EXECUTION COPY
STOCK PURCHASE AGREEMENT (THE "AGREEMENT"), ENTERED INTO BY AND BETWEEN
MESSRS. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ F. ("▇▇▇▇▇▇") AND ▇▇▇▇▇▇▇ ▇▇▇▇▇ F. ("▇▇▇▇▇", AND
JOINTLY WITH ▇▇▇▇▇▇, THE "SELLERS"), CONSOLTEX MEXICO, S.A. DE C.V.
("PURCHASER") AND ROYALTON MEXICANA, S.A. DE C.V. (THE "COMPANY"),
PURSUANT TO THE FOLLOWING REPRESENTATIONS, WARRANTIES AND CLAUSES:
REPRESENTATIONS AND WARRANTIES
1) The Sellers hereby represent and warrant:
a) Each of ▇▇▇▇▇▇ and ▇▇▇▇▇ are residents of the United Mexican
States ("MEXICO") with sufficient legal capacity to enter into
this Agreement and comply with their obligations hereunder.
b) ▇▇▇▇▇▇ is married under separation of marital property
(SEPARACION DE BIENES) and ▇▇▇▇▇ is married under community
property (SOCIEDAD CONYUGAL) as evidenced by the respective
marriage certificates (ACTA DE MATRIMONIO), copies of which are
attached hereto as EXHIBIT "A".
c) Neither the execution nor delivery by each Seller of this
Agreement nor compliance by each Seller with any of the
provisions hereof, will violate, conflict with or result in a
breach of or default under, any loan agreement, commitment or
obligation of the borrowing of money or the obtaining of
credit, or any other agreement, license, permit or other
instrument to which each Seller or the Company is a party or by
which such Seller or the Company or their properties or assets
may be bound, will violate any order, rule, regulation,
injunction, decree, judgment, statute, law or ruling of any
court, administrative agency or governmental agency applicable
to such Seller, the Company, any of their properties or assets,
other than as described in EXHIBIT "B" hereto.
d) Each Seller has full power and authority to enter into, and
perform his obligations hereunder, which constitute valid and
binding obligations of each Seller.
e) Neither the Sellers nor the Company shall be required to obtain
any consent or approval from any third parties or regulatory
authorities, for the execution of this Agreement by each Seller
or for the compliance by each Seller with any of the provisions
hereof, except for the consent of the wife of ▇▇▇▇▇ which ▇▇▇▇▇
hereby grants on her behalf.
f) The Company (the term "COMPANY" shall hereinafter include any
corporations merged into the Company, to the extent these
representations and warranties refer to obligations or facts in
the past in respect of which such merged corporations are
relevant) is a stock corporation duly organized and validly
existing under the laws of Mexico, with a paid-in minimum
capital of Ps.$9,000.00 (Nine Thousand Pesos 00/100), and a
paid-in total capital of Ps.$7,216,946.00 (Seven Million Two
Hundred Sixteen Thousand Nine Hundred Forty Six Pesos 00/100),
represented by 7,216,946 outstanding and fully paid shares with
a face value of Ps.$1.00 (One Peso 00/100) each. The Company
has its corporate domicile located in Naucalpan de Jurez,
Estado de Mexico, and is duly registered in the Public
Registry of Commerce of Tlalnepantla, Federal District under
number 547, Volume Eight, Book First on January 14, 1985.
g) ▇▇▇▇▇▇ owns 3,608,473 shares representing 50% (fifty percent)
of the capital stock of the Company (the "▇▇▇▇▇▇ SHARES")
represented by stock certificates No. F02 and V04, copies of
which are attached hereto as EXHIBIT "C".
h) ▇▇▇▇▇ owns 3,608,473 shares representing 50% (fifty percent) of
the capital stock of the Company (the "▇▇▇▇▇ SHARES", and
jointly with the ▇▇▇▇▇▇ Shares, the "SHARES") represented by
stock certificates No. F01 and V03 copies of which are attached
hereto as EXHIBIT "D".
i) The shares are free and clear of all liens, guarantees,
security interests, claims or other encumbrances and no
options, warrants or other rights have been granted to third or
related parties with respect of the Shares. The Shares
represent 100% (one hundred percent) of the capital stock of
the Company.
j) The Company's corporate registries, including but not limited
to its shareholders' minutes registry its stock registry, and
all other corporate documents which are or may have been
mandatory pursuant to Mexican corporate law, are duly kept by
the Company, up to date and recorded or in process of recording
with the corresponding public registry where applicable.
k) SCHEDULE "1" contains a complete and current list of all of the
powers of attorney granted by the Company which are still in
effect as of the Closing Date (as defined herein).
l) SCHEDULE "2" contains a complete and current list of all the
accounts opened and maintained by the Company with domestic or
foreign banks or brokerage houses.
m) Except as disclosed in SCHEDULE "3", the Company owns no
relevant capital stock or other equity or property interest in
any other corporation, partnership or other entity.
