General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13D Brown & Sharpe Manufacturing Company 12 42K
2: EX-1 Underwriting Agreement 1 7K
3: EX-2 Plan of Acquisition, Reorganization, Arrangement, 75 242K
Liquidation or Succession
4: EX-3 Articles of Incorporation/Organization or By-Laws 30 114K
5: EX-4 Instrument Defining the Rights of Security Holders 3 11K
6: EX-5 Opinion re: Legality 11 39K
7: EX-6 Opinion re: Discount on Capital Shares 10 34K
EX-2 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Exhibit Table of Contents
Exhibit 2
ACQUISITION AGREEMENT
Dated as of June 10, 1994
BETWEEN
BROWN & SHARPE MANUFACTURING COMPANY
AND
FINMECCANICA S.P.A.
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT made as of June 10, 1994 (this
"Agreement") by and between Brown & Sharpe Manufacturing Company,
a Delaware corporation with its principal offices at 200
Frenchtown Road, Precision Park, North Kingstown, Rhode Island
02852 U.S.A. ("Brown & Sharpe") and Finmeccanica S.p.A., an
Italian corporation, operating through its Elsag Bailey division,
with offices at Via Puccini, 2, 16154 Genoa, Italy
("Finmeccanica").
WHEREAS, Brown & Sharpe and Finmeccanica have agreed to
combine the DEA Business with the Brown & Sharpe business upon
the terms and conditions set forth below, intending thereby to
expand the combined business line of CMM (as defined below)
products, strengthen CMM distribution capability worldwide,
augment its R&D capabilities, and provide for other synergies.
WHEREAS, Finmeccanica, through its direct and indirect
ownership of all of the issued and outstanding shares of capital
stock of DEA S.p.A., an Italian corporation (the "Company"), and
the other DEA companies listed in Annex A attached hereto
(collectively, the "DEA Companies or sometimes "the Company and
its Subsidiaries") is engaged in the design, engineering,
development, testing, manufacture, sale and servicing of
coordinate measuring machines ("CMMs") and parts and accessories
therefor (the "DEA Business");
WHEREAS, Brown & Sharpe and certain of its subsidiaries
(collectively, the "B&S Subsidiaries") are engaged in the design,
engineering, development, testing, manufacture, sale and
servicing of CMMs and other metrology products (the "B&S
Business");
NOW THEREFORE, and in consideration of the respective
covenants and conditions herein contained, Finmeccanica and Brown
& Sharpe hereby agree as follows:
1. Acquisition of the DEA Shares by Brown & Sharpe on the
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Closing Date.
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1.1 Purchase and Sale of the DEA Shares. Finmeccanica
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agrees to sell and transfer to Brown & Sharpe (or, at the option
of Brown & Sharpe, to one or more wholly owned subsidiaries of
Brown & Sharpe designated by Brown & Sharpe (its "designee" or
"designees")) at the Closing (as defined in Section 2), and Brown
& Sharpe agrees to purchase (or cause its designee or designees
to purchase) from Finmeccanica at the Closing, all of the issued
and outstanding shares of capital stock of the Company (the "DEA
Shares").
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1.2 Purchase Price for the DEA Shares. In consideration of
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the assignment, transfer, conveyance and delivery by Finmeccanica
of the DEA Shares to Brown & Sharpe (or its designee or
designees) and of the other agreements of Finmeccanica stated
herein, Brown & Sharpe (or its designees) will pay and
Finmeccanica will receive the purchase price for the DEA Shares
determined in accordance with Section 1.3 below.
1.3 Elements of the Purchase Price. Subject to the Post-
------------------------------
Closing Purchase Price Adjustment as described in Section 1.4,
the purchase price for the DEA Shares (the "Purchase Price")
shall be 3,450,000 shares of Class A Common Stock, $1.00 par
value per share (the "Brown & Sharpe Purchase Price Shares" which
term shall also include any additional shares of Class A Common
Stock of Brown & Sharpe issued to Finmeccanica pursuant to the
Post-Closing Purchase Price Adjustment referred to in Section 1.4
below).
1.3A Aggregate Permitted Indebtedness. As of July 31, 1994
--------------------------------
(the "Pricing Date"), the amount of Indebtedness (as defined
herein) which shall be reflected on the books of the Company and
its Subsidiaries shall be the sum of (w) 8,000 Million Italian
Lire ("Lit.") denominated Indebtedness ("Lit. Debt"), plus (x)
----
$9,897,960 U.S. Dollar denominated Indebtedness ("U.S. Debt"),
plus (y) the aggregate amount of the Company's and its
----
Subsidiaries' cash and cash equivalents in excess of Lit. 800
Million, minus (z) the amount of the accrual for TFR Liabilities
-----
of the Company and the Subsidiaries attributable to CIGS
Employees reflected on and as of the date of the Pricing Balance
Sheet, but not to exceed Lit. 1,700 Million ("Aggregate Permitted
Indebtedness"); such amount of TFR Liabilities shall first reduce
short term Lit. Debt to the maximum extent possible and then to
the extent short term Lit. Debt cannot be reduced by such amount,
U.S. Debt converted at the U.S. Dollar/Lit. exchange rate in
effect on the business day immediately preceding July 31, 1994 as
published in SOLE 24 ORE. "Indebtedness" shall mean amounts
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classified on the Pricing Balance Sheet (as such term is defined
in Section 1.4(c) below) as borrowings, including short-term
debt, current maturities of debt, long term debt and payables
(other than payables for goods or services) of the DEA Companies
to Finmeccanica (including its Elsag Bailey division and its
subsidiaries).
1.4 Post-Closing Purchase Price Adjustment.
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(a) For purposes of this Agreement and of calculating the
Post-Closing Purchase Price Adjustment, based on the Pricing
Balance Sheet as of July 31, 1994, the following terms shall have
the meanings ascribed to them below:
"Adjusted Net Asset Value" of the DEA Companies shall mean
an amount determined, as the case may be, by reference to the
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audited combined balance sheets of the DEA Companies at the
relevant balance sheet dates (June 30, 1993 or the Pricing Date),
equal to:
(i) the total assets (excluding cash and cash equivalents)
of the DEA Companies as shown on and as of the date of the
relevant balance sheet; minus
-----
(ii) the total liabilities of the DEA Companies as shown on
and as of the date of the relevant balance sheet, other than
amounts classified on the balance sheet of the DEA Companies
as of such relevant balance sheet date as Indebtedness; plus
----
(iii) the accrual for TFR Liabilities of the Company and
the Subsidiaries attributable to CIGS Employees shown on and
as of the date of the relevant balance sheet in the amount
of Lit. 1,700 Million as of the Pricing Date and Lit. 1,700
million as of June 30, 1993; plus.
----
(iv) solely with respect to the June 30, 1993 DEA Financial
Statements, the net accrual of Lit. 2,019 million for INPS
liability for terminated employees reflected on such
financial statements.
"CIGS Employees" shall mean, as of the relevant balance
sheet date, any and all employees of the Company and the
Subsidiaries that are, or have been in the past, placed in Cassa
Integrazione Guadagni Straordinaria and/or in the solidarity
system and/or in any temporary or definitive lay-off plan other
than (i) those employees who have been terminated with all TFR
Liabilities on account thereof having been paid in full and no
accrual in respect thereof is recorded on the books of the
Company or any Subsidiary, and (ii) those employees who have been
recalled to full-time active employment by the Company or any of
its Subsidiaries.
"TFR Liabilities" shall mean T.F.R. "trattamento di fine
rapporto" severance pay liabilities of the Company and the
Subsidiaries accrued as of the relevant balance sheet dates.
"Pricing Adjusted Net Asset Value" shall mean an amount
equal to the Adjusted Net Asset Value determined by reference to
the Pricing Balance Sheet (as herein defined), plus either (A)
----
Lit. 3.4 Billion which amount is equal to the aggregate amount of
the understatement of the provision for excess, slow moving and
obsolete inventory and the provision for warranty costs
identified in the report of RE&Y (as defined below) to the
December 31, 1993 DEA Financial Statements if such reserves have
been charged to the inventory account and charged as a warranty
liability on the Pricing Balance Sheet or (B) zero if there has
been no change in the accounting methodology for excess, slow
moving and obsolete inventory or warranty costs, i.e., no such
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charge or change in warranty costs is reflected in the Pricing
Balance Sheet. Any unrealized loss or gain on foreign currency
exchange with respect to Indebtedness (which was, by way of
reference, Lit 1.19 Billion on June 30, 1993) shall be assumed to
be zero in the Pricing Balance Sheet for purposes of the pricing
adjustments made pursuant to this Section 1.
"June 30, 1993 Adjusted Net Asset Value" shall mean an
amount equal to Lit. 112,551 Billion.
(b) Finmeccanica represents and warrants to Brown & Sharpe
that attached hereto as Schedule 1.4(b), is a true and accurate
list of all employees of the Company and its Subsidiaries who are
on CIGS on the date hereof; no additional employees will be on
CIGS at the Pricing Date or the Closing Date. In connection with
such Schedule, Finmeccanica represents and warrants to Brown &
Sharpe that (i) other than the 77 employees on CIGS (as set forth
on the Schedule), no Employee is on the date hereof, or as of the
Pricing Date or the Closing Date will be, on the solidarity
system, the mobilita system or on any temporary or definitive
layoff system, nor has any of such 77 employees on CIGS been
recalled to full employment and active work by the Company or any
Subsidiary, except in each case with the consent of Brown &
Sharpe, and (ii) except to the extent required by the Verbale di
Accordo dated June 15, 1993 among the Company, INTERSIND, FIOM-
CGIL, FIM-CISL, UILM-UIL and RSA-DEA no commitment has been or
will have been made on or prior to the Pricing Date or the
Closing Date with respect to any CIGS Employees being placed on
the solidarity system or the mobilita system or being recalled to
full employment and active work by the Company or any Subsidiary,
except that with regard to (i) and (ii) above, not more than five
employees in the aggregate may be recalled to full employment to
replace vacancies in the Company's existing work force, and for
each employee recalled from CIGS, another employee can be put on
CIGS so that the number of employees on CIGS never exceeds 77
employees.
(c) Subsequent to the Closing, Finmeccanica will cause
combined financial statements of the DEA Companies (consisting of
a balance sheet as of the Pricing Date (the "Pricing Balance
Sheet") and the related income statement, statement of
stockholder's equity and statement of cash flows for the period
January 1, 1994 through July 31, 1994, the Pricing Date, together
with notes thereto (hereinafter the "Pricing Financial
Statements", or sometimes the "Closing Financial Statements")
prepared by the Company to be audited and certified by Reconta
Ernst & Young ("RE&Y") and delivered to the parties within 75
days after the Closing Date. The scope of the audit will be
consistent with the scope used in the audits of the December 31,
1992 and 1993 and June 30, 1993 DEA Financial Statements. Brown
& Sharpe will cause the DEA Companies to furnish to Finmeccanica
and RE&Y such assistance in the preparation of the Pricing
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Financial Statements and their certification as they shall
reasonably request, including making available at no cost to
Finmeccanica all books and records pertinent thereto and
employees of the DEA Companies customarily involved in the
preparation of the DEA financial statements. Such employees may
be requested by Finmeccanica and under Finmeccanica's supervision
to prepare the Pricing Financial Statements and to perform other
tasks with respect thereto which shall generally be consistent
with tasks performed by such employees prior to the Closing Date.
These employees will prepare the Pricing Financial Statements
using the same accounting principles and accounting policies and
methodologies (including those policies attached as Annex C and
referred to below) used in the December 31, 1992 and 1993 and
June 30, 1993 DEA Financial Statements, consistently applied,
except to the extent that those accounting principles and
methodologies applicable to the provision for warranty costs and
the provision for slow moving and obsolete inventories, as
applied to the Pricing Financial Statements, may be provided for
in accordance with Italian GAAP or, in the absence thereof, IASC
GAAP (each as defined below), thereby eliminating the
understatement for warranty costs and overstatement of inventory
values as indicated in the report of RE&Y to the audited combined
financial statements for the Company and its Subsidiaries for the
periods ending December 31, 1993 and 1992 and June 30, 1993.
Finmeccanica has previously delivered to Brown & Sharpe and
C&L descriptions of the accounting principles and methodologies
used in the preparation of such financial statements with regard
to revenue recognition, accounts receivable reserves and related
receivables credit policy, excess and obsolete inventory and
warranty policy which are attached as Annex C hereto.
(d) The Pricing Financial Statements shall be denominated
in Italian Lire and shall fairly present, in conformity with
generally accepted Italian accounting principles (hereinafter
"Italian GAAP") or, in the absence thereof, accounting principles
recommended by the International Accounting Standards Committee
("IASC") (hereinafter "IASC GAAP") (except to the extent that an
increase of Lit. 2,800 Million to the reserve for excess, slow-
moving and obsolete inventory and a provision of Lit. 600 Million
for warranty costs may not be reflected in the Pricing Balance
Sheet) on a basis consistent with the December 31, 1992 and 1993
and June 30, 1993 DEA Financial Statements and the methodologies
described in Annex C, in all material respects the combined
financial position of the DEA Companies as of the Pricing Date
and the results of operations, changes in stockholder's equity
and cash flows during the period covered thereby. The amount on
the Pricing Balance Sheet for TFR Liability shall reflect an
accrual in respect of the number of CIGS Employees at the Pricing
Balance Sheet date, which accrual shall be calculated utilizing
the same methodology used in the December 31, 1993 and June 30,
1993 DEA Financial Statements for determining TFR Liability for
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CIGS Employees, consistently applied. The Closing Financial
Statements shall be accompanied by certificates of the Chief
Financial Officer of Elsag Bailey S.p.A., a subsidiary of
Finmeccanica as to the compliance with the provisions of this
Section 1.4(d) and the auditor's report of RE&Y.
(e) Although it is not to be a joint audit, Coopers &
Lybrand ("C&L") and Brown & Sharpe's accounting staff shall be
permitted access to work papers supporting specific audit areas
when completed and reviewed by the RE&Y engagement partner in
each respective country and will be allowed to observe any
physical counts and similar procedures RE&Y may conduct during
the audit. RE&Y will not be required to address, prior to
certification, any C&L and/or Brown & Sharpe accounting staff's
questions concerning the working papers. C&L will not in any way
interfere with the timely and efficient completion of the audit.
In addition, RE&Y and C&L will meet and agree with each other on
the scope and procedures for the audit.
(f) Within 30 days of Brown & Sharpe's receipt of the
Pricing Balance Sheet, Brown & Sharpe shall inform Finmeccanica
if Brown & Sharpe does not agree with the amounts contained in
such Pricing Balance Sheet, and, in the absence of such
notification, such Pricing Balance Sheet shall become final and
binding upon Brown & Sharpe and Finmeccanica at the expiration of
such 30 day period. If Brown & Sharpe gives such notification to
Finmeccanica, Brown & Sharpe and Finmeccanica shall promptly meet
in an effort to resolve any differences. In the event any
differences remain 30 days after Finmeccanica's receipt of such
notification by Brown & Sharpe, Brown & Sharpe and Finmeccanica
shall refer the question to their respective independent public
accountants which shall attempt to resolve such differences and
whose determination shall be final and binding upon Brown &
Sharpe and Finmeccanica. If such independent public accountants
are themselves unable to resolve any differences, they shall
refer such differences to a third firm of independent public
accountants selected by lot from among such of the "Big Six"
accounting firms (or their successors) as are not the past or
then current principal auditors of Finmeccanica and Brown &
Sharpe, whose determination of the Pricing Balance Sheet shall be
final and binding upon Brown & Sharpe and Finmeccanica. Such
accounting firm shall make its determination within sixty (60)
days after the referral. Each party shall bear the cost of its
own employees and independent accountants and shall share equally
the cost of any third firm of independent public accountants in
connection with such determination.
(g) The Purchase Price shall be adjusted as follows:
(i)(A) If the Pricing Adjusted Net Asset Value as of July
31, 1994 is greater than the June 30, 1993 Adjusted Net
Asset Value by an amount which, after netting the amounts
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required pursuant to Clauses (iii), A(i), A(ii) and A(iii)
below, is greater than Lit. 800 Million (the "Basket"), then
Brown & Sharpe shall issue an additional number of shares of
its Class A Common Stock with a value (as determined by the
average of the Closing Prices of such shares on the Listing
Exchange over a thirty day period immediately preceding the
Closing Date) equal to the amount by which the Pricing
Adjusted Net Asset Value exceeds the June 30, 1993 Adjusted
Net Asset Value after netting the amounts referred to in
Clauses (iii), A(i), A(ii) and A(iii) below ("Purchase Price
Increase").
(i)(B) If the Pricing Adjusted Net Asset Value as of July
31, 1994 is less than the June 30, 1993 Adjusted Net Asset
Value by an amount which, after netting the amounts required
pursuant to Clauses (iii), B(i), B(ii) and B(iii) below, is
greater than the Basket, then Finmeccanica shall contribute
cash to the capital of Brown & Sharpe (without receiving
shares therefor) in an amount equal to the amount of the
difference between the Pricing Adjusted Net Asset Value and
the June 30, 1993 Adjusted Net Asset Value after netting the
amounts referred to in Clauses (iii), B(i), B(ii) and B(iii)
below ("Purchase Price Decrease").
(ii) If the Pricing Adjusted Net Asset Value is less than or
more than the June 30, 1993 Adjusted Net Asset Value by an
amount which, after netting the amounts referred to in the
clauses set forth in (iii)(A) and (iii)(B) below, is, in
either case, less than or equal to the Basket, no adjustment
shall be made pursuant to Clause (i)(A) or (i)(B).
(iii) Any Post-Closing Purchase Price Adjustment required to
be made pursuant to Sections 1.4(g)(i)(A) or (B) above shall
be calculated by netting against the amount by which Actual
Excess Indebtedness as of July 31, 1994 is greater than or
less than Estimated Excess Indebtedness as of July 31, 1994.
(A)(i) In the event an adjustment is required to be made
pursuant to Section 1.4(g)(i)(A) above, the amount
of the Purchase Price Increase shall be netted
against the amount by which Actual Excess
Indebtedness is greater than Estimated Excess
Indebtedness. (As a result, the number of shares
of Brown & Sharpe's Class A Common Stock to be
issued to Finmeccanica pursuant to Section
1.4(g)(i)(A) shall be reduced by the difference
between Actual Excess Indebtedness and Estimated
Excess Indebtedness.)
(A)(ii) In the event an adjustment is required to be made
pursuant to Section 4(g)(i)(A) above, and if the
amount by which Actual Excess Indebtedness exceeds
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Estimated Excess Indebtedness is greater than or
equal to the Purchase Price Increase (the
"difference") under Section 1.4(g)(i)(A), then no
shares shall be issued by Brown & Sharpe to
Finmeccanica, and Finmeccanica will contribute
cash to Brown & Sharpe in an amount equal to such
difference.
(A)(iii) In the event an adjustment is required to be made
pursuant to Section 1.4(g)(i)(A) above, and if
Actual Excess Indebtedness is less than Estimated
Excess Indebtedness, Brown & Sharpe shall issue to
Finmeccanica shares of stock in an amount equal to
the sum of (1) the amount of the Purchase Price
Increase and (2) the difference between Estimated
Excess Indebtedness and Actual Excess
Indebtedness.
(B)(i) In the event that an adjustment is required to be
made pursuant to Section 1.4(g)(i)(B) above, the
amount of the Purchase Price Decrease shall be
netted against the amount by which Actual Excess
Indebtedness is less than Estimated Excess
Indebtedness, and the amount of cash contributed
to Brown & Sharpe by Finmeccanica under Section
1.4(g)(i)(B) shall be reduced by an amount equal
to the difference between (1) the shortfall
between Actual Excess Indebtedness and Estimated
Excess Indebtedness and (2) the Purchase Price
Decrease.
(B)(ii) In the event an adjustment is required to be made
pursuant to Section 1.4(g)(i)(B) above, and if the
amount by which Actual Excess Indebtedness is less
than Estimated Excess Indebtedness exceeds the
Purchase Price Decrease, then Brown & Sharpe will
issue shares to Finmeccanica in an amount equal to
such difference.
(B)(iii) In the event that an adjustment is required to be
made pursuant to Section 1.4(g)(i)(B) above, and
the Actual Excess Indebtedness is greater than the
Estimated Excess Indebtedness, Finmeccanica will
contribute cash to Brown & Sharpe in an amount
equal to the sum of (1) the Purchase Price
Decrease and (2) the amount by which Actual Excess
Indebtedness is greater than Estimated Excess
Indebtedness.
