EXHIBIT 2.1
SECURITIES PURCHASE AGREEMENT
by and among
SL INDUSTRIES, INC.,
SL INDUSTRIES VERTRIEB GMBH,
and
DCX-CHOL HOLDING GMBH
DCX-CHOL ENTERPRISES, INC.
CHOL ENTERPRISES, INC.
dated as of
January 3, 2003
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
January ___, 2003, is by and among SL Industries Vertrieb GmbH, a German
corporation registered with the Commercial Register in Ingolstadt, Germany under
HRB 3181 ("Vertrieb" or "Seller") and SL Industries, Inc. ("SL Industries"), on
the one hand, and DILIGENTIA Vierundachtzigste Vermoegensverwaltungs-GmbH (the
name of which is to be changed to DCX-Chol Holding GmbH on the basis of a
notarized shareholders' resolution as of January 3, 2003), a German corporation
registered with the Commercial Register in Cologne, Germany under HRB ▇▇▇▇▇ (▇▇▇
"▇▇▇▇▇▇▇▇▇"), ▇▇▇-▇▇▇▇ Enterprises, Inc., a Colorado corporation ("DCX-Chol")
and Chol Enterprises, Inc., a California corporation ("Chol Enterprises"), on
the other hand.
WHEREAS, SL Industries owns all of the issued and outstanding stock
of SL Delaware, Inc., a Delaware corporation ("SL Delaware");
WHEREAS, SL Delaware owns the sole limited partnership interests
(Kommanditanteil) in, and is the sole limited partner of SL Holding GmbH & Co.
KG, a German limited partnership registered with the Commercial Register in
Ingolstadt, Germany under HRA 1455 ("KGH");
WHEREAS, KGH owns all of the issued and outstanding capital stock
(Geschaftsanteile) of Vertrieb, which corporation is the sole general partner of
KGH; Vertrieb owns all of the issued and outstanding Capital Stock of
Elektro-Metall Export GmbH, a German corporation registered with the Commercial
Register in Ingolstadt, Germany under HRB 201 ("EME"), and EME owns 96.67% of
the issued and outstanding Capital Stock of Elektro-Metall Paks KFT, a Hungarian
corporation ("Paks") (each of SL Delaware, KGH, Vertrieb, EME and Paks shall be
referred to herein as an "EME Entity," and the EME Entities collectively shall
be referred to herein as the "EME Group"); and
WHEREAS, the Purchaser desires to acquire from Vertrieb, and
Vertrieb desires to sell to the Purchaser, all of the Capital Stock of EME in
accordance with and subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained,
the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. The terms defined in this Article I, whenever used
herein, shall have the following meanings for all purposes of this Agreement.
"Accountants" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, or such other
accountants mutually determined by the Parties.
"Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under the Exchange Act.
"Affiliate Agreements" shall have the meaning ascribed thereto in
Section 3.2.
"Agreement" shall have the meaning set forth in the preamble hereto.
"AktG" shall have the meaning set forth in Section 4.5 hereof.
"Annual Financial Statements" shall have the meaning set forth in
Section 3.6 hereof.
"▇▇▇▇▇▇ Agreement" shall have the meaning ascribed thereto in
Section 2.4 hereof.
"Business Day" shall include any day other than a Saturday, Sunday
or other day on which banking institutions in Los Angeles are authorized by law,
regulation or executive order to remain closed.
"Capital Stock" shall mean the capital stock issued by a
corporation, or equivalent interest in any other Person, including all voting
and non-voting capital stock, Voting Rights or equivalent interest.
"Chol Enterprises" shall have the meaning ascribed thereto in the
preamble.
"Closing" shall have the meaning ascribed thereto in Section 2.2
hereof.
"Closing Date" shall have the meaning ascribed thereto in Section
2.2 hereof.
"Closing Documents" shall have the meaning ascribed thereto in
Section 2.2 hereof.
"Closing Documents Releases" shall have the meaning ascribed thereto
in Section 2.2 hereof.
"Confidential Information" shall have the meaning ascribed thereto
in Section 5.8(a) hereof.
"Confirmation of Execution and Notarization" shall have the meaning
ascribed thereto in Section 2.2 hereof.
"Consents" shall have the meaning ascribed thereto in Section 3.5
hereof.
"Contract" shall mean any contract, agreement, arrangement,
commitment, guaranty, lease, indenture, mortgage, note, bond, encumbrance,
license, government registration, franchise, permit or other instrument,
including, without limitation, any written, oral or unwritten amendments,
waivers or legally binding understandings with respect thereto.
"Damages" shall have the meaning ascribed thereto in Section
8.3(f)(ii) hereof.
"Datron" shall mean Datron Inc. and its successors and assigns.
"Disclosure Schedule" shall mean the Disclosure Schedule attached
hereto as Annex I, dated as of the date hereof, delivered in connection with
this Agreement.
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"Down Payment" shall have the definition ascribed thereto in Section
2.3(a).
"Due Date" shall have the meaning ascribed thereto in Section 5.6(b)
hereof.
"EME" shall have the meaning ascribed thereto in the preamble
hereof.
"EME Additional Tax Payment" shall mean (i) the payment that would
have been due by EME to the German tax authorities for the year 2002 if EME were
not a party to the Profit and Loss Agreement, minus (ii) the EME Payment.
"EME Entity" shall have the meaning ascribed thereto in the preamble
hereof.
"EME Group" shall have the meaning ascribed thereto in the preamble
hereof.
"EME Payment" shall mean the payment of taxes by EME to the German
tax authorities that was made on account of the calendar year ending December
31, 2002 in the aggregate amount of 255,286.12 Euros for income tax and
223,160.00 Euros for trade tax.
"Environmental Claim" shall mean any claim, action, demand, order,
or notice by or on behalf of, any Governmental Entity or Person alleging
potential liability arising out of, based on or resulting from the violation of
any Environmental Law or permit or relating to any Hazardous Materials.
"Environmental Laws" shall mean all foreign, Federal, state, and
local laws and regulations that are applicable to EME and/or Paks relating to
Releases or threatened Releases of Hazardous Materials or otherwise relating to
pollution or protection of the environment, health, safety or natural resources,
including, without limitation, those relating to (A) the Releases or threatened
releases of Hazardous Materials or materials containing Hazardous Materials or
(B) the manufacture, generation, handling, treatment, storage, transport,
disposal or handling of Hazardous Materials or materials containing Hazardous
Materials.
"Environmental Permits" shall have the meaning ascribed thereto in
Section 3.16 hereof.
"Escrow Agent" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLP.
"Escrow Agreement" shall mean that certain Escrow Agreement by and
among the Parties and the Escrow Agent, dated as of the date hereof, in the form
attached hereto as Exhibit "A".
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Financial Statements" shall have the meaning ascribed thereto in
Section 3.6 hereof.
"GAAP" means United States generally accepted accounting principles
as in effect on the date or for the period with respect to which such principles
are applied.
"German Accounting Standards" shall have the meaning ascribed
thereto in Section 3.6 hereof.
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"Governmental Entity" shall have the meaning set forth in Section
3.5 hereof.
"Guaranty" shall have the meaning ascribed thereto in Section
2.3(b).
"Hazardous Materials" means all substances, matters and other
particles defined or listed as "hazardous" or "toxic" under Environmental Laws
or are otherwise subject to or regulated by Environmental Laws.
"Hungarian Accounting Standards" means the Hungarian general
principles for audits and economic examiners in effect for the relevant year.
"Insurance Policies" shall have the meaning set forth in Section
3.15 hereof.
"Intellectual Property Rights" shall have the meaning set forth in
Section 3.14(b) hereof.
"Interim Financial Statements" shall have the meaning ascribed
thereto in Section 3.6 hereof.
"Inventory" shall have the meaning ascribed thereto in Section 3.21
hereof.
"KGH" shall have the meaning ascribed thereto in the preamble
hereof.
"Law" shall mean all laws, statutes, ordinances, executive orders,
decrees, judgments, orders, writs, injunctions, rules and regulations of any
United States (federal, state or local) or foreign government (including Germany
and Hungary) or any political subdivision thereof, or any governmental,
regulatory or administrative authority, agent or commission or court of
competent jurisdiction.
"Lien" shall mean any and all mortgages, liens, attachments,
encumbrances, charges, options, rights of first refusal, any conditional sale or
other title retention agreement, restrictions, claims, leases, easements or
security interests of any nature whatsoever.
"Material Adverse Effect" shall mean a material adverse effect on
the business, operations, assets, liabilities, condition (financial or
otherwise) or results of operations on EME and Paks, taken together as a whole,
or on the ability of EME and Paks, taken together as a whole, to conduct their
business in the manner in which it is currently operated or conducted.
"1998 Agreement" shall mean that certain Purchase Agreement by and
between Datron and Seller, dated as of June 30, 1998.
"Notice of Offset" shall have the meaning ascribed thereto in
Section 8.3(g) hereof.
"Paks" shall have the meaning ascribed thereto in the preamble
hereof.
"Parties" shall mean Seller, SL Industries, the Purchaser, DCX-Chol
and Chol Enterprises.
"Permits" shall have the meaning set forth in Section 3.10 hereof.
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"Permitted Liens" shall have the meaning ascribed thereto in Section
3.13 hereof.
"Person" means any individual, corporation, partnership, limited
partnership, limited liability partnership, limited liability company, joint
venture, association, trust, Governmental Entity or other entity.
"Prior Environmental Losses" shall mean any Purchaser Losses arising
from claims of breach of Section 3.16 hereof caused by actions arising prior to
the "Closing Date" as such term is defined in the 1998 Agreement.
"Profit and Loss Agreement" shall mean that certain Profit and Loss
Transfer Agreement by and between KGH and EME dated as of November 18, 2002.
"Purchase Price" shall have the meaning ascribed thereto in Section
2.3 hereof.
"Purchased Shares" shall have the meaning ascribed thereto in
Section 2.1.
"Purchaser Environmental Losses" shall mean Purchaser Losses arising
from claims of breach of Section 3.16 hereof caused by actions arising after the
"Closing Date" as such term is defined in the 1998 Agreement, and prior to the
Closing Date as defined herein.
"Purchaser Indemnified Parties" shall have the meaning ascribed
thereto in Section 8.3.
"Purchaser Losses" shall have the meaning ascribed thereto in
Section 8.3.
"Purchaser Material Adverse Effect" shall mean a material adverse
effect on the business, operations, assets, financial condition or results of
operations on Purchaser, DCX-Chol and Chol Enterprises, taken together as a
whole.
"Purchaser Threshold" shall have the meaning ascribed thereto in
Section 8.3 hereof.
"Release" shall mean any release (whether or not sudden and/or
accidental), spill, emission, seepage, transfer, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment,
including the movement of Hazardous Materials through the air, soil, surface
water or groundwater.
