EXHIBIT 4.a
STOCK PURCHASE AGREEMENT
by and among
HARLYN PRODUCTS, INC.,
a California corporation
("Seller"),
HARLYN INTERNATIONAL,
a private Thailand limited company
(the "Company"),
and
THE L.L. KNICKERBOCKER CO., INC.,
a California corporation
("Buyer")
Dated: September 30, 1996
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS.................................................. 1
1.1 Defined Terms................................................ 1
1.2 Other Defined Terms.......................................... 4
ARTICLE II PURCHASE AND SALE OF STOCK................................... 4
2.1 Transfer of Stock............................................ 4
2.2 Consideration for Stock...................................... 4
ARTICLE III SETTLEMENT................................................... 5
3.1 Settlement................................................... 5
3.2 Documents to be Delivered.................................... 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY..... 6
4.1 Representations Regarding the Company........................ 6
4.2 Representations Regarding the Seller......................... 6
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...................... 16
5.1 Organization of Buyer........................................ 17
5.2 Authority Relative to Agreement.............................. 17
5.3 No Conflict or Violation..................................... 17
5.4 Consents and Approvals....................................... 18
5.5 Litigation................................................... 18
5.6 Brokers and Finders.......................................... 18
5.7 Material Misstatements or Omissions.......................... 18
ARTICLE VI ACTIONS BY SELLER, THE COMPANY AND BUYER PRIOR TO THE
SETTLEMENT DATE.............................................. 19
6.1 Maintenance of Business...................................... 19
6.2 Certain Prohibited Transactions.............................. 19
6.3 Investigation by Buyer....................................... 20
6.4 Consents and Best Efforts.................................... 21
6.5 Notification of Certain Matters.............................. 21
ARTICLE VII CONDITIONS TO SELLER'S OBLIGATIONS........................... 21
7.1 Representations, Warranties and Covenants.................... 21
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7.2 Consents..................................................... 21
7.3 No Governmental Proceeding or Litigation..................... 22
7.4 Commitment to Purchase Inventory............................. 22
7.5 Certificates................................................. 22
7.6 Corporate Documents.......................................... 22
ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS............................ 22
8.1 Representations, Warranties and Covenants.................... 22
8.2 Consents..................................................... 22
8.3 No Governmental Proceeding or Litigation..................... 23
8.4 Transfer of Shares of Capital Stock by Other Shareholders.... 23
8.5 Certificates................................................. 23
8.6 Corporate Documents.......................................... 23
8.7 Completion of Due Diligence.................................. 23
ARTICLE IX [INTENTIONALLY OMITTED]...................................... 23
ARTICLE X ACTIONS BY SELLER, THE COMPANY
AND BUYER AFTER THE SETTLEMENT............................... 24
10.1 Books and Records............................................ 24
10.2 Further Assurances........................................... 24
10.3 Filing Tax Returns........................................... 24
ARTICLE XI INDEMNIFICATION.............................................. 24
11.1 Survival of Representations, Etc............................. 24
11.2 Indemnification.............................................. 24
ARTICLE XII MISCELLANEOUS................................................ 25
12.1 Termination.................................................. 25
12.2 Assignment................................................... 25
12.3 Notices...................................................... 26
12.4 Choice of Law................................................ 27
12.5 Entire Agreement; Amendments and Waivers..................... 27
12.6 Counterparts................................................. 27
12.7 Invalidity................................................... 27
12.8 Headings..................................................... 27
12.9 Expenses..................................................... 27
12.10 Publicity.................................................... 28
12.11 Confidential Information..................................... 28
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STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT, dated as of September 30, 1996, is made
by and among HARLYN PRODUCTS, INC., a California corporation ("Seller"), HARLYN
INTERNATIONAL, a private Thailand limited company (the "Company"), and THE L.L.
KNICKERBOCKER CO., INC., a California corporation (the "Buyer").
R E C I T A L S :
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A. Seller owns 149,993 ordinary shares, with a par value of 100 baht
per share, of the Company (collectively, the "Stock"). The Company is currently
engaged in the business of the manufacture and sale of fine jewelry (the
"Business").
B. Buyer desires to purchase from Seller, and Seller desires to
transfer to Buyer, all of the Stock upon the terms and subject to the conditions
set forth in this Agreement.
A G R E E M E N T :
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NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
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1.1 Defined Terms
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As used herein, the terms below shall have the following meanings:
"Actions" shall mean any action, claim, suit, litigation, proceeding,
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dispute, arbitration or investigation and any outstanding order, writ,
injunction, judgment or decree.
"Affiliate" shall mean any person, corporation, partnership or other
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entity that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the specified
entity or person. The term "control" as used herein (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to vote fifty person (50%) or more of the outstanding
voting securities or interests of such person or entity.
"Balance Sheet Date" shall mean June 30, 1996.