(h) In the event of any Post-Closing Purchase Price
Adjustment pursuant to all of the provisions of 1.4(g) (after
taking into account by netting any adjustment required because
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Actual Excess Indebtedness as of July 31, 1994 is more or less
than Estimated Excess Indebtedness as of July 31, 1994), (a) the
delivery of a certificate or certificates representing additional
Brown & Sharpe Purchase Price Shares to Finmeccanica or (b) the
payment of cash by Finmeccanica to Brown & Sharpe (as a
contribution to capital, without the receipt of any additional
shares of stock) shall take place within ten days following
acceptance (or final determination) under Section 1.4(f) of the
Pricing Balance Sheet. Any certificates representing additional
Brown & Sharpe Purchase Price Shares shall bear legends as
required by Section 2.2 hereof.
(i) Not less than ten (10) days prior to July 31, 1994,
Finmeccanica shall cause to be delivered to Brown & Sharpe an
estimated unaudited combined balance sheet of the DEA Companies
as of the July 31, 1994 Pricing Date ("Forecasted Pricing Balance
Sheet"). The Forecasted Pricing Balance Sheet shall be
denominated in Lit. and shall be prepared by the chief financial
officer of the Elsag Bailey division of Finmeccanica to the
extent practicable on a basis consistent with the December 31,
1993 and the June 30, 1993 combined balance sheets included in
the DEA Financial Statements (except for such changes as are
necessary to comply with the provisions hereof).
(j) The parties agree that, prior to July 31, 1994, if the
Pricing Adjusted Net Asset Value (as computed based on the
Forecasted Pricing Balance Sheet) is or may be, depending on
certain contingencies, greater than the June 30, 1993 Adjusted
Net Asset Value without regard to the Basket, Finmeccanica shall
cause the Company and/or its Subsidiaries to factor on
commercially reasonable terms and at market rates, without
recourse, an amount, which shall be mutually agreed between the
parties, of the receivables then on the books of the Company and
its Subsidiaries. Any differential between the cash received and
the face amount of such receivables (net of any reserves in
respect thereto), as reflected on the Forecasted Pricing Balance
Sheet, shall be added to the Pricing Adjusted Net Asset Value and
the face amount (net of reserve) of the receivables factored
shall be subtracted from the Pricing Adjusted Net Asset Value and
the term Forecasted Pricing Balance Sheet shall thereafter
include the results of such factoring transactions.
2. Closing. The acquisition of the DEA Shares by Brown & Sharpe
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or its designee(s) from Finmeccanica in exchange for the Purchase
Price and the consummation of the transactions contemplated by
this Agreement (the "Closing") shall be held at 12:00 P.M. at the
offices of Ropes & Gray, One International Place, Boston,
Massachusetts, 02110 U.S.A. on the date of the Special Meeting of
Stockholders of Brown & Sharpe relating to the transactions
contemplated hereby (the "Closing Date"), or at such other time
and place as the parties may agree in writing. It is understood,
however, that July 31, 1994 is the "Pricing Date" and that the
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parties are using a July 31, 1994 Pricing Balance Sheet as
distinguished from a balance sheet dated as of the actual Closing
for various purposes under this Agreement, including purchase
price adjustment.
At the Closing:
2.1 Delivery and Recordation of the DEA Shares by
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Finmeccanica. Finmeccanica will deliver to Brown & Sharpe (or
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one or more of its designees) certificates representing the DEA
Shares, duly endorsed with authenticated signature, in proper
form for transfer and will cause upon said delivery the due
recordation of such transfer of such DEA Shares on the stock
ledger book of the Company as required to vest in Brown & Sharpe
(or its designee) all of the right, title and interest in the DEA
Shares.
2.2 Payment to Finmeccanica. Brown & Sharpe (or its
-----------------------
designee) will deliver to Finmeccanica a certificate or
certificates representing 3,450,000 of the Brown & Sharpe
Purchase Price Shares, which shall in each case bear a legend
referencing the investment representation in Section 3.20 and the
restrictions and provisions of the Stockholders Agreement
referred to below.
2.3 Stockholders Agreement. Finmeccanica and Brown &
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Sharpe shall execute and deliver a Stockholders Agreement
providing for the election of directors of Brown & Sharpe,
restrictions on transfer, sale of or other disposition of the
Brown & Sharpe Purchase Price Shares issued or to be issued to
Finmeccanica and registration and pro rata securities purchase
rights, in substantially the form of Exhibit 2.3 (the
"Stockholders Agreement").
It is expressly understood that Finmeccanica's right to
purchase a pro-rata portion of future issues of securities by
Brown & Sharpe from time to time, in order to maintain its
percentage ownership of the capital stock of Brown & Sharpe after
giving effect to the issue of stock of Brown & Sharpe at the
Closing, is an integral part of the acquisition transaction
contemplated by this Agreement. Said right is, for the
convenience of the parties, set forth in the Stockholders
Agreement to be delivered at the Closing hereunder.
2.4 [Intentionally Left Blank]
2.5 [Intentionally Left Blank]
2.6 Certificates, Opinions, etc. Each party will deliver
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to the others such certificates, opinions and other documents as
are contemplated hereby or as may reasonably be requested by the
other parties to evidence compliance with the terms of Sections 1
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and 2 and the other provisions of this Agreement, including
Sections 10 and 11.
2.7 Conduct of DEA Business Between the Pricing Date, July
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31, 1994 and the Closing. In addition to complying with the
------------------------
provisions of Section 6.1 hereof, from July 31, 1994 (the date of
the Pricing Balance Sheet) through the Closing, subject always to
the Closing occurring, the parties further agree to cause the
Company to operate the DEA Companies as follows:
(a) Accrual of Economic Benefits From July 31, 1994 to the
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Closing Date. In view of the fact that the Post-Closing Purchase
------------
Price Adjustment will reflect the operation of the DEA Business
only through July 31, 1994, the economic risks and benefits which
derive from the DEA Business from such date through the Closing
shall accrue for the account of Brown & Sharpe, and Finmeccanica
shall, if requested by Brown & Sharpe, execute such documents and
instruments and shall take such action or refrain from taking
such action as Brown & Sharpe may reasonably request, in order to
evidence and to give effect to Brown & Sharpe's rights to such
economic risks and benefits.
(b) Operation and Management of the DEA Business after the
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Pricing Date, July 31, 1994 . Finmeccanica shall manage the DEA
----------------------------
Business for the benefit of Brown & Sharpe in accordance with
this Section 2.7. Except to the extent of cash and cash
equivalents shown on the Pricing Balance Sheet (less Lit. 800
Million), the DEA Companies shall not use any of their cash or
other assets to pay any principal, interest or other charges in
connection with Indebtedness existing as of the close of business
on the Pricing Date, July 31, 1994, in excess of Aggregate
Permitted Indebtedness; nor shall any such principal, interest or
other charges be charged to or in any way become the
responsibility of the DEA Companies. The DEA Companies shall,
however, be responsible for and make all accruals and payments
required in connection with principal, interest and other charges
in connection with new borrowings or incremental utilization of
existing lines of credit after July 31, 1994. Finmeccanica shall
not permit any cash or other assets to be transferred out of the
DEA Companies by way of a dividend or distribution or in any
other manner to Finmeccanica or any affiliate thereof, except
that the DEA Companies may pay trade payables in the ordinary
course of the conduct of the DEA Business, consistent with past
practice; nor shall the DEA Companies forgive or compromise any
amount owed to them by Finmeccanica or any affiliate thereof (or
any amount owed to a third party without the consent of Brown &
Sharpe). Finmeccanica shall not be required to fund, contribute
to the assets of or otherwise make any commitments or guarantees
with respect to any action taken or proposed to be taken by the
DEA Business unless specifically consented to and indemnified by
Brown & Sharpe. Finmeccanica shall be entitled to rely on any
written instruction as to the operation of the DEA Business given
-11-
by Brown & Sharpe, shall not be liable for any failure to act or
for action it takes pursuant to such written instruction and
shall be promptly indemnified by Brown & Sharpe for any "damages"
(as defined in Section 8.5) arising from such reliance, inaction
or action, except that Finmeccanica shall be liable to Brown &
Sharpe for any damages resulting from any negligence on
Finmeccanica's part in failing to act or not to act in accordance
with such written instructions from Brown & Sharpe, or failing to
refrain from acting, in each case, in accordance with such
written instructions from Brown & Sharpe.
3. Representations and Warranties by Finmeccanica. Finmeccanica
----------------------------------------------
represents and warrants to Brown & Sharpe (and its designee(s))
as to the matters set forth in this Section 3. For purposes of
this Section 3, the term "best knowledge of Finmeccanica" shall
mean the actual knowledge of the Chief Financial Officer and
Chief Legal Officer the Elsag Bailey division of Finmeccanica,
the Managing Director, Chief Financial Officer, and Director of
Sales and Marketing of DEA SpA and the general manager of each
DEA Company and branch other than DEA SpA and (solely as to the
matters covered by Section 3.12) the Director of Product
Development of DEA SpA.
3.1 Corporate Status. The Company is a corporation duly
----------------
organized, validly existing and in good standing under the laws
of the Republic of Italy and has all necessary corporate power
and authority to carry on the DEA Business as now conducted and
as proposed to be conducted. The Company has delivered to Brown
& Sharpe a complete and correct copy of its charter and by-laws,
each as amended to date and all minutes of meetings of its
stockholders and directors since January 1, 1991. On the Closing
Date Finmeccanica will have delivered to Brown & Sharpe or to the
possession of DEA all other minutes of meetings of stockholders
and directors and all other corporate records of DEA and its
subsidiaries (or branches). Finmeccanica is a corporation duly
organized, validly existing and in good standing under the laws
of the Republic of Italy and has all necessary corporate power
and authority to carry on its business.
Except as set forth in Schedule 3.1, the assets of the DEA
Companies constitute all of the property and property rights
(including contract rights) used in the conduct of the DEA
Business in the manner and to the extent presently conducted and
conducted since June 30, 1993 except for incidental changes in
such items in the ordinary course of business. Finmeccanica is
not engaged in any aspect of the manufacture and sale of CMM's
except through the DEA Companies.
3.2 Capitalization and Ownership of the DEA Shares. The
----------------------------------------------
authorized and issued share capital of the Company consists of
16,300,000 shares of common stock, nominal value Lit. 1,000 per
share (the "Company Common Stock" or the "DEA Shares").
-12-
Finmeccanica owns of record and beneficially all of the issued
and outstanding Company Common Stock, free and clear of all
liens, claims, charges, encumbrances and restrictions
("Encumbrances"). No other person or entity has or shares any
direct or indirect interest or right with respect to the DEA
Shares. The DEA Shares have been duly authorized and validly
issued and are fully paid and nonassessable. There are no
preemptive rights or rights of first refusal on the part of any
holder of any class of securities of the Company or any other
person. There are no options, warrants, conversion or other
rights, agreements or commitments of any kind obligating the
Company, contingently or otherwise, to issue or sell any shares
of its capital stock of any class or any securities convertible
into or exchangeable for any such shares, and no authorization
therefore has been given. Finmeccanica has full right, power and
authority to transfer the DEA Shares to Brown & Sharpe and/or its
designees, free and clear of any Encumbrances, and such transfer
will not constitute a breach or violation of, or a default under,
any agreement or instrument by which Finmeccanica is bound.
3.3 Subsidiaries. The DEA Companies listed on Annex A,
------------
other than the Company (each, a "Subsidiary and, collectively,
the "Subsidiaries"), are the only corporations, associations,
partnerships or other entities or business enterprises in which
the Company has any investment or owns any shares of capital
stock or any other record or beneficial equity or other ownership
or control interest. Except as set forth on Schedule 3.3, the
Company owns or is sole beneficiary of all of the issued and
outstanding stock options, warrants, rights or commitments,
relating to the issuance of any shares of capital stock of or
equity interests in the Subsidiaries. Each Subsidiary is a duly
organized, validly existing corporation in good standing under
the laws of its jurisdiction of organization and has all
necessary power and authority, corporate or otherwise, to carry
on its business as presently conducted and as proposed to be
conducted. The Company has delivered to Brown & Sharpe a
complete and correct copy of the organizational and governance
documents, each as amended to date, of each Subsidiary.
3.4 Authority for Agreement. Finmeccanica has all
-----------------------
necessary power and authority to execute and deliver this
Agreement and the Stockholders Agreement and to carry out its
obligations hereunder and thereunder. Each of this Agreement and
the Stockholders Agreement constitutes the valid and legally
binding obligation of Finmeccanica and is enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization or similar laws of general application affecting
the rights and remedies of creditors. The execution and delivery
of this Agreement and the Stockholders Agreement and the
consummation of any of the other transactions contemplated hereby
and thereby will not conflict with, or result in any violation
of, or default with respect to, or require the consent of any
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third parties under, any mortgage, loan, indenture, lease,
agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries, or Finmeccanica. Subject to the receipt prior
to the Closing of the consents of certain of the DEA Companies'
lenders as provided in Section 10.12 below, such execution,
delivery and consummation will not accelerate the maturity of or
otherwise modify in any material respect the terms of any
indebtedness of the Company or any Subsidiary, or result in the
creation of any Encumbrance upon any of the property or assets of
the Company or any Subsidiary.
There are no agreements by which the Company or any
Subsidiary is bound which restrict the ability of the Company to
carry on the DEA Business or any other metrology business
anywhere in the world. Except as described in Schedule 3.4,
there are no agreements to which the Company or any Subsidiary is
a party which upon the consummation of the transactions
contemplated hereby create rights in any third party enforceable
against the Company or any Subsidiary as a consequence of a
change in control of the Company or any Subsidiary, and no
consent, approval, order or authorization of, recording, or
registration, declaration or filing with any governmental
authority is required in connection with the execution and
delivery of this Agreement and the Stockholders Agreement or the
consummation of any of the other transactions contemplated hereby
and thereby by the Company or Finmeccanica.
3.5 Financial Statements; Indebtedness.
----------------------------------
(a) Attached hereto as Schedule 3.5 are true and correct
copies of (i) the audited combined balance sheets of the Company
and the Subsidiaries as of December 31, 1993 and 1992 and June
30, 1993 and the related combined statements of operations,
accumulated deficit and cash flows all denominated in Lit
(together with the auditors' reports thereon, including any
exceptions noted therein) for the twelve and six month periods
then ended (excluding any non-metrology activities of any DEA
Company), together with the notes to such financial statements
(the "Audited Combined DEA Financial Statements"); (ii) the
separate audited balance sheets of each of the Subsidiaries other
than Digital Electronic Automation Company ("DEA U.S.") as of
December 31, 1993 and 1992 and June 30, 1993 and the related
statements of operations, accumulated deficit and cash flows for
the twelve and six month periods then ended, together with the
notes to such financial statement (the "Audited DEA Subsidiaries
Financial Statements"); and (iii) the audited balance sheets of
DEA U.S. as of December 31, 1993 and of the Digital Electronic
Automation division of Elsag Bailey, Inc. as of December 31, 1992
and June 30, 1993 and the related statements of operations,
divisional deficit and cash flows (together with the auditors'
-14-
reports thereon, including any exceptions noted therein) for the
twelve and six month periods then ended, together with the notes
to such financial statements (the "Audited DEA U.S. Financial
Statements") (collectively, the "DEA Financial Statements").
(b) Except as otherwise indicated in the respective reports
of auditors or in the notes thereto, all of the DEA Financial
Statements have been prepared (in the case of the Audited
Combined DEA Financial Statements) in accordance with Italian
GAAP or, in the absence thereof, with IASC GAAP or (in the case
of the Audited DEA Subsidiaries Financial Statements) in
accordance with IASC GAAP or, in the case of the U.S. entity,
United States generally accepted accounting principles ("U.S.
GAAP"), in each case consistently applied throughout the periods
indicated, and fairly present, in all material respects, the
financial condition of the DEA Companies (excluding any non-
metrology activity of any DEA Company) and the results of their
operations and cash flows as of the dates and for the periods
covered thereby, subject to the exceptions stated in the
auditor's reports included therewith.
(c) The DEA Financial Statements are in accordance with the
books and records of the DEA Companies. All material
transactions occurring during the periods covered by the DEA
Financial Statements have been disclosed in the DEA Financial
Statements to the extent required to be disclosed under the
applicable generally accepted accounting principles referred to
above.
At the Closing Finmeccanica will place in the possession of
Brown & Sharpe the books and records of the DEA Companies,
including without limitation the accounting journals and general
ledgers of the DEA Companies.
3.5.1 Terms of Indebtedness of the Company and the
--------------------------------------------
Subsidiaries on the Closing Date. The principal terms of
--------------------------------
the Aggregate Permitted Indebtedness of the Company and the
Subsidiaries which will be outstanding on the Closing Date
are set out on Schedule 3.5.1 (identifying the lender,
amount outstanding, interest rate(s) and maturity). The
Company has provided Brown & Sharpe with access to all
agreements relating to such Aggregate Permitted Indebtedness
and all copies of such agreements delivered by the Company
to Brown & Sharpe are true and correct.
3.6 Absence of Undisclosed Liabilities. Except as set
----------------------------------
forth in Schedule 3.6 and other than liabilities which have
arisen after December 31, 1993 in the ordinary course of business
and consistent with past practice, neither the Company nor any of
its Subsidiaries has any material liabilities or obligations of
any nature, whether absolute, contingent or otherwise (including
without limitation, letters of credit for the purchase of
-15-
inventory) which are required to be reflected or reserved against
in, or otherwise provided for in the notes to, the DEA Financial
Statements under Italian GAAP or, in the absence thereof, IASC
GAAP, and which are not so reflected or reserved against therein
or in the notes thereto.
3.7 Absence of Changes. Except as set forth in Schedule
------------------
3.7 since December 31, 1993, (a) there has been no material
adverse change in the condition, financial or otherwise (other
than as a result of general external economic conditions
affecting the metrology industry), properties, assets,
liabilities, business or operations of the Company and its
Subsidiaries, considered as a whole ("Material Adverse Change");
and (b) neither the Company nor any of its Subsidiaries has:
(i) declared, set aside, made or paid any dividend or
other distribution in respect of its capital stock or agreed
to do any of the foregoing, or purchased or redeemed or
agreed to purchase or redeem, directly or indirectly, any
shares of its capital stock;
(ii) issued or sold any shares of its capital stock of
any class or any options, warrants, conversion or other
rights to purchase any such shares or any securities
convertible into or exchangeable for such shares;
(iii) incurred any indebtedness for purchase money or
borrowed money other than in the ordinary course of business
consistent with past practice;
(iv) mortgaged, pledged, or subjected to any
Encumbrance, any of its properties or assets, tangible or
intangible, except Permitted Encumbrances (as defined in
Section 3.9.1);
(v) acquired or disposed of any assets or properties
in any transaction involving money or value in excess of
$25,000 with any officer, director or salaried employee of
the Company, or any Subsidiary, or any relative by blood or
marriage, or except in the ordinary course of business
acquired or disposed of any assets or properties having a
value in excess of $100,000 in any transaction with any
other person;
(vi) forgiven or canceled any debts or claims, or
waived any rights, except in the ordinary course of business
and consistent with past practices;
(vii) (A) granted to any officer, director or
consultant or to any employee whose annual compensation is,
or was during the year ended December 31, 1993, in excess of
the equivalent of $50,000, any material increase in
-16-
compensation in any form (including any material increase in
scope of any benefits), other than annual salary increases
consistent with prior practice, or (B) become subject to any
request for severance or termination pay, or granted any
severance or termination pay, or entered into any employment
or severance agreement with any officer or employee (other
than a CIGS Employee) whose annual compensation is or was
during the year ended December 31, 1993 in excess of the
equivalent of $50,000;
(viii) adopted, or amended in any material respect,
any bonus, profit-sharing, compensation, stock option,
pension, welfare, security, retirement, deferred
compensation or other material plan, agreement, trust, fund
or arrangement for the benefit of any employee or employees;
(ix) except as disclosed on Schedule 3.7 experienced
any actual or, to the best of the knowledge of the Company
and the Subsidiaries, threatened dispute with a supplier
involving more than $100,000 or with a customer involving
more than the lower of (a) $90,000 or (b) the full contract
value of the machine or other product which is the subject
of the dispute;
(x) except as disclosed on Schedule 3.7, made any
capital expenditures or commitment therefor in excess of
$250,000;
(xi) incurred any liability (absolute, accrued or
contingent) except current liabilities incurred, liabilities
under contracts entered into, borrowings under short-term
lines of credit and liabilities in respect of letters of
credit issued under credit facilities, in each case incurred
in the ordinary course of business consistent with past
practices;
(xii) suffered a loss, damage or destruction, whether
or not covered by insurance, in excess of $25,000; or
(xiii) extended or modified in any material respect
the terms or provisions of any lease of real property of the
character set forth on Schedule 3.9 or described in Section
3.9.2.
