STOCK PURCHASE AGREEMENT
dated as of December 23, 1996
Between
GENERAL CIGAR CO., INC.
HONDURAS AMERICAN TABACO, S.A. de C.V.
and
THE SELLERS
(as defined)
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF STOCK.................................. 2
1.1 Transfer of Stock.................................... 2
1.2 Purchase Price....................................... 2
1.3 Repayment of Indebtedness; Net Income................ 2
1.4 Post-Closing Adjustment.............................. 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS................... 3
2.1 Organization of the Company.......................... 3
2.2 Ownership............................................ 4
2.3 Capitalization....................................... 4
2.4 Authorization........................................ 5
2.5 Intellectual Property................................ 5
2.6 Absence of Certain Changes or Events................. 7
2.7 Material Contracts................................... 7
2.8 No Conflict or Violation............................. 10
2.9 Consents and Approvals............................... 10
2.10 Financial Statements................................. 10
2.11 Litigation........................................... 11
2.12 Liabilities.......................................... 11
2.13 Compliance with Law.................................. 11
2.14 No Brokers........................................... 12
2.15 Labor and Employment Matters......................... 12
2.16 Transactions with Certain Persons.................... 13
2.17 Employee Benefits.................................... 14
2.18 Real Property; Tangible Assets....................... 14
2.19 Tax Matters.......................................... 16
2.20 Environmental Compliance............................. 17
2.21 Insurance............................................ 18
2.22 Performance Bonds and Letters of Credit.............. 19
2.23 Utilities............................................ 19
2.24 Political Contributions.............................. 19
ARTICLE III ACTIONS BY THE COMPANY AND BUYER PRIOR TO THE CLOSING....... 20
3.1 Conduct of Business.................................. 20
3.2 Investigation by Buyer............................... 23
3.3 No Continuing Negotiations........................... 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..................... 24
4.1 Organization of Buyer................................ 24
4.2 Authorization........................................ 25
4.3 Consents and Approvals............................... 25
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4.4 No Brokers........................................... 25
4.5 No Conflict or Violation............................. 25
4.6 Litigation........................................... 25
4.7 Compliance with Law.................................. 26
ARTICLE V CLOSING..................................................... 26
5.1 Closing.............................................. 26
5.2 Documents to be Delivered............................ 26
ARTICLE VI CONDITIONS TO SELLERS' OBLIGATIONS.......................... 27
6.1 Representations, Warranties and Covenants............ 27
6.2 Consents............................................. 27
6.3 No Governmental or Other Proceeding or Litigation.... 27
6.4 Opinion of Counsel................................... 28
6.5 Certificates......................................... 28
6.6 Contemporaneous and Contingent Transactions.......... 28
6.7 Additional Shareholders.............................. 28
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS........................... 28
7.1 Representations, Warranties and Covenants............ 28
7.2 Consents............................................. 29
7.3 No Governmental or Other Proceeding or Litigation.... 29
7.4 Opinion of Counsel................................... 29
7.5 No Material Degradation of Assets.................... 29
7.6 Receipt of Audit Report.............................. 29
7.7 Tax Matters.......................................... 29
7.8 Contemporaneous and Contingent Transactions.......... 30
7.9 Certificates......................................... 30
ARTICLE VIII ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING.............. 30
8.1 Books and Records.................................... 30
8.2 Further Assurances................................... 30
8.3 Litigation Support................................... 31
ARTICLE IX INDEMNIFICATION............................................. 31
9.1 Agreement to Indemnify............................... 31
9.2 Survival of Representations, Warranties and Covenants 32
9.3 Claims for Indemnification........................... 33
9.4 Defense of Claims.................................... 33
9.5 Tax Indemnification and Other Matters................ 34
9.6 Offset Rights........................................ 34
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9.7 Limitation on Indemnification........................ 35
9.8 Responsibility for Products.......................... 35
ARTICLE X MISCELLANEOUS............................................... 36
10.1. Termination.......................................... 36
10.2 Assignment........................................... 36
10.3 Notices.............................................. 37
10.4 Choice of Law........................................ 38
10.5 Entire Agreement; Amendments and Waivers............. 38
10.6 Counterparts......................................... 38
10.7 Invalidity........................................... 39
10.8 Headings............................................. 39
10.9 Expenses............................................. 39
10.10 Publicity............................................ 39
10.11 Authority of Sellers................................. 40
10.12 Tax Filing........................................... 40
10.13 Supplemental Schedules............................... 40
ARTICLE XI DEFINITIONS................................................. 40
11.1 Defined Terms........................................ 40
11.2 Other Defined Terms.................................. 47
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EXHIBITS
A Stockholders
B Financial Statements
C Letters from Other Stockholders
DISCLOSURE SCHEDULES
2.1 Organization of the Company
2.5 Intellectual Property
2.7 Scheduled Contracts
2.8 Conflicts or Violations
2.9 Consents and Approvals
2.11 Litigation
2.12 Liabilities
2.13 Compliance with Law
2.15 Employment Matters
2.16 Transactions with Certain Persons
2.17 Employee Benefits
2.18 Real Property
2.19 Tax Matters
2.20 Environmental Compliance
2.21 Insurance
2.22 Performance Bonds and Letters of Credit
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Stock Purchase Agreement
This Stock Purchase Agreement, dated as of December 23, 1996, among General
Cigar Co., Inc. ("General Cigar"), a corporation duly organized and existing
under the laws of the State of Delaware (General Cigar is hereinafter sometimes
referred to as the "Buyer"), Honduras American Tabaco S.A. de C.V., a
corporation duly organized and existing under the laws of Honduras (the
"Company" or "HATSA") and Xxxxx Xxxxxxx ("Xx. Xxxxxxx") and Xxxxxx Xxxxxxxxxx
("Xx. Xxxxxxxxxx"). Xx. Xxxxxxx and Xx. Xxxxxxxxxx are hereinafter sometimes
collectively referred to as the "Sellers."
W I T N E S S E T H:
WHEREAS, the defined terms have the meanings ascribed to them in Article XI
or as set forth elsewhere in this Agreement.
WHEREAS, the Sellers and Persons (other than the Sellers) set forth in
Exhibit A hereto (collectively, the "Other Stockholders") have executed and
delivered to Buyer and Sellers the letters attached hereto as Exhibit C.
WHEREAS, Buyer desires to purchase from Sellers and the Other Stockholders,
and Sellers and the Other Stockholders desire to transfer to Buyer, all of the
Stock, subject to the terms and conditions of this Agreement.
NOW THEREFORE, IT IS AGREED:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Transfer of Stock. Upon the terms and subject to the conditions
contained herein, the Sellers will sell, convey, transfer, assign and deliver to
Buyer, and Buyer will acquire on the Closing Date, all of the Sellers' shares of
Stock and Sellers will deliver the shares of Stock held by the Other
Stockholders to Buyer pursuant to the letters from the Other Stockholders
attached hereto as Exhibit C.
1.2 Purchase Price. At the Closing, upon the terms and subject to the
conditions set forth herein, Buyer shall pay to the Sellers, on behalf of the
Stockholders, the aggregate amount of Twenty Million Dollars ($20,000,000) (the
"Purchase Price") by wire transfer of immediately available funds to accounts
designated by the Sellers.
1.3 Repayment of Indebtedness; Net Income. In addition to the Purchase
Price, the Sellers shall be entitled to receive, on behalf of the Stockholders,
a distribution of the Net Income of the Company for calendar year 1996 (the
"1996 Net Income"). The Sellers, on behalf of the Stockholders, estimate the
1996 Net Income of HATSA to be $4,200,000 (the "Estimated Net Income"), none of
which has been distributed to any Person. As of December 31, 1996, the Company
shall issue to the Sellers, on behalf of the Stockholders, promissory notes with
a face value equal to the Estimated Net Income which note shall be repaid by the
Company, at its face value, upon the Closing, by wire transfer as set forth in
Section 1.2 above. The Sellers shall ensure that, except as set forth in this
Section 1.3, from October 31, 1996, through the Closing Date, the Company shall
not (i) create or pay any additional indebtedness with respect to the
Stockholders or (ii) distribute any cash or other property to the Stockholders
with respect to their stock ownership in the Company except for the distribution
made in November 1996 to Stockholders in the aggregate amount of $527,218 (none
of which represents 1996 Net Income).
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1.4 Post-Closing Adjustment. Net Income of HATSA as determined based upon
the 1996 Income Statement of HATSA, prepared and agreed pursuant to Section 1.6
of the Villazon Agreement, shall be final and binding on Buyer and the
Stockholders. If the Net Income of HATSA is less than the Estimated Net Income
of HATSA, the Sellers, on behalf of the Stockholders shall pay such difference
to Buyer in cash in immediately available funds within 5 Business Days after the
date on which the 1996 Income Statements are agreed upon as provided for in the
Villazon Agreement, such payment to be made by them pro rata to the proportion
of the Purchase Price paid to each of them. If the Net Income of HATSA exceeds
the Estimated Net Income of HATSA, Buyer shall pay such difference to the
Sellers, on behalf of the Stockholders, pro-rata to the proportion of the
Purchase Price paid to each of them, within 5 Business Days after the date on
which the 1996 Income Statements are agreed upon as provided for in the Villazon
Agreement. For purposes of calculating the 1996 Net Income of HATSA, FASB 52
shall not be taken into consideration in accordance with the principle set forth
in that certain letter dated December 23, 1996 from Buyer to Xxxx Xxxxx. For the
purposes of calculating the Net Worth of HATSA, FASB 52 shall not be taken into
consideration in accordance with the Balance Sheet attached hereto as Exhibit
B-1.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to the limitations set forth in Article IX, the Sellers, jointly
and severally, hereby represent and warrant to Buyer as follows:
2.1 Organization of the Company. The Company is duly incorporated and
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its Business as it is presently being conducted and to own and lease its
properties and assets. The Company is duly qualified and in good standing in
each jurisdiction where, by virtue of its business carried on or properties
owned, it is required to be so qualified and the failure to be so qualified
would have, individually or in the aggregate, a Material Adverse Effect. Each
such jurisdiction is set forth on Disclosure Schedule Section 2.1. The Sellers
have delivered to
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Buyer (or Buyer's Representatives) true and complete copies of the Articles of
Incorporation and By-laws of the Company (as amended to date).
2.2 Ownership. (a) Except as set forth in Note 6 of the Financial
Statements, Sellers and, to the Knowledge of Sellers, the Other Stockholders,
own of record and beneficially all of the shares of Stock set forth against
their names in Exhibit A, free of Encumbrances, including without limitation any
agreement, understanding or restriction affecting the transfer, voting rights or
other incidents of record or beneficial ownership pertaining to such Stock.
Except as set forth in Note 6 to the Financial Statements, Sellers and, to the
Knowledge of Sellers, the Other Stockholders are not a party to any option,
warrant, subscription, commitment or any other contract that could require the
Stockholders to sell, transfer or otherwise dispose of any capital stock of any
Stockholder or any agreement or understanding providing rights of first refusal
or similar rights with respect to any capital stock of the Company. Except as
set forth in Note 6 of the Financial Statements, Sellers, and, to the Knowledge
of Sellers, the Other Stockholders, are not parties to any voting trust, proxy
or other agreement or understanding with respect to the voting of any capital
stock of the Company.
