STOCK PURCHASE AGREEMENT
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THIS AGREEMENT is made as of September 23, 1999 among CHESHIRE
DISTRIBUTORS, INC., a Delaware corporation ("Buyer"), XXXXXXX X.X. XXXXXXX and
ALBERTEINA XXXXXXX, (sometimes referred to herein individually as "Seller" and
collectively as "Sellers"), and XXXXXXX CIGARETTE DEPOT (PTY) LIMITED, a South
African corporation (the "Company").
P R E A M B L E:
WHEREAS, Buyer wishes to purchase from Sellers and Sellers wish to sell
to Buyer all of the outstanding Shares of the Company (the "Shares"), as well as
certain other assets, consisting of real property owned by or under the control
of Sellers and used in connection with the business of the Company (the "Related
Assets").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase. Each Seller hereby agrees (a) to sell and
transfer to Buyer that number of Shares set forth on Exhibit 1.1(a) opposite the
name of such Seller, which Shares in the aggregate represent 100% of the issued
and outstanding shares of capital stock of the Company, free and clear of all
Liens, and (b) to sell, transfer and convey or cause to be sold transferred and
conveyed all of the Related Assets, which Related Assets are described in
Exhibit 1.1(b), free and clear of all Liens. Buyer hereby agrees to purchase all
the Shares and Related Assets for an aggregate purchase price equal to
$10,000,000 ( "Purchase Price").
1.2 Payment of Purchase Price. At the Closing, subject to the terms and
conditions hereof, the Sellers will deliver to Buyer certificate(s) representing
the Shares, against payment of the first installment of the Purchase Price
therefor in the sum of $1,000,000 by certified check or by wire transfer of
immediately available funds to bank accounts in the Republic of South Africa, as
designated by Sellers, respectively. The Buyer shall pay the remainder of the
Purchase Price in the same manner, by paying a second installment of $4,000,000
("Second Installment") on or before the first anniversary of the Closing Date,
and a final installment of $5,000,000 on or before the third anniversary date of
the Closing Date, such three installments being evidenced by a Promissory Note
signed by Buyer in favor of Sellers, and secured by a Guaranty executed by Xxxx
Xxxxxxxxx ("Xxxxxxxxx"), Buyer's principle shareholder, and a pledge of
Xxxxxxxxx' shares in the Buyer, each in form approved by respective counsel for
the parties
1.3 Transfer of Related Assets. Sellers shall cause title to the
Related Assets to be transferred to Buyer not later than the first anniversary
of the Closing Date. It shall be a condition to the payment of the Second
Installment that such transfer shall have been consummated.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer, as of
the date of this Agreement and as of the Closing Date (as if such
representations and warranties were remade on the Closing Date), as follows:
2.1 Due Incorporation; Subsidiaries.. The Company, and each Subsidiary,
are duly organized, validly existing and in good standing under the laws of the
Republic of South Africa, with all requisite power and authority
to own, lease and operate their respective properties and to carry on their
respective businesses as they are now being owned, leased, operated and
conducted. The Company, and each Subsidiary, is licensed or qualified to do
business and is in good standing (where the concept of "good standing" is
applicable) as a foreign corporation in each jurisdiction where the nature of
the properties owned, leased or operated by it and the business transacted by
them requires such licensing or qualification. The names of each Subsidiary and
the jurisdictions in which the Company, and each Subsidiary are licensed or
qualified to do business as a foreign corporation are set forth on Exhibit 2.1.
Other than the Subsidiaries, the Company does not hold any direct or indirect
economic, voting or management interest in any Person or directly or indirectly
own any security issued by any Person. True, correct and complete copies of the
Certificate of Incorporation and Bylaws, as amended, and all minutes of all
meetings (or written consents in lieu of meetings) of the Board of Directors
(and all committees thereof) and stockholders of the Company, and each
Subsidiary, have been delivered to Buyer. Except as set forth in Exhibit 2.1,
all actions taken by the Board of Directors (and all committees thereof) and
stockholders of the Company and each Subsidiary are reflected in such minutes
and written consents.
2.2 Due Authorization. Each of Sellers and the Company has full power
and authority to enter into this Agreement and each of Sellers and the Company
has full power and authority to enter into its respective Related Agreements and
to consummate the transactions contemplated hereby and thereby. Each of Sellers
and the Company has duly and validly executed and delivered this Agreement and
each of Sellers and the Company has duly and validly executed and delivered (or
prior to or at the Closing will duly and validly execute and deliver) its
respective Related Agreements. This Agreement constitutes legal, valid and
binding obligations of each of Sellers and the Company and each respective
Related Agreements upon execution and delivery by either or both of Sellers or
by the Company will constitute legal, valid and binding obligations of such
party, in each case, enforceable in accordance with its respective terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies.
2.3 Consents and Approvals; Authority Relative to this Agreement.
(a) Except for the approval of the Exchange Control Department of the
South African Reserve Bank or as set forth on Exhibit 2.3, no consent,
authorization or approval of, filing or registration with, or cooperation from,
any Governmental Authority or any other Person not a party to this Agreement is
necessary in connection with the execution, delivery and performance by either
or both Sellers or by the Company of this Agreement, their respective Related
Agreements or the consummation of the transactions contemplated hereby or
thereby.
(b) Except as set forth on Exhibit 2.3, the execution, delivery and
performance by Sellers and the Company of this Agreement and their respective
Related Agreements do not and will not, and the consummation of the transactions
contemplated hereby and thereby does not and will not, (i) violate any Law; (ii)
violate or conflict with, result in a breach or termination of, constitute a
default or give any third party any additional right (including a termination
right) under, permit cancellation of, result in the creation of any Lien upon
any of the assets or properties of either or both of Sellers, the Company under,
or result in or constitute a circumstance which, with or without notice or lapse
of time or both, would constitute any of the foregoing under, any Contract to
which either or both of Sellers of the Company is a party or by which either or
both of Sellers or the Company or any of their respective assets or properties
are bound; (iii) permit the acceleration of the maturity of any indebtedness of
either of Sellers or the Company or indebtedness secured by their respective
assets of properties; or (iv) violate or conflict with any provision of any of
the certificate of incorporation, charter, bylaws or similar organizational
instruments of the Company.
2.4 Capitalization.
(a) The authorized capital stock of the company consists of 100 Shares of
Common Stock, one (1) South African rand par value, of which all such Shares are
currently issued and outstanding. All of such Shares (i) are validly issued,
fully paid and nonassessable and (ii) are, and when issued were, free of
preemptive rights. Xxxxxxx X.X. Xxxxxxx owns (legally and beneficially) 99 of
such Shares, free and clear of any and all Liens, and Alberteina Xxxxxxx owns
(legally and beneficially) 1 of such Shares, free and clear of any and all
Liens. Except as set forth in Exhibit 2.4, there are no shares of capital stock
of the Company held in the treasury of the Company and no shares of capital
stock of the Company are currently reserved for issuance for any purpose or upon
the occurrence of any event or condition.
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(b) Except as set forth in Exhibit 2.4, there are no shares of capital
stock or other securities (whether or not such securities have voting rights) of
the Company issued or outstanding or any subscriptions, option, warrants, calls,
rights, convertible securities or other agreements or commitments of any
character obligating either or both of Sellers or the Company, or obligating
either or both of Sellers or any of their Affiliates to cause the Company to
issue, transfer or sell, or cause the issuance, transfer or sale of, any shares
of capital stock or other securities (whether or not such securities have voting
rights) of the Company. Except as set forth in Exhibit 2.4, there are no
outstanding contractual obligations of either or both of Sellers or the Company
which relate to the purchase, sale, issuance, repurchase, redemption,
acquisition, transfer, disposition, holding or voting of any shares of capital
stock or other securities of the Company or the management or operation of the
Company. Except for either of Sellers' rights as a holder of Shares and except
for employee benefit plans or bonus arrangements disclosed pursuant to Section
2.17, no Person has any right to participate in, or receive any payment based on
any amount relating to, the revenue, income, value or net worth of the Company
or any component or portion thereof, or any increase or decrease in any of the
foregoing.
(c) The assignments, endorsements, stock powers and other instruments
of transfer delivered by each Seller to Buyer at the Closing will be sufficient
to transfer such Seller's entire interest, legal and beneficial, in the Shares.
Each Seller has, and on the Closing Date will have, full power and authority to
convey good and marketable title to all of the Shares, and upon transfer to
Buyer of the certificates representing such Shares, Buyer will receive good and
marketable title to such Shares, free and clear of all Liens.
2.5 Financial Statements; Undisclosed Liabilities; Other Documents.
(a) The Financial Statements have been prepared in accordance with South
African GAAP and will prior to the Closing be converted to US GAAP consistently
applied and present fairly the financial position, assets, liabilities and
retained earnings of the Company as of the dates thereof and the revenues,
expenses, results of operations, changes in financial position and cash flows of
the Company for the periods covered thereby. The Financial Statements are in
accordance with the books and records of the Company, do not reflect any
transactions which are not bona fide transactions and do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
(b) Except as set forth in Exhibit 2.5 or in the Latest Balance Sheet, the
Company has no liabilities, debts, claims or obligations, whether accrued,
absolute, contingent or otherwise, whether due or to become due, other than
trade payables and accrued expenses incurred in the ordinary course of business
since the date of the Latest Balance Sheet.
