EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
dated as of
December 6, 1995,
among
The Shareholders whose names
appear on the signature pages hereto
as Sellers
and
Wyle Electronics, a California corporation
as Buyer
TABLE OF CONTENTS
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SECTION PAGE
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Recitals 1
ARTICLE I
DEFINITIONS/PURCHASE & SALE/CLOSING............ 1
1.1 Definitions.................................... 1
1.2 Transfer of Stock by Sellers................... 9
1.3 Purchase of the Stock by Buyer/
Purchase Price................................. 9
1.4 The Closing.................................... 10
1.5 Balance Sheet Adjustment....................... 10
1.6 Earnout Payment................................ 12
1.7 Accounts and Notes Receivable Adjustment....... 16
1.8 Payment by Sellers............................. 17
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS...... 17
2.1 Organization and Related Matters............... 17
2.2 Stock.......................................... 18
2.3 Financial Statements; Changes; Contingencies... 19
2.4 Tax and Other Returns and Reports.............. 20
2.5 Material Contracts............................. 21
2.6 Real and Personal Property; Title to
Property; Leases............................... 22
2.7 Intangible Property............................ 22
2.8 Authorization; No Conflicts.................... 23
2.9 Legal Proceedings and Certain Labor Matters.... 23
2.10 Records........................................ 24
2.11 Sufficiency of Assets.......................... 24
2.12 Insurance...................................... 24
2.13 Permits........................................ 24
2.14 Compliance with Law............................ 24
2.15 Dividends and Other Distributions.............. 25
2.16 Employee Benefits.............................. 25
2.17 Certain Interests.............................. 28
2.18 Intercompany Transactions...................... 28
2.19 No Brokers or Finders.......................... 28
2.20 Customers and Suppliers........................ 29
2.21 Sellers' Investment Representation............. 29
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES OF SELLERS...... 29
2A.1 Organization and Related Matters............... 29
2A.2 Stock.......................................... 29
2A.3 Authorization; No Conflicts.................... 30
2A.4 Sellers' Investment Representation............. 30
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER........ 31
3.1 Organization and Related Matters............... 31
3.2 Authorization.................................. 31
3.3 No Conflicts................................... 31
3.4 No Brokers or Finders.......................... 32
3.5 Legal Proceedings.............................. 32
3.6 Buyer's Stock.................................. 32
3.7 Investment Representation...................... 32
ARTICLE IV
COVENANTS WITH RESPECT TO CONDUCT OF THE
COMPANIES AND THEIR SUBSIDIARIES PRIOR TO
CLOSING........................................ 33
4.1 Access......................................... 33
4.2 [Omitted]...................................... 33
4.3 Conduct of Business............................ 33
4.4 Notification of Certain Matters................ 34
4.5 Permits and Approvals.......................... 35
4.6 Preservation of Business Prior to Closing
Date........................................... 35
4.7 Government Filings............................. 35
4.8 Elimination of Intercompany and Affiliate
Liabilities.................................... 35
4.9 Pension Plan................................... 36
4.10 Opinions....................................... 36
ARTICLE V
ADDITIONAL CONTINUING COVENANTS................ 36
5.1 Noncompetition................................. 36
5.2 Nondisclosure of Proprietary Data.............. 37
5.3 Tax Cooperation................................ 37
5.4 Representatives................................ 38
5.5 Preparation and Filing of Tax Returns.......... 38
5.6 Allocation of Tax Liability.................... 40
5.7 Consistency; Amended Returns................... 40
5.8 Section 338 and Comparable Elections........... 41
5.9 Name Change.................................... 41
5.10 Conduct of Business on Closing Date............ 41
5.11 Health Plan.................................... 42
5.12 Releases....................................... 42
ARTICLE VI
CONDITIONS OF PURCHASE......................... 42
6.1 General Conditions............................. 42
6.2 Conditions to Obligations of Buyer............. 43
6.3 Conditions to Obligations of Sellers........... 44
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ARTICLE VII
TERMINATION OF OBLIGATIONS; SURVIVAL........... 45
7.1 Termination of Agreement....................... 45
7.2 Effect of Termination.......................... 45
7.3 Survival of Representations and Warranties..... 46
ARTICLE VIII
INDEMNIFICATION................................ 46
8.1 Indemnification by Sellers..................... 46
8.2 Indemnification by Buyer....................... 48
8.3 Certain Tax Matters............................ 48
8.4 Losses Net of Insurance Benefit................ 51
8.5 Procedures Relating to Indemnification......... 51
8.6 Survival....................................... 52
8.7 Escrow......................................... 53
ARTICLE IX
GENERAL........................................ 53
9.1 Amendments; Waivers............................ 53
9.2 Schedules; Exhibits; Integration............... 53
9.3 Best Efforts; Further Assurances............... 53
9.4 Governing Law/Jurisdiction..................... 54
9.5 Assignment..................................... 54
9.6 Headings....................................... 54
9.7 Counterparts................................... 55
9.8 Publicity and Reports.......................... 55
9.9 Parties in Interest............................ 55
9.10 Notices........................................ 55
9.11 Expenses....................................... 56
9.12 Remedies; Waiver............................... 56
9.13 Attorney's Fees................................ 57
9.14 Specific Performance........................... 57
9.15 Arbitration.................................... 57
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EXHIBITS
EXHIBIT A Restricted Stock Agreement
EXHIBIT B Escrow Agreement
EXHIBIT C Form of Opinions of Counsel
EXHIBIT D Employment Agreement
EXHIBIT E Investment Representation and Certification
SCHEDULES
SCHEDULE 1.2 Stock List
SCHEDULE 1.3(a) Individual Cash Amounts
SCHEDULE 1.3(b) Individual Amounts of Buyer's Shares
SCHEDULE 1.5(b) Modifying Principles for Modified GAAP
SCHEDULE 1.5(d) Sellers' Percentages
SCHEDULE 1.3(a)(1) Noncompetition Amounts
SCHEDULE 2.1 Subsidiaries List, Officers and Directors
SCHEDULE 2.2 Equity Securities of Companies
SCHEDULE 2.3(a) List of Audited Financial Statements Delivered to Buyer
SCHEDULE 2.3(b) List of Unaudited Financial Statements Delivered to Buyer
SCHEDULE 2.3(c) Material Adverse Changes
SCHEDULE 2.4 Tax List
SCHEDULE 2.5 Material Contract List
SCHEDULE 2.6 Matters Affecting Material Assets or Properties
SCHEDULE 2.7 Intangible Property List
SCHEDULE 2.9 Legal Proceedings of Sellers
SCHEDULE 2.12 Insurance List
SCHEDULE 2.16(a) Employee Benefit Plan Lists
SCHEDULE 2.16(b) Stock Bonus, Pension, or Profit-Sharing Plans
SCHEDULE 2.16(c) Plans Subject to Title IV of ERISA
SCHEDULE 2.17 Certain Interests
SCHEDULE 2.18 Intercompany Transactions
SCHEDULE 2.20 Customer List
SCHEDULE 3.5 Litigation (Buyer)
SCHEDULE 4.3 Conduct of Business
SCHEDULE 4.5 Approvals and Permits
SCHEDULE 4.8 Liabilities and Obligations to be Terminated
SCHEDULE 5.12 Releases
SCHEDULE 6.2(j) Lease Terms
SCHEDULE 6.2(l) Conditions to Closing
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of December 6, 1995,
among Wyle Electronics, a California corporation ("Buyer"), and Xxxxxxx
Xxxxxxxxx, Credit Shelter Trust - Xxxxxxx Xxxxxxxxx, Credit Shelter Trust -
Xxxxxx Xxxxxxxxx, Xxxxxxxx X. Xxxxxxxxx, Xxxxxxx Xxxxxxxxx Xxxxxxxxx and Xxx X.
Xxxxxxxxx (collectively, the "U.S. Sellers"), and Hanbet LLC, a New Jersey
limited liability company ("Hanbet"), Xxxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxxxx
Xxxxxxx (together with Xxxxxxx Xxxxxx and Xxxx Xxxxxx, the "U.K. Managers"),
Xxxxxx Xxxxxx, Xxxx Xxxxxx and Loic Leverdier (together with Xxxxxx Xxxxxx and
Xxxx Xxxxxx, the "French Managers," and collectively, with the U.S. Sellers,
Hanbet and the U.K. Managers, the "Sellers").
R E C I T A L S
WHEREAS, the Sellers together own, directly or indirectly, all of the
outstanding capital stock of Xxxxxx Xxxxxxxx Ltd., a New Jersey corporation
("Ginsbury U.S."), Ginsbury Electronic GmbH, a German corporation ("Ginsbury
Germany"), Ginsbury Electronique S.A., a French corporation ("Ginsbury France"),
Ginsbury Electronic (Scandinavia) A.B., a Swedish corporation ("Ginsbury
Sweden"), and Ginsbury (U.K.) Ltd., a United Kingdom corporation ("Ginsbury
U.K." and, together with Ginsbury U.S., Ginsbury Germany, Ginsbury France and
Ginsbury Sweden, the "Companies"); and
WHEREAS, the Sellers desire to sell, and Buyer desires to buy, all of
the outstanding capital stock of the Companies (other than capital stock of
Ginsbury France owned by Ginsbury Germany).
A G R E E M E N T
In consideration of the mutual promises contained herein and intending
to be legally bound, the parties agree as follows:
ARTICLE I
DEFINITIONS/PURCHASE & SALE/CLOSING
1.1 DEFINITIONS.
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As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"Action" means any action, complaint, petition, suit or other
proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person.
"Agreement" means this Agreement by and among Buyer and Sellers as
amended or supplemented together with all Exhibits and Schedules attached or
incorporated by reference.
"Approval" means any approval, authorization, consent, qualification
or registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement or other communication required to be filed with
or delivered to, any Governmental Entity or any other Person.
"Associate" of a Person means
(i) a corporation or organization (other than the Companies or a party
to this Agreement) of which such Person is an officer or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities;
(ii) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a similar
capacity; and
(iii) any spouse or other immediate family member of such person or
any immediate family member of such spouse.
"Auditors" means Spitz, Xxxxxxxx & Xxxxxx, P.C., independent public
accountants to the Companies.
"Business" means the business of the Companies and the Subsidiaries
(it being understood that "Business" excludes the Excluded Businesses).
"Buyer's Accountants" means Xxxxxx Xxxxxxxx LLP.
"Buyer's Shares" means restricted shares of Buyer's Common Stock,
which shares shall be subject to the terms and conditions set forth in
Exhibit A.
"Cash Purchase Price" has the meaning set forth in Section 1.3.
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"Closing" means the consummation of the purchase and sale of the Stock
under this Agreement.
"Closing Date" means the date of the Closing.
"Closing Date Net Assets" means the Net Assets as of the Closing Date
reflected on the Final Balance Sheet, as adjusted to reflect the write-up or
write-down of any assets to reflect a new basis of accounting following the
Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" means Ginsbury U.S., Ginsbury Germany, Ginsbury France,
Ginsbury Sweden and Ginsbury U.K.
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"Current Liabilities" means accounts payable, accrued expenses and
taxes (excluding income and franchise taxes that are classified as current
liabilities under GAAP).
"Earnout Year" means any of the first four consecutive calendar years
beginning on the Closing Date, with the first such year beginning on the Closing
Date and ending on December 31, 1996.
"EBIT of the Ginsbury Division" means revenues attributable to sales
of products and services by the Ginsbury Division, less (a) the cost of such
sales (which in the case of inventory of Buyer, means Buyer's cost of such
inventory) and (b) selling, general and administrative expenses attributable to
the Ginsbury Division (including the direct cost of services provided by Liberty
Contract or any other division of Buyer to Ginsbury in support of such sales).
"EBIT of the Ginsbury Division" shall not include interest, taxes, the
amortization of goodwill, extraordinary gains or losses, or any allocation for
general corporate overhead of Buyer. EBIT of the Ginsbury Division for the
first Earnout Year shall be annualized based on the number of days elapsed in
such year.
"EBIT Threshold" means, with respect to any Earnout Year, an amount
equal to 22% of the average of the Quarterly Net Assets of the Ginsbury Division
for such Earnout Year, plus the amount of any increase pursuant to Section
1.6(f).
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"Employment Agreement" means the Employment Agreement, to be dated as
of the Closing Date, between Buyer and Xxx Xxxxxxxxx, in substantially the form
attached hereto as Exhibit "D."
"Encumbrance" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, Law, equity or otherwise, except
for any restrictions generally arising under any applicable Law (other than
through violations of Law or third party rights due to any actions by any
Seller, Company or Subsidiary).
"Environment" means any surface or subsurface physical medium or
natural resource, including air, land, soil, surface waters, ground waters,
stream and river sediments and biota.
"Environmental Law" means any Law relating to the injury to, or the
pollution or protection of, human health and safety or the Environment.
"Equity Securities" means any capital stock or other equity interest
or any securities convertible into or exchangeable for capital stock or any
other rights, warrants or options to acquire any of the foregoing securities.
"Escrow Agreement" means the Escrow Agreement, to be dated as of the
Closing Date, among Sellers named therein, Buyer and Chemical Bank, as escrow
agent (the "Escrow Agent"), in substantially the form attached hereto as
Exhibit B.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations and published interpretations.
"ERISA Affiliate" has the meaning set forth in Section 2.16(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Businesses" means Ginsbury Electronic Inc., a Delaware
corporation, Ginsbury FSC, Inc., a Barbados corporation, Ginsbury Electronic
Ltd., a United Kingdom corporation, and Beam Companies Ltd., a United Kingdom
corporation.
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"Final Determination" means, with respect to any United States federal
Tax Liability for which indemnification is sought under Section 8.3(a) or
Section 8.3(b), (i) a final, unappealable decision by a court of competent
jurisdiction; (ii) the expiration of the statute of limitations for claiming a
refund or, if a refund claim has been timely filed, the expiration of the time
for instituting suit in respect of such refund claim; (iii) the execution by or
on behalf of the taxpayer and the IRS of a closing agreement under Section 7121
of the Code; or (iv) any other final and irrevocable determination of such Tax
Liability, including, without limitation, execution of Form 870-AD (or its
successor). In the context of foreign, state or local Taxes for which
indemnification is sought under the foregoing sections of this Agreement, "Final
Determination" shall mean any event with similar final effect; provided,
however, that if the meaning of this term shall be unclear under foreign, state
or local law, it shall mean any final unappealable and irrevocable determination
of such Tax Liability.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Ginsbury Division" means the Business, which shall be operated as a
division of Buyer following the Closing.
"Good Reason" means the failure by Buyer to fulfill its obligations in
all material respects under the Employment Agreement and under this Agreement,
to the extent not remedied promptly after receipt of written notice by Xxx
Xxxxxxxxx specifying the failure by Buyer.
"Goodwill Adjustment Amount" means $800,000 for Earnout Year one and
$900,000 for Earnout Years two, three and four.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the related regulations and published
interpretations.
"Hazardous Substance" means (but shall not be limited to) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances," or any other formulation
5
intended to define, list or classify substances under applicable Environmental
Laws by reason of a substance's ignitibility, corrosivity, reactivity,
radioactivity, carcinogenicity, reproductive toxicity or leachability.
"Intangible Property" means any trade secret, secret process or other
confidential information or know-how and any and all Marks.
"IRS" means the Internal Revenue Service of the United States or any
successor entity.
