SHARE PURCHASE AGREEMENT
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Exhibit
10.1
AGREEMENT
dated as of May 2nd, 2008
among Lakeland do Brasil
Empreendimentos e Participações Ltda., a limited company (sociedade limitada) organized
under the laws of Brazil (the “Purchaser”), Lakeland Industries, Inc., a
Delaware corporation (“Lakeland”), Xxxxxx Xxxxxxx dos Xxxxxxxxx
Xxxxxx, Brazilian Citizen, married, businessman, bearer of the
identification Card XX X. 4607520 SSP/BA, enrolled with the Brazilian Taxpayers’
Registry (CPF/MF) under N. 000.000.000-00, resident and domiciled in the City of
Xxxxx xx Xxxxxxx, State of Bahia, at Condominio Encontro das Águas, Quadra I,
Lote 39, 42700-000 (“Xxxxxx”), Elder Xxxxxx Xxxxxx xx
Xxxxxxxxx, Brazilian Citizen, single, businessman, bearer of the
identification Card XX X. 05746155.47 SSP/BA, enrolled with the Brazilian
Taxpayers’ Registry (CPF/MF) under N. 000.000.000-00, resident and domiciled in
the City of Salvador, State of Bahia, at Xxx Xxxxxxxx xx Xxxxx Xxxxxxxxxx, 000,
Xxxxxxxxxx Xxxxx Trianon – Bairro Caminho das Arvores, CEP 41820-700, (“Elder”), Xxxxxx Xxxxxxxx Xxxxxx da Xxxxxxxxx
Xxxxxxx, Brazilian Citizen, married, businesswoman, bearer of the
identification Card XX X. 02504273.46 SSP/BA, enrolled with the Brazilian
Taxpayers’ Registry (CPF/MF) under N. 000.000.000-00, resident and domiciled in
the City of Salvador, State of Bahia, at Alameda Cabo Frio, Quadra 34, Lote 10,
Bairro Praias do Flamengo, CEP 41603-115 (“Xxxxxx”, and together
with Xxxxxx and Elder, the “Sellers”), Nordeste Empreendedor Fundo Mútuo de
Investimento em Empresas Emergentes, enrolled with the Taxpayers’
Registry (CNPJ/MF) under N. 05.047.787/0001-60, by its legal representative UBS
Pactual Serviços Financeiros S.A. – Distribuidora de Títulos e Valores
Mobiliários, with offices in the City of Rio de Janeiro, State of Xxx xx
Xxxxxxx, xx Xxxxx xx Xxxxxxxx, 000, 0x andar, parte, enrolled with the
Taxpayers’ Registry (CNPJ/MF) under N. 29.650.082/0001-00 ("Nordeste
Empreendedor”), Qualytextil S.A., a
corporation (sociedade por
ações) organized under the laws of Brazil (the “Company”), Xxxxxxxxx Xxxxx Passos xx
Xxxxxxx, Brazilian Citizen, married, doctor, bearer of the Identification
Card XX X. 1190033, enrolled with the Brazilian Taxpayers’ Registry (CPF/MF)
under N. 000.000.000-00, resident and domiciled in the City of Xxxxx xx Xxxxxxx,
State of Bahia, at Condominio Encontro das Águas, Quadra I, Lote 39, 42700-000,
and Xxxxx xx Xxxxxxxx
Xxxxxxx, Brazilian, married, industrial, bearer of ID Card N. 9012051018
SSP/BA, enrolled with the Brazilian Taxpayers’ Registry under CPF/XX X.
000.000.000-00, resident and domiciled in the City of Salvador, State of Bahia,
at Alameda Cabo Frio, x/x., Xxxxxx 00, Xxxx 00, Xxxxx do Flamengo, 40280-440
(“Xxxxx”).
W I T N E
S S E T H
WHEREAS,
on or prior to the Closing Date, the Sellers will be the record and beneficial
owners of all of the outstanding capital stock of the Company, comprised of
1,507,701 shares, being 1,492,624 shares of common stock and 15,077 shares of
Class A preferred stock, without par value, of the Company (the “Shares”), to be
distributed among the Sellers, in accordance with the table contained in Exhibit A
hereto;
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WHEREAS,
the Sellers desire to sell the Shares to the Purchaser and the Purchaser desires
to purchase the Shares, free and clear of any Lien, on the terms and conditions
hereinafter set forth;
WHEREAS,
to induce the Purchaser to enter into this Agreement and to purchase the Shares
hereunder, the Sellers have agreed to make certain representations, warranties,
covenants, indemnities and other agreements hereunder for the benefit of the
Company, the Purchaser and its shareholders;
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein, the parties hereto agree to enter into this Share
Purchase Agreement ("Agreement"), under
the terms and conditions as follows:
ARTICLE
1
Definitions
“2008 Adjusted Purchase Price”
shall have the meaning set forth in Section 2.05 of this Agreement;
“Affiliate” means, with respect
to any Person, any other Person directly or indirectly controlling, controlled
by, or under common control with such Person, as control is defined in Article
116 of Brazilian Corporation Law;
“Agreement” means this Share
Purchase Agreement and Exhibits attached herein;
“Brazilian Corporation Law”
means Law No. 6,404/76 as amended;
“Brazilian GAAP” means
generally accepted accounting principles in Brazil;
“Business” means production,
manufacture, and sale of personnel protective equipment;
“Business Day” means any day
other than a Saturday, Sunday, or other day on which commercial banks in the
City of São Paulo, State of São Paulo are authorized by law to
close;
“CDI” means the average daily
rate offered for Extra-Group Overnight Interbank Deposits, calculated and
released daily by Central de Custódia e Liquidação Financeira de Títulos - CETIP
and capitalized on an annual basis (for a 252-business-day year), or, in case of
temporary unavailability or discontinuance thereof, another National Financial
System benchmark rate replacing it, as agreed on between the
parties.
“Claim” shall have the meaning
set forth in Section 10.03 of this Agreement;
“Closing” shall have the
meaning set forth in Section 8.01 of this Agreement;
“Closing Date” shall have the
meaning set forth in Section 8.01 of this Agreement;
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“Closing Transactions” shall
have the meaning set forth in Section 8.02 of this Agreement;
“Company” means Qualytextil
S.A.;
“Confidential Information”
shall have the meaning set forth in Section 6.02 of this Agreement;
“2007 EBITDA” shall mean the amount
of R$3,118,000.00;
“Employees” shall mean the
registered employees (including those who are retired but still registered) and
appointed officers of the Company or any of its Affiliates, including, but not
limited to the employees of Prestserv, as of the date of this
Agreement;
“Environmental Laws” shall mean
any Law, including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of the environment or natural
resources;
“Financial Statements” shall
have the meaning set forth in Section 3.05 of this Agreement;
“Governmental Authority” means
any government, governmental entity, regulatory authority, department,
commission, board, agency or instrumentality, any recognized stock exchange and
any court, arbitrator, tribunal, whether foreign or domestic with jurisdiction
over the Parties;
“Indemnified Party” shall have
the meaning set forth in Section 10.01 hereof;
“Intellectual Property” shall
mean the intellectual property listed in Exhibit 3.12 attached
herein and any other existing technical documentation related to
that;
“Law” shall mean any federal,
state, or local statute, law, ordinance, regulation, rule, code, decree, other
requirement or rule of law of Brazil or any other jurisdiction, and any other
similar act or law;
“Liens” shall mean liens,
security interests, options, rights of first refusal, easements, charges,
indentures, encroachments, licenses to third parties, leases to third parties,
security agreements, or any other encumbrances and other restrictions or
limitations on the transfer, license, sale, disposal or use of real or personal
property;
“Loss” shall have the meaning
set forth in Section 10.1 hereof. Any Losses due under this Agreement shall be
paid by the Sellers net of any negative or positive Tax effect or potential
effect on the Indemnified Party thereof;
“Outstanding Debts” shall mean
the actual amount of the outstanding debts of the Company listed in Exhibit B of this
Agreement as of the Closing Date;
“Parties” means the Purchaser,
Lakeland, the Sellers, and the Company; and “Party” means any of
them;
“Permits” shall have the
meaning set forth in Section 3.11 of this Agreement;
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“Person” means any individual,
corporation, partnership, limited liability company, association, trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof;
“Prestserv” means Prestserv
Serviços Ltda., a limited company (sociedade limitada) organized
under the laws of Brazil, enrolled with the Brazilian Taxpayers Registry under
nº 05.411.989/0001-40, an Affiliate of the Company.