"Representative" means, with respect to any Person, each of such
Person's Affiliates, directors, officers, employees, partners, members,
representatives, agents, contractors, advisors and consultants and each of the
heirs, executors and assigns of any of the foregoing.
"Secured Note" shall have the meaning ascribed thereto in Section
2.3 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Dividend" shall have the meaning ascribed thereto in Section
2.3.
"Seller Indemnified Parties" shall have the meaning ascribed thereto
in Section 8.3.
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"Seller's Knowledge" shall mean the actual knowledge of any of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇ after
inquiry of each other. Any actual knowledge of any of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇ shall be imputed to the other
persons.
"Seller Losses" shall have the meaning ascribed thereto in Section
8.3.
"Seller Release of Claims" shall have the meaning ascribed thereto
in Section 2.4 hereof.
"Seller Resignations" shall have the meaning ascribed thereto in
Section 2.4 hereof.
"Seller Threshold" shall have the meaning ascribed thereto in
Section 8.3 hereof.
"Share Transfer and Pledge Agreement" shall mean the share transfer
and pledge agreement as is required to be notarized by the German notary.
"Taxes" shall have the meaning set forth in Section 3.12 hereof.
"Tax Refund" shall mean the refunds that may be owing from the
German tax authorities to the EME Group as a result of the EME Payment.
"Tax Return" shall have the meaning set forth in Section 3.12(d)
hereof.
"Transaction Documents" shall mean this Agreement, the Secured Note,
the Unsecured Note, the Guaranty, the Seller Release of Claims, the Seller
Resignations, the Closing Documents Releases, the Escrow Agreement, the ▇▇▇▇▇▇
Agreement, the Share Transfer and Pledge Agreement and the Confirmation of
Execution and Notarization.
"Unsecured Note" shall have the meaning ascribed thereto in Section
2.3 hereof.
"Vertrieb" shall have the meaning ascribed thereto in the preamble
hereof.
"Voting Rights" shall mean the Hungarian form of capital stock
issued by a corporation, or equivalent interest in any other Person, including
all voting and non-voting capital stock.
All dollar amounts used herein refer to United States Dollars.
ARTICLE II
PURCHASE AND SALE OF CAPITAL STOCK.
2.1. Purchase and Sale of EME Capital Stock. Subject to the terms
and conditions herein stated, Seller hereby sells, assigns, transfers and
delivers to the Purchaser on the Closing Date, and the Purchaser hereby
purchases and accepts the assignment, transfer and delivery from Seller on the
Closing Date, free and clear of all Liens, except the Liens granted pursuant to
the Share Transfer and Pledge Agreement, one-hundred percent (100%) of the
Capital Stock of EME (the "Purchased Shares").
2.2. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on January 3, 2003 (the "Closing
Date") as follows:
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(i) One day prior to the Closing Date, the Parties shall
have executed all Transaction Documents and other documents,
certificates and instruments required to be delivered
hereunder for the Closing (collectively, "Closing Documents"),
other than the Share Transfer and Pledge Agreement and those
described in clauses (ii) and (iii) of this Section 2.2, and
the Parties shall provide such Closing Documents, together
with the Down Payment, to the Escrow Agent, which Closing
Documents and Down Payment shall be held by the Escrow Agent
pursuant to the Escrow Agreement and shall not be released
except as provided in the Escrow Agreement pursuant to clause
(iii) of this Section 2.2;
(ii) on the Closing Date, the Share Transfer and Pledge
Agreement shall be executed by the Seller's German counsel on
behalf of Seller on the one hand (which German counsel shall
have been so authorized by Seller), and by Purchaser's, German
counsel on behalf of Purchaser, on the other hand (which
German counsel shall have been so authorized by Purchaser, and
shall be executed in front of a German notary in accordance
with German Law; and immediately thereafter, the respective
German counsels shall execute and fax to Purchaser and Seller
a Confirmation of Execution and Notarization in the form
attached hereto as Exhibit "B" (the "Confirmation of Execution
and Notarization");
(iii) upon receipt of and conditioned upon the
Confirmation of Execution and Notarization, the Purchaser and
Seller shall each execute and fax to the Escrow Agent a
Closing Documents Release in the forms attached hereto as
Exhibit "C" and Exhibit "D" (the "Closing Documents
Releases"), which shall authorize the release by the Escrow
Agent to the Parties of all Closing Documents; and
(iv) upon receipt of, and conditioned upon receipt of,
each of (x) the Confirmation of Execution and Notarization,
(y) Seller's Closing Documents Release, and (z) Purchaser's
Closing Documents Release, the Escrow Agent shall transmit the
Secured Note, the Unsecured Note, the Guaranty to Seller, the
Down Payment shall be delivered by wire transfer to the bank
account(s) designated by Seller, and the Escrow Agent shall
transmit the Seller Release of Claims, the Seller
Resignations, the legal opinions referred to in Section
2.3(c), the ▇▇▇▇▇▇ Agreement and any other Closing Documents
to Purchaser, and the Closing shall occur upon the receipt by
Seller.
2.3. Purchase Price and Deliveries at Closing. The Purchaser shall
purchase the Purchased Shares for an aggregate purchase price equal to Ten
Million Dollars ($10,000,000), payable as follows, (the "Purchase Price"):
(a) Down Payment. On the Closing Date, the Purchaser shall deliver
to Seller, a down payment in the amount of Four Million Dollars ($4,000,000), by
wire transfer (or other mutually satisfactory form) to the bank account(s)
designated by Seller (the "Down Payment"); plus
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(b) Seller Financing.
(i) Secured Note. Purchaser shall deliver to Seller a
promissory note executed by Purchaser, dated the Closing Date, in
the form of Exhibit "E" attached hereto (the "Secured Note"), in the
original principal amount of Three Million Dollars ($3,000,000),
payable on the later of (a) March 15, 2003 or (b) the completion and
delivery by the Accountant of the audit of the financial statements
of EME and Paks for the period ended December 31, 2002, but in no
event later than May 1, 2003 with interest at a rate equal to the
LaSalle Bank National Association, Chicago, Illinois, publicly
announced prime rate in effect from time to time, plus Two Percent
(2%), per annum;
(ii) Share Transfer and Pledge Agreement. The Purchaser
shall deliver to Seller that certain Share Transfer and Pledge
Agreement in the form of Exhibit "F" attached hereto (the "Share
Transfer and Pledge Agreement") executed by the Purchaser and EME in
favor of Seller, which Share Transfer and Pledge Agreement shall
secure the Secured Note;
(iii) Guaranty. The Purchaser shall deliver to Seller
that certain Guaranty executed by DCX-Chol and Chol Enterprises in
favor of Seller in the form attached hereto as Exhibit "G" (the
"Guaranty"), by which DCX-Chol and Chol Enterprises shall jointly
and severally guaranty the obligations of Purchaser under the
Secured Note and the Unsecured Note;
(iv) Unsecured Note. The Purchaser shall deliver to
Seller a promissory note executed by Purchaser, dated the Closing
Date, in the form of Exhibit "H" attached hereto (the "Unsecured
Note"), in the original principal amount of One Million Dollars
($1,000,000), as it may be decreased if so required pursuant to
Section 8.3(g), payable by April 3, 2004, with interest at a rate of
Twelve Percent (12%) per annum for so long as the Unsecured Note
remains unsecured. If Purchaser elects to provide security for the
Unsecured Note by granting to Seller a first priority lien on assets
of the Purchaser, DXC-Chol and/or Chol Enterprises that are
sufficient in Seller's reasonable opinion to secure the principal
amount of the Unsecured Note, then the interest rate on the
Unsecured Note shall be reduced to a rate equal to the LaSalle Bank
National Association, Chicago, Illinois, publicly announced prime
rate in effect from time to time, plus Two Percent (2%), per annum
from and after the granting of such lien; plus
(c) Seller Dividend. On or prior to January 2, 2003, Seller shall
cause EME and/or Paks to distribute (or as of the Closing Date, EME and/or Paks
shall have distributed) up to Two Million Dollars ($2,000,000) to Seller, either
by way of dividend, distribution or other payment from EME's annual earnings, to
the extent EME and Paks are not prohibited from making such dividend,
distribution or other payment by applicable Law or their governing documents
(the "Seller Dividend"). Since December 1, 2002, Seller has already caused EME
and/or Paks to distribute Two Million Dollars ($2,000,000) to Seller in
satisfaction of the Seller Dividend. The actual amount of the Seller Dividend
shall constitute a part of the Purchase Price.
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2.4. Other Deliveries
(a) Seller Release of Claims. Seller and SL Industries shall execute
and deliver, and shall cause KGH and SL Delaware to execute and deliver, to
Purchaser the Seller Release of Claims in the form attached hereto as Exhibit
"I" releasing EME and Paks from any and all liabilities to Seller, SL
Industries, KGH, SL Delaware and their Affiliates as set forth therein (the
"Seller Release of Claims").
(b) Resignations. Seller shall execute and deliver to Purchaser
resignations from any Representatives of Seller or its Affiliates who are board
members or officers of EME and/or Paks who are not residents of Germany or
Hungary, in the form attached hereto as Exhibit "J" (the "Seller Resignations").
(c) Legal Opinions. Seller shall deliver to Purchaser an opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & Wolosky LLP in the form attached hereto as
Exhibit "K", and an opinion of Holters & ▇▇▇▇▇▇ in the form attached hereto as
Exhibit "L".
(d) Other Transaction Documents. The Parties shall execute and
deliver to the appropriate other Parties all other Closing Documents requested
by the other Parties to consummate the Closing.
(e) ▇▇▇▇▇▇ Agreement. ▇▇▇ ▇▇▇▇▇▇, Seller and EME, shall execute the
▇▇▇▇▇▇ Agreement substantially in the form of Exhibit "M" hereto.
2.5. Ownership of Purchased Shares. At the Closing, unless
explicitly specified otherwise in the Share Transfer and Pledge Agreement, the
Purchaser immediately shall become the owner of all right, title and interest in
and to one hundred percent (100%) of the Purchased Shares free and clear of all
Liens, subject only to the Liens granted pursuant to the Share Transfer and
Pledge Agreement.
2.6. Audit Fees. The fees and expenses of the Accountants in
connection with the audit in accordance with GAAP of EME and Paks for the period
ended December 31, 2002 will be split equally between Seller and SL Industries,
on the one hand, and Purchaser, DCX-Chol and Chol Enterprises, on the other
hand.