"Just Cause" means that Buyer, acting in good faith based upon the
information then known to Buyer, determines that Xxx Xxxxxxxxx has: (iv) failed
to fulfill his obligations in all material respects under the Employment
Agreement and under this Agreement, to the extent not remedied promptly after
receipt of written notice by Buyer specifying the failure by Xxx Xxxxxxxxx; or
(v) been convicted of a crime involving moral turpitude.
"Law" means any constitutional provision, statute or other law, rule,
or regulation of any Governmental Entity and any Order.
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including, but not limited to, interest or other carrying costs, penalties,
reasonable legal, accounting and other professional fees and expenses incurred
in the investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or suffered by
the specified Person.
"Xxxx" means any brand name, copyright, patent, service xxxx,
trademark, tradename, and all registrations or application for registration of
any of the foregoing.
"Material Contract" means Contracts deemed material by Section 2.5.
"Net Assets" means the total assets (excluding any goodwill, cash and
cash equivalents) minus the Current Liabilities of the Ginsbury Division as
reflected on its balance sheet as of the end of each quarter following the
Closing, which balance sheet shall be prepared in accordance with GAAP
consistently applied.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
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"Overlap Period" means any taxable period beginning on or before and
ending after the Closing Date.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"Person" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"Post-Closing Tax Period" means (i) any taxable period beginning after
the Closing Date and (ii) the portion of any Overlap Period beginning
immediately after the Closing Date and ending at the close of the last day of
such Overlap Period.
"Pre-Closing Tax Period" means (i) any taxable period ending at or
before the close of the Closing Date and (ii) the portion of any Overlap Period
beginning on the first day of such Overlap Period and ending at the close of the
Closing Date.
"Principal Sellers" means Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxxxx and
Hanbet LLC.
"Purchase Price" means (i) the Cash Purchase Price, reduced by
$754,000, plus or minus (ii) the amount of any adjustment pursuant to Section
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1.5, minus (iii) the amount of any adjustment pursuant to Section 1.7, plus (iv)
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the amount of any earnout payments pursuant to Section 1.6, plus (v) the amount
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of any funds (excluding interest) distributed to certain Sellers pursuant to the
terms of the Escrow Agreement, plus (vi) the value of Buyer's Shares issued to
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Sellers (based on the average closing price referred to in Section 1.3).
"Purchase Price Net Assets" means $33,000,000, plus any amount paid by
Buyer to Sellers pursuant to Section 1.5(a), or minus any amount paid by Sellers
to Buyer pursuant to Section 1.5(a).
"Quarterly Net Assets" means as of the end of any fiscal quarter
during an Earnout Year, an amount equal to (a) the Purchase Price Net Assets,
increased by (b) the amount, if any, equal to the excess of the Net Assets as of
such quarter-end over the Closing Date Net Assets, or decreased by (c) the
amount, if any, equal to the excess of the Closing Date Net Assets over the Net
Assets as of such quarter-end.
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"SEC" means the Securities and Exchange Commission or any successor
entity.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock" means all of the outstanding capital stock or share capital of
the Companies.
"Subsidiary" means any Person in which any of the Companies has a
direct or indirect equity or ownership interest in excess of 5%, other than the
Excluded Businesses.
"Tax" means any foreign, federal, state, county or local income, sales
and use, value added, excise, franchise, real and personal property, transfer,
gross receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
Governmental Entity, any interest and penalties (civil or criminal) related
thereto or to the nonpayment thereof.
"Tax Arbitrator" means a nationally recognized accounting firm that
represents neither Sellers nor Buyer nor any Affiliate of any party. Sellers
and Buyer hereby designate Price Waterhouse LLP to act as Tax Arbitrator, unless
it is later disqualified by reason of establishing a relationship with any party
or an Affiliate of any party. In the event it is so disqualified or otherwise
fails to serve, the parties shall promptly designate a replacement Tax
Arbitrator in accordance with the provisions of the third paragraph of Section
1.5(c).
"Tax Liabilities" means (i) all liabilities for Taxes and (ii) all
reasonable out-of-pocket costs and expenses related thereto incurred as a result
of the commencement of a Tax Proceeding (including, without limitation,
reasonable attorneys' and accountants' fees), but excluding costs and expenses
incurred by the indemnified party or any Affiliate where the indemnifying party
has elected to assume control of a Tax Proceeding or where the indemnifying
party and indemnified party share joint control of a Tax Proceeding under
Section 8.3(f).
"Tax Proceeding" means any audit, other administrative proceeding or
judicial proceeding involving Taxes.
"Tax Reserve" means the amount of all Taxes reflected as a liability
on the Final Balance Sheet.
8
"Tax Return" means a report, return or other information required to
be supplied to a Governmental Entity with respect to Taxes, including, where
permitted or required, combined or consolidated returns for any group of
entities that includes any of the Companies or any of the Subsidiaries.
"Transfer Tax" means any foreign, federal, state, county, or local
sales and use, value added, excise, personal property, stamp, stamp duty
reserve, documentary or other transfer tax or fee imposed on the sale or
transfer of the Stock, whether imposed on the Buyer, the Sellers, the Companies
or any Subsidiary, and any income or capital tax imposed on the Sellers, as a
result of the transfer of the Stock from the Sellers to the Buyer.
"Trusts" means the Credit Shelter Trust - Xxxxxxx Xxxxxxxxx and the
Credit Shelter Trust - Xxxxxx Xxxxxxxxx.
1.2 TRANSFER OF STOCK BY SELLERS.
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Subject to the terms and conditions of this Agreement, each Seller
agrees to sell the Stock listed beside that Seller's name on Schedule 1.2 and
deliver the certificates (or other documentation required to transfer the Stock
in the jurisdictions where the Companies are incorporated) evidencing the Stock
to Buyer at the Closing, and to cause such certificates to be endorsed properly
for transfer to or accompanied by a duly executed stock power in favor of Buyer
or its nominee(s) as Buyer may have directed at least three business days prior
to the Closing Date and otherwise in a form acceptable for transfer on the books
of the Companies. Each Seller will pay any Transfer Taxes with respect to the
transfer of that Seller's Stock. Each Principal Seller shall cause each other
Seller to perform its obligations under this Section 1.2.
1.3 PURCHASE OF THE STOCK BY BUYER/PURCHASE PRICE.
---------------------------------------------
Subject to the terms and conditions of this Agreement, Buyer agrees to
acquire the Stock from Sellers and: (i) to pay an aggregate of $28,254,000 in
cash (the "Cash Purchase Price") to Sellers at the Closing in funds immediately
available in the individual amounts set forth on Schedule 1.3(a) attached
hereto; (ii) to pay an aggregate of $100,000 in cash to Sellers at Closing in
funds immediately available in the individual amounts set forth in Schedule
1.3(a)(1) attached hereto in consideration for the covenants of Sellers in
Section 5.1; (iii) to transfer an aggregate of $2,500,000 in cash to the Escrow
Agent under the Escrow Agreement; (iv) to issue and deliver to Sellers, as
additional purchase price, in the individual amounts set
9
forth on Schedule 1.3(b) hereto the number of Buyer's Shares having an aggregate
value, based on the average closing price of the Common Stock as reported by the
New York Stock Exchange on the 20 trading days immediately prior to the Closing
Date, of $3,000,000; and (v) to pay, as additional purchase price, the
additional amounts, if any, of up to $5,000,000 pursuant to Section 1.6 below.
1.4 THE CLOSING.
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The Closing shall take place on the third business day after the
satisfaction of the conditions in Section 6.1(b) of Article VI (but in no event
earlier than January 4, 1996). The parties shall use their best efforts to
effectuate the Closing by January 31, 1996.
1.5 BALANCE SHEET ADJUSTMENT.
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(a) Adjustment. The Cash Purchase Price shall be
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adjusted as follows:
(i) If $5,706,554 (the "Base Amount") exceeds the amount of
the adjusted combined/consolidated net worth of the Companies and their
Subsidiaries determined in accordance with Section 1.5(b) (the "Adjusted Net
Worth"), the Cash Purchase Price shall be reduced by an amount equal to that
excess.
(ii) If the amount of the Adjusted Net Worth exceeds the Base
Amount, the Cash Purchase Price shall be increased by an amount equal to that
excess.
(b) Determination. The Adjusted Net Worth shall be determined
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as of the close of business on the day of the Closing (the "Determination
Time") on the basis of the combined/consolidated balance sheet of the Companies
and their Subsidiaries as of the Determination Time (the "Final Balance Sheet").
The Final Balance Sheet shall be prepared by the Principal Sellers in accordance
with the principles used in the preparation of the September 30, 1995 balance
sheet referred to in Section 2.3(b), as modified by the principles set forth on
Schedule 1.5(b) (as modified, "Modified GAAP"), and shall be reported upon by
the Auditors. The Sellers shall pay the fees and expenses of the Auditors. The
Final Balance Sheet shall reflect an accrual for taxes payable in an amount
equal to the taxes payable reflected on the September 30, 1995 balance sheet
referred to in Section 2.3(b), as adjusted in the good faith determination of
the Principal Sellers, to reflect ordinary accruals for Taxes payable in
connection with the operation of the Business between September 30, 1995 and the
Closing Date and Taxes paid during that period; the Final Balance Sheet shall
not reflect any tax assets.
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(c) Procedures. The Principal Sellers shall engage the Auditors
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to examine the Final Balance Sheet and shall use all reasonable efforts to
deliver, or cause to be delivered, to the Buyer the Final Balance Sheet within
90 days after the Closing, together with a report of the Auditors thereon (the
"Report"): (a) setting forth the amount of the Adjusted Net Worth reflected in
the Final Balance Sheet; (b) stating that (i) the examination has been made in
accordance with generally accepted auditing standards and (ii) the Final Balance
Sheet has been prepared in conformity with Modified GAAP; and (c) setting forth
the amount of any required adjustment to the Cash Purchase Price under this
Section 1.5. During the period from the Closing until the date of delivery of
the Final Balance Sheet, the Buyer shall give the Principal Sellers and the
Auditors such assistance and access during normal business hours to the books
and records of the Companies and their Subsidiaries as the Principal Sellers and
the Auditors shall reasonably request to enable them to prepare and examine,
respectively, the Final Balance Sheet. The Auditors shall provide Buyer's
Accountants with reasonable notice of, and shall permit Buyer's Accountants to
observe, the physical inventory count and cut-off tests forming the basis for
the Final Balance Sheet. The Principal Sellers and the Auditors shall give the
Buyer and Buyer's Accountants such access during normal business hours to their
books and records and the working papers of the Auditors as the Buyer and
Buyer's Accountants shall reasonably request.
If the Buyer delivers to the Principal Sellers, within 60 days after
the Buyer's receipt of the Final Balance Sheet and the Report, a written notice
(the "Dispute Notice") that it disputes any item (a "Disputed Item") in the
Final Balance Sheet or the Report, the Disputed Item or Items shall be resolved
in the manner set forth in the following paragraph. If the Buyer does not
deliver the Dispute Notice to the Principal Sellers within that 60-day period,
the Final Balance Sheet and the Report shall be final, binding and conclusive on
the parties. For the purpose of the Buyer's review of the Final Balance Sheet,
the parties agree that subsequent events and transactions occurring during the
Buyer's 60-day review period may be considered by the Buyer in determining the
appropriate amounts to be reflected in the Final Balance Sheet.
If the Principal Sellers and the Buyer are unable to resolve any
Disputed Item or Items within 30 days after the Principal Sellers' receipt of
the Dispute Notice, the Disputed Items shall be referred for final determination
to Price Waterhouse LLP, or, if such firm is unable or unwilling to make such
final determination, to such other independent accounting firm as the Buyer and
the Principal Sellers shall mutually designate. If the parties are unable
11
mutually to agree on the designation of such a firm, either the Principal
Sellers or the Buyer may at any time request that the president of the American
Arbitration Association designate a nationally recognized accounting firm for
this purpose. Any determination by such firm with respect to any Disputed Item
or Items shall be final, binding and conclusive on the parties. The cost of
such firm shall be borne 50% by the Buyer and 50% by the Sellers.
(d) Payment. Within 10 days after the Final Balance Sheet and the
-------
Report shall have become final, binding and conclusive on the parties, or, if
there are any Disputed Items, within 10 days after the resolution of all
Disputed Items becomes final, binding and conclusive on the parties, (i) the
Principal Sellers shall cause each Seller to pay the Buyer the percentage set
forth beside that Seller's name on Schedule 1.5(d) of the amount, if any, by
which the Base Amount exceeds the Adjusted Net Worth or (ii) the Buyer shall pay
each Seller that percentage of the amount, if any, by which the Adjusted Net
Worth exceeds the Base Amount. Any payment under this Section 1.5(d) shall be
made by wire transfer of immediately available funds, to accounts previously
designated by notice given in writing by the Buyer to the Principal Sellers (in
the case of payment to the Buyer) or by the Principal Sellers to the Buyer (in
the case of payment to the Sellers), and shall be accompanied by payment of an
amount in the nature of simple interest at the rate of 8% a year on the amount
of that payment from the date of the Closing to the date of payment.
1.6 EARNOUT PAYMENT.
---------------
(a) Payment Requirement. For each of the four Earnout Years following
-------------------
the Closing, after the end of each Earnout Year, as an additional amount to be
paid for the Stock purchased by Buyer from Sellers, Buyer shall pay to Sellers
an "Earnout Payment" if, but only if, (a) EBIT of the Ginsbury Division for such
Earnout Year exceeds the EBIT Threshold for such Earnout Year and (b) 50% of
such excess exceeds the Goodwill Adjustment Amount for such Earnout Year.
(b) Earnout Payment Amount. The Earnout Payment for such Earnout
----------------------
Year shall be the lesser of (a) an amount equal to (x) 50% of the excess of EBIT
of the Ginsbury Division for such Earnout Year over the EBIT Threshold for such
Earnout Year, minus (z) the Goodwill Adjustment Amount for such Earnout Year
(the "Adjusted Earnout") or (b) $2.5 million. Notwithstanding any other
provision in this Agreement, the maximum aggregate amount of Earnout Payments
payable hereunder during the four Earnout Years is $5 million.
12
(c) Calculation/Operation of the Ginsbury Division. The calculation
----------------------------------------------
of EBIT of the Ginsbury Division pursuant to this Section 1.6 shall be made in
accordance with generally accepted accounting principles consistently applied in
accordance with the past practices of Buyer with respect to its operating
divisions. During the period that the Earnout Payments are being determined,
Buyer will cause the Business to be accounted for, in substance, as a separate
entity and, to the extent practicable, maintain books and records and an
accounting system as if the Ginsbury Division were a separate entity. Xxx
Xxxxxxxxx shall serve as Vice President of Buyer and as President of the
Ginsbury Division pursuant to the terms of the Employment Agreement attached
hereto as Exhibit D. The Ginsbury Division shall be an operating unit of Buyer
having a level of autonomy consistent with the other operating units of Buyer.
Xxx Xxxxxxxxx shall have a level of management control over the operations of
the Ginsbury Division that is consistent with the management control exercised
by the Presidents of the other operating units of Buyer.