“Purchase Price” shall mean the
amount in Reais equivalent to seven (7) times the 2007 EBITDA less all
Outstanding Debts;
“R$” or “Reais” shall mean the lawful
currency in Brazil;
“Retained Amount” shall mean
the aggregate of: (i) up to R$ 649,000.00 to satisfy indemnification
regarding the contingencies of the Company, as detailed in Exhibit C hereto,
which funds will remain in escrow for five (5) years or upon expiration of the
statute of limitations applicable to such contingencies (whichever occurs first)
and will only be released by mutual agreement between the Parties; (ii) the
amounts of R$ 355,369.00 corresponding to 10% of the receivables and R$
268,874.00, corresponding to 10% of the stocks of the Company both on December
31, 2007, to satisfy indemnification regarding contingencies of the Company, as
detailed in Exhibit C hereto, which funds will remain in escrow for a period of
(a) 6 months with respect to the receivables, and (b) one (1) year with respect
to the stocks, and will only be released by mutual agreement between the
Parties; (iii) 10% of the Purchase Price to satisfy indemnifications for unknown
contingencies, representations and warranties, including but not limited to any
tax issues, which funds will remain in escrow for the period of two (2) years
from the Closing Date, and will only be released by mutual agreement between the
Parties; and (iv) 20% of the Purchase Price, which funds shall remain in escrow
until the 2008 EBITDA is determined, in order to satisfy the payment of eventual
2008 Adjusted Purchase Price, as set forth in Section 2.05 below;
“Right of First Refusal” shall
have the meaning set forth in Section 2.10 of this Agreement;
“Shares” shall mean the shares
of common stock and shares of preferred stock of the Company, representing, in
the aggregate, 100% of the Company’s voting and total capital
stock;
“Supplementary Purchase Price”
shall have the meaning set forth in Section 2.06 hereof; and
“Tax” means all taxes, charges,
fees, levies or other assessments imposed by any taxing authority, including,
without limitation, income, gross receipts, sales, use, 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.
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ARTICLE
2
Purchase
and Sale of Shares
Section
2.03. Payment
Conditions. The Purchase Price (less the Retained Amount)
shall be paid on the Closing Date to the Sellers by means
of electronic transfer (XXX) or a bank draft or any
other similar mean of immediately available funds, in Reais, to the bank
accounts set forth in Schedule 2.03
hereto.
Section
2.04. Escrow. The
Retained Amount shall be held in escrow by the Escrow Agent pursuant to the
terms and conditions set forth in the Escrow Agreements to be executed on the
Closing Date, substantially in the form of Schedule 2.04 hereto,
and the funds in escrow shall only be released:
(a) to
the Purchaser or, at the Purchaser’s discretion, the Company to satisfy (i)
indemnifications regarding the contingencies specified in Exhibit C hereto, (ii)
indemnifications for unknown contingencies of the Company or representations and
warranties provided by the Sellers, including but not limited to any tax issues,
or (iii) the payment of eventual 2008 Adjusted Purchase Price, as set forth in
Section 2.05 below; or
(b) to
the Sellers upon expiration of the terms established in Section 1.01 above
(see definition of Retained Amount), for each Retained
Amount.
Section
2.05. Purchase
Price Adjustment. To the extent that the Company’s EBITDA in
2008 is less than the 2007 EBITDA, the Purchase Price shall be automatically
adjusted to an amount in Reais equal to seven (7) times the Company’s EBTIDA in
2008 (the “2008
Adjusted Purchase Price”). For the purposes of determining the Company’s
EBITDA in 2008, within up to 90 (ninety) days after December 31, 2008, the
Purchaser shall cause the Company to provide the Sellers with a written and
audited statement describing the Company’s EBITDA in 2008, prepared in
accordance with Brazilian GAAP and in a manner consistent with the manner in
which the 2007 EBITDA was determined by the Parties. Should the Purchaser and
the Sellers agree on the amounts so presented as the Company’s EBITDA in 2008,
then the amount of the difference between the Purchase Price and the 2008
Adjusted Purchase Price (plus the amount to be determined in accordance with
Section 2.07(b)(i), if any) shall, within 30 (thirty) Business Days after the
presentation of the mentioned statement by the
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Company,
be released from the Escrow Account in benefit of the Purchaser, provided
however that in no event the adjustment shall exceed the amount equivalent to
20% of the Purchase Price accrued of interests (if any), obtained with the
investments permitted under the Escrow Agreement, specifically in relation to
the portion of Retained Amount corresponding to the 2008 Adjusted Purchase
Price. Should the Purchaser and the Sellers disagree with the amounts presented
by the Company as the Company’s EBITDA in 2008, and should the Parties and their
respective external auditors not be able to reach an agreement upon such values
within 30 (thirty) Business Days as from the presentation of referred original
statement, then the Parties shall jointly appoint (and equally bear the costs
of) another auditing firm selected among Deloitte Touche Tomahatsu, KPMG,
Ernst&Young or PriceWaterhouseCoopers. Should the Parties not reach an
agreement as to the third auditing firm within the immediately subsequent 5
(five) Business Days, then it shall be chosen following the order that they
appear above. The retained third auditing firm shall, within 15 (fifteen)
Business Days following its engagement, issue a final and binding statement
contemplating the Company’s EBITDA in 2008 (the third auditing firm shall
prepare and issue its final statement in accordance with Brazilian GAAP and in a
manner consistent with the manner in which the 2007 EBITDA was determined by the
Parties). The payment of the Adjusted Purchase Price (plus the amount to be
determined in accordance with Section 2.07(b)(i), if any), if any, derived from
the final statement by the third auditing firm shall be made within 5 (five)
Business Days as from the issuance of such final statement.
Section
2.06. Supplementary
Purchase Price. (a) Subject to the Company’s EBITDA in 2010
being equal to or greater than R$ 4,449,200, the Purchaser shall then pay to the
Sellers the difference between six (6) times the Company’s EBITDA in 2010 and
seven (7) times the 2007 EBITDA (R$ 21,826,000.00), less any unpaid disclosed or
undisclosed contingencies (other than Outstanding Debts) from pre-closing which
exceeds R$ 100,000.00 ("Supplementary Purchase
Price"). The Supplementary Purchase Price in no event shall be greater
than R$ 27,750,000.00. For the purposes of determining the Company’s EBITDA in
2010, within up to ninety (90) days after December 31, 2010, the Purchaser shall
cause the Company to provide the Sellers with a written and audited statement
describing the Company’s EBITDA in 2010, prepared in accordance with Brazilian
GAAP and in a manner consistent with the manner in which the 2007 EBITDA was
determined by the Parties. Should the Purchaser and the Sellers agree on the
amounts so presented as the Company’s EBITDA in 2010, then the Supplementary
Purchase Price shall, within 30 (thirty) Business Days after the presentation of
the mentioned statement by the Company, be paid by the Purchaser to the Sellers.
Should the Purchaser and the Sellers disagree with the amounts presented by the
Company as the Company’s EBITDA in 2010, and should the Parties and their
respective external auditors not be able to reach an agreement upon such values
within 30 (thirty) Business Days as from the presentation of referred original
statement, then the Parties shall jointly appoint (and equally bear the costs
of) another auditing firm selected among Deloitte Touche Tomahatsu, KPMG,
Ernst&Young or PriceWaterhouseCoopers. Should the Parties not reach an
agreement as to the third auditing firm within the immediately subsequent 5
(five) Business Days, then it shall be chosen following the order that they
appear above. The retained third auditing firm shall, within 15 (fifteen)
Business Days following its engagement, issue a final and binding statement
contemplating the Company’s EBITDA in 2010 (the third auditing firm shall
prepare and issue its final statement in accordance with Brazilian GAAP and in a
manner consistent with the manner in which the 2007 EBITDA was determined by the
Parties). The payment of the Supplementary Purchase Price, if any, derived from
the final
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statement
by the third auditing firm shall be made within 5 (five) Business Days as from
the issuance of such final statement. To the extent that the Company’s EBITDA in
2010 is greater than R$6,356,000, the Supplementary Purchase Price will be
payable in February 2011 based on a multiple of six (6) times such capped amount
of R$6,356,000 and the remaining amount of the Supplementary Purchase Price
shall be paid in February 2012, provided however that this remainder will be due
only if the actual Company’s EBITDA in 2011 corresponds to at least 90% of the
Company’s EBITDA in 2010.
(b) If
the Management Agreement contemplated by Section 5.04 hereto is terminated
either by the Company without cause or by any of the Sellers with cause as
provided for in Section 7.5 of the Management Agreement, then the Supplementary
Purchase Price shall amount R$ 27,750,000.00, regardless of the actual amount of
the Company’s EBITDA in 2010 and the Supplementary Purchase Price will then be
payable in full in February 2011. For the avoidance of any doubt, the Management
Agreement will be deemed to be terminated without cause by the Company if
termination is made without the occurrence of any of the events described in
Section 7.3 of the Management Agreement.