(b) The Stockholders have taken all necessary action pursuant to the
Stockholders Agreement among them described in Note 6 of the Financial
Statements, to permit the sale of the Stock to Buyer on the terms hereof.
2.3 Capitalization.
(a) The authorized capital Stock of the Company consists of 200,000
shares of common stock, 50 Lempiras par value, all of which shares are issued
and outstanding and no shares are held in the treasury of the Company. All of
the outstanding capital Stock has been duly authorized, and is validly issued,
fully paid and non-assessable. Except as set forth in Note 6 of the Financial
Statements, there are no outstanding or authorized options, warrants,
subscriptions, calls, commitments, preemptive rights, securities convertible
into or exchangeable for capital Stock, or other rights that could require the
Company to issue, sell, or otherwise cause to become outstanding any capital
Stock, or any agreement or
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understanding providing rights of first refusal or similar rights with respect
to any capital Stock. There are no outstanding or authorized stock appreciation,
phantom or similar rights with respect to the Company.
(b) Exhibit A hereto correctly sets forth the Stockholders and their
respective ownership of the Company.
2.4 Authorization.
(a) This Agreement has been duly executed and delivered by the Sellers
and the Company, and, assuming the due authorization, execution and delivery of
this Agreement by Buyer is a valid and binding obligation of the Sellers and the
Company except as enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and except where
enforceability is subject to the application of equitable principles or
remedies.
(b) The Sellers have taken all requisite action to approve and consent
to this Agreement and the performance of the transactions contemplated hereby.
2.5 Intellectual Property
To the Knowledge of Sellers and the Company:
(a) Disclosure Schedule Section 2.5 sets forth a complete and correct
list and summary description of all trademarks, tradenames, service marks,
service names, brand names, registrations thereof and applications therefor held
by the Company (collectively referred to hereinafter as the "Intellectual
Property"), together with a complete list of all licenses granted by or to the
Company or other agreements with respect to any of the Intellectual Property.
The Intellectual Property constitutes all the intellectual property used in the
Business other than trade secrets and copyrights, if any. The Company holds no
patents.
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(b) The Intellectual Property is valid and subsisting and is
enforceable.
(c) Except as set forth on Disclosure Schedule Section 2.5, the
Company has sole, full and clear title to the Intellectual Property, free and
clear of all claims, liens, encumbrances, mortgages, licenses (either as
licensee or licensor), including claims or rights of employees, agents,
consultants or other parties involved in the development or creation of such
Intellectual Property and no other person or entity has or shall have any claim
of ownership with respect to the Intellectual Property whatsoever.
(d) Except as set forth in any license or other agreements set forth
on Disclosure Schedule Section 2.5 hereto, the Company owns and/or has the right
and/or license to use, sublicense, assign, modify and transfer the Intellectual
Property free and clear of any limitations or encumbrances.
(e) Except as set forth on Disclosure Schedule Section 2.5, neither
the Company nor any officers, stockholders or directors of the Company are
currently in receipt of any notice of any violation of, and the Company is not
violating or infringing upon and has not for the last six years violated or
infringed, the rights of any other person or entity in any trademark, trade
name, service xxxx, copyright, mask work, trade secret, know-how, patent or
other intangible property right or asset, and has not conducted any acts of
unfair competition.
(f) Except as set forth on Disclosure Schedule Section 2.5 no person
or entity is infringing any intellectual property rights of the Company with
respect to the Intellectual Property.
(g) Except as set forth on Disclosure Schedule Section 2.5, the
Company has not during the three years preceding the date of this Agreement been
a party to any Proceeding that involved or may involve a claim of infringement
by any Person (including any Governmental Authority) of any intellectual
property rights of such Person or a claim of infringement by the Company with
respect to the Intellectual Property. Except as set forth on Disclosure Schedule
Section 2.5, no intellectual property right with respect to the
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Intellectual Property is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the Company, or
restricting the licensing thereof by the Company to any person, and there are no
claims, judgments or settlements to be paid out by the Company relating to the
Intellectual Property.
(h) Disclosure Schedule Section 2.5 sets forth a list of all license
fees, rents, royalties or other charges that the Company is required or
obligated to pay with respect to the Intellectual Property. Except as set forth
on Disclosure Schedule Section 2.5(h), none of the Intellectual Property has
been incorporated into or made a part of any other intellectual property and
none of the Intellectual Property is dependent on any other intellectual
property in order to freely operate or be utilized in the manner in which it is
intended.
(i) The Sellers and the Company shall keep confidential and not
disclose to any third party any trade secrets among the Intellectual Property,
except such of said trade secrets as now are or hereinafter become published or
otherwise generally available to the public other than through the direct or
indirect actions of the Sellers or the Company; even after any trade secrets
become generally available to the public, neither the Sellers nor the Company
shall disclose, without Buyer's prior written approval, the fact that such trade
secrets were furnished to Buyer by the Sellers or the Company or originated with
the Sellers or the Company. The Company shall advise its employees and other
personnel who at any time have access to such trade secrets of the obligations
assumed hereunder by the Company.
2.6 Absence of Certain Changes or Events. Since October 31, 1996 the
Business has been conducted in the ordinary course and there has not been any
event, occurrence, state of circumstances or facts or change in the Company or
in the Business that has had or that, to the Knowledge of the Sellers or the
Company, may be reasonably expected to have, either alone or together, a
Material Adverse Effect.
2.7 Material Contracts.
To the Knowledge of Sellers and the Company:
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(a) Disclosure Schedule Section 2.7 sets forth a complete list of the
following Contracts (collectively, the "Scheduled Contracts"):
(i) each Contract between the Company and another Person whose dollar
volume of sales or services for products sold to such Person exceeded in
1995, or during the first six months of 1996, One Hundred Thousand Dollars
($100,000);
(ii) each Contract of the Company that requires payment or incurrence
of Liabilities, or the rendering of services or the sale of goods, by the
Company, subsequent to the date of this Agreement of more than One Hundred
Thousand Dollars ($100,000) or otherwise material to the Business and not
cancelable (without Liability) within 30 days;
(iii) all Contracts relating to, or evidences of, or guarantees of, or
providing security for, Indebtedness for Borrowed Money or the deferred
purchase price of property (whether incurred, assumed, guaranteed or
secured by any asset);
(iv) all license, sale, distribution, commission, marketing, agent,
franchise, technical assistance or similar contracts relating to or
providing for the marketing and/or sale of the products to which the
Company is a party or by which it is otherwise bound;
(v) all partnership, joint venture, teaming arrangements or other
similar Contracts;
(vi) all Contracts not made in the ordinary course of business;
(vii) all employment Contracts and severance agreements, including
without limitation Contracts (A) to employ or terminate executive officers
or other personnel and other contracts with present or former officers,
directors or stockholders of the Company or (B) that will result in the
payment by, or the creation of any Liability to pay on behalf of the
Company any severance, termination, "golden parachute," or
8
other similar payments to any present or former personnel following
termination of employment or otherwise as a result of the consummation of
the transactions contemplated by this Agreement;
(viii) all labor or union Contracts;
(ix) Contracts containing covenants limiting the freedom of the
Company or any officer, director, shareholder or affiliate of the Company,
to engage in any line of business or compete with any person;
(x) Any Contract with the United States, state or local government or
any agency or department thereof;
(xi) Leases of personal property not cancelable (without Liability)
within 60 calendar days and having an annual rental exceeding Fifty
Thousand Dollars ($50,000);
(xii) all powers of attorney;
(xiii) other Contracts the failure of performance of which could have
a Material Adverse Effect.
(b) The Company has made true and correct copies of all Contracts
required to be disclosed pursuant to Section 2.7 above available to Buyer (or
Buyer's Representatives). Except as disclosed in Disclosure Schedule Section
2.7, each Contract is a legal, valid and binding obligation of the Company and
each other party thereto, enforceable against each such party thereto in
accordance with its terms, and neither the Company nor any other party thereto,
is in material default thereunder. Disclosure Schedule Section 2.7 sets forth a
description of all oral agreements or understandings which, had they been in
writing, would have been required to have been disclosed on Disclosure Schedule
Section 2.7 other than oral agreements for the purchase of tobacco by the
Company.
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(c) Except as set forth on Disclosure Schedule Section 2.7, (i) there
is no pending or threatened claim of breach of, or default under, any Contract
with any Person listed in Disclosure Schedule Section 2.7; and (ii) the Company
is not aware of any intention on the part of any Person to terminate or
materially reduce purchases from or supplies to the Company in a manner that
would result in a Material Adverse Effect.
2.8 No Conflict or Violation. To the Knowledge of Sellers and the Company,
except as set forth on Disclosure Schedule Section 2.8, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated by this Agreement will (a) conflict with or result in any breach or
default under any term or provision of any Scheduled Contract, or result in or
give to any person the right or power to cause the termination or acceleration
of any Scheduled Contract or prevent the Company from consummating the
transactions contemplated by this Agreement, (b) result in the creation or
imposition of any Lien on any of the property or assets of the Company, or (c)
result in any violation by the Company of any statute, order, rule, regulation,
ordinance, code, judgment, writ, injunction, decree or award. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will result in any violation of the
provisions of the charter or other organizational document or by-laws of the
Company.
2.9 Consents and Approvals. To the Knowledge of the Sellers and Company,
except as set forth on Disclosure Schedule Section 2.9, no Permit from any
Governmental Authority or any other Person, is required to be made or obtained
by the Company in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby.
2.10 Financial Statements.
(a) Attached hereto as Exhibit B are true and complete copies of the
Financial Statements.
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(b) The Financial Statements have been based on the books and records
of the Company and reflect the financial condition, results of operations and
statements of cash flow of the Company as of the dates indicated or the periods
indicated as and to the extent represented in a representation letter from the
Company to Price Waterhouse L.L.P., a copy of which has been delivered to the
Buyer.
2.11 Litigation. To the Knowledge of Sellers and the Company, except as set
forth on Disclosure Schedule Section 2.11, (i) there are no actions, suits,
claims, hearings, arbitrations, proceedings (public or private) or governmental
investigations that have been brought by any Governmental Authority or by or
against any other Person (collectively, "Proceedings") pending or threatened
against or involving the Company or the Business; (ii) there are no Proceedings
pending or, to the Knowledge of the Company or the Stockholders, threatened
which seek to enjoin or rescind the transactions contemplated by this Agreement;
and (iii) there are no existing orders, judgments or decrees of any Governmental
Authority naming the Company as an affected party.
2.12 Liabilities. To the Knowledge of Sellers and the Company, except as
set forth on Disclosure Schedule Section 2.12, the Company is not liable for,
directly or indirectly, any indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured, accrued or unaccrued, joint,
several, joint and several, due or to become due, vested or unvested, executory,
determined, determinable, absolute, contingent or otherwise, whether or not
required by GAAP to be set forth in a financial statement (each a "Liability"
and collectively, "Liabilities") except (i) Liabilities set forth on the Interim
Balance Sheet of HATSA and (ii) Liabilities of the Company incurred since
October 31, 1996 in the ordinary course of business that, individually or when
combined with all other Liabilities, have not had, do not and will not have a
Material Adverse Effect.
2.13 Compliance with Law. To the Knowledge of Sellers and the Company, the
Company is and, for the period of the applicable statute of limitations, as
extended, has been in compliance in all material respects with all Applicable
Laws, including without limitation
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Applicable Laws relating to the employment of minors, except as set forth on
Disclosure Schedule Section 2.13.