(d) Timing of Payment; Settlement of Disputes. Buyer will deliver to
-----------------------------------------
the Principal Sellers its calculation of EBIT of the Ginsbury Division,
certified by its Chief Financial Officer, to Sellers within 90 days after the
end of each Earnout Year (the "Earnout Payment Date"), together with any Earnout
Payment required by such calculation to be paid by wire transfer of immediately
available funds to accounts designated by the Sellers (in the individual
percentages set forth in Schedule 1.5(d)). Buyer shall from time to time give
the Principal Sellers and the Auditors access during normal business hours to
the books and records of the Ginsbury Division as the Principal Sellers shall
reasonably request to enable them to review the calculation of EBIT of the
Ginsbury Division. If the Principal Sellers fail to notify Buyer in writing,
within ten business days following delivery of the calculation of EBIT of the
Ginsbury Division, of any objections to such calculation, the Principal Sellers'
failure to so object during such ten business day period shall constitute
approval of such calculations. If the Principal Sellers timely object, Buyer
and the Principal Sellers shall use their best efforts to resolve any
differences with respect to such calculations. In the event Buyer and the
Principal Sellers are unable to reach agreement within 30 days after Buyer's
receipt of the notice of objection, then either Buyer or the Principal Sellers
shall have the right to cause Price Waterhouse LLP (the "Reviewer") to perform a
review (the "Review") of the calculations and resolve such dispute. Such firm
shall act as arbitrator, and its conclusions shall be conclusive hereunder,
absent fraud or manifest error. Buyer shall pay 50% of the fees and expenses in
performing
13
the Review, and the Sellers shall pay the remaining 50% of such fees and
expenses. Any upward adjustment to the Earnout Payments due pursuant to this
Section 1.6 made as a result of the Review shall be paid promptly by Buyer by
wire transfer of immediately available funds to accounts designated by the
Sellers. Any downward adjustment made with respect to such Earnout Year as a
result of such determination shall be refunded promptly by the Sellers by wire
transfer of immediately available funds to an account designated by Buyer.
(e) Excess of Adjusted Earnout. If, in any Earnout Year, the Adjusted
--------------------------
Earnout exceeds $2.5 million, then the maximum of $2.5 million shall be paid
pursuant to Section 1.6(a) above and the excess shall not be carried forward or
credited in any subsequent year.
(f) Shortfall of EBIT. If in any Earnout Year the EBIT Threshold
-----------------
exceeds the EBIT of the Ginsbury Division, then the EBIT Threshold for the
following Earnout Year shall be increased by an amount equal to 50% of such
excess.
(g) Prepayment Right. Buyer shall be entitled to prepay the earnout
----------------
obligations under this Section 1.6 without further obligation or liability to
Sellers.
(h) Acceleration of Earnout. If, during any Earnout Year, (x) Buyer
-----------------------
sells all or substantially all of the assets of the Ginsbury Division (a
"Transaction") to a third party or (y) Xxx Xxxxxxxxx terminates his employment
for Good Reason or the Buyer terminates his employment without Just Cause, then
Buyer shall pay, within ten days of the closing of such Transaction or the
termination of employment, the difference between $5 million and the aggregate
amount of Earnout Payments made prior to such closing or termination by wire
transfer of immediately available funds to accounts designated by the Sellers;
provided, however, that if the Transaction or termination of employment occurs
-------- -------
in the fourth Earnout Year and such difference equals or exceeds $2.5 million,
then Sellers shall be entitled to $2.5 million and shall not be entitled to any
amounts in excess of $2.5 million. Upon any payment under this Section 1.6(h),
the obligations contained in this Section 1.6 shall terminate.
(i) Equitable Adjustment. The parties hereto acknowledge and agree
--------------------
that during the Earnout Years, if Buyer expands the business of its other
divisions in any manner that materially adversely affects the existing base of
business of the Ginsbury Division, Buyer and Sellers agree that an appropriate
equitable adjustment shall be
14
made, as shall be mutually reasonably agreed upon by Buyer and the Principal
Sellers, in the calculation of the EBIT Threshold so that the Sellers are not
deprived of the benefits bargained for by them under this Section 1.6. In no
event shall an adjustment be made which would obligate Buyer to make a payment
to Sellers of more than $2.5 million for any Earnout Year or more than $5.0
million in the aggregate for all Earnout Years. In the event Buyer and the
Principal Sellers are unable to reach agreement as to the equitable adjustment
of the EBIT Threshold, Buyer or the Principal Sellers shall have the right to
cause the Reviewer to determine an equitable adjustment of the EBIT Threshold
(the "Adjustment"). The Reviewer's determination shall be final and binding on
the parties. Buyer shall pay 50% of the fees and expenses of the Reviewer in
determining the Adjustment, and Sellers shall pay the remaining 50% of such fees
and expenses. Subject to the foregoing, Buyer may, without causing an equitable
adjustment pursuant to this clause, conduct its business in any commercially
reasonable manner as the Board of Directors of Buyer deems appropriate,
including, without limitation, the hiring, laying off or retiring of employees,
the borrowing of moneys and the incurrence of liabilities or indebtedness, the
acquisition or commencement of new businesses or the rendition of new services,
and Buyer may generally take actions as the Board of Directors of Buyer deems to
be in the best interests of Buyer, even though such actions may affect EBIT of
the Ginsbury Division.
(j) Termination of Earnout Obligations. If Xxx Xxxxxxxxx terminates
----------------------------------
his employment with Buyer due to death or disability (as defined in his
employment agreement with Buyer) or without Good Reason, or if Buyer terminates
Xxx Xxxxxxxxx'x employment for Just Cause, then (i) Buyer shall be obligated to
make any Earnout Payment accrued but not yet paid for the preceding Earnout
Year, (ii) in the case of termination due to death or disability, Buyer shall be
obligated to pay a proportional amount of the Earnout Payment payable pursuant
to Section 1.6(b) for such Earnout Year (as and when determined pursuant to such
Section 1.6(b)), equal to the amount of such Earnout Payment times the number of
-----
days elapsed in the Earnout Year prior to such death or disability divided by
----------
365, and (iii) Buyer shall have no further obligation to make any Earnout
Payments hereunder for the Earnout Year in which Xxx Xxxxxxxxx'x employment
terminated or for any subsequent year.
(k) No Set-Off. Buyer shall not be entitled to set off Earnout
----------
Payments against amounts owing to Buyer from Sellers under Article VIII of this
Agreement or otherwise, unless a court or arbitrator has rendered a final, non-
appealable, decision in Buyer's favor that Sellers owe Buyer such amounts.
15
1.7 ACCOUNTS AND NOTES RECEIVABLE ADJUSTMENT.
----------------------------------------
(a) Definitions.
-----------
(i) "Guaranteed Amount" means an amount equal to the net book
value of the accounts receivable that exist at the close of business on the day
of the Closing (the "Receivables") as set forth on the Final Balance Sheet as
finally determined under Section 1.5.
(ii) "Shortfall Amount" means the amount, if any, by which the
Guaranteed Amount, reduced by $100,000, exceeds the aggregate amount of
Receivables collected through the close of business on the 182nd day following
the Closing (the "Cutoff Time").
(b) Collection of Receivables. The Buyer shall, both before and after
-------------------------
the Cutoff Time, use, or cause to be used, substantially the same efforts to
collect the Receivables as the Business uses in collecting receivables prior to
the Closing. The Buyer shall from time to time furnish, or cause to be
furnished, to the Principal Sellers copies of all records and other information
as the Principal Sellers may reasonably request as to the efforts used to
collect the Receivables and to verify the amounts collected.
(c) Procedures and Payments.
-----------------------
(i) As promptly as practicable after the Cutoff Time, the Buyer
shall provide the Principal Sellers a statement, certified by its Chief
Financial Officer (the "A/R Certificate"), setting forth: (i) the aggregate
amount of the Receivables collected through the Cutoff Time; and (ii) the
Shortfall Amount, if any. Within 10 days after the receipt by the Principal
Sellers of the A/R Certificate, the Principal Sellers shall, if they dispute the
Shortfall Amount, give the Buyer written notice of that fact (the "Principal
Sellers' Receivables Notice"). If the Principal Sellers so give the Buyer the
Principal Sellers' Receivables Notice, the dispute shall be resolved in
accordance with the procedures set forth in the third paragraph of Section
1.5(c), mutatis mutandis. If the Principal Sellers do not so give the Buyer the
------- --------
Principal Sellers' Receivables Notice within that 10-day period, the Principal
Sellers shall cause each Seller to pay Buyer, not later than five days after the
expiration of that 10-day period, the percentage of the sum of the Shortfall
Amount plus $100,000 set forth beside that Seller's name on Schedule 1.5(d). If
the Principal Sellers so give the Buyer the Principal Sellers' Receivables
Notice within that 10-day period, the Principal Sellers shall cause each Seller,
not later than 10 days after all disputes shall have been resolved in the manner
set forth above, to pay Buyer the percentage of the sum of the Shortfall Amount
plus
16
$100,000 set forth beside that Seller's name on Schedule 1.5(d).
(ii) Immediately after receipt of the required payments, if any,
pursuant to this Section 1.7(c), the Buyer shall cause to be assigned to the
Sellers, without recourse to the Buyer, all the Receivables that have not
theretofore been collected. If no payment is required under this Section
1.7(c), no such assignment shall be required. If, and only if, an assignment is
required pursuant to this Section 1.7(c), the Buyer shall pay the Principal
Sellers monthly, as agents for all the Sellers, all amounts collected, net of
reasonable third-party collection expenses, after the Cutoff Time in respect of
the Receivables.
(iii) Any payment under this Section 1.7(c) shall be made by wire
transfer of immediately available funds, to an account previously designated by
notice given in writing by the Buyer to the Principal Sellers or by the
Principal Sellers to the Buyer, as the case may be.
(d) Notes Receivable-Trade. Principal Sellers hereby guarantee that
----------------------
the Notes Receivable-Trade of the Companies and the Subsidiaries appearing on
the September 30, 1995 financial statements referred to in Section 2.3(b) shall
be paid in full in accordance with the agreements and promissory notes governing
such obligations.
1.8 PAYMENT BY SELLERS.
------------------
At the Closing, the Principal Sellers shall pay or cause Hanbet to pay
$854,528.30 to Ginsbury U.S. in full satisfaction of the notes receivable from
Hanbet to Ginsbury U.S.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Principal Sellers jointly and severally represent, warrant and agree as
follows:
2.1 ORGANIZATION AND RELATED MATTERS.
--------------------------------
Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each of the individual Sellers has the full
capacity and right to enter into and perform this Agreement and any related
agreements. Each of the Sellers has all necessary power and authority to
execute, deliver and perform this Agreement and any related agreements to which
it is a party.
17
The trustees of the Trusts have the authority to execute and deliver this
Agreement and any related agreements to which the Trusts are a party, and to
perform the obligations of the Trusts under such agreements. Schedule 2.1 lists
all Subsidiaries of the Companies and sets forth the capitalization of each
Subsidiary and each Company's ownership interest therein, any other interest of
any Seller or any other Person therein, and the jurisdiction in which each
Company and each Subsidiary is organized. Each of the Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization. The Companies and the
Subsidiaries have all necessary corporate power and authority to own their
respective properties and assets and to carry on their respective businesses as
now conducted. The Companies and the Subsidiaries are duly qualified or
licensed to do business as foreign corporations in good standing in the
jurisdictions listed on Schedule 2.1, which are all jurisdictions in which the
character or the location of the assets owned or leased by any of them or the
nature of the business conducted by any of them requires licensing or
qualification, except in each case where the failure to be so qualified or
licensed would not have a material adverse effect on the Business taken as a
whole. Schedule 2.1 lists the current directors and executive officers of each
of the Companies and of each Subsidiary. True, correct and complete copies of
the respective charter documents of the Companies and the Subsidiaries as in
effect on the date hereof have been delivered to Buyer. Neither any of the
Companies nor any Subsidiary is a registered or reporting company under the
Exchange Act.
2.2 STOCK.
-----
Except for shares of capital stock of Ginsbury France owned by
Ginsbury Germany, the Sellers own all of the outstanding shares of capital stock
and other Equity Securities, if any, of the Companies beneficially and of
record, and they own such shares and other Equity Securities in the respective
amounts set forth on Schedule 2.2. The Companies own all of the outstanding
Equity Securities of each of the Subsidiaries, beneficially and of record.
Except as set forth in Schedule 2.2, all of such Equity Securities of the
Companies and the Subsidiaries are owned free and clear of any Encumbrance. At
the Closing, Buyer will acquire good and marketable title to and complete
ownership of the Stock, free of any Encumbrance. Schedule 2.2 sets forth the
number of shares of authorized capital stock of each of the Companies, the
number of shares issued and the number of shares currently outstanding. There
are no outstanding Contracts or other rights to subscribe for or purchase, or
Contracts or other obligations to issue or grant any rights to acquire, any
Equity Securities of any of
18
the Companies or any Subsidiary. There are no outstanding Contracts of any
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Equity
Securities of any of such entities. All Equity Securities of the Companies and
their Subsidiaries are duly authorized, validly issued and outstanding and are
fully paid and nonassessable and were issued in conformity with applicable Laws.
There are no preemptive rights in respect of any Equity Securities of any of the
Companies or any Subsidiary, except, in the case of the Companies and
Subsidiaries other than Ginsbury U.S., for preemptive rights under applicable
Law and charter documents. Any Equity Securities of any of the Companies or any
Subsidiary which were issued and reacquired by any of such entities were so
reacquired (and, if reissued, so reissued) in compliance with all applicable
Laws, and neither any of the Companies nor any Subsidiary has any outstanding
obligation or liability with respect thereto.
2.3 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
--------------------------------------------
(a) Audited Financial Statements. Sellers have delivered to Buyer the
----------------------------
audited financial statements listed on Schedule 2.3(a). All such financial
statements have been audited by the Auditors, whose reports thereon are included
with such financial statements. All such financial statements have been
prepared in conformity with GAAP applied on a consistent basis (except as
disclosed therein). The statements of operations and cash flow included therein
present fairly the results of operations and cash flows of the Companies and
their Subsidiaries for the respective periods covered, and the balance sheets
included therein present fairly the financial condition of the Companies and
their Subsidiaries as of their respective dates. The Principal Sellers have
made available to Buyer copies of each management letter or other letter
delivered to Sellers or the Companies by the Auditors in connection with such
financial statements or relating to any review by the Auditors of the internal
controls of the Companies during the five-year period ended March 31, 1995 or
thereafter, and have made available for inspection all reports and working
papers produced or developed by the Auditors or management in connection with
their audit of such financial statements, as well as all such reports and
working papers for prior periods for which any tax liability required of the
Companies has not been finally determined or barred by applicable statutes of
limitations. Since March 31, 1995, there has been no change in any of the
accounting policies, practices or procedures of any of the Companies or the
Subsidiaries required to be disclosed by GAAP, except as disclosed in the
interim financial statements described in Section 2.3(b) below.
19
(b) Unaudited Interim Financial Statements. Sellers have delivered to
--------------------------------------
Buyer the unaudited financial statements listed in Schedule 2.3(b). Such
financial statements have been reviewed by the Auditors. All such interim
financial statements have been prepared in conformity with GAAP applied on a
consistent basis (including, without limitation, on a basis consistent with the
financial statements for the fiscal year ended March 31, 1995 listed in Schedule
2.3(a)), except as otherwise disclosed therein. The statements of operations
and cash flows present fairly the results of operations and cash flows of the
Companies and their Subsidiaries for the respective periods covered, and the
balance sheets present fairly the financial condition of the Companies and their
Subsidiaries as of their respective dates. All such interim financial
statements reflect all adjustments (which consist only of normal recurring
accruals) necessary for a fair presentation. At the dates of such balance
sheets, neither any of the Companies nor any of their Subsidiaries had any
material liability (actual, contingent or accrued) that, in accordance with GAAP
applied on a consistent basis, should have been shown or reflected therein but
was not.