(xiv) made any changes in accounting principles or
accounting practices.
3.8 Taxes.
-----
(a) The following defined terms shall have the meanings set
forth below:
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(i) "Tax" means any (and in the plural "Taxes" shall
---
mean all) income, gross receipts, license, payroll, employment,
excise, manufacturing, severance, stamp, occupation, premium,
windfall profits, environmental, customs, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, turnover,
alternative or add-on minimum, estimated or other tax, duty, or
other fiscal charge of any kind whatsoever (whether payable
directly, or by way of withholding or on account, and including
those paid or withheld in the capacity as withholding tax agent),
including without limitation any interest, penalty, or addition
thereto, whether disputed or not, imposed by any national or
local taxing authority or other authority having jurisdiction to
administer or enforce any of the foregoing.
(ii) "Tax Return" means any return, declaration,
----------
report, claim for refund, or information return relating to
Taxes, including without limitation any schedule or attachment
thereto, and any amendment thereof.
(b) Except as set forth on Schedule 3.8:
(i) The Company and each of the Subsidiaries have
filed or caused to be filed and, from the date hereof until the
Closing Date, will file or cause to be filed all Tax Returns
required to be filed by them in accordance with applicable laws
on or before the date hereof or the Closing Date (as applicable)
with respect to Taxes.
(ii) All Taxes which are shown on Tax Returns filed on
or before the date hereof as due from or payable by the Company
or the Subsidiaries have been paid in full or adequately
disclosed and fully provided for in the DEA Financial Statements,
and all Taxes which are shown on Tax Returns filed after the date
hereof and on or before the Closing Date as due from or payable
by the Company or the Subsidiaries will be paid in full or
adequately disclosed and fully provided for in the Company's
Closing Financial Statements.
(iii) There are no actions, suits, proceedings,
examinations, audits, claims or assessments by any governmental
authority now pending against the Company or the Subsidiaries in
respect of Taxes or any Tax Return.
(iv) There are no outstanding agreements or waivers
between the Company or any Subsidiary and any governmental
authority extending the statute of limitations applicable to any
Tax Return of the Company or any of the Subsidiaries for any
period;
-18-
(v) The Company and the Subsidiaries have delivered to
Brown & Sharpe correct and complete copies of all income Tax
Returns, examination reports, and statements of deficiencies for
the 1990, 1991 and 1992 tax years and shall deliver all income
Tax Returns for subsequent periods that are filed on or before
the Closing Date. No Tax deficiency (whether or not agreed to by
the Company or the Subsidiaries) have been assessed against or
proposed in writing to be assessed against the Company or any
Subsidiary by any governmental authority except for Tax
deficiencies that have been paid in full or adequately disclosed
and fully provided for in the DEA Financial Statements. Prior to
the Closing Finmeccanica will have placed in the possession of
the Company all other tax returns of the Company and its
Subsidiaries.
(vi) The Company and the Subsidiaries are not a party
to any Tax sharing agreement. It is understood, however, that
Istituto per la Ricostruzione Industriale - IRI S.P.A. files
consolidated VAT returns for all its consolidated Italian
subsidiaries (including the Company).
(vii) The Company and the Subsidiaries are not liable,
by contract or as a matter of law, primarily or otherwise, for
the payment of any Taxes for which another person is liable.
(viii) The Company has reported net operating losses
as reflected in its Tax Returns filed for the 1988, 1989, 1990,
1991 and 1992 tax years and a cumulative net operating loss of
23.5 Billion Lit. in its draft Tax Return for the 1993 tax year,
a copy of which is furnished as Exhibit 3.8(viii). Finmeccanica
makes no representation or warranty that the net operating losses
of the Company and its Subsidiaries referred to above will be
allowed as deduction by the Company or its Subsidiaries in tax
periods ending after the Closing Date.
3.9 Property.
--------
3.9.1 Title; Encumbrances. Except as stated in
-------------------
Schedule 3.9, each of the Company and its Subsidiaries (as
indicated in Schedule 3.9) has good and marketable title to
all real properties owned by it and to all material tangible
personal property reflected in the June 30, 1993 and
December 31, 1993 combined balance sheets included in the
DEA Financial Statements or acquired after such dates
(except to the extent of property disposed of since such
dates in the ordinary course of business), and valid
leasehold interests in all real properties leased by the
Company or its Subsidiaries and all material tangible
personal properties leased by the Company or its
Subsidiaries, in each case free and clear of all mortgages,
liens, charges, encumbrances, easements, security interests
or title imperfections except (a) liens for current taxes
-19-
not due and payable or the validity of which is being
contested in good faith, (b) liens securing Indebtedness
reflected on the December 31, 1993 balance sheet included in
the DEA Financial Statements, which liens are listed on
Schedule 3.9, (c) purchase money security interests and
liens securing rental payments under leases incurred in the
ordinary course of business, (d) liens arising by operation
of law in favor of mechanics, materialmen and similar
parties for work done to the extent that the obligation
secured thereby is not at the time required to be paid and
(e) other encumbrances on real property, such as ordinary
utility easements, rights of way, zoning, building and use
restrictions, that do not materially interfere with the
existing use of such property in the conduct of the DEA
Business or materially detract from the value of such
property (the exceptions described in the foregoing clauses
(a), (b), (c), (d) and (e) being referred to herein as
"Permitted Encumbrances").
Neither the Company nor any Subsidiary has received any
notice or has any knowledge of any violation of any zoning
restrictions and ordinances, health and fire codes and
ordinances, laws or regulations, affecting any such parcel
in any material respect, and have no reason to believe that
any authority contemplates issuing the same. Neither the
Company nor any Subsidiary has received any notice of any
condemnation or eminent domain proceeding for any taking of
any such parcel, or any part thereof or of any negotiations
for the purchase of any such parcel, or any part thereof in
lieu of condemnation and, to the best of their knowledge, no
condemnation or eminent domain proceedings or negotiations
have been commenced or threatened in connection with any
such property.
3.9.2 Leases. Except as set forth on Schedule 3.9.2,
------
the Company and its Subsidiaries enjoy peaceful and
undisturbed possession under all leases of real and personal
property to which they are parties (which in the case of
personal property means any lease having an unexpired term
of one or more years and remaining rental payments
aggregating in excess of $10,000) and all such leases are
valid and subsisting; the Company or its Subsidiaries, as
the case may be, have paid all rent due and payable under
all such leases, and there exists no material default on the
part of the Company or its Subsidiaries, or, to the best of
Finmeccanica's and the Company's knowledge, the lessors,
existing thereunder.
3.9.3 Condition. Except as set forth in
---------
Schedule 3.9.3, all structures and other improvements,
including fixtures, located on the real property owned or
leased by the Company or any of its Subsidiaries and all
-20-
tangible personal property owned or leased by the Company or
its Subsidiaries, which in each case are necessary for the
conduct of the DEA Business as presently conducted, are in
good operating condition in all material respects for
property of its type and age, subject to ordinary wear and
tear.
3.10 Material Contracts. Schedule 3.10 contains a complete
------------------
and correct list of all agreements, contracts and commitments of
the following types, written or oral, to which the Company or any
of its Subsidiaries is a party or by which any of their property
is bound as of the date hereof (collectively the "DEA Material
Contracts"):
(a) notes, loans, credit agreements, overdraft
facilities, mortgages, indentures, security agreements and
other agreements and instruments relating to the borrowing
of money or extension of credit to the Company or its
Subsidiaries or to any guarantee by the Company or its
Subsidiaries of any obligations of a third party;
(b) consulting or professional services agreements, or
employment agreements;
(c) all distribution, agency, commission or sales
representative agreements;
(d) agreements, orders, or commitments for the
purchase of raw materials exceeding $75,000 in any case or
for the purchase of supplies or finished products exceeding
$75,000 in any case or;
(e) agreements, orders or commitments for the sale or
lease to customers of products or services exceeding
$200,000 in any case (or $100,000, if such agreements,
orders or commitments for sale or lease involve a warranty
or performance representation, terms or acceptance criteria
imposed by the purchaser which are different from the
standard warranty and terms and conditions of sale terms
disclosed in or scheduled pursuant to Section 3.22);
(f) all licenses by or to the Company or its
Subsidiaries (other than solely intercompany licenses
between the Company and any of the Subsidiaries) of any
Intellectual Property (as defined in Section 3.12) to or
from any affiliated or unaffiliated third party (excluding
any end-user licenses available through normal commercial
channels), including all licenses from third parties
relating to Software Programs and Technical Documentation
(as such terms are defined in Section 3.12);
-21-
(g) agreements or commitments for capital expenditures
in excess of $100,000 for any single project or series of
related projects; and
(h) other agreements or obligations material to the
Company and its Subsidiaries involving payments, receipts,
assets or obligations of more than $100,000.
The Company has delivered or made available to Brown &
Sharpe complete and correct copies of all written Material
Contracts and accurate summaries of all oral Material Contracts.
Except as disclosed in Schedule 3.10, all such Material Contracts
are in full force and effect. Except as set forth on Schedule
3.10, neither the Company nor any of its Subsidiaries have any
outstanding powers of attorney, except routine powers of attorney
relating to representation before governmental agencies or given
in connection with qualification to conduct business in another
jurisdiction.
3.11 Accounts Receivable; Inventories. (a) The accounts
--------------------------------
receivable of the Company and its Subsidiaries reflected on the
combined balance sheets of the DEA Companies as at June 30, 1993
and December 31, 1993 contained in the DEA Financial Statements
(except those collected since such date) and such additional
accounts receivable as are reflected on the books of the Company
and its Subsidiaries on the date hereof, net of applicable
reserves as shown on such June 30, 1993 and December 31, 1993
balance sheets or applicable reserves on the additional accounts
receivable subsequent to December 31, 1993, (which reserves have
been determined in accordance with the general accounting
methodology with respect to reserves against accounts receivable
and with respect to credit policies relating to receivables
utilized by the Company and its Subsidiaries and furnished to
Brown & Sharpe pursuant to Section 1.4(b) above) and arose out of
bona fide sales and deliveries of goods or the performance of
services in the ordinary course of the DEA Business in accordance
with past practice.
(b) The inventories reflected on such combined balance
sheet as at December 31, 1993 and held by the Company and its
Subsidiaries on the date hereof are in good, usable or saleable
condition and, except as indicated in the report of RE&Y
accompanying the DEA Financial Statements for the periods ended
December 31, 1993 and 1992, have been reflected on such balance
sheet in accordance with Italian GAAP or, in the absence thereof,
IASC GAAP consistently applied. The reserves with respect to
obsolete, slow moving or discontinued items and the accounting
for inventory is in accordance with the general accounting policy
and methodology with respect to inventory utilized by the Company
and its Subsidiaries and furnished to Brown & Sharpe pursuant to
Section 1.4(b) above, except as indicated in the report of RE&Y
-22-
accompanying the DEA Financial Statements for the periods ended
December 31, 1993 and 1992.
To the best knowledge of Finmeccanica and the Company,
except as disclosed on Schedule 3.11(b), none of the DEA
Companies holds any goods on consignment from third parties.
Except as disclosed on Schedule 3.11(b), no third party
(including Finmeccanica or any of its affiliates) holds any goods
on consignment from the DEA Companies or has purchased goods from
the DEA Companies on a "sale on approval" basis or with a right
of return (other than pursuant to an express warranty as
disclosed in Schedule 3.22D).
3.12 Intellectual Property. (a) For purposes of this
---------------------
Section 3.12, the term "Intellectual Property" shall mean all
patents and patent applications, registered or unregistered
trademarks, copyrights, service marks, applications for
registration thereof, trade names, inventions, processes, designs
and design rights, formulas, trade secrets, know-how, software
and computer programs, including all software or program logic
burned into a chip ("Firmware") and other items of intellectual
property and propriety rights.
(b) The Company and the Subsidiaries own all rights to the
name "DEA" and the other names listed on Schedule 3.12 for all
products, and no other person has acquired or owns any rights
thereto. Schedule 3.12 also contains a complete and correct list
of all patents, patent applications, registered or unregistered
trademarks, tradenames or servicemarks, registered trademarks,
tradenames or servicemarks applications, and all copyrights or
copyright applications (which copyrights are listed by general
category only), which are, in the case of each item on said
lists, owned by the Company and the Subsidiaries or in which the
Company or its Subsidiaries has any rights or licenses. Schedule
3.12 also sets forth the principal products (or features such as
controls) which utilize or are covered by the software programs
and Firmware which the DEA Companies own or have the right to
use.
The Company and its Subsidiaries own, or possess adequate
rights to use, all Intellectual Property necessary for the
conduct of the DEA Business as presently conducted and as
conducted since June 30, 1993.
Except as set forth on Schedule 3.12, neither the Company
nor any of its Subsidiaries has any obligation to make payments
of royalties or other amounts or transfer any interest in such
Intellectual Property to any third party, including Finmeccanica
and its other affiliates.
(c) For the purposes of this Section 3.12(c), the term
"Technical Documentation" shall mean flow charts, diagrams,
-23-
descriptive texts and programs, computer print-outs, underlying
tapes, source codes and computer data bases, mechanical designs,
parts manufacturing and assembly processes and similar items
owned by the Company and the Subsidiaries or in which the Company
or the Subsidiaries has any right or interest with respect to the
software programs and Firmware.
To the best knowledge of Finmeccanica, the Technical
Documentation, including that relating to the Firmware and the
software programs (except with respect to any third party
software programs which include only the materials and Technical
Documentation actually delivered to the Company and the
Subsidiaries by the third party under any third party software
contract) includes the source code, system documentation,
statements of principles of operation, and schematics for all
software programs and Firmware used in the conduct of the DEA
Business. Except with respect to third party software programs,
the Technical Documentation also includes any program (including
compilers), "workbenches", tools and higher level (or
"proprietary") language used for the development, maintenance,
and implementation of the software programs and Firmware.
(d) To the best knowledge of Finmeccanica and the Company,
the Company and the Subsidiaries have obtained all necessary
rights and licenses to use, copy and distribute as part of the
software programs or Firmware used in the DEA business the third-
party programming and materials contained in the software
programs and Technical Documentation. The Company has exercised
reasonable efforts to maintain the source codes and system
documentation relating to the software programs. The software
programs and Firmware have been maintained in confidence, except
for end-user licenses solely for use in connection with products
of the Company and the Subsidiaries purchased by such end-users.
The Company and the Subsidiaries have not received or have
knowledge of any claims from any person or entity that the use of
the Intellectual Property by the Company and the Subsidiaries
infringes or conflicts with any intellectual property right or
other proprietary right of any person or entity.
(e) Except as indicated in Schedule 3.12, to the best
knowledge of Finmeccanica and the Company, the Company and the
Subsidiaries have not granted, transferred or assigned, or
acquiesced in or permitted use without a license of, any right or
interest in the Intellectual Property to any person or entity,
except pursuant to non-exclusive end-user license agreements for
internal purposes only.
3.13 Insurance. The Company and its Subsidiaries have
---------
maintained and now maintain, as the case may be, (i) insurance on
the DEA Business covering property damage and loss of income by
fire and other casualty to the limits and with the deductibles
shown on Schedule 3.13 and (ii) insurance protection against such
-24-
liabilities, claims and risks including product liability, and in
such amounts, as is shown on such Schedule. The Company will,
upon request, deliver to Brown & Sharpe complete and correct
copies of all such policies together with all riders and
amendments thereto. Such policies are in full force and effect,
all premiums due thereon have been paid, and the Company and its
Subsidiaries have complied in all material respects with the
provisions of such policies and have not received notice of any
material increase in insurance premiums payable.
3.14 Litigation. (a) Except for the matters described in
----------
Schedules 3.8, 3.14 and 3.19.1 and claims fully covered by
insurance policies of the Company and its Subsidiaries, there are
no judicial or administrative actions, suits, proceedings or
arbitrations or investigations (domestic or foreign) pending or,
to the best knowledge of Finmeccanica or the Company, threatened
(for an amount in excess of $100,000 in the case of threatened
matters) against the Company or any of its Subsidiaries or their
respective assets, including the DEA Shares, or which were
pending or threatened at any time since January 1, 1991.
Finmeccanica has heretofore furnished or made available to Brown
& Sharpe, if so requested by Brown & Sharpe, true and complete
copies of all relevant court papers, proceeding administrative
request, and other documents relating to the matters specifically
set forth on Schedules 3.8, 3.14 and 3.19.1. Grievance matters
if less than $15,000 or, in the aggregate $50,000, are excluded
from this Section 3.14.
(b) Except as listed on Schedule 3.14, there are no
machines, products, systems or equipment sold by the Company or
any of its Subsidiaries as to which, to the best knowledge of
Finmeccanica, there is pending a written dispute with a customer
for an amount in excess of $100,000 as to the performance or
functionality of the items sold to such customer (and all such
disputes where the Company or a Subsidiary has received a letter
from legal counsel for such customer have been reflected in the
reserve to the accounts receivable on the December 31, 1993
combined balance sheet included in the DEA Financial Statements
or reserved against in the case of any such disputes occurring
after December 31, 1993 to the extent required in each case to be
so reserved against under applicable Italian GAAP or in the
absence thereof IASC GAAP and the reserves policies furnished to
Brown & Sharpe under Section 1.4(c)).
3.15 Compliance with Laws; Governmental Authorizations.
-------------------------------------------------
Except for matters described in Schedule 3.15 and excluding
environmental matters that are encompassed by Section 3.16 below
and all matters encompassed by Section 3.19 below, the Company
and its Subsidiaries are not in violation of or default in any
material respect under any statute, law, ordinance, rule,
regulation, judgment, order, decree, permit, concession, grant,
franchise, license or other governmental authorization or
-25-
approval including without limitation any laws, rules or
regulations of the European Union ("EU Law") applicable to the
Company or its Subsidiaries or to any of their assets,
properties, products or services. All permits, concessions,
grants, franchises, licenses and other governmental
authorizations and approvals necessary for the conduct of the DEA
Business have been duly obtained and are in full force and
effect, except where the failure to obtain or maintain in effect
any of the foregoing would not have a material adverse effect on
any plants or facilities of the Company or any Subsidiary or on
the business of the Company or any Subsidiary, and there are no
proceedings pending or, to Finmeccanica's knowledge threatened
that may result in the revocation, cancellation or suspension, or
any materially adverse modification, of any thereof.
3.16 Environmental Matters. Schedule 3.16 is a true and
---------------------
complete list of all known conditions or states of fact existing
on the date hereof and as of the Closing Date based on or
resulting from the presence in or discharge, spill, disposal,
emission, generation, storage or release of any chemical,
pollutant, contaminant, waste, toxic or hazardous substance or
petroleum product into the environment caused by any of the DEA
Companies at any location owned or leased, currently or in the
past, by the Company or any of its Subsidiaries, which
constitutes a violation of or requires remediation under any
Health and Environmental Laws.
"Health and Environmental Laws" means any decree, order
(including any administrative act issued by any authority
requiring compliance with applicable laws, statutes, rules and
regulations before the issue of a formal order) or arbitration
award of, any EU Regulation and Decision (as defined below) or
any law, statute, or binding decision or regulation of or any
agreement with, or any license, authorization or permit from, any
EU Institution, national, regional or local governmental
authority or court relating to occupational and public health and
safety (including fire prevention), or the environment in effect
as of the date hereof and the Closing Date (including, without
limitation, national, regional and local laws, statutes, rules
and regulations relating to environmental matters and
contamination of any type whatsoever).
"EU Institution" shall mean the EU Council, the European
Commission and the European Court of Justice.
"EU Regulations and Decisions" means all applicable
regulations and decisions adopted by the EU Council (or the
former Council of the European Community) or the European
Commission (or the former Commission of the European Community).
3.16.1 Except as disclosed on Schedule 3.16, the
Company and its Subsidiaries are in compliance in all
-26-
material respects with all applicable Health and
Environmental Laws with respect to the use, transport,
import, export, temporary or final storage, recycling or
disposal of any waste, chemical substance or mixture,
pollutant, including without limitation, any contaminant,
irritant, or pollutant or other hazardous or toxic substance
("Hazardous Materials") which are identified as such in any
jurisdiction in which the Company or its Subsidiaries either
owns or leases real property or conducts its business.