Section 2.07. Outstanding
Debts. On the
Closing Date the Purchaser undertakes to transfer to the Company the funds in
the amount then estimated by the Parties for the debt described in Exhibit C
with a view to repaying all Outstanding Debts, including without limitation the
debentures issued by the Company, provided that the Sellers must obtain the
consent of all lenders of the Company to accept the repayment of the debts
without penalties and under the same terms and conditions set forth in the
respective agreements and to the change in control of the Company. If it is not
possible to pay any of the Outstanding Debts on the Closing Date, the Purchaser
shall pay the remaining Outstanding Debts within thirty (30) days from the
Closing Date, except for the debentures issued by the Company that must be paid
on the Closing Date. The Parties hereby expressly agree that due to the
nature of the Outstanding Debts the actual amounts that shall be paid may vary
from the estimated amount of the Outstanding Debts on the Closing Date and the
Parties shall make adjustments to the Purchase Price in order to reflect such
variations should such difference be greater than R$20,000.00. If the actual
amount of the Outstanding Debts is: (i) greater than the estimated amount of the
Outstanding Debts on the Closing Date, then the Purchaser shall be entitled to
adjust the Purchase Price to deduct the difference between the estimated amount
of the Outstanding Debts on the Closing Date and the actual amount of the
Outstanding Debts from the Purchase Price, with due observance to Section 2.05
above; and (ii) less than the estimated amount of the Outstanding Debts on the
Closing Date, then the Purchaser shall cause the Company to pay to the Sellers
the difference between the amount of the estimated amount of the Outstanding
Debts on the Closing Date and the actual amount of the Outstanding Debts within
thirty days as of the payment in full of the Outstanding Debts.
Section
2.08. Penalty upon
Default. In case the Purchaser fails to pay any and all amounts due
hereunder at its due date, such amounts shall be duly adjusted by the CDI from
the date any of the payments are effectively due until the date the respective
amount is paid by the Purchaser. Additionally, the Purchaser shall pay a
punitive penalty (multa
punitiva não-compensatória) of 2% over the outstanding amount duly
adjusted by CDI, as described above.
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Section
2.09. Lakeland’s
Guarantee. The Parties additionally agree that Lakeland shall guarantee
to the Sellers any and all payments due hereunder by the Purchaser, provided,
however, that the Sellers shall necessarily proceed first against the Purchaser
before proceeding to enforce this guaranty and as a condition to payment or
performance by Lakeland hereon.
Section
2.10. Right of First Refusal
and Pledge of Shares. (a) If the Purchaser, at any time before
the payment of the Supplementary Purchase Price, receives an offer to sell its
shares in the Company, it shall (i) give the Sellers the right to acquire those
shares on the same terms and conditions set forth in such offer (“Right of First
Refusal”), exercisable by written notice given by the Sellers to the
Purchaser within thirty (30) days after the receipt of a notice from the
Purchaser informing the terms and conditions of the offer and (ii) concurrently
with the sale of the shares to a third party and as a condition of the latter to
acquire shares in the Company, grant, or cause the third party acquiring the
shares to grant, to the Sellers as security for the payment of the Supplementary
Purchase Price a first priority security interest in and to shares representing
30% of the total issued and outstanding capital stock of the
Company.
(b) The
Purchaser shall not be bound to transfer shares to the Sellers as a result of
the exercise of the Right of First Refusal by the Sellers if those shares do not
represent all of the shares contemplated in the offer made by the third
party.
(c) If
the Sellers elect not to exercise its Right of First Refusal or if they fail to
timely exercise the Right of First Refusal, then the Purchaser may sell the
shares to the third party offering to purchase the shares.
ARTICLE
3
Representations
and Warranties of the Sellers and Nordeste Empreendedor
A) The
Sellers severally represent and warrant to the Purchaser that each of the
following representations and warranties is, as of the date hereof, and will be,
on the Closing Date, true and correct and in full force and effect:
Section
3.01. Existence and
Power. (a) Each of the Company and its Affiliates (including
Prestserv) is duly organized, validly existing and in good standing under the
laws of the Federative Republic of Brazil. The Company has all corporate powers,
governmental licenses, authorizations, permits, consents and approvals required
to own its respective properties and to carry on its business as presently
conducted. The Exhibit
3.01 contains a true and complete copy of the amended and restated bylaws
of the Company, as currently in effect and shall be on the Closing Date duly
registered before the appropriate trade board or applicable authorities. The
Company has and will have as of the Closing Date all clearance certificates that
enable the transaction contemplated herein to be performed as described in the
Agreement. Except for Prestserv, the Company has no and will have no direct or
indirect subsidiary.
Section
3.02. Authorization, Required Filings and
Consents. (a) The execution, delivery and performance by the
Sellers and the Company of this Agreement and the consummation of the
transactions contemplated hereby are duly and validly authorized by all
necessary corporate action,
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and no
other corporate proceedings on the part of the Sellers, or the Company are
necessary to consummate the transactions contemplated herein.
(b)
Except for any contrary disposition hereof, no filing or registration with, or
notification by the Sellers or the Company to, and no permit, authorization,
consent or approval of, any Governmental Authority is necessary for the
execution and delivery of this Agreement by the Sellers, or the consummation by
the Sellers of the transactions contemplated by this Agreement.
Section
3.03. Noncontravention. The
execution, delivery and performance of this Agreement and any other agreement or
document related hereto and the consummation of the transactions contemplated
hereby by the Sellers or the Company do not and will not (i) violate the
organizational documents or its article of association, (ii) conflict with or
violate any Law applicable to the Sellers, (iii) require any consent or other
action by any Person, constitute a default, or give rise to any right of
termination, cancellation, vesting or acceleration of any right or obligation,
of the Company, or to a loss of any benefit to which the Company is entitled
under any provision of any agreement or other instrument binding upon the
Company, or (iv) result in the creation or imposition of any Lien on any asset
of the Company.
(b) The
Sellers shall be on the Closing Date the legal holder and registered owner of
shares of common stock and shares of preferred stock of the Company,
representing, in the aggregate, 100% of the Company’s voting and total capital
stock. Exhibit
3.04(b) contains a table indicating the current ownership structure of
the Company as of this date. Sellers further represents and warrants to
Purchaser that, as of the date hereof until the Closing Date, Sellers will have
full and valid title of the Shares, free and clear of any Lien or any third
party rights, except for any contrary disposition in this
Agreement.
Section
3.05. Financial
Statements. Exhibit 3.05 hereto
contains a true copy of the audited consolidated financial statements of the
Company for the fiscal year ended on December 31, 2007 (the “Financial
Statements”), which have been prepared in accordance with the Brazilian
GAAP and consistent with the Company’s past practices. The Financial Statements
are true, correct and complete, can be reconciled with the books and records of
the Company in all aspects and adequately reflect the financial situation of the
Company on such dates, as well as the results of the Company’s
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activities
in the time periods, not having occurred any transactions out of the ordinary
course of business. All accounts, notes receivable and other
receivables reflected in the Financial Statements are valid, genuine and fully
collectible in the aggregate amount thereof, subject to normal and customary
trade discounts, less any reserves for doubtful accounts recorded on the
Financial Statements. Except as disclosed by the Sellers in this Agreement or in
its Exhibits, all the financial or other debts of the Company, duly reflected in
the Financial Statements, are not due on the date hereof and there is no current
default under any obligation of the Company.
(b) The
properties and assets owned, leased or subleased or licensed by the Company, or
which it otherwise has the right to use, constitute all of the properties and
assets used or held for use in connection with the business of the Company and
are adequate to conduct such business as currently conducted. All of
the Company’s properties and assets are in good working condition and repair,
ordinary wear and tear excepted, and have been maintained in a manner consistent
with generally accepted industry practice.
Section
3.07. Absence of
Certain Changes. Except as (a) approved in writing by the
Purchaser or (b) otherwise permitted or required by this Agreement, or (c)
required by Law, any judgement, decree or order, or (d) in the ordinary course
of business and consistent with past practices, as from December 31, 2007 and up
to the date hereof, there has been:
(i) no
physical damage, destruction, loss or abandonment of any asset or property of
the Company;
(ii) no
acquisition, sale, assignment, transfer, lease, sublease, license or other
disposal of any asset or property of the Company;
(iii) no
change in the management practices of the Company;
(iv) no
change in the accounting policies and practices of the Company;
(v) no
creation of any Liens on all or any portion of any asset or property of the
Company;
(vi) no
amendment, modification, alteration, failure to renew or termination of any
contract;
(vii) no
waiver of any rights of the Company or any cancellation of any claims, debts or
accounts receivable owing to the Company, other than in the ordinary course of
business;
(viii) no
redemption of capital stock or declaration or payment of any dividends or
distributions (whether in cash, securities or other property) to the current
holders of capital stock of the Company and no other forms of transfer of funds
from the Company to its shareholders;
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(ix) no
issuance of shares of capital stock, notes, bonds or other securities,
convertible or not into shares of capital stock, or any option, warrant or other
right to acquire the same, or any other interest in the Company;
(x) no
advance or capital contribution to or investment by the Company;
(xi) no
entering into any joint venture or similar arrangement by the
Company;
(xii) no
entering into any form of financial agreement;
(xiii) no
revaluation of any tangible or intangible assets of the Company;
(xiv) no
litigation, which has had or could have an adverse effect on the Company or its
financial condition;
(xv) no
incurrence of any damage, destruction or similar loss, whether or not covered by
insurance;
(xvi) no
material adverse change in the Company’s financial condition, business,
operations or prospects;
(xvii) no
change in the labor conditions of the Employees, or increase in the compensation
or benefits or establishment of any new bonus, insurance, severance, retirement,
profit sharing, or other similar employee benefit plans to any
Employees;
(xviii)
no event that could reasonably be expected to prevent or materially delay the
performance of the Sellers or the Company's obligation pursuant to this
Agreement and the consummation of the transaction contemplated herein;
and
(xix) no
commitment by the Sellers or the Company to do any of the
foregoing.