(c) No Material Adverse Changes. Except as set forth in Schedule
---------------------------
2.3(c), since September 30, 1995, the Business has been conducted in the
ordinary course of business and, whether or not in the ordinary course of
business, there has not been, occurred or arisen:
(i) a material adverse change in the Business taken as a whole,
(ii) any agreement, condition, action or omission which would be
proscribed by (or require consent under) Section 4.3 had it existed,
occurred or arisen after the date of this Agreement,
(iii) any strike or other labor dispute, or
(iv) any casualty, loss, damage or destruction of any material
property of any of the Companies or their Subsidiaries in excess of
applicable insurance coverage.
2.4 TAX AND OTHER RETURNS AND REPORTS.
---------------------------------
Each of the Companies and Subsidiaries has timely filed or will file
(or, where permitted or required, its respective direct or indirect parents have
timely filed or will file when due) all required Tax Returns and, in the good
faith belief of Sellers, have paid all Taxes due (i) with respect to Ginsbury
U.S. for all periods ending on or before March 31, 1995, and (ii) with respect
to the
20
Companies other than Ginsbury U.S. and the Subsidiaries, all periods ending on
or before December 31, 1994. None of the Companies nor any Subsidiary has
elected to be treated as a consenting corporation under Section 341(f) of the
Code. Schedule 2.4 lists the date or dates through which the IRS and any other
Governmental Entity have examined the United States federal income tax returns
and any other Tax Returns of any of the Companies or the Subsidiaries. All
required Tax Returns, including amendments to date, have been prepared in good
faith without negligence or willful misrepresentation and, in the good faith
belief of Sellers, are complete and accurate in all material respects. Except
as set forth in Schedule 2.4, no Governmental Entity has, during the past three
years, examined or is in the process of examining any Tax Returns of any of the
Companies or any Subsidiary. Except as set forth on Schedule 2.4, no
Governmental Entity has proposed (tentatively or definitively), asserted or
assessed, or, to the best knowledge of Sellers and the Companies, threatened to
propose or assert, any deficiency, assessment or claim for Taxes.
2.5 MATERIAL CONTRACTS.
------------------
Schedule 2.5 lists each Contract to which any of the Companies or any
Subsidiary is a party or to which any of the Companies, any Subsidiary or any of
their respective properties is subject or by which any thereof is bound that is
deemed a Material Contract under this Agreement. Each Contract existing on the
date of this Agreement that (a) after September 30, 1995 obligates any of the
Companies to pay $250,000 or more (excluding purchase orders in the ordinary
course of business consistent with past practices), (b) has an unexpired term as
of the date hereof in excess of one year and cannot be terminated by a Company
or Subsidiary without liability in excess of $250,000, (c) provides for an
extension of credit in excess of $250,000, other than consistent with normal
credit terms, (d) limits or restricts the right of any Company or any Subsidiary
to compete or otherwise to conduct its business in any manner or place, (e)
provides for a guaranty or indemnity by any of the Companies or any Subsidiary
where the liability or obligation guaranteed or indemnified against exceeds
$250,000, (f) grants a general power of attorney, agency or similar authority to
another person or entity, (g) contains a right of first refusal, or (h) contains
a right or obligation of any Affiliate, officer or director, or any Associate of
any of the foregoing, of any of the Sellers, any of the Companies or any
Subsidiary against or to any of the Companies or any Subsidiary, shall be deemed
to be a Material Contract and has been identified on such Schedule 2.5. True
copies of the agreements appearing on Schedule 2.5, including all amendments and
supplements, have been delivered to Buyer. No material breach or default, to
21
the best knowledge of the Sellers and the Companies, alleged material breach or
default, or event which would (with the passage of time, notice or both)
constitute a material breach or default under any Material Contract by any of
the Companies or the Subsidiaries, as the case may be, or, to the best knowledge
of the Sellers and the Companies, any other party or obligor with respect
thereto, has occurred.
2.6 REAL AND PERSONAL PROPERTY; TITLE TO PROPERTY; LEASES.
-----------------------------------------------------
The Companies and each Subsidiary have good and marketable title to, or
the right to use under a valid lease or other agreement, free of Encumbrances,
all assets and properties that are material to the Business, including but not
limited to all assets that they respectively purport to own or have the right to
use, except for (a) Encumbrances consisting of liens for Taxes not yet due or
matters otherwise described in Schedule 2.6, (b) other Encumbrances that do not
affect the value or use of any such assets or property, (c) assets and
properties not material to the Business that have been disposed of in the
ordinary course of business consistent with past practice and (d) Encumbrances
arising after the date of this Agreement not in violation of Section 4.3. The
Companies do not own and, except for Ginsbury U.S., have never owned, any fee
interests in real property. All material tangible properties of each of the
Companies and each Subsidiary are in a good state of maintenance and repair
(except for ordinary wear and tear) and are adequate for the Business. To the
best knowledge of Sellers and the Companies, there is no pending or threatened
Action that would materially interfere with the quiet enjoyment of any material
leasehold under which any of the Companies or any Subsidiary is a lessee.
2.7 INTANGIBLE PROPERTY.
-------------------
Schedule 2.7 lists any and all Marks and other material items of
Intangible Property in which any of the Companies or their Subsidiaries have an
interest on the date of this Agreement and the nature of such interest. Each of
the Companies and their Subsidiaries have the necessary rights to all material
Intangible Property required for use in connection with the Business, the
absence of which would have a material adverse effect on the Business. On or
prior to the date of this Agreement, neither any Seller, any of the Companies
nor any Subsidiary has received any notice to the effect (or is otherwise aware)
that the Intangible Property or any use by the Companies or any Subsidiary of
any such property conflicts with or allegedly conflicts with or infringes the
rights of any Person.
22
2.8 AUTHORIZATION; NO CONFLICTS.
---------------------------
The execution, delivery and performance of this Agreement and any
related agreements by Sellers have been duly and validly authorized by the Board
of Directors of the corporate Sellers and by all other necessary corporate
action on the part of each such Seller. This Agreement and any related
agreements constitute the legally valid and binding obligations of Sellers,
enforceable against each Seller in accordance with its respective terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles generally. The
execution, delivery and performance of this Agreement by Sellers and the
execution, delivery and performance of any related agreements or contemplated
transactions by any of the Sellers, any of the Companies or any Subsidiary will
not violate, or constitute a breach or default (whether upon lapse of time
and/or the occurrence of any act or event or otherwise), or result in the
termination of, or acceleration of the rights of any Person under, the charter
documents or by-laws, if any, of any of such Persons, or, subject to obtaining
all Permits and Approvals contemplated by this Agreement to be obtained, violate
any Law, the violation of which would have a material adverse effect on any
Seller's ability to consummate the transactions contemplated by this Agreement
or on the Business taken as a whole. Except as contemplated by this Agreement,
no Permits or Approvals of Governmental Entities are required to be obtained by
any of the Sellers, any of the Companies or any Subsidiary, the absence of which
would have a material adverse effect on any Seller's ability to consummate the
transactions contemplated by this Agreement or on the Business taken as a whole.
2.9 LEGAL PROCEEDINGS AND CERTAIN LABOR MATTERS.
-------------------------------------------
There is no Order or Action pending, or, to the best knowledge of
Sellers and the Companies, threatened, against or affecting any of the Companies
or the Subsidiaries or any of their respective properties or assets that
individually or when aggregated with one or more other Orders or Actions has or
might reasonably be expected to have a material adverse effect on the Business
taken as a whole or on the Sellers' ability to perform this Agreement, or on any
transaction contemplated by this Agreement. There is no organized labor strike,
dispute, slowdown or stoppage, or collective bargaining or unfair labor practice
claim (collectively, "Labor Matters"), pending or to the best knowledge of
Sellers and the Companies threatened, against or affecting any of the Companies
or the Subsidiaries or the Business. There is no matter as to which any of the
Companies or the Subsidiaries has received any notice, claim or assertion, or,
to the best knowledge of Sellers and the
23
Companies, which otherwise has been threatened or is reasonably expected to be
threatened or initiated, against or affecting any director, officer, employee,
agent or representative of any of the Companies or the Subsidiaries, nor to the
best knowledge of Sellers and the Companies is there any reasonable basis
therefor, in connection with which any such Person has or may reasonably be
expected to have any right to be indemnified by any of the Companies or
Subsidiaries.
2.10 RECORDS.
-------
The copies of the certificates of incorporation, by-laws and similar
organizational documents, and the stock ledgers and minute books, of the
Companies that have been delivered or made available to the Buyer are complete
and correct.
2.11 SUFFICIENCY OF ASSETS.
---------------------
The Companies own, or have all rights that are necessary to enable
them to use, all the assets used in or necessary for the operations of their
businesses as presently conducted. The Companies do not own any real property.
2.12 INSURANCE.
---------
Set forth on Schedule 2.12 is a list and brief description of all the
insurance policies each of the Companies has in effect and the claims experience
under each policy since January 1, 1992.
2.13 PERMITS.
-------
The Companies and the Subsidiaries hold all Permits that are required
by any Governmental Entity to permit each of them to conduct its business as now
conducted, and all such Permits are valid and in full force and effect. To the
best knowledge of Sellers and the Companies, no suspension, cancellation or
termination of any of such Permits is threatened or imminent.
2.14 COMPLIANCE WITH LAW. The Companies and their Subsidiaries are
-------------------
organized and have conducted their respective businesses in accordance with
applicable Laws, and the forms, procedures and practices of the Companies and
their Subsidiaries are in compliance with all such Laws, except where the
failure to be so organized or to have so conducted business or where the failure
to have complied, would not have a material adverse effect on the Business taken
as a whole.
24
2.15 DIVIDENDS AND OTHER DISTRIBUTIONS.
---------------------------------
There has been no dividend or other distribution of assets or
securities, whether consisting of money, property or any other thing of value,
declared, issued or paid to or for the benefit of Sellers subsequent to the date
of the most recent financial statements described in Section 2.3 by any of the
Companies or any Subsidiary (except for dividends and distributions of cash or
cash equivalents to effect the transactions described or referred to in item 3
of Schedule 2.18 or items 1 and 2 on Schedule 4.8 hereto).
2.16 EMPLOYEE BENEFITS.
-----------------
(a) Employee Benefit Plans, Collective Bargaining and Employee
----------------------------------------------------------
Agreements, and Similar Arrangements.
------------------------------------
(i) Schedule 2.16(a) lists all employee benefit plans and
collective bargaining, employment or severance agreements or other similar
arrangements under which benefits are provided to (or have been, within the
three years preceding the Closing Date provided to) employees of any of the
Companies or any Subsidiary (other than oral agreements terminable without
liability and arrangements pursuant to applicable Laws), including, without
limitation, (a) any profit-sharing, deferred compensation, bonus, stock option,
stock purchase, pension, retainer, consulting, retirement, severance, welfare or
incentive plan, agreement or arrangement, (b) any plan, agreement or arrangement
providing for "fringe benefits" to employees, officers, directors or agents,
including but not limited to benefits relating to automobiles, clubs, vacation,
child care, parenting, sabbatical, sick leave, medical, dental, hospitalization,
life insurance and other types of insurance, (c) any employment agreement not
terminable on 30 days (or less) written notice, or (d) any other "employee
benefit plan" (within the meaning of Section 3(3) or ERISA).
(ii) Sellers have delivered to Buyer true and complete copies of
all documents and summary plan descriptions with respect to such plans,
agreements and arrangements, or summary descriptions of any such plans,
agreements or arrangements not otherwise in writing.
(iii) Except as provided in Item 20 under "Employee Benefits"
of Schedule 2.16(a), the Companies and their Subsidiaries are in full compliance
in all material respects with the applicable provisions of ERISA (as amended
through the date of this Agreement), the regulations and published authorities
thereunder, and all other Laws applicable with respect to all such employee
benefit plans,
25
agreements and arrangements. The Companies and their Subsidiaries have in all
material respects performed all of their obligations under all such plans,
agreements and arrangements. To the best knowledge of Sellers and the
Companies, there are no Actions (other than routine claims for benefits) pending
or threatened against such plans or their assets, or arising out of such plans,
agreements or arrangements, and, to the best knowledge of Sellers and the
Companies, no facts exist which could give rise to any such Actions that might
have a material adverse effect on such plans, agreements, or arrangements or the
Business.
(b) Qualified Plans.
---------------
(i) Schedule 2.16(b) lists all "employee pension benefit plans"
(within the meaning of Section 3(2) of ERISA) in Schedule 2.16(a) which are also
stock bonus, pension or profit-sharing plans within the meaning of Section
401(a) of the Code.
(ii) Each such plan intended to qualify under Section 401(a) of
the Code received a determination letter from the IRS to the effect that the
Plan is qualified under Section 401(a) of the Code and any trust maintained
pursuant thereto is exempt from federal income taxation under Section 501(a) of
the Code and, to the best knowledge of Sellers and the Companies, nothing has
occurred or will occur through the date of Closing that caused or could cause
the loss of such qualification or exemption. To the best knowledge of Sellers
and the Companies, no prohibited transaction (within the meaning of Section 4975
of the Code) or party-in-interest transaction (within the meaning of Section 406
of ERISA) has occurred with respect to any of such plans.
(iii) Sellers have delivered to Buyer for each such plan copies
of the following documents: (i) the Form 5500 filed in the most recent plan
year, including but not limited to all schedules thereto and financial
statements with attached opinions of independent accountants, (ii) the most
recent determination letter from the IRS, (iii) the consolidated statement of
assets and liabilities of such plan as of its most recent valuation date, and
(iv) the statement of changes in fund balance and in financial position or the
statement of changes in net assets available for benefits under such plan for
the most recently ended plan year.
26
(c) Title IV Plans.
--------------
(i) Schedule 2.16(c) lists all plans in Schedules 2.16(a) and
2.16(b) which are also subject to Title IV of ERISA.
(ii) With respect to each such plan in which any of the
Companies, any Subsidiary or any trade or business (whether or not incorporated)
that is a member of a group of which any of the Companies is a member and which
is under common control within the meaning of Section 414 (b) and (c) of the
Code ("ERISA Affiliate") participates or has participated, (i) neither any of
the Companies nor any Subsidiary nor any ERISA Affiliate has withdrawn from such
plan during a plan year in which it was a "substantial employer" (as defined in
Section 4001(a) (2) of ERISA), (ii) neither any of the Companies nor any
Subsidiary nor any ERISA Affiliate has filed a notice of intent to terminate any
such plan or adopted any amendment to treat any such plan as terminated, (iii)
the PBGC has not instituted proceedings to terminate any such plan, (iv) no
accumulated funding deficiency, whether or not waived, exists with respect to
any such plan, and neither any of the Companies nor any Subsidiary nor any ERISA
Affiliate has failed to make full payment of all amounts which under the
provisions of any such plan are required to be made as contributions thereto,
(v) all required premium payments to the PBGC have been paid, (vi) no reportable
event, as described in Section 4043 of ERISA, has occurred with respect to any
such plan, and (vii) no excise taxes are payable under the Code.
(iii) In addition to the documents listed in subsection (b)(3)
above, Sellers have delivered to Buyer for each Title IV plan copies of the
following documents: (i) the Form PBGC-1 filed in each plan year, and (ii) the
actuarial report as of the last valuation date.
(d) Multiemployer Plans. No plan listed in Schedule 2.16(a) is a
-------------------
"multiemployer plan" (within the meaning of Section 3(37) of ERISA). Neither
any of the Companies nor any Subsidiary has ever contributed to or had an
obligation to contribute to any multiemployer plan.