2.14 No Brokers. Neither the Company, nor any Seller and none of their
respective Affiliates or Associates has entered into and nor, to Sellers' or the
Company's Knowledge, have the Other Stockholders entered into any contract,
agreement, arrangement or understanding with any Person which will result in the
obligation of Buyer, the Company or any Stockholder to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby.
2.15 Labor and Employment Matters.
(a) Except as set forth on Disclosure Schedule Section 2.15, no
collective bargaining agreement exists that is binding on the Company and,
except as described in Disclosure Schedule Section 2.15, to the Knowledge of the
Company and Sellers, no petition has been filed or Proceedings instituted by an
employee or group of employees with any labor relations board seeking
recognition of a bargaining representative, nor, to the Knowledge of the Company
or the Sellers, has there been any union organizing effort by any union or group
of employees in the last five years at any of the facilities operated by the
Company. Disclosure Schedule Section 2.15 describes any organizational effort
currently being made or threatened by or on behalf of any labor union to
organize any employees of the Company.
(b) Except as set forth on Disclosure Schedule Section 2.15, (i) there
is no labor strike, dispute, slow down or stoppage pending or, to the Knowledge
of the Company and Sellers, threatened, against or directly affecting the
Company; (ii) no grievance or arbitration Proceeding arising out of or under any
collective bargaining agreement is pending, and no claims therefor exist; and
(iii) neither the Company nor any of the Sellers nor any of their respective
Affiliates has received any notice or has any Knowledge of any threatened labor
or civil rights dispute, controversy or grievance or any other unfair labor
practice, Proceeding or breach of contract claim or action with respect to
claims of, or obligations to, any employee or group of employees of the Company.
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(c) To the Knowledge of the Company and Sellers, the Company has
complied and is currently complying, in respect of all employees of the Company,
with all Applicable Laws respecting employment and employment practices and the
protection of the health and safety of employees, from whatever source such law
may be derived, including, without limitation, statutes, ordinances, laws,
rules, regulations, policies, standards, judicial or administrative precedents,
judgments, orders, decrees, awards, citations, licenses, official
interpretations and guidelines, except for such instances which are not, in the
aggregate, material.
(d) To the Knowledge of the Company and Sellers, Disclosure Schedule
Section 2.15 sets forth all individuals who are independent contractors of the
Company or tobacco brokers for material sales of the Company's products,
together with a description of any arrangements with such Persons. The Sellers
have delivered to Buyer true copies of all Contracts with any such Persons.
2.16 Transactions with Certain Persons.
(a) Except with respect to the Lease of Real Property described in
Section 2.18, no Seller, nor, to the Knowledge of Sellers or the Company, any
officer or director of the Company nor any Associate of any Seller or the
Company is presently a party to any transaction with the Company (other than
employment agreements and salaries, bonuses or benefits for services as
officers, directors or employees of the Company) including, without limitation,
any contract, agreement or other arrangement (i) providing for the furnishing of
material services by, or the purchase of supplies of material quantities of
tobacco or other goods from such Person or an Associate of any such Person, (ii)
providing for the rental of material real or personal property, from or to any
such Person or an Associate of any such Person, or (iii) otherwise requiring
material payments from or to any such Person or an Associate of any such Person.
(b) There is no indebtedness of any nature owed by the Company to any
of the Stockholders other than the promissory note described in Section 1.3.
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2.17 Employee Benefits.
Except to the minimum extent required under Honduras law or otherwise
disclosed on Disclosure Schedule Section 2.17, there are no employee benefit
plans or arrangements for employees of the Company, including without
limitation, pension benefits, severance arrangements or life or health insurance
arrangements. Except as set forth on Disclosure Schedule Section 2.17, to the
Knowledge of Sellers and the Company:
(a) Except as would not result in any material liability of the
Company, neither the execution nor delivery of this Agreement or other related
agreements by the Company nor the Closing will result in the acceleration or
creation of any rights of any Person to any benefits of the Company; and
(b) As of the date of this Agreement, the Company does not have any
post retirement benefit obligation.
2.18 Real Property; Tangible Assets.
(a) True copies of all deeds and title documents relating to real
property owned by the Company ("Owned Real Property") have been delivered to
Buyer (or Buyer's Representatives) by the Company. The Company is the record
owner of and has good and marketable fee simple title to all Owned Real Property
free and clear of all Encumbrances. The Company enjoys peaceful and undisturbed
possession of all Owned Real Property.
(b) The only real property lease or licenses to which the Company is a
party or by which it is bound or that are used for the conduct of the Business
is the lease of 421 sq. meters of office space in San Xxxxx Sula, Honduras dated
April 1, 1996 (the "Leased Real Property" and together with the Owned Real
Property, the "Real Property"). Except for the Leased Real Property, there are
no leases, subleases, licenses, occupancy agreements, options, rights,
concessions or other agreements or arrangements, written or oral, granting to
any Person the right to purchase, use or occupy any Real Property in connection
with the
14
Business or any portion thereof or interest in any such property. With respect
to such Leases, to the Knowledge of Sellers and the Company, there exist no
defaults by the Company or any default or threatened default by any third party
thereunder, that has affected or could reasonably be expected to affect the
rights and privileges thereunder of the Company and have a Material Adverse
Effect. With respect to each Lease of real property, the Company has an
unencumbered interest in the Leasehold Estate. The Company enjoys peaceful and
undisturbed possession of all Leased Real Property. The transfer of the Stock
contemplated by this Agreement will not result in any default, penalty or
modification to any Lease to which the Company is a party. The Company has made
a true and correct copy of the Lease of Real Property available to Buyer (or
Buyer's Representatives).
(c) Except as set forth on Disclosure Schedule Section 2.18, to the
Knowledge of the Company and Sellers, all material buildings and structures
located on any Real Property are in all material respects structurally sound.
(d) To the Knowledge of the Company and Sellers, except as set forth
on Disclosure Schedule Section 2.18, with respect to any Real Property, there
exists no applicable restrictive covenant, constitutional or agrarian law
restrictions regarding foreigners or foreign shareholders, zoning ordinance,
building code, use or occupancy restriction, or any violation of any such
ordinance, code or restriction, or any condemnation action or proceeding with
respect thereto, that will interfere with the use for its current use thereof by
the Company following the Closing.
(e) Except as disclosed on Disclosure Schedule Section 2.18 to the
Knowledge of the Company and Sellers, none of the material buildings and
structures located on any Real Property nor any appurtenances thereto or
equipment thereon, nor the operation or maintenance thereof for its current use,
violates any restrictive covenants or encroaches on any property owned by others
nor does any building or structure of third parties encroach upon any Real
Property. To the Knowledge of the Company and Sellers, no condemnation
Proceeding is pending or threatened, which would preclude or impair the use of
Real Property for the use for which it is currently being used.
15
(f) All appropriate certificates of occupancy and all Permits required
for current operations have been or will be obtained, are or will be in full
force and effect and will not be violated by this Agreement or the transactions
contemplated hereby. To the Knowledge of Sellers and the Company, the Company is
not in violation of any Applicable Laws relating to the ownership of Real
Property by foreign entities or by local entities owned by foreign entities.
(g) Excluding the Owned Real Property and the Leased Real Property,
the Company has good and marketable title to the assets of the Company, free and
clear of any Encumbrances. Such assets include without limitation all assets
reflected on the Interim Balance Sheet of HATSA or used for the conduct of the
Business. All tangible assets and properties are in good operating condition and
repair and are usable in the ordinary course of business and, to the Knowledge
of the Company and Sellers, conform in all material respects to all Applicable
Laws relating to their construction, use and operation.
2.19 Tax Matters. (a) To the Knowledge of Sellers and the Company, (i) the
Company is eligible to benefit from and is in compliance with the Temporary
Import Regime (RIT) through resolutions issued by the Ministry of Economy, which
expire in the year 1998; (ii) its current permit relating to such regime is in
good standing and (iii) such tax benefits include exemption from payment of
taxes and customs duties on imports of equipment and raw materials used in the
production and exportation of cigars and related products and exemption from
payment of income tax, for a 10 year period ending in 1998, on profits generated
by cigars and related products exports to foreign countries, excluding the
Central American region.
(b) The Company and Sellers have no Knowledge of any action to repeal
or diminish the tax benefits described above in this Section 2.19.
(c) To the Knowledge of Sellers and the Company, (i) The Company has
timely filed with appropriate taxing authorities all Returns and paid any Taxes
required to be filed or paid through the date hereof and will timely file any
such Returns and pay any Taxes
16
required to be filed or paid on or prior to the Closing Date and (ii) the
Returns filed are complete and accurate in all material respects.
(d) To the Knowledge of Sellers and the Company, (i) no deficiencies
for Taxes have been claimed, proposed or assessed by any Governmental Authority
against the Company; (ii) there are no pending or threatened audits,
investigations or claims for or relating to any liability in respect of Taxes
and (iii) the Company (x) is not engaged in a United States trade or business
for federal income tax purposes and (y) is not a passive foreign investment
company within the meaning of the Code.
(e) To the Knowledge of Sellers and the Company, (i) the Company has
complied to date with all provisions regarding the Honduran temporary import
regime (regimen de importacion temporal) and all previous regimes relating to
tax benefits and (ii) its current Permit relating to such regime is in good
standing.
(f) To the Knowledge of Sellers and the Company, the Company has paid
to date all municipal fees and taxes regarding real estate, production, services
and delivers herewith the original certificates of compliance and permits to
operate issued by each of the municipal authorities in which the Company
operates.
(g) To the Knowledge of Sellers and the Company, the Company has
complied to date with all withholdings on employee salaries relative to income
tax, municipal tax, social security, training (INFOP), housing (RAP-FOSOVI) and
all other withholding mandated by law.
2.20 Environmental Compliance.
(a) Except as set forth on Disclosure Schedule Section 2.20 or as
would not have a Material Adverse Effect, to the Knowledge of the Company and
Sellers, the Company has obtained all Permits from all Governmental Authorities,
or from any other Person, that are required under any Environmental Law.
Disclosure Schedule Section 2.20 sets forth all
17
Permits issued under any Environmental Law of the Company relating to the
Company or the Business.
(b) Except as set forth on Disclosure Schedule Section 2.20 or as
would not have a Material Adverse Effect, to the Knowledge of the Company and
Sellers, the Company is and has been in compliance since January 1, 1994, with
all terms and conditions of all Permits of all Governmental Authorities (and all
other Persons) required under all Environmental Laws and used in the Business or
that relate to the Company. To the Knowledge of the Company and Sellers, the
Company is and has been in compliance with all other limitations, restrictions,
conditions, standards, requirements, schedules and timetables required or
imposed under all Environmental Laws.
(c) To the Knowledge of the Company and Sellers, except as set forth
on Disclosure Schedule Section 2.20, there are no present or past events,
conditions, circumstances, incidents, actions or omissions relating to or in any
way affecting either the Company or the Business that violate or violated any
Environmental Law or may violate any Environmental Law after the Closing or that
may give or have given rise to any Environmental Liability, or otherwise form
the basis of any claim, action, demand, suit, Proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to
the manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of any Hazardous
Substance.