2.6 No Adverse Effects or Changes. Except as listed in Exhibit 2.6, since
February 28, 1999, the Company has not:
(i) suffered any Company Material Adverse Effect;
(ii) suffered any damage, destruction or Loss to any of its assets
or properties (whether or not covered by insurance);
(iii) incurred any obligation or entered into any Contract which
required a payment by any party in excess of, or a series of
payments which in the aggregate exceed, $100,000 or provides
for the delivery of goods or performance of services, or any
combination thereof, having a value in excess of $100,000
except for purchases of raw materials and supplies in the
ordinary course of business of the Company;
(iv) taken any action, entered into authorized any Contract or
transaction other than in the ordinary course of business and
consistent with past practice;
(v) sold, transferred, conveyed, assigned or otherwise disposed of
any of its assets or properties, except sales of inventory in
the ordinary course of business and consistent with past
practice;
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(vi) waived, released or cancelled any claims against third parties
or debts owing to it, or any rights which have any material
value;
(vii) made any changes in its accounting systems, policies,
principles or practices;
(viii)entered into, authorized, or permitted any transaction either
or both of Sellers or any Affiliate of either or both of
Sellers;
(vix) authorized for issuance, issued, sold, delivered or agreed or
committed to issue, sell or deliver (whether through the
issuance or granting of options, warrants, convertible or
exchangeable securities, commitments, subscriptions, rights to
purchase or otherwise) any shares of capital stock or any
other securities, or amended any of the terms of any such
securities;
(x) split, combined, or reclassified any shares of its capital
stock, declared, set aside or paid any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, or
redeemed or otherwise acquired any securities of the Company;
(xi) except for Existing Borrowings, made any borrowings, incurred
any debt (other than trade payables in the ordinary course of
business and consistent with past practice), or assumed
guaranteed, endorsed (except for the negotiation or collection
of negotiable instruments in transactions in the ordinary
course of business and consistent with past practice) or
otherwise become liable (whether directly, contingently or
otherwise) for the obligations of any other Person, or made
any payment or repayment in respect of any indebtedness (other
than trade payables and accrued expenses in the ordinary
course of business and consistent with past practice), in each
case, in excess of $25,000;
(xii) made any loans, advances or capital contributions to, or
investments in, any other Person, in each case, in excess of
$10,000;
(xiii)entered into, adopted, amended or terminated any bonus,
profit sharing, compensation, termination, stock option, stock
appreciation, right, restricted stock, performance unit,
pension, retirement, deferred compensation, employment,
severance or other employee benefit agreements, trusts, plans,
funds or other arrangements for the benefit or welfare of any
director, officer or employee, or increased in any manner the
compensation or fringe benefits of any director or officer, or
increased by five percent (5%) or more the compensation or
fringe benefits of any nonunion employee earning in excess of
$35,000 annually, or paid any benefit not required by any
existing plan and arrangement or entered into any contract,
agreement, commitment or arrangement to do any of the
foregoing;
(xiv) except for capital expenditures contemplated by (xv) below,
acquired, leased or encumbered any assets outside the ordinary
course of business or any assets which are material to the
Company;
(xv) authorized or made any capital expenditure which individually
is in excess of $25,000;
(xvi) made any Tax election or settled or compromised any Tax
liability; or waived or extended the statue of limitations in
respect of any such Taxes;
(xvii)paid any amount, performed any obligation or agreed to pay
any amount or perform any obligation, in settlement or
compromise of any suits against the Company or any of its
directors, officers, employees or agents;
(xviii)paid in excess of $20,000, performed any obligation or
agreed to pay in excess of $20,000 or perform any obligation,
in settlement or compromise of any claims of liability
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against the Company or any of its directors, officers,
employees or agents; or
(xix) terminated, modified, amended or otherwise altered or changed
any of the terms or provisions of any Contract, or paid any
amount not required by Law or by any Contract, other than in
the ordinary course of business and consistent with past
practices.
2.7 Title to Properties. Except as disclosed on Exhibit 2.7, the Company
(i) has, and on the Closing Date will have, good and marketable title to, and
is, and on the Closing Date will be, the lawful owner of, all of the tangible
and intangible assets, properties and rights used in connection with its
business and all of the tangible and intangible assets, properties and rights
reflected in the Financial Statements or Exhibit 2.9 or 2.10 (other than assets
leased under the leases set forth in Exhibits 2.9 or 2.10 and assets disposed of
in the ordinary course of business since the date of such Financial Statement.
2.8 Condition and Sufficiency of Assets. Except as disclosed on Exhibit
2.8, all of the tangible assets and properties of the Company, whether real of
personal, owned or leased, have been well maintained and are in good operation
condition and repair (with the exception of normal wear and tear), and are free
from defects other than such minor defects as do not interfere with the intended
use thereof in the conduct of normal operations or adversely affect the resale
value thereof. Immediately after the Closing Date, the Company shall own or have
a permanent right to use all the assets, properties, rights, know-how, key
personnel, processes and ability which are required for or currently used in
connection with the operation of its business as it is presently conducted. Such
assets, properties and rights were sufficient to produce the income for the
fiscal year ended February 28, 1999, as shown on the Financial Statements.
Except as set forth in Exhibit 2.8, the Company has no liabilities not directly
related to, and that did not arise directly our of, the business of the Company.
2.9 Real Property.
(a) The Company does not hold legal title to, or own any legal or
beneficial interest in any real property, except as set forth on Exhibit 2.9 A
(the "Owned Real Property"), nor does it lease any real property, except as set
forth on Exhibit 2.9 B (the "Leased Real Property") pursuant to Leases (the
"Real Property Leases"). The Company does not hold, occupy or use any real
property except for the Owned Real Property and the (the Leased Real Property).
True and complete copies of the legal descriptions of the Owned Real Property
and the Leased Real Property and of the Property Leases have been provided to
Buyer. The activities carried on in all buildings, plants, facilities,
installations, fixtures and other structures or improvements themselves, are not
in violation of, or in conflict with, any applicable zoning, Environmental Law,
health regulations or ordinance or any other similar Law. Except as set forth in
Exhibit 2.9, no asbestos, asbestos-containing materials, PCB compounds or other
pollutants, contaminants or Hazardous Material have been used in the
construction or repair of, or any alterations or additions to, or are otherwise
located on, any portion of the Owned or Leased Real Property. No parcel of land
included in the Owned or Leased Real Property relies on or regularly makes use
of access to the nearest public road or right-of-way over land owned by others,
except where such access is by means of one or more valid recorded easements not
subject to divestiture, the terms of which have been disclosed in writing to
Buyer prior to the date hereof, and which easements the Company is entitled to
use under the terms of the documents creating such easements and under the terms
of the Real Property Leases. All covenants or other restrictions (if any) to
which any of the Owned or Leased Real Property is subject are being in all
respects properly performed and observed and, except for covenants contained in
the Real Property Leases, do not provide for forfeiture or reversion of title if
violated, and neither the Company nor the owners of any of the Owned or Leased
Real Property has received any notice of violation (or claimed violation)
thereof. Sellers have delivered to Buyer true and complete copies of the most
recent title insurance policies and surveys (if any) for the Owned and Leased
Real Property and copies of any recorded documents referred to in such policies
or surveys, together with copies of all reports (if any) of any engineers,
environmental consultants or other consultants in its possession relating to any
of the Owned or Leased Real Property.
(b) Each separate parcel included in the Owned or Leased Real Property
and any improvements located thereon are served by water, storm and sanitary
sewer facilities, telephone, gas and electricity, fire protection, drainage and
other public utilities, all of which are adequate for the present and continued
use thereof in the usual and normal conduct of the Company's business and
operations, and have adequate parking facilities that meet all requirements
imposed by applicable Laws. None of the Owned or Leased Real Property is subject
to any recorded or unrecorded Lien, easement, right-of-way, building or use
restriction, exception, variance, reservation or limitation as might in any
material respect interfere with or impair the present and continued use thereof
in the usual
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and normal conduct of the business and operations of the Company.
(c) Except as disclosed on Exhibit 2.9, there is no pending, or, to the
knowledge of the Company or the Sellers, threatened or proposed proceeding or
governmental action to modify the zoning classification of, or to condemn or
take by the power of eminent domain (or to purchase in lieu thereof), or to
classify as a landmark, or to impose special assessments on, or otherwise to
take or restrict in any way the right to use, develop or alter, all or any part
of the Owned or Leased Real Property.
(d) All the Real Property Leases are in full force and effect, valid and
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally and by equitable limitations on the availability of
specific remedies. None of the Real Property Leases have been amended or
modified except as set forth in Exhibit 2.9, and there are no agreements,
written or oral, between the Company and the owner of the Leased Real Property,
other than the Real Property Leases. The Company has not received any notice of
any, and there exists no, dispute, claim, event of default or event which
constitutes or would constitute (with notice or lapse of time or both) a default
under any Real Property Lease. All rent and other amounts due and payable with
respect to the Real Property Leases have been paid through the date of this
Agreement and all rent and other amounts due and payable with respect to the
Real Property Leases on or prior to the Closing Date will have been paid prior
to the Closing Date. All lessors under the Real Property Leases have consented
or prior to Closing will have consented (where such consent is necessary) to the
consummation of the transactions contemplated by this Agreement or the Related
Agreements without requiring modification in the rights or obligations
thereunder except as set forth in Exhibit 2.3.
2.10 Personal Property. Sellers have heretofore delivered a true and
complete list of all of the tangible personal property used by the Company in
its business having an original acquisition cost of $5,000 or more. Exhibit 2.10
sets forth all leases of personal property binding upon the Company, or any of
its assets or properties, and all items of personal property covered thereby.
All of such tangible personal property is presently utilized by the Company in
the ordinary course of its business. Sellers have delivered to Buyer true and
complete copies of all such personal property leases.
2.11 Inventories. Sellers have heretofore made available to Buyer a true
and accurate list of all inventories of the Company as of August 31,1999, with a
complete listing of all items that have remained in inventory for over twelve
months. Except as described on such list, each item of the inventory owned by
the Company is of merchantable quality, is not obsolete and is usable and
saleable in the ordinary course of its business, and none of such items is held
on assignment or consignment. Such inventories are fairly reflected in the
inventory accounts on the balance sheets included in the Financial Statements in
accordance with GAAP, including all appropriate reserves, and are valued at the
lower of cost or market.
2.12 Accounts Receivable and Advances. Exhibit 2.12 contains a true and
accurate list of all accounts receivable of the Company in excess of $10,000 and
originating on or prior to July 1, 1999, and all loans and advances to third
parties ("Advances"). Except as disclosed on Exhibit 2.12, (a) each account
receivable of the Company (collectively, the "Accounts Receivable" represents a
sale made in the ordinary course of business other than to Affiliates and which
arose pursuant to an enforceable written Contract for a bona fide sale of goods
or for services performed, and the Company has performed all of its obligations
to produce the goods or perform the services to which such Account Receivable
relates, and (b) to the best of Seller's knowledge, no Account Receivable or
Advance, in each case in excess of $10,000, is subject to any claim for
reduction, counterclaim, set-off, recoupment or other claim for credit,
allowances or adjustments by the obligor thereof. Except as reserved against in
the Financial Statements, all Accounts Receivable and Advances are collectible
in full within 90 days of their obligation
2.13 Intellectual Property. Exhibit 2.13 is a true and complete list of
the trademarks, tradenames, service marks, patents and copyrights (including any
registrations of or pending applications for nay of the foregoing) used by the
Company in the conduct of its business. Except as disclosed on Exhibit 2.13:
(a) all of the Company's Intellectual Property is owned by the Company free
and clear of all Liens, and is not subject to any license, royalty or other
agreement, and the Company has not granted any license or agreed to pay or
receive any royalty in respect of any Intellectual Property;
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(b) none of the Company's Intellectual Property has been or is subject of
any pending or threatened litigation or claim of infringement;
(c) no license or royalty agreement to which the Company is a party is in
breach or default by any party thereto or the subject of any notice of
termination given or threatened;
(d) the products manufactured or sold by the Company and any process,
method, part, design, material or other Intellectual Property they employ, and
the marketing and use by the Company of any such product, service or other
Intellectual Property, do not infringe any Intellectual Property or confidential
or proprietary rights of another, and the Company has not received any notice
contesting its right to use any Intellectual Property; and
(e) the Company owns or possesses adequate rights in perpetuity in and to
all Intellectual Property necessary to conduct its business as presently
conducted.