(e) Health Plans. All group health plans of the Companies, any
------------
Subsidiary and any ERISA Affiliate have been operated in all material respects
in compliance with the group health plan continuation coverage requirements of
Section 162(k) and Section 4980B of the Code to the extent such requirements are
applicable.
(f) Fines and Penalties. There has been no act or omission by any of
-------------------
the Companies or any Subsidiary or any ERISA Affiliate that has given rise to or
may give rise to
27
fines, penalties, taxes, or related charges under Section 502(c) or (k) or
Section 4071 of ERISA or Chapter 43 of the Code that might have a material
adverse effect on the plans, agreements or arrangements referred to in this
Section 2.16 or the Business.
2.17 CERTAIN INTERESTS.
-----------------
Except as set forth on Schedule 2.17: (a) no Affiliate of any of the
Sellers, the Companies or any Subsidiary nor any officer or director of any
thereof, nor any Associate of any such individual, has any material interest in
any property used in or pertaining to the Business; (b) no such Person is
indebted or otherwise obligated to any of the Companies or any Subsidiary; and
(c) none of the Companies nor any Subsidiary is indebted or otherwise obligated
to any such Person, except for amounts due under normal arrangements applicable
to employees generally as to salary or reimbursement of ordinary business
expenses not unusual in amount or significance. The consummation of the
transactions contemplated by this Agreement will not (either alone, or upon the
occurrence of any act or event, or with the lapse of time, or both) result in
any benefit or payment (severance or other) arising or becoming due from any of
the Companies or any Subsidiary or the successor or assign of any thereof to any
Person referred to in the preceding sentence.
2.18 INTERCOMPANY TRANSACTIONS.
-------------------------
Except as set forth on Schedule 2.18, since Xxxxx 00, 0000, xxxx of
the Companies nor any Subsidiary has engaged in any transaction with any of the
Sellers nor any other Affiliate of any of the Sellers. None of the Companies
nor any Subsidiary has any liabilities or obligations to any of the Sellers or
any other Affiliate of any of the Sellers and none of the Sellers or such
Affiliates has any obligations to any of the Companies or any Subsidiary. The
consummation of the transactions contemplated by this Agreement will not (either
alone, or upon the occurrence of any act or event, or with the lapse of time, or
both) result in any payment arising or becoming due from any of the Companies or
any Subsidiary or the successor or assign of any thereof to any of the Sellers
or any Affiliate of any of the Sellers.
2.19 NO BROKERS OR FINDERS.
---------------------
No Seller, Company or Subsidiary is a party to or bound by any
Contract with any broker or finder in connection with the transactions
contemplated by this Agreement.
28
2.20 CUSTOMERS AND SUPPLIERS.
-----------------------
Schedule 2.20 lists the names and the approximate percentages of
revenue attributable to the ten largest customers of and ten most significant
suppliers of the Business taken as a whole during the period from January 1,
1995 to September 30, 1995. Except as set forth on Schedule 2.20, no such
customer or supplier has given notice that it intends to terminate or materially
reduce its business with any of the Companies.
2.21 SELLERS' INVESTMENT REPRESENTATION.
----------------------------------
Each Seller will be acquiring the Buyer's Shares for such Seller's own
account for investment and not with a view to or for sale in connection with a
distribution thereof. Each Seller is an informed and sophisticated investor, or
has engaged expert advisors, experienced in the evaluation of companies such as
the Buyer. Each Seller or such Seller's expert advisor(s), has undertaken such
investigation and has been provided with and has evaluated such documents and
information as that Seller or that Seller's expert advisor(s) has deemed
necessary to enable that Seller to make an informed and intelligent decision
with respect to the acquisition of the Buyer's Shares contemplated by this
agreement. Notwithstanding anything to the contrary in this Section 2.21 or in
Exhibit A to this Agreement, nothing in this Section 2.21 or in Exhibit A to
this Agreement shall be deemed to affect the rights or obligations of the
parties under Article VIII in respect of any warranty or representation under
Article III.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers other than the Principal Sellers severally
represents, warrants and agrees as follows:
2A.1 ORGANIZATION AND RELATED MATTERS.
--------------------------------
That Seller has the full capacity and right to enter into and perform
this Agreement and any related agreements. That Seller has all necessary power
and authority to execute, deliver and perform this Agreement and any related
agreements to which it is a party.
2A.2 STOCK.
-----
That Seller owns all of the outstanding shares of capital stock and
other Equity Securities, if any, of the Companies, beneficially and of record,
in the respective
29
amounts set forth on Schedule 2.2. All such Equity Securities are owned free
and clear of any Encumbrance. At the Closing, Buyer will acquire good and
marketable title to and complete ownership of that Seller's Stock, free of any
Encumbrance. Except as set forth on Schedule 2.2, there are no outstanding
Contracts or other rights to subscribe for or purchase, or Contracts or other
obligations to issue or grant any rights to acquire, the Equity Securities owned
by that Seller. Except as set forth on Schedule 2.2, there are no outstanding
Contracts of any Company to repurchase, redeem or otherwise acquire the Equity
Securities owned by that Seller. That Seller's Equity Securities are duly
authorized, validly issued and outstanding and are fully paid and nonassessable
and were issued in conformity with applicable Laws.
2A.3 AUTHORIZATION; NO CONFLICTS.
---------------------------
The execution, delivery and performance of this Agreement and any
related agreements by that Seller have been duly and validly authorized by all
necessary action on the part of that Seller. This Agreement and any related
agreements constitute the legally valid and binding obligations of that Seller,
enforceable against that Seller in accordance with its respective terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles generally. The
execution, delivery and performance of this Agreement by that Seller and the
execution, delivery and performance of any related agreements or contemplated
transactions by that Seller will not violate, or constitute a breach or default
(whether upon lapse of time and/or the occurrence of any act or event or
otherwise), or result in the termination of, or acceleration of the rights of
any Person under, the charter documents or by-laws, if any, of that Seller, or
any Material Contract of that Seller. To the best of that Seller's knowledge,
after due inquiry, except for matters identified in Schedule 2.8 as requiring
that certain action be taken by or with respect to a Governmental Entity, the
execution and delivery of this Agreement by that Seller and the performance of
this Agreement and any related or contemplated transactions by that Seller will
not require filing or registration with, or the issuance of any Permit by, any
Governmental Entity.
2A.4 SELLERS' INVESTMENT REPRESENTATION.
----------------------------------
That Seller will be acquiring the Buyer's Shares for such Seller's own
account for investment and not with a view to or for sale in connection with a
distribution thereof. That Seller is an informed and sophisticated investor, or
has engaged expert advisors, experienced in the evaluation of companies such as
the Buyer. That Seller or
30
such Seller's expert advisor(s) has undertaken such investigation and has been
provided with and has evaluated such documents and information as that Seller or
that Seller's expert advisor(s) has deemed necessary to enable that Seller to
make an informed and intelligent decision with respect to the acquisition of the
Buyer's Shares contemplated by this Agreement. Notwithstanding anything to the
contrary in this Section 2A.4 or in Exhibit A to this Agreement, nothing in this
Section 2A.4 or in Exhibit A to this Agreement shall be deemed to affect the
rights or obligations of the parties under Article VIII in respect of any
warranty or representation under Article III.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants and agrees as follows:
3.1 ORGANIZATION AND RELATED MATTERS.
--------------------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. Buyer has all necessary
corporate power and authority to carry on its business as now being conducted.
Buyer has the necessary corporate power and authority to execute, deliver and
perform this Agreement and any related agreements to which it is a party.
3.2 AUTHORIZATION.
-------------
The execution, delivery and performance of this Agreement and any
related agreements by Buyer has been duly and validly authorized by the Board of
Directors of Buyer and by all other necessary corporate action on the part of
Buyer. This Agreement constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles generally.
3.3 NO CONFLICTS.
------------
The execution, delivery and performance of this Agreement and any
related agreements by Buyer will not violate the provisions of, or constitute a
breach or default whether upon lapse of time and/or the occurrence of any act or
event or otherwise under (a) the charter documents or bylaws of Buyer, (b) any
Law to which Buyer is subject or (c) any Contract to which Buyer is a party that
is material to the financial condition, results of operations or conduct of the
business of Buyer, provided (as to clauses (b) and
31
(c) respectively) that the appropriate regulatory approvals are received as
contemplated by Section 6.1.
3.4 NO BROKERS OR FINDERS.
---------------------
Buyer is not a party to or bound by any Contract with any broker or
finder in connection with the transactions contemplated by this Agreement.
3.5 LEGAL PROCEEDINGS.
-----------------
Except as set forth on Schedule 3.5 hereto, there is no Order or
Action pending or, to the best knowledge of Buyer, threatened against or
affecting Buyer that individually or when aggregated with one or more other
Actions has or might reasonably be expected to have a material adverse effect on
Buyer's ability to perform this Agreement or any other aspect of the
transactions contemplated by this Agreement.
3.6 BUYER'S STOCK.
-------------
As of the date hereof, the authorized capital stock of Buyer consists
of 25,000,000 shares of Common Stock, without par value, of which 12,365,662
shares were issued and outstanding as of September 30, 1995, and 500,000 shares
of Preferred Stock, of which no shares are issued and outstanding. Upon
issuance in accordance with the terms of this Agreement, Buyer's Shares will be
validly issued, fully paid and nonassessable, subject to the restrictions set
forth on Exhibit A hereto.
3.7 INVESTMENT REPRESENTATION.
-------------------------
Buyer will be acquiring the Stock for Buyer's own account for
investment and not with a view to or for sale in connection with a distribution
thereof. Buyer is an informed and sophisticated investor, or has engaged expert
advisors, experienced in the evaluation of companies such as the Companies.
Buyer or Buyer's expert advisor(s) has undertaken such investigation and has
been provided with and has evaluated such documents and information as Buyer or
Buyer's expert advisor(s) has deemed necessary to enable that Buyer to make an
informed and intelligent decision with respect to the transactions contemplated
by this Agreement. Notwithstanding anything to the contrary in this Section 3.7,
nothing in this Section 3.7 shall be deemed to affect the rights or obligations
of the parties under Article VIII.
32
ARTICLE IV
COVENANTS WITH RESPECT TO CONDUCT OF THE COMPANIES
AND THEIR SUBSIDIARIES PRIOR TO CLOSING
4.1 ACCESS.
------
Sellers shall cause each of the Companies and its Subsidiaries to
authorize and permit Buyer and its representatives (which term shall be deemed
to include its independent accountants and counsel) to have reasonable access
during normal business hours, upon reasonable notice and in such manner as will
not unreasonably interfere with the conduct of their respective businesses, to
all of their respective properties, books, records, operating instructions and
procedures, Tax Returns and all other information with respect to the Business
as Buyer may from time to time reasonably request, and to make copies of such
books, records and other documents and to discuss their respective businesses
with such other Persons, including, without limitation, their respective
directors, officers, employees, accountants, counsel, suppliers, customers, and
creditors, as Buyer reasonably considers necessary or appropriate for the
purposes of familiarizing itself with the Business, obtaining any necessary
Approvals of or Permits for the transactions contemplated by this Agreement and
conducting an evaluation of the organization and business of the Companies and
their Subsidiaries.
4.2 [OMITTED].
4.3 CONDUCT OF BUSINESS.
-------------------
Sellers agree with and for the benefit of Buyer that, subject to Items
1 and 3 on Schedule 4.8, none of the Companies nor any Subsidiary shall, without
the prior consent in writing of Buyer, which may not be unreasonably withheld:
(a) conduct the Business in any manner except in the ordinary course
consistent with past practices; or
(b) make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan, guaranty or other extension of
credit, to or for the benefit of any director, officer, employee,
stockholder or any of their respective Associates or Affiliates; provided,
--------
however, that the Companies shall be entitled to make loans to employees
-------
consistent with past practices in an aggregate amount not to exceed
$10,000; or
33
(c) sell, transfer, mortgage, encumber or otherwise dispose of any
assets except (i) for dispositions of property not material in amount, or
(ii) in the ordinary course of business, or (iii) as contemplated by this
Agreement; or
(d) issue, sell, redeem or acquire for value, or agree to do so, any
debt obligations or Equity Securities of any of the Companies or any of
their Subsidiaries; or
(e) declare, issue, make or pay any dividend or other distribution of
assets (other than cash and cash equivalents to effect the transactions
contemplated by Schedule 4.8 hereto) to its shareholders, or split,
combine, dividend, distribute or reclassify any shares of its Equity
Securities; or
(f) change or amend its charter documents or bylaws; or
(g) make any material capital expenditures or commitments with respect
thereto; or
(h) make any material investment, by purchase, contributions to
capital, property transfers, or otherwise, in any other Person; or
(i) agree to or make any commitment to take any actions prohibited by
this Section 4.3.
Nothing in this Section 4.3 or in Section 4.8 or otherwise in this
Agreement shall be deemed to affect the rights or obligations of the
parties under the leases and employment agreements set forth on Schedule
4.3 (except as contemplated by Section 6.2(j)).
4.4 NOTIFICATION OF CERTAIN MATTERS.
-------------------------------
Sellers shall give prompt notice to Buyer, and Buyer shall give prompt
notice to Sellers, of (i) the occurrence, or failure to occur, of any event that
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Closing Date and (ii) any failure of Buyer or
any of the Sellers, as the case may be, to comply with or satisfy, in
34
any material respect, any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement.
4.5 PERMITS AND APPROVALS.
---------------------
(a) Sellers and Buyer each agree to cooperate and use their best
efforts to obtain (and will immediately prepare all registrations, filings and
applications, requests and notices preliminary to all) Approvals and Permits
listed in Schedule 4.5.
(b) To the extent that the Approval of a third party with respect to
any Material Contract is required in connection with the transactions
contemplated by this Agreement, Sellers shall use their best efforts to obtain
such Approval prior to the Closing Date, if requested to do so by Buyer in
writing.
4.6 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE.
----------------------------------------------
During the period beginning on the date hereof and ending on the
Closing Date, (a) Sellers will use their best efforts to preserve the Business
and to preserve the goodwill of customers, suppliers and others having business
relations with the Companies and their Subsidiaries and (b) the Principal
Sellers and Buyer will consult with each other concerning, and the Principal
Sellers will cooperate to keep available to Buyer, the services of the officers
and employees of the Companies and their Subsidiaries that Buyer may wish to
have retained. Nothing in this Section shall obligate Buyer, the Companies or
any Subsidiary after the Closing to retain or offer employment to any officer or
employee of the Companies or any Subsidiary.
4.7 GOVERNMENT FILINGS.
------------------
The Principal Sellers will make and will cause the Companies and their
Subsidiaries to make any and all filings required under the Xxxx-Xxxxx-Xxxxxx
Act and such other filings set forth on Schedule 4.5. The Principal Sellers and
Buyer shall furnish each other such necessary information and reasonable
assistance as the other(s) may reasonably request in connection with its or
their preparation of necessary filings or submissions under the provisions of
such laws.
4.8 ELIMINATION OF INTERCOMPANY AND AFFILIATE LIABILITIES.
-----------------------------------------------------
Prior to the Closing, Sellers shall cause all liabilities and
obligations of Sellers and all their Affiliates and Associates (other than the
Companies and
35
their Subsidiaries) to the Companies and their Subsidiaries to be terminated
(with or without payment), and shall cause all liabilities and obligations of
the Companies and their Subsidiaries to the Sellers and all their Affiliates and
Associates (other than the Companies and their Subsidiaries) to be terminated
(with or without payment), in each case without any liability or obligation of
the Companies or their Subsidiaries after the Closing. Such transactions and
any required payments are described on Schedule 4.8 hereto. Except as set forth
on Schedule 4.8, at Closing, there will be no liabilities or other obligations
between the Companies and Sellers or their Affiliates and Associates.