2.7. Payment of Intercompany Advances. EME shall make a payment to
SL Industries at or prior to the Closing in payment of all outstanding
intercompany advances and loans then due and owing in the amounts set forth in
Section 5.6(d) of the Disclosure Schedule.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER and SL INDUSTRIES
Seller and SL Industries jointly and severally represent and warrant
to the Purchaser, DCX-Chol, Chol Enterprises and their respective Affiliates as
follows:
3.1. Corporate Organization, Etc. Each of Seller, SL Industries, EME
and Paks is a corporation or partnership duly organized, validly existing and,
to the extent applicable under the laws of the relevant jurisdiction, in good
standing under the laws of the jurisdiction of its incorporation or organization
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and has all requisite corporate or partnership power and authority to conduct
its business as it is now being conducted and to own, lease and operate its
property and assets. Each of Seller and SL Industries is qualified or licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction in which ownership of property or the conduct of its business
requires such qualification or license, except where the failure to be so
qualified or licensed will not have a Material Adverse Effect. True and complete
copies of the organizational and governing documents of each of EME and Paks, as
presently in effect, have been heretofore delivered to the Purchaser.
3.2. Capitalization; Affiliate Transactions. (a) Seller owns one
hundred percent (100%) of the Capital Stock of EME and EME owns 96.67% of the
Voting Rights of Paks. The Purchased Shares are subject to no restrictions on
transferability or any other Liens other than restrictions imposed by (i) the
Securities Act, (ii) applicable state securities laws, and (iii) applicable
German securities laws, none of which restrictions prohibit the transactions
contemplated in the Transaction Documents. Except for this Agreement, and except
as set forth in Section 3.2(a) of the Disclosure Schedule, there are no
outstanding options or other rights to acquire, directly or indirectly, from
Seller, SL Industries or any EME Entity, or any plans, Contracts or commitments
providing for the issuance of, or the granting of rights by Seller, SL
Industries and/or any EME Entity to acquire, directly or indirectly: (i) any
interest in the capital, profits, losses, assets or liabilities of EME or Paks
or (ii) any securities convertible into or exchangeable for any interest in the
capital, profits, losses, assets or liabilities of EME or Paks. Except as
described in Schedule 3.2(a) of the Disclosure Schedule, there are no
outstanding agreements or understandings with respect to the voting, holding or
selling of any interest in the capital, profits, losses, assets or liabilities
or Capital Stock of EME or Paks.
(b) Except as set forth in Schedule 3.2(b) of the Disclosure
Schedule there are no and have not been any (i) advances or loans by Seller, SL
Industries or any of their respective Affiliates to or on behalf of or from EME
or Paks or (ii) other Contracts between EME or Paks and Seller, SL Industries or
any EME Entity (clauses (i) and (ii), collectively, "Affiliate Agreements"). All
Affiliate Agreements have been performed in accordance with their terms. None of
the Affiliate Agreements have resulted in or given rise to, nor will they result
in or give rise, any Taxes that have not been paid in full or accrued on the
Interim Financial Statements. None of the Affiliate Agreements shall survive
after the Closing.
3.3. Capitalization and Ownership Structure of Seller, EME and Paks.
(a) Seller. The authorized capital of Seller in the aggregate
nominal amount of DM 50,000 consists exclusively of two shares as follows: one
share in the nominal amount of DM 49,500 and one share in the nominal amount of
DM 500, all of which are issued and outstanding. KGH owns all such outstanding
capital stock of Seller.
(b) EME. The authorized capital of EME in the aggregate nominal
amount of DM 3,000,000 consists exclusively of four shares as follows: one share
in the nominal amount of DM 1,400,000, one share in the nominal amount of DM
1,200,000 and two shares each in the nominal amount of DM 200,000, all of which
are issued and outstanding. Seller owns all such outstanding capital stock of
EME.
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(c) Paks. The authorized capital of Paks consists exclusively of
2,300 Voting Rights with a value of 10,000 HUF per Voting Right, all of which
are issued and outstanding. EME owns 2,208 Voting Rights of Paks, and ▇▇▇▇▇
▇▇▇▇▇▇ owns 92 Voting Rights of Paks.
All of the issued and outstanding Capital Stock of each of EME and
Paks are duly authorized, validly issued, fully paid and nonassessable, and are
owned directly by Seller, free and clear of all Liens and any preemptive rights
in respect thereto, other than with respect to 92 Voting Rights of Paks which
are owned by ▇▇▇▇▇ ▇▇▇▇▇▇. True and complete copies of the organizational and
governing documents of each of Seller, EME and Paks have been heretofore
delivered to the Purchaser.
3.4. Authority Relative to the Transaction Documents. Each of Seller
and SL Industries has all requisite corporate authority and power to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all required corporate, shareholder or
partnership action on the part of Seller, SL Industries and each EME Entity and
no other corporate, shareholder or partnership proceedings on the part of
Seller, SL Industries or any EME Entity are necessary to authorize this
Agreement or the other Transaction Documents or to consummate the transactions
contemplated hereby or thereby. The Transaction Documents to which they are a
party have been duly and validly executed and delivered by Seller, SL Industries
and each EME Entity, respectively, as applicable, and, assuming the Transaction
Documents have been duly authorized, executed and delivered by the Purchaser,
DCX-Chol and/or Chol Enterprises, as applicable, the Transaction Documents to
which they are a party constitute the valid and binding agreement of Seller, SL
Industries and each EME Entity, enforceable against Seller, SL Industries and
such EME Entity in accordance with their terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally,
including the effect of statutory and other laws regarding fraudulent
conveyances and preferential transfers and subject to the limitations imposed by
general equitable principles (regardless whether such enforceability is
considered in a proceeding at law or in equity).
3.5. Consents and Approvals; No Violations. Neither the execution
and delivery of this Agreement and the other Transaction Documents by Seller, SL
Industries and the respective EME Entities, nor the consummation of the
transactions contemplated hereby and thereby will (a) violate any provision of
the organizational or governing documents of Seller, SL Industries or any EME
Entity or any applicable Law, (b) require any consent, waiver, approval,
exemption, registration, declaration, license, authorization or permit of, or
filing with or notification to, any federal, state, local or foreign government,
executive official thereof, governmental or regulatory authority, agency or
commission, including courts of competent jurisdiction, domestic or foreign (a
"Governmental Entity"), (c) require any consent, waiver, approval, exemption,
registration, declaration, license, authorization or permit of, or filing with
or notification to, any other Person, except, with respect to this clause (d),
for such consents, waivers, approvals, exemptions, registrations, declarations,
licenses, authorizations, permits, filings or notifications which are listed in
Section 3.5 of the Disclosure Schedule (the "Consents"), or which, if not
obtained or made, will not allow for the termination, cancellation or
acceleration or any obligation to repay under, any of the terms, conditions or
12
provisions of any Contract or obligation that would cost EME and Paks
collectively more than Twenty Thousand Dollars ($20,000) for each instance or
One Hundred Thousand Dollars ($100,000) in the aggregate for all instances, (e)
result in the imposition of any Lien, (f) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration or any obligation
to repay) under, any of the terms, conditions or provisions of any Contract or
obligation to which Seller, SL Industries, EME or Paks is a party or by which
Seller, SL Industries, EME or Paks or any of their respective properties or
assets may be bound, which violation, breach or default could have a Material
Adverse Effect, or (g) violate any order, writ, judgment, injunction, decree,
statute, ordinance, rule or regulation of any Governmental Entity applicable to
Seller, SL Industries, EME or Paks or by which any of their respective
properties or assets may be bound which violation could have a Material Adverse
Effect.
3.6. Financial Statements. The Purchaser, DCX-Chol and Chol
Enterprises have previously been furnished with (i) the audited balance sheets
of EME and the related audited statements of earnings, retained earnings and
cash flows of EME (including any related notes) for the fiscal year ended
December 31, 1999 (EME did not own Paks in 1999), and the audited balance sheets
of EME (which includes Paks as an investment) and the related audited statements
of earnings, retained earnings and cash flows of EME (which includes Paks as an
investment) (including any related notes) for the fiscal year ended December 31,
2000 and December 31, 2001 (in English), together with the report thereon of the
independent public accountant of EME and Paks (the "Annual Financial
Statements") and (ii) the unaudited balance sheets of EME (which includes Paks
as an investment) and related unaudited statements of earnings, retained
earnings and cash flows of EME (which includes Paks as an investment) (including
any related notes) for the eleven-month period ending November 30, 2002 (the
"Interim Financial Statements"), and together with the Annual Financial
Statements, the "Financial Statements"). Each of the balance sheets included in
the Financial Statements, in all material respects, fairly presents the
financial position of EME (for 1999) and EME (which includes Paks as an
investment) (for 2000 and 2001) as of its date, and the other related statements
included in the Financial Statements, in all material respects, fairly present
the results of operations and changes in the financial position of EME (for
1999) and EME (which includes Paks as an investment) (for 2000 and 2001) for the
periods presented therein, all in conformity with Law and with the principles of
sound accounting and generally accepted accounting practice in the Federal
Republic of Germany (the "German Accounting Standards") in respect of the Annual
Financial Statements and in conformity with GAAP in respect of the Interim
Financial Statements, except for the absence of footnotes and normal year-end
adjustments with respect to the Interim Financial Statements. Except as
explicitly set forth on the balance sheets in the Financial Statements, neither
EME nor Paks has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise) which would be required to be reflected on an
audited balance sheet prepared in accordance with the German Accounting
Standards in respect of the Annual Financial Statements and in accordance with
GAAP in respect of the Interim Financial Statements. Each of Seller, KGH and SL
Delaware have no operations, have no assets other than interests in other EME
Entities, and have no liabilities other than in connection with the ownership of
such EME Entities and maintaining their organizational status and preparing Tax
Returns and other filings required to Governmental Entities.
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3.7. Absence of Certain Changes. Except as set forth in Section 3.7
of the Disclosure Schedule, since November 30, 2002, (a) there has not been any
change in the business, operations, assets, liabilities, condition (financial or
otherwise) or operations of EME or Paks, except such changes which, in the
aggregate, do not and will not have a Material Adverse Effect, (b) there has not
been any event or circumstance which could have a Material Adverse Effect, (c)
there has not been any actual, threatened, anticipated or contemplated damage,
destruction, loss (whether or not covered by insurance), conversion,
termination, cancellation, default or taking by eminent domain or other action
by any third party or Governmental Entity with respect to any EME Entity which
has or may have a Material Adverse Effect; (d) none of the EME Entities has
conducted its respective businesses in any material respect not in the ordinary
and usual course consistent with past practice, and (e) none of the EME Entities
has (i) incurred any indebtedness or issued any debt securities or assumed,
guaranteed or endorsed the obligations of any other Person, (ii) declared, set
aside for payment or paid any dividend or other distribution (whether in cash,
stock, property or any combination thereof), or redeemed or otherwise acquired
any shares of capital stock of any Person, (iii) sold, transferred or otherwise
disposed of, any of its material property or assets or, (iv) created any Lien on
any of its property or assets.