2.14 Contracts. Exhibit 2.14 lists all of the Contracts and arrangements of
the following types to which the Company is a party or to which it is bound, or
to which any of its assets or properties is subject:
(a) any collective bargaining agreement and a summary of the collective
bargaining unit's position with respect to any such agreement currently the
subject of negotiations;
(b) any Contract or arrangement of any kind with any employee, officer or
director of the Company or any of the respective Affiliates of such individuals,
or any Contract or other arrangement of any kind with either or both of Sellers
or any Affiliate of either or both of Sellers other than any such Contract or
arrangement described in Section 2.17(a);
(c) any Contract or arrangement with a sales representative, manufacturer's
representative, distributor, dealer, broker, sales agency, advertising agency or
other Person engaged in sales, distributing or promotional activities, or any
Contract to act as one of the foregoing on behalf of any Person;
(d) any Contract or arrangement of any nature which involves the payment or
receipt of cash or other property, an unperformed commitment, or goods or
services (i) having a value in excess of $50,000;
(e) any Contract or arrangement pursuant to which the Company has made or
will make loans or advances, or has or will have incurred debts or become a
guarantor or surety or pledged its credit on or otherwise become responsible
with respect to any undertaking of another (except for the negotiation or
collection of negotiable instruments in transactions in the ordinary course of
business);
(f) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, lease of real property or personal property, loan commitment
or other Contract or arrangement relating to the borrowing of funds, an
extension of credit or financing;
(g) any Contract or arrangement involving a partnership, joint venture or
other cooperative undertaking;
(h) any Contract or arrangement involving any restrictions with respect to
the geographical area of operations or scope or type of business of the Company;
(i) any power of attorney or agency agreement or arrangement with any
person pursuant to which such Person is granted the authority to act for or on
behalf of the Company, or the Company is granted the authority to act for or on
behalf of any Person;
(j) any Contract for which the full performance thereof may extend beyond
60 days from the date of this Agreement, except for customer purchase orders
that were entered into in the ordinary course of the Company's business;
(k) any Contract not made in the ordinary course of business which is to be
performed in whole or in
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part at or after the date of this Agreement;
(l) any Contract, whether or not fully performed, related to any
acquisition or disposition of the Company or any predecessor in interest of the
Company, or any acquisition or disposition of any subsidiary, division, line of
business, or real property; and
(m) any Contract not specified above that is material to the Company.
Sellers have delivered to Buyer true and complete copies of each
document listed on Exhibit 2.14, and a written description of each oral
arrangement so listed. Except as disclosed on Exhibit 2.14, all such Contracts
and arrangements (i) when entered into, were on terms no less favorable to the
Company than the terms which could have been obtained at the date thereof from
an unrelated third party, and (ii) if cancelled at any time by the other party,
would not have a Company Material Adverse Effect.
2.15 Permits. Exhibit 2.15 is a true and accurate list of all licenses,
certificates, permits, franchises, rights, code approvals and private product
approvals (collectively, "Permits") held by the Company. Except for the Permits
listed on Exhibit 2.15, there are no Permits, whether federal, state, local or
foreign, which are necessary for the lawful operation of the business of the
Company.
2.16 Insurance.
(a) Exhibit 2.16 contains an accurate and complete list of all policies of
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Company (or its assets or business), Sellers
have heretofore delivered to Buyer a true and complete copy of all such
policies, including all occurrence-based policies applicable to the Company (or
its business) for all periods prior to the Closing Date. All such policies are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with (i) all requirements of Law and
(ii) all Contracts to which the Company is a party, and are valid, outstanding
and enforceable policies. Such insurance policies provide types and amounts of
insurance customarily obtained by businesses similar to the business of the
Company. Except as set forth in Exhibit 2.16, the Company has not been refused
any insurance with respect to its assets or operations, and its coverage has not
been limited by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, during the last three (3)
years.
(b) Sellers have furnished to Buyer a list of all claims, which (including
related claims which in the aggregate) exceed $50,000, which have been made by
the Company in the last three years under any workers' compensation, general
liability, property or other insurance policy applicable to the Company or any
of its properties. Except as set forth on said list, there are no pending or
threatened claims under any insurance policy. Such claim information includes
the following information with respect to each accident, loss, or other event:
(a) the identity of the claimant; (b) the nature of the claim; (c) the date of
the occurrence; (d) the status as of the report date and (e) the amounts paid or
expected to be paid or recovered.
2.17 Employee Benefits.
(a) General. The Company is not a party to and does not participate in or
have any liability or contingent liability with respect to:
(i) except as listed on Exhibit 2.17, any employee welfare, benefit,
pension retirement or deferred compensation plan, incentive compensation
plan, stock plan, unemployment compensation plan, vacation pay, severance
pay, bonus or benefit arrangement, insurance or hospitalization program or
any other fringe benefit arrangements for any current or former employee,
director, consultant or agent, whether pursuant to contract, arrangement,
custom or informal understanding, (referred to collectively hereinafter in
this Section as "arrangements"); or
(ii) except as listed on Exhibit 2.17, any employment, consulting or
agency agreement (referred to collectively hereinafter in this Section as
"agreements").
8
(b) Plan Documents and Reports. A true and correct copy of each of the
plans, arrangements, and agreements listed on Exhibit 2.17, and all contracts
relating thereto, to the funding thereof, including, without limitation, all
trust agreements, insurance contracts, administration contracts, investment
management agreements, subscription and participation agreements, and record
keeping agreements, each as in effect on the date hereof, has been supplied to
Buyer. In the case of any plan, arrangement, or agreement which is not in
written form, Buyer has been supplied with an accurate description of such plan,
arrangement, or agreement as in effect on the date hereof.
(c) Compliance With Laws; Liabilities. As to all plans, arrangements, and
agreements listed on Exhibit 2.17:
(i) All plans and arrangements comply and have been administered in
form and in operation in all material respects with all
requirements of Law applicable thereto, and there has been no
notice issued by any Governmental Authority questioning or
challenging such compliance.
(ii) There are no actions, suits, or claims (other than routine claims
for benefits) pending or threatened involving such plans,
arrangements or agreements or the assets thereof, and no facts
exist which could give rise to any such actions, suits, or claims
(other than routine claims for benefit).
(iii)There has been no act or omission that would impair the right or
ability of the Company to unilaterally amend or terminate any
plan, arrangement or agreement.
2.18 Employment and Labor Matters. Exhibit 2.18 contains a true, complete
and accurate list of the names, titles, annual compensation (including all
bonuses and similar payments made with respect to each such individual for the
current and preceding fiscal years) of all directors, officers and employees of
the Company who have an annual aggregate remuneration of $30,000 or more. The
Company has and currently is conducting its business in full compliance with all
Laws relating to employment and employment practices, terms and conditions of
employment, wages and hours, affirmative action, and nondiscrimination in
employment. Except as disclosed on Exhibit 2.18, the relationships of the
Company with its employees are good; there is, and during the past five years
there has been, no labor strike, dispute, slow-down, work stoppage or other
labor difficulty actually pending or threatened against or involving the Company
and no attempt is currently being made or during the past three years has been
made to organize any employees of the Company to form or enter a labor union or
similar organization. Exhibit 2.18 contains a list of all grievances by
employees during the past three years which have resulted in a significant
change in work practices or contract interpretation or terms or resulted in
arbitration.
2.19 Taxes.
(a) The amounts provided as a liability on the Financial Statements for all
Taxes are adequate to cover all unpaid liabilities for all Taxes, whether or not
disputed or not disputed, that have accrued with respect to or are applicable to
the period ended on and including the Closing Date or to any years and periods
prior thereto and for which the Company may directly or contingently liable in
its own right or as a transferee of the assets of, or successor to, any Person.
The Company has not incurred any Tax Liabilities other than in the ordinary
course of business for any taxable year for which the applicable statute of
limitations has not expired; there are no Tax Liens (other than Liens for
current Taxes not yet due and payable) upon the properties or assets of the
Company. Except as set forth in Exhibit 2.19, the Company has not granted or
been requested to grant any waiver of any statutes of limitations applicable to
any claim for Taxes.
(b) Tax Returns have been filed for the Company and the Group, and all
other filings in respect of taxes have been made for the Company, for all
periods through and including the Closing Date as required by applicable Law.
All Taxes shown as due on all such Tax Returns and other filings have been paid.
Each such Tax Return and filing is true and correct and neither the Company has
or will have any additional liability for Taxes with respect to any Tax Return
or other filing heretofore filed or which was required by Law to be filed, other
than as reflected as liabilities on the Financial Statements (which shall not
include any amount reflected as a liability for deferred taxes). Except as set
forth in Exhibit 2.19, none of the Tax Returns or other filings that include the
operations of the Company has ever been audited or investigated by any
Governmental Authority, and no facts exist which would constitute grounds for
the assessment of any additional Taxes by any Governmental Authority with
respect to the
9
taxable years covered in such Tax Returns and filings. Except as set forth in
Exhibit 2.19, no material issues have been raised in any examination by any
Governmental Authority with respect to the business and operations of the
Company which, by application of similar principles, reasonably could be
expected to result in a proposed adjustment to the liability for Taxes for any
other period not so examined. All Taxes which the Company and the Group are
required by Law to withhold or collect, including without limitation, sales and
use taxes, and amounts required to be withheld for Taxes of employees and other
withholding taxes, have been duly withheld or collected and, to the extent
required, have been paid over to the proper Governmental Authorities or are held
in separate bank accounts for such purpose. All information returns required to
be filed by the Company, prior to the Closing Date have been (or will be) filed,
and all statements required to be furnished to payees by the Company prior to
the Closing Date have been furnished to such payees, and the information set
forth on such information returns and statements is true, complete and correct.
(c) Except as set forth in Exhibit 2.19, the Company is not a party to or
is otherwise subject or any arrangement having the effect of or giving rise to
the recognition of a deduction or loss in a taxable period ending on or before
the Closing Date, and a corresponding recognition of taxable income or gain in a
taxable period ending after the Closing Date, or any other arrangement that
would have the effect of or give rise to the recognition of taxable income or
gain in a taxable period ending after the Closing Date without the receipt of or
entitlement to a corresponding amount of cash.
(d) Except as set forth in Exhibit 2.19, the Company is not subject to any
joint venture, partnership or other arrangement or contract which is treated as
a partnership for Tax purposes.
2.20 No Defaults or Violations. Except as disclosed on Exhibit 2.20:
(a) The Company has not breached any provision of, not is it in default
under the terms of, any Contract to which it is a party or under which it has
any rights or by which it is bound, and no other party to any such Contract has
breached such Contract or is in default thereunder.
(b) The Company is in compliance with, and no violation exists under, any
and all Laws applicable to the Company;
(c) No notice from any Governmental Authority has been received by the
Company claiming any violation of any Law (including any building, zoning or
other ordinance) or requiring any work, construction or expenditure, or
asserting any Tax, assessment or penalty.
2.21 Environmental Matters. Except as disclosed in Exhibit 2.21:
(a) The business, operations and facilities (whether owned or leased) of
the Company, and all existing uses of and activities on or at any of the
properties or facilities (whether owned or leased) of the Company, are in
material compliance with all Environmental Laws in effect as of the date hereof,
and no condition exists or event occurred which, with or without notice or the
passage of time or both, would constitute a violation of or give rise to any
Lien under any Environmental Law;
(b) The Company is in possession of all Environmental Permits necessary or
desirable for the conduct or operation of its business (or any part thereof),
and is in material compliance with all of the requirements, conditions and
limitations included in such Environmental Permits;
(c) The Company has not received any notice from any Governmental Authority
or any other Person that any past or present aspect of the business, operations
or facilities (whether owned or leased) of the Company is in violation of any
Environmental Law or Environmental Permit, or that the Company is responsible or
liable (or potentially responsible or liable) for the investigation, cleanup or
remediation of any Hazardous Materials at any location; and
10
(d) The Company is not the subject of any litigation or proceedings in any
forum, judicial or administrative, involving a demand for damages, injunctive
relief, penalties, or other potential liability with respect to violations of or
liability under any Environmental Law.