4.9 PENSION PLAN.
------------
Effective on or before the Closing Date, the Principal Sellers shall
cause the Xxxxxx Xxxxxxxx, Ltd. Pension Plan to make a full distribution of the
accrued benefit of Xxxxxxx Xxxxxxxxx in a lump sum, in cash and/or securities
(the form of benefits to be selected by Xx. Xxxxxxxxx), in accordance with the
terms and conditions of such plan.
4.10 OPINIONS.
--------
The Principal Sellers shall use their best efforts to cause to be
delivered to Buyer at the Closing opinions dated the Closing Date substantially
to the effect set forth in paragraphs i, iii, iv, v, vi, vii, ix and x of
Exhibit C-2 with respect to Ginsbury Denmark and Ginsbury Finland. For purposes
of this Section 4.10, best efforts shall include the reasonable expenditure of
funds by Sellers to cause such opinions to be delivered to Buyer.
ARTICLE V
ADDITIONAL CONTINUING COVENANTS
5.1 Noncompetition.
--------------
(a) Restrictions on Competitive Activities. Sellers agree that after
--------------------------------------
the Closing Buyer and the Companies shall be entitled to the goodwill and going
concern value of the Business and to protect and preserve the same to the
maximum extent permitted by law. Sellers also acknowledge that the management
contributions to the Business by certain of the Sellers have been uniquely
valuable and involve proprietary information that would be competitively unfair
to make available to any competitor of any of the Companies and their
Subsidiaries. For these and other reasons and as an inducement to Buyer to
enter into this Agreement, each Seller (other than Xxxxxx Xxxxxx and Xxxx
Xxxxxx, who Principal Sellers represent are not employees in the
36
Business) agrees that for a period of three years after the date hereof neither
he nor it will, directly or indirectly, for his or its own benefit or as agent
for another, carry on or participate in the ownership, management or control of,
or the financing of, or be employed by, or consult for or otherwise render
services to, any other present or future business enterprise that competes with
any of the Companies or any Subsidiary in activities in which any of the
Companies or any Subsidiary is engaged as of the Closing Date in each state in
the United States and in each foreign country in which the Companies or their
Subsidiaries now operate.
(b) Special Remedies and Enforcement. Each Seller recognizes and
--------------------------------
agrees that a breach by any Seller of his or its covenants set forth in this
Section 5.1 could cause irreparable harm to Buyer, that Buyer's remedies at law
in the event of such breach would be inadequate, and that, accordingly, in the
event of such breach a restraining order or injunction or both may be issued
against him or it, in addition to any other rights and remedies which are
available to Buyer. If this Section 5.1 is more restrictive than permitted by
the Laws of the jurisdiction in which Buyer seeks enforcement hereof, this
Section 5.1 shall be limited to the extent required to permit enforcement under
such Laws.
(c) RTPA Suspension. No provision of this Agreement or any agreement
---------------
forming part of the same arrangement as this Agreement, by virtue of which this
Agreement is subject to registration (if such be the case) under the Restrictive
Trade Practices Act of 1976 (the "RTPA"), shall take effect until the day after
particulars of this Agreement have been furnished to the Director General of
Fair Trading pursuant to Section 24 of the RTPA.
5.2 NONDISCLOSURE OF PROPRIETARY DATA. Each Seller agrees that neither
---------------------------------
he nor it nor any of his or its representatives shall, at any time, make use of,
divulge or otherwise disclose, directly or indirectly, any trade secret or other
proprietary data (including, but not limited to, any customer list, record or
financial information) concerning the business or policies of any of the
Companies or any of their Subsidiaries (until and unless such trade secret or
other proprietary data shall have become generally available to non-Company
personnel through no fault of Seller).
5.3 TAX COOPERATION.
---------------
After the Closing, Sellers and Buyer shall, and shall cause their
respective subsidiaries and Affiliates to, cooperate fully with each other, and
with the Companies and
37
the Subsidiaries in preparing all Tax Returns or with respect to any Tax
Proceeding, including responding to audits, obtaining refunds, making any
determination under this Agreement (including, but not limited to, the
determination of the responsibility for the payment of Taxes under this
Agreement), verify issues and negotiate settlements with Governmental Entities,
or defend or prosecute any Tax claims. Sellers shall provide, or cause to be
provided at Sellers' sole cost and expense, to Buyer, the Companies and the
Subsidiaries any original books and records of the Companies and the
Subsidiaries in their possession or control and other information relating to
Taxes requested by such parties as well as, at Buyer's sole cost and expense,
access to, and the cooperation of, the Auditors of Sellers and their Affiliates
in connection with any Tax Proceeding.
5.4 REPRESENTATIVES.
---------------
Each Seller hereby appoints Xxxxxxx Xxxxxxxxx and Xxx Xxxxxxxxx, as
representatives (the "Representatives"), to represent such Sellers in connection
with the transactions contemplated by this Agreement, and to take any and all
other action on their behalf hereunder that may be taken by Sellers under the
terms hereof. Each Seller understands and agrees that the Representatives have
been appointed as the Representatives by each of the other Sellers. Buyer shall
be entitled to rely on the advice, information and decisions of the
Representatives without any obligation independently to verify, authenticate or
seek the confirmation or approval of the Representatives' advice, information or
decisions or any other facts from Sellers or any other Person. The
Representatives named above shall continue to serve as such until written notice
of any change is received by Buyer.
5.5 PREPARATION AND FILING OF TAX RETURNS.
-------------------------------------
(a) The Principal Sellers shall cause to be prepared (at their
expense) all Tax Returns of the Companies and Subsidiaries for Pre-Closing Tax
Periods (other than a Pre-Closing Tax Period that is part of an Overlap Period)
that are due after the Closing Date.
(b) Buyer shall cause each Tax Return referred to in Section 5.5(a) to
be signed and timely filed and all Taxes shown as due on such Tax Return to be
timely paid. At least thirty (30) days prior to the due date (including
extensions) of such Tax Return, the Principal Sellers shall cause such Tax
Return to be delivered to Buyer, and if such Tax Return reflects positions or
report items in a manner which is inconsistent with returns for prior periods,
such Tax Returns shall not be filed without Buyer's written
38
consent, which shall not be unreasonably withheld. At least three (3) days
prior to such due date (including extensions), the Principal Sellers shall
provide Buyer with sufficient funds to pay any liability for Taxes shown as due
on such Tax Return, but only to the extent that the amount due from Sellers
exceeds the Tax Reserve (reduced by any prior offsets pursuant to Section 8.3(a)
or this Section 5.5).
(c) Buyer shall cause to be prepared (at its expense) and timely filed
all Tax Returns of the Companies and Subsidiaries that include Pre-Closing Tax
Periods and are due after the Closing Date other than Tax Returns referred to in
Section 5.5(a) and shall cause all Taxes shown as due on such Tax Returns to be
timely paid. Buyer shall cause each such Tax Return to be delivered to the
Principal Sellers for their review at least thirty (30) days prior to the due
date (including extensions) of such Tax Return and if the taxable income for a
Company or any Subsidiary in respect of a particular Pre-Closing Tax Period is
in excess of $25,000, such Tax Return shall not be filed without their written
consent, which shall not be unreasonably withheld. At least three (3) days
prior to the due date (including extensions) of such Tax Return, Sellers shall
pay to Buyer an amount equal to the Taxes due and attributable to the Pre-
Closing Tax Period included in such Tax Return (as determined under Section 5.6,
but only to the extent that the amount due from the Principal Sellers exceeds
the Tax Reserve (reduced by any prior offsets pursuant to Section 8.3(a) or this
Section 5.5).
(d) If a Tax Return referred to in Section 5.5(b) or Section 5.5(c) is
to be filed pursuant to a valid extension, the Principal Sellers shall pay to
Buyer, at least three (3) days prior to the due date of the Tax Return without
regard to such extension, an amount equal to the Taxes due and attributable to
the applicable Pre-Closing Tax Period, but only to the extent that the amount
due from the Principal Sellers exceeds the Tax Reserve (reduced by any prior
offsets pursuant to Section 8.3(a) or this Section 5.5). Buyer shall cause the
Taxes due on the due date without regard to extensions to be timely paid.
Appropriate adjustments shall be made between the parties as necessary, if at
the time the Tax Return is actually filed, the Taxes due and attributable to the
Pre-Closing Tax Period are more or less than the amount, if any, previously paid
by the Principal Sellers.
39
5.6 ALLOCATION OF TAX LIABILITY.
---------------------------
(a) To the extent permitted by applicable law, the parties hereto
agree to cause foreign, state and local Tax periods of the Companies and the
Subsidiaries to be closed at the close of business on the Closing Date. In the
event applicable law does not permit the closing of any such period, the
allocation of Tax Liabilities shall be made in accordance with Section 5.6(b).
(b)(i) In the case of a Tax Return of any of the Companies or
Subsidiaries for an Overlap Period based upon income, gross receipts (such as
sales Taxes) or specific transactions involving Taxes other than Taxes based
upon income or gross receipts, the amount of Taxes attributable to any Pre-
Closing Tax Period or Post-Closing Tax Period included in the Overlap Period
shall be determined by closing the books of the relevant Company or Subsidiary
as of the close of business on the Closing Date and by treating each of such
Pre-Closing Tax Period and Post-Closing Tax Period as a separate taxable year,
except that exemptions, allowances or deductions that are calculated on an
annual basis shall be apportioned on a per diem basis. Any estimated Taxes paid
by or with respect to, such Company or Subsidiary on or prior to the Closing
Date shall be a credit against the Taxes due and attributable to the Pre-Closing
Tax Periods in Sections 5.5(b) and (c).
(ii) If the liability for Taxes for an Overlap Period is determined on
a basis other than income, gross receipts or specific transactions, the amount
of Taxes attributable to any Pre-Closing Tax Period included in the Overlap
Period shall be equal to the amount of such Taxes for the Overlap Period
multiplied by a fraction, the numerator of which is the number of days in the
Pre-Closing Tax Period included in the Overlap Period and the denominator of
which is the total number of days in the Overlap Period, and the amount of such
Taxes attributable to any Post-Closing Tax Period included in an Overlap Period
shall be the excess of the amount of the Taxes for the Overlap Period over the
amount of Taxes attributable to the Pre-Closing Tax Period included in such
Overlap Period.
5.7 CONSISTENCY; AMENDED RETURNS.
----------------------------
(a) Buyer shall cause no election to be made, no accounting method to
be adopted and no reporting position to be taken by, or with respect to, any of
the Companies or Subsidiaries in a Tax Return which the Buyer has the obligation
to cause to be prepared pursuant to Section 5.5(c) or in a Tax Proceeding that
is inconsistent with any election, accounting method or reporting position
previously made, elected or taken by, or with respect to, the relevant
40
Company or Subsidiary in a Tax Return for a Pre-Closing Tax Period, unless the
Principal Sellers shall provide their written consent.
(b) The Principal Sellers shall cause no election to be made, no
accounting method to be adopted and no reporting position to be taken by, or
with respect to, any of the Companies or Subsidiaries in a Tax Return for any
Pre-Closing Tax Period that has not yet been filed and that they have the
responsibility to cause to be prepared that is inconsistent with any election,
accounting method or reporting position previously made, elected or taken by, or
with respect to, the relevant Company or Subsidiary in a prior Tax Return,
unless Buyer shall provide its written consent.
(c) Buyer shall not file, and it shall cause the Companies, the
Subsidiaries and its other Affiliates not to file, any amended Tax Return or
claim or suit for refund for any of the Companies or Subsidiaries with respect
to any Pre-Closing Tax Period not including an Overlap Period, unless Sellers
have provided their written consent, which consent may be withheld in their sole
discretion. In the case of an Overlap Period, if the filing of the amended Tax
Return or claim or suit for refund would cause the taxable income for the Pre-
Closing Tax Period included in such Overlap Period to exceed $25,000, such
action shall require the Principal Sellers' written consent, which shall not be
unreasonably withheld.
5.8 SECTION 338 AND COMPARABLE ELECTIONS. Buyer shall not make, and
------------------------------------
it shall cause the Companies, the Subsidiaries and its other Affiliates not to
make, any election under Section 338 of the Code, or any comparable provision
under foreign, state or local law, with respect to any of the Companies or the
Subsidiaries in connection with the purchase of Stock on the Closing Date.
5.9 NAME CHANGE. The Principal Sellers shall cause the names of the
-----------
Excluded Businesses to be changed within 30 days of the Closing Date to names
not confusingly similar to "Sylvan," "Ginsbury," or "Xxxxxx Xxxxxxxx."
5.10 CONDUCT OF BUSINESS ON CLOSING DATE. Each of Sellers and Buyer
-----------------------------------
agrees not to cause any of the Companies or Subsidiaries to engage in any
transaction on the Closing Date outside of the ordinary course of business that
could affect any Tax Liabilities of Sellers, except the transactions
contemplated by this Agreement.
41
5.11 HEALTH PLAN.
-----------
For a period of three (3) years after the Closing Date, the Buyer
shall either (i) cause the Business to provide a substantially similar health
plan for employees (and their dependents) in the United States to that
maintained at the Closing Date by the Business for employees (and their
dependents) in the United States, or (ii) permit employees (and their
dependents) of the Business in the United States to participate in the health
plan of Buyer available to similarly situated employees, and shall cause any
such health plan to cover all pre-existing conditions of such employees and
dependents that were covered by the health plans of the Business at the Closing
Date.
5.12 RELEASES.
--------
As promptly as practicable after the Closing, Buyer shall use its best
efforts to cause the obligors under the guarantees listed in Schedule 5.12 to be
released from all obligations and liabilities under such guarantees, and,
pending such releases, Buyer shall, from and after the Closing, indemnify and
hold such obligors harmless from and against all such obligations and
liabilities.
ARTICLE VI
CONDITIONS OF PURCHASE
6.1 GENERAL CONDITIONS.
------------------
The obligations of the parties to effect the Closing shall be subject
to the following conditions, unless waived in writing by Buyer and the Principal
Sellers:
(a) No Orders; Legal Proceedings. There shall not be in effect any
----------------------------
Law or Order, nor shall any Action have been instituted and remain pending
by any Governmental Entity at what would otherwise be the Closing Date,
which prohibits or restricts or would (if successful) prohibit or restrict
the transactions contemplated by this Agreement or (with respect to
obligations of Buyer only) which would not permit the Business as presently
conducted to continue materially unimpaired following the Closing Date.
(b) Approvals. To the extent required by applicable Law, all Permits
---------
and Approvals required to be obtained from any Governmental Entity in order
that the transactions contemplated by this Agreement not violate any
applicable Law shall have been received or obtained on or prior to the
Closing Date and any applicable
42
waiting period under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or been
terminated.
6.2 CONDITIONS TO OBLIGATIONS OF BUYER.
----------------------------------
The obligations of Buyer to effect the Closing shall be subject to the
following conditions, except to the extent waived in writing by Buyer:
(a) Representations and Warranties and Covenants of Seller. The
------------------------------------------------------
representations and warranties of Sellers herein contained shall be true in
all material respects at the Closing Date with the same effect as though
made at such time; Sellers shall have in all material respects performed
all obligations and complied with all covenants and conditions required by
this Agreement to be performed or complied with by them at or prior to the
Closing Date, and Sellers shall have delivered to Buyer a certificate of
the Principal Sellers to such effect dated the Closing Date and signed by
or on behalf of such Sellers.