3.16.2 Except as disclosed on Schedule 3.16, (i)
neither the Company nor any of its Subsidiaries has received
notice from any governmental authority (or has knowledge
that any governmental authority may give notice) that it is
in violation of any applicable Health and Environmental Laws
with respect to the use, transport, import, export,
temporary or final storage, recycling or disposal of any
such Hazardous Materials; (ii) the Company and its
Subsidiaries have obtained and have complied with all
financial or other conditions contained in all necessary
permits, licenses, authorizations and consents for the use,
transport, import, export, temporary or final storage,
recycling and disposal of all Hazardous Materials used in
the conduct of the DEA Business except for those permits,
licenses or authorizations the failure to obtain which would
not have a Material Adverse Effect on the DEA Business; and
(iii) to the knowledge of Finmeccanica, there have been no
direct or indirect discharges, spills, leaks or releases,
whether accidental or voluntary, of any Hazardous Materials
caused by any of the DEA Companies on any real property (a)
now leased or previously leased or (b) now owned or
previously owned by the Company or any of its Subsidiaries,
which in any case constitutes a violation of or requires
remediation under any Health and Environmental Law.
3.17 Brokers, Finders, etc. Neither Finmeccanica, the
---------------------
Company or any of its Subsidiaries has retained any financial
advisor, broker, agent or finder or paid or agreed to pay for any
financial advisor, broker, agent, or finder on account of this
Agreement or any transaction contemplated hereby, or any
transaction of like character that would be required to be paid
by Finmeccanica, the Company, any of its Subsidiaries or Brown &
Sharpe.
3.18 Directors, Officers and Employees; Compensation. The
-----------------------------------------------
Company has delivered to Brown & Sharpe a true and complete list
of directors and officers of the Company and its Subsidiaries and
of all employees and consultants of the Company and its
Subsidiaries whose current total compensation was for the
calendar year ended 1993 at an annual rate in excess of $50,000
(or the equivalent amount in foreign currency), which list states
-27-
the annual rate of compensation of, and the positions held by,
the persons listed.
3.19 Labor and Employment; ERISA.
---------------------------
3.19.1 Except as set forth on Schedule 3.19.1:
(a) each of the Company and its Subsidiaries is in
compliance in all material respects with all applicable EU
Regulations and Decisions, national and state or local laws,
rules and regulations with respect to its employees and
employment practices, and terms and conditions of
employment, including without limitation any provisions
thereof relating to wages, bonuses, hours of work and social
security pensions and other mandatory contributions, medical
laws and safety insurance laws and regulations (including
[INPS, INAIL] and other similar authorities as well as other
funds, entities or agencies, as provided for by the
applicable national collective bargaining agreements);
(b) there is not pending or, to the best knowledge of
Finmeccanica, threatened, and there has not occurred since
January 1, 1991, any material trade union or collective
labor-related disputes or strikes involving the Company or
any of its Subsidiaries;
(c) there are no grievance or arbitration proceedings
arising out of or under any national collective bargaining
agreement pending or, to the best knowledge of Finmeccanica,
threatened, and no claim therefor has been asserted against
the Company, in each case for an amount in excess of $15,000
or in the aggregate $50,000;
(d) all pension plans and severance funds required by
law to be funded by the Company or any Subsidiary are funded
in accordance with applicable laws, regulations or statutes;
(e) there are no material written agreements or
understandings with any unions or shop committees (in regard
to employees outside the United States), except under the
provisions of the applicable national collective bargaining
agreements;
(f) except where required by law, there are no
employment agreements (other than those the terms of which
are solely prescribed by laws, regulations and applicable
national collective bargaining agreements) or agreements for
provision of services or consultancy of whatever nature,
which (A) are not terminable by the Company or its
Subsidiaries on 90 or fewer days notice at any time without
penalty, (B) have a remaining term, as of the date hereof,
of more than one year in length of obligation on the part of
-28-
the Company or its Subsidiaries or (C) involve payment by
the Company and its Subsidiaries, subsequent to the date
hereof, of more than US $50,000;
(g) there are no employment agreements whatsoever that
may be terminated solely as a result of a change of control
of the Company or any of its Subsidiaries, other than for as
provided for by any applicable national collective
bargaining agreements.
3.19.2 Schedule of Employee Benefit Plans.
----------------------------------
(a) Schedule 3.19.2 contains a true and complete list,
as of the date of this Agreement, of all profit sharing,
deferred compensation, severance pay, bonus, stock option,
stock purchase, pension, retainer, consulting, retirement,
change-in-control, welfare or incentive plans, contracts,
arrangements, policies, programs or practices, vacation pay
(or so-called "thirteen months' pay") or other plans,
policies or agreements for the benefit of employees whether
or not subject to the US Employee Retirement Income Security
Act of 1974, as amended ("ERISA") (including any funding
mechanism therefor now in effect or required in the future
as a result of the transaction contemplated by this
Agreement or otherwise) maintained or contributed to by the
Company and its Subsidiaries (other than government plans)
and in which any one or more of the employees (including
former employees and beneficiaries of employees or former
employees) of the Company and its Subsidiaries participates
or is eligible to participate, whether or not reduced to
writing, including, without limitation, a complete list of
all plans, agreements, arrangements, policies, programs or
practices which constitute "fringe benefits" with respect to
any of the employees of the Company and its Subsidiaries,
vacation plans or programs, sick leave plans or programs,
group medical insurance, group life insurance, medical
reimbursement, disability insurance, workmen's compensation,
supplemental unemployment benefits, other insurance coverage
relating to employees (including any self-insured
arrangements) and related benefits, any employee benefit
plan (as defined in Section 3(3) of ERISA), maintained by
the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries makes or is required to
make contributions, or to which the Company or any of its
Subsidiaries is a party or by which it is bound, except any
such plan, contract, arrangement, policy, program or
practice which the Company or any of its Subsidiaries is
required by law to maintain or to which the Company or any
of its Subsidiaries is required by law to contribute
(collectively, the "Plans"). True, current and complete
copies of such Plans, all amendments and written
interpretations with respect thereto, if any, and to the
-29-
extent applicable, copies of the most recent of the
following have been furnished to Brown & Sharpe: (i)
determination letter of the Internal Revenue Service and any
outstanding request for a determination letter; (ii) Form
5500, attached schedules, audited financial statements, and
any related actuarial valuation reports with respect to the
last three plan years for each Plan; and (iii) any summary
plan description.
(b) Each Plan and each trust or funding vehicle
related to such Plan has been administered and operated in
all material respects in compliance with its terms and with
all applicable statutes, orders, rules and regulations,
including where applicable, ERISA and the US Internal
Revenue Code of 1986, as amended ("Code"), including, but
not limited to, the preparation and filing of all required
reports and returns with respect to such Plan, the
submission of such reports or returns to the appropriate
governmental authorities, the timing, preparation and
distribution of all required employee communications
(including without limitation any notice of plan amendments
which is required prior to the effectiveness of such
amendments), and the proper and timely disposition of all
benefit claims. Each Plan which is intended to be a
"qualified plan" as described in Section 401(a) of the Code
has been determined by the Internal Revenue Service to so
qualify (or a timely application for such determination has
been or is intended to be submitted to the Internal Revenue
Service), and neither the Company nor any Subsidiary knows
of any fact or facts which might adversely affect such
qualification. Neither the Company nor any Subsidiary
sponsors or contributes to any Plan subject to the funding
requirements of Section 412 of the Code.
(c) With respect to all Plans and related trusts, no
"prohibited transaction," as that term is defined in Section
406 of ERISA, has occurred which is likely to subject any
Plan, related trust or party dealing with any such Plan or
related trust to any material tax or penalty on prohibited
transactions imposed by Section 502(i) of ERISA or Section
4975 of the Code and the consummation of the transactions
contemplated hereby will not constitute such a prohibited
transaction. There are no actions, suits, arbitrations or
claims with respect to a Plan (other than routine claims for
benefits by employees, beneficiaries or dependents arising
in the normal course of operations of such Plan) pending, or
to the best knowledge of Finmeccanica, threatened, with
respect to any such Plan or any fiduciary or sponsor of such
Plan with respect to their duties under such Plan or the
assets of any trust under any such Plan.
-30-
(d) Other than the TFR Liabilities reflected on the
December 31, 1993 balance sheet included in the DEA
Financial Statements, there are no unfunded obligations
under any Plan providing pension or post-retirement welfare
benefits to any employee of the Company or any Subsidiary
who will be employed by Brown & Sharpe after the Closing
Date (other than continuation of health coverage as provided
pursuant to Sections 601 through 608 of ERISA, Sections 104,
105, 106, and 4980B of the Code).
3.20 Investment Representation. Neither Finmeccanica nor
-------------------------
any of its affiliates owns beneficially or of record any of the
capital stock of Brown & Sharpe. Finmeccanica is acquiring the
Brown & Sharpe Purchase Price Shares and the Contingent Stock for
its own account and not with a view to, or for sale in connection
with, directly or indirectly, any distribution thereof that would
require registration under the Securities Act of 1933, as amended
(the "Securities Act") or applicable state "blue sky" or
securities laws or would otherwise violate the Securities Act of
1933 or such state securities laws.
3.21 Government Grants. Attached as Schedule 3.21 is a
-----------------
true and correct list of grants from governmental bodies to the
Company and its Subsidiaries as reflected on the combined balance
sheet at December 31, 1993 included in the DEA Financial
Statements. Except as set forth in Schedule 3.21, the funds
represented by such grants have been disbursed by the relevant
governmental bodies and received by the relevant DEA Companies,
and no DEA Company which is a recipient of any such grant is in
default of any of the terms and conditions specified in the
governmental authorization of such grant.
3.22 Customers, Suppliers, Product Warranties, Defects in
----------------------------------------------------
Products. Schedule 3.22A contains a correct and complete list of
--------
all orders for unshipped goods involving a sales price of $95,000
or more for non-standard and $150,000 or more for standard
machines, products or equipment. To the best of the knowledge of
the Company and the Subsidiaries, all such orders are written
orders signed by the customer, with a delivery date as set forth
on Schedule 3.22A and such orders do not require any reserves to
be established under Italian GAAP or, in the absence thereof,
IASC GAAP or under the past practices of the Company and the
Subsidiaries. Schedule 3.22A also includes a current and
complete list of all sales transactions involving a sales price
of $95,000 or more for non-standard and $150,000 for standard
machines, products or equipment pursuant to which the goods have
been shipped and the revenue therefrom recognized in full but as
to which (i) the Company or a Subsidiary has an obligation to
perform services (excluding warranty services) or additional work
(such as for example software programming) at no additional
charge in addition to the sales price and (ii) the gross margin
recognized in the transaction is less than the cost of performing
-31-
the service or other work (other than warranty work) that is
contractually to be performed by the Company or the Subsidiary.
Schedule 3.22B is a list by country of the top 20 customers
of the Company and its Subsidiaries, having the largest aggregate
monetary purchases from the Company and the Subsidiaries for each
of the years 1993, 1992 and 1991, with notation of the aggregate
dollar purchases, and a list of the top 10 suppliers to the
Company for each of the years 1993, 1992 and 1991.
The estimated costs of warranty work and "out-of-warranty"
work (less any payments received therefor) for machines sold by
the Company and the Subsidiaries in each of 1993, 1992 and 1991
are set forth on Schedule 3.22C. It is expressly acknowledged
and agreed by Brown & Sharpe that inasmuch as the DEA Companies
do not charge warranty costs to a separate account in the
ordinary course of business, actual historical warranty cost data
are not available, and that the figures stated in the foregoing
sentence are solely estimates provided in good faith for
informational purposes. Unless such information has not been
provided in good faith, Finmeccanica shall not be liable for any
failure to disclose, or inaccurate disclosure of, the actual
warranty cost of the DEA Companies in respect of the machines
described in the foregoing sentence. Schedule 3.22D sets forth a
correct and complete list of machines sold for $95,000 or more
(for standard machines) and $150,000 or more (for nonstandard
machines) under warranty as of the date hereof for which the
Company has provided special or non-standard warranty provisions.
Attached as Schedule 3.22E are the standard warranty provisions
relating to CMMs and spare parts therefor produced and sold as
part of the DEA Business since January 1, 1993.
3.23 No Illegal Payments, etc. Neither Finmeccanica, the
------------------------
Company or any of its Subsidiaries, nor, to the knowledge of
Finmeccanica or the Company, any of their respective officers,
employees or agents, has (a) directly or indirectly given or
agreed to give any illegal gift, contribution, payment or similar
benefit to any supplier, customer, governmental official or
employee or other person who was, is or may be in a position to
help or hinder the Company or any of its Subsidiaries (or assist
in connection with any actual or proposed transaction) or made or
agreed to make any illegal contribution, or reimbursed any
illegal political gift or contribution made by any other person,
to any candidate for federal, state, local or foreign public
office (i) which would subject the Company, any of its
Subsidiaries to any damage or penalty in any civil, criminal or
governmental litigation or proceeding or (ii) the non-
continuation of which has had or will have, individually or in
the aggregate, a material adverse effect on the Company or any
Subsidiary or (b) established or maintained any unrecorded fund
or asset or made any false entries on any books or records for
any purpose.
-32-
3.24 Financial Statements and Other Information for
----------------------------------------------
Inclusion in the Brown & Sharpe Proxy Statement. Finmeccanica
-----------------------------------------------
has heretofore delivered to Brown & Sharpe for inclusion in the
Brown & Sharpe Proxy Statement and the Brown & Sharpe
Registration Statement (each as defined in Section 22) (i)
consolidated financial statements (expressed in U.S. dollars)
consisting of balance sheets, income statements, statements of
cash flow and the footnotes relating thereto for the Company and
the Subsidiaries and including the operations of the metrology
business units in the United States, France and England (to the
extent not included in the above referred entities as at the end
of and for each of the years ended December 31, 1993, 1992 and
1991, and at March 31, 1994 and for the three months then ended
(which statements are audited in the case of the years ended
December 31, 1993, 1992 and 1991 and unaudited in the case of the
three months ended March 31, 1994) in each case in accordance
with U.S. GAAP and in compliance with the Securities Act of 1933,
as amended (the "Securities Act"), the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated by the Securities Exchange Commission
(the "Commission Rules") applicable to financial statements
prepared for inclusion in proxy statements and registration
statements, in each case reported on and certified by the
unqualified opinion of RE&Y with respect to years ending
December, 1992 and 1993 and of Coopers & Lybrand with respect to
years ending 1990 and 1991, together with the text of
Management's Discussion and Analysis of Financial Condition and
Results of Operations ("Management's Discussion and Analysis")
for the year ended December 31, 1993 and the three months ended
March 31, 1994 and (ii) a description of the business of the
entities included in the consolidated financial statements
referred to above complying with the requirements, in each case,
of the Securities Act and the Exchange Act and the Commission
Rules applicable to such information. All of the financial
statements referred to in this Section 3.24 are true and complete
in all material respects and the Management's Discussion and
Analysis referred to above and the description of the business
does not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
3.25 Disclosure. Neither this Agreement (including without
----------
limitation the Schedules hereto), nor the DEA Financial
Statements, nor the information and financial statements
furnished to Brown & Sharpe and referred to in Section 3.24
furnished for the Brown & Sharpe Proxy Statement and for the
Brown & Sharpe Registration Statement, nor any other document,
certificate, financial statement or other instrument furnished or
to be furnished by or on behalf of Finmeccanica, contains or will
contain any untrue statement of a material fact, nor, considered
as a whole, omit to state a material fact necessary in order to
make the statements contained herein or therein not misleading.
-33-
4. Representations and Warranties by Brown & Sharpe. Brown &
------------------------------------------------
Sharpe represents and warrants to Finmeccanica as follows:
4.1 Corporate Status. Brown & Sharpe is a corporation duly
----------------
organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and
authority to carry on its business as now conducted and to own or
lease and operate its properties as and in the places where such
business is now conducted and such properties are now owned,
leased or operated. Brown & Sharpe is qualified to do business
in each jurisdiction in which such qualification is required and
where the failure to do so would have a Material Adverse Effect
(as defined in Section 4.6).
4.2 Authority for Agreement. Brown & Sharpe has all
-----------------------
necessary corporate power to execute and deliver this Agreement
and the Stockholders Agreement and to carry out its obligations
hereunder and thereunder and to cause any of its subsidiaries to
carry out any of its obligations. The execution and delivery of
this Agreement and the Stockholders Agreement and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary actions on behalf of
Brown & Sharpe on the date hereof, except for the approval of its
stockholders as contemplated by Section 10.6. Upon obtaining of
such approval by stockholders of Brown & Sharpe, this Agreement
and the Stockholders Agreement constitute the valid and legally
binding obligations of Brown & Sharpe and are enforceable against
Brown & Sharpe in accordance with their respective terms, subject
to bankruptcy, insolvency, reorganization or similar laws of
general application affecting the rights and remedies of
creditors and to general equity principles; and the execution and
delivery of this Agreement and the Stockholders Agreement and the
consummation of the transactions contemplated hereby will not
conflict with, or result in any violation of, or default under,
any provision of the charter or by-laws of Brown & Sharpe or any
mortgage, loan indenture, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
Brown & Sharpe, any of its subsidiaries or any of their
respective properties or assets. Except as set forth in Schedule
4.2, such execution, delivery and consummation will not
accelerate the maturity of or otherwise modify in any material
respect the terms of any indebtedness of Brown & Sharpe or any of
its subsidiaries, or result in the creation of any Encumbrance
upon any of the properties or assets of Brown & Sharpe or any of
its subsidiaries. There are no agreements by which Brown &
Sharpe or any of its subsidiaries is bound which restrict the
ability of Brown & Sharpe to carry on the B&S Business anywhere
in the world. Except as set forth on Schedule 4.2 and subject to
such filings as may be required by the Securities and Exchange
Commission, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental
-34-
authority is required in connection with the execution and
delivery of this Agreement or the consummation of the
transactions contemplated hereby and thereby by Brown & Sharpe.
4.3 Capitalization; Authorization of Brown & Sharpe
-----------------------------------------------
Purchase Price Shares and Brown & Sharpe Purchase Price Shares
--------------------------------------------------------------
Right. Brown & Sharpe's authorized capital stock consists of
-----
15,000,000 shares of Class A Common Stock, 2,000,000 shares of
Class B Common Stock and 1,000,000 shares of Preferred Stock. On
March 4, 1994 there were issued and outstanding 4,468,138 shares
of Class A Common Stock, 545,693 shares of Class B Common Stock
and no shares of Preferred Stock. On March 24, 1994, a total of
175,000 shares of Class A Common Stock were issued to Diehl GmbH
& Co. ("Diehl") in connection with the acquisition by Brown &
Sharpe from Diehl of the share capital of Ets. Pierre Roch S.A.
and Mauser Prazisions - Messmittel GmbH (the "Roch Group"), of
which 140,350 shares of Class A Common Stock were issued to Diehl
for cash and 34,650 shares were issued to Diehl in consideration
for the transfer of the Roch Group to Brown & Sharpe
International Capital Corporation, a wholly-owned subsidiary of
Brown & Sharpe and an additional 25,000 shares of Class A Common
Stock have been reserved for issuance to Diehl pursuant to
purchase price adjustments. In connection with the acquisition
of the Roch Group, Diehl also received a non-assignable
contingent right to receive an additional 50,000 shares of Class
A Common Stock of Brown & Sharpe.
As of March 24, 1994, the Company had reserved for issuance
609,523 shares of Class A Common Stock issuable on conversion of
the 9 1/4% Convertible Debentures Due December 15, 2005
outstanding in principal amount of $16,000,000, and shares of
Class A Common Stock, not exceeding 800,000 shares in the
aggregate, issuable pursuant to the Amended Profit Incentive
Plan, the amended 1973 Stock Option Plan, the Restated Employee
Stock Ownership and Profit Participation Plan, the Savings and
Retirement Plan and the 1989 Equity Incentive Plan. Upon
obtaining approval by the Stockholders of Brown & Sharpe, the
Brown & Sharpe Purchase Price Shares to be issued in connection
with the transactions contemplated hereby will have been duly
authorized and, when issued under this Agreement shall be validly
issued, fully paid and non-assessable. Brown & Sharpe has
reserved a sufficient number of Class A Common Stock for issuance
pursuant to the Post-Closing Price Adjustment provided for in
Section 1.4 hereof. The Brown & Sharpe Purchase Price Shares
will be duly authorized for listing on the New York Stock
Exchange upon the required approval by stockholders of Brown &
Sharpe of the issue thereof pursuant to this Agreement. There
are no preemptive rights on the part of any holder of any class
of securities of Brown & Sharpe. There are no options, warrants,
conversion or other rights, agreements, or commitments of any
kind obligating Brown & Sharpe, contingently or otherwise, to
issue or sell any shares of its capital stock of any class or any
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securities convertible into or exchangeable for any such shares
except as set forth above, and no authorization therefor has been
given, except for not exceeding 100,000 shares of Class A Common
Stock which may be issued in connection with potential
acquisitions. All outstanding shares of Brown & Sharpe's Class A
Common Stock and Class B Common Stock and any outstanding
options, warrants or other rights to purchase shares of Brown &
Sharpe's capital stock and any shares of Brown & Sharpe's stock
issuable upon exercise, conversion or exchange thereof, have been
issued or granted in compliance with the registration or
qualification provisions of the Securities Act and any applicable
state securities laws, or pursuant to valid exemptions therefrom.