2.22 Litigation.
(a) Except as disclosed in Exhibit 2.22, there are no actions, suits,
arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations pending or threatened against or affecting the
Company or any of its officers, directors, employees, agents or stockholders
thereof in their capacity as such, or any of the Company's properties or
businesses, and neither the Sellers nor the Company is aware of any facts or
circumstances which may give rise to any of the foregoing. Except as set forth
on Exhibit 2.22, all of the proceedings pending or threatened against the
Company are fully covered by insurance policies (or other indemnification
agreements with third parties) and are being defended by the insurers (or such
third parties), subject to such deductibles as set forth in such Exhibit. Except
as disclosed in Exhibit 2.22, the Company is not subject to any order,
judgement, decree, injunction, stipulation or consent order of or with any court
or other Governmental Authority. The Company has not entered into any agreement
to settle or compromise any proceeding pending or threatened against it which
has involved any obligation other than the payment of money or for which the
Company has any continuing obligation.
(b) There are no claims, actions, suits, proceedings or investigations
pending or threatened by or against the Company or either or both of Sellers
with respect to this Agreement or the Related Agreements, or in connection with
the transactions contemplated hereby or thereby, and neither of Sellers has any
reason to believe there is a valid basis for any such claim, suit, proceeding,
or investigation.
2.23 No Conflict of Interest. Except as disclosed on Exhibit 2.23, neither
of Sellers nor any of their Affiliates have or claim to have any direct or
indirect interest in any tangible or intangible property used in the business of
the Company, except as a holder of Shares. Except as set forth on Exhibit 2.23,
neither of Sellers nor any of their Affiliates have any direct or indirect
interest in any other Person which conducts a business similar to, has any
Contract or arrangement with, or does business or is involved in any way with,
the Company, except for the ownership of less than 2% of any class securities of
any publicly held corporation. Exhibit 2.23 contains a complete and accurate
description of all such Persons, interests, arrangements and other matters.
2.24 Bank Accounts. Exhibit 2.24 sets forth the names and locations of each
bank or other financial institution at which the Company has an account (giving
the account numbers) or safe deposit box and the names of all Persons authorized
to draw thereon or have access thereto, and the names of all Persons, if any,
now holding powers of attorney or comparable delegation of authority from the
Company and a summary statement thereof.
2.25 Customers, Suppliers, etc.
(a) Exhibit 2.25 sets forth a list of the ten largest customers and ten
largest suppliers of the Company in terms of revenue during the fiscal year
ended February 28, 1999 (collectively, the "Major Customers" and "Major
Suppliers", respectively).
(b) Except to the extent set forth in Exhibit 2.25, since February 28,
1999, there has not been any adverse change in the business relationship, and
there has been no material dispute, between the Company and any Major Customer
or Major Supplier, agent or sales representative, and there are no indications
that any Major Customer intends to reduce its purchases from the Company.
2.26 Claims Against Officers and Directors. There are no pending or
threatened claims against any director, officer, employee or agent of the
Company or any other Person which could give rise to any claim for
indemnification against the Company.
2.27 Due Diligence Materials. Except as provided in Exhibit 2.27, Sellers
shall have provided to Buyer or its representatives, in accordance with the
terms of Section 4.2, all documents of the character and type requested by Buyer
in connection with its "due diligence" investigation of the Company, and there
are no documents in the
11
possession of Sellers, the Company or any of their respective agents or
representatives of a character or type described in such requests which have not
been so provided to Buyer or its representatives.
2.28 Improper and Other Payments. To the best of Sellers' knowledge, except
as set forth on Exhibit 2.28, (a) neither the Company, any director, officer,
employee, agent or representative of the Company, or any other Person acting on
behalf of any of them, has made, paid or received any bribes, kickbacks or other
similar payments to or from any Person, whether lawful or unlawful, (b) no
contributions have been made, directly or indirectly, to a domestic or foreign
political party or candidate and (c) no improper foreign payment (as defined in
the United States Foreign Corrupt Practices Act) has been made.
2.29 Brokers. None of the Sellers or the Company has used any broker or
finder in connection with the transactions contemplated hereby, and neither
Buyer nor any Affiliate of Buyer has or shall have any liability or otherwise
suffer or incur any Loss as a result of or in connection with any brokerage or
finder's fee or other commission of any Person retained by either or both of
Sellers or by the Company in connection with any of the transactions
contemplated by this Agreement.
2.30 Accuracy of Statements. Neither this Agreement nor any Exhibit,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Company or either or both of Sellers
to Buyer or any representative or Affiliate of Buyer in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
2.31 Projections; Material Facts. In connection with the transactions
contemplated by this Agreement, Sellers have furnished to Buyer a business plan
including certain projected budgets, financial statements and forecasts. Except
as limited by the next sentence, all statements contained in the business plan
are true, correct and complete in all material respects.. The Company and
Sellers do not represent or warrant that any occurrences, developments or facts
(including, without limitation, projections),which the business plan says will
occur or eventuate after its date (or which were otherwise furnished in writing
to Buyer), will in fact occur or eventuate after such date. But the Company and
Sellers represent and warrant that such occurrences, developments of facts,
including such projections, presented therein were prepared by the Company in
good faith based on its best knowledge, information and belief. No
representation or warranty by the Company or Sellers contained in the business
plan (other than the projections), this Agreement or any other written
statement, information, material or certificate furnished or to be furnished to
Buyer pursuant hereto or in connection with the transactions contemplated hereby
by the Company or Sellers contains any untrue statement or material fact or
omits to state a material fact necessary to make the statements contained
therein or herein not misleading, when all are taken together as a whole (it
being understood that, in the event of any inconsistency between this Agreement
and any other writings, this Agreement shall control). The Company knows of no
information or fact which has or would have a material adverse effect on the
financial condition, business or business prospects of the Company, which has
not been disclosed to Buyer. Since the respective dates as of which information
is given in the business plan, the Company knows of no material adverse change
in the business, business prospects, property, condition or results of
operations of the Company.
2.32 Investigation. It shall be no defense to an action for breach of this
Agreement that Buyer or its agents have (or have not) made investigations into
the affairs of the Company or that the Company or Sellers could not have known
of the misrepresentation or breach of warranty.
2.33 Related Assets. Sellers hold legal title to all of the Related Assets
described in Exhibit 1.1(b), except for the Corporate Owned Related Assets; and
as for the Corporate Owned Related Assets, Sellers own 100% of the outstanding
capital stock in the corporations listed in Exhibit 1.1(b) which own such
assets. Except as set forth in Exhibit 2.33, each of the representations and
warranties set forth in this Agreement, including without limitation in Sections
2.9 and 2.21 are true and correct as applied to the Related Assets and the
corporations owning the Corporate Owned Related Assets.
12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to each of Sellers, as of the date of this
Agreement and as of the Closing Date ( as if such representations and warranties
were remade on the Closing Date), as follows:
3.1 Due Incorporation. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with all
requisite power and authority to own, lease and operate its properties and to
carry on its business as they are now owned, leased, operated and conducted.
3.2 Due Authorization. Buyer has full power and authority to enter into
this Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Buyer of this Agreement and Related Agreements have been duly and validly
approved by the board of directors of Buyer and no other actions or proceedings
on the part of Buyer are necessary to authorize this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby. Buyer has duly
and validly executed and delivered this Agreement and has duly and validly
executed and delivered (or prior to or at the Closing will duly and validly
execute and deliver) the Related Agreements. This Agreement and the Related
Agreements constitute legal, valid and binding obligations of Buyer, in each
case enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws in effect which affect the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific remedies.
3.3 Consents and Approvals; Authority Relative to this Agreement.
(a) Except for the approval of the Exchange Control Department of the South
African Reserve Bank or as set forth on Exhibit 3.3, no consent, authorization
or approval of, filing or registration with, or cooperation from, any
Governmental Authority or any other Person not a party to this Agreement is
necessary in connection with the execution, delivery and performance by Buyer of
this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby.
(b) Except as set forth on Exhibit 3.3, the execution, delivery and
performance by Buyer of this Agreement and its Related Agreements do not and
will not, and the consummation of the transactions contemplated hereby and
thereby does not and will not, (i) violate any Law; or (ii) violate or conflict
with any provision of the certificate of incorporation, charter, bylaws or
similar organizational instruments of Buyer.
ARTICLE V
COVENANTS
4.1 Implementing Agreement. Subject to the terms and conditions hereof,
each party thereto shall use its reasonable best efforts to take all action
required of it to fulfill its obligations under the terms of this Agreement and
to facilitate the consummation of the transactions contemplated hereby. Each
Seller agrees that unless this Agreement is terminated in accordance with the
provisions of Section 8.1, each Seller will not encumber the Shares, will not
sell the Shares to any Person other than Buyer (or an Affiliate of Buyer) and
will not take any other action which would have the effect of preventing or
disabling each Seller's respective performance of its obligations under this
Agreement.
4.2 Access to Information and Facilities.
(a) From and after the date of this Agreement or such earlier time as Buyer
and Sellers shall have mutually agreed, Sellers shall, and shall cause the
Company to, give Buyer and Buyer's representatives unrestricted access during
normal business hours to all of the facilities, properties, books, Contracts,
commitments and records of the Company and shall make the officers and employees
of the Company available to Buyer and its representatives as Buyer and its
representatives shall from time to time request; provided, however, that access
to Company Confidential Information shall be provided not later than ten
Business Days prior to the Closing. Buyer
13
and its representatives will be furnished with any and all information
concerning the Company which Buyer or its representatives reasonably request.
(b) Except as may be reasonably necessary to carry out this Agreement and
the transactions contemplated hereby, Buyer will not, will cause its Affiliates
not to, and will instruct its and its Affiliates' agents and financing sources
not to disclose Company Confidential Information to any Person other than
Buyer's employees, agents and financing sources on a "need to know" basis
without the prior consent of the Company, unless compelled to disclose any such
Company Confidential Information by judicial or administrative process or, in
the opinion of Buyer's counsel, by other requirements of law.
(c) Except as may be reasonably necessary to carry out this Agreement and
the transactions contemplated hereby, Sellers will not, will cause their
Affiliates not to, and will instruct their, and their Affiliates' agents and
financing sources not to disclose any Buyer Confidential Information to any
Person other than Sellers' or the Company's employees, agents and financing
sources without the prior consent of Buyer, unless compelled to disclose any
such Buyer Confidential Information by judicial or administrative process or, in
the opinion of Sellers' counsel, by other requirements of law.