n) The Company's balance sheets, as of December 31, 1995, 1996,
1997 and 1998, and the related statements of income,
shareholders equity and changes in the financial position for
the years then ended, were audited by ▇▇▇▇, ▇▇▇▇▇ y ▇▇▇▇▇▇▇,
S.C. ("AGL"), a copy of which has been delivered to the
Purchaser or, in the case of the fiscal year of 1998 will be
delivered to the Purchaser prior to the Closing Date, and are
attached hereto as SCHEDULE "4", have all been prepared in
accordance with generally accepted accounting principles in
effect in Mexico consistently applied through the indicated
periods (except as otherwise stated in such financial
statements) and fairly represent the financial condition
(including, but not limited to, all direct and contingent
liabilities and fixed and current assets) of the Company as of
the respective dates and the results of operation of the
Company for the indicated periods; there have been no dividend
payments (or other distributions) to the Company's shareholders
since December 31, 1998, or dividends (or other distributions)
not reflected in the aforementioned financial statements, and
no material adverse changes in the business or conditions,
financial or otherwise, of the Company, except in the ordinary
course of business and except for changes due to any political
or economic situations in Mexico that could directly or
indirectly adversely affect the business of the Company, and to
the best of its knowledge no fact or condition exists or is
contemplated or threatened which might cause such a material
adverse change in the future (except for any political or
economic events in Mexico that could directly or indirectly
adversely affect the business of the Company); the Company has
conducted its business since the date of its incorporation in
accordance with generally accepted business practices.
o) Except as disclosed in SCHEDULE "5", no member of the board of
directors of the Company (including, without limitation ▇▇▇▇▇▇
and ▇▇▇▇▇), director, officer, employee or affiliate of the
Company (each a "RELATED PERSON") or any member of any such
Related Person's family (up to the second generation in lineal
and/or collateral descendency) is a party to any contract,
agreement, arrangement or transaction with the Company.
p) Except as disclosed in SCHEDULE "6" (i) the Company has filed
or caused to be filed in a timely manner with the appropriate
governmental authorities all Tax Documents required to be filed
by it on or prior to the Closing Date (as defined herein)
(taking into account any properly granted extensions of time to
file any Tax Documents), and all such Tax Documents are true,
complete and correct in all material respects, (ii) all Taxes
required to be paid by the Company on or prior to the Closing
Date have been or will be timely paid in full and, where
payment of Taxes of the Company with respect to taxable years
or other taxable periods ending on or prior to the Closing Date
is not yet due, such Taxes are or will be, by the Closing Date,
reflected as Tax reserves (other than reserves for deferred
income Taxes established to reflect the difference between book
and tax basis) in the financial statements of the Company,
(iii) there are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any Taxes or
Tax Documents of the Company for any taxable period, and the
Company has not requested an extension of time within which to
file any Tax Document in respect of any taxable year, which Tax
Document has not since been filed, (iv) no audit or other
administrative proceeding or court proceeding has formally
commenced or is presently pending with regard to any Taxes or
Tax Documents of or including the Company, and no notification
has been received by the Company or the Sellers with respect to
the Company that such an audit or other proceeding is pending
or, to the best knowledge of the Sellers, threatened with
respect to any Taxes due from or with respect to the Company or
any Tax Document filed (or required to have been filed) by or
with respect to the Company, (v) there are no liens for Taxes
upon (A) the assets of the Company or (B) the Shares, (vi) the
Company is not a party to, or bound or has any obligation under
any agreement or arrangement providing for the allocation,
sharing or indemnification of Taxes nor is otherwise obligated
to indemnify any party for any Taxes, (vii) no issue has been
raised by any taxing authority in any audit of the Company that
if raised with respect to any other period not so audited could
be expected to result in a proposed deficiency for any period
not so audited, (viii) the Company is not a party to any
election with respect to Taxes that would have a material
ongoing effect on the Company, and (ix) no unpaid deficiencies
for Taxes of the Company have been claimed, proposed or
assessed by any taxing authority.
For purposes of this Agreement, (i) "TAXES" shall mean all
taxes, charges, fees, levies or other assessments imposed by
any taxing authority, including, without limitation, income,
value added, asset, gross receipts, sales, use, AD VALOREM,
goods and services, capital, transfer, bulk transfer,
franchise, profits, license, withholding, payroll, employment,
employer health, social contributions, social security, excise,
estimated, severance, stamp, occupation, property or other
taxes, customs duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties,
additions to tax or additional amounts, including any amounts
payable as a result of the application of monetary correction
or any other similar factor, imposed by any taxing authority;
and (ii) "TAX DOCUMENT" shall mean any report, return,
document, declaration, schedule or any other information or
filing required to be supplied, including by electronic means
or otherwise, to any governmental authority or jurisdiction
with respect to Taxes including, without limitation, any
amendments thereto.
q) Except as disclosed in SCHEDULE "7", all accounts, books and
records material to the Company's business, have been fully,
properly and accurately kept in accordance with generally
accepted Mexican accounting principles and are kept at the
Company's facilities.
r) As of February 26, 1999, the Company has not, except for
transactions in the ordinary course of business and consistent
with past practice, (i) incurred any liability or assumed any
obligation of any type, (ii) entered into any transaction which
implies the sale or transfer of assets of the Company in excess
of U.S.$10,000.00 (Ten Thousand United States Dollars 00/100).