3.8. Contracts and Commitments. Except as set forth in Section 3.8
of the Disclosure Schedule, neither EME nor Paks is in breach or default and, to
Seller's Knowledge, no other party to any of the material Contracts relating to,
binding on or affecting EME or Paks, or the assets used in the business of EME
or Paks, is as of the date of this Agreement and will not be at the Closing, in
breach or default (and no event has occurred which with notice or the lapse of
time or both would constitute a default or violation) under any of the material
Contracts of EME or Paks, except such defaults which, individually or in the
aggregate, will not have a Material Adverse Effect. To the Seller's Knowledge,
there has not been any threatened cancellation of any material Contract relating
to, binding on or affecting EME or Paks, or the assets used in the business of
EME or Paks, or any outstanding dispute under any such Contract, or to the
Seller's Knowledge, any bases for any claim or breach or default thereunder
other than in the ordinary course of business consistent with past practice. The
execution, delivery and performance by Seller and SL Industries of this
Agreement and the other Transaction Documents and the transactions contemplated
hereby and thereby will not entitle any other party to any material Contract of
EME or Paks to cancel, suspend or terminate any such Contract. To Seller's
Knowledge, there is no reason to believe that any of such material Contracts
that are renewable solely at the option of the other party thereto will not be
renewed by the other party on reasonable terms.
3.9. No Undisclosed Liabilities. Except as and to the extent set
forth in the Financial Statements or in Section 3.9 of the Disclosure Schedule,
none of the EME Entities has any liabilities of any nature (whether accrued,
absolute, matured, contingent or otherwise) which would be required by the
German Accounting Standards in respect of the Annual Financial Statements or by
GAAP in respect of the Interim Financial Statements to be reflected on its
audited consolidated balance sheet prepared in accordance with the German
Accounting Standards in respect of the Annual Financial Statements or by GAAP in
respect of the Interim Financial Statements, except such liabilities which were
incurred in the ordinary course of business since November 30, 2002.
14
3.10. No Default or Violation. Except as set forth in Section 3.10
of the Disclosure Schedule, neither EME nor Paks is in default or violation (and
no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
its organizational or governing documents or (ii) any Law applicable to EME or
Paks. Each of EME and Paks has all governmental permits, licenses and
authorizations necessary for the conduct of their businesses in all material
respects as presently conducted (the "Permits") and each of EME and Paks is in
material compliance with the terms of the Permits, and no suspension,
revocation, termination or cancellation of any of such Permits is pending or, to
Seller's Knowledge, threatened.
3.11. Litigation; Product Liability. (a) Except as set forth in
Section 3.11(a) of the Disclosure Schedule, as of the date of this Agreement,
there is no action, suit or proceeding pending, and, to Seller's Knowledge,
there is no action, suit or proceeding threatened, against or affecting EME or
Paks or any properties or rights of EME or Paks, before any arbitrator or
Governmental Entity. As of the date of this Agreement, none of Seller, SL
Industries or any EME Entity has received notice that EME or Paks is subject to
any outstanding injunction, writ, judgment, order or decree of any arbitrator or
Governmental Entity.
(a) Except as set forth in Section 3.11(b) of the Disclosure
Schedule, as of the date of this Agreement, neither EME nor Paks has been
subject to any written claim, suit or proceeding relating to product liability,
breach of product warranty, or similar claims in 2001 or 2002, and to Seller's
Knowledge neither EME nor Paks has been subject to any oral claim, suit or
proceeding relating to product liability, breach of product warranty, or similar
claims in 2001 or 2002. Except as set forth in Section 3.11(a) of the Disclosure
Schedule, to Seller's Knowledge, none of the current products of EME or Paks nor
any of the manufacturing processes, designs, schematics or procedures of or
relating to any products of EME or Paks contains any defects or deficiencies
that could result in any product liability or similar claims in excess of
$50,000 in the aggregate, except as to any such defects of deficiencies to which
the customer has consented in writing.
3.12. Taxes. (a) Each EME Entity has, within the time and manner
prescribed by law, (i) filed or placed on extension with the appropriate taxing
authorities (or joined in the filing of) all Tax Returns required to be filed by
it in respect of any Taxes that were or may become due by or in respect of EME
or Paks, and each such Tax Return was complete and accurate in all material
respects and (ii) paid in full or accrued for all Taxes due by or in respect of
EME or Paks whether or not reflected on the Tax Returns, including but not
limited to, Taxes required to be withheld by EME or Paks, excluding Taxes
currently being disputed in good faith.
(b) No deficiencies for any Taxes have been asserted or assessed
in writing or, to Seller's Knowledge, verbally proposed against EME or Paks
which remain unpaid.
(c) Neither the Seller Dividend nor the activities carried out in
connection therewith will give rise to any liability or obligation for Taxes for
EME, Paks, the Purchaser or its Affiliates nor, except for the Taxes
specifically referred to as being split by the parties pursuant to Section 9.11,
will the consummation of the transactions contemplated in this Agreement and the
other Transaction Documents give rise to any liability or obligation for Taxes
for EME or Paks, including but not limited to Taxes required to be withheld.
15
(d) For purposes of this Agreement, (i) "Tax" or "Taxes" shall
mean all national, federal, state, local or foreign and other taxes,
assessments, duties, income, profits, franchise, gross receipts, alternative
minimum, capital, withholding, payroll, sales, use, property, excise, transfer,
documentary, recording, social security contributions and similar charges of any
kind, whether computed on a separate, unitary, combined or any other basis,
imposed by any Governmental Entity, including interest, penalties and additions
thereto, and (ii) "Tax Return" shall mean any return, report, information return
or other document (including any related or supporting information) with respect
to Taxes including any schedule or attachment thereto and including any
amendment thereof.
(e) The Interim Financial Statements reflect an adequate reserve
for all unpaid Taxes attributable to the activities and operations of EME and
Paks during all Tax periods or portions thereof through the date of such Interim
Financial Statements, including, but not limited to, any Taxes required to be
withheld by EME or Paks.
(f) Each of Seller, EME and Paks is characterized as a foreign
corporation as described in Section 7701(a)(5) of the Internal Revenue Code of
1986, as amended (the "Code"), for United States federal income tax purposes and
no EME Entity has taken a position with any Governmental Entity contrary to such
characterization of the Seller, EME or Paks for U.S. Income Tax purposes.
(g) None of Seller, EME or Paks is a foreign corporation engaged
in trade or business within the United States, whether for purposes of Section
882 of the Code, Section 6038C of the Code or other United States federal income
tax purposes.
(h) Neither EME nor Paks is doing business or maintains a taxable
presence in a jurisdiction in which it does not file Tax Returns and no claim
has been made by any Governmental Entity in a jurisdiction in which EME or Paks
does not file Tax Returns that EME or Paks may be subject to Taxes assessed by
such jurisdiction.
(i) Neither EME nor Paks is under any current or potential
obligation to indemnify any other person with respect to any Tax or pay the
Taxes of any other person as a transferee or successor, by contract or
otherwise. Except for the Profit and Loss Agreement, neither EME nor Paks is a
party to or bound by any tax indemnity, sharing or allocation agreement or
arrangement that provides for the allocation, apportionment, sharing or
assignment of any Tax liability or benefit, or the transfer or assignment of
income, revenues, receipts or gains for the principal purposes of determining
Tax liability.
(j) No income under any arrangement or understanding to which any
EME Entity is a party will be attributed to EME or Paks in any Tax period (or
portion thereof) after the Closing Date to the extent such income is not also
represented by receipts to with EME or Paks, as the case may be, is legally
entitled after the Closing.
(k) Neither EME nor Paks is required to report in a Tax Return
for the taxable period ending after the Closing income attributable to
transactions that economically accrued in a prior taxable period but on which
neither EME nor Paks was subject to Tax in any prior taxable period.
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(l) There is no agreement or other document extending the period
of assessment, payment, remittance or collection of any Taxes by or on behalf of
EME or Paks. No power of attorney with respect to any Taxes has been executed or
filed with any Governmental Entity, including without limitation the United
States Internal Revenue Service, by or on behalf of EME or Paks.
(m) Each of EME and Paks has complied in all material respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes in connection with amounts paid or owing to an employee,
independent contractor, shareholder, EME Entity or any other party including,
without limitation, withholding of Taxes pursuant to Code Section 1441, or under
any corresponding provisions of state, local or foreign income tax law and has,
within the time and manner prescribed by law, withheld from and paid over to the
proper Governmental Entities all amounts required to be so withheld and paid
over under applicable law.
(n) There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of EME or Paks.
(o) Neither EME nor Paks is a party to any joint venture,
partnership or other arrangement or contract that could be treated as a
partnership for Tax purposes.
(p) Any loan payable by EME or Paks to SL Industries, Seller, or
any Affiliate thereof has been forgiven and contributed to the capital of EME or
Paks, as the case may be, by the lender. Any loans payable to EME or Paks by SL
Industries, Seller, or any Affiliate thereof, have been repaid in full to EME or
Paks, as the case may be.
3.13. Title to Properties. Except as set forth on Section 3.13(a) of
the Disclosure Schedule:
(a) EME and Paks have good and valid title to all of the assets
and properties (real and personal) which are reflected on the Interim Financial
Statements (except for assets and properties sold, consumed or otherwise
disposed of by them in the ordinary course of business, not to exceed $20,000 in
fair market value in the aggregate, excluding inventory sold in the ordinary
course of business, and except for properties (real and personal) that are
leased as set forth in Section 3.13(b)), and such assets and properties are
owned free and clear of all Liens, except for (i) the Liens listed on Section
3.13(a) of the Disclosure Schedule, (ii) any Liens that would be revealed by a
personal inspection of the properties, (iii) rights of utility companies to lay,
maintain and repair pipes, lines conduits, cable boxes and other installations
on, under and across the properties and any rights, easements and licenses in
favor of, or agreements with, any public utility company, including but not
limited to, gas, electricity, telephone, telegraph and cable television services
and private sewer agreements, if any, (iv) Liens for taxes, assessments, water
and sewer charge and the like for which payments may still be made without the
imposition of a penalty, and (v) Liens, including those described in Section
3.13(a)(iii), whose existence does not materially adversely affect the current
use and operation of such properties (the "Permitted Liens") and such assets and
properties are sufficient to conduct the business of EME and Paks as currently
conducted without interference.
17
(b) EME and Paks hold under valid lease agreements all real and
personal properties being held under capitalized leases, and all real and
personal property that is subject to the operating leases, all of which are set
forth in Section 3.13(b) of the Disclosure Schedule, and each of EME and Paks
enjoys peaceful and undisturbed possession of such properties under such leases.
None of SL Industries, Seller, or the EME Entities has received any written
notice of any adverse claim to the title to any properties owned by EME or Paks
or with respect to any lease under which any properties are held by EME or Paks.
(c) All items of property, plant and equipment of EME and Paks
have been adequately maintained consistent with normal industry practice, with
reasonable wear and tear excepted, and are sufficient to permit the conduct of
the business of EME and Paks as currently conducted.