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"Benefit Arrangement" shall mean any written employment, consulting,
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severance or other similar contract, arrangement or policy and each written
plan, arrangement, program, agreement or commitment providing for insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, life, health, disability or accident benefits or for
deferred compensation, profit-sharing bonuses, stock options, stock appreciation
rights, stock purchases or other forms of incentive compensation or post-
retirement insurance, compensation or benefits.
"Books and Records" shall mean (i) all records and lists pertaining to
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the business, customers, suppliers or personnel of the Company, (ii) all
product, business and marketing plans of the Company and (iii) all books,
ledgers, files, reports, plans, drawings and operating records of every kind
maintained by the Company in connection with its Business.
"Buyer" shall mean The L.L. Knickerbocker Co., Inc., a California
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corporation.
"Company" shall mean Harlyn International, a private Thailand limited
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company.
"Condition" shall mean the condition (financial or other), business,
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prospects, assets, liabilities and/or operations of the Company.
"Disclosure Schedules" means the schedules delivered by Seller to
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Buyer on or prior to the Settlement Date which set forth exceptions to the
representations and warranties contained in Article IV hereof and certain other
information called for by Article IV hereof and other provisions of this
Agreement.
"Encumbrances" shall mean any claim, lien, pledge, option, charge,
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easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance, community property rights, or other right of third parties, whether
voluntarily incurred or arising by operation of law, and includes, without
limitation, any agreement to give any of the foregoing in the future and any
contingent sale or other title retention agreement or lease in the nature
thereof.
"Environmental Laws" shall mean all federal, state, local or foreign
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statutes, ordinances, regulations, rules, judgments, orders, notice
requirements, court decisions, agency guidelines or principles of law which (i)
regulate or relate to the protection or clean-up of the environment, the use,
treatment, storage, transportation or disposal of hazardous, toxic or otherwise
dangerous substances (whether gas, liquid or solid), the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources, or the health and safety of persons or property or (ii)
impose liability with respect to any of the foregoing.
"Execution Date" shall mean September 30, 1996, or such other date as
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may be mutually agreed upon in writing by Seller and Buyer.
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"Execution Financial Statements" shall mean the balance sheet and the
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related statements of operations, stockholders' equity and cash flows for the
Company as of and for the period ended on the Execution Financial Statements
Date, together with the notes thereto.
"Execution Financial Statements Date" shall mean the Execution Date.
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"Facilities" shall mean all offices, buildings and other real property
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and related facilities which are owned or leased by the Company.
"Financial Statements" shall mean the balance sheet and the related
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statements of operations, stockholders' equity and cash flows for the Company as
of, and for the year ended, June 30, 1996, together with the notes thereto which
were audited by Deloitte Touche Komatsu, employees of which are the Company's
statutory auditors.
"Fixtures and Equipment" shall mean all of the furniture, fixtures,
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furnishings, machinery and equipment owned by the Company and located in, at or
upon the Facilities as of the Balance Sheet Date plus all additions,
replacements or deletions since the Balance Sheet Date in the ordinary course of
the Company's Business.
"Material Adverse Effect" shall mean a material adverse effect on the
-----------------------
Condition of the Company.
"Permit(s)" shall mean any and all licenses, permits, franchises,
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approvals, authorizations, consents, orders or other permits of, or filings
with, any governmental authority, whether foreign, federal, state, county or
local relating to the operation of the Company's Business.
"Representative" shall mean any officer, director, principal,
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attorney, accountant, agent, employee or other representative.
"Seller" shall mean Harlyn Products, Inc., a California corporation.
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"Settlement Date" shall mean October 15, 1996, or such other date as
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shall be agreed to in writing by Buyer and Seller.
"Subsidiaries" shall mean all corporations, partnerships, joint
------------
ventures or other entities in which the Company either owns capital stock, is a
general or limited partner or is in some other manner affiliated through an
investment or participation in the equity of such entities.
"Taxes" shall mean any federal, state, local or foreign income, sales,
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use, transfer, payroll, personal property, occupancy, franchise, premium or
other tax, levy, impost, fee, imposition, assessment or similar charge, together
with any related addition to tax, interest or penalty thereon.
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1.2 Other Defined Terms
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The following terms shall have the meanings given such terms in the
Sections set forth below:
Term Section
- ---- -------
Business Recitals
Company Documents 4.1(a)
Contracts 4.1(q)
Damages 11.2(a)
Net Asset Value 2.2
Other Shareholders 2.1
Proprietary Rights 4.1(u)
Purchase Price 2.2
Settlement 3.1
Stock Recitals
Transfer 2.1
ARTICLE II
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PURCHASE AND SALE OF STOCK
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2.1 Transfer of Stock
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Upon the terms and subject to the conditions contained herein, Seller
will sell, convey, transfer, assign and deliver (collectively, "Transfer") to
Buyer, and Buyer will acquire on the Settlement Date, the Stock, free and clear
of all Encumbrances. In addition, Seller agrees to use its best efforts to
cause all of the shareholders of the Company, other than Seller (the "Other
Shareholders"), to Transfer to Buyer on or before the Settlement Date all shares
of capital stock of the Company owned by the Other Shareholders, free and clear
of all Encumbrances. In order to effect the Transfer of the Stock to Buyer on
the Settlement Date, Seller agrees to execute all documents necessary to
instruct Wells Fargo Bank, or any other holder of the Stock on the Settlement
Date, to effect such Transfer.