4.3 Preservation of Business.
(a) From the date of this Agreement until the Closing Date, Sellers shall
cause the Company to operate only in the ordinary and usual course of business
and consistent with past practice, and shall use their best efforts to (a)
maintain the assets of the Company in substantially their current state of
repair, excepting normal wear and tear, and preserve intact the present business
organization and personnel of the Company, (b) preserve the goodwill and
advantageous relationships of the Company with customers, suppliers, independent
contractors, employees and other Persons material to the operation of its
business, and (c) not permit any action or omission which would cause any of the
representations or warranties of Sellers contained herein to become inaccurate
or any of the covenants of Sellers to be breached. Without limiting the
generality of the foregoing, except as set forth in Exhibit 4.3(a) and except
for actions relating to rationalization of the businesses of the Company with
the mutual written agreement of Sellers and Buyer prior to the Closing the
Company will not, without the prior written consent of Buyer:
(i) take any action, or enter into or authorize any Contract or
transaction, other than in the ordinary course of business and
consistent with past practice;
(ii) sell, transfer, convey, assign or otherwise dispose of any of its
assets or properties, except sales of inventory in the ordinary
course of business and consistent with past practice;
(iii) waive, release or cancel any claims against third parties or debts
owing to it, or any rights which have any value;
(iv) make any changes in its accounting systems, policies, principles
or practices;
(v) enter into, authorize, or permit any transaction with either or
both of Sellers or any Affiliate of either or both of Sellers;
(vi) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting
of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any
shares of capital stock or any other securities of the Company, or
amend any of the terms of any such capital stock or other
securities;
(vii) split, combine, or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any
capital stock or other securities of the Company;
(vii) enter into, adopt, amend or terminate any bonus, profit sharing,
compensation, termination, stock
14
option, stock appreciation right, restricted stock, performance
unit, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreements, trusts, plans,
funds or other arrangements for the benefit or welfare of any
director, officer or employee, or increase in any manner the
compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any existing plan and
arrangement or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(viii) except for capital expenditure contemplated by (ix) below,
acquire, lease or encumber any assets outside the ordinary course
of business or any assets which are material to the Company;
(ix) authorize or make any capital expenditure which individually is in
excess of $100,000;
(x) make any Tax election or settle or compromise any federal, state,
local or foreign income Tax liability; or waive or extend the
statute of limitations in respect of any such Taxes;
(xi) pay any amount, perform any obligation or agree to pay any amount
or perform any obligation, in settlement or compromise of any suit
against the Company, or any of its directors, officers, employees
or agents; or
(xii) terminate, modify, amend of otherwise alter or change any of the
terms or provisions of any Contract, or pay any amount not
required by Law or by any Contract, other than in the ordinary
course of business and consistent with past practices.
4.4 Consents and Approvals. Sellers shall use their best efforts, and shall
cause the Company to use its best efforts, to obtain all consents, approvals,
certificates and other documents required in connection with the performance by
any such parties of this Agreement and their respective Related Agreements and
the consummation of the transactions contemplated hereby and thereby, including
all consents and approvals by each party to any of the Contracts referred in
Exhibit 2.3; provided, however, that no contact will be made by either or both
of Sellers or the Company (or any representative of any of such parties) with
any third party to obtain any such consent or approval except in accordance with
a plan previously agreed to by Buyer. Sellers shall, and shall cause the Company
to, make all filings, applications, statements and reports to all Governmental
Authorities and other Persons which are required to be made prior to the Closing
Date by or on behalf of either or both of Sellers, the Company or any of their
respective Affiliates pursuant to any applicable Law or Contract in connection
with this Agreement or any of their respective Related Agreements and the
transactions contemplated hereby and thereby, and expedited submission of all
materials required by any Governmental Authority in connection with such
filings. Buyer shall make all filings, applications, statements and reports to
all Governmental Authorities and other Persons which are required to be made
prior to the Closing Date by or on behalf of Buyer or any of its Affiliates
pursuant to any applicable Law or Contract in connection with this Agreement or
any Related Agreement and transactions contemplated hereby and thereby, and
expedited submission of all materials required by any Governmental Authority in
connection with such filings.
4.5 Maintenance of Insurance. Sellers shall cause the Company to continue
to carry its existing insurance through the Closing Date, and shall not allow
any breach, default, termination or cancellation of such insurance policies or
agreements to occur to exist.
4.6 Resignation of Officers and Directors. Sellers shall cause each officer
and member of the Board of Directors of, and each trustee or fiduciary of any
plan or arrangement involving employee benefits of, the Company, if so requested
by Buyer, to tender his or her resignation from such position effective as of
the Closing.
4.7 Supplemental Information.
(a) From time to time prior to the Closing, Sellers will promptly disclose
in writing to Buyer any matter hereafter arising which, if existing, occurring
or know at the date of this Agreement would have been required to be disclosed
to Buyer or which would render inaccurate any of the representations, warranties
or statements set forth herein. No information provided to a party pursuant to
this Section shall be deemed to cure any breach of any representation, warranty
or covenant made in this Agreement.
15
(b) From time to time prior to the Closing, Buyer will promptly disclose in
writing to Sellers any matter hereafter arising which, if existing, occurring or
known at the date of this Agreement would have been required to be disclosed to
Sellers to which would render inaccurate any of the representations, warranties
or statements set forth in Article IV hereof. No information provided to a party
pursuant to this Section shall be deemed to cure any nreach of any
representation, warranty or covenant made in this Agreement.
4.8 Noncompetition. Each of Sellers agrees that the following provisions of
this Section are intimately linked to the other transactions contemplated by
this Agreement, and each Seller acknowledges that Buyer would not enter into
this Agreement without each Seller agreeing to be bound by the following
provisions from the date hereof until the Ending Date (as hereinafter defined):
(a) Except as expressly approved (which approval shall not be unreasonably
withheld) by Buyer, each Seller agrees that from and after the date of this
Agreement until 3 years after the later of (i) the Closing Date, and (ii) the
date the employment of such Seller by the Company terminates (the later of such
dates being referred to herein as the "Ending Date" with respect to each
Seller), that he shall not directly or indirectly:
(i) except as an officer or employee of the Company ( or any successor
corporation into which it may be merged or consolidated), engage
in, control, advise, manage, serve as a director, officer, or
employee of, act as a consultant to, provide any funds for,
receive any economic benefit from, have any financial interest in
(except investment in not more than 2% of any class of securities
of any publicly traded company) or exert any influence upon
(whether by guarantee, loan or otherwise), any business which
conducts activities in the Territory (as hereinafter defined)
similar to those conducted by the Company provided that this
restriction shall not apply to any activity in connection with a
business that does not actually or potentially compete with the
activities of the Company;
(ii) except in connection with any duties as an officer or employee of
the Company, solicit, divert or attempt to solicit or divert any
party who is or was a customer or supplier of the Company,
provided that this restriction shall not apply to any activity on
behalf of a business that does not actually or potentially compete
with the activities of the Company;
(iii) employ, solicit for employment or encourage to leave their
employment, in each case, either as an employee, agent or
representative, any person who was during the two-year period
prior to such employment, solicitation or encouragement or is an
officer, employee, agent or representative of the Company;
(iv) disturb, or attempt to disturb, any business relationship between
any third party and the Company; or
(v) make any statement to any third party, including the press or
media, likely to result in adverse publicity for the Company.
"Territory" means the Republic of South Africa and all other countries in which
the Company has transacted business prior to the Ending Date.
(b) In the event of actual or threatened breach of the provisions of this
Section, Buyer, in addition to any other remedies available to it for such
breach or threatened breach, including the recovery of damages, shall be
entitled to an injunction restraining either or both of Sellers, as appropriate,
from such conduct.
(c) If at any time any of the provisions of this Section shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to duration, area, scope of activity or otherwise, then this
Section shall be considered divisible (with the other provisions to remain in
full force and effect) and the invalid or unenforceable provisions shall become
and be deemed to be immediately amended to include only such time, area, scope
of activity and other restrictions, as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter, and
each Seller expressly agrees that this Agreement, as so amended, shall be valid
and binding as though any invalid or unenforceable provision had not been
included herein.
16
(d) The provisions of this Section shall be in addition to, and not in
limitation of, any other provisions contained in any other agreement restricting
competition by either or both of Sellers.
(e) Sellers shall not, directly or indirectly, (i) disclose, or (ii) use
for their own benefit, or for the benefit of any other Person(other than, in the
case of (a) below, the Company or Affiliate of the Company), (a) any secret or
confidential information, customer lists, supplier information, or any other
data of or pertaining to the Company or to any Affiliate of the Company, their
respective businesses or financial affairs, or their products which are not a
matter of public knowledge or (b) any Buyer Confidential Information
(collectively, the "Confidential Information"). Each Seller agrees that upon
termination of such Seller's employment agreement with the Company for any
reason and upon the request of the Company on or after the Closing Date, he will
immediately deliver to the Company all original papers, books, manuals, lists,
correspondence and documents containing or relating to the Confidential
Information, together with al copies thereof, except that each Seller may keep
copies of such materials as shall be necessary to permit such Seller to prepare
his tax returns or to comply with any other legal requirements.
4.9 Exclusivity.
Neither of Sellers and non of the Company or any of their respective
directors, officers, employees, representatives, agents or Affiliates shall,
directly or indirectly, solicit, initiate, encourage, respond favorably to,
permit or condone inquiries or proposals from, to provide any confidential
information to, or participate in any discussions or negotiations with, any
Person (other than Buyer, and the respective directors, officers, employees,
representatives and agents) concerning (i) any merger, sale of assets not in the
ordinary course of business, acquisition, business combination, change of
control or other similar transaction involving the Company, or (ii) any purchase
or other acquisition by any Person of the Shares, or (iii) any sale or issuance
by the Company of any shares of its capital stock. Sellers will promptly advise
Buyer of, and communicate to Buyer the terms and conditions of (and the identity
of the Person making), any such inquiry or proposal received.
4.10 Use of Name. From and after the Closing Date, neither of Sellers nor
any of their Affiliates will directly or indirectly use in any manner any trade
name, trademark, service xxxx or logo used by the Company or any word or logo
that is similar in sound or appearance.
4.11 Tax Indemnity.
(a) For purposes of this Agreement, "Tax Indemnification Period" means the
period (including all prior taxable years) ending on and including the Closing
Date. For any taxable year of the Company that does not end on, and would
otherwise extend beyond, the Closing Date, there shall be a deemed short taxable
year ending on and including such date and a second deemed short taxable year
beginning on and including the day after such date. For purposes of allocating
gross income and deductions between deemed short taxable years, the books of the
Company shall be closed as of the close of business of the Closing Date, and all
amounts of income, gain, loss and deduction shall be reflected in the period in
which such items accrued under the Company's normal tax accounting methods.
(b) Sellers agree to jointly and severally indemnify Buyer against, and
agree to hold it harmless from, any and all Losses incurred or suffered by it
relating to or arising our of or in connection with any and all Taxes that have
become due and payable during, or which have accrued with respect to the Company
for, any period included in the Tax Indemnification Period and that have not
been paid prior to the Closing Date or reserved on the Financial Statements
(which reserves shall not take into account any liability for deferred taxes).
Any Taxes attributable to the operations of the Company payable as a result of
an audit of any Tax Return shall be deemed to have accrued in the period to
which such Taxes are attributable.