Section
3.08. Contracts. (a)
Exhibit 3.08
(a)(i) hereto contains a list of all agreements entered into and executed
by the Company in force as of this date. All the agreements presently in force
to which the Company is a party were entered into and executed in the ordinary
course of business, having conformed to all the required legal formalities, are
valid, binding and in full force and effect and are enforceable against the
Company. Except for those listed in Exhibit 3.08 (a)(ii),
the Company is not in default of any obligations arising from these agreements,
there is no event, occurrence, condition or act (including the Closing of the
transaction contemplated herein) which, with the giving of notice or the lapse
of time or both would become a default by the Company.
(b)
Except for the agreements described in Exhibit 3.08(b), no
consent or approval is required in order to consummate the transactions
contemplated herein, including without limitation the change of control of the
Company.
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Section
3.09. Guaranties. The
Company has not secured any third parties’ obligations, including obligations of
the Sellers.
Section
3.10. Litigation. (a)
Except as disclosed in Exhibit 3.10(a)
hereto, there is no, and on the Closing Date there will not be any, claim,
action, suit, investigation or proceeding (or any basis thereof) pending
against, threatened against or affecting, the Company or any of their respective
properties before any court or arbitrator or any Governmental
Authority. Except as disclosed in Exhibit 3.10(a)
hereto, the Company is not subject to any judgment, injunction, order, decree or
arbitration award. There is no, and on the Closing Date there will not be any,
claim, action, suit, litigation, investigation or proceeding (or any basis
therefor) outstanding or pending against, threatened against or affecting the
Company or any of their respective properties before any court or arbitrator or
any Governmental Authority that would prevent the Company from entering into or
implementing the transactions contemplated in this Agreement.
(b) The
Sellers are not aware of any facts or circumstances which could result in a
private or governmental claim, action, suit, investigation or proceeding (or any
basis therefor) against the Company. On the Closing Date there will be no
judgement, decree or order against the Company that could prevent, enjoy, or
alter or delay any of the transactions contemplated herein.
Section
3.12. Intellectual
Property Rights. (a) Exhibit 3.12 contains
a true and complete list of all Intellectual Property Rights owned by the
Company and all Intellectual Property Rights used by the Company by license or
other agreement. The Intellectual Property Rights represent all items
of intellectual property necessary to permit the Company to conduct its
operations as currently conducted. Company's Intellectual Property Rights are
duly registered, or may be the case, filed for registry, with INPI and are in
good standing with all fees and filings due as of the date hereof and the
Closing Date. Company's Intellectual Property Rights are not licensed in any way
to any third party and the use thereof by any third party is not in any way
authorized.
(b) There
is no claim, action, suit, investigation or proceeding (or any basis therefor)
pending against the use by the Company of any Intellectual Property Right.
Neither the Sellers nor the Company has received notice of any claims (i)
challenging the validity, effectiveness or ownership of the Intellectual
Property, or (ii) to the effect that the use, distribution, licensing,
sublicensing, sale or any other exercise of rights in any product, work,
technology or process as now used or offered or proposed for use, licensing,
sublicensing or sale by the Company infringes on or misappropriates
any
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intellectual
property or other proprietary or personal right of any Person. All of the rights
within the Intellectual Property are valid. There is no unauthorized use,
infringement or misappropriation of any Company's Intellectual Property by any
third party or by any Employee or former employee.
Section
3.13. Taxes. (a) Except
as set forth in Exhibit 3.13 hereto,
all Taxes and Tax Liabilities of the Company for all taxable periods before the
date hereof and due until the Closing Date, were and shall be duly and timely
performed, paid or accrued for. There is no proceeding against, or audit of, the
Company now pending or threatened by any Governmental Authority regarding any
Taxes assessed on and due by the Company.
(b)
Except as set forth in Exhibit 3.13 hereto:
(i) the Company has filed in a timely manner (or there has been filed on its
behalf) with the appropriate Governmental Authorities all Tax Returns required
to be filed by it and all such Tax Returns are true, complete and correct as
filed; (ii) all Taxes required to be paid by the Company (including Taxes
required to be deducted or withheld and paid over to a taxing authority) have
been timely paid in full or are reflected as Tax reserve on 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
Returns of the Company; (iv) no audits or other administrative proceedings or
court proceedings have formally commenced or are presently pending with regard
to any Taxes or Tax Return of or including the Company, and no notification has
been received by the Company or the Seller that such an audit or other
proceeding is pending or threatened with respect to any Taxes due from or with
respect to the Company or any Tax Return filed (or required to have been filed)
by or with respect to the Company; (v) there are no Liens for Taxes upon the
assets of the Company; (vi) the Company is not a party to, is bound by, or has
any obligation under any agreement or arrangement providing for the allocation,
sharing or indemnification of Taxes or is otherwise obligated to indemnify any
party for any Taxes; and (vii) the Company has not requested an extension of
time within which to file any Tax Return in respect of any taxable year, which
Tax Return has not since been filed.
Section
3.14. Employee
Matters. (a) Exhibit 3.14(a)
hereto sets forth an accurate and complete list of the names, titles, hiring
dates, accrued vacation time, current monthly rates of salary, bonus, employee
benefits and other compensation of all employees (including, without limitation,
managers, officers and directors) of the Company and of Prestserv, including any
such employee who is on disability leave or any other leave of
absence.
(b) There
is no liability of any kind with respect to amounts withheld or deducted amounts
from employees' earnings, for the period ending on or the date hereof and there
will be no liability of any kind ending on or the Closing Date. The Company is
in compliance with all Brazilian federal, state, municipal and other applicable
laws and regulations relating to the employment of labour, including all such
laws, regulations and orders relating to wages and hours, labour relations,
civil rights, safety and health, workers' compensation, and social security and
other taxes.
(c) There
is no (and has not been during the last five years) labour strike, slow down,
stoppage or other material labour difficulty, actual or threatened, against or
affecting the Company.
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(d) The
Company has established an adequate accounting reserve for all labour
obligations, dues and liabilities with respect to the period until the date
hereof. There are no overdue and payable sums owed to Employees, other than the
respective accounting provisions.
(e)
Neither the Seller nor the Company is a party to, and has no obligations under
or with respect to, any collective bargaining or other labor union contract
applicable to the Employees and no collective bargaining agreement is being
negotiated by the Company that may obligate it thereunder.
Section
3.15. Environmental
Matters. The Company has at all times been in compliance with
all applicable Environmental Laws. The Company has applied for and received all
permits required under Environmental Laws for their respective assets and
business (“Environmental
Permits”) and has, and will have until the Closing Date obtained or filed
for all the Environmental Permits, approvals, licenses and authorizations
required by law to carry on the business as now conducted by the Company. There
are no pending claims in writing by any Governmental Authority or any other
person in respect of Environmental Laws affecting the Company or the business.
The Company has not received any written notice of any violations of any
Environmental Laws or has received any written warning notices, administrative
complaints, judicial complaints or other formal or informal notices from any
person alleging that conditions of the business of the Company are, or may be,
in violation of any Environmental Laws. There is not now, nor has there ever
been, any treatment, storage, disposal, discharge or other type of release of
hazardous substances on property adjacent to or near the real properties owned
and/or leased by the Company or to the surface or ground water flowing to the
real properties owned and/or leased by the Company which has resulted in
contamination of such real properties.
Section
3.16. Insurance. Exhibit 3.16.
contains all of the insurance policies or programs relating to the properties
and assets of the Company in effect as of the date hereof. All of such insurance
policies are and will be on the Closing Date (i) in full force and effect; (ii)
underwritten by financially sound and reputable insurers, (iii) sufficient for
all applicable requirements of law; and (iv) secure coverage in amounts and
against all risks that are normal and customary for the operation of the
businesses of the Company. All of such insurance policies will remain in full
force and effect in accordance with their terms and will not terminate or lapse
by reason of any of the transactions contemplated hereby. The Company is not in
default with respect to its obligations under any of such Insurance
Policies.
Section
3.17. Powers of
Attorney. Exhibit 3.17 hereto
contains copies of all powers of attorney granted by the Company and in full
force and effect. The powers of attorney were validly granted by the Company and
in good standing under its by-laws, and all acts executed pursuant any of the
powers of attorneys were valid and effective.
Section
3.18. Inventory. All the inventory
of the Company are in good physical condition and are fully usable,
merchantable, saleable and fit for the purpose for which it was manufactured or
produced. The Company has no obligations, contingent or otherwise, to repurchase
or replace any product it has sold other than in the ordinary course of
business. The expected costs of such repurchases and replacements are expected
to be consistent in amount and scope with prior experience. There is
no inventory on consignment. Except for inventory in transit in the ordinary
course, the inventory is located in the main address at the Company or in any of
its branches. From
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the date
hereof until the Closing Date the Company and the Sellers undertake to take all
the measures so as to prevent the occurrence of any changes in the inventory of
the Company out of the ordinary course of business.