2.21 Insurance. Disclosure Schedule Section 2.21 sets forth a list of each
insurance policy (respectively, an "Insurance Policy") currently or, to the
Knowledge of the Company and Sellers, (after reasonable investigation, including
contact with the Company's insurance brokers) at any time held by or on behalf
of or providing insurance coverage to the Company or, its business, property or
assets (or its directors, officers, salespersons, agents or employees),
including without limitation any "occurrence based" liability policies
regardless of the periods to which they relate. Each Insurance Policy which is
designated as a "Current Policy" on Disclosure Schedule Section 2.21 is, and at
the Closing Date will be, in full force and effect, without any material
amendments or modifications having been made
18
thereto and with all premiums having been paid through the expiration dates
specified therein. The Company has not received any written notice of
non-renewal or notice of violation in connection with any Current Policy set
forth on Disclosure Schedule Section 2.21 or any written notice or request from
the insurance company which issued any Current Policy set forth in Disclosure
Schedule Section 2.21 or any board of fire underwriters requesting any work or
alteration with respect to the Real Property or any personal property owned or
used by the Company. Disclosure Schedule Section 2.21 also sets forth for each
Current Policy the type of coverage, the name of the insured, the insurer, the
premium, the expiration date, the period to which it relates, the deductibles
and loss retention amounts and the amounts of coverage.
2.22 Performance Bonds and Letters of Credit. Disclosure Schedule Section
2.22 sets forth all letters of credit and performance bonds to which the Company
is a party or under which the Company is obligated. Disclosure Schedule Section
2.22 also sets forth all letters of credit and performance bonds that relate to
properties or assets of the Company or relating to the Business to which the
Company is a party or under which the Company is bound.
2.23 Utilities. The Company has paid to date all utilities, including all
power company (ENEE), telephone company (HONDUTEL) and water supply charges and
it owes no amounts to the entities providing those services be it for service,
equipment, materials, fines or other matters.
2.24 Political Contributions. The Company has not made any payments to any
government official, political party or organization in Honduras.
19
ARTICLE III
ACTIONS BY THE COMPANY AND BUYER PRIOR TO THE CLOSING
The Sellers and Buyer covenant as follows for the period from the date
hereof through the Closing Date:
3.1 Conduct of Business. From the date hereof until the Closing Date, the
Sellers shall join with Xxxx Xxxxx, one of the Other Stockholders ("Xx. Xxxxx"),
to instruct the Company to use its commercially reasonable best efforts to
conduct the Business in the ordinary course and cause the Company to use its
commercially reasonable best efforts to preserve intact the business
organizations and relationships and goodwill with third parties and keep
available the services of the present officers, employees, agents and other
personnel of the Company. Without limiting the generality of the foregoing, from
the date hereof until the Closing Date:
(a) except as required by Section 3.1(b) below, without the Buyer's
prior consent, the Company shall use commercially reasonable best efforts not
to:
(i) purchase or otherwise acquire assets from any other Person
other than in the ordinary course of business;
(ii) sell, assign, lease, license, transfer or otherwise dispose
of, or mortgage, pledge or encumber (other than with Permitted Liens), any
Real Property or amend, terminate or renew any Lease thereof;
(iii) subject to clause (ii) above, sell, assign, lease, license,
transfer or otherwise dispose of, or mortgage, pledge or encumber (other
than with Permitted Liens), any of its assets except in the ordinary course
of business;
20
(iv) incur any Liability, except Liabilities incurred in the
ordinary course of business;
(v) amend or modify in any material respect or terminate any
Scheduled Contract or any other Contract entered into by the Company after
the date hereof which, if in existence on the date hereof, would be
required to be set forth on Disclosure Schedule Section 2.7(a) as a
Scheduled Contract (each, a "Subsequent Material Contract");
(vi) make or commit to make any capital expenditure, or group of
related capital expenditures, in excess of Fifty Thousand Dollars ($50,000)
for the Company, other than capital expenditures expressly required under
any Scheduled Contract;
(vii) enter into or commit or propose to enter into any
Subsequent Material Contract or enter into any Contract or understanding
with an Affiliate;
(viii) create, incur, assume or guarantee any Indebtedness for
Borrowed Money;
(ix) (1) increase the rate or terms of compensation payable or to
become payable to its directors, officers or employees, (2) pay or agree to
pay any pension, retirement allowance or other employee benefit not set
forth in Disclosure Schedule Section 2.17, (3) commit itself to any
pension, profit sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, insurance, severance pay,
continuation pay, termination pay, retirement or other employee benefit
plan, agreement or arrangement not set forth in Disclosure Schedule Section
2.17, (4) enter into any employment agreement with or for the benefit of
any Person or (5) increase the rate of compensation under or otherwise
change the terms of any employment agreement;
21
(x) make any change in its accounting methods or in the manner of
keeping its books and records (except as requested by Buyer);
(xi) amend its charter or bylaws; or
(xii) issue or commit to issue any shares of capital stock or
obligations or securities convertible into or exchangeable for capital
stock.
(b) the Company shall use commercially reasonable best efforts to:
(i) (1) maintain its assets in the ordinary course of business in
good operating order and condition, reasonable wear and tear, damage by
fire and other casualty excepted, (2) promptly repair, restore or replace
any assets in the ordinary course of business and (3) upon any damage,
destruction or loss to any of such assets, apply any and all insurance
proceeds received with respect thereto to the prompt repair, replacement
and restoration thereof to the condition of such assets before such event;
(ii) use commercially reasonable best efforts to comply in all
material respects with all material Applicable Laws;
(iii) use its commercially reasonable best efforts to obtain,
prior to the Closing Date, all Required Consents;
(iv) use its commercially reasonable best efforts to take all
actions necessary to be in compliance with all material respects with, and
to maintain the effectiveness of, all Permits;
(v) file on a timely basis (taking into account all applicable
extensions) all Returns which relate to the Company or its operations;
22
(vi) notify the Buyer in writing of any action, event, condition
or circumstance, or group of actions, events, conditions or circumstances
that results in, or could reasonably be expected to result in, a Material
Adverse Effect, other than changes in general economic or industry-related
conditions, such notification to be provided to the Buyer promptly after
the occurrence of any such action, event, condition or circumstances, or
group thereof;
(vii) notify the Buyer in writing of the commencement of any
Proceeding by or against the Company or of becoming aware of any threat,
claim, action, suit, inquiry, proceeding, notice of violation, demand
letter, subpoena, government audit or disallowance that could reasonably be
expected to result in a Proceeding, such notification to be provided to the
Buyer promptly after such commencement or Sellers or the Company becoming
aware thereof;
(viii) notify the Buyer in writing of the occurrence of any
breach of any representation or warranty, or any covenant or agreement,
contained in this Agreement, promptly after any Seller becomes aware of any
such breach;
(ix) pay accounts payable and pursue collection of its accounts
receivable in the ordinary course of business; and
(x) make any filings necessary to enable the Company to maintain
its current tax holiday status.
3.2 Investigation by Buyer. From the date hereof until the Closing Date,
the Company shall provide to Buyer's Representatives during regular business
hours reasonable access to the business, officers, properties, books and records
of (or relating to) the Company, as Buyer reasonably deems necessary or
advisable. The Company will furnish to Buyer's Representatives such financial
and operating data and other information relating to the Company as Buyer may
reasonably request and will instruct the directors, officers, key employees,
counsel, auditors and financial advisors of the Company to cooperate with
Buyer's Representatives in their investigation of the Company.
23
3.3 No Continuing Negotiations. Until the earlier of the Closing, or the
termination of this Agreement pursuant hereto, neither Seller nor the Company,
nor any Affiliate, Associate or Representative of any of the foregoing, shall
initiate, solicit or entertain any proposals or offers from any Person relating
to, or enter into or participate in any negotiations with, or enter into any
agreement or understanding with, or provide any confidential information to
(including, without limitation, by way of furnishing any non-public information
concerning, or afford any access to, the business, offices, properties or
assets, or the books, records, officers, directors, employees, agents or
Representatives of the Company), any Person in connection with the sale of any
shares of capital stock or other securities of the Company or of all or
substantially all of the assets of the Company (or any interest therein), or any
investment in the Company or any merger, consolidation or other similar
transaction involving the Company (each of the foregoing is referred to as a
"Third Party Transaction"). If the Sellers, Xx. Xxxxx or, to Sellers' Knowledge,
the Company shall receive any written proposal regarding a Third Party
Transaction, the Company or such Seller, as the case may be, shall within three
Business Days notify Buyer of such proposal regarding a Third Party Transaction
and shall, in any such notice to Buyer, indicate in reasonable detail the
identity of the offeror and the general terms of such proposal. No information
of any nature shall be furnished to any Person other than Representatives of
Buyer during such period with respect to Affiliates of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers as follows:
4.1 Organization of Buyer. Buyer is duly incorporated and validly existing
as a corporation in good standing under the laws of the State of Delaware and
has full corporate power to conduct its business as it is presently being
conducted and to own and lease its properties.
24
4.2 Authorization. Buyer has the corporate power to execute and deliver
this Agreement and to consummate the transactions contemplated hereby, and all
requisite corporate action has been taken by the Board of Directors of Buyer to
authorize the execution, delivery and performance of this Agreement by Buyer.
This Agreement has been duly executed and delivered by Buyer and, assuming the
due execution of this Agreement by Sellers and the Company is a valid and
binding obligation of Buyer except as enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and except where enforceability is subject to the application of
equitable principles or remedies.
4.3 Consents and Approvals. No consent, approval or authorization of any
governmental or regulatory authority or any other Person is required to be made
or obtained by Buyer or any of its Affiliates in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
4.4 No Brokers. Neither Buyer nor any Affiliate of Buyer has entered into
or will enter into any contract, agreement, arrangement or understanding with
any Person which will result in the obligation of Sellers, the Company or Buyer
to pay any finder's fee, brokerage commission or similar payment in connection
with the transactions contemplated hereby.
4.5 No Conflict or Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the charter or
bylaws of Buyer, (b) a breach of, or a default under, any term or provision of
any contract or agreement to which Buyer is a party, which breach or default
would prevent Buyer from consummating the transactions contemplated hereby or
(c) a violation by Buyer of any statute, rule, regulation, ordinance, code,
order, judgment, writ, injunction, decree or award, which violation would
prevent Buyer from consummating the transactions contemplated hereby.
4.6 Litigation. (i) There are no Proceedings pending or, to the Knowledge
of Buyer, threatened, against or involving Buyer which seek to enjoin or rescind
the transactions contemplated by this Agreement; and (ii) there are no existing
orders, judgments or
25
decrees of any Governmental Authority naming Buyer as an affected party which
would, in either case, prevent Buyer from performing its obligations under this
Agreement.
4.7 Compliance with Law. To its Knowledge, Buyer is and, for the period of
the applicable statute of limitations, as extended, has been in compliance in
all material respects with all Applicable Laws, except where non-compliance
would not prevent Buyer from performing its obligations under this Agreement.
ARTICLE V
CLOSING
5.1 Closing. The closing of the transactions contemplated herein (the
"Closing") shall be held at 9:00 a.m. local time on the Closing Date at the
offices of Xxxxxx & Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at
such other place and time as the parties may agree. Buyer, Sellers and the
Company agree that, subject to the terms and conditions of this Agreement, they
shall each use their reasonable best efforts to cause the Closing to occur on
January 15, 1997 or as promptly thereafter as practicable.
5.2 Documents to be Delivered.
(a) At the Closing, the Sellers will deliver the following to Buyer:
(i) stock certificates representing all of the Stock, together
with duly executed stock powers;
(ii) all stock books, shareholders' record books, and minute
books of the Company
(iii) all powers of attorney of the Company;
26
(iv) such other documents as are required to be delivered
pursuant to Article VII.