s) As of February 26, 1999, the Company does not have any ongoing
or outstanding transaction with the government of Mexico or any
political subdivision or agency thereof.
t) SCHEDULE "8" contains a complete and current list of (i) all
real property which the Company owns, leases, subleases or
uses, as the case may be, (ii) any notice from governmental
agencies received in regards to such properties of any
violations of law, and (iii) a list of encumbrances, defects,
easements, rights of way or other similar charges or
limitations with respect thereto.
u) SCHEDULE "9" contains a complete list of all outstanding
credits, loans, or other indebtedness relating to borrowed
money or guarantee of any of the foregoing setting forth the
maturities thereof.
v) The Company is not in default with respect to any of its debts
or obligations as described above and in SCHEDULE "9".
w) The inventories of the Company are in a condition such that
they can be sold or converted into finished garment which can
then be sold by the Company in the ordinary course of its
business as regular merchandise without any discount (except
for discounts per volume). The inventories do not consist of
items that are obsolete, damaged or slow-moving or any item
held in consignment. The Company's inventories are valued at
the lower of cost or net realizable value.
x) SCHEDULE "10" contains a complete and current list of (i) all
collective bargaining agreements or similar agreements with any
labor unions or associations representing employees of the
Company, (ii) all of the Company's non unionized employees,
officers and agents, their salaries and any benefit granted by
the Company in excess of those mandated by Mexican law and the
collective bargaining agreements, and (iii) all notices
received by the Company in regards to collective or individual
labor claims.
y) (i) There is no labor strike, slowdown, lockout, work stoppage,
arbitration, lawsuit or administrative proceeding relating to
labor or employment matters or other labor dispute pending
against or threatened against the Company, (ii) the Company
does not incur in any unfair labor practice, and (iii) the
Company is and has at all times been in compliance with all
applicable labor laws.
z) The closing of the transactions hereunder will not trigger any
payment to any member of the board of directors or of the
management of the Company (except for the purchase price
payable to ▇▇▇▇▇▇ and ▇▇▇▇▇ hereunder).
aa) The Company has not entered into any management, agency,
consulting, distribution, marketing and other agreements
involving compensation for services rendered or to be rendered
in excess of U.S.$10,000.00 (Ten thousand United States Dollars
00/100) per year except as disclosed in the Company's financial
statements which are attached hereto as SCHEDULE 4.
ab) Except as disclosed in SCHEDULE "11" there is no action, suit,
proceeding or governmental investigation of any nature
(including civil, mercantile, criminal and administrative)
pending or threatened against or affecting the Company, any of
its properties or assets.
ac) SCHEDULE "12" contains a complete and current list of insurance
policies (including insured amounts, insured risks, and
deductible amounts) which the Company maintains with respect to
its business properties or employees, and such policies are
presently in full force and effect and the corresponding
premiums are current in payment.
ad) SCHEDULE "13" contains a complete and current list of all
patents, trademarks, tradenames, inventions and similar
intellectual property owned by the Company or licensed by the
Company from third parties which are all free of any
encumbrance and duly registered with the competent Mexican
authorities, and such registrations are in full force and
effect; the Company is not infringing any trademark or other
intellectual property right of third parties and is not using
any trade-▇▇▇▇ or intellectual property owned by any Related
Person.
ae) (i) The Company has obtained all permits, licenses,
authorizations and registries as required under Mexican
environmental laws for conducting its business and operating
its properties, and such permits, licenses and authorizations
are in full force and effect, (ii) the Company has filed all
applications necessary to renew all its permits, licenses,
authorizations and registrations, (ii) the Company is in
compliance with all applicable environmental laws, (iii) the
Company has delivered to the Purchaser all environmental
reports filed with Mexican or foreign authorities, (iv) neither
the Company nor the Sellers have knowledge or have received any
written notice regarding action, suit, proceeding or
governmental investigation relating in any way to environmental
laws, (v) the Company has not released, discharged or otherwise
disposed of, any substance deemed as hazardous or prohibited by
the applicable environmental laws on, adjacent or beneath any
of the properties owned, leased, subleased or otherwise used by
the Company, (vi) the Company has not been declared responsible
for any actions toward cleaning up the environment, (vii) no
employee or officer of the Company has been subject to contact
with hazardous substances, and (viii) the Company has not
entered into any agreement, contract or other instrument in
which it has assumed any liability or obligation in regards to
the generation, manufacture, use, transportation or disposal of
hazardous substances.
af) The Company is not party to any written or oral contract or
agreement presently in effect, (i) entered into in the ordinary
course of business which involves a delivery obligation by the
Company for more than 3 (three) months, (ii) entered into
outside of the ordinary course of business, (iii) covering a
period of more than 12 (twelve) months (except the Lease
Agreement), or (iv) with any customer, supplier or third party
which by its terms (x) could be canceled or the pricing
conditions thereof changed in case of a change of ownership or
management of the Company (except for the agreement entered
into with ▇▇▇▇▇▇ ▇▇▇▇▇▇), (y) would require a payment of a
penalty or fee, or any accelerated payment as a result of the
transactions contemplated by this Agreement, or (z) prevent the
Company from entering any specific relevant market or
manufacturing any type of product.
ag) The Company is in compliance in all material aspects with all
laws, regulations, administrative permits and acts, judicial
orders and decrees applicable to it, except as provided to the
contrary in this Agreement or its Schedules.
ah) There is no material agreement or other restriction binding on
the Company, nor any other material fact or circumstance
relevant to the Company, with material adverse effects to the
Company, which has not been disclosed to the Purchaser and
which, if disclosed to the Purchaser, would have adversely
affected the decision of the Purchaser to enter into this
Agreement. This representation excludes any circumstance or
fact deriving from any political or economic events in Mexico
which may affect the Company's business.