3.14. Patents, Trademarks, Etc. (a) Section 3.14 of the Disclosure
Schedule sets forth a true and complete list as of the date of this Agreement of
all Intellectual Property Rights filed by, or issued or registered to or owned
by, each EME Entity and all material intellectual property license agreements to
which any EME Entity is a party. With respect to registered trademarks, such
list sets forth a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. The
Intellectual Property Rights listed in Section 3.14 of the Disclosure Schedule
are not subject to any maintenance fees or renewal fees except as disclosed in
Section 3.14 of the Disclosure Schedule. Except as set forth in Section 3.14 of
the Disclosure Schedule, to Seller's Knowledge, none of the EME Entities is
required to pay any royalty or other amount to anyone with respect to any of the
Intellectual Property Rights.
(b) (i) Each of EME and Paks own or possess adequate licenses or
other valid rights to use all patents, trademarks (registered or unregistered),
trade names, service marks, copyrights and applications and registrations
therefor (whether filed or unfiled), trade secrets and other intellectual
property and proprietary rights, whether or not subject to statutory
registration or protection, which are material to the conduct of the business of
EME and Paks (the "Intellectual Property Rights"), (ii) as of the date of this
Agreement, the validity of the Intellectual Property Rights and the title or
rights to use thereof by EME and Paks are not being questioned in any litigation
to which any EME Entity is a party, nor to Seller's Knowledge, is any such
litigation threatened, (iii) as of the date of this Agreement, none of Seller,
SL Industries nor any EME Entity has received notice that it is a party to any
litigation in connection with which a Person has alleged that the conduct of the
business of EME or Paks infringed or infringes with any valid patents,
trademarks, trade name, service marks or copyrights of others, nor, to Seller's
Knowledge , is any such litigation threatened, (iv) to Seller's Knowledge, (A)
no Person is infringing upon or violating any of the Intellectual Property
Rights and (B) no claim is pending or threatened to that effect and (v) none of
the EME Entities is under any obligation or commitment, absolute or contingent,
to any third party to sell, assign, transfer, convey or effect a sale,
assignment, transfer or conveyance of any of the Intellectual Property Rights or
to enter into any contract with respect to the foregoing.
3.15. Insurance. EME and Paks maintain policies of fire and
casualty, property, life, theft, auto, casualty, product liability, general
liability, workmen's compensation, health, medical, disability, business
interruption, employee fidelity and other forms of insurance in such amounts,
with such deductibles and against such risks and losses, and with such reputable
18
insurers, as are reasonable for their business, assets and properties (the
"Insurance Policies") and all such Insurance Policies are listed in Section 3.15
of the Disclosure Schedule. All such Insurance Policies are in full force and
effect and all premiums due and payable thereon have been paid in full, and no
notice of cancellation or termination has been received with respect to any such
policy which has not been replaced on substantially similar terms prior to the
date of such cancellation. As of the date of this Agreement, there are no
pending material claims under the Insurance Policies by any EME Entity as to
which the insurers have denied liability. To Seller's Knowledge, none of such
Insurance Policies will be cancelable or terminable, and none of the provisions
or coverages of any such Insurance Policies will be affected in respect of EME
and Paks, as a result of the transactions contemplated in the Transaction
Documents other than Insurance Policies which are maintained other than at the
EME or Paks level, in which EME and Paks shall no longer have an insurable
interest and which Insurance Policies are, to Seller's Knowledge, listed on
Section 3.15(b) of the Disclosure Schedule. To Seller's Knowledge, EME and Paks
have tendered all claims under their Insurance Policies to their insurance
carrier.
3.16. Environmental Matters. Except as set forth in Section 3.16 of
the Disclosure Schedule, (a) Seller, EME and Paks are in compliance with all
applicable Environmental Laws, except where failure to be in compliance would
not have a Material Adverse Effect; (b) there is no Environmental Claim pending
or, to Seller's Knowledge, threatened against Seller, EME or Paks; (c) EME and
Paks have obtained all material permits, approvals, identification numbers,
licenses or other authorizations required under any applicable Environmental
Laws (the "Environmental Permits") and is and has been in compliance with their
requirements; (d) such Environmental Permits may be retained by EME and Paks
after the Closing without the consent of any Governmental Entity; (e) there are
no underground or aboveground storage tanks or any surface impoundments, septic
tanks, barrels, pits, sumps or lagoons in which Hazardous Materials are being or
have been treated, used, stored or disposed of on, or under, any real or
personal property currently owned or leased by EME or Paks, or to Seller's
Knowledge, on any real or personal property formerly owned, leased or occupied
by EME or Paks; (f) neither EME nor Paks has released, discharged or disposed of
Hazardous Materials on, from, over, or beneath any real or personal property
owned or leased or on any real or personal property formerly owned or leased by
EME or Paks, and none of such real or personal property is contaminated with any
Hazardous Materials other than in compliance with Environmental Laws; (g) no EME
Entity has undertaken or completed any investigation or assessment or remedial
or response action relating to any Release of Hazardous Materials at any site,
location or operation of EME or Paks, either voluntarily or pursuant to the
order of any Governmental Entity or the requirements of any Environmental Law;
and (h) since January 1, 2000, there have been no pending or threatened actions,
suits, demands, demand letters, claims, liens, notices of non-compliance or
violation, notices of liability or potential liability, investigations,
proceedings, consent orders or consent agreements relating in any way to
Environmental Laws, any Environmental Permits or any Hazardous Materials (the
"Environmental Claims") against any EME Entity or any of its property. SL
Industries and Seller have provided to Purchaser, DCX-Chol and Chol Industries
true and correct copies of all pages (including all disclosure schedules) of the
1998 Agreement that relate to any of the matters addressed in this Section 3.16.
3.17. Employee and Labor Matters. Except as set forth in Section
3.17 of the Disclosure Schedule, no EME Entity is a party to any collective
bargaining or other labor union contract or shop agreement applicable to EME or
Paks or has established a shop practice applicable to persons employed by EME or
19
Paks, no collective bargaining agreement is being negotiated by any EME Entity
in respect of EME or Paks, and none of SL Industries, Seller and the EME
Entities know of any activities or proceedings of any labor union to organize
any of the employees of EME or Paks. Except as set forth in Section 3.17 of the
Disclosure Schedule, as of the date hereof, (i) each EME Entity is in compliance
in all material respects with all applicable Laws relating to employment and
employment practices, wages, hours, occupational safety, health standards,
severance payments, equal opportunity, payment of social security, national
insurance and other Taxes, and terms and conditions of employment, in each case
in relation to EME and Paks or their businesses (ii) there are no charges with
respect to or relating to any EME Entity pending, or to Seller's Knowledge,
threatened before or any Governmental Entity responsible for the prevention of
unlawful, unfair labor or discriminatory employment practices in relation to EME
or Paks or their businesses, and (iii) there is no labor dispute, strike or work
stoppage against any EME Entity, pending or, to Seller's Knowledge, threatened
which may interfere with the business activities of EME or Paks. Except as set
forth in Section 3.17 of the Disclosure Schedule, to Seller's Knowledge, all
sums due for employee compensation and benefits, including pension and severance
benefits, and all vacation time owing to any employees of EME and Paks have been
duly and adequately accrued on the accounting records, in accordance with GAAP
and the German Accounting Standards, of EME and Paks.
3.18. Brokers and Finders. None of Seller, SL Industries, any EME
Entity nor any of their respective Representatives has employed any broker or
finder or incurred any liability for any investment banking fees, brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement other than Imperial Capital LLC, the costs of
which shall be paid by Seller.
3.19. Certain Business Practices. Neither EME nor Paks, nor any
director, officer, or, to Seller's Knowledge, any agent or employee of EME or
Paks has (a) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (b) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or (c) made any other unlawful
payment.
3.20. Change in Control. Except as set forth in Section 3.20 of the
Disclosure Schedule, none of the EME Entities is a party to any Contract related
to employment or consulting services that contains a "change in control,"
"potential change in control" or similar provision, which, as a result of the
consummation of the transactions contemplated in the Transaction Documents would
(either alone or upon the occurrence of any additional acts or events) (a)
result in any payment (whether of severance pay or otherwise) becoming due from
EME or Paks to any Person, (b) result in the acceleration of any obligations
under such Contract payable by or otherwise binding on EME or Paks or (c)
reasonably be expected to prevent or delay the Closing.
3.21. Inventory. Except (a) for Inventory (as defined below) which
has been adequately reserved for in the balance sheet of the Interim Financial
Statements, (b) for Inventory that is obsolete and the cumulative effect of such
obsolescence would not have a Material Adverse Effect, or (c) as disclosed in
Section 3.21 of the Disclosure Schedule, the Inventory of each EME Entity is
usable and salable in the ordinary course of business, is of consistent and
merchantable quality and quantity, is fit for its intended purposes and not
subject to any write down or write off in accordance with GAAP and has been
20
produced in accordance with all applicable Laws. As used in this Agreement, the
term "Inventory" shall mean all items which are included in the term Inventory
on the Financial Statements, under GAAP, including, without limitation, finished
products, samples, work-in-process, raw materials, labels and packaging
materials that are used in, or held for use in, the operations of the business
of EME and Paks.
3.22. Relationship with Suppliers. In the three (3) month period
prior to the date hereof, there has not been any change in the business
relationship between EME or Paks and any of their top current twenty (20)
suppliers that could have a Material Adverse Effect, and to Seller's Knowledge
there is no reason to believe that there will be any change in such relationship
in the future that could have a Material Adverse Effect, outside of the ordinary
course of business or in a manner inconsistent with precedent business
practices, as a result of the consummation of the transactions contemplated in
the Transaction Documents.
3.23. Relationship with Customers. Except as set forth in Section
3.23 of the Disclosure Schedule, in the three (3) month period prior to the date
hereof, there has not been any change in the purchasing relationship between EME
or Paks and any of their current top twenty (20) customers that could have a
Material Adverse Effect, and to Seller's Knowledge there is no reason to believe
that there will be any change in such relationship in the future that could have
a Material Adverse Effect, outside of the ordinary course of business or in a
manner inconsistent with precedent business practices, as a result of the
consummation of the transactions contemplated in the Transaction Documents.
3.24. Accounts Receivable. The Accounts Receivable (as hereinafter
defined) of EME and Paks have arisen solely out of bona fide sales and
deliveries of goods, performance of services or other business transactions in
the ordinary course of business consistent with past practice. The allowances
for collection losses associated with such Accounts Receivable reflected in such
balance sheet have been determined in accordance with GAAP and Hungarian
Accounting Standards consistent with past practice. Except as is consistent with
past practice, there are no discounts, trade promotions or similar marketing
arrangements that affect the collectibility or value of any such Accounts
Receivable. As used in this Agreement, the term "Accounts Receivable" shall mean
all of the trade notes or accounts receivable arising out of Inventory sold or
shipped or services performed that are set forth in the accounts receivable line
of the Interim Financial Statements or arising in the ordinary course of
business thereafter.