Section
3.19. No
Undisclosed Liabilities. There are no liabilities of the
Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances that could reasonably be expected to result in
such a liability, other than (i) liabilities provided for in the Financial
Statements; or (ii) disclosed in any Exhibit attached herein.
Section
3.20. Certain
Representations with respect to the U.S. Regulations. Neither
the Company, nor any of its Affiliates, nor any of its current or former
shareholders (directly or indirectly), directors, officers, employees, agents or
other persons acting on behalf of the Company have ever violated or committed
any act or made any payment in violation of, or that requires disclosure under,
the United States Foreign Corrupt Practices Act, including but not limited to
have offered, promised or given, or authorized or approved the payment, gift or
promise of anything of value, directly or through a third party, to any
“government official” (broadly defined to include any official, employee or
agent of an entity owned or controlled by a government, any official or employee
of a public international organization, any candidate for political office, and
any political party or party official) for the purpose of securing any improper
business advantage for the Company or any of its Affiliates in relation to the
business, including to obtain or retain business or agreements.
Section
3.21. Representations
Complete. None of the representations or warranties made by
the Sellers and the Company herein or in any other related document, have or
will have at the Closing Date any untrue statement, or omits or will omit as of
date hereof and at the Closing Date to state any fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
B)
Nordeste Empreendedor represents and warrants to the Purchaser that each of the
following representations and warranties is, as of the date hereof, and will be,
on the Closing Date, true and correct and in full force and effect:
Section
3.22. Existence and
Power. Nordeste Empreendedor is duly organized, validly
existing and in good standing under the laws of the Federative Republic of
Brazil.
Section
3.23. Authorization, Required Filings and
Consents. (a) The execution, delivery and performance by
Nordeste Empreendedor of this Agreement and the consummation of the transactions
contemplated hereby are duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of Nordeste Empreendedor
are necessary to consummate the transactions contemplated herein.
(b) No
filing or registration with, or notification by Nordeste Empreendedor to, and no
permit, authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by Nordeste
Empreendedor, or the consummation by Nordeste Empreendedor of the transactions
contemplated by this Agreement.
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Section
3.24. Noncontravention. (a)
The execution, delivery and performance of this Agreement and any other
agreement or document related hereto and the consummation of the transactions
contemplated hereby by Nordeste Empreendedor do not and will not (i) violate the
organizational documents or its article of association, (ii) conflict with or
violate any Law applicable to Nordeste Empreendedor, nor (iii) require any
consent or other action by any Person.
(b) For
the purposes of Section 3.04, on or prior to the Closing Date, Nordeste
Empreendedor (together with the members of the Board of Directors of the Company
holding one (1) preferred class A share of capital stock of the Company each)
agrees to sell, convey, assign, transfer and deliver to the Sellers and the
Sellers agree to purchase and acquire from Nordeste Empreendedor (and from the
members of the Board of Directors of the Company holding one (1) preferred
class A share of capital stock of the Company each) all of the 15,077 shares of
class A preferred stock jointly held by Nordeste Empreendedor and the members of
the Board of Directors of the Company, so that on the Closing Date the Seller be
the legal holder and registered owner of all the Shares, including such 15,077
preferred shares of class A stock, in the proportion set forth in Exhibit A
hereto.
ARTICLE
4
Representations
and Warranties of the Purchaser
The
Purchaser hereby represents and warrants to the Sellers and the Company that
each of the following representations and warranties is, as of the date hereof,
and will be, on the Closing Date, true and correct and in full force and
effect:
Section
4.02. Authorization, Binding
Effect. The execution, delivery and performance by Purchaser
of this Agreement and the consummation of the transactions contemplated hereby
are within the powers of the Purchaser and have been duly authorized by all
necessary action on the part of the Purchaser. This Agreement and Exhibits have
been duly executed and delivered by the Purchaser and, assuming the due
authorization, execution and delivery by the Seller and the Company, constitutes
a legal, valid and binding obligation of the Purchaser enforceable against it in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors’ rights generally.
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or
affected or (iii) result in any breach of or constitute a default (or an event
which with the giving of notice or lapse of time or both could reasonably be
expected to become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any of their property or asset pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation.
Section
4.05. Representations
Complete. None of the representations or warranties made by
the Purchaser herein contains at the date hereof or will contain at the Closing
Date any untrue statement of a material fact, or omits at the date hereof or
will omit at the Closing Date to state any material fact necessary in order to
make the statements contained herein, in the light of the circumstances under
which made, not misleading.
ARTICLE
5
Covenants
of the Company, the Sellers
Section
5.01. Conduct of
Business.
(a) From
the date hereof until the Closing Date, the Sellers shall cause the Company to,
and the Company shall conduct its business in the ordinary and usual course of
business. In addition to the above, the Sellers shall not take any action that
may lead the Company to cause or experience: (i) physical damage, destruction,
loss or abandonment of any asset or property of the Company; (ii) acquisition,
sale, assignment, transfer, lease, sublease, license or other disposal of any
asset or property of the Company; (iii) any change in the management practices
of the Company; (iv) any change in the accounting policies and practices of the
Company; (v) creation of any Liens on all or any portion of any asset or
property of the Company; (vi) any amendment, modification, alteration, failure
to renew or termination of any material contract; (vii) waiver of any rights of
the Company or any cancellation of any claims, debts or accounts receivable
owing to the Company, other than in the ordinary course of business; (viii)
redemption of capital stock or declaration or payment of any dividends or
distributions (whether in cash, securities or other property) to the current
holders of capital stock of the Company and no other forms of transfer of funds
from the Company to its shareholders; (ix) issuance of shares of capital stock,
notes, bonds or other securities, convertible or not into shares of capital
stock, or any option, warrant or other right to acquire the same, or any other
interest in the Company; (x) advance or capital contribution to or investment by
the Company; (xi) entering into any joint venture or similar arrangement by the
Company; (xii) entering into any form of financial agreement; (xiii) revaluation
of any tangible or intangible assets of the Company; (xiv) litigation, which
could have a material adverse effect on the Company or its financial condition;
(xv) any loss to the Company; or (xvi) any adverse change in the Company’s
financial condition, business, operations or prospects.
(b) If
any of the events described above occurred or are reasonably expected to occur,
the Sellers shall promptly give notice to the Purchaser and to the
extent possible, shall discuss with the Purchaser any action to be taken by the
Company as a result thereof.
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(c)
Notwithstanding Section 5.01(a) above, prior to the Closing Date the Company
shall not, and the Sellers shall not cause the Company to, enter into, modify,
amend or terminate any contract having an aggregate value of more than
R$200,000.00, except as first approved in writing by the Purchaser.
Section
5.02. Access to
Information; Confidentiality. From the date hereof until the
Closing Date, the Company, and the Sellers will (i) from time to time
upon reasonable prior notice and during regular business hours, give the
Purchaser and its counsel, financial advisors, auditors and other authorized
representatives full access to the offices, properties, books and records
relating to the Company, (ii) furnish to the Purchaser and its counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information relating to the Company as such Persons
may reasonably request and (iii) instruct the employees, counsel and financial
advisors of the Sellers or the Company to cooperate with the Purchaser in its
investigation of the Company. No investigation by the Purchaser or its counsel,
financial advisors, auditors or any other person or other information received
by the Purchaser or its counsel, financial advisors, auditors or any other
person shall operate as a waiver or otherwise affect any representation,
warranty or agreement given or made by the Company or the Sellers
hereunder.
Section
5.04. Certain
Employees. The Sellers shall continue in their current
positions with the Company until December 31, 2011, and they shall cause Xxxxx
to serve as a manager of the Company until December 31, 2011, pursuant to the
terms and conditions set forth in the Management Agreements to be executed on
the Closing Date, substantially in the form of Exhibit 5.04 hereto
and upon payment of a market salary.
Covenants
of the Company, the Sellers and the Purchaser
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limited
to the Purchaser’s obligation of using its best efforts to obtain and deliver to
Wachovia Bank, National Association all the documents listed in Exhibit 6.01,
for the purposes of meeting the condition set forth in Section 7.02(k). The
Parties agree to cause the Company to execute and deliver all such documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by this Agreement.
Section
6.02. Confidentiality. From
and after the date hereof, the Parties agree to hold, and to use their best
efforts to cause their Affiliates and respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
any and all information regarding the terms and conditions of this Agreement,
any financial, Tax-related or commercial information of the Parties (“Confidential
Information”). The terms and conditions of this Agreement may
only be disclosed in the event that any of the Parties is compelled to disclose
such information by law, rule, regulation, order or decree enacted by a
Governmental Authority to which the Party is subject or as a result of judicial
or administrative process in connection with any action, suit, proceeding or
investigation. In any event the terms and conditions of this
Agreement are disclosed, the Party concerned shall take all such steps as may be
reasonable in the circumstances to agree the contents of such disclosure with
the other Party before making such disclosure.