II) The Purchaser hereby represents and warrants:
a) It is a stock corporation duly organized and validly existing
under the laws of Mexico.
b) It has full power and authority to enter into, and perform its
obligations hereunder, which constitute valid and binding
obligations of the Purchaser.
c) It shall not be required to obtain any consent or approval of
any third parties or regulatory authorities, for the execution
of this Agreement or for the compliance with any of the
provisions hereof, other than those consents or approvals it
has already obtained.
d) Any two of Messrs. ▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇ or any of them together with either of ▇▇▇▇▇ ▇▇▇▇▇
or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, have full power to execute and
deliver this Agreement on behalf and in representation of the
Purchaser, and to bind the Purchaser pursuant to the terms
hereof, and such authority has not been revoked or modified
whatsoever.
III. The Company hereby represents and warrant:
a) That it is a stock corporation duly organized and validly
existing under the laws of Mexico.
b) That it wishes to act as guarantor of certain obligations of
the Purchaser in accordance to the terms of this Agreement.
c) Its representatives have sufficient authority to subscribe this
Agreement; such authority has not been revoked nor modified in
any way.
NOW THEREFORE, based upon the foregoing representations and
warranties, the parties hereto agree as follows:
CLAUSES
FIRST. SALE OF SHARES; CLOSING DATE. Subject to the terms and
conditions set forth herein, each Seller hereby agrees to sell to the
Purchaser and the Purchaser hereby agrees to purchase from each Seller
the Shares owned by such Seller, on the date on which all conditions set
forth in Clause Sixth have been met and at the latest on February 26,
1999 (the "CLOSING DATE"). On the Closing Date, each Seller shall
deliver the certificates evidencing the Shares sold by it, duly endorsed
in favor of the Purchaser and instruct the Secretary of the board of
directors of the Company to make the corresponding notations in the stock
registry book of the Company, and the Purchaser shall pay to the Sellers
the Purchase Price (as defined herein) as set forth in Clause Second
hereof. On the Closing Date, the Purchaser will designate a third party
in favor of whom 1 (one) of the Shares will be transferred so that the
Company will have, at all times, 2 (two) shareholders.
SECOND. PRICE; ADJUSTMENTS; TAXES. a) The purchase price for the Shares
is Ps.$25,700,000.00 (Twenty five million seven hundred thousand Pesos
00/100) and U.S.$1,760,000.00 (One million seven hundred and sixty
thousand United States Dollars 00/100) (the "PURCHASE PRICE"). The
Purchase Price will be divided between the Sellers based upon their
participation in the Company's capital stock. Therefore, the Purchaser
will pay each Seller his respective participation in the Purchase Price
as instructed thereby. The Purchase Price will be paid as follows:
(i) Ps.$25,700,000.00 (Twenty five million seven hundred thousand Pesos
00/100) on the Closing Date ("TRANCHE A").
(ii) U.S.$880,000.00 (Eight hundred and eighty thousand United States
Dollars 00/100) on February 26, 2000 ("TRANCHE B").
(iii) U.S.$220,000.00 (Two hundred and twenty thousand United States
Dollars 00/100) each of May 26, August 26, November 26, 2000 and
February 26, 2001 ("TRANCHE C").
Interest will be payable on the outstanding amounts of Tranche B and
Tranche C as of the Closing Date at an annual rate equal to the LIBOR
Rate plus 2 (two percentage points). Interest will be paid on such
outstanding amounts on February 26, May 26, August 26, November 26, 2000
and February 26, 2001 in arrears plus the respective value added tax.
Payment of Tranche B and Tranche C, along with interest thereon will be
guaranteed by means of a corporate guarantee granted in favor of the
Sellers by Consoltex (USA), Inc. and Royalton in the terms hereof.
For the purposes of the preceding paragraph, "LIBOR Rate" shall mean, the
arithmetic average (rounded upwards to the nearest 1/16 of 1%) as
determined by the Purchaser, of the offered quotations of the principal
London offices of the banks appearing on the display page designated as
page "LIBO" on the Reuters Monitor Money Rates Service (or such other
page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates for United States dollar
deposits of leading banks, (the "Reuters Screen"), at approximately 11:00
a.m. London time on each 6 (six) month anniversary of the Closing Date
for United States dollars deposits made for 6 (six) month periods and in
amounts approximately equal to Tranche B and Tranche C, as shown on the
Reuters Screen.