3.25. Affiliate Relationships. Section 3.25 of the Disclosure
Schedule sets forth a complete and accurate list of all Contracts involving any
of Seller, SL Industries or any EME Entity in which any of Seller's, SL
Industries' or such EME Entity's officers, directors, shareholders or Affiliates
have a direct or indirect financial interest, including indebtedness owed to
Seller, SL Industries by EME or Paks or any EME Entity and indebtedness owed by
Seller, SL Industries or any EME Entity to EME or Paks.
3.26. Disclosure. None of this Agreement, the other Transaction
Documents, the Financial Statements, any Schedule or Exhibit hereto or thereto
or, to Seller's Knowledge, any certificate, document or other statement
delivered to the Purchaser, DCX-Chol, Chol Enterprises or their Affiliates by
any of SL Industries, the EME Entities or their officers, directors, employees
21
or agents, including, but not limited to Imperial Capital, in connection with
the transactions contemplated in the Transaction Documents, taken as a whole,
contains any untrue statement of a material fact or omits any statement of
material fact necessary to make the statements contained in this Agreement, the
other Transaction Documents, the Financial Statements, any Schedule or Exhibit
hereto or thereto or any certificate document or other statement delivered to
the Purchaser by any of SL Industries, the EME Entities or their officers,
directors, employees or agents, including, but not limited to Imperial Capital,
in connection with the transactions contemplated in the Transaction Documents,
taken as a whole, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF Purchaser, DCX-CHOL and chol enterprises
The Purchaser, DCX-Chol and Chol Enterprises jointly and severally
represent and warrant to Seller and SL Industries as follows:
4.1. Corporate Organization; Etc. Each of Purchaser, DCX-Chol and
Chol Enterprises is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to conduct its business as it is now
being conducted and to own, lease and operate its property and assets except
where the failure to be so organized, existing and in good standing or to have
such power or authority would not, in the aggregate, either (i) have a Purchaser
Material Adverse Effect or (ii) impair, hinder or adversely affect the ability
of Purchaser, DCX-Chol or Chol Enterprises to perform any of its obligations
under the Transaction Documents or to consummate the transactions contemplated
hereby or thereby.
4.2. Authority Relative to the Transaction Documents. Each of
Purchaser, DCX-Chol and Chol Enterprises has all requisite corporate authority
and power to execute and deliver this Agreement and the other Transaction
Documents to which they are a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the other Transaction Documents to which Purchaser, DCX-Chol or Chol
Enterprises is a party and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all required
corporate action on the part of Purchaser, DCX-Chol and Chol Enterprises and no
other corporate proceedings on the part of Purchaser, DCX-Chol or Chol
Enterprises are necessary to authorize such Transaction Documents or to
consummate the transactions contemplated hereby and thereby. The Transaction
Documents to which each of Purchaser, DCX-Chol and Chol Enterprises is a party
have been duly and validly executed and delivered by Purchaser, DCX-Chol and
Chol Enterprises and, assuming the Transaction Documents have been duly
authorized, executed and delivered by Seller, SL Industries and the EME
Entities, as the case may be, the Transaction Documents constitute the valid and
binding agreement of Purchaser, DCX-Chol and Chol Enterprises, respectively,
enforceable against Purchaser, DCX-Chol and Chol Enterprises in accordance with
their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and preferential
transfers and subject to the limitations imposed by general equitable principles
(regardless whether such enforceability is considered in a proceeding at law or
in equity).
22
4.3. Brokers and Finders. None of Purchaser, DCX-Chol or Chol
Enterprises or any of their Representatives has employed any investment banker,
broker or finder or incurred any liability for any investment banking fees,
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
4.4. Investment Intent.
(a) Purchaser is acquiring the Purchased Shares for its own
account and not for distribution (other than for potential subsequent transfers
to Purchaser's Affiliates, including DCX-Chol and Chol Enterprises) and
acknowledges that it must bear the economic risk of the investment in the such
portion of the Purchased Shares for an indefinite period of time under
applicable securities laws and regulations. The Purchaser agrees that the
Purchased Shares acquired by it pursuant to this Agreement will not be offered,
sold, transferred, assigned or otherwise disposed of without compliance with
applicable securities laws and regulations. The Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of acquiring its portion of the Purchased Shares pursuant
to this Agreement and the other Transaction Documents; and Purchaser has the
financial ability to bear the economic risks of acquiring and holding the
Purchased Shares to be acquired by Purchaser pursuant to this Agreement for
investment.
(b) Purchaser understands that the Purchased Shares are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that Seller
and SL Industries are relying in part upon the truth and accuracy of, and
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth in this Agreement in
order to determine the availability of such exemptions and the eligibility of
Purchaser to acquire the Purchased Shares.
4.5. German Control of Concentrations. The annual worldwide sales of
Purchaser, including the worldwide sales of all undertakings controlled by or
controlling (whether alone or jointly together with other enterprises) Purchaser
within the sense of section 17 of the German Stock Corporation Act
(Aktiengesetz, or "AktG") as well as the sales of all companies belonging to the
same group as Purchaser within the sense of section 18 AktG, together with the
worldwide sales of EME which, in the fiscal year ended December 31, 2002,
amounted to approximately 28,600,000 Euros, did not exceed, in the last business
year, the amount of 500,000,000 Euros.
ARTICLE V
COVENANTS
5.1. Commercial Register. Purchaser hereby agrees that, within 30
days of the Closing Date, Purchaser shall notify the Commercial Register in
Ingolstadt, Germany that a share transfer has occurred.
5.2. Profit and Loss Agreement. The Parties undertake to take all
actions necessary to terminate the Profit and Loss Agreement effective January
1, 2003 0.00 hrs or any other date as soon as legally possible thereafter and to
insure that any notification to the Commercial Register required in such context
shall be carried out with no undue delay. Furthermore, the Parties shall ensure
23
that, in the event the termination should not be legally possible as of January
1, 2003 0.00 hrs, there shall be no obligations to transfer any profits or
absorb any losses, as the case may be, for the period from January 1 and the
point in time when the termination of the Profit and Loss Agreement becomes
effective, and to indemnify each other against such transfer or absorption.
5.3. Insurance. Seller and SL Industries will not cancel Insurance
Policies in the name of and for the benefit of EME and Paks after the Closing
Date, other than Insurance Policies which are maintained other than at the EME
and/or Paks level, in which EME and Paks shall no longer have an insurable
interest, which Insurance Policies are, to Seller's Knowledge, listed on Section
3.15(b) of the Disclosure Schedule.
5.4. Filings. Promptly after the execution of this Agreement, each
of the Parties shall prepare and make or cause to be made any required filings,
submissions, disclosures and notifications under the laws of any domestic or
foreign jurisdiction to the extent that such filings are necessary to consummate
or as a result of the transactions contemplated hereby and in the other
Transaction Documents and will use its reasonable best efforts to take all other
actions necessary to consummate the transactions contemplated hereby in a manner
consistent with applicable law. Each of the Parties will furnish to the other
Parties such necessary information and reasonable assistance as such other
Parties may reasonably request in connection with the foregoing. In the event
that a Party is required to disclose confidential information of the other
Parties hereto in any such filings, submissions, disclosures and notifications,
such disclosing Party shall notify the affected Party and provide the affected
Party a reasonable period to review and comment on such disclosures in advance.
5.5. Further Assurances. Upon the terms and subject to the
conditions herein provided, each of the Parties agrees to use its best efforts
to take or cause to be taken all action, to do or cause to be done, and to
assist and cooperate with the other Parties hereto in doing, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including, but not limited to, the
execution and delivery of such instruments, and the taking of such other actions
as the other Parties hereto may reasonably require in order to carry out the
intent of this Agreement.
5.6. Tax Covenants.
(a) Cooperation on Tax and Audit Matters. The Purchaser, on the
one hand, and Seller and SL Industries, on the other hand, shall cooperate
fully, as and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns and any audit, litigation or other
proceeding with respect to Taxes of EME or Paks or audit of the 2002 financial
statement of EME. Such cooperation shall include the retention and (upon the
other Party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation, or other proceeding and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Purchaser
agrees, and will cause EME and Paks, and Seller and SL Industries agree, and
will cause KGH and SL Delaware, (i) (A) to retain all books and records with
respect to Tax and audit matters pertinent to EME or Paks relating to any
taxable period beginning before the Closing Date until the expiration of the
24
applicable statute of limitations (and any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered into
with any taxing authority and to retain financial records relating to the audit
of all periods through the Closing Date, and (B) to give the other Party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other Party so requests, to allow the other
Party to take possession of such books and records. Seller and SL Industries
will provide Purchaser and will cause KGH and SL Delaware to provide Purchaser
within sixty (60) days after the Closing (i) Forms 5471 for EME and Paks, (ii)
complete trial balances as of and for the year ending December 31, 2002 and
(iii) an existing appraisal containing a detailed fixed asset listing and
architectural drawing for the sites and buildings used by EME or Paks.
(b) Responsibility for Filing 2002 Tax Returns. Seller and SL
Industries, with the cooperation of EME and Paks, shall prepare or cause to be
prepared all Tax Returns for or in which EME and Paks are included for the
period ended December 31, 2002 and shall pay any and all Taxes that are payable
in respect of the period ended December 31, 2002 (the "Final Period Returns")
and in respect of the payments and writeoffs set forth on Section 3.2(b) of the
Disclosure Schedule. Purchaser shall file or cause to be filed all the Final
Period Returns for EME and Paks. The Final Period Returns shall be prepared in
accordance with applicable Law. No position will be taken on the Final Period
Returns, except to the extent required by applicable law, that would adversely
affect EME or Paks after the Closing. SL Industries shall deliver to the
Purchaser a copy of each Final Period Return, together with any schedules, work
papers and other documentation that are relevant to their preparation, not later
than thirty (30) days prior to the due date for such Final Period Return
(including applicable extensions) (the "Due Date"). The Purchaser may provide
comments, including but not limited to requested revisions, to the proposed
Final Period Return, which comments shall be delivered to SL Industries within
ten (10) days after the Purchaser's receipt of the copy of such proposed Final
Period Returns. The Seller and SL Industries shall consider in good faith any
such comments to such Final Period Return as are reasonably requested by the
Purchaser. Purchaser shall file the Final Period Returns on the earlier of (i)
the provision to SL Industries by Purchaser of written notice from the Purchaser
indicating the Purchaser's consent to such filing or (ii) one (1) day prior to
the Due Date.
(c) Tax Refunds. Upon receipt of the Tax Refund, the Purchaser
shall, within five (5) days of receipt thereof, pay over (or cause to paid over)
to the Seller the Tax Refund, together with any notices from the appropriate
taxing authorities regarding such Tax Refund. Additionally, no later than the
earlier of (i) three days prior to the due date or (ii) September 30, 2003, the
Purchaser shall pay to the Seller the EME Additional Tax Payment. Any other
refund of Taxes received by EME or Paks after the Closing that relates to any
Tax period or portions thereof ending on or before the Closing Date and that are
not accrued for on the Interim Financial Statements shall be for the account of
and shall be paid to Seller within five (5) days following receipt.
