiscal years through December 31, 1996 and the
period thereafter until the Closing Date. Sellers will pay the
costs and expenses accruing in connection with remedies and
actions of the aforementioned kind. Sellers shall make
available to Purchaser all documents or information which
Purchaser reasonably requires in order to file remedies with the
tax authorities or to file an action against the tax authorities
in the tax court in respect of tax assessments referring to
periods after the Closing Date.
13.2 In the event that Taxes including any interest or penalties
become due for and payable by KCS or any Subsidiary for fiscal
years through December 31, 1996 which have not been sufficiently
provided for in the Final Subsidiaries' Balance Sheets and/or in
the Final Pro Forma Consolidated Opening Balance Sheet Sellers
shall indemnify KCS and the relevant Subsidiary therefor,
however, where KCS does not hold 100% in any Subsidiary, limited
to the percentage held by KCS; the same shall apply to any Taxes
becoming due for and payable by KCS or any Subsidiary for the
period from January 1, 1997 up to the Closing Date to the extent
that such tax payment were not provided for in the Final Pro
Forma Consolidated Closing Balance Sheet.
For the avoidance of doubt it is hereby agreed that the
provisions of Section 11.3 shall not apply to claims under this
Section 13.2.
ARTICLE 14
INFORMATION, CONDUCT OF PROCEEDINGS,
ACCESS TO FILES
14.1 Purchaser shall ensure that Sellers will be promptly and fully
notified of any claim of Purchaser under this Agreement. A
failure to notify Sellers of such claim does not affect
Purchaser's right to damages to the extent that the damage has
not increased due to such
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failure. Purchaser shall make available to Sellers copies of all
relevant documents which Sellers may reasonably request in order to
defend themselves against such claim. Without Sellers' prior consent
which shall not be unreasonably withheld Purchaser may not enter into
a settlement (Vergleich), waiver (Verzicht) or acknowledgement
(Anerkenntnis) as a result of which Purchaser would be entitled to
indemnification under Article 11.
14.2 Purchaser shall ensure that Sellers are granted in accordance with
their reasonable request access to all files, documents and information
useful in the context of
14.2.1 the defence against potential claims of Purchaser against
Sellers under this Agreement, or
14.2.2 tax assessments against Sellers or any person or entity holding
an interest in any of the Sellers, or
14.2.3 other documents and information which are otherwise reasonably
required by Sellers.
ARTICLE 15
INDEMNIFICATION IN CASE OF
PERSONAL LIABILITY OF KRC
15.1 Purchaser undertakes that it will not take any action which may result
in a revival of personal liability of KRC for obligations of KCS
pursuant to Section 172 (4) of the German Commercial Code (HGB).
15.2 Purchaser will indemnify and hold harmless KRC or its partners from
and against any damage and any expenses (including legal costs and
expenses) which any of them may incur as a result of a personal
liability which has arisen due to actions referred to in Section 15.1.
ARTICLE 16
COVENANT NOT TO COMPETE
16.1 Basic Rule. For a period of five (5) years commencing as of the
Closing Date (the "Non-Compete Period"), Sellers and their Affiliates
shall not compete, either directly or indirectly, with KCS, the
Subsidiaries, EAS or any of their respective successors in the
rendering of research and development services for third parties,
production,
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and supply of complete seats for the original equipment of non-commercial
vehicles (PKW) in the respective geographical markets in which the
production and distribution activities of KCS, the Subsidiaries and EAS are
conducted as of the Closing Date. This basic rule shall not apply to the
extent Section 16.2 through 16.7 provides for an exception.