4.12 Termination of Certain Agreements. Each Seller shall, and each Seller
agrees that it shall cause its Affiliates and the Company to, and that its
Affiliates and the Company shall, effective as the Closing, without any cost to
the Company, terminate, rescind, cancel and render void and of no effect all of
the Contracts between the Company on the one hand and such Seller or any of its
Affiliates, as the case may be (other than the Company) on the other hand,
except for those Contracts listed in Exhibit 4.12 and those Contracts entered
into pursuant to this Agreement.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under Article I of this Agreement are subject to
the satisfaction or waiver by Buyer of the following conditions precedent on or
before the Closing Date:
5.1 Warranties True as of Both Present Date and Closing Date. The
representation and warranties of Sellers contained herein shall have been
accurate, true and correct on and as of the date of this Agreement, and shall
also be accurate, true and correct on and as of the Closing Date with the same
force and effect as though made by Sellers on and as of the Closing Date,
unless, in each case, any such inaccuracy, untruth or incorrectness with respect
thereto shall not (i) have been wilful on the part of either Seller and (ii) be
reasonably likely to result in a Company Material Adverse Effect.
5.2 Compliance with Agreements and Covenants. Sellers and the Company shall
have performed and compiled with all of their respective covenants, obligations
and agreements contained in this Agreement to be performed and compiled with by
them on or prior to the Closing Date.
5.3 Consents and Approvals. Buyer shall have received written evidence
satisfactory to Buyer that the approval of the Exchange Control Department of
the South African Reserve Bank and all other consents and approvals required for
the consummation of the transactions contemplated hereby or the ownership and
operation by Buyer of the Company and it business have been obtained, and all
required filings have been made, including those set forth on Exhibit 2.3, and
excluding those excluded as set forth on Exhibit 2.3.
5.4 Documents. Buyer shall have received all of the agreements, documents
and items specified in Section 7.2.
5.5 Employment Agreements. The Company shall have entered into an
employment agreement with each of Xxxxx Xxxxxxx, X. Xxxxxxx, Xxxxxxx Xxxxxxx and
Xxxxx Xxxxxxx, substantially in the forms attached hereto as Exhibit 5.5.
5.6 Consulting Agreement. The Company shall have entered into a consulting
agreement with Xxxxxxx X.X. Xxxxxxx, substantially in the form attached hereto
as Exhibit 5.6.
5.7 Noncompetition Agreement. The Company shall have entered into a
Noncompetition Agreement, substantially in the form of Exhibit 5.7 hereto, with
each of the key employees named in Exhibit 5.7.
5.8 Due Diligence Review. Buyer shall have been satisfied with (i) results
of its investigation and review of the business, operations, assets,
liabilities, results of operations, cash flows, condition (financial and
otherwise) and prospects of, and other matters relating to, the Company and (ii)
the results of its investigation, and review that there is no material adverse
misstatement with respect to Sellers' representations set forth herein.
5.9 Delivery of Exhibits. All exhibits respecting the Company and/or
Sellers or either of them have been delivered in final form at least five
Business Days prior to the Closing Date (not counting the Closing Date as one of
such Days) and no such exhibit contains or reflects a Material Adverse Change
from the last previous draft of such exhibit, or, if none, the last oral
discussion or written memorandum respecting such exhibit or Exhibit.
5.10 No Material Adverse Change. No Company Material Adverse Change shall
have occurred and no event shall have occurred which, in the reasonable
judgement of Buyer, is reasonably likely to have a Company Material Adverse
Effect.
5.11 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which (a)
might have a Company Material Adverse Effect, or (b) could enjoin, restrain or
prohibit, or could result in substantial damages in respect of, any provision of
this Agreement or any of the Related Agreements or the consummation of the
transactions contemplated hereby or thereby or any integration of any operations
of the Company with those of Buyer and its Affiliates.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS
The obligations of Sellers under Article I of this Agreement are subject to
the satisfaction or waiver by Sellers of the following conditions precedent on
or before the Closing Date:
6.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Buyer contained herein shall have been
accurate, true and correct on and as of the date of this Agreement, and shall
also be accurate, true and correct on and as of the Closing Date with the same
force and effect as though made by Buyer on and as of the Closing Date.
6.2 Compliance with Agreements and Covenants. Buyer shall have performed
and complied with all of its respective covenants, obligations and agreements
contained in this Agreement to be performed and complied with by it on or prior
to the Closing Date.
6.3 Documents. Seller shall received all of the agreements, documents and
items specified in Section 7.3.
6.4 Consulting Agreement. Xxxxxxx X.X. Xxxxxxx shall have each entered into
a consulting agreement with the Company, substantially in the form attached
hereto as Exhibit 5.6.
6.5 Release of Personal Guarantees. Sellers shall have received a release
or indemnification (which indemnification, if any, shall not be subject to the
amount limitations set forth in Section 9.2 of this Agreement) by the Company
and Buyer with respect to certain personal guarantees of Sellers in connection
with the obligations of the Company specified on Exhibit 6.5 of this Agreement,
substantially in the forms attached hereto as Exhibit 6.5
6.6 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which could
enjoin, restrain or prohibit, or could result in substantial damages in respect
of, any provision of this Agreement or any of the Related Agreements or the
consummation of the transactions contemplated hereby or thereby or any
integration of any operations of the Company with those of Buyer and its
Affiliates, including its Subsidiaries.
6.7 Consents and Approvals. Sellers shall have received written evidence
satisfactory to Sellers that the approval of the Exchange Control Department of
the South African Reserve Bank and all other consents and approvals required for
the consummation of the transactions contemplated hereby have been obtained, and
all required filings have been made, including those set forth in Exhibit 4.3.
ARTICLE VII
CLOSING
7.1 Closing. The Closing shall be scheduled to occur at the offices of
Xxxxxx Xxxxxxx & Associates, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at
10:00 A.M. on the later of: (i) November 1, 1999 , or (ii) such later date as
the parties hereto shall mutually agree. The Closing, and all transactions to
occur at the Closing, shall be deemed to have taken place at, and shall be
effective as of, the close of business on the Closing Date.
7.2 Deliveries by Sellers. At the Closing, in addition to any other
documents or agreements required under this Agreement, Sellers shall deliver to
Buyer the following:
(a) Certificates evidencing all of the Shares, which certificates shall be
duly endorsed in blank or accompanied by duly executed stock powers;
(b) The resignations of the persons listed in Exhibit 7.2(b) as directors
and officers of the Company;
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(c) Evidence, in form satisfactory to Buyer, that all consents and
approvals referred to in Exhibit 2.3 have been obtained;
(d) Except for those Liens specified on Exhibit 7.2(d) attached hereto, a
written statement from each Person holding a Lien upon any of the assets of the
Company, or upon any Shares, confirming the repayment of the indebtedness
secured thereby and the release as of the Closing Date of (i) such Lien and (ii)
all obligation xxxxxx any and all Contracts relating thereto;
(e) A certificate dated the Closing Date of each Seller certifying as to
the compliance by each Seller and the Company, as the case may be, with Sections
5.1 and 5.2;
(f) The Certificates of Incorporation or similar instruments of the Company
certified by the Secretary of State or equivalent Person of the jurisdiction of
incorporation of the Company, and Bylaws or similar instruments of the Company,
certified by the Secretary of the Company;
(g) Certificates of Good Standing for the Company from the Republic of
South Africa;
(h) An opinion, dated the Closing Date, of [Name}, counsel for Sellers and
the Company, substantially in the form attached hereto as Exhibit 7.2(h);
(i) [Intentionally omitted].
(j) A certificate of the Company's Secretary certifying resolutions of the
Board of Directors of the Company approving this Agreement, the Company's
Related Agreements and the transactions contemplated hereby and thereby
(together with an incumbency and signature certificate regarding the officer(s)
signing on behalf of the Company;
7.3 Deliveries by Buyer. At the Closing, Buyer shall deliver to Sellers the
following:
(a) The respective aggregate amounts payable to each Seller at the Closing
pursuant to Section 1.2;
(b) A certificate, dated the Closing Date, of an executive officer of
Buyer, certifying as to the compliance by Buyer with Sections 6.1 and 6.2;
(c) Certificates of Buyer's secretary certifying resolutions of the board
of directors of parties approving this Agreement and its Related Agreements and
the transactions contemplated hereby and thereby (together with an incumbency
and signature certificate regarding the officer(s) signing on behalf of Buyer)'
(d) Evidence, in form satisfactory to Sellers, that all consents and
approvals referred to in Exhibit 3.3 have been obtained; and
(e) An opinion, dated the Closing Date, of [Name] counsel for Buyer,
substantially in the form of Exhibit 7.3(e);
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time on or prior
to the Closing Date:
(a) With the mutual consent of Sellers and Buyer;
(b) By Sellers or Buyer, if the Closing shall not have taken place on or
before October 31, 1999 ; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
wilful failure to fulfil any obligation under this Agreement has been the cause
of or
20
resulted in the failure of the Closing to occur on or before such date;
(c) By Buyer, if there shall have been a material breach of any covenant,
representation or warranty or other agreement of either or both of Sellers or of
the Company hereunder, and such breach shall not have been remedied within ten
Business Days after receipt by Sellers of a notice in writing from Buyer
specifying the breach and requesting such be remedied; or
(d) By Sellers, if there shall have been a material breach of any covenant,
representation or warranty or other agreement of Buyer hereunder, and such
breach shall not have been remedied within ten Business Days after receipt by
Buyer of notice in writing from Sellers specifying the breach and requesting
such be remedied.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all obligations of the parties hereunder shall terminate, except
for the obligations set forth in Sections 4.2(b), 11.1, 11.11 and 11.12, which
shall survive the termination of this Agreement, and except that no such
termination shall relieve any party from liability for any prior wilful breach
of this Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 Survival. Except as otherwise specified, the representations and
warranties of Sellers contained herein shall survive the Closing for a period
expiring at the close of business on the date that is one year after the date
that Buyer and Sellers receive from the one year anniversary of the Closing
Date, (the "Survival Date") except that (i) Tax Warranties shall survive until
the Tax Statute of Limitations Date, and (ii) Title and Authorization Warranties
shall survive forever. The representations and warranties of Buyer contained
herein shall survive the Closing for a period expiring at the close of business
on the Survival Date except that the representations and warranty set forth in
Section 3.2 hereof shall survive forever.
9.2 Limits on Indemnification. The parties hereto agree that any
indemnification payments to be made pursuant to this Agreement by either or both
of Sellers on the one hand or Buyer on the other hand shall be subject to the
requirement that no claim may be made (i) until the aggregate amount of
indemnifiable Losses incurred by Sellers on the one hand or Buyer on the other
hand exceeds $200,000, at which time such claim for indemnification may be made
for the aggregate amount of all indemnifiable Losses exceeding $200,000 or (ii)
for any amount with respect to the Sellers jointly in excess of $1,500,000.