Brown & Sharpe is not a party or subject to any agreement or
understanding and, to the best of its knowledge, there is no
agreement or understanding between any persons that affects or
relates to the voting or giving of written consents with respect
to any security or the voting by a director of Brown & Sharpe.
Except for agreements relating to shares of Class A common stock
held by members of the Mercer family and by Diehl GmbH & Co.,
which together do not exceed in the aggregate 300,000 shares
(exclusive of 50,000 contingent shares which Diehl GmbH has a
right to acquire), Brown & Sharpe is not under any obligation to
register any of its presently outstanding securities or any of
its securities which may hereafter be issued. To the extent
Brown & Sharpe is under any obligation to register any of its
securities, such obligations do not violate, limit or impede the
rights granted to Finmeccanica under the Stockholders Agreement.
Brown & Sharpe has heretofore delivered a true and complete
copy of its Certificate of Incorporation, as amended, setting
forth the rights and privileges associated with the classes of
its capital stock. A correct list as of March 4, 1994 of
beneficial owners of 5% or more of the capital stock of Brown &
Sharpe is contained in the Brown & Sharpe Proxy Statement
delivered to its securities holders for the 1994 Annual Meeting
on April 29, 1994.
4.4 Subsidiaries. Except as set forth on Schedule 4.4,
------------
there are no corporations, associations, partnerships or other
entities or business enterprises in which Brown & Sharpe,
directly or indirectly, has any investment or owns any shares of
capital stock or any other record or beneficiary equity or other
ownership or control interest (except such investments or
interests which as of December 25, 1993 had a book value as
reflected in the Brown & Sharpe Financial Statements (as defined
in Section 4.5) of less than $250,000) which are set forth in a
letter of even date from Brown & Sharpe to Finmeccanica. Except
as set forth on Schedule 4.4, Brown & Sharpe owns or is sole
beneficiary of all of the issued and outstanding stock options,
warrants, rights or commitments, relating to the issuance of any
shares of capital stock or equity interests of its subsidiaries.
Brown & Sharpe and its subsidiaries have no commitment to
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contribute to the capital of, make loans to or share the losses
of any enterprise.
Each of Brown & Sharpe's subsidiaries is a duly organized,
validly existing corporation in good standing under the laws of
its jurisdiction of organization, and has all necessary power and
authority (corporate or otherwise) to carry on its business as
presently conducted and as proposed to be conducted.
4.5 Financial Statements. Attached hereto as Schedule 4.5
--------------------
are copies of the audited consolidated balance sheets of Brown &
Sharpe and its subsidiaries at and for the years ending December
25, 1993, December 26, 1992 and December 28, 1991 and the three
months ending April 2, 1994 (unaudited) and related statements of
operations, changes in shareholder equity and cash flows
(together with the auditors' reports thereon) for each of the
years in the three year period ended December 25, 1993 and for
the three months ended April 2, 1994 (unaudited), together with
the notes to such financial statements (all of such financial
statements being herein referred to as the "Brown & Sharpe
Financial Statements"). Such financial statements are true and
complete in all material respects and have been prepared in
accordance with U.S. GAAP consistently applied throughout the
periods indicated (except as otherwise indicated in the report of
Coopers & Lybrand and except as indicated in the footnotes to the
Financial Statements for the three months ended April 2, 1994),
and fairly present the financial condition of the entities
covered thereby, as of the dates thereof, and the results of
their operations for the indicated periods subject, in the case
of the unaudited statements, to normal and recurring year-end
audit adjustments.
4.6 Absence of Changes. Except as set forth in the Brown &
------------------
Sharpe Report on Form 10-Q for the quarter ended April 2, 1994
and in Schedule 4.6 and other than liabilities which have arisen
after December 25, 1993 in the ordinary course of business
consistent with past practice, since December 25, 1993, (a) there
has been no material adverse change in the condition, financial
or otherwise (other than as a result of general external economic
conditions affecting the metrology industry), properties, assets,
liabilities, business or operations of Brown & Sharpe and its
subsidiaries, considered as a whole (a "Material Adverse Effect")
and (b) neither the Company nor any of it subsidiaries has:
(i) declared, set aside, made or paid any dividend or
other distribution (other than intercompany dividends or
distributions) in respect of its capital stock, or agreed to do
any of the foregoing, or purchase or redeem or agreed to purchase
or redeem, directly or indirectly, any shares of its capital
stock;
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(ii) issued or sold any shares of its capital stock of
any class or any options, warrants, conversion or other rights to
purchase any such shares or any securities convertible into or
exchangeable for such shares; except for issuances or proposed
------
issuances as referred to in Section 4.3;
(iii) incurred any indebtedness for purchase money or
borrowed money other than in the ordinary course of business
consistent with past practices, except that it is understood that
Brown & Sharpe and its Subsidiaries may borrow additional amounts
under the lines of credit and agreements described in its Annual
Report on Form 10-K for the year ended December 25, 1993 (the
"Annual Report") and that Brown & Sharpe may obtain a Rhode
Island Plant mortgage which would be repaid following the Closing
out of the proceeds of the funding referred to in Section 10.11;
(iv) mortgaged, pledged, or subjected to any
Encumbrance any of its properties or assets, tangible or
intangible, except for loans under the lines of credit and
agreements described in its Annual Report and Permitted
Encumbrances; other than in connection with a Rhode Island Plant
Mortgage referred to above;
(v) except in the ordinary course of business or in
connection with the Roch Group acquisition or any pending
acquisition by Brown & Sharpe the consideration for which
consists of shares of its Class A Common Stock as contemplated by
Section 4.3, acquired or disposed of any tangible assets or
properties having a value in excess of $100,000 in any
transaction with any other person;
(vi) forgiven or canceled any debts or claims, or
waived any rights, except in the ordinary course of business and
consistent with past practices;
(vii) with respect to any director, officer, employee
or consultant whose annual compensation is, or was during the
year ended December 25, 1993, in excess of the equivalent of
$50,000, (A) granted to any such person any material increase in
compensation in any form (including any material increase in
scope of any benefits), other than annual salary increases
consistent with prior practice, or increases upon promotions or
bonuses under the President's Award Program and the Profit
Incentive Plan or promotional increases in sales commissions, or
(B) become subject to any request for severance or termination
pay, or granted any severance or termination pay, or entered into
any employment or severance agreement with any such person;
(viii) adopted, or amended in any material respect, any
bonus, profit-sharing, compensation, stock option, pension,
welfare, security, retirement, deferred compensation or other
material plan, agreement, trust, fund or arrangement of Brown &
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Sharpe Manufacturing Company for the benefit of any employee or
employees;
(ix) experienced any Material Adverse Effect in its
relations with any of its suppliers or customers;
(x) except for the construction of the TML Building
in England or as disclosed on Schedule 4.6, made any capital
expenditures or commitment therefor in excess of $250,000;
(xi) incurred any liability (absolute, accrued or
contingent) except current liabilities incurred, liabilities
under contracts entered into, in each case incurred in the
ordinary course of business, borrowings under short-term lines of
credit, the borrowings referred to in clauses (iii) and (iv)
above and liabilities in respect of letters of credit issued
under credit facilities;
(xii) extended or modified in any material respect the
terms or provisions of any lease of real property to the Company
or any Subsidiary that is a Brown & Sharpe Material Contract (as
defined in Section 4.12).
(xiii) made any change in accounting principles or
practices, except for a shift to percentage of completion
accounting for its Leitz subsidiary (Brown & Sharpe already being
on percentage of completion accounting method).
4.7 Taxes.
-----
Except as set forth on Schedule 4.7:
(i) Brown & Sharpe and each of its Subsidiaries have
filed or caused to be filed and, from the date hereof until the
Closing Date, will file or cause to be filed all Tax Returns
required to be filed by them on or before the date hereof or the
Closing Date (as applicable) with respect to Taxes.
(ii) All Taxes which are shown on Tax Returns filed on
or before the date hereof as due from or payable by Brown &
Sharpe or its Subsidiaries have been paid in full or adequately
disclosed and fully provided for in the Brown & Sharpe Financial
Statements and all Taxes which are shown on Tax Returns filed
after the date hereof and on or before the Closing Date due from
or payable by Brown & Sharpe or its Subsidiaries will be paid in
full or adequately disclosed and fully provided for in the Brown
& Sharpe financial statements.
(iii) There are no actions, suits, proceedings,
examinations, audits, claims or assessments by any governmental
authority now pending against Brown & Sharpe or its subsidiaries
in respect of Taxes or any Tax Return.
-39-
(iv) There are no outstanding agreements or waivers
between Brown & Sharpe or any subsidiary and any governmental
authority extending the statute of limitations applicable to any
Tax Return of Brown & Sharpe or any of its subsidiaries for any
period;
(v) No Tax deficiency (whether or not agreed to by
Brown & Sharpe or its Subsidiaries) have been assessed against
proposed in writing to be assessed against Brown & Sharpe or any
subsidiary by any governmental authority except for Tax
deficiencies that have been paid in full or adequately disclosed
and fully provided for in the Brown & Sharpe Financial
Statements.
(vi) Brown & Sharpe and its subsidiaries are not a
party to any Tax sharing agreement.
(vii) Brown & Sharpe and its subsidiaries are not
liable, by contract or as a matter of law, primarily or
otherwise, for the payment of any Taxes for which another person
is liable.
4.8 Litigation. Except for the matters described in
----------
Schedule 4.8 and claims fully covered by insurance policies of
the Company and its subsidiaries, there are no judicial or
administrative actions, suits, proceedings or arbitrations or
investigations (domestic or foreign) pending or, to the best
knowledge, of Brown & Sharpe, threatened (for an amount in excess
of $100,000 in the case of threatened matters) against Brown &
Sharpe or any of its subsidiaries. Brown & Sharpe has heretofore
furnished or made available to Finmeccanica, if so requested by
Finmeccanica, true and complete copies of all relevant court
papers, proceedings, administrative requests, and other documents
relating to the matters specifically set forth on Schedule 4.8.
4.9 Filings Under the Securities Exchange Act of 1934.
-------------------------------------------------
(a) The Brown & Sharpe Annual Report on Form 10-K for the
year ended December 25, 1993, the Report on Form 10-Q for the
first quarter of 1994 and the 1994 Annual Meeting Proxy Statement
heretofore filed under the Exchange Act, when they were filed
(or, if any amendment with respect to any such document was
filed, when such amendment was filed), conformed in all material
respects with the requirements of the Exchange Act and the rules
and regulations thereunder; and no such document when it was
filed (or, if an amendment with respect to any such document was
filed, when such amendment was filed), contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading.
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(b) The Brown & Sharpe Proxy Statement to approve the issue
of the Brown & Sharpe Purchase Price Shares and the Contingent
Stock under this Agreement, when filed, will conform in all
material respects with the requirements of the Exchange Act and
the rules and regulations thereunder and, when it is filed, will
not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, excluding
from the provisions of this Section 4.9(b) the description of the
DEA Business, the financial statements of the Company and the
Subsidiaries, the related Management's Discussion and Analysis
and financial and other data relating to the Company and the
Subsidiaries contained therein.
(c) The Brown & Sharpe Registration Statement, when filed,
will conform in all material respects with the requirements of
the Securities Act and the Commission Rules and, when it is
declared effective in accordance with the Commission Rules, will
not contain an untrue statement of a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances under which
they were made, excluding from the provisions of this Section
4.9(c) the description of the business of the Company and the
Subsidiaries (or information in respect thereof contained in a
combined description of the business of Brown & Sharpe after
giving effect to the transactions contemplated by this
Agreement), the financial statements of the Company and the
Subsidiaries, the related Management's Discussion and Analysis
and financial and other data relating to the Company and the
Subsidiaries contained therein.
4.10 Brokers, Finders, etc. Neither Brown & Sharpe nor any
----------------------
of its subsidiaries has retained any financial advisor, broker,
agent or finder or paid or agreed to pay for any financial
advisor, broker, agent, or finder on account of this Agreement or
any transaction contemplated hereby, or any transaction of like
character that would be required to be paid by Brown & Sharpe,
the Company, any of its Subsidiaries or Finmeccanica, except for
the fees of Wertheim Schroder payable by Brown & Sharpe pursuant
to the agreements between Brown & Sharpe and Wertheim Schroder.
4.11 Disclosure. This Agreement (including without
----------
limitation the Schedules hereto), the Brown & Sharpe Financial
Statements, the information furnished by Brown & Sharpe for the
Brown & Sharpe Proxy Statement, any other document, certificate,
financial statement or other instrument furnished or to be
furnished by or on behalf of Brown & Sharpe do not contain any
untrue statement of a material fact, or, considered as a whole,
omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
4.12 Contracts and Other Instruments
-------------------------------
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(a) The Brown & Sharpe Annual Report on Form 10-K for the
year ended December 25, 1993 includes in Item 14 a list of all
contracts, agreements and other instruments material to Brown &
Sharpe ("B&S Material Contracts"), to the extent required to be
so listed and filed as an exhibit by applicable rules under the
Exchange Act and, except as specified therein, as of the date
such Annual Report was filed pursuant to the Exchange Act, there
is no other contract, agreement or other instrument that is
material to the Brown & Sharpe Business, taken as a whole, which
was required to be so filed.
(b) Except as disclosed in Schedule 4.12, neither Brown &
Sharpe nor, to Brown & Sharpe's best knowledge, any other party
to any B&S Material Contract to which Brown & Sharpe is a party
or which any of their assets or properties are bound is in breach
of or default under or is claimed to be in breach of or default
in complying with any provision thereof or has committed or
permitted any event which, with notice or the passage of time or
both, would constitute such a breach or default, except for such
breaches and defaults which in the aggregate would not have a
Material Adverse Effect on the B&S Business taken as a whole.
(c) Except as set forth in Schedule 4.12, no consent of any
party to any such contract, agreement or other instrument to
which Brown & Sharpe is a party or by which any of their
properties or assets are bound is required for any of the
transactions contemplated by this Agreement except for such
consents, the failure of which to obtain would not in the
aggregate have a Material Adverse Effect on Brown & Sharpe.
4.13 Compliance with Laws; Governmental Authorizations.
-------------------------------------------------
Except for matters described in Schedule 4.13 or covered
elsewhere in this Section 4, Brown & Sharpe and its subsidiaries
are not in violation in any material respect of any governmental
license or permit, statute, law, ordinance, rule, regulation,
judgment, order, decree, permit, concession, grant, franchise,
license or other governmental authorization or approval including
without limitation any EU laws applicable to Brown & Sharpe or
its subsidiaries or to any of their assets, properties,
properties or businesses. All permits, concessions, grants,
franchises, licenses and other governmental authorizations and
approvals necessary for the conduct of the business of Brown &
Sharpe and its subsidiaries as presently conducted have been duly
obtained and are in full force and effect, except where the
failure to obtain or maintain in effect any of the foregoing
would not have a material adverse effect on the business of Brown
& Sharpe or any subsidiary, and there are no proceedings pending
or, to the Brown & Sharpe's best knowledge, threatened that may
result in the revocation, cancellation or suspension, or any
materially adverse modification, of any thereof.
-42-
4.14 Environmental Matters. Schedule 4.14 is a true and
---------------------
complete list of all known conditions or states of fact existing
on the date hereof and as of the Closing Date based on or
resulting from the presence in or discharge, spill, disposal,
emission, generation, storage or release of any chemical,
pollutant, contaminant, waste, toxic or hazardous substance or
petroleum product into the environment caused by any of Brown &
Sharpe or any of its subsidiaries at any location owned or
leased, currently or in the past, by Brown & Sharpe or any of its
subsidiaries, which constitutes a violation of or requires
remediation under any Health and Environmental Laws.
4.14.1 Except as disclosed on Schedule 4.14, Brown &
Sharpe and its subsidiaries are in compliance in all
material respects with all applicable Health and
Environmental Laws with respect to the use, transport,
import, export, temporary or final storage, recycling or
disposal of any waste, chemical substance or mixture,
pollutant, including without limitation, any contaminant,
irritant, or pollutant or other hazardous or toxic substance
("Hazardous Materials") which are identified as such in any
jurisdiction in which Brown & Sharpe or its subsidiaries
either owns or leases real property or conducts its
business.
4.14.2 Except as disclosed on Schedule 4.14, (i)
neither Brown & Sharpe nor any of its subsidiaries has
received notice from any governmental authority (or has
knowledge that any governmental authority may give notice)
that it is in violation of any applicable Health
Environmental Laws with respect to the use, transport,
import, export, temporary or final storage or disposal of
any such Hazardous Materials; (ii) Brown & Sharpe and its
subsidiaries have obtained and have complied with all
financial or other conditions contained in all necessary
permits, licenses, authorizations and consents for the use,
transport, import, export, temporary or final storage,
recycling and disposal of all Hazardous Materials used in
the conduct of the Brown & Sharpe Business except for those
permits, licenses or authorizations the failure to obtain
which would not have a Material Adverse Effect on the Brown
& Sharpe Business; and (iii) to Brown & Sharpe's knowledge,
there have been no, direct or indirect, discharges, spills
or leaks or releases, whether accidental or voluntary, of
any Hazardous Materials caused by any of Brown & Sharpe or
any of its subsidiaries on any real property (a) now leased
or previously leased or (b) now owned or previously owned by
Brown & Sharpe or any of its subsidiaries, which in any case
constitutes a violation of or requires remediation under any
Health and Environmental Law.
-43-
4.15 Absence of Undisclosed Liabilities. Except as set
----------------------------------
forth in Schedule 4.15 and other than liabilities which have
arisen after December 25, 1993 in the ordinary course of business
consistent with past practice (including those permitted by or
scheduled pursuant to Section 4.6), neither Brown & Sharpe nor
any of its Subsidiaries has any material liabilities or
obligations of any nature, whether absolute, contingent or
otherwise which are required to be reflected or reserved against
in, or otherwise provided for in the notes to, the Brown & Sharpe
Financial Statements under U.S. GAAP and which are not so
reflected or reserved against therein or in the notes thereto.
4.16 Prohibited Foreign Trade Practices Act; Sensitive
-------------------------------------------------
Payments. To the best of Brown & Sharpe's knowledge, Brown &
--------
Sharpe and its subsidiaries are in compliance with the Prohibited
Foreign Trade Practices Act with respect to the Brown & Sharpe
Business, and have no "sensitive" receipts or disbursements,
which are defined to mean the following types of transactions:
(i) illegal receipts from or payments to governmental officials
or employees; (ii) commercial bribes or kickbacks; (iii) amounts
disbursed or received with an understanding that rebates or
refunds will be made in contravention of the laws of any nation
or other jurisdiction; (iv) illegal political contributions; or
(v) payments of commitments, regardless of form, made with the
knowledge or under circumstances that would indicate that all or
part thereof is to be paid ultimately to or for the benefit of
governmental officials or employees or as an influence payment or
kickback.
5. Expenses. Each of the parties hereto shall assume and bear
--------
all expenses, costs and fees (including any fees of investment
banks, financial advisors, professional advisers and legal
counsel) incurred or assumed by such party in the preparation and
execution of this Agreement and compliance herewith, whether or
not the transactions herein provided for shall be consummated, it
being understood and agreed that Finmeccanica and not the Company
shall assume and bear the reasonable legal, and other out-of-
pocket expenses, costs and fees of the Company and the
Subsidiaries in connection with the transactions hereby
contemplated, except that the Company may pay for the audit fees
of RE&Y in preparing the audited financial statements of the
Company and the Subsidiaries, including the Closing Financial
Statements; Brown & Sharpe, on the one hand, and Finmeccanica, on
the other, shall indemnify and hold each other harmless from and
against any and all liabilities and claims in respect of any such
expenses, costs or fees or taxes which are the responsibility of
or assumed by Brown & Sharpe, the Company and the Subsidiaries on
the one hand and which are the responsibility of or assumed by
Finmeccanica and their affiliates on the other hand.