(d) Affiliated Loans. Any loan payable by EME or Paks to SL
Industries, Seller, or any Affiliate thereof will be forgiven and contributed to
the capital of EME or Paks, as the case may be, by the lender. Prior to the
Closing, any loans payable to EME or Paks by SL Industries, Seller, or any
Affiliate thereof, will be forgiven by EME or Paks, as the case may be.
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(e) Defense. In the event Purchaser, EME or Paks shall receive a
written claim for taxes ("Claim") from any jurisdiction for any period ending on
or before December 31, 2002 with respect to EME or Paks, Purchaser shall
promptly send a copy thereof to SL Industries. SL Industries shall at its sole
cost then have the right to contest the Claim and SL Industries shall have the
right to select the attorneys and other persons necessary to represent EME and
Paks ("Seller's Representatives") in contesting the Claim. Purchaser shall
cooperate, and shall cause EME and Paks to cooperate, with SL Industries as may
be reasonably requested by SL Industries in contesting the Claim. If SL
Industries receives the Claim directly, then SL Industries shall have the right
to contest the Claim under the above procedures and Purchaser will cooperate,
and shall cause EME and Paks to cooperate, with SL Industries as provided above.
5.7. Non-Competition. Each of Seller and SL Industries will not, for
two (2) years from the Closing Date, directly or indirectly through
subsidiaries, as an owner, partner, shareholder, joint venturer, corporate
officer, director, employee, manager, consultant, principal, trustee or
licensor, or an other capacity whatsoever of or for any Person:
(a) solicit, divert or take away, or attempt to solicit,
divert or take away, the business or patronage of any
of the clients, customers or suppliers of EME of Paks;
or
(b) lend or allow its name or reputation to be used by or
otherwise allow its skill, knowledge or experience to
be used by any Person that competes with the
businesses of EME or Paks in the German, Hungarian and
European market as such businesses exist as of the
Closing Date, except for the business of SL Montevideo
Technology, Inc., together with its subsidiaries.
Upon the sale of SL Industries or any of its subsidiaries, the restrictions
contained in this Section 5.7 shall terminate with respect to the operations of
such division or subsidiary being sold.
5.8 Confidentiality.
(a) Each of Seller, SL Industries, and their Affiliates has had
access to, and there has been disclosed to each of Seller, SL Industries, and
their Affiliates, information of a confidential nature that has great value to
EME and Paks and constitutes a substantial basis upon which the value of EME and
Paks is predicated. Such information includes trade secrets, customer or
supplier lists, pricing information, marketing arrangements, strategies,
business plans, internal performance statistics, training manuals, and other
information concerning EME or Paks that is competitively sensitive or
confidential (the "Confidential Information").
(b) Each of Seller and SL Industries will not, and will cause
their respective Affiliates to not, (i) use or divulge any Confidential
Information, except: (A) to EME's or Paks' personnel; (B) to the extent
disclosure may be required by Law; or (C) if such information becomes lawfully
obtainable from other sources who were not under a duty of confidentiality and
26
(ii) use or permit to be used any Confidential Information for the gain or
benefit of any Person other than the Purchaser or for his or its own personal
gain or benefit.
5.9 Reasonableness of Restrictions and Enforceability. Given
Seller's and SL Industries' position as a direct or indirect shareholder,
partner or owner of EME and Paks and Seller's and SL Industries' strong business
ties that are significant to the growth of the businesses of EME and Paks, each
of Seller and SL Industries acknowledges that the restrictions in this Agreement
are reasonable both individually and in the aggregate and that the duration,
geographic scope, extent and application of each of such restrictions are no
greater than is necessary for the protection of EME's and Paks' legitimate
business interests, which include but are not limited to EME's and Pak's trade
secrets and other valuable confidential business information acquired by the
Purchaser, its substantial relationships with prospective or existing customers
and suppliers, and the goodwill associated with the businesses of EME and Paks.
5.10 Termination of Profit and Loss Agreement. Purchaser, DCX-Chol
and Chol Enterprises agree that, in the event a trade creditor makes a claim
against KGH arising from termination of the Profit and Loss Agreement, they
shall indemnify KGH from such liability to the extent such liability was stated
on the Interim Financial Statements or arise in the ordinary course of business
thereafter.
5.11 Severable Covenants. The Parties intend that the covenants in
Section 5.7 will be construed as a series of separate covenants. All such
separate covenants will be deemed identical. The Parties desire and intend that
this Agreement be enforced to the fullest extent permissible under the Laws and
public policies applied in each jurisdiction in which enforcement is sought. If
any particular provision of Sections 5.7, 5.8 and 5.9 is adjudicated to be
invalid or unenforceable, (a) each of the Parties agrees that if such provisions
would be valid or enforceable if some part or parts of them were deleted or the
period or area of application reduced, the applicable restriction will apply
with the modifications necessary to make it valid and enforceable, and (b) such
adjudication will apply only with respect to the operation of this Agreement in
the particular jurisdiction in which the adjudication is made, and the
unenforceable covenant will be eliminated from this Agreement to the extent
necessary to permit the remaining separate covenants (or portions of them) to be
enforced.
ARTICLE VI
[Intentionally left blank]
ARTICLE VII
[Intentionally left blank]
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ARTICLE VIII
INDEMNIFICATION
8.1. [Intentionally left blank]
8.2. [Intentionally left blank]
8.3. Indemnification.
(a) Indemnification by SL Industries and Seller. Regardless of
any pre-Closing investigations, examinations or prior knowledge of the
Purchaser, DCX-Chol, Chol Enterprises or their Affiliates or Representatives or
due diligence conducted by the Purchaser, DCX-Chol, Chol Enterprises or their
Affiliates or their Representatives or disclosure by SL Industries, Seller, the
EME Entities or their Affiliates or Representatives, SL Industries and Seller,
(together, the "Seller Indemnifying Parties") jointly and severally, shall
indemnify and hold harmless the Purchaser, DXC-Chol and their Affiliates,
together with their respective transferees, directors, officers, employees,
managers, agents and advisors (the "Purchaser Indemnified Parties"), from,
against and with respect to any and all demands, claims, actions or causes of
action, assessments, liabilities, losses, costs, damages, penalties, charges or
expenses, including without limitation interest, penalties and reasonable
counsel and accountants' fees, disbursements and expenses (collectively,
"Purchaser Losses") arising out of, or related to:
(i) any breach of any representation, warranty, covenant or
agreement (or in the case of claims made by third parties, any
claim or allegation that if true would constitute a breach of any
representation, warranty, covenant or agreement) made by SL
Industries or Seller in this Agreement, including the Disclosure
Schedule and Exhibits hereto or any other document or agreement
delivered by or on behalf of SL Industries or Seller in
connection therewith; and
(ii) without limiting the preceding clause (i), any claims
arising out or in connection with the potential liability
relating to any items listed in Section 8.3(a)(ii) of the
Disclosure Schedule.
(b) Indemnification by Purchaser, DCX-Chol and Chol Enterprises.
The Purchaser, DCX-Chol and Chol Enterprises (together, the "Purchaser
Indemnifying Parties") shall jointly and severally indemnify, defend and hold
harmless Seller, SL Industries, SL Delaware, KGH and their Affiliates, together
with their respective directors, officers, employees, managers, representatives,
transferees, agents and advisors ("Seller Indemnified Parties") from, against
and with respect to any and all demands, claims, actions or causes of action,
assessments, liabilities, losses, costs, damages, penalties, charges or
expenses, including without limitation interest, penalties and reasonable
counsel and accountants' fees, disbursements and expenses (collectively, "Seller
Losses") arising out of, or related to any breach of any representation,
warranty, covenant or agreement (or in the case of claims made by third parties,
any claim or allegation that if true would constitute a breach of any
representation, warranty, covenant or agreement) made by Purchaser, DCX-Chol and
Chol Enterprises in this Agreement, including the Schedules and Exhibits hereto,
if any, or any other document or agreement delivered by or on behalf of
Purchaser, DCX-Chol and Chol Enterprises in connection therewith.
28
(c) Length of Indemnity Obligation of Seller and SL Industries.
The right of the Purchaser Indemnified Parties to make a claim for indemnity
under Section 8.3(a) will survive the Closing and remain in full force and
effect thereafter until the eighteen (18) month anniversary of the Closing Date,
except that any claim for indemnity arising in connection with the
representations and warranties contained in (i) Sections 3.2, 3.3, and 3.12 and
the indemnity provided in Section 8.3(a)(ii) and in connection with the
covenants contained in Section 5.6 shall survive the Closing and remain in full
force and effect thereafter until 30 days following the expiration of the
applicable statutes of limitations (including any extensions), and (ii) Section
3.16 shall survive the Closing in the cases of claims relating (x) to
Purchaser's Environmental Losses until the four (4) year anniversary of the
Closing Date, and (y) Prior Environmental Losses under the applicable statute of
limitation under the 1998 Contract; provided, however, that with respect to a
claim of actual fraud, each of the representations and warranties shall survive
until the applicable statutes of limitations for actual fraud have expired.
(d) Length of Indemnity Obligation of Purchaser. The right of the
Seller Indemnified Parties to make a claim for indemnity under Section 8.3(b)
will survive the Closing and remain in full force and effect thereafter until
the eighteen (18) month anniversary of the Closing Date; provided, however, that
with respect to a claim of actual fraud, each of the representations and
warranties shall survive until the applicable statutes of limitations for actual
fraud have expired.
(e) Indemnification Procedures.
(i) Any claim for recovery or indemnification pursuant to
Section 8.3(a) or 8.3(b) will be made promptly after discovery of
the circumstances underlying such claim in a written statement
signed by the Party seeking such recovery or indemnification, which
will specify in reasonable detail each individual item of Purchaser
Loss or Seller Loss, as the case may be, suffered by the Party
seeking recovery or indemnification and the estimated amount
thereof, the date such item was claimed or the facts giving rise to
such claim were discovered, the basis for any alleged liability and
the nature of the breach or claim to which each such item is
related.
(ii) The Party seeking indemnification for any third party
claim will give the indemnifying party(s) prompt notice of such
third party claim which might give rise to liability of the
indemnifying party(s) for indemnification hereunder. If the
indemnifying party(s) contest any third party claim, it will have
the option to defend (retaining counsel acceptable to the
indemnified party, which acceptance shall not be unreasonably
withheld or delayed), at the indemnifying party's expense, any such
matter, provided that the indemnified party will have the right, at
its own cost and expense, to participate in the defense of such
claim. However, notwithstanding the preceding sentence, (a) if the
indemnifying party elects not to defend the claim, or (b) if the
claim has been brought or asserted against the indemnifying party(s)
as well as the indemnified party and such indemnified party
reasonably concludes that there may be one or more factual or legal
defenses available to it that are in conflict with those available
to the indemnifying party(s) and the indemnifying party is unwilling
to raise such defenses, then the indemnified party may elect to
29
conduct its defense on its own behalf, in which case the reasonable
fees and expenses of the indemnified party's counsel will be at the
expense of the indemnifying party(s). In the latter event, the
indemnified party may settle such claim, after giving notice of such
proposed settlement to the indemnifying party, on such terms as the
indemnified party may reasonably deem appropriate and no such action
taken by the indemnified party in defending or settling such claim
will release the indemnifying party of any obligation hereunder.