Section
6.04. Public
Announcements. The Parties agree to consult with each other
before issuing any press release or making any public statement with respect to
this Agreement or the transactions contemplated hereby and, except for any press
releases and public statements the making of which may be required by applicable
law or any listing agreement with any national securities exchange, will not
issue any such press release or make any such public statement prior to such
consultation.
Conditions
to Closing
Section
7.01. Conditions to
Obligations of the Purchaser and the Sellers. The obligations
of the Purchaser and the Sellers to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) There
shall not be threatened, instituted or pending any action or proceeding
challenging this Agreement or the transactions contemplated hereby, or seeking
to prohibit, alter, prevent or materially delay the Closing by any Person before
any court, arbitrator or governmental body, agency or official.
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(b) No
provision of any applicable law or regulation and no judgment, injunction, order
or decree shall prohibit the consummation of the Closing.
(c) All
actions by or in respect of or filings with any governmental body, agency,
official or authority required to permit the consummation of the Closing shall
have been taken, made or obtained.
(a) (i)
Each of the Sellers shall have performed in all material respects all of its
obligations hereunder required to be performed by it on or prior to the Closing
Date, (ii) the representations and warranties of the Sellers contained in this
Agreement and in any certificate or other writing delivered pursuant hereto (A)
that are qualified by materiality or material adverse effect shall be true at
and as of the Closing Date as if made at and as of such date, and (B) that are
not qualified by materiality or material adverse effect shall be true in all
material respects at and as of the Closing Date as if made at and as of such
time, (iii) the Purchaser shall have received a certificate signed by each of
the Sellers to the foregoing effect and such other information as the Purchaser
may reasonably request to determine the satisfaction of this
condition.
(b) There
shall not be threatened, instituted or pending any action or proceeding by any
Person before any court or governmental authority or agency, domestic or
foreign, (i) seeking to restrain, prohibit or otherwise interfere with the
purchase and sale of the Shares or the ownership or operation by the Company or
the Purchaser of all or any material portion of the business or assets of the
Company or of the Purchaser or any of their respective Affiliates or to compel
the Company or the Purchaser or any of their respective Affiliates to dispose of
all or any material portion of the business or assets of the Company or of the
Purchaser or any of their respective Affiliates, (ii) seeking to impose or
confirm limitations on the ability of the Purchaser effectively to exercise full
rights of ownership of the Shares, including without limitation, the right to
vote all additional Shares on all matters properly presented to the Company’s
stockholders or (iii) seeking to require divestiture by the Purchaser of any
Shares.
(c) There
shall not be any action taken, or any statute, rule, regulation, injunction,
order or decree proposed, enacted, enforced, promulgated, issued or deemed
applicable to the acquisition of the Shares, by any court, government or
governmental authority or agency, domestic or foreign, that, in the reasonable
judgment of the Purchaser could, directly or indirectly, result in any of the
consequences referred to in clauses 7.02(b)(i) through 7.02(b)(iii)
above.
(d) The
Purchaser shall have received evidence establishing that, at the time of the
Closing the representations and warranties contained in Section 3.04 shall be
true and correct in all respects.
(e) The
Purchaser shall have received all documents it may reasonably request relating
to the existence of the Sellers and the authority of the Sellers to execute,
deliver and perform this Agreement, all in form and substance satisfactory to
the Purchaser.
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(f) All
obligations, agreements, contracts, powers of attorney, plans, leases,
arrangements and commitments owed between any Affiliate, on the one hand, and
the Company, on the other hand, as of the Closing shall have been settled or
terminated.
(g) The
Purchaser shall have received the following clearance certificates in the name
of the Seller and the Company: (i) Debt Clearance Certificate - CND issued by
the Instituto Nacional do Seguro Social (Brazilian Social Security Institute -
INSS); (ii) Federal Taxes Clearance Certificate issued by the Secretaria da
Receita Federal (Brazilian Federal Revenue Office); (iii) Clearance Certificate
- CRS issued by the Fundo de Garantia por Tempo de Serviço (Brazilian
Unemployment Compensation Fund - FGTS).
(h) The
Purchaser shall have received (a) a written resignation from each one of the
members of the Board of Directors of the Company, and (b) a written release from
each member of the Board of Directors of the Company, releasing the Company from
any and all obligations or liabilities that may be owed by the Company to such
member in its capacity of member of Board of Directors and individual
shareholder of the Company.
(i) The
Purchaser shall have received evidence that the Company has obtained all the
consents and approvals listed in Exhibit 3.08(b).
(j) The
Purchaser shall have been satisfied, in its sole discretion, with the results of
its legal, accounting, labor, tax and business due diligence review of the
Company, including, without limitation, the operation, business, assets, working
capital, liabilities and prospects of the Company and any Affiliates
thereof.
(k)
Wachovia Bank, National Association shall have disbursed the loan contemplated
by the $30,000,000 Second Amended and Restated Promissory Note and the Third
Modification to Note and Loan Agreement and Reaffirmation of Guaranty, among
Lakeland, National Association Bank and others.
ARTICLE
8
Closing
Section
8.01. Closing. Subject
to the terms and conditions set forth herein, and the satisfactory completion
(or waiver) of each of the conditions precedents contemplated in Article 7
above, the closing of the deal contemplated by this contract ("Closing") shall take
place at the offices of Xxxxxx Filho, Xxxxx Filho, Marrey Jr. e Xxxxxxx, at
Xxxxxxx Xxxxxxx Xxxxxxx xx Xxxx, 447, in the City of São Paulo, State of São
Paulo, on May 9th, 2008
(“Closing
Date”).
Section
8.02. Closing
Transactions. On the Closing Date, the following actions shall
be taken by the Parties, all of which considered to have taken place
simultaneously ("Closing
Transactions"):
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(i) The
Purchaser shall pay to the Sellers the Purchase Price less the Retained Amount,
in Reais, by wire transfer, in immediately available funds, to the Sellers’ bank
account in Brazil, designated in Exhibit 2.03, and cause the Company to pay all
the Outstanding Debts with due regard for item 2.07.
(ii) The
Parties shall hold a shareholders' meeting in the form contained in Exhibit 8.02(ii)
hereto in order to accept the resignation of actual members of Board of Director
of the Company and elect the new members of the Board of Directors, to be
appointed by the Purchaser.
(iii) The
Purchaser shall deposit the Retained Amount with the Escrow Agent upon execution
and delivery of the Escrow Agreements, substantially in the form of Schedule
2.04 hereto.
(iv) The
Sellers and the Purchaser shall execute in the share transfer book (livro de transferência de ações
nominativas) of the Company deeds of transfer of 1,492,624 shares of
common stock and 15,077 shares of preferred stock, representing, in the
aggregate, 100% of the Company’s voting and total capital stock, free and clear
of any Liens, together with all documents reasonably required to transfer assign
and deliver title to such Shares to the Purchaser.
(v) The
Company and Miguel, Marcia, Elder and Xxxxx shall execute and deliver the
Management Agreements contemplated by Section 5.04.
(vi) The
Company and Wachovia Bank, National Association shall execute and
deliver certain collateral agreements on terms and conditions to be mutually
agreed by the Purchaser and Wachovia Bank, National Association , pursuant to
which the Company shall grant a first priority security interest in and to all
of its assets to secure the payment of all amounts required to be paid under the
Third Modification to Note and Loan Agreement and Reaffirmation of Guaranty,
among Lakeland, Wachovia Bank, National Association and others.
(vii)
Each Party shall confirm that all the representations and warranties given
by them are true and correct as of the Closing Date; and that there has not been
any breach of the representations and warranties given by each Party nor of any
covenant pursuant to this Agreement.
ARTICLE
9
Post-Closing
Obligations
Section
9.01. Employees of
Prestserv. Within six (6) months from the Closing Date, the
Parties shall negotiate in good faith the terms pursuant to which the Company
shall absorb the employees of Prestserv associated with the activities of
production and manufacture of personnel equipment of the Company. The Parties
shall agree on terms that are less burdensome to the Company.
Section
9.02. Non Compete
and Non-Solicitation. (a) Each of the Sellers agrees that for
a period of seven (7) years from the Closing Date (or 7 (seven) years from the
termination of the relevant Management Agreements, whichever occurs later), it
shall not, directly or indirectly (i) provide consulting or other services to,
serve as a director or other advisor to, maintain any employee relationship
with, or make any loan, extend credit to, or have any ownership interest in, any
Person that competes with the Business or operates a business similar to the
Business within the territory of
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Brazil,
(ii) solicit any Person not to conduct business with the Company, the Purchaser
or their respective Affiliates or to conduct its business with any Person that
operates a business similar to the Business within the territory of Brazil or
otherwise interfere with such customer relationship.