Notwithstanding the foregoing, all excise, documentary, transfer
(including indirect transfer of stock of the Subsidiaries), value
added taxes and like taxes, if any, or fees for the like payable
in connection with the sale, transfer and delivery of the DEA
-44-
Shares to Brown & Sharpe or its designees (including indirect
transfer of DEA Subsidiary shares and transactions pursuant to
the Post-Closing Purchase Price Adjustment provisions) shall be
paid in the first instance by Brown & Sharpe and the total cost
thereof shall be borne equally by the parties, except that in
this connection it is agreed that any liability for registration
taxes or issue taxes incurred by the Company in connection with
the removal of "excess" Indebtedness of the Company in accordance
with Section 6.4 and other applicable sections shall be paid by
the Company and shall be the responsibility of Brown & Sharpe and
shall not be reflected in the Pricing Adjusted Net Asset Value
for purposes of determining the Post-Closing Purchase Price
Adjustment.
6. Additional Covenants of the Parties. The parties further
-----------------------------------
covenant and agree as follows:
6.1 Conduct of Business. From and after the date of this
-------------------
Agreement and until the Closing Date, except as the other party
shall otherwise specifically consent to in writing, each of the
parties will conduct, or in the case of Finmeccanica, cause the
Company and the Subsidiaries to conduct, their affairs so that
they:
(a) carry on their respective businesses in, and only
in, the usual, regular and ordinary course in substantially
the same manner as conducted since January 1, 1994 and use
reasonable efforts to preserve intact their respective
present business organizations, to the extent reasonably
possible keep available the services of present officers and
employees, and preserve their respective relationships with
customers, suppliers and others having business dealings
with them;
(b) not sell or withdraw assets, including factoring
of receivables, except for inventory in the ordinary course
of business or disposals of assets which are replaced in the
ordinary course.
(c) maintain all of the material structures, equipment
and other tangible personal property used in the conduct of
their respective businesses as conducted since January 1,
1993 in good repair, order and condition except for ordinary
wear and tear;
(d) keep in full force and effect insurance comparable
in amount and scope of coverage to the insurance now carried
by them and, in the case of Finmeccanica, as disclosed on
Schedule 3.13;
(e) perform in all material respects all obligations
under all DEA Material Contracts and B&S Material Contracts,
as the case may be;
-45-
(f) maintain their books of account and records in the
usual, regular and ordinary manner;
(g) comply in all material respects with all
applicable statutes, laws, ordinances, rules and
regulations;
(h) not take or permit to be taken any action or incur
any liability or obligation which if taken or incurred prior
to the date hereof would have been required to be disclosed
pursuant to any of the representations and warranties made
by Finmeccanica or Brown & Sharpe, as the case may be;
(i) not issue any capital stock or other securities
other than, in the case of Brown & Sharpe, as may be
required pursuant to any of Brown & Sharpe's stock option or
employee benefit plans described in Section 4.3 or from such
reserves as are disclosed in Section 4.3 or not exceeding
100,000 shares of Class A Common Stock for purposes of
future acquisitions; and
(j) maintain adequate reserves under the applicable
accounting principles specified in Section 3.5 and the
reserve policies provided to Brown & Sharpe and referred to
in Section 1.4(b) or the applicable accounting principles
specified in Section 4.5 for all Taxes and other
governmental charges which have occurred during such period
and for any disputes with customers.
Notwithstanding the foregoing provisions of this Section
6.1, this Section 6.1 shall be subject to the over-riding
provisions of Section 2.7 which provides, as set forth therein,
that the business of the DEA Companies during the period after
July 31, 1994 and prior to the completion of the Closing on the
Closing Date shall be operated for the economic benefit of Brown
& Sharpe. In addition, the factoring of a mutually agreed amount
of receivables of the DEA Companies, as contemplated by Section
1.4(j) and Section 6.4, shall not constitute a violation of this
Section 6.1.
6.2 Governmental Filings. (a) The parties shall fully
--------------------
cooperate in making joint or separate filings to the German,
Belgian, and Portuguese antitrust or competition authorities and
in seeking any approvals which may be required from such
authorities for the consummation of the transactions contemplated
hereby. Each party shall be responsible for any inaccuracy or
omission relating to information supplied by it and contained in
such filings and further agrees to indemnify and hold harmless
the other party for any damages, including without limitation,
fines imposed by such authorities, arising from such inaccuracy
or omission.
-46-
(b) The parties acknowledge that the Closing may occur on a
date which is more than one year after the expiration in August
1993 of the waiting period under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 ("HSR") for completion of the
transactions contemplated hereby and that it is a condition to
each of Finmeccanica's and Brown & Sharpe's obligation to perform
its agreements hereunder that the transactions either close prior
to the expiration of said one year period or that the parties
refile reports under the HSR Act and not complete the
transactions hereby contemplated until after the expiration of
the HSR waiting period following said 1994 HSR filings by the
parties. Accordingly, each of the parties covenants and agrees
to cooperate and use their best efforts to make all necessary
filings and notifications under HSR permit the Closing.
6.3 Shareholder Approval. (a) Brown & Sharpe shall, as
--------------------
soon as reasonably practicable after the date hereof, take all
action necessary in accordance with the Exchange Act, the laws of
the State of Delaware and Brown & Sharpe's Certificate of
Incorporation and By-laws to give notice of and convene a special
meeting (the "Meeting") of its shareholders to consider and vote
upon the approval of the issuance of the Brown & Sharpe Purchase
Price Shares in connection with the consummation of the
transactions contemplated hereby and for such other purposes as
may be necessary or desirable. The Board of Directors of Brown &
Sharpe shall, consistent with their fiduciary obligations,
recommend without qualification of any nature that Brown &
Sharpe's shareholders vote to approve such issuance of the Brown
& Sharpe Purchase Price Shares, and use its reasonable best
efforts to solicit and secure from the shareholders of Brown &
Sharpe such approval, which efforts may include, without
limitation, causing Brown & Sharpe to solicit shareholder proxies
therefor and to advise Finmeccanica upon its request from time to
time as to the status of the shareholder vote then tabulated.
(b) Promptly following the date of this Agreement, Brown &
Sharpe shall prepare and file with the Securities and Exchange
Commission under the Exchange Act and the Commission Rules a
preliminary draft of the Brown & Sharpe Proxy Statement. The
Company and Finmeccanica shall cooperate fully with Brown &
Sharpe in the preparation and filing of the Brown & Sharpe Proxy
Statement and any amendments and supplements thereto. So far as
practicable in the judgment of Brown & Sharpe's counsel, the
Brown & Sharpe Proxy Statement shall not be filed, and no
amendment or supplement thereto shall be made by Brown & Sharpe,
without Finmeccanica's (or its counsel's) prior approval which
shall not be unreasonably delayed or withheld. Brown & Sharpe
shall use its reasonable best efforts to have any review of the
Brown & Sharpe Proxy Statement conducted by the Securities and
Exchange Commission promptly. As soon as reasonably practicable
following the date hereof, Brown & Sharpe shall cause to be
mailed a definitive Brown & Sharpe Proxy Statement to its
shareholders entitled to vote at the Meeting called to vote upon
-47-
the issuance of the Brown & Sharpe Purchase Price Shares promptly
following completion of any review by, or in the absence of such
review, the termination of any applicable waiting period required
under the Exchange Act and the Commission Rules.
6.4 Elimination of Excess Indebtedness. Finmeccanica will,
----------------------------------
prior to July 31, 1994, make its best possible forecast of the
amount of total Indebtedness of the DEA Companies, net of cash,
in excess of Lit. 800 Million, on the Forecasted Pricing Balance
Sheet of the DEA Companies as of July 31, 1994.
Based on that forecast, Finmeccanica will identify the
amount of total Indebtedness of the DEA Companies to be
discharged at the Closing by Finmeccanica. If practical,
Finmeccanica may concentrate the Indebtedness of the DEA
Companies (including through a payoff of certain Indebtedness to
third parties) in the so-called current account of the DEA
Companies with Finmeccanica. By making contributions of the
appropriate amount to the capital of DEA on or prior to the
Closing, Finmeccanica will put itself in a position to cause the
DEA Companies to be obligated at the Closing in the aggregate
only with respect to an amount of Indebtedness equal to the
amount of Aggregate Permitted Indebtedness as of July 31, 1994.
It is understood that, as of the Pricing Date, July 31, 1994, the
exact amount of Indebtedness of the DEA Companies to be
discharged can only be estimated. After July 31, 1994 and prior
to the Closing, Finmeccanica shall use its best efforts to gather
the information necessary to verify the accuracy of the forecast
made prior to July 31, 1994 with regard to the amount of
Indebtedness of the DEA Companies to be discharged. Finmeccanica
will share such information with Brown & Sharpe, and the parties
agree that they will work together in good faith to effect the
required reduction of Indebtedness in a manner that will result,
after making all of the calculations contemplated by Section 1.4,
in the issuance of the least possible number of additional Brown
& Sharpe Purchase Price Shares under Section 1.4(h).
Accordingly, Finmeccanica will determine, with the consent of
Brown & Sharpe, which may not unreasonably be withheld, if the
forecast for the amount of Indebtedness of the DEA Companies to
be discharged by Finmeccanica on the Closing needs to be modified
based on the new information, and any such modification shall be
reflected on the Forecasted Pricing Balance Sheet (which term
shall thereafter for all purposes reflect such modification).
On the Closing Date Finmeccanica shall cause the DEA
Companies to be obligated in the aggregate only with respect to
Indebtedness equal to the amount of Aggregate Permitted
Indebtedness as of July 31, 1994 by discharging any DEA Companies
Indebtedness in excess of Aggregate Permitted Indebtedness.
Subsequent to the Closing, on the basis of the final Pricing
Balance Sheet as determined under Section 1.4(f), the precise
actual amount of Excess Indebtedness that should have been
-48-
discharged at the Closing shall be established ("Actual Excess
Indebtedness"). In the event that the Actual Excess Indebtedness
as of July 31, 1994 based on the Pricing Balance Sheet is less or
more than the Forecasted Excess Indebtedness based on the
Forecasted Pricing Balance Sheet as of July 31, 1994 (as adjusted
by Finmeccanica for any reforecast required by this Section 6.4
above), the amount of said overage or shortfall shall be taken
into account and netted in the Post-Closing Purchase Price
Adjustment calculation as provided in Section 1.4(g). Then, as
and to the extent required by Section 1.4(h), Brown & Sharpe
shall issue additional Brown & Sharpe Purchase Price Shares or
Finmeccanica shall contribute cash to the capital of Brown &
Sharpe (without receiving any shares of stock therefor).
6.5 B&S Business Plan. As soon as practicable after the
-----------------
date hereof, and in any event not later than the Closing Date,
the executive management of Brown & Sharpe shall submit for
approval by the Board of Directors of Brown & Sharpe (as
evidenced by an extract from the meeting of the Board of
Directors of Brown & Sharpe) a business plan for the 18-month
period commencing upon the Closing Date (containing a detailed
action plan for the implementation of management's revenue and
cost objectives). Brown & Sharpe shall deliver to Finmeccanica,
not later than the Closing, a copy of such business plan.
7. Survival of Representations and Warranties. Except as
------------------------------------------
otherwise specifically provided for in this Agreement, all
representations, warranties and agreements (other than Section 8)
of Finmeccanica and Brown & Sharpe contained herein or in any
document, certificate or other instrument required to be
delivered hereunder in connection with the transactions
contemplated hereby shall survive for a period of 21 months from
the Closing Date. Notwithstanding the foregoing:
(a) the representations and warranties set forth in
Sections 3.16, 3.20, and 3.21 and Section 4.14 shall survive for
five years from the Closing Date;
(b) the representations and warranties set forth in
Sections 3.8, 3.19, 3.23 and 3.24 and Sections 4.7 and 4.9 shall
survive until thirty (30) days after the expiration of the
relevant statutes of limitation, including any extensions
thereof; and
(c) the representations and warranties set forth in
Sections 3.2, 3.4, 3.9.1, 3.12 and 3.17 and Sections 4.2, 4.3 and
4.10 shall survive without limit as to time.
8. Indemnification.
---------------
8.1 Indemnity by Finmeccanica. Finmeccanica hereby agrees
-------------------------
to indemnify, defend and hold harmless Brown & Sharpe and its
directors, officers and affiliates (and, in the case of claims
-49-
arising in connection with the DEA Financial Statements and the
information furnished by Finmeccanica and included in the Brown &
Sharpe Proxy Statement or the Brown & Sharpe Registration
Statement, each person, if any, who controls Brown & Sharpe
within the meaning of Section 15 of the Securities Act) against
and in respect of any damage that results from
(i) the inaccuracy of any representation or warranty
made by Finmeccanica herein, or resulting from any
misrepresentation, breach of warranty or
non-fulfillment of any agreement or covenant of
Finmeccanica contained herein or in any agreement or
instrument required to be entered into in connection
herewith and specifically identified herein or from any
misrepresentation in or omission from any schedule,
document, certificate or other instrument required to
be furnished by Finmeccanica hereunder and specifically
identified herein;
(ii) (a) the amount (if any) by which the accrual for
TFR Liabilities on the Pricing Balance Sheet exceeds
Lit. 1,715 million; (b) the amount (if any) by which
the Lit. 2,400 million liability for INPS for
terminated employees reflected on the June 30, 1993 DEA
Financial Statements has not been actually paid by the
Closing, except for Lit. 16 million which the parties
agreed need not be paid by such date; and (c) any
liability to any employee of the Company or any
Subsidiary terminated or terminating prior to or on the
Closing Date or, after the Closing Date, if such
termination results from or grants rights to any such
employee as a consequence of a change in control
(excluding those provisions provided for under
applicable labor or national contract or statute); and
(d) any in accuracy in the representations and
warranties made in Section 1.4(b) above and in Schedule
1.4(b);
(iii) any liability of the Company or any Subsidiary
for Indebtedness in excess of the Aggregate Permitted
Indebtedness on the Closing Date (subject to the Post-
Closing Purchase Price Adjustment);
(iv) any liability on account of any conditions or
states of fact existing on the Closing Date based on or
resulting from the presence in or discharge, spill,
disposal, emission, generation, storage or release of
any chemical, pollutant, contaminant, waste, toxic or
hazardous substance or petroleum product into the
environment caused by any of the DEA Companies at any
location owned or leased, currently or in the past, by
the Company or any of its Subsidiaries, which
constitutes a violation of or requires remediation
-50-
under Environmental Laws other than any such conditions
or states of fact disclosed on Schedule 3.16 (as to
which Finmeccanica shall have no liability under this
clause (iv)); provided that such condition or states of
--------
fact shall not have been discovered as a result of
Brown & Sharpe's voluntary investigative efforts;
provided, further that nothing in this clause (iv)
-------- -------
shall limit the obligations of Finmeccanica pursuant to
clause (i) to the extent such matters relate to a
breach of the representations and warranties covered by
Section 3.16 hereof;
(v) all Taxes arising from judgments, assessments,
impositions, administrative decrees or arbitration
awards upon, or being the liabilities of, the Company
or any of the Subsidiaries to the extent that such
Taxes are not absorbed by net operating losses and are
attributable to any period ending on or prior to the
Closing Date and the aggregate liability in respect
thereof exceeds the amount provided for Taxes in the
Closing Balance Sheet;
(v)(A) any liability or other damages (including
without limitation, the cost of making improvements to
facilities or changes in operations conducted at the
facilities in order to obtain the issuance of the
permits and certificates noted in Schedule 3.15)
resulting from the failure of the DEA Business to have
the permits or certificates noted in Schedule 3.15.
(vi) any and all claims, actions, suits and proceedings
resulting from any of the foregoing (hereinafter called
a "Brown & Sharpe Claim" or "Brown & Sharpe Claims").
At the option of Brown & Sharpe, any dispute between the parties
under clause (iv) of Section 8.1 as to the existence of states of
fact or conditions on or prior to the Closing Date or having come
into existence after the Closing Date shall be referred to the
parties' respective independent environmental consultants which
shall attempt to resolve such disputes and whose determination
shall be final and binding on the parties. If such independent
environmental consultants are themselves unable to agree, they
shall refer any such dispute to a third firm of independent
environmental consultants whose determination and resolution of
such dispute shall be final and binding on the parties. Such
third firm of independent environmental consultants shall make
its determination within sixty (60) days after the referral.
Each party shall bear the cost of its own independent
environmental consultants and shall share equally in the costs of
any third firm of independent environmental consultants so
appointed.
-51-
Notwithstanding the foregoing, Finmeccanica shall have no
obligation to indemnify Brown & Sharpe under this Section 8.1
unless, and only to the extent that, the aggregate of all amounts
for which indemnity would otherwise be due as a result of or
arising out of the matters set forth in clauses (i) through (vi)
of Section 8.1 (but excluding clause (ii)(a)) above exceed
$500,000, provided that in computing such amount each single
--------
indemnity amount (or any series of amounts relating to a class
action or series of claims arising out of a common set of facts)
of less than $10,000 shall be disregarded. Finmeccanica's
liability under this Section 8.1 shall not exceed in the
aggregate $10,000,000.
8.2 Brown & Sharpe Indemnity. Brown & Sharpe hereby agrees
------------------------
to indemnify and hold harmless Finmeccanica and its directors,
officers and affiliates against and in respect of any damage
resulting from
(i) the inaccuracy of any representation or warranty
made by Brown & Sharpe or resulting from any
misrepresentation, breach of warranty or non-
fulfillment of any agreement or covenant of Brown &
Sharpe contained herein or in any agreement or
instrument required to be entered into in connection
herewith and specifically identified herein or from any
misrepresentation in or omission from any document,
certificate or other instrument required to be
furnished by Brown & Sharpe hereunder and specifically
identified herein or any liability or any other damage
arising prior to the expiration of 21 months from the
Closing resulting from (i) any accounting restatement
of Brown & Sharpe Financial Statements (other than a
restatement for the change in accounting principle
previously disclosed in Brown & Sharpe's 10Q for the
first quarter of 1994) or (ii) the establishment of a
specific receivable reserve relating to one customer,
as disclosed in the Brown & Sharpe Registration
Statement, or any charges made thereto, (it being
understood that this provision shall be the only remedy
for breach of any representation by Brown & Sharpe
based on the occurrence of any such restatement, or the
transaction giving rise to said restatement).
(ii) any liability on account of (A) facts or
conditions which present a substantial threat to human
health or to the environment, including environmental
conditions at operating facilities, or (B) any
violation of any environmental laws which are or may
become applicable, relating to any act or failure to
act by Brown & Sharpe or condition or occurrence
existing on or prior to the Closing Date unless such
facts or conditions are set forth on Schedule 4.14 (in
which event there shall be no liability with respect
-52-
thereto under this clause (ii)); provided, however,
-------- -------
that nothing in this clause (ii) shall limit the
obligations of Brown & Sharpe pursuant to clause (i) to
the extent that such matters relate to a breach of the
representations and warranties covered by Section 4.14
hereof;
(iii) all Taxes arising from judgments, assessments,
impositions, administrative decrees or arbitration
awards upon, and being the liabilities of, Brown &
Sharpe or any of the Brown & Sharpe Subsidiaries to the
extent that such Taxes are attributable to the period
prior to the Closing Date and the aggregate liability
in respect thereof exceeds the amount provided for
Taxes in the December 25, 1993 consolidated balance
sheet included in the Brown & Sharpe Financial
Statements, as adjusted in the interim consolidated
financial statements of Brown & Sharpe during the
period from December 25, 1993 through the quarter
ending prior to the Closing Date; and
(iv) any and all claims, actions, suits and proceedings
resulting from any of the foregoing (hereinafter called
an "Finmeccanica Claim" or "Finmeccanica Claims").
Notwithstanding the foregoing, Brown & Sharpe shall have no
obligation to indemnify Finmeccanica under this Section 8.2
unless, and only to the extent that, the aggregate of all amounts
for which indemnity would otherwise be due as a result of or
arising out of the matters set forth in clauses (i) through (iv)
above exceed $500,000; provided that in computing such amount
--------
each single indemnity amount (or any series of amounts relating
to a class action or series of claims arising out of a common set
of facts) of less than $10,000 shall be disregarded. Brown &
Sharpe's liability under this Section 8.2 shall not exceed
$10,000,000.
8.3 Certification of Claims. If Brown & Sharpe or
-----------------------
Finmeccanica is of the opinion that any Brown & Sharpe Claim or
an Finmeccanica Claim, as the case may be, has occurred or will
or may occur, Brown & Sharpe or Finmeccanica, as the case may be,
shall so notify the other, and each such notice shall specify the
circumstances of such asserted Brown & Sharpe Claim or
Finmeccanica Claim.