(b) At the Closing, Buyer will deliver to the Sellers the Purchase
Price and such documents as are required to be delivered pursuant to Article VI.
ARTICLE VI
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transaction contemplated
hereby on the Closing Date are subject, in the discretion of Sellers, to the
satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
6.1 Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date as
if such representations and warranties were made at and as of the Closing Date,
and Buyer shall have performed in all material respects all agreements and
covenants required hereby to be performed by it prior to or at the Closing Date.
6.2 Consents. All consents, approvals and waivers from Governmental
Authorities and other parties necessary to permit the Sellers to consummate the
transactions contemplated hereby shall have been obtained.
6.3 No Governmental or Other Proceeding or Litigation. No Proceeding by any
Governmental Authority or other Person shall be pending or threatened which (i)
questions the validity or legality of the transactions contemplated hereby, or
(ii) could reasonably be expected to cause any of the transactions contemplated
by this Agreement to be rescinded following consummation.
27
6.4 Opinion of Counsel. Buyer shall have delivered to the Sellers an
opinion or opinions of counsel to Buyer on terms reasonably acceptable to the
Sellers.
6.5 Certificates. Buyer shall have delivered to the Sellers such
certificates of Buyer signed by its officers to evidence compliance with the
conditions set forth in this Article VI as may be reasonably requested by the
Sellers.
6.6 Contemporaneous and Contingent Transactions. The closing of the
purchase by Buyer of the assets and business of Villazon, pursuant to the
Villazon Agreement shall occur concurrently with the Closing. Except insofar as
the closing of the Villazon Agreement is contingent upon the Closing, the
Closing is contingent upon and shall occur concurrently with the closing of the
purchase by Buyer of certain assets of Villazon pursuant to the Villazon
Agreement.
6.7 Additional Shareholders. Buyer shall ensure that the Company has at
least five shareholders (including Buyer) immediately following the Closing.
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions contemplated hereby
are subject, in the discretion of Buyer, to the satisfaction or waiver, on or
prior to the Closing Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations and
warranties of the Sellers contained in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as if such representations and warranties were made at and as of the
Closing Date, and the Sellers shall have performed in all material respects all
agreements and covenants required hereby to be performed by them prior to or at
the Closing Date.
28
7.2 Consents. All Required Consents from Governmental Authorities and the
Required Consents from other necessary parties shall have been obtained.
7.3 No Governmental or Other Proceeding or Litigation. No Proceeding by any
Governmental Authority or other Person shall be pending or threatened which (i)
questions the validity or legality of the transactions contemplated hereby, (ii)
could reasonably be expected to have a Material Adverse Effect, or (iii) could
reasonably be expected to cause any of the transactions contemplated by this
Agreement to be rescinded following consummation.
7.4 Opinion of Counsel. The Sellers shall have delivered to Buyer an
opinion or opinions of counsel for the Sellers and the Company, reasonably
acceptable to Buyer.
7.5 No Material Degradation of Assets. Since the date of this Agreement,
there shall have been no change in condition of the tangible assets of the
Company except for such changes which, in the aggregate, have not had and will
not have a Material Adverse Effect.
7.6 Receipt of Audit Report. Buyer shall have received the report of its
independent public accountants in form satisfactory to file a Form S1
Registration Statement under the Securities Act of 1933, as amended which report
shall confirm that the Financial Statements were prepared in accordance with
Accounting Principles and were complete and correct.
7.7 Tax Matters.
(a) The Tax benefits described in Section 2.19 shall not have been
rescinded or reduced, nor shall notice of any such action have been received by
the Company.
(b) The Company shall have provided Buyer with all forms, certificates
and/or other instruments reasonably requested by Buyer required by Honduran Tax
law to effect the transfer of the Stock to Buyer.
29
(c) The Sellers shall have delivered certificates from relevant
authorities confirming the payment by the Company of all applicable property and
municipal Taxes.
7.8 Contemporaneous and Contingent Transactions. The closing of the
purchase by Buyer of the assets and business of Villazon, pursuant to the
Villazon Agreement shall occur concurrently with the Closing. Except insofar as
the closing of the Villazon Agreement is contingent upon the Closing, the
Closing is contingent upon and shall occur concurrently with the closing of the
purchase by Buyer of certain assets of Villazon pursuant to the Villazon
Agreement.
7.9 Certificates. Sellers shall furnish Buyer with such certificates of
each Seller to evidence compliance with the conditions set forth in this Article
VII as may be reasonably requested by Buyer.
ARTICLE VIII
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
8.1 Books and Records. Sellers and the Buyer agree that for a period of
five (5) years after the Closing Date, each party (at its expense) shall have
the right to inspect and to make copies of any books, records and files relating
to the business, properties, assets or operations of the Company, to the extent
that they pertain to the operations of the Company prior to the Closing Date and
remain in existence and available, at any time during business hours for any
proper purpose.
8.2 Further Assurances. On and after the Closing Date, Sellers and Buyer
will take, and Sellers will exercise the powers of attorney given to them by the
Other Stockholders to take, all appropriate action and execute all documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof, including without
limitation, putting Buyer in possession and operating control of the Business
and the Company.
30
8.3 Litigation Support. In the event and for so long as any party hereto or
their respective successors or assigns is contesting or defending against any
Proceeding in connection with (i) any transaction contemplated by this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Company, the other
party or parties hereto and the Sellers (and their respective successors and
assigns) will cooperate with such party or such Seller and its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary, in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification thereof under this Agreement).
ARTICLE IX
INDEMNIFICATION
9.1 Agreement to Indemnify.
(a) Buyer and each Affiliate of Buyer, (Buyer and each such Affiliate
is a "Buyer Indemnitee") shall be indemnified and held harmless to the extent
set forth in this Article IX by the Sellers, jointly and severally in respect of
any and all Losses (other than Losses relating to Taxes which are indemnified as
set forth in Section 9.5 below and Losses relating to product liability which
are indemnified as set forth in Section 9.8) in connection with, arising out of,
or as a result of any inaccuracy or misrepresentation in or breach of any
representation, warranty, covenant or agreement made in this Agreement by any
Seller.
(b) The Sellers (each a "Seller Indemnitee") shall be indemnified and
held harmless to the extent set forth in this Article IX by Buyer in respect of
(i) any and all Losses in connection with, arising out of, or as a result of any
inaccuracy or misrepresentation in or breach of any representation, warranty,
covenant or agreement made
31
in this Agreement by Buyer or (ii) payment by Sellers of any Liability of the
Company incurred after the Closing Date.
9.2 Survival of Representations, Warranties and Covenants.
(a) Except as hereinafter provided in this Section 9.2, and except for
indemnification obligations set forth in Section 10.7 of the Villazon Agreement
(which are incorporated herein by reference pursuant to Section 9.8 and survive
without limitation) and expense reimbursement obligations set forth in Section
10.8 of the Villazon Agreement (which are incorporated herein by reference
pursuant to Section 9.8 and survive for a five year period), all
representations, warranties, covenants, agreements and obligations of each of
Buyer and the Sellers (each, an "Indemnifying Party") contained herein and all
claims of any Buyer Indemnitee or Seller Indemnitee (each, an "Indemnitee") in
respect of any breach of any representation, warranty, covenant, agreement or
obligation of any Indemnifying Party contained in this Agreement, shall survive
the Closing and shall expire two years after the Closing Date.
(b) Each of the following representations, warranties, covenants,
agreements and obligations of the Sellers as Indemnifying Parties shall survive
the Closing Date until the expiration of sixty (60) days following any
applicable statute of limitations, including extensions thereof: (i) the
inaccuracy or misrepresentation in or breach of any representation, warranty,
covenant or agreement made by any Seller any time in this Agreement arising out
of fraud, or willful misconduct; (ii) any inaccuracy or misrepresentation in or
breach of any representation or warranty made in any representation as to Taxes
regardless of whether or not such inaccuracy or misrepresentation or breach
arises out of fraud, gross negligence or willful misconduct (which shall be
considered as set forth in Section 9.5 below); and (iii) the breach or failure
to perform by any Seller after the Closing Date of any of the covenants,
agreements or obligations of the Sellers contained in this Agreement.
(c) The termination of the representations and warranties provided
herein shall not affect the rights of any Buyer Indemnitee or Seller Indemnitee
(as applicable) in
32
respect of any claim for indemnity made by such Indemnitee in a writing received
by the Indemnifying Party prior to the expiration of the applicable survival
period provided herein.
9.3 Claims for Indemnification. If any Buyer Indemnitee or Seller
Indemnitee (as applicable) shall believe that such Indemnitee is entitled to
indemnification pursuant to this Article IX in respect of any Losses, such
Indemnitee shall give the appropriate Indemnifying Party prompt written notice
thereof. Any such notice shall set forth in reasonable detail and to the extent
then known the basis for such claim for indemnification. The failure of such
Indemnitee to give notice of any claim for indemnification promptly shall not
adversely affect such Indemnitee's right to indemnity hereunder except to the
extent that such failure adversely affects the right of the Indemnifying Parties
to assert any reasonable defense to such claim. Each such claim for indemnity
shall expressly state that the Indemnifying Party shall have only the twenty
(20) Business Day period referred to in the next sentence to dispute or deny
such claim. The Indemnifying Party shall have twenty (20) Business Days
following its receipt of such notice either (y) to acquiesce in such claim by
giving such Indemnitee written notice of such acquiescence or (z) to object to
the claim by giving such Indemnitee written notice of the objection. If the
Indemnifying Party does not object thereto within such twenty (20) Business Day
period, such Indemnitee shall be entitled to be indemnified for all Losses
reasonably incurred by such Indemnitee in respect of such claim.
9.4 Defense of Claims. In connection with any claim which may give rise to
indemnity under this Article IX resulting from or arising out of any claim or
Proceeding against an Indemnitee by a Person that is not a party hereto, the
Indemnifying Party may (unless such Indemnitee elects not to seek indemnity
hereunder for such claim), upon written notice to the relevant Indemnitee,
assume the defense of any such claim or Proceeding if the Indemnifying Party
with respect to such claim or Proceeding acknowledges in writing to the
Indemnitee the Indemnitee's right to indemnity pursuant hereto in respect of the
entirety of such claim (as such claim may have been modified through written
agreement of the Indemnitee(s) and the Indemnifying Party) and provide
assurances, satisfactory to such Indemnitee, that the Indemnifying Party will be
financially able to satisfy such claim in full if such claim or Proceeding is
decided adversely. If the Indemnifying Party assumes the
33
defense of any such claim or Proceeding, the Indemnifying Party shall select
counsel reasonably acceptable to such Indemnitee to conduct the defense of such
claim or Proceeding, shall take all steps necessary in the defense or settlement
thereof and shall at all times diligently and promptly pursue the resolution
thereof.
9.5 Tax Indemnification and Other Matters.
Notwithstanding anything to the contrary in the Agreement, each Seller
shall jointly and severally indemnify, save and hold harmless Buyer, the Company
and each Buyer Indemnitee from and against any and all Losses incurred in
connection with, arising out of, resulting from or relating to (i) any fact
inconsistent with, or any untruth or inaccuracy of, any representation or
warranty of any of the Sellers contained in Section 2.19, (ii) any and all Taxes
with respect to all periods ending on or prior to the Closing Date (including
the amount of Taxes which would have been paid but for the application of any
credit or net operating loss or capital loss deduction).