Except under the circumstances described in the preceding sentence,
the indemnified party will not enter into any settlement agreement
without the indemnifying party's consent which will not be
unreasonably withheld or delayed. The indemnifying party(s) will
not, without the prior written consent of the indemnified party
(which will not be unreasonably withheld), enter into any settlement
of a claim, if pursuant to or as a result of such settlement,
injunctive or other equitable relief will be imposed against the
indemnified party or if such settlement does not expressly
unconditionally release the indemnified party from all liabilities
or obligations with respect to such claim, with prejudice. The
indemnified party and the indemnifying party(s) will cooperate with
the each other in the defense, compromise or settlement of any claim
for which indemnification is sought.
(f) Limitation on Indemnification Obligation.
(i) Seller, SL Industries, SL Delaware and KGH shall not be
liable, and the Purchaser Indemnified Parties agree not to enforce
any claim for indemnification until the aggregate amount of all such
claims exceeds $100,000 (the "Purchaser Threshold"); provided,
however, that once the amount of claims exceeds the Purchaser
Threshold, the Purchaser Indemnified Parties shall be entitled to
recover the entire amount from all claims in excess of $100,000. The
Purchaser, DCX-Chol and Chol Enterprises shall not be liable, and
the Seller Indemnified Parties agree not to enforce any claim for
indemnification until the aggregate amount of all such claims
exceeds $100,000 (the "Seller Threshold"); provided, however, that
once the amount of claims exceeds the Seller Threshold, the Seller
Indemnified Parties shall be entitled to recover the entire amount
from all claims in excess of $100,000. Notwithstanding anything to
the contrary contained herein, all claims for indemnity for claims
arising in connection with the representations and warranties
contained in Sections 3.2, 3.3, 3.12 and 3.16 and in connection with
the covenants contained in Section 5.6 shall not be subject to the
Purchaser Threshold or the Seller Threshold, and the party seeking
indemnity shall be entitled to recover the entire amount for all
such claims, except that, to the extent the claim for indemnity
under Section 3.16 relates to Prior Environmental Losses, the Seller
and SL Industries shall have no liability of any kind for any such
claim, and Seller's and SL Industries' sole responsibility shall be
to, in good faith, using commercially reasonable efforts, and at
their sole cost, seek to recover from Datron for such claim, to the
extent permitted under the 1998 Agreement, and to remit such funds
(net of reimbursed costs from Datron) to Purchaser upon receipt. The
total liability for Purchaser Losses by Seller or SL Industries
shall not exceed $5,000,000 in the aggregate; provided, that there
30
shall be no limit in respect of Purchaser Losses and Purchaser
Environmental Losses arising in connection with the representations
and warranties contained in Sections 3.2, 3.3, 3.12 and 3.16 and the
indemnity provided under Section 8.3(a)(ii) and in connection with
the covenants contained in Section 5.6. The total liability for
Seller Losses by Purchaser, DCX-Chol and Chol Industries shall not
exceed $5,000,000 in the aggregate.
(ii) Each party hereto shall use commercially reasonable
efforts to recover Purchaser Losses or Seller Losses, as the case
may be ("Damages") under all applicable insurance policies and from
all third parties prior to seeking recovery pursuant to this Article
8 and the amount of any Damages for which a party may be indemnified
under Article 8 shall be reduced by any such recovery. If a Seller
Indemnified Party or a Purchaser Indemnified Party, as the case may
be, recovers insurance proceeds after recovering any Damages
pursuant to this Article 8, then such party shall promptly remit to
the Seller Indemnifying Parties or the Purchaser Indemnifying
Parties, as the case may be (the "Indemnifying Party") that paid
such indemnification hereunder the amount of such insurance proceeds
to the extent the insurance proceeds together with the amount paid
by the Indemnifying Party exceeds the amount of the Damages up to
the amount of the indemnification for Damages that was paid by the
Indemnifying Party hereunder.
(g) Purchaser's Right of Offset. Notwithstanding anything to the
contrary contained in this Agreement or the other Transaction Documents, the
Purchaser, DCX-Chol and Chol Enterprises shall have the right to offset any
Purchaser Losses arising in connection with the representations and warranties
set forth in Section 3.12 against any amounts payable under the terms of the
Unsecured Note. Purchaser shall provide written notice to Seller at least two
(2) days prior to the date of such offset (the "Notice of Offset"). Under no
circumstances shall any amounts, including without limitation Purchaser Losses,
be offset against any amounts payable under the terms of the Secured Note.
ARTICLE IX
MISCELLANEOUS
9.1. Amendment and Modifications. This Agreement may be amended,
modified or supplemented at any time by the Parties. This Agreement may be
amended only by an instrument in writing signed on behalf of all Parties.
9.2. Extension; Waiver. At any time prior to the Closing, the
Parties entitled to the benefits of the respective term or provision may (i)
extend the time for the performance of any of the obligations or other acts of
the other Parties, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing delivered
pursuant hereto or (iii) waive compliance with any obligation, covenant,
agreement or condition contained herein in order to effectuate the Closing. Any
agreement on the part of any Party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of the
Parties entitled to the benefits of such extended or waived term or provision,
and no such extension or waiver shall be deemed to be a waiver or release of any
31
losses or damages (including Purchaser Indemnified Losses or Seller Indemnified
Losses) that the extending or waiving Party may incur as a result of any
underlying breach or failure that was extended or waived in order to effectuate
the Closing. No failure or delay by any Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law.
9.3. Entire Agreement; Assignment. This Agreement and the other
Transaction Documents (a) constitute the entire agreements among the Parties
with respect to the subject matter hereof and thereof and supersedes all other
prior agreements and understandings, both written and oral, among the Parties or
any of them with respect to the subject matter hereof and (b) shall not be
assigned by operation of law or otherwise. Notwithstanding the foregoing,
Purchaser, DCX-Chol and Chol Enterprises may assign their rights under this
Agreement to an Affiliate or Affiliates after the Closing in connection with a
transfer of the Purchased Shares to such Affiliate or Affiliates, in which case
the representations, warranties, indemnities, covenants and other obligations of
Seller, SL Industries, SL Delaware and KGH hereunder and under the Transaction
Documents shall inure to the benefit of such Affiliate or Affiliates.
9.4. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
9.5. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally, sent by facsimile (which is confirmed during
a Business Day between the hours of 8:00 am and 6:00 pm), one day following
being sent by overnight courier or five days following being sent by registered
or certified mail (postage prepaid, return receipt requested) to the Parties at
the following addresses:
If to the Purchaser, DCX-Chol or Chol Enterprises, to:
c/o DCX-Chol Enterprises, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Silver & ▇▇▇▇▇▇▇▇, APLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Perry Silver, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
32
If to Seller, SL Industries, SL Delaware or KGH, to:
Seller
c/o SL Industries, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the Person to whom notice is given may
have previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
9.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof, or, in the event that the court of competent jurisdiction does not
apply the laws of the State of Delaware, then this Agreement shall be governed
by and construed in accordance with the laws of the State of California.
9.7. [Intentionally Left Blank]
9.8. Jurisdiction; Forum. (a) By the execution and delivery of this
Agreement, the Parties hereto submit to the personal jurisdiction of any state
or federal court in the State of California in any suit or proceeding arising
out of or relating to this Agreement, except as otherwise provided in the
Secured Note, the Unsecured Note and the Guaranty.
(b) The Parties agree that the appropriate and exclusive forum
for any disputes between any of the Parties arising out of this Agreement or the
transactions contemplated hereby shall be in any state or Federal court in the
State of California. The Parties further agree that the Parties will not bring
suit with respect to any disputes arising out of this Agreement or the
transactions contemplated hereby in any court or jurisdiction other than the
above specified courts; provided, however, that the foregoing shall not limit
the rights of the Parties to obtain execution of judgment in any other
jurisdiction. The Parties further agree, to the extent permitted by law, that
final and unappealable judgment against a Party in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of such judgment.
33
9.9. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
9.10. Counterparts. This Agreement and the other Transaction
Documents may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one and the same
agreement.
9.11. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, and except as otherwise expressly set forth herein,
all legal and other costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the Party incurring
such expenses. All expenses incurred in Germany in connection with the
Transaction Documents and the transactions contemplated therein, such as notary
fees, sales, use, transfer, real estate, recording, stamp and other taxes,
duties or fees shall be paid equally by Purchaser and Seller. Seller and SL
Industries shall use their own funds and not the funds or properties of any EME
Entity to pay for any of expenses referred to in this Section 9.11.
9.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each Party and its respective successors and
assigns and, except as set forth in herein, nothing in this Agreement, express
or implied, is intended by or shall confer upon any other Person or Persons any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
9.13. Attorneys' Fees. If any legal action or any arbitration or
other proceeding is brought either for enforcement of this Agreement or the
other Transaction Documents, or because of an alleged dispute, breach, default,
or material misrepresentation in connection with any of the provisions of the
this Agreement or the other Transaction Documents, the prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which such party may be
entitled.
9.14. Interpretation. No reference in this Agreement to "best
efforts" or "all reasonable efforts" shall require a Person obligated to use
such efforts to incur unreasonable out-of-pocket expenses or indebtedness or,
except as expressly provided herein, to institute litigation or to consent
generally to service of process in any jurisdiction. All references to "dollars"
or "$" herein refer to United States dollars. All references in this Agreement
to Exhibits, Schedules, Articles, Sections, subsections, or other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections,
and other subdivisions of this Agreement unless expressly provided otherwise.
The words "this Agreement," "herein," "hereby," "hereunder," and "hereof," and
words of similar import, refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The words "this Section,"
"this subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "including" (in its
various forms) means "including without limitation" and the word "or" is not
exclusive. Pronouns in masculine, feminine, or neuter genders shall be construed
to state and include any other gender and words, terms, and titles (including
terms defined herein) in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise expressly requires.
34
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
PURCHASER:
DCX-CHOL HOLDING GMBH
By:______________________________
Name:
Title:
DCX-CHOL:
DCX-Chol Enterprises, Inc.
By:______________________________
Name:
Title:
CHOL ENTERPRISES
Chol Enterprises, Inc.
By:______________________________
Name:
Title:
SELLER:
SL INDUSTRIES VERTRIEB GMBH
By:______________________________
Name:
Title:
SL INDUSTRIES:
SL INDUSTRIES, INC.
By:______________________________
Name:
Title:
S-1