8.4 Third Party Actions.
-------------------
(a) In the event any claim is made, suit is brought or
tax audit or other proceeding, including any administrative
action relating to environmental laws or conditions, is
instituted against Brown & Sharpe or the Company or any
Subsidiary, or any of their respective directors, officers
or affiliates which involves or appears reasonably likely to
-53-
involve a Brown & Sharpe Claim for which indemnification may
be sought against Finmeccanica hereunder, Brown & Sharpe
will, promptly (and in any event within 15 days) after
receipt of notice of any such claim, suit, tax audit or
proceeding, notify Finmeccanica of the commencement thereof.
The failure to so notify Finmeccanica of the commencement of
any such claim, suit, tax audit or proceeding will relieve
Finmeccanica from liability only to the extent that such
failure materially adversely affects the ability of
Finmeccanica to defend its interests in such claim, suit,
tax audit or proceeding. Finmeccanica (at its expense)
shall have the right and shall be given the opportunity (i)
to assume and control the defense of such claim, suit, tax
audit or proceeding or (ii) in the case of any environmental
claim or administrative action for which remediation is or
may be required, to have authority and control as to the
methodology, extent and implementation of any clean-up or
remedial measures ("Remedial Measures") with respect
thereto, provided that Brown & Sharpe and its counsel (at
--------
Brown & Sharpe's expense) may participate in (but not
control the conduct of) all matters pertaining to the
defense or settlement of such claim, suit, tax audit or
proceeding and, in the case of any Remedial Measures
required by law or administrative action, have the rights
provided in Section 8.7.1 hereof. Whether or not
Finmeccanica elects to assume such defense, Brown & Sharpe
shall not, except at its own cost, make any settlement with
respect to any such claim, suit, tax audit or proceeding
without the prior consent of Finmeccanica, which may not be
unreasonably withheld; provided, that, if Finmeccanica
--------
elects not to undertake any Remedial Measure(s) as may be
required either by law or pursuant to an administrative
order, Brown & Sharpe may undertake any and all such
Remedial Measures as may be required by such law or
administrative order without the consent of Finmeccanica but
the lack of Finmeccanica's consent thereto shall not relieve
it of its indemnification obligations hereunder. In the
event that Brown & Sharpe determines to settle any such
claim, suit, tax audit or proceeding without the prior
consent of Finmeccanica (as provided above), Finmeccanica
shall have no indemnification obligations with respect to
such claim, suit, tax audit or proceeding. Brown & Sharpe's
consent to the settlement of any such claim, suit, tax audit
or proceeding by Finmeccanica shall be required and shall
not be unreasonably withheld, but such consent shall not be
required if (or to the extent that) such settlement only
requires the payment of a monetary amount.
(b) In the event any claim is made, suit is brought or
tax audit or other proceeding is instituted against
Finmeccanica which involves or appears reasonably likely to
involve a Finmeccanica Claim for which indemnification may
be sought against Brown & Sharpe hereunder, Finmeccanica
-54-
will, promptly (and in any event within 15 days) after
receipt of notice of any such claim, suit, tax audit or
proceeding, notify Brown & Sharpe of the commencement
thereof. The failure to so notify Brown & Sharpe of the
commencement of any such claim, suit, tax audit or
proceeding will relieve Brown & Sharpe from liability only
to the extent that such failure materially adversely affects
the ability of Brown & Sharpe to defend its interest in such
claim, suit, tax audit or proceeding. Brown & Sharpe (at
its expense) shall have the right and shall be given the
opportunity to assume and control the defense of such claim,
suit, tax audit or proceeding, provided that Finmeccanica
--------
and their counsel may participate in (but not control the
conduct of) all matters pertaining to the defense or
settlement of such claim, suit, tax audit or proceeding.
Whether or not Brown & Sharpe elects to assume such defense,
Finmeccanica shall not, except at its own cost, make any
settlement with respect to any such claim, suit, tax audit
or proceeding without the prior consent of Brown & Sharpe,
which may not be unreasonably withheld. In the event that
Finmeccanica determines to settle any such claim, suit, tax
audit or proceeding without the prior consent of Brown &
Sharpe (as provided above), Brown & Sharpe shall have no
indemnification obligations with respect to such claim,
suit, tax audit or proceeding. Finmeccanica's consent to
the settlement of any such claim, suit, tax audit or
proceeding by Brown & Sharpe shall be required and shall not
be unreasonably withheld, but such consent shall not be
required if (or to the extent that) such settlement only
requires the payment of a monetary amount.
8.5 Definition of Damages. For purposes of this Section 8,
---------------------
the term "damages" shall mean the amount of any loss, claim,
demand, damage, deficiency, assessment, judgment, remediation,
cost or expense (including reasonable attorneys', consultants'
and experts' fees and expenses) actually incurred, (in the case
of a Finmeccanica Claim, either by Finmeccanica directly or by
virtue of its shareholding in Brown & Sharpe) less the sum of the
----
following economic benefits, if any, pertaining to such loss,
claim, demand, damage, deficiency, cost or expense: (i) any
income tax savings (net of any income tax cost attributable to
the indemnity payment) actually realized (or incurred) that
affect the overall economic impact of the damage to the
indemnified party and (ii) any insurance proceeds actually
realized and adverse insurance consequences actually incurred
(such as premium adjustments and other detriments) that affect
the overall economic impact of the damages to the indemnified
party. Notwithstanding the foregoing, neither party will be
entitled to any special, exemplary or consequential damages,
including without limitation lost profits, good will or
investments (excluding any damage resulting from a diminution in
the value of the Brown & Sharpe Purchase Price Shares), loss of
distributors, suppliers or customers or inability to use any of
-55-
the properties of the DEA Business or the B&S Business with
respect to any environmental matters covered under Sections
8.1(i) and (iv) and 8.2(i) and (ii). In the event that an
indemnified party hereunder pays a claim covered by the
indemnified party's insurance for which it is entitled to
indemnification by another party hereunder, such indemnified
party shall pay such claim and the indemnifying party shall
reimburse the indemnified party the full amount of such claim
(less the amount of any insurance proceeds previously recovered
by the indemnified party with respect to such claim). If the
indemnified party subsequently receives insurance proceeds with
respect to such claim, the indemnified party shall pay the
indemnifying party such insurance proceeds up to the amount
actually paid by the indemnifying party. In the event of any
claim by any third party based on facts which, if true as
alleged, would give rise to any liability for damages as to which
indemnification exists under this Agreement, the amount of the
damages shall be deemed to include the reasonable costs of the
defense thereof, whether or not successful, subject to the rights
of the indemnifying party to assume such defense pursuant to
Section 8.4 hereof.
8.6 Pricing Balance Sheet. Neither party shall be entitled
---------------------
to seek damages from the other party pursuant to this Section 8
with respect to any claim to the extent that the liability
forming the basis for such claim is reflected as a liability in
the Pricing Balance Sheet and thereby included in the calculation
of the Post-Closing Purchase Price Adjustment under Section 1.4,
including a liability not resulting in an adjustment as a result
of the Basket.
8.7 Environmental Limitations. For the avoidance of doubt,
-------------------------
no claim for damages by either party for which indemnification is
available pursuant to Sections 8.1(iv) or 8.2(ii), respectively,
may be made by either party if the basis for such claim derives
from a change in law or regulation or a change in the standards
of enforcement or remediation applicable to environmental
conditions or hazards which change becomes effective on or after
the Closing Date.
8.7.1 Remediation. (a) In the event of any Brown &
-----------
Sharpe Claim under Section 8.1(iv) which involves the taking or
required taking of a Remedial Measure with respect to any leased
real property of the Company or any of its Subsidiaries and which
Finmeccanica undertakes pursuant to Section 8.4(a), then
Finmeccanica shall use its reasonable efforts to minimize
interruption or other disruption of the operations of the DEA
Business and exercise its authority and control over the
remediation in a reasonable manner and in compliance with all
applicable Environmental Laws. Finmeccanica shall inform Brown &
Sharpe at least quarterly of actions taken in furtherance of such
remedial measures since the previous update and actions
anticipated prior to the next update. The purpose of such
-56-
updates shall be to attempt to reach consensus as to the best
means of handling such matters. All consultant proposals,
reports, conclusions and/or data shall be submitted promptly to
Brown & Sharpe upon Finmeccanica's receipt. To the extent
reasonably practicable, any submissions by Finmeccanica to
environmental regulatory agencies shall be submitted to Brown &
Sharpe for review prior to submission to such agency. Brown &
Sharpe shall cooperate, assist and not interfere with
Finmeccanica's performance of its obligations hereunder,
including without limitation allowing Finmeccanica and its
agents, representatives or contractors to have access to the
premises of the DEA Companies in order to (i) conduct studies,
take samples and perform other inspections on the premises of the
DEAd Companies, (ii) install, maintain and operate treatment
systems, equipment and other apparatus incidental to implementing
a remedial measure; (iii) consult pertinent books and records and
knowledgeable employees of the DEA Companies; and (iv) take any
other remediation or other actions necessary to fulfill
Finmeccanica's responsibilities under Sections 8.1(iv) and
8.4(a); provided, however, that if any Remedial Measure shall
-------- -------
require the closing of any facility (or significant portion
thereof) of the DEA Business for a period of greater than one
week, then Finmeccanica shall consult with Brown & Sharpe so as
to determine a reasonable period of shut down, taking into
account Brown & Sharpe's need to minimize any disruptive effect
on the facilities' operations and Finmeccanica's desire to
utilize the most cost-effective method of remediation, and
Finmeccanica shall conform the remediation plan accordingly.
9. Access and Information; Confidentiality.
---------------------------------------
9.1 Finmeccanica shall cause the Company to afford to Brown
& Sharpe and its employees, accountants, counsel and other
authorized representatives reasonable access during normal
business hours, upon reasonable notice, throughout the period
prior to the Closing to the facilities, properties, books and
records of the Company and its Subsidiaries and shall cause its
representatives to furnish to Brown & Sharpe such additional
financial and operating data and other information as Brown &
Sharpe may from time to time reasonably request. Brown & Sharpe
shall cause all information obtained by it or its representatives
pursuant to this Agreement or in connection with the negotiation
hereof to be treated as confidential and shall not use, nor
permit others to use, any such information for any purpose
whatsoever in a manner detrimental to the Company or its
Subsidiaries. In the event that this Agreement is terminated,
Brown & Sharpe shall promptly return all documents (together with
all copies thereof) provided by the Company or any of its
Subsidiaries.
9.2 Brown & Sharpe shall afford to Finmeccanica and its
employees, accountants, counsel and other authorized
representatives reasonable access during normal business hours,
-57-
upon reasonable notice, throughout the period prior to the
Closing to the facilities and properties of Brown & Sharpe and
its subsidiaries and shall cause its representatives to furnish
to Finmeccanica such additional financial data and other
information (including action plans and projections relating to
the transactions contemplated hereby) as Finmeccanica may from
time to time reasonably request. Finmeccanica shall cause all
information obtained by it or its representatives pursuant to
this Agreement or in connection with the negotiation hereof to be
treated as confidential and shall not use, nor permit others to
use, any such information for any purpose whatsoever in a manner
detrimental to Brown & Sharpe. In the event that this Agreement
is terminated, Finmeccanica shall promptly return all documents
(together with all copies thereof) provided by Brown & Sharpe.
9.3 Confidentiality. Following the Closing Date,
---------------
Finmeccanica shall hold in confidence all financial information
concerning the business, assets, intellectual property, products,
application methods, sources of supply, markets, marketing
methods and customers of the Company and its Subsidiaries that
heretofore has been treated as proprietary or confidential. This
Agreement shall continue to apply after the Closing Date for a
period of five years, but shall cease to apply to information
that comes into the public domain (other than through a breach by
Finmeccanica of an obligation of confidentiality owed to Brown &
Sharpe hereunder) and to information the disclosure of which is
required by law or pursuant to any request or order of any
governmental agency or authority.
10. Conditions Precedent to Brown & Sharpe's Obligations. All
----------------------------------------------------
obligations of Brown & Sharpe under this Agreement are subject to
the fulfillment to the satisfaction of Brown & Sharpe and its
counsel prior to or at Closing of each of the following
conditions, any of which may be waived in writing by Brown &
Sharpe:
10.1 Performance by Finmeccanica; Certificate.
----------------------------------------
Finmeccanica shall have performed and complied with all
agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing, and
shall deliver to Brown & Sharpe a certificate of the Chief
Executive Officer and Chief Financial Officer of the Elsag Bailey
Division of Finmeccanica, dated the Closing Date, to such effect.
10.2 Representations and Warranties; Certificate. The
-------------------------------------------
representations and warranties of Finmeccanica contained in this
Agreement shall be true and correct in all material respects on
and as of the Closing Date except for changes contemplated by
this Agreement or specifically consented to or approved by Brown
& Sharpe, and Brown & Sharpe shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the
Elsag Bailey Division of Finmeccanica dated the Closing Date to
the foregoing effect.
-58-
10.3 Opinions of Counsel. Brown & Sharpe shall have
-------------------
received such opinions of counsel for Finmeccanica and the
Company and its Subsidiaries with respect to the subject matter
of this Agreement as Brown & Sharpe and its counsel shall deem
necessary, the form and substance of such opinions of counsel to
be determined by Brown & Sharpe and its counsel.
10.4 Absence of Litigation. No action or proceeding shall
---------------------
have been instituted or threatened prior to or at the Closing
Date before any court or governmental agency, body or authority
pertaining to the transactions contemplated hereby, the result of
which could prevent or make illegal the consummation of such
transactions.
10.5 Governmental Clearance and Approval. All required
-----------------------------------
filings with all United States, European, federal, national,
state, local and foreign governmental agencies or authorities,
the notification of which, or consent, approval or clearance by
which, is necessary in connection with the consummation of the
transactions (or any of them) contemplated hereby shall have been
made, and all clearances or consents required in order to effect
the transactions contemplated hereby shall have been obtained, or
any applicable waiting period under any applicable statute or
regulation shall have expired or been terminated, without any
objection or notice of intent to challenge the transactions
contemplated hereby having been received by any of the parties
hereto or their subsidiaries and not withdrawn by the objecting
or challenging agency.
10.6 Approval by Stockholders of Brown & Sharpe. The issue
------------------------------------------
of the Brown & Sharpe Purchase Price Shares pursuant to this
Agreement shall have been approved by the stockholders of Brown &
Sharpe in accordance with its Bylaws and the rules of the New
York Stock Exchange, and in connection therewith, Wertheim
Schroder shall have provided Brown & Sharpe with a fairness
opinion on the contemplated transactions hereunder in customary
form, which is satisfactory to the Board of Directors of Brown &
Sharpe.
10.7 Approval of Proceedings; Documentation. All corporate
--------------------------------------
and other proceedings in connection with the transactions
contemplated by this Agreement, and the form and substance of all
opinions, certificates and other documents hereunder shall be
reasonably satisfactory in form and substance to Brown & Sharpe
and its counsel.
10.8 Factoring of Receivables. The parties shall have
------------------------
mutually agreed on the amount of factoring of DEA receivables and
such factoring shall have been satisfactorily completed on or
prior to July 31, 1994.
10.9 Stockholder Agreement. Finmeccanica shall have
---------------------
executed and delivered the Stockholders Agreement.
-59-
10.10 [Intentionally left blank]
10.11 Working Capital and Refinancing Requirements. Brown
--------------------------------------------
& Sharpe shall have completed arrangements with its principal
lending institutions to ensure that Brown & Sharpe and its
Subsidiaries, including the Company and its Subsidiaries, are
able to obtain sufficient borrowings to meet working capital
requirements, including refinancing of their working capital
requirements for the Brown & Sharpe Business and the DEA Business
to be conducted after the Closing Date, or shall have
simultaneously completed such other arrangements to raise such
necessary funding, in each case as Brown & Sharpe deems
appropriate.
10.12 Company Indebtedness; Consents of Lenders. The
-----------------------------------------
aggregate Indebtedness of the Company and its Subsidiaries as of
the Closing Date shall not exceed the Aggregate Permitted
Indebtedness as defined by and calculated in accordance with the
applicable Sections of this Agreement; and the terms and
conditions of such Aggregate Permitted Indebtedness shall be
satisfactory to Brown & Sharpe, and the Lenders identified on
Schedule 3.5.1 shall, if required, have consented to the
transactions contemplated hereby.
10.13 Resignations of Members of the Board of Directors.
-------------------------------------------------
All of the members of the boards of directors of the Company and
each Subsidiary shall have submitted their resignations as
directors effective upon the Closing on the Closing Date and upon
their acceptance by Brown & Sharpe after the Closing Date.
10.14 [Intentionally Left Blank]
10.15 [Intentionally Left Blank]
11. Conditions Precedent to the Obligations of Finmeccanica.
-------------------------------------------------------
The obligation of Finmeccanica to consummate the transactions
contemplated hereby shall be subject to the fulfillment prior to
or at the Closing of each of the following conditions, any of
which may be waived by Finmeccanica:
11.1 Performance by Brown & Sharpe; Certificate. Brown &
------------------------------------------
Sharpe shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing on the Closing Date and
Brown & Sharpe shall delivered a certificate of its President and
Chief Financial Officer, dated the Closing Date, to such effect.
11.2 Representations and Warranties; Certificate. The
-------------------------------------------
representations and warranties of Brown & Sharpe contained in
this Agreement shall be true and correct in all material respects
on and as of the Closing Date, except for changes contemplated by
this Agreement or specifically concerted to or approved by
Finmeccanica, and Finmeccanica shall have received a certificate
-60-
of the President and Chief Financial Officer of Brown & Sharpe to
that effect.
11.3 Opinion of Counsel. Finmeccanica shall have received
------------------
an opinion of Ropes & Gray, counsel to Brown & Sharpe, and, if
appropriate, an opinion of James W. Hayes, III or other counsel
to Brown & Sharpe, with respect to the subject matter of this
Agreement in form and substance reasonably satisfactory to
Finmeccanica and its counsel.
11.4 Absence of Litigation. No action or proceeding shall
---------------------
have been instituted or threatened prior to or at the Closing
Date before any court or governmental agency, body or authority
pertaining to the transactions contemplated hereby, the result of
which could prevent or make illegal the consummation of such
transactions.
11.5 Governmental Clearance and Approval. All required
-----------------------------------
filings with all United States, European, federal, state, local
and foreign governmental agencies or authorities, the
notification of which, or consent, approval or clearance by
which, is necessary in connection with the consummation of the
transactions contemplated hereby shall have been made, and all
clearances or consents required in order to effect the
transactions contemplated hereby shall have been obtained, or any
applicable waiting period under any applicable statute or
regulation shall have expired or been terminated, without any
objection or notice of intent to challenge the transactions
contemplated hereby having been received by any of the parties
hereto and not withdrawn by the objecting or challenging agency.
11.6 Approval by Stockholders of Brown & Sharpe. The issue
------------------------------------------
of the Brown & Sharpe Purchase Price Shares and the Contingent
Stock pursuant to this Agreement shall have been approved by the
stockholders of Brown & Sharpe in accordance with its Bylaws and
the rules of the New York Stock Exchange.
11.7 Approval of Proceedings; Documentation. All corporate
--------------------------------------
and other proceedings in connection with the transactions
contemplated by this Agreement, and the form and substance of all
opinions, certificates and other documents hereunder shall be
satisfactory in form and substance to Finmeccanica and its
counsel.
11.8 Execution and Delivery of Stockholder Agreement.
-----------------------------------------------
Brown & Sharpe shall have executed and delivered the Stockholders
Agreement.
11.9 [Intentionally Left Blank]
11.10 Guarantees of Indebtedness of the Company to Banks.
--------------------------------------------------
Each relevant lender to the DEA Companies shall have released
-61-
Finmeccanica from its guarantee of Indebtedness of the Company
and either (a) such Indebtedness shall have been extinguished or
an agreement to repay all of such indebtedness shall have been
reached with each such lender as of the Closing Date or (b) Brown
& Sharpe shall have agreed to guarantee that portion of Aggregate
Permitted Indebtedness of the Company and its Subsidiaries which
is owed to each such lender on the Closing Date and each such
lender shall have agreed to substitute the guaranty of Brown &
Sharpe for the guaranty of Finmeccanica.