(b) None
of the Sellers shall directly or indirectly, and the Sellers shall cause any of
their respective Affiliates or Persons in which they have or may have an equity
interest, not to directly or indirectly, at any time prior to the 7th
(seventh) anniversary of the Closing Date, solicit (x) any Person who is offered
employment by the Company or their respective Affiliates, not to accept such
offer of employment or (y) any Person who is employed by the Company or their
Affiliates, to leave the employment in the Company or their Affiliates and to
work for, or to form a new entity with any Person.
(c) Each
of the Sellers hereby acknowledges and agrees that the provisions of this
Section 9.02 are reasonable and necessary for the Company, the Sellers, the
Purchaser and their respective Affiliates’ protection and that if any portion
thereof shall be held contrary to Law or invalid or unenforceable in any respect
in any jurisdiction, or as to one or more periods of time, areas of business
activities, or any part thereof, the remaining provisions shall not be affected
but shall remain in full force and effect and that any such invalid or
unenforceable provision shall be deemed, without further action on the part of
any Person, modified and limited to the extent necessary to render the same
valid and enforceable in such jurisdiction. Each of the Parties further agrees
that, in the event of a breach of or a default under this Section 9.02, the
remedies foreseen in Article 10 would be insufficient and that the aggrieved
Party shall be entitled to (i) specific performance to enjoin any breach, or the
continuation of any breach, of the provisions of this Section 9.02 and (ii) a
punitive penalty (multa
punitiva não-compensatória) for each of the violating party and for each
violation individually considered in the amount of R$500,000.00 (five hundred
thousand Reais), being such penalty exclusively due by the defaulting
Seller.
Section
9.03. Access to
Books and Records. On and after the Closing Date, the Sellers
will afford promptly to the Company, the Purchaser, Lakeland and their
respective agents reasonable access to its books of account, financial and other
records (including, without limitation, accountant’s work papers), information,
employees and auditors to the extent necessary or useful for the Company, the
Purchaser or Lakeland in connection with any audit, investigation, dispute or
litigation or any other reasonable business purpose relating to the
Company.
Section
9.04. Non-disparagement. From the
date hereof until the termination hereof, Sellers will not, and will not permit
any of their respective Affiliates, to knowingly make any statement, written or
oral, which disparages or is derogatory to the Company in any communications
with any Person.
ARTICLE
10
Indemnification
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claims,
awards, judgments, costs and expenses (including reasonable fees and expenses of
attorneys) (“Losses”) incurred or
suffered by any of the Indemnified Parties in connection with, relating to or as
a result of (i) any misdisclosure, inaccuracy, untruthfulness, violation or
breach of any representations and warranties given in this Agreement; and/or
(ii) any breach of any covenant or agreement contained in this
Agreement. Additionally, the Sellers hereby agree to indemnify and hold the
Indemnified Parties, harmless from any and all Losses incurred or suffered by
any of the Indemnified Parties in connection with, relating to or as a result of
any and all debts and liabilities of any kind (tax, labour, civil, environmental
etc.), including but not limited to those related to judicial or administrative
procedures, resulting from any act or omission, fact, event or circumstance
related to the Company or its business that occurred on or prior to the Closing
Date, which have not been recorded in the Financial Statements, whether or not
known by the Sellers and whether or not included in the Exhibits hereto
attached, or which, if recorded in the Financial Statements, are not adequately
provisioned in the Company’s accounting records.
Section
10.02. Survival of
Indemnity Obligation. The obligation to indemnify pursuant to
this Article 10 shall remain in full force and effect for the survival periods
of the indemnification obligations according to the applicable law.
Section
10.03. Indemnification
Procedures. (a) In the event that any action, suit,
proceeding, demand, assessment or other notice of claim (“Claim”) is at any
time instituted against or made upon any Indemnified Party for which
indemnification may be due from the Sellers pursuant to Section 10.01 above,
such Indemnified Party shall notify the Sellers of the assertion of any claim,
or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought under this Agreement. The Sellers shall have the right,
at its election, to take over the defense of such claim by giving written notice
to the Indemnified Party at least 5 (five) Business Days prior to the
time when an answer or other responsive pleading or notice with respect thereto
is required. If the Sellers make such election, they may conduct the defense of
such claim through counsel reasonably acceptable to the Indemnified Party, shall
be solely responsible for the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim; provided, that if the
Indemnified Party shall have concluded that there may be legal defenses
available to it which are different from or in conflict with those available to
the Seller, the Indemnified Party shall have the right to select separate
counsel (reasonably acceptable to the Sellers) to assume such legal defenses or
to otherwise participate in the defense of such action at the expense of the
Sellers. The Sellers shall not settle any such claim without prior notice to and
consultation with the Indemnified Party, and no such settlement which might have
an adverse effect on the Indemnified Party may be agreed to without the written
consent of the Indemnified Party. So long as the Sellers are diligently
contesting any such claim in good faith, the Indemnified Party may pay or settle
such claim only at its own expense; provided, that the Seller shall not be
obligated to indemnify the Indemnified Party in connection with any such payment
or settlement unless the Seller shall have consented thereto, such consent not
to be unreasonably withheld. If the Sellers do not make an election to take over
defense or settlement of a claim, or having made such election does not, in the
reasonable opinion of the Indemnified Party, proceed diligently to defend such
claim, then the Indemnified Party may (after written notice to the Seller
Party), at the expense of the Sellers, take over the defense of and proceed to
handle such claim in its discretion and the Sellers shall be bound by any
defense or settlement that the Indemnified Party may make in good
faith.
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(b) The
Party responsible for the conduct of the defense of a lawsuit or arbitration
proceeding shall provide the other Party with copies of the main court or
arbitration filings (peças processuais) as well as quarterly reports regarding
the conduct of the defense, which shall include, among others, the status and
the analysis of the probability of success of such defense.
Section
10.04. Cooperation. The
Parties agree to cooperate in defending such claims and the Sellers, the Company
and the Indemnified Party shall provide any information necessary to the other
party and such access to its books, records and properties as any Seller or
Indemnified Party shall reasonably request with respect to any matter for which
indemnification is sought thereunder; and the parties hereto agree to cooperate
with each other in order to ensure the adequate defense thereof. Any information
obtained under these provisions shall be deemed confidential and its use in
relation to any third party or any claim shall be used upon and in accordance
with a prior written agreement between the Indemnified Party and the
Seller.
Section
10.05. Due
Date. (a) With regard to third party claims for which
indemnification is payable hereunder such indemnification (and not expenses and
similar costs, which become due as and when incurred) shall become due by the
Seller upon the earlier to occur of: (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five Business Days after the date that the judgment creditor
has the right to execute the judgment; (ii) the entry of an unappealable
judgment or final appellate decision against the Indemnified Party; or (iii) a
settlement of the claim in accordance with the preceding
paragraphs. Notwithstanding the foregoing, the reimbursement of
expenses, fees and similar costs of the Indemnified Party shall be due on a
current basis by the Sellers if such expenses are a liability of the Sellers.
With regard to other claims for which indemnification is payable hereunder, such
indemnification shall be due promptly by the Sellers upon demand by the
Indemnified Party.
(b) Any
amounts to be indemnified by a Party to another Party shall be duly adjusted by
the CDI from the date any of the Losses are effectively incurred, suffered or
paid by the Indemnified Party until the date the respective indemnification is
paid by the Sellers. All payments to be made by the Sellers pursuant to this
Article 10 that are not paid after due date or a valid demand for payment is
made (whichever is earlier) shall continue to be adjusted by the CDI from the
date any such amount is due until the date of the respective payment.
Additionally, the Seller shall pay a punitive penalty (multa punitiva
não-compensatória) of 2% (two per cent) over the outstanding amount duly
adjusted by CDI, as described above.
Section
10.06. Guarantee
(”Fiança”). To secure the payment of all amounts required to be paid by
the Sellers under this Agreement, with interest at the rates set forth
herein, and the full performance by the Sellers of all of the other terms,
covenants and obligations set forth herein, the Sellers, with the consent
of their spouses, hereby irrevocably and irreversibly, jointly and
severally, guarantee the Sellers’ obligation to pay any indemnity under
this Article 10, waiving all benefits under Articles 827, 834, 835, 836,
837,837, 838 and 839 of the Brazilian Civil Code.
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Termination
Section
11.01. Right to
Terminate. This Agreement may be terminated at any time prior
to the Closing without liability or penalty to any of the Parties:
(i) by
the mutual written consent of the Parties;
(ii) by
either Party in the event that any Governmental Authority shall have issued an
order, decree or ruling or taken any other action restraining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and unappealable;
and
(iii) by
either Party in the event that the Closing does not occur until 9th May
2008, so as long as the terminating Party is not in breach of any of its
representations, warranties, covenants or agreements hereunder before the
termination.
Section
11.02. Effects of
Termination. In the event of termination of this Agreement as
provided in Section 11.01, this Agreement shall immediately become void and
there shall be no liability on the part of any Party to this Agreement, except
that:
(i) the
obligations under Sections 6.02, 12.01 and 13.06 will survive; and
(ii)
nothing in this Article 11 shall relieve either Party from liability for any
breach, failure to perform or comply with this Agreement which has given the
right to the other Party to exercise the right of termination pursuant to
Section 11.1 of this Agreement.