9.6 Offset Rights. Anything in this Agreement to the contrary
notwithstanding, Buyer may withhold and set off against the Installment Notes
any amount as to which Buyer reasonably believes any Seller is obligated to
indemnify any Buyer Indemnitee pursuant to this Article IX. With respect to any
amount as to which Buyer claims a right of set-off hereunder (a "Set-Off
Amount"), Buyer shall be entitled to cease making payments to the holders of the
Installment Notes to the extent of the Set-Off Amount hereunder upon
commencement of such indemnification claim and shall instead pay when due any
such amounts due under such Installment Notes to an escrow account or as
otherwise directed by a court of competent jurisdiction until such time as the
parties have agreed, or a court of competent jurisdiction has determined, the
amount of the Sellers' indemnification obligations hereunder. The escrow agent
shall be selected by Buyer and shall be reasonably satisfactory to the Sellers.
The escrow account shall be established on terms such that Payments may only be
made from such escrow account in accordance with an order of a court of
competent jurisdiction or upon the joint authority of a Seller and Buyer. Each
party shall execute and deliver to the other parties such documentation
acknowledging their obligations under this Section 9.6 as the other parties
shall reasonably require.
34
9.7 Limitation on Indemnification. The indemnification obligations of the
Sellers and Buyer pursuant to Section 9.1(a) hereof and Sections 10.1(a) and
10.7(c) of the Villazon Agreement or Section 9.1(b) hereof and Section
10.1(b)(i) of the Villazon Agreement (as applicable) shall not be effective
until the aggregate dollar amount of all Losses which would otherwise be
indemnifiable pursuant to Section 9.1(a) hereof and Sections 10.1(a) and 10.7(c)
of the Villazon Agreement or Section 9.1(b) hereof and Section 10.1(b)(i) of the
Villazon Agreement, as the case may be, exceeds Two Hundred Fifty Thousand
Dollars ($250,000) and then such indemnification obligation shall apply only to
Losses in excess of $250,000 provided, however, that any trade payable of the
Company incurred in the ordinary course of business but not reflected on the
Closing Date Balance Sheet and which, had it been so reflected, would not have
reduced the Net Worth below $4,635,000, shall not be treated as a Loss for the
purpose of this Section 10.6.. The indemnification obligations pursuant to
Sections 9.1(a) hereof and Sections 10.1.(a) and 10.7(c) of the Villazon
Agreement shall be limited to an aggregate amount of Five Million Dollars
($5,000,000) and the indemnification obligations set forth in Section 9.1(b)
hereof and Section 10.1(b)(i) of the Villazon Agreement shall be limited to an
aggregate amount of Five Million Dollars ($5,000,000). The limitations on the
indemnification obligations, as set forth in this Section 9.7, shall not apply
to (i) any breach of a representation or warranty which arises as a result of
fraud or failure to close the transactions the subject of this Agreement (except
pursuant to the terms of this Agreement) by the Indemnifying Party, or (ii) for
any breach of the representations and warranties set forth in Sections 2.1, 2.2,
2.3, 2.4, 2.14, the second sentence of Section 2.18(a), the third and fourth
sentences of Section 2.18(b), the first two sentences of Section 2.18(g) and
Sections 2.19, 4.1, 4.2 or 4.4.
9.8 Responsibility for Products; Contributions Toward Expenses. The terms
of Sections 10.7 and 10.8 of the Villazon Agreement are incorporated by
reference herein and made applicable to Sellers, the Company and Buyer under
this Agreement to the same extent as applied to Stockholders, Sellers and Buyer
under the Villazon Agreement, it being understood that (i) any amounts
indemnified under this Agreement and the Villazon Agreement shall be aggregated
for purposes of calculating the limitation on indemnity set forth in Section 9.7
of this Agreement and Section 10.6 of the Villazon Agreement and (ii)
35
any amounts contributed toward expenses with respect to HATSA or Villazon as
provided by Section 10.8 of the Villazon Agreement shall be aggregated for
purposes of determining the $1,000,000 limitation set forth therein.
ARTICLE X
MISCELLANEOUS
10.1. Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written agreement of the Buyer and the Sellers; or
(b) by the Buyer or the Sellers, if the Closing shall not have
occurred prior to February 1, 1997 (the "Termination Date", as extended as
provided below); provided that (i) if the date of execution of this Agreement is
after December 13, 1996, such Termination Date shall be extended to a date 45
days following the date hereof and (ii) if the applicable waiting period,
including any extensions thereof, under the HSR Act in respect of the filing
made pursuant to the Villazon Agreement shall not have expired by such date,
then the Termination Date shall be extended to a date 5 Business Days following
expiration of any such applicable waiting period.
Time shall be of the essence in this Agreement. In the event of
termination of this Agreement as provided in this Section 10.1, this Agreement
shall forthwith become void and there shall be no liability on the part of any
party hereto except (i) as set forth in Sections 10.9 and 10.10 of this
Agreement and (ii) that nothing herein shall relieve any party from liability
for any wilful breach hereof. No party shall have a right to terminate this
Agreement if the Closing shall not have occurred because of a breach by such
party of its obligations hereunder.
10.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Sellers without the prior written
consent of Buyer, or by
36
Buyer (other than to the Parent) without the prior written consent of Sellers.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, and
no other Person shall have any right, benefit or obligation hereunder.
10.3 Notices. Unless otherwise provided herein, any notice, request,
instruction or other documents to be given hereunder by any party to the others
shall be in writing and effective when delivered in person or by courier (with a
receipt obtained therefor), telegraphed, telexed or by facsimile transmission,
if a facsimile number is set forth in respect of such party below (with an
executed copy mailed as described below), or effective on the date receipt is
acknowledged when mailed by certified mail, postage prepaid, return receipt
requested, as follows:
If to Buyer: Culbro Corporation
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: A. Xxxx Xxxxxx, Esq.
Senior Vice President and General Counsel
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Sellers: Xxxxxx Xxxxxxxxxx
00 Xxxxxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
and to: Xxxxx Xxxxxxx
0000 Xxx Xxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
With a copy to: Fowler, White, Gillen, Boggs, Xxxxxxxxx and Banker, PA
501 East Xxxxxxx Boulevard (Suite 1700)
Xxxxx, Xxxxxxx 00000
37
Attention: Xxxx X. Xxxx, Xx., Esq.
Facsimile (000) 000-0000
and to: Xxxxxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
10.4 Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the internal laws of the
State of New York, without regard to the conflict of law principles thereof
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
10.5 Entire Agreement; Amendments and Waivers. This Agreement together with
the Confidentiality Agreements, constitutes the entire agreement between the
parties pertaining to the subject matter hereof and supersedes all prior or
contemporaneous agreements, understanding, negotiations and discussions, whether
oral or written, of the parties. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by all parties. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
10.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
38
10.7 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect after Closing, such invalidity, illegality, or unenforceability shall
not affect any other provision of this Agreement or any other such instrument.
10.8 Headings. The headings of the articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
10.9 Expenses. The Sellers and Buyer shall each be liable for their own
costs and expenses incurred in connection with the negotiation, preparation,
execution or performance of this Agreement.
10.10 Publicity. The parties agree to notify each other prior to issuing
any press release or making any public statement regarding the transactions
contemplated hereby, and will attempt to obtain the reasonable approval of the
other parties prior to making such release or statement, and the parties hereto
shall issue a mutually acceptable press release as soon as practicable after the
Closing Date.
39
10.11 Authority of Sellers. The Sellers shall have delivered to the Buyer
the letters attached hereto as Exhibit B.
10.12 Tax Filing. Buyer acknowledges that it may be required to make a
filing in early 1997 to preserve the Company's tax status.
10.13 Supplemental Schedules. The Company may provide and/or supplement the
schedules required hereby until December 31, 1996; provided, however, that any
material disclosures made after the date hereof shall constitute a condition to
Buyer's obligation to close under Article VII.
ARTICLE XI
DEFINITIONS
11.1 Defined Terms. As used herein, the terms below shall have the
following meanings:
"Accounting Principles" means GAAP, applied on a consistent basis with the
past practice of the Company; provided that FASB 52 relating to currency
translations shall not be observed or reflected with respect to the Company.
"Affiliate" shall mean a Person that directly or indirectly through one or
more intermediaries controls, is controlled by, or is under common control with
the Person specified.
"Agreement" shall mean this Stock Purchase Agreement, together with the
Disclosure Schedule and all exhibits referenced herein.
"Annual Financial Statements" shall mean the balance sheet as of December
31, 1995 and the related statement of operations, stockholders' equity and cash
flows for the year ended December 31, 1995 of the Company attached hereto as
Exhibit B.
40
"Applicable Law or Laws" shall mean, with respect to any Person, any
domestic, foreign, federal, state or local statute, law, ordinance, rule,
regulation, order, writ, injunction, directive, judgment, decree or other
requirement, all as in effect as of the Closing, of any Governmental Authority
(including any Environmental Law) applicable to such Person or any of its
Affiliates or any of their respective properties, assets, officers, directors,
employees, consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person or any
of its Affiliates).
"Associate" shall mean, when used to indicate a relationship with any
Person, (a) any other Person of which such Person is an officer or partner or
is, directly or indirectly, the beneficial owner of ten percent (10%) or more of
any class of equity securities issued by such other Person, (b) 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 fiduciary capacity, and (c)
any relative or spouse of such Person, or any relative of such spouse who has
the same home as such Person or who is a director or officer of such Person or
any Affiliate thereof.
"Business" shall mean the business as currently conducted by the Company,
including without limitation the business of manufacturing and distributing
cigars and associated products.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which commercial banking institutions in New York New York are authorized or
obligated by law or executive order to be closed
"Closing Date" shall mean January 15, 1997 or, if later, the fifth Business
Day following the date on which all conditions set forth in Article VI and VII
hereof shall have been satisfied or waived, provided however that the Closing
shall be deemed effective as of 12.01 a.m. New York City time on January 1,
1997.
41
"Code" shall mean the Internal Revenue Code of 1986, as it may be amended
from time to time.
"Confidentiality Agreements" shall mean the confidentiality agreements
between Culbro Corporation and Villazon dated August 26, 1996 and October 14,
1996.
"Contract" shall mean any written agreement, understanding, arrangement,
contract, note, loan, evidence of indebtedness, purchase, order, letter of
credit, indenture, security or pledge agreement, franchise agreement,
undertaking, practice, covenant not to compete, employment agreement, license,
instrument, obligation or commitment to which the Company is a party or is bound
and which relates to the Business or the Company.
"Disclosure Schedule" shall mean a schedule attached hereto and delivered
by Sellers to Buyer which sets forth exceptions to the representations and
warranties contained herein and other provisions of this Agreement.
"Encumbrance" shall mean, with respect to any asset, any Lien, adverse
claim, easement, right of way, zoning or building restriction, or any other
right of others or other adverse interest of any kind, including without
limitation any lease, chattel mortgage, conditional sales contract, collateral
security arrangement and other title or interest retention arrangement with the
exception of Permitted Liens.
"Environmental Laws" shall mean all Applicable Laws relating to the
protection of human health or the environment including, without limitation: (i)
all requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land; (ii) all requirements
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transports or handling of Hazardous Substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature.