(b) No Material Adverse Change. There shall not have been any
--------------------------
material adverse change in or affecting the Business taken as a whole
subsequent to the date of this Agreement.
(c) Opinion of Counsel. Buyer shall receive at the Closing opinions,
------------------
dated the Closing Date, in form and substance substantially as set forth in
Exhibit
C-1.
(d) Consents. [OMITTED]
--------
(e) Employment Agreement. Xxx Xxxxxxxxx shall have executed and
--------------------
delivered to Buyer an Employment Agreement in the form attached hereto as
Exhibit D.
(f) Escrow Agreement. Certain Sellers and the Escrow Agent shall have
----------------
executed and delivered an Escrow Agreement in the form attached hereto as
Exhibit B.
(g) Spin-Off. At or before the Closing, there shall have been
--------
distributed or otherwise transferred all the stock of the Excluded
Businesses to one or more Sellers or their Affiliates or Associates without
any liability or obligation of the Buyer, the Companies or the Subsidiaries
at or after the Closing.
(h) Investment Representations. Each of Sellers shall have executed
--------------------------
and delivered to Buyer a completed Investment Representations and
Certification in the form attached hereto as Exhibit E.
43
(i) Access to Inventory Count. The Auditors shall provide Buyer's
-------------------------
Accountants with reasonable notice of, and shall permit Buyer's Accountants
to observe, the physical inventory count and cut-off tests forming the
basis for the Final Balance Sheet.
(j) Real Estate. The Companies' real estate lease in the United
-----------
Kingdom shall have been amended to reflect the changes set forth in
Schedule 6.2(j).
(k) Directors' and Officers' Resignations. Sellers shall have
-------------------------------------
delivered to Buyer the written resignations, effective as of the Closing
Date, of such directors and officers of the Companies and the Subsidiaries
as the Buyer shall have designated at least ten (10) business days prior to
the Closing.
(l) Schedule Items. Sellers shall have caused the actions listed on
--------------
Schedule 6.2(l) to have occurred on or before the Closing Date.
(m) Ginsbury FSC, Inc. At or prior to Closing, the Sellers will
------------------
transfer the operating assets and operating liabilities (as reflected on
the Final Balance Sheet) of Ginsbury FSC, Inc. to Ginsbury U.S. at no cost
or expense to Buyer, the Companies or the Subsidiaries.
6.3 CONDITIONS TO OBLIGATIONS OF SELLERS.
------------------------------------
The obligations of Sellers to effect the Closing shall be subject to
the following conditions, except to the extent waived in writing by the
Principal Sellers:
(a) Representations and Warranties and Covenants of Buyer. The
-----------------------------------------------------
representations and warranties of Buyer herein contained shall be true in
all material respects at the Closing Date with the same effect as though
made at such time; Buyer shall have in all material respects performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Buyer shall have delivered to Sellers a certificate of Buyer to
such effect, dated the Closing Date and signed by or on behalf of Buyer.
(b) No Material Adverse Change. There shall not have been any
--------------------------
material adverse change in or affecting Buyer taken as a whole subsequent
to the date of this Agreement.
44
(c) Employment Agreement. Buyer shall have executed and delivered to
--------------------
Xxx Xxxxxxxxx, an Employment Agreement in the form attached hereto as
Exhibit D.
(d) Escrow Agreement. Buyer and the Escrow Agent shall have executed
----------------
and delivered an Escrow Agreement in the form attached hereto as Exhibit B.
(e) Opinion of Buyer's Counsel. Sellers shall receive at Closing from
--------------------------
O'Melveny & Xxxxx, an opinion dated the Closing Date, in form and substance
as set forth in Exhibit C-3.
ARTICLE VII
TERMINATION OF OBLIGATIONS; SURVIVAL
7.1 TERMINATION OF AGREEMENT.
------------------------
Anything herein to the contrary notwithstanding, this Agreement and
the transactions contemplated by this Agreement shall terminate if the Closing
does not occur on or before the close of business on February 28, 1996, unless
extended by mutual consent in writing of Buyer and the Representatives, and
otherwise may be terminated at any time before the Closing as follows and in no
other manner:
(a) Mutual Consent. By mutual consent in writing of Buyer and the
--------------
Representatives.
(b) Conditions to Buyer's Performance Not Met. By Buyer by written
-----------------------------------------
notice to the Principal Sellers if any event occurs or condition exists
which would render impossible the satisfaction of one or more conditions to
the obligations of Buyer to consummate the transactions contemplated by
this Agreement as set forth in Section 6.1 or 6.2.
(c) Conditions to Sellers' Performance Not Met. By the Principal
------------------------------------------
Sellers by written notice to Buyer if any event occurs or condition exists
which would render impossible the satisfaction of one or more conditions to
the obligation of Sellers to consummate the transactions contemplated by
this Agreement as set forth in Section 6.1 or 6.3.
7.2 EFFECT OF TERMINATION.
---------------------
In the event that this Agreement shall be terminated pursuant to
Section 7.1, all further obligations of the parties under this Agreement shall
terminate without further liability of any party to another; provided that the
obligations of the parties contained in Section 9.11 shall
45
survive any such termination. A termination under Section 7.1 shall not relieve
any party of any liability for a breach of, or for any misrepresentation under,
this Agreement, or be deemed to constitute a waiver of any available remedy
(including specific performance, if available) for any such breach or
misrepresentation.
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
The representations and warranties contained in or made pursuant to
this Agreement shall expire on the second anniversary of the Closing, except
that (i) the representations and warranties contained in Section 2.1 (except the
last three sentences), Section 2.2, the first two sentences of Section 2.8 and
Sections 2A.1, 2A.2, 2A.3 (except the last sentence), 3.1 and 3.2 shall survive
the Closing and shall remain in full force and effect indefinitely, and (ii) the
representations and warranties contained in Section 2.4 shall continue through
the expiration of the applicable statute of limitations as the same may be
extended (or, if a claim has been asserted prior to such expiration, until six
months after the date of its final resolution). If a claim or notice is given
under Article VIII with respect to any representation or warranty prior to the
applicable expiration date, the right of the party claiming indemnification with
respect thereto shall not be reduced or affected by virtue of the fact that the
claim is not resolved before the applicable expiration date, and for purposes of
such claim such representation or warranty shall continue indefinitely until
such claim is finally resolved.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. The Principal Sellers jointly and
--------------------------
severally agree to indemnify and defend the Buyer, the Companies and each
Subsidiary against and hold them harmless from any Loss of Buyer, any Company or
any Subsidiary for or on account of or arising from or in connection with (a)
any misrepresentation or breach of warranty by the Sellers in this Agreement,
(b) any breach of any covenant or agreement by the Sellers in this Agreement,
(c) any (i) violation of or noncompliance with applicable Environmental Laws or
any Permit under any applicable Environmental Laws, (ii) disposal, discharge or
release of solid wastes or Hazardous Substances or (iii) exposure to Hazardous
Substances, in each case under (i), (ii) or (iii) to the extent relating to the
Business and arising from facts, events or circumstances prior to the Closing,
(d) any other liabilities of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due,
46
probable of assertion or not, arising in connection with the conduct of the
Business or the Excluded Businesses prior to the Closing, other than (i)
liabilities reflected on the Final Balance Sheet (it being understood that
Buyer, the Companies and the Subsidiaries shall be entitled to indemnification
with respect to accounts payable or with respect to accrued expenses under
clause (d), only to the extent the aggregate amount of actual accounts payable
or of actual accrued expenses, as the case may be, exceeds the aggregate amount
of accrued accounts payable or of accrued expenses, as the case may be,
reflected on the Final Balance Sheet, (ii) liabilities and obligations under
Contracts (including, without limitation, employee benefit plans and policies),
except in connection with any breach or alleged breach of any such Contract,
(iii) obligations to accept returns of products in the ordinary course of
business, provided that the Final Balance Sheet shall reflect any product
returns during the period from Closing through delivery of the Final Balance
Sheet to Buyer, and (iv) obligations to any employees for severance under
applicable Law as a result of their severance by Buyer, any Company or any
Subsidiary after the Closing, or (e) the sublease by Ginsbury Germany of its
Lease in Munich, Germany; however, the Sellers shall not have any liability
under clauses (a), (b) and (d) above, unless the aggregate of all Losses
thereunder exceeds an amount on a cumulative basis equal to $400,000 (the
"Basket Amount") provided, further, that with respect to any breach of the
-------- -------
covenants in Sections 1.7 and 1.8, the limitation of the Basket Amount shall not
be applicable. At such time, if any, as the aggregate amount of such Losses
exceeds the Basket Amount, the Principal Sellers shall be liable for all of such
Losses (including the first $400,000). In no event shall the Sellers be
obligated to indemnify for any consequential damages resulting from any
misrepresentation or breach of any warranty, covenant or agreement, nor shall
they have an aggregate liability under clause (a) of the first sentence of this
Section 8.1 in excess of the Purchase Price. Notwithstanding the foregoing, the
Principal Sellers shall be obligated to indemnify for any consequential damages
resulting from any misrepresentation or breach of warranty in Sections 2.3(a)
and (b), 2.14 and 2.20. Notwithstanding anything to the contrary in the
foregoing (including in clause (d) of the first sentence of this Section 8.1),
the parties acknowledge and agree that Sellers' obligation to indemnify Buyer,
the Companies and the Subsidiaries in respect of Tax Liabilities shall be
exclusively governed by Section 8.3.
The Buyer acknowledges and agrees that its sole and exclusive remedy
with respect to any and all claims relating to the sale of the Stock by Sellers
to Buyer shall be pursuant to the indemnification provisions in this
47
Article VIII. In furtherance of the foregoing, the Buyer waives, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action it may have against the Sellers relating to the transactions contemplated
by this Agreement (but excluding the Employment Agreement and the Escrow
Agreement) arising under or based upon any Law or otherwise (other than claims
of, and causes of action arising from, fraud). The Principal Sellers
acknowledge and agree that the Principal Sellers' obligation to indemnify Buyer,
the Companies and the Subsidiaries in respect of Tax Liabilities in Section 8.3
are independent of, and not subject to the limitations of, this Section 8.1.
8.2 INDEMNIFICATION BY BUYER. The Buyer agrees to indemnify the
------------------------
Sellers against and hold them harmless from any Loss suffered or incurred by
them for or on account of or arising from or in connection with (a) any
misrepresentation or breach of warranty by the Buyer in this Agreement and (b)
any breach of any covenant or agreement by the Buyer in this Agreement; however,
the Buyer shall not have any liability under clause (a) above, if the claim for
indemnification is made after the applicable expiration date referred to in
Section 7.3. In no event shall the Buyer be obligated to indemnify the Sellers
for consequential damages resulting from any misrepresentation or breach of any
warranty, covenant or agreement.
8.3 CERTAIN TAX MATTERS.
-------------------
(a) Sellers Indemnity. The Principal Sellers agree to indemnify,
-----------------
defend and hold harmless Buyer, the Companies and each Subsidiary against (i)
all Tax Liabilities of Sellers or any of their Affiliates, the Companies or any
of the Subsidiaries for any Pre-Closing Tax Period, whether or not resulting
from a Tax Proceeding, except to the extent otherwise provided in clause (ii) of
Section 8.3(b), (ii) all Tax Liabilities of, or attributable to, the Companies
or the Subsidiaries, which Tax Liabilities result from the failure of Sellers to
perform, or the breach by Sellers of, any covenant made by the Seller in this
Agreement, (iii) all Tax Liabilities for Pre-Closing Tax Periods of, or
attributable to, the Companies or the Subsidiaries resulting from the breach by
Sellers of the representations and warranties contained in Section 2.4, (iv) any
Tax Liabilities for Pre-Closing Tax Periods of any member of a consolidated or
combined tax group of which any of the Sellers or any of their Affiliates is, or
was at any time, a member, for which any of the Companies or any Subsidiary is
jointly or severally liable as a result of its inclusion in such group, (v) any
Transfer Tax Liabilities arising out of the transfer of the Stock; provided,
however, the Principal Sellers shall be required to make an indemnification
payment or payments to Buyer, the Companies,
48
the Subsidiaries or any of its other Affiliates under this Section 8.3(a) solely
to the extent that the amount of indemnification sought exceeds the Tax Reserve
(reduced by any prior offsets pursuant to this section or Section 5.5).
Notwithstanding the foregoing, the Principal Sellers shall not indemnify and
hold harmless Buyer, the Companies, the Subsidiaries or its other Affiliates
from and against any Tax Liabilities resulting from an actual or deemed election
made under Section 338 of the Code, or any comparable provision under foreign,
state or local law, with respect to any of the Companies or Subsidiaries in
connection with the purchase of Stock on the Closing Date.
(b) Buyer Indemnity Obligation. The Principal Sellers shall have no
--------------------------
indemnification obligation in respect of, and Buyer agrees to indemnify, defend
and hold harmless Sellers and their Affiliates against, (i) all Tax Liabilities
of, or attributable to, the Companies and the Subsidiaries for any Post-Closing
Tax Period, except to the extent otherwise provided in clause (ii) of Section
8.3(a), (ii) all Tax Liabilities of, or attributable to, the Companies and the
Subsidiaries, which Tax Liabilities result from the failure by Buyer to perform,
or the breach by Buyer of, any covenant made by Buyer in this Agreement, and
(iii) all Tax Liabilities resulting from an actual or deemed election made under
Section 338 of the Code, or any comparable provision under foreign, state or
local law, with respect to any of the Companies or Subsidiaries in connection
with the purchase of Stock on the Closing Date.
(c) Limitation. No party otherwise required to indemnify any other
----------
party with respect to Tax Liabilities in accordance with Section 8.3(a) or
Section 8.3(b) above shall have any obligation to indemnify such other party
until there has been a Final Determination with respect to any such Tax
Liabilities, at which time indemnification shall be promptly made.
(d) Sole Tax Indemnification. Sections 8.3(a) and 8.3(b) shall
------------------------
provide the exclusive remedy for breach of any representation, warranty or
covenant set forth in this Agreement with respect to Tax Liabilities.
(e) Tax Proceedings. (i) If, subsequent to the Closing Date, Buyer,
---------------
any of the Companies or Subsidiaries shall receive notice of a Tax Proceeding
with respect to one or more of the Companies or Subsidiaries for which the
Principal Sellers could have an indemnification obligation under Section 8.3(a),
Buyer shall promptly notify Sellers in writing of such Tax Proceeding. The
Principal Sellers shall have the responsibility for, and the right to control,
at their expense, the conduct and resolution of Tax Proceedings relating to Pre-
Closing Tax Periods and to participate in
49
the disposition of the audit of any Tax Return relating to Post-Closing Tax
Periods ending after the Closing Date, if such audit or disposition thereof
could give rise to a claim for indemnification hereunder. The Principal Sellers
shall not be responsible for the indemnification under Section 8.3(a) of any Tax
Liabilities resulting from a Tax Proceeding which they were not offered the
opportunity to control on a timely basis as provided in this section.