In the event ▇▇▇▇▇▇ resigns from his executive position at the Company,
▇▇▇▇▇▇ will not receive any payment under Tranche B and Tranche C, in the
understanding that such scenario will have no effect on ▇▇▇▇▇'▇ right to
receive his share of Tranche B and Tranche C. In addition, in the event
that during his tenure at the Company, the Company suffers any damages or
losses due to ▇▇▇▇▇▇'▇ willful misconduct, such damages and losses may be
set off against or retained from amounts due to ▇▇▇▇▇▇ under Tranche B
and Tranche C.
Payment of the Purchase Price will be made by the Purchaser by electronic
wire transfer to the account designated by each Seller or by check, as
instructed in writing by such Sellers, and will be made in the currency
stated above.
b) The Purchase Price will be adjusted as follows:
(i) In the event the Company's Net Working Capital (including therein
the Net Working Capital of Vest Company Vestco, S.A. de C.V.), as
measured by the "Closing Date Summary of Net Working Capital and Net
Debt" prepared by AGL in the form as is attached hereto as EXHIBIT "E"
(the "CLOSING DATE REPORT") (y) is below the Reference Amount then the
Purchase Price will be reduced, and (z) exceeds the Reference Amount then
the Purchase Price will be increased, in an amount equal to such
deficiency or excess, as the case may be. For purposes of this Clause and
of the Closing Date Report, "NET WORKING CAPITAL" will include, but will
not be limited to, all current assets such as trade and other receivables
due in less than one year, inventory, prepaid expenses and advances to
suppliers, LESS cash, short term investments in securities and/or bank
accounts, all current liabilities, including but not limited to trade and
other payables, taxes, accruals, customer advances and any other payments
due in less than one year. "REFERENCE AMOUNT" shall mean
Ps.$11,500,000.00 (Eleven million five hundred thousand Pesos 00/100) if
the Company's (including Vest Company Vestco, S.A. de C.V.) net losses
for the months of January and February of 1999 exceed Ps.$500,000.00
(Five hundred thousand Pesos 00/100); if such net losses for the months
of January and February of 1999 are equal or less than Ps.$500,000.00
(Five hundred thousand Pesos 00/100) "REFERENCE AMOUNT" shall mean
Ps.$12,000,000.00 (Twelve million Pesos 00/100).
(ii) In the event the Company's Net Debt (including therein the Net Debt
of Vest Company Vestco, S.A. de C.V.), as measured by the Closing Date
Report is below or exceeds Ps.$6,000,000.00 (Six million Pesos 00/100)
then the Purchase Price will be increased or reduced in an amount equal
to such deficiency or excess, as the case may be. For purposes of this
Clause and of the Closing Date Report, "NET DEBT" shall mean the
Company's (including Vest Company Vestco, S.A. de C.V.) Total Debt less
cash and short term investments in securities and/or bank accounts and
"TOTAL DEBT" shall mean all amounts owing to related or third parties
including but not limited to bank debt and capital leases.
The Purchaser will withhold U.S.$100,000.00 (One hundred thousand United
States Dollars 00/100) from Tranche A to cover any adjustment to be made
pursuant to sections (i) and (ii) above. PricewaterhouseCoopers ("PC")
and AGL will jointly prepare an audit certificate (the "AUDIT
CERTIFICATE") attesting to the Net Working Capital and the Net Debt set
forth in the Closing Date Report. All adjustments made to the Purchase
Price will be paid by the Sellers, to the extent not covered by the
aforementioned withholding, or by the Purchaser, as the case may be, at
the latest one week after the delivery to the Company of the Audit
Certificate.
In the event of disagreement between PC and AGL, in the amounts contained
in the Audit Certificate such difference will be settled pursuant to the
arbitration proceeding set forth in Clause Ninth hereof, unless such
difference is for an amount less than Ps.$1,000,000.00 (One million Pesos
00/100), in which case, the final amounts will be adjusted by half of
said difference.
c) Each Seller hereby delivers to the Purchaser a letter issued by ▇▇.
▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ stating that it will file a tax statement
with the competent tax authorities pursuant to the terms of articles 103
of the Mexican Income Tax Law (LEY DEL IMPUESTO SOBRE LA RENTA) and 126
of the Regulations to the Income Tax Law (REGLAMENTO DE ▇▇ ▇▇▇ DEL
IMPUESTO SOBRE LA RENTA) in regards to the transaction contemplated in
this Agreement. In addition, the Sellers will deliver to the Purchaser a
copy of the respective tax statement and receipt of payment issued by the
competent tax authorities, if such is the case, and of any other evidence
requested by the Purchaser to that effect within the 15 (fifteen) days
immediately following the date such statements or payments have to be
made pursuant to the terms of applicable law.
THIRD. UNCOLLECTED RECEIVABLES.
In the event that any of the accounts receivable of the Company existing
on the Closing Date is not collected after normal collection and within
the normal payment terms granted by the Company to its clients, and at
the latest within 120 (one hundred twenty) days following its
corresponding due date, net of reserves created for such effects and
evidenced in the Company's financial statements (the "UNCOLLECTED
RECEIVABLES"), any such Uncollected Receivable shall be assigned on a
monthly basis by the Company to the Sellers, within 30 (thirty) days of
the respective request of the Company, without recourse to the Company
and Sellers shall reimburse the Company at the time of such assignment
for the full face amount of any such Uncollected Receivable so assigned.