16.2 Recaro Seats. Sellers and their Affiliates shall be permitted to develop,
produce and supply complete vehicle seats bearing exclusively the RECARO
trademark or characterized by typical RECARO styling elements so that the
end user identifies the seat as a RECARO seat (such seats hereinafter
referred to as "RECARO Seats"), provided that such RECARO Seats are not
used for Non-Qualifying Vehicles produced by original equipment
manufacturers ("OEMs") for which Section 16.3 shall apply. "Non-Qualifying
Vehicles" shall mean all vehicle models and their respective first
successor model (i) set forth in Annex 16.3.1 and, in addition thereto,
the BMW E53 (SVW), the Ford Mondeo, the SAAB 640 (9.5) and the Volvo
P066 (C90) and P2X (VNS 90) for which Purchaser or any of its Affiliates
(excluding KCS, the Subsidiaries, EAS and JCA Mexico) supplies or is
contracted to supply as of the Closing Date standard seating equipment in
the geographical markets of Western Europe (including, without limitation,
the Czech Republic and Poland) and (ii) for which KCS or any of its
Subsidiaries or EAS supplies or is contracted to supply as of the Closing
Date standard seating equipment in the geographical markets in which the
production and distribution activities of KCS, the Subsidiaries and EAS are
conducted; the car models supplied by KCS as of the Closing Date are set
forth in Annex 16.3.2.
16.3 Non-Qualifying Vehicles. For each OEM, Sellers and their Affiliates
shall be permitted to develop, produce and supply RECARO Seats for
Non-Qualifying Vehicles up to an annual number equal to the Annual
Allowance (as defined below) for such OEM. If, during any 12 month period
beginning on the Closing Date, Sellers or any of their Affiliates supply
RECARO Seats for Non-Qualifying Vehicles in a number which exceeds the
Annual Allowance for any OEM (the "Excess RECARO Seats"), Sellers jointly
and severally shall pay Purchaser for each Excess RECARO Seat, an amount
equal to 80% of the incremental profit on such Excess RECARO Seat that
Sellers or any of their Affiliates are entitled to receive in accordance
with the applicable supply contract for the Non-Qualifying Vehicle. For
the purposes of this paragraph, "incremental profit" is defined as Sellers'
or their Affiliates' average earnings before taxes per RECARO Seat
multiplied by the number of Excess RECARO Seats.
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For each OEM (other than Porsche), the "Annual Allowance" shall be the
higher of (i) the number of RECARO Seats supplied by Sellers and their
Affiliates (not including KCS, the Subsidiaries, EAS and JCA Mexico)
for Non-Qualifying Vehicles manufactured by such OEM during the last
12 months prior to the Closing Date and (ii) the number of RECARO
Seats for which Sellers or their Affiliates (not including KCS, the
Subsidiaries, EAS and JCA Mexico) have a contract to supply RECARO
Seats for Non-Qualifying Vehicles to be manufactured by such OEM
during the 12 months commencing on the Closing Date, provided that if
no specific amount of RECARO Seats is specified pursuant to a contract
referred to in this clause (ii), then the Annual Allowance shall be
the number of RECARO Seats supplied under the relevant supply contract
within twelve months following the Closing Date; the alternative
provided in (ii) shall, however, only be available to the extent it
does not lead to a supply of RECARO Seats for Non-Qualifying Vehicles
in respect of all OEMs which exceeds the total number of all RECARO
Seats supplied to all OEMs for Non-Qualifying Vehicles during the last
12 months prior to the Closing Date by more than 20% (the "120% Rule").
The Annual Allowance for Porsche shall be 4,000. Sellers shall
notify Purchaser on a quarterly basis of the number of RECARO Seats
supplied in accordance with Section 16.3 and shall have the burden of
proving that such sales are not in excess of the Annual Allowance.
Unless the 120% Rule provides otherwise, the Annual Allowance is
specific for each OEM and cannot be transferred among OEMs.