Section
11.03. Remedies. (a) At
any time prior to the Closing, either Party may:
(i)
extend the time for the performance of any of the obligations or other acts of
the other Party;
(ii)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement;
or
(iii)
waive compliance with any of the agreements or conditions contained in this
Agreement.
(b) This
Agreement may only be terminated prior to Closing and in accordance with Section
11.01 of this Agreement. After the Closing has taken place, the
indemnification rights provided for in Article 10 of this Agreement shall be the
sole and ultimate remedy available to the Parties with respect to any breach of
the representations and warranties of the Parties in this Agreement, and/or any
breach of any covenant or other term in this Agreement.
ARTICLE
12
Dispute
Resolution
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Section
12.01. Arbitration. (a)
Any dispute arising between the Parties in connection with this Agreement, its
interpretation, validity, performance, enforceability, breach or termination,
shall be settled in an amicable way by the Parties by direct negotiations held
in good faith for a term not exceeding 30 (thirty) calendar days.
(b) If,
upon expiration of the 30-day period, the Parties have not reached an amicable
settlement, the dispute must be submitted to the decision of an arbitration
panel and shall be finally settled under the rules of Arbitration of the Chamber
of Commerce Brasil-Canadá (“CCBC”) by 3 (three) arbitrators appointed in
accordance with the said rules. Language of the proceeding shall be English.
Place of arbitration and the issuance of the award shall be the City of São
Paulo, State of São Paulo, Brazil. The claims and disputes taken before the
arbitration proceeds shall be solved according to Brazilian law, which will also
be applicable to solve any controversy regarding this arbitration Article.
Notwithstanding the arbitration provisions above, the Parties hereto shall have
the right to go to court in the County of São Paulo in order to (i) obtain
injunctive relief or (ii) to enforce the submission of the other Party to the
arbitration proceeding.
ARTICLE
13
Miscellaneous
Section
13.01. Binding
Effect. This Agreement will be binding and inure to the benefit of the
Parties, their respective legal successors and permitted assignees.
Section
13.02. Assignability. The
rights and obligations set forth in this Agreement must not be assigned, except
for (i) the right of the Purchaser to act through any Affiliate incorporated in
Brazil or elsewhere; or (ii) with the written consent of the other
Parties.
Section
13.03. Severability. In case any
term or provision set forth in this Agreement is considered invalid, illegal or
not applicable, due to any legal provision or final court decision, all the
other conditions and provisions hereto will remain in full force and effect. In
case any term or provision is considered invalid, illegal or inapplicable, the
Parties will negotiate, in good faith, the amendment of this Agreement, so as to
effect the original intent of the Parties hereto as closely as
possible.
Section
13.04. Waiver;
Amendment. (a) No failure of delay in exercising any right,
power or privilege hereunder will be considered as a waiver thereof, nor will
any single or partial exercise thereof prevent the future exercise thereof or
the exercise of any other right, power or privilege. The rights and legal
measures set forth herein will be cumulated and will not prevent any other
rights or legal measures set forth in the law or in this Agreement.
(b) Any
provision of this Agreement may only be amended or waived if through written
form and signed by all the Parties hereto.
Section
13.05. Notices. All
notices and communications required or allowed pursuant to this Agreement, will
be made in written form, in English, and will be sent by registered mail, by fax
(receipt confirmed) or e-mail (receipt confirmed), to the following
addresses:
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If to the
Purchaser:
000
Xxxxxxx Xxxxxx, xxxxx 0
Xxxxxxxxxx,
XX 00000, XXX
Fax:
000-000-0000
At.:
Xxxxx Xxxxxxxx and Xxxxxxxxxxx X. Xxxx
e-mail:
XXXxxxxxxx@xxxxxxxx.xxx and XXXxxx@xxxxxxxx.xxx
if to the
Sellers:
Xxxxxx
Xxxxxxx dos Guimarães Bastos
Condominio
Encontro das Águas, Quadra I, Lote 39
42700-000
– Xxxxx xx Xxxxxxx - BA
Fax: 00
00 0000-0000
E-mail:
xxx@xxxxxxxxxxx.xxx.xx
Elder
Xxxxxx Xxxxxx da Xxxxxxxxx
Xxx
Xxxxxxxx xx Xxxxx Xxxxxxxxxx, 000, Xxxxxxxxxx Monte Trianon
Bairro
Caminho das Arvores, CEP 41820-700
Salvador,
BA
Fax: 00
00 0000-0000
E-mail:
xxxxxx.xxxxxx@xxxxxxxxxxx.xxx.xx
Xxxxxx
Xxxxxxxx Xxxxxx da Xxxxxxxxx Xxxxxxx
Xxxxxxx
Xxxx Xxxx, Xxxxxx 00, Lote 10
Bairro
Praias do Flamengo, CEP 41603-115
Salvador,
BA
Fax: 00
00 0000-0000
E-mail:
xxxxxxxxxxxxx@xxxxxxxxxxx.xxx.xx
if to the
Company:
Qualytextil
X.X.
Xxx xx
Xxxxxxxxxx, 000
00.000-000 Xxxxxxxx
XX
Fax: (00
00) 0000-0000
At.
Xxxxxx Xxxxxxx dos Xxxxxxxxx Xxxxxx
e-mail:
xxx@xxxxxxxxxxx.xxx.xx
with copy
to the Purchaser.
The
Parties are entitled to amend, by means of written communication, pursuant to
this Section 13.05, the addresses above.
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Section
13.06. Expenses. All
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the Party incurring such cost
or expense.
Section
13.07. Counterparts. This
Agreement may be signed in any number of counterparts, each of which will be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
Section
13.08. Entire
Agreement. This Agreement (including the Exhibits attached hereto)
constitute the entire agreement between the Parties with respect to the subject
matter of this Agreement and supersede all prior agreements, understandings and
offers, both oral and written, between the Parties with respect to the subject
matter of this Agreement.
Section
13.09. Language. This Agreement is
being executed in the English language. The version in the Portuguese language,
a copy of which is attached hereto as Exhibit 13.09, is
only for reference of the Parties. In the event of any discrepancy between the
English and Portuguese versions of this Agreement, the English version of the
Agreement shall prevail.
Section
13.10. Applicable
Law. This Agreement is governed and interpreted in accordance
with the laws of the Federative Republic of Brazil.
IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed by their respective authorized officers, as of the day and year first
above written, in the presence of the two witnesses named below.
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São
Paulo, May 2, 2008.
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||||
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LAKELAND
DO BRASIL EMPREENDIMENTOS E PART. LTDA.
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||||
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By:
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/s/ Xxxx Xxxxxxx
Lucena
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|||
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Name:
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Xxxx
Xxxxxxx Xxxxxx
|
|||
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Title:
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Administrator
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|||
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LAKELAND
INDUSTRIES, INC.
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||||
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By:
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/s/ Xxxx X.
Xxxxxxxx
|
|||
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Name:
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Xxxx
X. Xxxxxxxx
|
|||
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Title:
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CFO
|
|||
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XXXXXX
XXXXXXX DOS GUIMARÃES BASTOS
|
||||
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By:
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/s/ Xxxxxx Xxxxxxx Dos
Xxxxxxxxx Xxxxxx
|
|||
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ELDER
XXXXXX XXXXXX XX XXXXXXXXX
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||||
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By:
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/s/ Elder Xxxxxx
Xxxxxx Da Xxxxxxxxx
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|||
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XXXXXX
XXXXXXXX XXXXXX DA XXXXXXXXX XXXXXXX
|
||||
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By:
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/s/ Xxxxxx Xxxxxxxx
Xxxxxx Da Xxxxxxxxx Xxxxxxx
|
|||
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NORDESTE
EMPREENDEDOR FUNDO MÚTUO DE INV. EM EMP. EM.
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||||
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By:
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||||
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Name:
|
||||
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Title:
|
||||
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By:
|
||||
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Name:
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||||
|
Title:
|
||||
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QUALYTEXTIL
S.A.
|
||||
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By:
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/s/ Xxxxxx X.
Xxxxxx
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By:
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/s/ Elder Xxxxxx
Xxxxxx xx Xxxxxxxxx
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|
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Name:
|
Xxxxxx
X. Xxxxxx
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Name:
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Elder
Xxxxxx Xxxxxx xx Xxxxxxxxx
|
|
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Title:
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CFO
|
Title:
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CEO
|
|
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XXXXXXXXX
XXXXX PASSOS XX XXXXXXX
|
||||
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By:
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/s/ Xxxxxxxxx Xxxxx
Passos Xx Xxxxxxx
|
|||
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XXXXX
XX XXXXXXXX XXXXXXX
|
||||
|
By:
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/s/ Xxxxx Xx Xxxxxxxx
Xxxxxxx
|
|||
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WITNESSES:
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||
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1.
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2.
|
|
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Name:
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Name:
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|
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ID:
|
ID:
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