Sellers hereby agree to designate, and the Purchaser accepts and shall
cause the Company to accept, Sellers as assignees of such accounts
receivable. Therefore Sellers shall be liable for the payment of such
account receivables to the Company.
The Purchaser agrees to cause the Company to execute, and the Sellers
agree to execute such documents reasonably necessary to assign the
Uncollected Receivables pursuant to this Clause Third. The Purchaser
agrees to use all reasonable efforts to collect the receivables of the
Company; provided, however, that neither the Purchaser nor the Company
shall be obligated to commence any legal proceedings in order to collect
any Uncollected Receivable, except for such proceedings which are
required by law to preserve any creditors right when applicable. The
foregoing notwithstanding, the Sellers shall not be liable to make any
reimbursement or otherwise under this Clause Third whenever lack of
collection results from gross negligent acts or omissions, or willful
default of the Purchaser, the Company or their respective employees or
representatives.
FOURTH. INDEMNIFICATION TO THE PURCHASER AND TO THE COMPANY.
a) The Sellers shall indemnify, defend and hold harmless the Purchaser
and the Company and each of their respective directors, officers,
employees, affiliates, shareholders, agents and representatives and
their successors and assigns (collectively, the "INDEMNITEES"), from
and against, and pay or reimburse them, any liability, demands,
claims, actions or causes of action, assessments, losses, damages,
costs and expenses (including without limitation, attorney's fees and
expenses) (collectively, the "DAMAGES"), asserted against or incurred
by any Indemnity as a result or arising directly or indirectly out of
(i) a breach or inaccuracy in any representation or warranty of the
Seller contained herein or in the Secondary Agreements (as defined
herein) when made or at and as of the Closing Date as though such
representation and warranty were made at and as of the date hereof
and the Closing Date, (ii) any breach of any of the covenants and
agreements of the Sellers contained in this Agreement or the
Secondary Agreements, or (iii) any liability or obligation (whether
direct, indirect, accrued, contingent or otherwise) of the Company
incurred or arising out of facts or circumstances existing, at any
time prior to the Closing Date.
b) Any claims for Damages under paragraph a) of this Clause must be
made by the Purchaser or the Company within a period of 24
(twenty four)months beginning on the Closing Date, in writing to the
Sellers in accordance with Clause Fifth hereof, except that claims
for Damages related to any material default, violation, act or
omission by the Company prior to the Closing Date in respect of
Taxes, employee,labor, social security and environmental matters,
which may be made until 45 (forty five) days following the
expiration of the applicable statute of limitations (including
extensions thereof).
c) Any claim made by the Purchaser or the Company hereunder involving
an accounting matter,in respect of which the Sellers disagree, shall
be submitted to an internationally recognized accounting firm in
Mexico City, selected jointly by the Purchaser and the Seller within
30 (thirty) days after such claim is made, and in the event such
selection is not made by them within such period, such disagreement
shall be submitted to KPMG ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, S.C., which shall
answer within 45 (forty five) calendar days. The parties hereto
agree to accept the decision of such accounting firm as final,
without recourse to such firm. The parties hereto agree to provide
within 10 (ten) days full and unrestricted access to records and
files to enable the selected firm to provide its opinion on any
matter which is referred to it.
FIFTH. INDEMNIFICATION PROCEDURES.
a) Whenever the Purchaser or the Company (the "INDEMNIFIED PARTY")
whishes to assert a claim for Damages (a "CLAIM") against the Seller
(the "INDEMNIFYING PARTY") under Clause Fourth hereof, the
Indemnified Party shall give written notice (a "NOTICE OF CLAIM") to
the Indemnifying Party at the address set forth in Clause Eighth
hereof. The Indemnifying Party shall receive a Notice of Claim
promptly but not later than 30 (thirty) days after the Indemnified
Party has actual knowledge of the facts constituting the basis for a
Claim except that in the event a Claim has to be contested within a
certain period pursuant to a judicial or administrative order, the
Indemnifying Party shall receive the Notice of Claim within 10 (ten)
calendar days after the Indemnified Party had knowledge of such
matter or Claim, in the understanding that the Notice of Claim shall
be delivered immediately in the event the term to contest said Claim
is less than such 10 (ten) day period, in order to allow the
Indemnifying Party to contest said Claim more adequately. Notice of
Claim shall be delivered to the Indemnifying Party in the event of
Tax determinations, within 10 (ten) days following the receipt of
the notification of such Tax determinations. The failure to provide
a Notice of Claim shall relieve the Indemnifying Party of its
indemnification obligations hereunder. The Notice of Claim shall
specify in reasonable detail all facts known to such Indemnified
Party giving rise to such indemnification Claim and an estimate of
the amount of the liability arising therefrom. The Indemnifying
Party shall respond in writing promptly to any Notice of Claim, but
not later than 10 (ten) days from the date the Notice of Claim is
given, indicating its position as to the Claim.