(ii) However, if the resolution of a Tax Proceeding described in
Section 8.3(e)(i) would legally bind and increase the Tax Liabilities of any of
the Companies or Subsidiaries in a Post-Closing Tax Period and the Principal
Sellers have not agreed to indemnify Buyer fully for such increase in Tax
Liabilities, the Principal Sellers shall afford Buyer the opportunity to control
jointly the conduct and resolution of such Tax Proceeding that would so bind and
increase the Tax Liabilities of any of the Companies or Subsidiaries in a Post-
Closing Tax Period. If Buyer shall decline in writing to participate in the
control of the conduct of such Tax Proceeding, the Principal Sellers shall have
the right to control the conduct of such Tax Proceeding, provided that the
Principal Sellers shall not resolve such Tax Proceeding without Buyer's written
consent, which shall not be unreasonably withheld.
(iii) If the Principal Sellers shall elect in writing not to
control or participate in the control of the conduct of a Tax Proceeding
described in Section 8.3(e)(i), Buyer shall have the right to control the
conduct of such Tax Proceeding, provided that Buyer shall keep the Principal
Sellers informed of all developments on a timely basis and Buyer shall not
resolve such Tax Proceeding without the Principal Sellers' written consent,
which shall not be unreasonably withheld.
(iv) In the event of a dispute between the Representatives and
Buyer regarding the conduct or resolution of any Tax Proceeding in which they
share joint control of the conduct and resolution, such dispute shall be
referred to a Tax Arbitrator. Each of the Principal Sellers and Buyer shall
present its position to the Tax Arbitrator which shall decide which position
shall be adopted. The Tax Arbitrator shall not be entitled to adopt any other
position, unless the Principal Sellers and Buyer so agree in writing. The
decision of the Tax Arbitrator shall be final and binding, and its fees and
costs shall be paid one-half by the Principal Sellers and one-half by Buyer.
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(f) Refunds for Pre-Closing Tax Periods.
-----------------------------------
(i) If Buyer, any of the Companies or Subsidiaries, or any of
Buyer's other Affiliates shall receive a refund (whether directly or indirectly
through a right of offset or credit) of Taxes paid by any of the Companies or
Subsidiaries for a Pre-Closing Tax Period, Buyer shall pay to the Principal
Sellers the amount of such refund at the time that any of the foregoing receives
it (or receives the benefit of the refund through a right of offset or credit).
Buyer shall, upon the Principal Sellers' written request and at the Principal
Sellers' sole cost and expense, prepare and prosecute a claim for refund of
Taxes for a Pre-Closing Tax Period, subject to review by the Principal Sellers.
8.4 LOSSES NET OF INSURANCE BENEFIT. The amount of any Loss for which
-------------------------------
indemnification is provided under this Article shall be net of any amounts
actually recovered by the indemnified party in respect of the Loss under
insurance policies. Nothing in this Section shall be deemed to obligate any
person to maintain any insurance or to pursue any claim against any insurer or
third party (other than to pursue claims against an insurer in a manner
consistent with Buyer's customary practices).
8.5 PROCEDURES RELATING TO INDEMNIFICATION. A party (the "indemnified
--------------------------------------
party") seeking indemnification under Section 8.1 or 8.2 in respect of, arising
out of or involving a claim or demand made by any person, firm, governmental
authority or corporation against the indemnified party (a "Third Party Claim")
shall notify the indemnifying party in writing of the Third Party Claim within
20 days after receipt by the indemnified party of written notice of the Third
Party Claim; however, failure to give such notification shall not affect the
indemnification provided under this Article, except to the extent the
indemnifying party shall actually have been materially prejudiced by the
failure. Thereafter, the indemnified party shall deliver to the indemnifying
party, promptly after the indemnified party's receipt thereof, copies of all
notices and documents (including court papers) received by the indemnified party
relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense of the claim
and, if it so chooses, to assume the defense of the claim with counsel selected
by the indemnifying party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for any legal expense subsequently incurred by the
indemnified party in connection with the
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defense of the claim, unless the named parties to any such Third Party Claim
(including any impleaded parties) include both the indemnified party and the
indemnifying party and the indemnified party shall have been advised by its
counsel that representation of both such parties by the same counsel would be
inappropriate under applicable standards of professional conduct due to actual
or potential conflicts of interest between them (in which case the indemnifying
party shall be required to pay the fees and expenses of separate counsel for the
indemnified party). With respect to all Third Party Claims, the indemnified
party shall cooperate in all reasonable respects with the indemnifying party in
connection with such claims and the defense or compromise of the claims. Such
cooperation shall include the retention and (upon the indemnifying party's
reasonable request) the provision to the indemnifying party of records and
information reasonably relevant to the Third Party Claim, making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided under this Section 8.5. If the
indemnifying party shall have assumed the defense of a Third Party Claim, the
indemnified party shall not, without first waiving the indemnity as to such
claim, admit any liability with respect to, or settle, compromise or discharge,
the Third Party Claim, without the indemnifying party's prior written consent.
8.6 SURVIVAL. This Article VIII shall survive the Closing and shall
--------
remain in effect for a period of two years after the date of Closing, except as
to the indemnification under (i) Section 8.1(a) relating to representations and
warranties that survive the Closing and remain in full force and effect
indefinitely, which indemnification shall also remain in full force and effect
indefinitely, (ii) Section 8.1(c), which indemnification shall remain in full
force and effect indefinitely, and (iii) Section 8.3, which indemnification
shall remain in effect and shall continue through the expiration of any
applicable statute of limitations, as the same may be extended (or, if a claim
has been asserted prior to such until six months after the date of its final
resolution). Any matter as to which a claim has been asserted by notice to the
other party that is pending or unresolved at the end of any applicable
limitation period shall continue to be covered by this Article VIII
notwithstanding any applicable statute of limitations (which the parties hereby
waive) until such matter is finally terminated or otherwise resolved by the
parties or by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid.
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8.7 ESCROW.
------
If any matter as to which Buyer has asserted a claim hereunder has
been finally determined in accordance with this Agreement and the procedures set
forth in the Escrow Agreement, Buyer shall have the right, in addition to any
other rights and remedies (whether under this Agreement or otherwise), to be
paid first from the funds subject to the Escrow Agreement for the amount of such
claim up to the amount of such funds available, with any remaining liability in
excess of such available funds to be paid by the Principal Sellers to Buyer
within ten (10) days of such final determination by wire transfer of immediately
available funds to an account designated by Buyer.
ARTICLE IX
GENERAL
9.1 AMENDMENTS; WAIVERS.
-------------------
This Agreement and any schedule or exhibit attached hereto may be
amended only by agreement in writing of all parties. No waiver of any provision
nor consent to any exception to the terms of this Agreement or any agreement
contemplated hereby shall be effective unless in writing and signed by the party
to be bound and then only to the specific purpose, extent and instance so
provided.
9.2 SCHEDULES; EXHIBITS; INTEGRATION.
--------------------------------
Each schedule and exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of this Agreement,
although schedules need not be attached to each copy of this Agreement. Any
matter disclosed in any Schedule to this Agreement shall be deemed disclosed in
each other Schedule to this Agreement. This Agreement, together with such
schedules and exhibits, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings of the parties in connection therewith, except for the
confidentiality agreement dated August 24, 1995, between Buyer and Xxxxxx
Xxxxxxxx Ltd. There are no representations or warranties, express or implied,
by the parties, other than as expressly set forth in this Agreement.
9.3 BEST EFFORTS; FURTHER ASSURANCES.
--------------------------------
(a) Standard. Each party will use its best efforts to cause all
--------
conditions to its obligations to be timely satisfied and to perform and fulfill
all obligations on its part to be performed and fulfilled under this
53
Agreement, to the end that the transactions contemplated by this Agreement shall
be effected substantially in accordance with its terms as soon as reasonably
practicable. The parties shall cooperate with each other in such actions and in
securing requisite Approvals. Each party shall execute and deliver both before
and after the Closing such further certificates, agreements and other documents
and take such other actions as may be necessary or appropriate to consummate or
implement the transactions contemplated hereby or to evidence such events or
matters.
(b) Limitation. As used in this Agreement, the term "best efforts"
----------
shall not mean efforts which require the performing party to do any act that is
unreasonable under the circumstances, to make any capital contribution or to
expend any funds other than reasonable out-of-pocket expenses incurred in
satisfying its obligations hereunder, including but not limited to the fees,
expenses and disbursements of its accountants, actuaries, counsel and other
professionals.
9.4 GOVERNING LAW/JURISDICTION.
--------------------------
This Agreement, the legal relations between the parties and any
Action, whether contractual or non-contractual, instituted by any party with
respect to matters arising under or growing out of or in connection with or in
respect of this Agreement, shall be governed by and construed in accordance with
the laws of the State of California applicable to contracts made and performed
in such State and without regard to conflicts of law doctrines, except to the
extent that certain matters are preempted by federal or foreign laws or are
governed as a matter of controlling law by the law of the jurisdiction of
organization of the respective parties.
9.5 ASSIGNMENT.
----------
No assignment by any party of his or its rights under this Agreement
shall relieve that party of any liability or obligation that party may have to
any other party under this Agreement.
9.6 HEADINGS.
--------
The descriptive headings of the Articles, Sections and subsections of
this Agreement are for convenience only and do not constitute a part of this
Agreement.
54
9.7 COUNTERPARTS.
------------
This Agreement and any amendment hereto or any other agreement (or
document) delivered pursuant hereto may be executed in one or more counterparts
and by different parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or more counterparts have
been signed by each party and delivered to the other party.
9.8 PUBLICITY AND REPORTS.
---------------------
Sellers and Buyer shall coordinate all publicity relating to the
transactions contemplated by this Agreement and no party shall issue any press
release, publicity statement or other public notice relating to this Agreement,
or the transactions contemplated by this Agreement, without consulting with the
other party, except to the extent that a particular action is required by
applicable law.
9.9 PARTIES IN INTEREST.
-------------------
This Agreement shall be binding upon and inure to the benefit of each
party, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement. Nothing in this Agreement is intended to relieve
or discharge the obligation of any third person to (or to confer any right of
subrogation or action over against) any party to this Agreement.
9.10 NOTICES.
-------
Any notice or other communication hereunder must be given in writing
and (a) delivered in person, (b) transmitted by telex, telefax or
telecommunications mechanism or (c) mailed by certified or registered mail,
postage prepaid), receipt requested as follows:
IF TO BUYER, ADDRESSED TO:
Wyle Electronics
00000 Xxxxxxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
55
WITH A COPY TO:
O'Melveny & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
IF TO SELLERS, ADDRESSED TO:
Xxxxxxx Xxxxxxxxx
000 Xxxxxxxxxx Xxxx
Xxxxxxx, XX 00000
and
Xxx Xxxxxxxxx
00 Xxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
WITH A COPY TO:
Proskauer Xxxx Xxxxx & Xxxxxxxxxx, LLP
0000 Xxxxxxxx
Xxx Xxxx,XX 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section and an appropriate answerback is received, (ii) if given by mail, three
days after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (iii) if given by any other means, when
actually delivered at such address.
9.11 EXPENSES.
--------
Sellers and Buyer shall each pay their own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including but not limited to the fees, expenses and
disbursements of their respective accountants and counsel. Any such expenses of
the Companies shall be paid by Sellers prior to the Closing.
9.12 REMEDIES; WAIVER.
----------------
All rights and remedies existing under this Agreement and any related
agreements or documents are
56
cumulative to and not exclusive of, any rights or remedies otherwise available
under applicable Law. No failure on the part of any party to exercise or delay
in exercising any right hereunder shall be deemed a waiver thereof, nor shall
any single or partial exercise preclude any further or other exercise of such or
any other right.
9.13 ATTORNEY'S FEES.
---------------
In the event of any Action by any party arising under or out of, in
connection with or in respect of, the prevailing party shall be entitled to
reasonable attorney's fees, costs and expenses incurred in such Action.
9.14 SPECIFIC PERFORMANCE.
--------------------
Sellers and Buyer each acknowledge that, in view of the uniqueness of
the Business and the transactions contemplated by this Agreement, each party
would not have an adequate remedy at law for money damages in the event that
this Agreement has not been performed in accordance with its terms, and
therefore agrees that the other party shall be entitled to specific enforcement
of the terms hereof in addition to any other remedy to which it may be entitled,
at law or in equity.
9.15 ARBITRATION.
-----------
All claims, disputes and other matters as to which the parties
disagree arising out of this Agreement or the interpretation or breach of
alleged breach thereof, shall be decided by final and binding arbitration in
accordance with the Rules of Practice and Procedure of the Judicial Arbitration
& Mediation Services/Endispute ("JAMS") then in effect, unless the parties
mutually agree otherwise. The arbitration shall be conducted before a retired
judge selected by agreement of the parties from the JAMS panel. If the parties
cannot agree upon the arbitrator, JAMS will provide a list of three available
retired judges and each party may strike one. The remaining judge will serve as
arbitrator. The arbitration shall be held in the State of New York at a
location selected by the arbitrator. This agreement to arbitrate shall be
specifically enforceable under applicable law in any court of competent
jurisdiction. Notice of the demand for arbitration shall be filed in writing
with the other party to this Agreement and with JAMS. The demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen, and in no event shall it be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable
contractual, or other, statute of limitations. It is the parties' objective to
57
expedite the arbitration proceedings by placing the following limitations on
discovery: (a) each party may propound only one interrogatory requesting the
name, business affiliation and address of each witness to be called at the
arbitration hearing; (b) on a date to be determined at the pre-hearing
conference, each party may serve one (1) request for the production of
documents, the requests shall be limited to thirty (30), including subparts, and
the documents are to be exchanged thirty (30) days later; and (c) each party may
depose two (2) witnesses. Each deposition must be concluded within four (4)
hours and all depositions must be completed within thirty (30) days of the pre-
hearing conference. Any party deposing an opponent's expert must pay the
expert's fee for attending the deposition. The arbitration proceedings shall
remain confidential. Any monetary award of the arbitrators may include interest
at the prime rate as published from time to time by The Chase Manhattan Bank,
N.A., plus one percent (1%), which interest shall accrue from the date the
claim, dispute or other matter in question was rightfully due and payable under
this Agreement until the date the award is paid to the prevailing party. There
shall be no restriction on the power of the arbitrator to award punitive damages
in the appropriate case. The award rendered by the arbitrator shall be final
and judgment may be entered in accordance with applicable law and in any court
having jurisdiction thereof. Each party shall pay the fees of its own
attorneys, expenses of witnesses and all other expenses connected with the
presentation of such party's case. The cost of the arbitration, including the
cost of the record or transcripts thereof, if any, administrative fees, and all
other fees involved, shall be shared equally, unless the arbitrator otherwise
directs.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
BUYER
By:__________________________
Its:_________________________
SELLERS
______________________________
XXXXXXX XXXXXXXXX
CREDIT SHELTER TRUST -
XXXXXXX XXXXXXXXX
By:___________________________
Its: _________________________
CREDIT SHELTER TRUST -
XXXXXX XXXXXXXXX
By:___________________________
Its: _________________________
_______________________________
XXXXXXXX X. XXXXXXXXX
________________________________
XXXXXXX XXXXXXXXX XXXXXXXXX
________________________________
XXX X. XXXXXXXXX
SIGNATURE PAGE CONTINUED
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HANBET LLC, A NEW JERSEY LIMITED
LIABILITY COMPANY
By: _____________________________
Its: ____________________________
______________________________
XXXXXXX XXXXXX
______________________________
XXXX XXXXXX
_______________________________
XXXXXXX XXXXXXX
_______________________________
XXXXXX XXXXXX
_______________________________
XXXX XXXXXX
_______________________________
LOIC LEVERDIER
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