RECARO Seats supplied as follows shall not count towards the Annual
Allowance:
16.3.1 RECARO Seats supplied by Sellers or their Affiliates which have
been manufactured by Purchaser or its Affiliates (including
KCS, the Subsidiaries, EAS and JCA Mexico) on behalf of
Sellers or their Affiliates; or
16.3.2 RECARO Seats supplied as optional seating equipment
("Sonderausstattung") provided, however, that none of the
following alternatives is applicable: (1) An OEM offers the
RECARO Seats as optional seating equipment together with other
optional car equipment as part of a package at a reduced
price; (2) the number of cars of a certain car model sold
by an OEM vehicle manufacturer with the optional seating
equipment exceeds during any period of six calendar months the
number of cars of that certain car model sold with the
standard seating equipment; (3) an OEM offers a car model
with a standard
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equipment which includes RECARO Seats at a fixed price
and grants the customer the option to reduce the fixed
price by choosing a seating equipment which is cheaper
than the RECARO seats ("delete-option").
After 42 months from Closing Date, Sellers and their Affiliates
shall be entitled to develop, produce and supply an unlimited
amount of RECARO Seats for the Non-Qualifying Vehicles set
forth on Annex 16.2.1; the term of the Non-Compete Period
provided in Section 16.1 shall be modified thereby.
16.4 Hardware Seat Structures. For the term of the Non-Compete
Period, Sellers and their Affiliates shall not develop, produce
or supply either directly or indirectly, hardware structures to
be incorporated in non-commercial vehicle seats
(Sitzstrukturen) which were specifically designed for
non-commercial vehicle seats sold by KCS or its Subsidiaries or
structures with similar features ("SEAT STRUCTURES") to
competitors of KCS, its Subsidiaries or their respective
successors, if such Seat Structures will be incorporated into
seats to be offered or sold by that competitor to any OEM
vehicle manufacturer for installation in the same vehicle model
or its first successor model which constitutes the subject
matter of a supply relationship already existing or agreed upon
in a contract with KCS or its Subsidiaries as of the Closing
Date of this Purchase Agreement (such supply relationship is
hereinafter referred to as the "KCS CLOSING SUPPLY
RELATIONSHIP") or, in the case of the first successor model, of
a future supply relationship (such future supply relationship
is hereinafter referred to as the "KCS SUCCESSOR SUPPLY
RELATIONSHIP" or together with the KCS Closing Supply
Relationship the "KCS SUPPLY RELATIONSHIP"), provided, however,
that Sellers and their Affiliates may supply to competitors
Seat Structures to be incorporated into seats of models,
(i) with respect to which the KCS Supply
Relationship has been terminated or a notice of
termination has been given by the respective
OEM vehicle manufacturer; or
(ii) which are manufactured at a production facility
of the respective OEM vehicle manufacturer
which is not the subject matter of a KCS Supply
Relationship.
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Moreover, Sellers and their Affiliates as suppliers of Seat
Structures agree, for the term of the Non-Compete Period, not to
participate, either directly or indirectly, in the bidding of
any competitor of KCS, its Subsidiaries or any of their
respective successors for the supply of seats to an OEM vehicle
manufacturer when such bid shall be submitted in competition for
award of any KCS Successor Supply Relationship if KCS or any of
its Subsidiaries is participating in such bidding.
Sellers and their Affiliates shall not be bound by the
restrictions of this Section 16.4 if they are specifically and
in writing requested by any OEM vehicle manufacturer which is a
party to a KCS Supply Relationship and a customer of Sellers or
any of their Affiliates
(i) to supply Seat Structures for vehicle models
which are the subject matter of a KCS Supply
Relationship; or
(ii) to participate in a bidding of any competitor
for a KCS Successor Supply Relationship.
(iii) However, should Sellers or any of their
Affiliates so supply Seat Structures in
competition for any KCS Supply Relationship, it
will pay Purchaser 80% of the incremental profit
Sellers or any of their Affiliates receive in
accordance with the relevant supply contract.
The incremental profit shall be equal to
Sellers' or their Affiliates' average earnings
before taxes per Seat Structure supplied
multiplied by the Seat Structures supplied in
accordance with (i) and (ii) above.