9.3 Indemnification by Sellers. Each of Sellers, jointly and severally,
agrees to indemnify Buyer against, and agrees to hold it harmless from, any and
all Losses incurred or suffered by it relating to or arising out of or in
connection with any of the following; provided, however, that such
indemnification shall, except as set forth in Sections 4.8 and 11.2, be the sole
remedy for Buyer for any and all such Losses:
(a) any breach of or any inaccuracy in any representation or warranty made
by Sellers in this Agreement or any Related Agreement or any document delivered
at the Closing; provided, however, that (A) except for breaches of or
inaccuracies in Tax Warranties or Title and Authorization Warranties, a notice
of Buyer's claim shall have been given to Sellers not later than the close of
business on the Survival Date, and (B) in the case of a Tax Warranty, a notice
of the Buyer's claim shall have been given to Sellers not later than the Tax
Statute of Limitations Date; or
(b) any breach of or failure by either or both of Sellers or the Company to
perform any covenant or obligation of such party set out or contemplated in this
Agreement or any Related Agreement or any document delivered at the Closing.
9.4 Indemnification by Buyer. Buyer agrees to indemnify each of Sellers
against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection with
any of the following; provided, however that such indemnification shall, except
as set forth in Section 11.12, be the sole remedy for either or both of Sellers
for any and all such Losses:
21
(a) any breach of or any inaccuracy in any representation or warranty made
by Buyer in Sections 4.1, 4.2, or 4.3 in this Agreement or any Related Agreement
or any document delivered at the Closing; or
(b) any breach of or failure by buyer to perform any covenant or obligation
set our or contemplated in this Agreement or any Related Agreement or any
document delivered at the Closing.
9.5 Claims. The provisions of this Section shall be subject to Section 9.6.
As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement, the indemnified person ("Idemnified
Person") shall promptly give notice to the Indemnifying Person ("Indemnified
Person") of such claim and the amount the Indemnified Person will be entitled to
receive hereunder from the Indemnifying Person; provided that the failure of the
Indemnified Person to promptly give notice shall not relieve the Indemnifying
Person of its obligations except to the extent (if any) that the Indemnifying
Person shall have been prejudiced thereby. If the Indemnifying Person does not
object in writing to such indemnification claim within 30 days of receiving
notice thereof, the Indemnified Person shall be entitled to recover, on the
thirty-fifth day after such notice given, from the Indemnifying Person the
amount of such claim, and no later objection by the Indemnifying Person shall be
permitted; if the Indemnifying Person agrees that it has an indemnification
obligation but objects that it is obligated to pay only a lesser amount, without
prejudice to the Indemnified Person's claim for the difference. In addition to
the amounts recoverable by the Indemnified Person from the Indemnifying Person
pursuant to the foregoing provisions, the Indemnified Person shall also be
entitled to recover from the Indemnifying Person interest on such amounts at the
rate of Two Times Prime from, and including, the thirty-fifth day after such
notice of an indemnification claim is given to, but not including, the date such
recovery is actually made by the Indemnified Person.
9.6 Notice of Third-party Claims; Assumption of Defense. The Indemnified
Person shall give notice as promptly as is reasonably practicable to the
Indemnifying Person of the assertion of any claim, or the commencement of any
suit, action or proceeding, by any Person not a party hereto in respect of which
indemnity may be sought under this Agreement; provided that the failure of the
Indemnified Person to promptly give notice shall not relieve the Indemnifying
Person of its obligations except to the extent (if any) that the Indemnifying
Person shall have been prejudiced thereby. The Indemnifying Person may, at its
own expense, (a) participate in the defense of any claim, suit, action or
proceeding and (b) upon notice to the Indemnified Person and the Indemnifying
Person's delivering to the Indemnified Person written agreement that the
Indemnified Person is entitled to Indemnification for any Losses arising out of
such claim, suit, action or proceeding and that the Indemnifying Person shall be
liable for the entire amount of any Loss, at any time during the course of any
such claim, suit, action or proceeding, assume the defense thereof provided,
however, that (i) the Indemnifying Person's counsel is reasonably satisfactory
to the Indemnified Person, and (ii) the Indemnifying Person shall thereafter
consult with the Indemnified Person upon the Indemnified Person's reasonable
request for consultation from time to time with respect to such claim, suit,
action or proceeding. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right (but not the duty) to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Person. If, however, the Indemnified Person
reasonably determines from its judgement that representation by the Indemnifying
Person's counsel of both the Indemnifying Person and the Indemnified Person
would present such counsel with a conflict of interest, then such Indemnified
Person may employ separate counsel to represent and defend it in any such claim,
action, suit or proceeding and the Indemnifying Person shall pay the fees and
disbursements of such separate counsel. Whether or not the Indemnifying Person
chooses to defend or prosecute any such claim, suit, action or proceeding, all
of the parties hereto shall cooperate in the defense or prosecution thereof.
9.7 Settlement or Compromise. Any settlement or compromise made or caused
to be made by the Indemnified Person or the Indemnifying Person, as the case may
be, of any claim, suit, action or proceeding shall also be binding upon the
Indemnifying Person or the Indemnified Person, as the case may be, in the same
manner as a final judgement or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise; provided, however,
that no obligation, restriction or Loss shall be imposed on the Indemnified
Person as a result of such settlement without its prior written consent. The
Indemnified Person will give the Indemnifying Person at least 30 days notice of
any proposed settlement or compromise of any claim, suit, action or proceeding
it is defending, during which time the Indemnifying Person may reject such
proposed settlement or compromise; provided ,however, that from and after such
rejection, the Indemnifying Person shall be obligated to assume the defense of
and full and complete liability and responsibility for such claim, suit, action
or proceeding
22
and any and all Losses in connection therewith in excess of the amount of
unindemnifiable Losses which the Indemnified Person would have been obligated to
pay under the proposed settlement or compromise.
9.8 Failure of Indemnifying Person to Act. In the event that the
Indemnifying person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
9.9 Tax Character. Sellers and Buyer agree that any payments pursuant to
this Article IX will be treated for tax purposes as adjustments to the purchase
price of the Shares, and that they will report such payments on all Tax Returns
consistently with such characterization.
ARTICLE X
DEFINITIONS
10.1 Definitions. The following terms shall have the following meanings for
the purposes of this Agreement:
"Affiliate" means, with respect to any specified Person (1) any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(2) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities of the specified Person or a Person described in clause (1) of this
paragraph, (3) another Person of which the specified Person is a director,
officer or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, or (4) any relative or spouse
of the specified Person or any of the foregoing Persons.
"Business Day" means any day of the year other than (i) any Saturday or
Sunday or (ii) any other day on which commercial banks located in New York City
are generally closed for business.
"Buyer Confidential Information" means all confidential information
concerning Buyer or its Affiliates that (i) is not and has not become
ascertainable or obtainable from public or published information, (ii) is not
received from a third party or is received from a third party pursuant to the
authorization of Buyer, (iii) was not in the Company's or either or both of
Sellers' possession prior to disclosure thereof to Sellers or the Company in
connection with the transactions contemplated herein, and (iv) was not
independently developed by the Company or either or both of Sellers.
"Closing" means the consummation of the transactions contemplated herein.
"Closing Date" means the date at which the Closing occurs.
"Company Confidential Information" means all confidential information
concerning the Company or its Affiliates that (i) is not and has not become a
ascertainable or obtainable from public or published information, (ii) is not
received from a third party or is received from a third party pursuant to the
authorization of the Company or either or both of Sellers in connection with
Buyer's due diligence review of the Company, (iii) was not in Buyer's possession
prior to disclosure thereof to Buyer in connection with the transactions
contemplated herein, and (iv) was not independently developed by Buyer.
"Company Material Adverse Change" means a change (or circumstance involving
a prospective change) in the business, operations, assets, liabilities, results
or operations, cash flows, condition (financial or otherwise) or prospects of
the Company which is materially adverse.
"Company Material Adverse Effect" means an effect (or circumstance
involving a prospective effect) on the business, operations, assets,
liabilities, results of operations, cash flows, condition (financial or
otherwise) or prospects of the Company which is materially adverse.
23
"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
"Corporate Owned Related Assets" means those assets described in Exhibit
1.1(b) used in connection with the business of the Company which are currently
not owned by the Company, but are owned by other corporations, the entire stock
ownership of which is held by Sellers.
"Dollars" or numbers preceded by the symbol "$" means amounts in United
States Dollars.
"Ending Date" means the date specified in Section 4.8(a)..
"Environmental Law" means any law which relates to or otherwise imposes
liability or standards of conduct concerning mining or reclamation of mined
land, discharges, emissions, releases or threatened releases of noises, odors or
any pollutants, contaminants or hazardous or toxic wastes, substances or
materials, whether as matter or energy, into ambient air, water, or land, or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous or toxic wastes, substances or materials.
"Environmental Permit" means any permit, license, approval, consent or
other authorization required by or pursuant to any applicable Environmental Law.
"Existing Borrowings" means all borrowings from lending institutions,
vendors or agencies of governments or their political subdivisions, as set forth
on the Financial Statements or in the books and records of the Company.
"Financial Statements" means all of the following:
(a) the audited financial statements of the Company as of February 28, 1999
(including all Exhibits and notes thereto), consisting of the balance sheet of
such date and the related statements of income and expenses, retained earnings,
changes in financial position and cash flows for the twelve-month period then
ended; and
(b) the audited financial statements of the Company as of February 28, 1999
(including all Exhibits and notes thereto) consisting of the balance sheet at
such date and the related statements of income and expenses, retained earnings,
changes in financial position and cash flows for the twelve-month period then
ended.
In addition to (a) and (b) above, after the date of this Agreement, the
term "Financial Statements" shall include any and all Interim Financial
Statements thereafter issued.
"GAAP" means U.S. generally accepted accounting principles at the time in
effect.
"Governmental Authority" means the government of the Republic of South
Africa, the United States or any other country or state or political subdivision
thereof and any entity, body or authority exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Hazardous Material" means:
(a) any petroleum product or fractions thereof; or
(b) any pollutant or contaminant or hazardous, dangerous or toxic chemical,
material or substance within the meaning of any other applicable South African
law, regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of conduct
concerning any hazardous, toxic dangerous waste, substance or material, all as
now or at any time hereafter in effect.
"Indemnified Person" means the Person or Persons claimed by the Indemnified
Person to be obligated to provide indemnification.
"Intellectual Property" means any and all trademarks, tradenames, service
marks, patents, copyrights (including any registrations, applications, licenses
or rights relating to any of the foregoing), Technology, trade
24
secrets, inventions, know-how, designs, computer programs, processes, and all
other intangible assets, properties and rights. The "Company's Intellectual
Property" means any and all Intellectual Property used by the Company in the
conduct of its business.
"Interim Financial Statements" means any financial statements delivered to
Buyer pursuant to Section 4.7.
"Latest Balance Sheet" means the audited comparative balance sheet of the
Company dated as of August 31, 1999, set forth in Exhibit 2.5.
"Law" means any law, statute, regulation, ordinance, rule, order, decree,
judgement, consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any Governmental
Authority.
"Lien" means any mortgage, lien (except for any lien for Taxes not yet due
and payable), charge, restriction, pledge, security interest, option, lease or
sublease, claim, right of any third party, easement, encroachment or
encumbrance.