b) If the Indemnifying Party wishes to contest or defend any Claim
brought or alleged by a third party against the Indemnified Party,
the Indemnified Party shall, at the expense of the Indemnifying
Party, (i) permit the Indemnifying Party and its attorneys,
accountants and other agents to have access to all properties,
records and documents of the Indemnified Party and furnish to the
Indemnifying Party to the extent available such financial,
commercial, legal, operating and other information with respect to
the business and operations of the Indemnified Party, as the
Indemnifying Party may reasonably request and as may be related to
the Claim being contested, (ii) permit the Indemnifying Party to
make any investigation which the Indemnifying Party may reasonably
request, (iii) procure the cooperation of the Indemnified Party's
counsel and accountants with respect to the foregoing, and (iv) take
such other actions as may be reasonably requested by the
Indemnifying Party, including the granting of special powers of
attorney in favor of the individuals appointed by the Indemnifying
Party and acceptable to the Indemnified Party, provided that such
attorneys in fact shall at all times keep the Indemnified Party
informed of the respective proceedings.
c) The Indemnified Party shall not make any settlement of any Claim
brought by a third party which would give rise to liability on the
part of the Indemnifying Party under this Agreement without the
prior written consent of the Indemnifying Party, provided that the
covenant pursuant to this paragraph c) shall exclusively apply in
the event that the Indemnifying Party assumes full responsibility
for the contest and defense of such Claim and all costs and expenses
which may be incurred by the Indemnified Party in this respect.
d) The indemnification required by this Agreement shall be made when
reasonable and properly documented losses, damages, costs and
expenses (including without limitation, attorney's fees and
expenses) or liabilities are incurred. Any indemnities payable
under this Agreement shall be limited to the amount of direct or
indirect damages sustained by the Indemnified Party, net of any
insurance proceeds, favorable tax effects or other recovery actually
received by such Indemnified Party but increased by any Taxes
arising out of any indemnity payment.
e) The Purchasers will have, in regards to Claims for Damages, the right
to set off amounts payable thereunder against amounts due under
Tranche B and Tranche C of the Purchase Price, in the understanding
that in such event, the set off will be made against amounts due
under next succeeding payment under Tranche B or Tranche C.
f) The Purchaser and the Company may only claim the payment of Damages if
the aggregate amount of Damages claimed hereunder exceeds
U.S.$20,000.00 (Twenty thousand United States Dollars 00/100) or its
equivalent in another currency.
SIXTH. CONDITIONS PRECEDENT TO CLOSING. Notwithstanding any other
provisions contained in this Agreement the Purchaser's obligation to pay
the Purchase Price is expressly conditioned upon the delivery by the
Sellers, the Company or the corporation owning the real estate leased by
the Company (the "RE COMPANY") to the Purchaser on or before the Closing
Date of the following:
a) A mortgage (the "MORTGAGE") duly executed by the RE Company by means
of public deed granted before a Notary Public in terms acceptable to
the Purchaser, and evidence that such Mortgage is in the process of
being registered in the Public Registry of Property of Tlalnepantla,
Estado de Mexico.
b) A pledge agreement (the "PLEDGE AGREEMENT") duly executed by the
▇▇▇▇▇ and ▇▇▇▇▇ Pin Guzzi in terms acceptable to the Purchaser, the
certificates representing the capital of the RE Company delivered to
the Purchaser with the notations of the guarantee in favor of the
Purchaser and/or the Company, and evidence of the respective
notation made in the corporate books of the RE Company of the Pledge
Agreement.
c) An employment agreement (the "EMPLOYMENT AGREEMENT") entered into
between the Company and ▇▇▇▇▇▇ in terms acceptable to both parties.
d) A lease and purchase option agreement entered into between the
Company and the RE Company (the "LEASE AGREEMENT" and jointly with
the Mortgage, the Pledge Agreement and the Employment Agreement, the
"SECONDARY AGREEMENTS") in terms acceptable to both parties.
SEVENTH. ROYALTON GUARANTEE. The Company hereby guarantees the punctual
payment of Tranche B and Tranche C of the Purchase Price in accordance
with the terms of this Agreement.
The Company waives the benefits of order and excusion established in
Articles 2814, 2815, 2818, 2820, 2822 and 2823 and the other applicable
articles of the Civil Code for the Federal District (CODIGO CIVIL PARA
EL DISTRITO FEDERAL EN MATERIA COMUN Y PARA TODA LA REPUBLICA EN
MATERIA FEDERAL), applicable as mandated by the Code of Commerce
(CODIGO DE COMERCIO).
This guarantee shall be in full force and effect until the Sellers have
been paid everything owed to them hereunder, including interest on
Tranche B and Tranche C of the Purchase Price, even if (i) the Company
cannot acquire the rights and privileges of the Sellers due to the
negligence of the Sellers; (ii) an extension or stay is granted to the
Purchaser without consent of the Company; (iii) the Sellers do not
legally request the Purchaser the payment of Tranche B and Tranche C of
the Purchase Price.