Nothing contained in this Section 16.4 shall prevent Sellers and
their Affiliates from or limit them in supplying Seat Structures
to the Sindelfingen plant of Daimler Benz at Sindelfingen,
regardless of whether this plant is operated by Daimler Benz or
by any other party.
16.5 Research and Development. Sellers and their Affiliates may
develop vehicle seats for production, distribution and sale and
may transfer or grant any rights, including but not limited to
the grant of licenses to patents and know-how resulting from
such research and development activities, provided that
16.5.1 Sellers and their Affiliates shall not engage, either
directly or indirectly, in any development activities
with competitors of KCS, its
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Subsidiaries or any of their respective successors during the
Non-Compete Period, if the seat product in question is to be
installed in the models which constitute the subject matter of
a KCS Supply Relationship.
16.5.2 For the term of the Non-Compete Period, Sellers and their
Affiliates shall not, directly or indirectly, solicit
offers for, nor shall they bid to provide any research and
development services for competitors of KCS, its Subsidiaries or
their respective successors, if the development services in
question will be utilized for the purpose of competing for the
award of the KCS Successor Supply Relationship.
16.5.3 Sections 16.5.1 and 16.5.2 shall not apply if Sellers or any of
their Affiliates are specifically and in writing requested by
any OEM which is party to a KCS Supply Relationship and a
customer of Sellers or any of their Affiliates
(i) to engage in development activities prohibited under
Section 16.5.1 or
(ii) to solicit offers or bid for contracts to provide
research and development services excluded under Section 16.5.2.
(iii) However, should Sellers or any of their Affiliates so
provide research and development services in competition for
any KCS Supply Relationship, they will pay Purchaser 80% of the
incremental profit Sellers or any of their Affiliates receive
in accordance with the relevant research and development
contract. The incremental profit shall be equal to Sellers' or
their Affiliates' average earnings before taxes per research
and development contract entered into in accordance with (i)
and (ii) above.
16.6 Notwithstanding the terms of this covenant not to compete, KRB may
continue to manufacture under the agreement attached as Annex 19.5
the complete seats for the VW Santana, complete seats for the
Mercedes-Benz trucks and complete seats for the Fiat
Tempra.
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16.7 It shall not constitute a violation of this covenant not to
compete, if within the context of an acquisition of an
undertaking or group of undertakings, a business is acquired by
any of Sellers or any of their Affiliates which operates in the
product and geographical market described in Section 16.1 above,
provided, however, that (i) the gross sales of such acquired
business in the last preceding fiscal year amounted to no more
than 10% of the total gross sales of the undertaking or group of
undertakings acquired, and (ii) during the term of the
Non-Compete Period the gross sales deriving from all acquired
businesses, including any internal expansion does not exceed DM
25 million in the aggregate.
16.8 During the Non-Compete Period,
(i) neither Sellers nor any of their Affiliates will solicit
to hire any employee of Purchaser or its Affiliates, including
any employee of KCS or any of the Subsidiaries without the
express written consent of Purchaser;
(ii) neither Purchaser nor any of its Affiliates will solicit
to hire any employee of Sellers or their Affiliates without the
express written consent of Sellers.
Article 17
Merger Control Proceedings
17.1 The sale of the Sold Interests pursuant to Section 3.1 (the
"Notified Transaction") is subject to a pre-merger notification
to the Commission. KV, KRC and Purchaser shall cooperate and
provide each other with all necessary assistance to comply with
this requirement.
17.2 The notification shall be filed jointly by KV, KRC and
Purchaser. KRC and KV on the one hand and Purchaser on the
other hand shall keep each other fully informed of all contacts
which they may have with the Commission in the context of this
transaction.