42
"Environmental Liabilities" shall mean all Liabilities of a Person (whether
such Liabilities are owed by such Person to Governmental Authorities, third
parties or otherwise) whether currently in existence or arising hereafter which
arise under or relate to any Environmental Law.
"Financial Statements" shall mean the Annual Financial Statements and the
Interim Financial Statements.
"GAAP" shall mean generally accepted accounting principles in the United
States as in effect on the date hereof.
"Governmental Authority" shall mean any foreign, domestic, federal, state
or local governmental authority, quasi-governmental authority, instrumentality,
court, government or self-regulatory organization, commission, tribunal or
organization or any regulatory, administrative or other agency, or any political
or other subdivision, department or branch of any of the foregoing.
"Hazardous Substances" shall mean any substance or material: (i) the
presence of which requires remediation under any Environmental Law; or (ii) the
generation, storage, treatment, transportation, disposal, remediation, removal,
handling or management of which is regulated by any Environmental Law; or (iii)
that is defined as a "hazardous waste" or "hazardous substance" under any
Environmental Law; or (iv) that is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic or mutagenic or otherwise hazardous and is
regulated under any Environmental Law; or (v) without limitation, that contains
gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenols
(PCBs) or asbestos.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and all applicable regulations promulgated thereunder.
"Indebtedness for Borrowed Money" of any Person shall mean, at any date,
without duplication, (i) any obligation of such Person for borrowed money,
properly recordable
43
under generally accepted accounting principles as a liability on the financial
statements of such Person, (ii) all obligations of such Person, properly
recordable under GAAP as a liability on the financial statements of such Person,
evidenced by bonds, debentures, notes, or other similar instruments, (iii) all
Indebtedness for Borrowed Money (as defined in clauses (i) and (ii) above) of
others secured by a lien on any asset of such Person, whether or not such
Indebtedness for Borrowed Money is assumed by such Person provided that leases
for automobiles shall not be so included, and (iv) all Indebtedness for Borrowed
Money (as defined in clauses (i) and (ii) above) of others guaranteed by such
Person.
"Installment Notes" shall have the same meaning as set forth in the
Villazon Agreement.
"Interim Financial Statements" shall mean the unaudited balance sheet as of
October 31, 1996 of the Company attached hereto as Exhibit B (the "Interim
Balance Sheet of HATSA") and the related statement of operations, stockholders'
equity and cash flows for the period ended October 31, 1996 of the Company.
"Knowledge" shall mean, with respect to any Person, the knowledge of such
Person (after reasonable inquiry), if an individual, or if the Knowledge of
Sellers, the knowledge of Xx. Xxxxxxx and Xx. Xxxxxxxxxx, or if the knowledge of
the Company, the knowledge of Xx. Xxxxxxx, Xx. Xxxxxxxxxx, Xx. Xxxxx, Xxxxx
Xxxxx, Xxxxxx Xxxxxx, Xxxxxxx Xxxxx Xxxxxxxxx and Xxxxxx Lean.
"Leasehold Estates" shall mean, all of the Company's rights and obligations
as Lessee under the Leases.
"Leases" shall mean all of the existing Leases or licenses of real or
personal property of the Company set forth on Disclosure Schedule Section 2.7 or
Section 2.18, and leases with respect to personal property of the Company which
are not required to be set forth on Disclosure Schedule 2.7.
44
"Lien" shall mean with respect to any asset of the Company, any mortgage,
title defect or objection, lien, pledge, option, security interest or
hypothecation, restriction, encumbrance or charge of any kind in respect of such
asset.
"Losses" shall mean, in respect of any obligation to indemnify any Person
pursuant to Article IX of this Agreement, any and all actual losses, damages,
liabilities, obligations, judgments, settlements, awards, and offsets which the
Indemnified Party may suffer or incur (together, "Damages"), and reasonable
out-of-pocket costs, expenses and attorneys' fees relating to Damages (including
any such reasonable costs, expenses and attorneys' fees incurred in enforcing
such right of indemnification against any Indemnifying Party or with respect to
any appeal) plus interest on such out-of-pocket costs, expenses and attorneys'
fees at the rate of interest set forth in the Stockholder Loan Notes from the
date paid by the Indemnitee until the date on which the indemnity payment for
such out-of-pocket costs, expenses and attorneys' fees is received, and
penalties, fines or punitive or exemplary damages, if any.
"Material Adverse Effect" shall mean a material adverse effect on the
financial condition, results of operations, business or assets of the Company
taken as a whole.
"Net Income of HATSA" shall mean the net income of the Company for the
period specified determined in accordance with Accounting Principles, as set
forth on the income statement(s) of HATSA for such period.
"Net Worth" shall have the same meaning as set forth in the Villazon
Agreement.
"Parent" shall mean General Cigar Holdings, Inc.
"Person" shall mean an individual, a partnership, a corporation, a trust,
an unincorporated organization, a government or any department or agency thereof
or any other entity.
45
"Permits" shall mean all licenses, permits, orders, consents, approvals,
registrations, authorization, qualifications and filings with and under all
federal, state or local laws and governmental or regulatory bodies and all
industry or other nongovernmental self-regulatory organization, necessary or
desirable for the past or present conduct of, or relating to the operation of,
the Business.
"Permitted Liens" shall mean (i) mechanics, materialmen's and similar Liens
with respect to any amounts incurred in the ordinary course of business which
are either not yet due and payable or which are being contested in good faith
through appropriate proceedings, (ii) Liens for Taxes not yet due and payable or
Liens for Taxes (A) which are being contested in good faith through appropriate
proceedings and (B) and for which adequate reserves have been established in
accordance with GAAP, (iii) Liens securing rental payments under capital lease
agreements, (iv) easements, covenants, conditions and other restrictions on
Owned Real Property that do not materially interfere with the present uses of
such real property.
"Representative" shall mean any officer, director, principal, attorney,
accountants, auditor, agent, employee, financial advisors or other
representative.
"Return" shall mean any United States or foreign federal, state, or local
tax return, declaration, report, estimate, information return, statement or
form.
"Required Consents" shall mean the consents so designated on the Disclosure
Schedule.
"Stock" shall mean all of the outstanding capital stock of the Company.
"Stockholder Loan Notes" shall have the same meaning as set forth in the
Villazon Agreement.
"Tax(es)" shall mean all taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, fees and other charges, however denominated,
including any interest,
46
penalties, additions to tax or additional amounts that may become payable in
respect thereof, imposed by any foreign, federal, state, or local government,
which taxes shall include, without limitation, all income taxes, payroll and
employee withholding taxes, unemployment insurance, social security, sales and
use taxes, excise taxes, franchise taxes, gross receipts taxes, occupation
taxes, real and personal property taxes, stamp taxes, transfer taxes, workers'
compensation and other obligations of the same or of a similar nature.
"Villazon" shall mean Villazon & Company, Inc.
"Villazon Agreement" shall mean the asset purchase agreement dated as of
December 20, 1996 among Buyer, Villazon, the Sellers and Xxxxxxxxxxx Xxxxxxxx.
11.2 Other Defined Terms. The following terms have the meanings defined for
such terms in the Sections set forth below:
Terms Section
----- -------
Buyer Recitals
Buyer Indemnitee 9.1
Closing 5.1
Company Recitals
Damages 11.1 "Losses"
Dividends 1.3(b)
Estimated Net Income of HATSA 1.3(b)
General Cigar Recitals
HATSA Recitals
Indemnifying Party 9.2(a)
Indemnitee 9.2(a)
Insurance Policy 2.21
Intellectual Property 2.5(a)
Interim Balance Sheet of HATSA 11.1 "Interim Financial
Statements"
47
Leased Real Property 2.18(b)
Liability; Liabilities 2.12
Xx. Xxxxxxxxxx Recitals
Xx. Xxxxxxx Recitals
Xx. Xxxxx 3.1
1996 Income Statement 1.4
Other Stockholders Recitals
Owned Real Property 2.18(a)
Proceedings 2.11
Purchase Price 1.2
Real Property 2.18(b)
Scheduled Contracts 2.7(a)
Stockholders Recitals
Sellers Recitals
Seller Indemnitee 9.1(b)
Set-Off Amount 9.6
Subsequent Material Contract 3.1(a)
Termination Date 10.1(b)
Third Party Transaction 3.3
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf by their respective officers thereunto
duly authorized, as of the date and year first above written.
GENERAL CIGAR CO. INC. Sellers
Xxxxx Xxxxxxx
By: /s/ A. XXXX XXXXXX
---------------------------
SECRETARY /s/ XXXXX XXXXXXX
A. Xxxx Xxxxxx -------------------------------
Xxxxxx Xxxxxxxxxx
/s/ XXXXXX XXXXXXXXXX
-------------------------------
HONDURAS AMERICAN TABACO, S.A. de C.V.
By: /s/ XXXX X. XXXXX
---------------------------
Xxxx X. Xxxxx
49
EXHIBIT "A"
Name No. of Shares Purchase Price ($US) Percentage
---- ------------- -------------------- ----------
SELLERS:
Xxxxx X. Xxxxxxx 45,000 $ 4,500,000 22.500%
Xxxxxx Xxxxxxxxxx 45,000 $ 4,500,000 22.500%
OTHER STOCKHOLDERS:
Xxxx X. Xxxxx 42,750 $ 4,275,000 21.375%
Xxxxx Xxxxx 33,750 $ 3,375,000 16.875%
Xxxxxx Xxxxxx 20,000 $ 2,000,000 10.000%
Xxxxxxx Xxxxx
Xxxxxxxxx 13,500 $ 1,350,000 6.750%
TOTALS: 200,000 $20,000,000 100.000%
EXHIBIT B
See pages F-38 through F-45 of the S-1 Registration Statement filed
on December 24, 1996.
EXHIBIT B-1
HONDURAS AMERICAN TABACO S.A. AGREED NET FASB52
INCOME OF ADJUSTED
BALANCE SHEETS HATSA ON 10/31/96
WITHOUT FASB52
Balance Balance Balance
as of as of as of
10.31.96 10.31.96 10.31.96
---------- ---------- ----------
Lps. US$ US$
ASSETS
Current Assets
Cash and banks 7,318,971 580,917 579,423 1,494
Receivable 1,376,065 109,220 110,712 (1,492)
Related parties receivable 16,225,276 1,287,823 1,287,823 (0)
Inventories 49,152,991 3,901,341 4,296,294 (394,953)
Prepaid expenses 596,853 47,373 47,365 8
Other current assets 0 0
---------- ---------- ---------- ----------
Total current assets 74,670,156 5,926,673 6,321,617 (394,944)
Property, plant and equipment, net 5,357,796 425,256 561,381 (136,125)
Other assets 12,000 952 6,000 (5,048)
---------- ---------- ---------- ----------
Total assets 80,039,952 6,352,881 6,888,998 (536,117)
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 0 0 0 0
Accrued liabilities 7,690,518 610,407 602,400 8,007
Affiliates payable 1,288,089 102,237 102,237 0
Dividends 4,724,128 374,961 374,960 1
Taxes payable 862,747 68,477 68,477 0
---------- ---------- ---------- ----------
Total current liabilities 14,565,482 1,156,082 1,148,074 8,008
Stockholders' Equity
Common stock 10,000,000 793,714 2,105,328 (1,311,614)
Retained earnings 55,474,470 4,403,085 3,635,596 767,489
---------- ---------- ---------- ----------
Total stockholders' equity 65,474,470 5,196,799 5,740,924 (544,125)
---------- ---------- ----------
Total liabilities and stockholders' equity 80,039,952 6,352,881 6,888,998
========== ========== ==========
HONDURAS AMERICAN TABACO S.A.