EIGHTH. MISCELLANEOUS.
a) This Agreement represents the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof
and shall prevail over any other agreement prior to the same, in the
understanding that it can only be amended by written instrument
signed by the parties hereto.
b) This agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns,
provided that this Agreement and all rights and obligations
hereunder may not be assigned or transferred without the prior
written consent of the other parties to this Agreement, except in
the case of the Purchaser who is entitled to assign its rights under
this Agreement to any affiliate or subsidiary, without the need of
prior consent granted by the Sellers.
c) The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
d) Notwithstanding the closing of the transaction, each party hereto
shall bear its own costs and expenses in connection with the
transactions contemplated herein and in the Secondary Agreements
(including without limitation legal, accounting and other
professional fees), except as provided in Clause Fourth hereof.
e) If at any time subsequent to the date hereof, any provision of this
Agreement shall be held to be illegal, void or unenforceable, such
provision shall be of no force and effect, but the illegality or
enforceability of such provision shall have no effect upon and shall
not impair the enforceability of any other provision of this
Agreement.
f) The Exhibits and Schedules attached hereto are an integral part
hereof.
g) The Sellers shall take all necessary steps to allow the Purchaser on
the Closing Date to take full possession of all the properties,
books, documents, and all other assets of the Company.
h) All notices and other communications hereunder shall be in writing
and may be given by any of the following methods: (a) personal
delivery; (b) facsimile transmission; (c) registered or certified
mail, postage prepaid, return receipt requested; or (d) overnight
delivery service. Such notices and communications shall be sent to
the appropriate party at its address or facsimile number given below
or at such other address or facsimile number for such party as shall
be specified by notice given hereunder (and shall be deemed given
upon receipt by such party or upon actual delivery to the
appropriate address, or, in case of a facsimile transmission, upon
transmission thereof by the sender and issuance by the transmitting
machine of a confirmation slip that the number of pages constituting
the notice has been transmitted without error; in the case of
notices sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the
address provided for above, PROVIDED, HOWEVER, that such mailing
shall in no way alter the time at which the facsimile notice is
deemed received):
The Company:
Ave. Industria Textil ▇▇. ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ de Mexico
Attn: General Director
Fax: ▇▇▇-▇▇-▇▇
The Sellers:
▇▇▇▇▇▇:
Heradito 320
Col. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇:
Sierra Chalchihui 235
Col. ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, D.F.
The Purchaser:
▇▇▇▇▇▇ ▇▇. ▇▇▇▇-▇▇▇
▇▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, D.F.
At'n: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇-▇▇
c.c.
Consoltex (USA), Inc.
1040 Avenue of the Americas, 6{th} Floor
New York, N.Y., 10018
Att'n: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President Finance and Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
i) The parties shall cooperate in good faith in all respects regarding
the transactions contemplated hereunder, and shall execute and
deliver all necessary documents in order to formalize the
transactions contemplated hereunder, including, the notarization of
the Mortgage and Lease Agreements, in the event such formalization
has not taken place prior to the Closing Date.
j) Each of the parties shall permit the others to review in advance and
approve the form of any press releases or any public announcement
concerning this Agreement, provided, however, that the parties will
not disclose the terms and conditions of this Agreement to any third
party, except to its counsel and accountants and as required by
applicable law and regulation.
k) Terms used with initial capital letters in this Agreement are terms
defined elsewhere in this Agreement; such terms shall have the
meaning as so defined.
l) During a period of 5 (five) years counted as of the Closing Date, no
Seller will engage in the United Mexican States, directly or
indirectly, as manager, director or investor, in the manufacturing
and/or distribution of apparel of the type produced and distributed
by the Company. In the event any of the Sellers breaches such an
obligation, it will pay to the Company a penalty fee of
U.S.$20,000.00 (Twenty thousand United States Dollars 00/100) for
each violation, which may be deducted from Tranche B and Tranche C
of the Purchase Price.
m) This Agreement shall be executed in the English and Spanish
languages, provided that the English version shall control.
NINTH. ARBITRATION.
a) The parties shall use their respective best efforts to settle
amicably all disputes or differences concerning the interpretation,
performance or application of any provision of this Agreement. If
any such dispute or difference cannot be settled, however, each
party shall have the right to refer it to arbitration for final
settlement without recourse to the courts. This shall not include
disputes concerning the validity and application of this Arbitration
Clause.
b) All disputes arising in connection with this Agreement shall be
finally settled under the provisions of the Commercial Arbitration
Rules of the American Arbitration Association, by three arbitrators
appointed in accordance with said rules.
c) The place of arbitration shall be Mexico, Federal District. The
English language shall be used throughout the arbitral proceedings,
the awards and other resolutions must be based on the provisions of
this Agreement and only if not provided for herein, they shall be
based on Mexican law.
IN WITNESS WHEREOF, the parties hereto execute this Agreement in Mexico
City, Federal District on February 26, 1999.
THE SELLERS
_____________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ F.
_____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇ F.
THE PURCHASER
Consoltex Mexico, S.A. de C.V.
_____________________________
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Attorney in fact
_____________________________
By: ▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney in fact
THE GUARANTOR
Royalton Mexicana, S.A. de C.V.
__________________________
By: ▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney
__________________________
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Attorney