"Loss" or "Losses" means any and all liabilities, losses, costs, claims,
damages (including consequential damages), penalties and expenses (including
attorney's fees and expenses and costs of investigation and litigation). In the
event any of the foregoing are indemnifiable hereunder, the terms "Loss" and
"Losses" shall include any and all attorney's fees and expenses and costs of
investigation and litigation incurred by the Indemnified Person in enforcing
such indemnity. No Loss shall be reduced by reason of tax benefits allegedly
enjoyed as a result of such Loss by any Indemnified Party.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited partnership, trust, association or other entity, including
a government or government department, agency or instrumentality.
"Real Property Leases" has the meaning set forth in Section 2.9.
"Related Agreement" means any Contract which is or to be entered into at
the Closing or otherwise pursuant to this Agreement. The Related Agreements
executed by a specified Person shall be referred to as "such Person's Related
Agreements," "its Related Agreements" or another similar expression.
"Related Assets" means those assets described in Exhibit 1.1(b) used in
connection with the business of the Company which are currently not owned by the
Company, but are under the ownership or control of Sellers.
"Shares" means the 100 shares of Common Stock,one South African rand par
value per share, of the Company held of record by Sellers, 99 of which shares
are held of record by Xxxxxxx X.X. Xxxxxxx and 1of which shares are held of
record by Alberteina Xxxxxxx.
"Subsidiaries" means any Person 50.1% or more of the voting power of which
is controlled by another Person.
"Survival Date" means the date specified in Section 9.1.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, employee's income withholding, other withholding, unemployment and
Social Security taxes, which are imposed by any Governmental Authority, and such
term shall include any interest, penalties or additions to tax attributable
thereto.
"Tax Return" means any report, return or other information required to be
supplied to a Governmental Authority in connection with any Taxes.
"Tax Statute of Limitations Date" means the close of business on the 30th
day after the expiration of the applicable statute of limitations with respect
to Taxes, including any extensions thereof (of if such date is not a Business
Day, the next Business Day).
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"Tax Warranty" means a representation or warranty in Sections 2.17 or 2.19.
"Territory" means the Republic of South Africa, and all other countries in
which the Company has transacted business prior to the Ending Date.
"Title and Authorization Warranty" means a representation or warranty in
Sections 2.2, 2.4 or 2.7.
"Two Times Prime" means two times the weighted average prime rate (as the
prime rate as from time to time announced by Citibank, N.A. in New York City).
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Sellers shall pay all expenses of Sellers and the Company
(including attorneys' fees and expenses) and Buyer shall pay all expenses of
Buyer (including attorneys' fees and expenses), in each case incurred in
connection with this Agreement and the transactions contemplated hereby. Sellers
shall pay all sales, use, stamp, transfer, service, recording, real estate and
like taxes or fees, if any, imposed by any Governmental Authority in connection
with the transfer and assignment of the Shares.
11.2 Amendment. This Agreement may be amended, modified or supplemented but
only in writing signed by each of the parties hereto.
11.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by telex, facsimile or other
wire transmission or (c) seven Business Days after being deposited in the U.S.
or South African mail, certified or registered mail, postage paid:
(a) If to Sellers, addressed as follows:
Xxxxxxx X.X. Xxxxxxx
Xxx xx Xxxxxxxxx 00X
Xxxxxxx, Xxxxxxx 0000
Xxxxxxxxx No.: 351-91-222-885
(b) If to Buyer, addressed as follows:
Cheshire Developments, Inc.
c/o Total Trade and Investment Ltd.
000 Xxxx Xxxx Xxxx
Xxxxxxxx XX. 00000
with a copy to:
Xxxxxx Xxxxxxx & Associates
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx, Esq.
26
Facsimile No.: 212-725-0805
(c) If to the Company, addressed as follows:
Xxxxxxx Cigarette Depot (PTY) Limited
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxx, Xxxxx Xxxxxx
Facsimile No.: 00-00-000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.4 Effect of Investigation.
(a) Any due diligence review, audit or other investigation or inquiry
undertaken or performed by or on behalf of Buyer shall not limit, qualify,
modify or amend the representations, warranties or covenants of, or indemnities
by Sellers or the Company made or undertaken pursuant to this Agreement,
irrespective of the knowledge and information received (or which should have
been received) therefrom by Buyer.
(b) Any due diligence review, audit or other investigation or inquiry
undertaken or performed by or on behalf of Sellers or the company shall not
limit, qualify, modify or amend the representations, warranties and covenants
of, or indemnities by, Buyer made or undertaken pursuant to this Agreement,
irrespective of the knowledge and information received (or which should have
been received) therefrom by Sellers or the Company.
11.5 Waivers. The failure of a party hereto at any time or times to require
performance of any provision hereof shall in no manner affect its right at a
later time to enforce the same. The waiver by a party of any condition or of any
breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any term, covenant, representation or warranty.
11.6 Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed an original, but all of which together
shall constitute one and the same instrument.
11.7 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Exhibits attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender herein shall not limit any provision of
this Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, with limitation,"
respectively. Underscored references to Articles, Sections, Subsections or
Exhibits shall refer to those portions of this Agreement. Consummation of the
transactions contemplated herein shall not be deemed a waiver of a breach of or
inaccuracy in any representation, warranty or covenant or of any party's rights
and remedies with regard thereto. No specific representation, warranty or
covenant contained herein shall limit the generality or applicability of a more
general representation, warranty or covenant contained herein. A breach of or
inaccuracy in any representation, warranty or covenant shall not be affected by
the fact that may more general or less general representation, warranty or
covenant was not also breached or in accurate.
11.8 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
giving effect to the principles of conflicts of law thereof.
11.9 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective estates, heirs, legal
representatives, successors and assigns; provided, however, that no assignment
of any rights or obligations shall be made by any party hereto without the
written consent of each
27
other party hereto, except that Buyer may assign its rights hereunder, but not
its obligations, without such consent toany Affiliate of Buyer.
11.10 No Third-Party Beneficiaries. This Agreement is solely for the of the
benefit of the parties hereto and, to the extend provided herein, their
respective estates, heirs, successors, Affiliates, directors, officers,
employees, agents and representatives, and no provision of this Agreement shall
be deemed to confer upon other third parties any remedy, claim, liability,
reimbursement, cause of action or other right.
11.11 Publicity. Prior to the Closing Date, except as required by Law or
the rules of any stock exchange, no public announcement or other publicity
regarding the transactions referred to herein shall be made by Buyer, Sellers,
the Company or any of their respective Affiliates, officers, directors,
employees, representatives or agents, without the prior written agreement of
Buyer and Sellers, in any case, as to form, content, timing and manner of
distribution or publication; provided, however, that nothing in this Section
shall prevent such parties from discussing such transactions with those Persons
whose approval, agreement or opinion, as the case may be, is required for
consummation of such particular transaction or transactions.
11.12 Liquidated Damages.
(a) If, prior to the Closing, Buyer materially fails to meet its
obligations under this Agreement or fails to close on the transactions
contemplated hereby, unless Buyer, as the case may be, is entitled not to close
pursuant to the terms hereof, Sellers may lawfully terminate this Agreement in
accordance with the notice and lapse of time requirements of Section 8.1(d), and
if it is so terminated, an aggregate of $[Amount] shall be payable by Buyer to
Sellers, all as liquidated damages to Sellers, and such payments shall be the
sole remedy prior to the Closing of Sellers and the Company for such failure by
Buyer and shall only be available as a remedy prior to the Closing.
(b) If, prior to the Closing either or both of Sellers materially fails to
meet their obligations under this Agreement or fails to close on the
transactions contemplated hereby, unless Sellers, as the case may be, are
entitled not to close pursuant to the terms hereof, Buyer may lawfully terminate
this Agreement in accordance with the notice and lapse of time requirements of
Section 8.1(c), and if it is so terminated, $ [Amount] shall be payable, jointly
and severally, by Sellers to Buyer as liquidated damages to Buyer, and such
payment shall be the sole remedy prior to the Closing of Buyer for such failure
by either or both of Sellers and shall only be available as a remedy prior to
the Closing. The Company agrees to guarantee Sellers' obligations with respect
to such liquidated damages.
11.13 Further Assurances. Upon the reasonable request of Buyer, each
Seller will on and after the Closing Date execute and deliver to Buyer such
other documents, releases, assignments and other instruments as may be required
to effectuate completely the transfer and assignment to Buyer of, and to vest
fully Buyer title to, the Shares, and to otherwise carry out the purposes of
this Agreement.
11.14 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
11.15 Remedies Cumulative. Unless otherwise specified, the remedies
provided in this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
11.16 Entire Understanding. This Agreement and the Related Agreements set
forth the entire agreement and understanding of the parties hereto and supercede
any and all prior agreements, arrangements and understandings among the parties.
11.17 Jurisdiction of Disputes; Waiver of Jury Trial. In the event any
party to this Agreement commences any litigation, proceeding or other legal
action in connection with or relating to this Agreement, any Related Agreement
or any matters described or contemplated herein or therein, with respect to any
of the matters described or contemplated herein or therein, the parties to this
Agreement hereby (a) agree under all circumstances absolutely and irrevocably to
institute any litigation, proceeding or other legal action in a court of
competent jurisdiction located within the City of New York, New York, whether a
state or federal court; (b) agree that in the event of any such litigation,
proceeding or action, such parties will consent and submit to personal
jurisdiction in any such court
28
described in clause (a) of this Section and to service of process upon them in
accordance with the rules and statutes governing service of process (it being
understood that nothing in this Section shall be deemed to prevent any party
from seeking to remove any action to a federal court in New York, New York; (c)
agree to waive to the full extent permitted by law any objection that they may
now or hereafter have to the venue of any such litigation, proceeding or action
in any such court or that any such litigation, proceeding or action was brought
in an inconvenient forum; (d) designate, appoint and direct CT Corporation
System as its authorized agent to receive on its behalf service of any and all
process and documents in any legal proceeding in the State of New York; (e)
agree to notify the other parties to this Agreement immediately if such agent
shall refuse to act, or be prevented from acting, as agent and, in such event,
promptly to designate another agent in the City of New York, satisfactory to
Sellers and Buyer, to serve in place of such agent and deliver to the other
parties written evidence of such substitute agent's acceptance of such
designation; (f) agree as an alternative method of service to service of process
in any legal proceeding by mailing of copies thereof to such party at its
address set forth here in for communications to such party; (g) agree that any
service made as provided herein shall be effective and binding service in every
respect; and (h) agree that nothing herein shall affect the rights of any party
to effect service of process in any other manner permitted by Law. EACH PARTY
HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR
RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR
CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY
OR APPROPRIATE TO EFFECT SUCH WAIVER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be execute and delivered as of the date first above written.
CHESHIRE DISTRIBUTORS, INC. XXXXXXX CIGARETTE DEPOT (PTY)
LIMITED
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxxxxxx X.X. Xxxxxxx
------------------------ ---------------------------
Xxxx Xxxxxxxxx Xxxxxxx X.X. Xxxxxxx
Title: Chairman Title: Chairman
/s/ Xxxxxxx X.X. Xxxxxxx
------------------------
Xxxxxxx X.X.Xxxxxxx
/s/ Alberteina Xxxxxxx
------------------------
Alberteina Xxxxxxx
29