Statement of Operations and Retained Earnings
October 31, October 31, October 31,
1996 1996 1996
------------- ------------- -------------
L. US$ US$
(10 months)
Net sales and other revenue 119,406,470 10,293,661 10,197,501 96,160
----------- ---------- ----------
Cost and expenses
Cost of goods sold 71,428,588 6,157,663 6,754,968 (597,305)
Selling, general and administrative expenses 2,508,406 216,242 210,444 5,798
----------- ---------- ----------
Operating profit 45,469,175 3,919,757 3,232,089
Other income (expense) (391,722) (33,769) (35,490) 1,721
----------- ---------- ----------
45,077,454 3,885,987 3,196,599
Translation gain (loss) 1,409,054 (54,643) 54,643
----------- ---------- ----------
Net income applicable to common shareholders 46,486,508 3,885,987 3,141,956 744,031
Retained earnings - beginning of year 30,901,175 2,344,829
EXHIBIT C
December 16, 1996
Xxxxx X. Xxxxxxx
Xxxxxx Xxxxxxxxxx
c/x Xxxxxxxx & Company, Inc.
00 Xxxx Xxx
Xxxxx Xxxxxx Xxxxx, XX 00000
Re: Honduras American Tabaco, S.A. de C.V.
(The "Company")
Gentlemen:
Reference is made to our letter (The "General Letter") of this date
addressed to General Cigar Co., Inc. ("General"), a copy of which is attached to
this letter. Capitalized terms used in the General Letter have the same meanings
when used in this letter.
The purpose of this letter is to confirm your authority, as our representatives,
to deliver our original Stock certificates, which have been duly endorsed in
blank, to General upon the closing of the transaction described in the
agreement, subject only to our receipt of the following funds:
1. The purchase price set forth on Exhibit A to the General Letter; and
2. Our proportionate share, determined according to the percentages set
forth on Exhibit A, of the Company's net income for the year ending
December 31, 1996.
3. This letter is to also confirm that we hereby release you from any
liabilities or other obligations in connection with the sale of the
Stock, subject only to our receipt of the funds set forth in
paragraphs 1 and 2 above in the manner we set forth to you in
writing.
Sincerely,
/s/ Xxxxx Xxxxx
--------------------------------
Xxxxx Xxxxx
/s/ Xxxxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxx Xxxxxxxxx
--------------------------------
Xxxxxxx Xxxxx Xxxxxxxxx
December 16, 1996
General Cigar Co., Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Re: Honduras American Tabaco S.A. de C.V.
("The Company")
Gentlemen:
We refer to that certain stock purchase agreement to be dated as of
December __, 1996 (The "Agreement") between you, the Company and Xxxxx Xxxxxxx
and Xxx Xxxxxxxxxx (The "Seller Representatives"). We hereby confirm that we own
of record and beneficially the number of shares of common stock of the Company
("Stock"), par value 50 Lempiras each, set forth against our names on Exhibit A
hereto, free of any claims of third parties including without limitation any
agreement, understanding or restriction affecting the transfer, voting rights or
other incidents of record or beneficial ownership pertaining to the Stock. None
of us are party to any voting trust, proxy or other agreement or understanding
with respect to the voting of any capital stock of the company. The sale of our
Stock to you will not result in a violation of, or breach under, any agreement
to which any of us is a party, or by which any of us is bound, or by which any
of our properties are affected.
We have delivered to the Seller Representatives certificates representing
the Stock owned by us, duly endorsed in favor of you. Copies of such
certificates are attached to this letter. We hereby authorize the Seller
Representatives, upon receipt by them of not less than $20,000,000 as payment
for the entire capital Stock of the Company, to deliver the same to you on our
behalf. We hereby confirm that receipt by the Seller Representatives of such sum
of shall be good discharge of all your obligations towards us in connection with
your purchase of the Stock.
If the terms of this letter are acceptable to you, please countersign and
deliver a copy to the Seller Representatives on our behalf.
We hereby agree to the sale of the Stock to you (or your nominee) on such
terms as the Seller Representatives, in their discretion shall think fit. We
hereby authorize and instruct the Seller Representatives to sign and deliver, in
our name or in their own names, on our behalf such documents and to do such acts
and things as they consider necessary to sell the Stock to you and to give
effect to the agreement.
We also each deliver herewith an irrevocable power of attorney, executed by us
before a notary in Honduras whose signature is registered in the U.S. Consulate
in Honduras, appointing the Seller Representatives as our attorney.
This letter shall be construed, interpreted and the rights of the parties
determined, in accordance with the laws of the State of New York without regards
to the conflict of laws principles thereof.
Yours very truly,
X.X. XXXXX
By:
--------------------------------
X. XXXXX
By: /s/ X. Xxxxx
-------------------------------
X. XXXXXX
By: /s/ X. Xxxxxx
--------------------------------
X. XXXXX
By: /s/ X. Xxxxx Xxxxxxxxx
--------------------------------
Acknowledged and agreed
GENERAL CIGAR CO., INC.
By:
------------------------
Name:
Title:
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
Between
GENERAL CIGAR CO., INC.
and
HONDURAS AMERICAN TABACO, S.A. de C.V.
and
THE SELLERS
dated as of
January 21, 1997
First Amendment To
Stock Purchase Agreement
This First Amendment, dated as of January ___, 1997, among General Cigar
Co., Inc. ("General Cigar"), a corporation duly organized and existing under the
laws of the State of Delaware (General Cigar is hereinafter sometimes referred
to as the "Buyer"), Honduras American Tabaco S.A. de C.V., a corporation duly
organized and existing under the laws of Honduras (the "Company" or "HATSA"),
Xxxxx Xxxxxxx ("Xx. Xxxxxxx"), Xxxxxx Xxxxxxxxxx ("Xx. Xxxxxxxxxx") and Xxxxxxx
Enterprises, Ltd., a Florida limited partnership ("Xxxxxxx Enterprises").
W I T N E S S E T H:
WHEREAS, the parties, other than Xxxxxxx Enterprises, have entered into
that certain Stock Purchase Agreement dated as of December 23, 1996 relating to
HATSA (the "Purchase Agreement"). Capitalized terms not otherwise defined herein
shall bear the same meaning as set forth in the Purchase Agreement.
WHEREAS, Xx. Xxxxxxx had transferred his Stock in HATSA to Xxxxxxx
Enterprises effective January 1, 1996, and the parties now wish to amend the
Purchase Agreement to reflect the substitution of Xxxxxxx Enterprises for Xx.
Xxxxxxx as a Seller thereunder.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to amend the Purchase Agreement as follows:
1. Additional Party.
The Purchase Agreement is hereby amended by adding Xxxxxxx Enterprises as
the owner and Seller of the Stock attributed in the Purchase Agreement to Xx.
Xxxxxxx. All references in the Purchase Agreement to Xx. Xxxxxxx shall be deemed
to refer to Xx. Xxxxxxx and Xxxxxxx Enterprises. It is agreed that Xx. Xxxxxxx
agrees to remain a party to the Purchase Agreement and personally obligated and
responsible with respect thereto with respect to all duties and obligations of
Xxxxxxx Enterprises, including but not limited to, Article II (Representations
and Warranties of Sellers), Article III (Actions by the Company and Buyer Prior
to the Closing) and Article IX (Indemnification).
2. Additional Representations and Warranties.
2.1 The following Section 2.1A is hereby added to the Purchase Agreement
as follows:
"2.1A Organization of Xxxxxxx Enterprises. Xxxxxxx Enterprises is
duly formed and validly existing as a Limited Partnership in good
standing under
1
the laws of its jurisdiction of formation and has full power and
authority to own and lease its properties and assets. Xxxxxxx
Enterprises is duly qualified and in good standing in each
jurisdiction where, by virtue of its properties owned, it is
required to be so qualified and the failure to be so qualified would
have, individually or in the aggregate, a Material Adverse Effect."
2.2 The following Section 2.2A is hereby added to the Purchase Agreement
as follows:
"2.2A Ownership of Stock of Xxxxxxx Enterprises. (a) Except as set
forth in Note 6 of the Financial Statements, Xxxxxxx Enterprises
owns of record and beneficially the 45,000 shares of Stock set forth
against Xxxxx Xxxxxxx'x name in Exhibit A, free of Encumbrances,
including without limitation any agreement, understanding or
restriction affecting the transfer, voting rights or other incidents
of record or beneficial ownership pertaining to such Stock. Except
as set forth in Note 6 to the Financial Statements, Xxxxxxx
Enterprises is not a party to any option, warrant, subscription,
commitment or any other contract that could require Xxxxxxx
Enterprises to sell, transfer or otherwise dispose of any capital
stock of Xxxxxxx Enterprises or any agreement or understanding
providing rights of first refusal or similar rights with respect to
any capital stock of the Company. Except as set forth in Note 6 of
the Financial Statements, Xxxxxxx Enterprises is not party to any
voting trust, proxy or other agreement or understanding with respect
to the voting of any capital stock of the Company."
2.3 The following Section 2.4A is hereby added to the Purchase Agreement
as follows:
"2.4A Authorization of Xxxxxxx Enterprises.
(a) This Agreement has been duly executed and delivered by
Xxxxxxx Enterprises, and, assuming the due authorization, execution
and delivery of this Agreement by Buyer is a valid and binding
obligation of Xxxxxxx Enterprises except as enforceability may be
limited by, bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and except where enforceability is
subject to the application of equitable principles or remedies.
(b) Xxxxxxx Enterprises has taken all requisite action to
approve and consent to this Agreement and the performance of the
transactions contemplated hereby."
3. Conflict with Purchase Agreement. In the event of a conflict between
this First Amendment and the Purchase Agreement, this First Amendment shall
control. Save as
2
expressly amended and modified hereby, the Purchase Agreement shall continue in
full force and effect.
4. Villazon Agreement. Xx. Xxxxxxx hereby confirms that the existence of
Xxxxxxx Enterprises in no way affects his obligations under the Villazon
Agreement, including without limitation, Section 10.9 thereof.
5. Amendment to Repayment of Indebtedness Provision. The third sentence of
Section 1.3 of the Purchase Agreement shall be deleted and replaced with the
following sentence:
"Upon the Closing, the Company shall pay $4,200,000 (being the
Estimated Net Income) to the Sellers, on behalf of the Stockholders
by wire transfer as set forth in Section 1.2 above."
[Remainder of page intentionally blank]
3
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed on their respective behalf by their respective officers
thereunto duly authorized, as of the date and year first above written.
GENERAL CIGAR CO. INC.
By: /s/ A. XXXX XXXXXX Xxxxx Xxxxxxx
--------------------
A. Xxxx Xxxxxx
Secretary
/s/ XXXXX XXXXXXX
---------------------------------
Xxxxxx Xxxxxxxxxx
/s/ XXXXXX XXXXXXXXXX
---------------------------------
Xxxxxxx Enterprises, Ltd.
By: /s/ XXXXX XXXXXXX
------------------------------
Xxxxx Xxxxxxx
General Partner
HONDURAS AMERICAN TABACO, S.A. de C.V.
By: /s/ XXXX X. XXXXX
------------------------------
Xxxx X. Xxxxx