Article 18
Intellectual Property Rights
18.1 KRC hereby assigns and transfers the patents set forth in Annex
18.1.1 and Annex 18.1.2 to KCS effective as of the Closing Date
together with all patents granted to
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KRC or applied for by KRC in other jurisdictions which have the
same subject matter as the patents set forth in Annex 18.1.1 and
Annex 18.1.2. The patents set forth in Annex 18.1.2 shall be
licensed back to KRC in accordance with the Grant Back Licence
Agreement attached as Annex 18.1.3. KRC undertakes to take all
actions necessary to have the patents registered in the name of
KCS. Purchaser shall bear the cost of such registration.
18.2 KRC shall hand over to KCS the complete files of all transferred
patents and/or patent application as well as all documents,
certificates, grants and other papers relating to the
transferred patents and all relevant correspondence and other
vouchers including renewal certificates and the like relevant to
the transferred patents promptly after the transfer of the
patents has become effective. KRC shall render KCS technical
assistance to the extent to which such assistance is necessary
in order to enable KCS to make proper use of the patents
transferred in accordance with Section 18.1 above. For such
purpose, KRC shall make available, within a reasonable time
frame and in a reasonable number, qualified personnel to KCS if
so requested by KCS. All costs arising in connection with the
technical assistance shall be borne by KCS.
ARTICLE 19
ANCILLARY AGREEMENTS
Sellers undertake that prior to the Closing Date
19.1 KRC and KCS sign the Grant Back Licence Agreement attached as
Annex 18.1.3;
19.2 KRC and KCS sign the Framework Services Supply Agreement in the
Areas of Research and Development attached as Annex 19.2;
19.3 KRB and KCS Brazil sign the Service Agreement attached as Annex
19.4;
19.4 KRB and KCS Brazil sign the Royalty Agreement attached as Annex
19.5.
19.5 KCS Brazil and AUTO COMERCIO E INDUSTRIA ACIL LTDA sign the
Supply Agreement attached as Annex 19.6.
Purchaser hereby irrevocably grants its consent to the signing of the
aforementioned agreements. The Agreements referred to in Section 19.3
thru 19.5 shall be signed in the Portuguese language. Prior to the
notarization of this
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Agreement, KRV and KCS signed a Service Agreement dated March 3, 1997
providing that KRV shall render certain services specified therein to
KCS which is attached as Annex 19.3.
ARTICLE 20
ASSIGNMENT
Neither any of the Sellers nor Purchaser are entitled to transfer rights
or obligations arising under this Agreement to a third party without the
consent of the other contracting parties, except that Purchaser may
assign this Agreement or any rights or obligations thereunder to any
entity affiliated with it within the meaning of Article 15 German Stock
Corporation Act (Aktiengest) provided that Purchaser shall continue to
be jointly and severally liable for any obligation under this Agreement
after the assignment.
ARTICLE 21
TAXES AND COSTS
21.1 Each party shall bear its own costs and expenses which it incurs
in connection with the preparation, execution and implementation
of this Agreement including, without limitation, all fees and
expenses of their respective advisers.
21.2 Taxes on income, profits and capital gains which may be assessed
against Sellers or the partners of PKG or Purchaser in
connection with this Agreement shall be borne by the respective
debtor in accordance with applicable tax laws.
21.3 All other taxes and costs in connection with the preparation,
execution and implementation of this Agreement including,
without limitation, notarial fees, public registration fees and
fees in connection with the clearance of the transactions
contemplated herein with the competent antitrust authority as
well as real property transfer tax (Grunderwerbsteuer) and
other transfer taxes, if any, shall be borne by Purchaser.
ARTICLE 22
CONFIDENTIALITY
22.1 The parties to this Agreement agree to keep confidential this
Agreement or any provisions thereof and not to disclose it to
third parties (including, without limitation, the press,
customers, suppliers or other persons or companies in the
market), except as far as they are
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obliged by law or applicable stock exchange regulations to
disclose and give notice of the same to any governmental or
administrative authority or otherwise. They will use their
best efforts even in such case to ensure that, notwithstanding
such mandatory disclosure and notice, confidentiality shall be
maintained to the maximum extent practicable.