12. Covenant Not to Compete. (a) Finmeccanica agrees that, in
-----------------------
consideration of the purchase by Brown & Sharpe hereunder,
neither Finmeccanica nor any affiliate thereof shall, on or prior
to the date which is five (5) years after the Closing Date
directly or indirectly own, manage, operate, control or have any
greater than 20% ownership interest in any business, venture or
activity which competes with the metrology business relating to
CMMs (including parts and accessories therefor) being conducted
or proposed to be conducted at the Closing Date by the Company
and its Subsidiaries or relating to metrology products performing
functions similar to those of the products manufactured and sold
by the Company and its Subsidiaries, whether or not the assets of
the Company and the Subsidiaries are subsequently moved in whole
or in part into another legal entity within Brown & Sharpe and
its Subsidiaries, provided that the provisions of this Section
--------
12(a) shall terminate if Brown & Sharpe no longer owns a greater
than 50% ownership interest in the DEA Business and provided
--------
further that Finmeccanica shall not be in breach of the covenant
-------
made in this Section 12(a) if Finmeccanica or any of its
affiliates acquires or invests in any company or group of
companies, whether through an acquisition of assets or stock,
merger, consolidation or other combination or otherwise, which
includes among its business operations the manufacture and sale
of metrology products performing functions similar to those of
the products manufactured and sold by the DEA Companies to the
extent that sales of such products constitute only an immaterial
portion of the total revenues of the acquired business. In this
connection Finmeccanica represents to Brown & Sharpe that it has
no present intention of acquiring any company or group of
companies engaged in the business of manufacturing and selling
such metrology products.
(b) Finmeccanica further agrees that for a period of three
(3) years after the Closing Date it will not, without the prior
written consent of Brown & Sharpe, recruit, offer employment,
including employment as a consultant, to any person who is an
employee of Brown & Sharpe (including the Company and its
Subsidiaries) or any subsidiary, group, or division of Brown &
Sharpe (including the Company and its Subsidiaries), unless such
person has been terminated by the Company or a Subsidiary.
13. Agreed Exchange Ratio. Except as otherwise specified in
---------------------
this Agreement, the Agreed Exchange Ratio for the purposes of
-62-
calculating 8 Billion Lit. Indebtedness of the Company and the
Subsidiaries on the Closing Date shall be $1 = Lit. 1,568. For
all other purposes, the Agreed Exchange Ratio shall be the U.S.
Dollar/Lit. exchange rate, as published in SOLE 24 ORE, in effect
-----------
on the date preceding the date a payment of cash or delivery of
Brown & Sharpe Purchase Price Shares is required.
14. Entire Agreement. This Agreement, together with the
----------------
schedules and exhibits hereto, constitutes the entire agreement
between the parties hereto pertaining to the subject matter
hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties,
representations, or other agreements between the parties in
connection with the subject matter hereof except as specifically
set forth or incorporated herein; provided, however, that the
-------- -------
provisions of Section 9 shall survive the termination of this
Agreement pursuant to Section 17.
15. Amendment. This Agreement may be amended by the parties
---------
hereto at any time, but only by an instrument in writing duly
executed and delivered on behalf of each of the parties hereto.
16. Press Releases. Each of the parties agrees that they (and
--------------
their respective affiliate and subsidiaries) will not issue any
announcements or reports, or confirm any statements by third
parties pertaining to any of the proposed transactions until
after the Closing Date under this Agreement except as may be
advisable for Brown & Sharpe under U.S. securities laws or
Finmeccanica under Italian securities laws upon advice of counsel
or except as may be mutually agreed upon by the parties.
17. Termination. This Agreement may be terminated without
-----------
liability:
(a) at any time by mutual agreement of Brown & Sharpe and
Finmeccanica;
(b) by either Brown & Sharpe or Finmeccanica if, by the
close of business on October 31, 1994, or such later
date as the parties may mutually agree, the
consummation of the transactions hereby contemplated to
take place on the Closing Date shall not have occurred;
provided, however, that this Agreement may not be
-------- -------
terminated by a party which at such time is in material
breach of a provision of this Agreement.
18. Headings. Section headings are not to be considered part of
--------
this Agreement and are included solely for convenience and are
not intended to be full or accurate descriptions of the content
thereof. References to sections are to portions of this
Agreement unless the context requires otherwise.
-63-
19. Exhibits, etc. Exhibits and schedules referred to in this
--------------
Agreement are an integral part of this Agreement.
20. Assignment, Successors and Assigns; Benefits of Agreement.
---------------------------------------------------------
This Agreement may not be assigned by any party without the prior
written consent of the other parties hereto, except that Brown &
Sharpe may designate one or more of its Subsidiaries to acquire
all or some of the DEA Shares. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective transferees,
successors and, subject to the foregoing, their assigns, and
shall not inure to the benefit of, or be enforceable by, any
other person or entity.
21. Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed
to have been duly given if delivered by hand or courier or
delivery service or mailed, first-class postage prepaid,
(a) if to Brown & Sharpe:
Brown & Sharpe Manufacturing Company
200 Frenchtown Road
Precision Park
North Kingstown, Rhode Island 02852
USA
Attn: Vice President and Chief
Financial Officer
In each case, with a copy to:
Ropes & Gray
One International Pace
Boston, MA 02110-2624
USA
Attn: Howard K. Fuguet, Esq.
(b) if to Finmeccanica:
Elsag Bailey
via G. Puccini, 2
16154 Genova
Italy
Attn: Chief Financial Officer and
General Counsel
in each case, with a copy to:
Coudert Brothers
-64-
1114 Avenue of the Americas
New York, NY 10036-7794
USA
Attn: W. Preston Tollinger, Esq.
or, in each case, at such other address as the party receiving
notice shall have furnished in writing to the party giving
notice.
22. Accounting Terms; Proxy Statement; Registration Statement.
---------------------------------------------------------
All accounting terms not otherwise defined herein have with
respect to Finmeccanica and its affiliates the meanings assigned
to them in accordance with generally accepted Italian accounting
principles or, in the absence thereof, with accounting principles
as recommended by the IASC, except for the financial statements
to be delivered for inclusion in the Brown & Sharpe Proxy
Statement and the Brown & Sharpe Registration Statement which
shall have the meanings assigned to them in accordance with
United States generally accepted accounting principles, and shall
have, with respect to Brown & Sharpe and its affiliates, the
meanings assigned to them in accordance with United States
generally accepted accounting principles.
The term "Brown & Sharpe Proxy Statement" shall mean the
definitive proxy statement of Brown & Sharpe as filed or to be
filed with the Securities and Exchange Commission relating to the
transactions contemplated hereby.
The term "Brown & Sharpe Registration Statement" shall mean
a Registration Statement on Form S-1 of Brown & Sharpe covering
the registration of an aggregate of $75,000,000 of debt
securities of Brown & Sharpe to be offered and sold under the
Securities Act.
23. Severability. The provisions of this Agreement are
------------
severable, and in the event that any one or more provisions are
deemed illegal or unenforceable, the remaining provisions shall
remain in full force and effect.
24. Arbitration. All disputes, differences, controversies or
------------
claims arising in connection with, or questions occurring under,
this Agreement (other than those relating to the Post-Closing
Purchase Price Adjustment, which shall be resolved in the manner
provided in Section 1.4) shall be finally settled under the Rules
of Arbitration (the "Rules") of the International Chamber of
Commerce ("ICC") by an arbitral tribunal composed of three
arbitrators appointed in accordance with said Rules.
24.1. Each of Brown & Sharpe and Finmeccanica shall each
nominate one arbitrator in accordance with the Rules. If a party
fails to nominate an arbitrator within thirty (30) days from the
date when the claimant's request for arbitration has been
-65-
communicated to the other party, such appointment shall be made
by the ICC International Court of Arbitration.
24.2. The two arbitrators so appointed shall agree upon the
third arbitrator who shall act as Chairman of the arbitral
tribunal. If said two arbitrators fail to nominate a Chairman,
the Chairman shall be selected by the ICC International Court of
Arbitration.
24.3. In all cases the Chairman of the arbitral tribunal
shall be a lawyer fluent in English and not of the same
nationality as either party.
24.4. The place of arbitration shall be London, England.
24.5. The arbitral proceedings shall be conducted in the
English language.
24.6. The parties hereby exclude any right of appeal to any
court on the merits of the dispute.
24.7. Judgment on the award may be entered in any court
having jurisdiction over the award or any of the parties or their
assets.
24.8. At the time of the arbitration, the parties may agree
in writing to submit the dispute to a single arbitrator. In such
event said single arbitrator shall be appointed by the ICC
International Court of Arbitration, and shall be subject to the
same qualifications as would have been the Chairman under Section
24.3 hereof.
24.9. Nothing contained in this arbitration clause shall
prevent either party from seeking injunctive relief or interim
measures of protection in the form of pre-award attachment of
assets from a court of competent jurisdiction.
25. Governing Law. This Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws (other than
those with respect to conflict of laws) of the State of New York.
26. Tax Return Cooperation. (a) Brown & Sharpe shall provide
----------------------
Finmeccanica or any affiliate that Finmeccanica may designate
(hereinafter the "Finmeccanica Group") with such financial,
accounting, tax and other information with respect to the Company
and the Subsidiaries as shall be reasonably required by the
Finmeccanica Group to enable the Finmeccanica Group to prepare:
(i) the income tax returns of the Company and the
Subsidiaries for the taxable years ending on December 31, 1993
and for any other taxable periods beginning before the Closing
Date and ending on or before the Closing Date, including, without
limitation, the U.S. Federal income tax returns and the U.S.
-66-
state and local corporate franchise and income tax returns of DEA
Company (which state and local tax returns may be prepared on a
separate return basis or on a unitary, combined or consolidated
basis),
(ii) any non-income tax return or report properly due by the
Company or any Subsidiary for any taxable periods beginning
before and ending on or before the Closing Date, except for any
return for registration or capital tax, if any, arising in
connection with the reduction of Indebtedness of DEA and its
subsidiaries required by Section 6.4 and other applicable
sections of this Agreement required to be filed by the Company or
any of its Subsidiaries for any period beginning on or after
January 1, 1994.
(iii) any income tax returns and non-income tax return
or report of the Finmeccanica Group which requires information
with respect to the Company or any Subsidiary.
(b) At the reasonable request of the Finmeccanica Group,
Brown & Sharpe shall cause a representative of the Company, or
the relevant Subsidiary, or any successor to the Company or the
relevant Subsidiary to sign any returns and related consents
prepared by the Finmeccanica Group for the Company or its
Subsidiaries for taxable periods ending on or before the Closing
Date pursuant to this Section 26.
(c) The Finmeccanica Group shall provide Brown & Sharpe,
the Company, any Subsidiary, or any affiliate of Brown & Sharpe
that Brown & Sharpe may designate (collectively, the "Brown &
Sharpe Group") with such financial, accounting, tax and other
information with respect to the Company and the Subsidiaries as
shall be reasonably required by the Brown & Sharpe Group to
enable the Brown & Sharpe Group to prepare:
(i) the income tax returns of the Company and the
Subsidiaries for any taxable periods beginning on or before the
Closing Date and ending after the Closing Date and for the two
taxable years following each such period, including, without
limitation, the Italian national income tax returns and the
Italian local income tax returns of the Company and comparable
returns for the Subsidiaries in other countries,
(ii) any non-income tax return or report properly due by the
Company or any Subsidiary for any taxable periods beginning on or
before and ending after the Closing Date, and any return for
registration or capital tax, if any, arising in connection with
the reduction of Indebtedness required by applicable sections of
this Agreement that is required to be filed by the Company or its
Subsidiaries for any period beginning on or after January 1,
1994;
-67-
(iii) any income tax return, non-income tax return or report
of the Brown & Sharpe Group which requires information with
respect to the Company or any Subsidiary.
(d) Brown & Sharpe will be responsible for filing, and
agrees to file or to cause the Company and the Subsidiaries to
file, all tax returns and reports of the Company and the
Subsidiaries for any taxable periods beginning on or after the
Closing Date and any return for registration or capital tax, if
any, arising in connection with the reduction of Indebtedness
required by applicable sections 6.4, 10.12 and 1.4(f) of this
Agreement that is required to be filed by the Company or its
Subsidiaries for any period beginning on or after January 1,
1994.
(e) None of the provisions of this Section 26 shall relieve
Finmeccanica of its obligation to indemnify, defend and hold
harmless Brown & Sharpe and its directors, officers and
affiliates as more fully provided in Section 8.1 of this
Agreement, except to the extent attributable to the acts or
omissions of Brown & Sharpe, of its directors, officers or
affiliates.
27. Counterparts. This Agreement may be executed simultaneously
------------
in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
-68-
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement, attested by their respective Secretaries as of
the day and year first above written.
ATTEST: BROWN & SHARPE MANUFACTURING COMPANY
/s/ James W. Hayes III By /s/ Fred M. Stuber
----------------------- ---------------------------------
Secretary Title: President, Chief Executive
Officer
ATTEST: FINMECCANICA S.p.A. (through its
Elsag Bailey Division)
/s/ Mario Orlando By /s/ Enrico Albareto
-------------------- -------------------------------
Secretary Title: President
-69-
ANNEX A
List of DEA Companies
---------------------
1. D.E.A. SpA (Italy)
Outstanding Capital Stock: 16,300,000 shares; nominal
-------------------------
value: L.1,000/share
Corporate Headquarters: Corso Torino, 70, Moncalieri
----------------------
(TO), Italy
2. D.E.A. Company (USA)
Outstanding Capital Stock:
-------------------------
Corporate Headquarters: 37100 Plymouth Rd., Livonia,
----------------------
Michigan 48150, U.S.A.
3. D.E.A.K.K. (Japan)
Outstanding Capital Stock:
-------------------------
Corporate Headquarters: 1030 Kawaraguchi-Ebina Shi,
----------------------
Kanagawa Pref., Japan
4. D.E.A. France S.A. (France)
Outstanding Capital Stock:
-------------------------
Other Shareholders:
------------------
Corporate Headquarters: 122, Rue Marcel Hartmann,
----------------------
94853 Ivry-sur-Seine CEDEX
France
5. D.E.A. GmbH (Germany)
Outstanding Capital Stock:
-------------------------
Corporate Headquarters: Praunheimer Landstr. 32, 6000
----------------------
Frankfurt 90, Germany
6. D.E.A. IBERICA S.A. (Spain)
Outstanding Capital Stock:
-------------------------
Corporate Headquarters: Ctra. del Mig, 37, 08940
----------------------
CORNELLA (Barcelona), Spain
-70-
7. D.E.A. U.K. (United Kingdom)
Corporate Headquarters: Terminal Three, 3B2,
----------------------
Sontehill Green, WESTLEA
SWINDON, WILTS, SN5 7HB
United Kingdom
-71-
EXECUTION VERSION
AMENDMENT NO. 1 TO ACQUISITION AGREEMENT
----------------------------------------
THIS AMENDMENT NO. 1 TO ACQUISITION AGREEMENT made as
of this 31st day of July, 1994 by and between Brown & Sharpe
Manufacturing Company, a Delaware corporation with its principal
offices at 200 Frenchtown Road, Precision Park, North Kingstown,
Rhode Island 02852 U.S.A. ("Brown & Sharpe") and Finmeccanica
S.p.A., an Italian corporation, operating through its Elsag
Bailey division, with offices at Via Puccini, 2, 16154 Genoa,
Italy ("Finmeccanica").
WHEREAS, the parties have entered into an Acquisition
Agreement dated as of June 10, 1994 ("Acquisition Agreement")
with regard to the acquisition by Brown & Sharpe of all of the
issued and outstanding shares of capital stock of DEA S.p.A., a
subsidiary of Finmeccanica;
WHEREAS, the parties wish to amend the Acquisition
Agreement in the manner provided herein;
NOW, THEREFORE, Finmeccanica and Brown & Sharpe hereby
agree as follows:
1. Definitions. Capitalized terms used herein and
-----------
not otherwise defined shall have the meanings ascribed to them in
the Acquisition Agreement.
2. Amount of Assumed Indebtedness. (a) The reference
------------------------------
to "8,000 Million Italian Lire ("Lit.") denominated Indebtedness
("Lit. Debt")" in Section 1.3A, clause (w) of the Acquisition
Agreement shall be amended by substituting "9,814 Million Italian
Lire ("Lit.") denominated Indebtedness" therefor.
(b) The reference to "$9,897,960 U.S. Dollar
denominated Indebtedness ("U.S. Debt")" in Section 1.3A, clause
(x) of the Acquisition Agreement shall be amended by substituting
"$8,741,072 U.S. Dollar denominated Indebtedness ("U.S. Debt")"
therefor.
(c) The reference to "8 Billion Lit. Indebtedness" in
Section 13 of the Acquisition Agreement shall be amended by
substituting "9,814 Million Lit. Indebtedness" therefor.
(d) Any reference in Schedule 3.5.1 or any other
section or schedule of the Acquisition Agreement to "8 Billion
Lit. Indebtedness" or to "$9,897,960 U.S. Dollar denominated
Indebtedness" shall be deemed revised to refer to "9,814 Million
Lit. Indebtedness" and to "$8,741,072 U.S. Dollar denominated
Indebtedness", respectively. Schedule 3.5.1 to the Acquisition
Agreement is hereby substituted in its entirety by Exhibit A
attached hereto and incorporated herein by reference.
(e) The parties hereby agree that the increase in Lit.
Debt provided for at Section 2(a) above results specifically and
solely from the Lit. 3,033 Million in aggregate principal amount
of new Lit. Debt incurred by the Company during the period from
January 1, 1994 through July 31, 1994 by virtue of loans advanced
to the Company under Contract Nos. 1171, 2229 and 2230 with the
Ministero dell'Industria of the Republic of Italy (net of
repayments of principal made by the Company in respect of
Indebtedness owed to Istituto Mobiliare Italiano, Mediocredito
Piemontese and Ministero dell'Industria).
(f) The amount of the accrual for TFR Liabilities of
the Company and the Subsidiaries attributable to CIGS Employees
reflected on and as of the date of the Pricing Balance Sheet, not
to exceed Lit. 1,700 Million, shall be applied solely to reduce
the amount of U.S. Debt reflected in Section 1.3A, clause (x) of
the Acquisition Agreement, as amended by Section 2(b) above, and
shall be converted to U.S. Dollars at an exchange rate of
U.S.$1.00/Lit. 1585.90, in lieu of the U.S. Dollar/Lit. exchange
rate in effect on the business day immediately preceding July 31,
1994 as published in Sole 24 Ore. For purposes of illustration
-----------
only, in the event that such accrual for TFR Liabilities is Lit.
1,700 Million, the countervalue in U.S. Dollars which shall be
applied to reduce U.S. Debt shall be US$1,071,946.
3. Continuing Effectiveness. Except to the extent
------------------------
modified by this Amendment No. 1 to Acquisition Agreement, all
terms and conditions of the Acquisition Agreement shall continue
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Amendment No. 1 to Acquisition Agreement, as
attested by their respective Secretaries, as of the date and year
first above written.
ATTEST: BROWN & SHARPE MANUFACTURING
COMPANY
/s/ James W. Hayes III By: /s/ Fred M. Stuber
------------------------ --------------------------
Secretary Title: President, Chief
Executive Officer
ATTEST: FINMECCANICA S.p.A. (through its
Elsag Bailey Division)
/s/ Mario Orlando By: /s/ Enrico Albareto
------------------------ --------------------------
Secretary Title: President
-2-
EXHIBIT A
SITUAZIONE DEBITI M/L AL 31.7.94
Valori in milioni di Lit.
================================================================================
ENTE SALDO AL RIMBORSI ACCENSIONI SALDO AL
31.12.93 31.7.94
--------------------------------------------------------------------------------
ISTITUTO MOBILIARE ITALIANO (IMI) 3.732 -811 2.921
--------------------------------------------------------------------------------
MEDIOCREDITO PIEMONTESE 326 -326
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MINISTERO DELL'INDUSTRIA 4.122 -262 3.033 6.893
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Totale 8.180 -1.389 3.033 9.814
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N.B. Le accensioni si riferiscono a:
Completamento del contratto n.1171 per Lit. 365 milioni.
Il finanziamento totale di tale contratto e' di Lit. 1.870 milioni.
Attualmente in preammortamento al 2.07% annuo
I rimborsi avverranno dal 18.4.95 in 10 rate annuali al tasso del 8,28%.
Accensione di 2 nuovi contratti per Lit. 2.668 milioni. Tale finanziamento
dovra' essere di Lit. 4.108 milioni.
Il finanziamento prevede un tasso annuo di preammortamento del 2,055% ed il
rimborso al tasso del 8,22%.
Dates Referenced Herein and Documents Incorporated by Reference
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