22.2 The parties to this Agreement will mutually agree upon the
language of an official press release and additional
information to be released to the press, customers and the
business community relating to the transactions contemplated by
this Agreement.
22.3 Sellers agree to keep confidential and not to disclose to any
third party any business, trade, or technical secret or other
non public information concerning the business of KCS and the
Subsidiaries or non public information concerning the Purchaser
and its Affiliates made available to them prior to the Closing
Date.
ARTICLE 23
MISCELLANEOUS
23.1 This Agreement is subject to and shall be construed in
accordance with the laws of the Federal Republic of Germany.
23.2 All disputes other than those referred to in Article 9 arising
under or in connection with this Agreement shall be finally
decided by an arbitration tribunal. For this parties shall
execute on the Date when this Agreement is notarized a separate
Arbitration Agreement.
23.3 All amendments to this Agreement, including, without
limitation, a change of this clause itself, must be made in
writing and with the express reference to this Agreement,
unless notarisation or any other form is required.
23.4 Purchaser waives all rights and claims it might have against
Drueker & Co. GmbH, Frankfurt am Main, or any of its officers or
employees or Sellers' auditors' or legal counsel or other
consultants who acted as advisors to Sellers (collectively
referred to as the "Advisors") resulting from or in connection
with the transactions contemplated by this Agreement except for
claims based on wilful misconduct. This waiver vests rights in
the Advisors as third party beneficiaries ("Vertrag zugunsten
Dritter" within the meaning of Section 328 German Civil Code).
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23.5 Save as provided for in Section 23.4 this Agreement shall not
vest any rights in third parties.
23.6 All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if
personally delivered, sent by facsimile transmission (with
delivery confirmed and hard copy sent), sent by overnight
courier (with delivery confirmed) or mailed registered or
certified mail, postage prepaid
- if to Sellers, to:
KEIPER RECARO Verwaltungsgesellschaft mit
beschrankter Haftung
Managing Director Finance
Dr. Karl-Heinz Nattland
Buchelstrasse 54 - 58
42855 Remscheid
Telefax: 02191 - 144 440
with a required copy to:
Hengeler Mueller Weitzel Wirtz
Dr. Peter Weyland
Bockenheimer LandstraBe 51
60325 Frankfurt am Main
Germany
Telefax: 069-725773
- if to Purchaser or LEAR, to:
LEAR Corporation GmbH & Co. KG
c/o LEAR Corporation
Joseph F. McCarthy
21557 Telegraph Road,
Southfield, Michigan 48034
Telefax: 001-810 746 1677
with required copy to:
Schurmane & Faylor
Folian A. Faylor or
Dr. Werner Mielke, LL.M.
Postfach 11 16 33
Friedrich-Ebert-Anlage 2-14
60325 Frankfurt am Main
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Telefax: 069-741-1610
-----------------------
Winston & Strawn
Mr. John L. MacCarthy
35 West Wacker Drive
Chicago, Illinois 60601
USA
Telefax: 001-312-558-5700
-------------------------
or to such other addresses as may hereafter be
furnished by any party to the other.
23.7 If any of the provisions of this Agreement be or become invalid
or unenforceable (nichtig oder unwirksam), all other provisions
hereof shall remain in full force and effect. The invalid or
unenforceable provision shall be deemed to be automatically
amended and replaced without the necessity of further action by
the parties hereto by such valid and enforceable provision that
shall accomplish as far as possible the commercial purpose and
intent of the invalid or unenforceable provision. The aforesaid
shall apply mutatis mutandis should this Agreement be
incomplete.
If any agreement entered into in connection with this Purchase
Agreement including, without limitation, the ancillary
agreements referred to in Article 19 be or become invalid or
unenforceable in whole or in part, this Agreement shall remain
in full force and effect.