Notwithstanding the foregoing, for financial reporting purposes the
Transfer of the Stock shall be deemed to be effective as of July 1, 1996.
2.2 Consideration for Stock
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Upon the terms and subject to the conditions contained herein, as
consideration for the purchase of the Stock, Buyer shall pay to Seller a
purchase price (the "Purchase Price") which shall be equal to the Net Asset
Value (as hereinafter defined) of the Company. The term "Net Asset Value" shall
mean the aggregate value of total assets of the Company as of June 30, 1996
reduced by the aggregate value of total liabilities of the Company as of June
30, 1996, subject to certain adjustments and/or eliminations of accounts as set
forth in that certain Letter of
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Intent dated September 20, 1996 by and between Seller and The L.L. Knickerbocker
(Thai) Co. Ltd., a wholly owned subsidiary of Buyer, and rolled forward to
reflect the values of such assets and liabilities as of September 30, 1996. The
parties hereto agree that the Net Asset Value is the aggregate amount set forth
on Schedule 2.2 attached hereto and that such amount is subject to adjustment
for any increase or decrease in the aggregate amount of the Net Asset Value as
determined upon verification by the Buyer of the values in Schedule 2.2 attached
hereto. The Purchase Price shall be paid as follows: (a) on the Execution Date,
$1,000,000 cash shall be paid by Buyer to Wells Fargo Bank to hold in escrow
until such time that (i) Seller and the Company deliver to Buyer the Disclosure
Schedules and Buyer completes its review of such Disclosure Schedules, and
Buyer, in its sole discretion, approves such Disclosure Schedules, (ii) the
respective Boards of Directors of the Seller and the Company approve the
execution and delivery of the Agreement and the consummation by the Seller and
the Company of the transactions contemplated thereby, and (iii) Seller obtains
the requisite consents of Wells Fargo Bank and Bank of Boston to the execution
and delivery of the Agreement by the Seller and the Company and the consummation
by the Seller and the Company of the transactions contemplated thereby, and at
such time that Buyer notifies Wells Fargo Bank of the occurrence of such events
then the $1,000,000 amount shall be released from escrow and paid to Wells Fargo
Bank and/or Bank of Boston and/or Seller in accordance with their mutual
agreement, with such amounts to be paid to said banks in partial repayment of
obligations of Seller and the Company to said banks; and (b) the remainder of
the Purchase Price, approximately $1,150,000, shall be paid on the Settlement
Date by Buyer to Wells Fargo Bank and/or Bank of Boston and/or Seller in
accordance with their mutual agreement, with such amounts to be paid to said
banks in partial repayment of obligations of Seller and the Company to said
banks; provided, however, such payment shall be contingent upon the satisfaction
of the requirements contained in Section 8.7 of this Agreement.
ARTICLE III
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SETTLEMENT
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3.1 Settlement
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The closing of the transactions contemplated herein (the "Settlement")
shall be held at 10:00 a.m. local time on the Settlement Date at ,
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unless the parties hereto otherwise agree.
3.2 Documents to be Delivered
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(a) To effect the Transfer of the Stock referred to in Section 2.1 and
the delivery of the consideration described in Section 2.2 hereof, Seller
and Buyer shall, on the Settlement Date, deliver the following:
(i) Seller shall have delivered to Buyer certificate(s)
evidencing the Stock, free and clear of any Encumbrances of any nature
whatsoever, accompanied by a separate share transfer deed duly
endorsed for Transfer of the Stock;
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(ii) Buyer and Seller shall each deliver all documents required to
be delivered by them, respectively, pursuant to Articles VII and VIII,
respectively;
(iii) Buyer shall deliver to Seller the remaining balance of the
Purchase Price as provided in Section 2.2; and
(iv) Seller shall deliver to Buyer letters of resignation of all
of the members of the Board of Directors of the Company effective as
of the Settlement Date.
(b) All instruments and documents executed and delivered to Buyer
pursuant hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Buyer. All instruments and documents
executed and delivered to Seller pursuant hereto shall be in form and
substance, and shall be executed in a manner, reasonably satisfactory to
Seller.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
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OF SELLER AND THE COMPANY
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4.1 Representations Regarding the Company
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Each of the Seller and the Company hereby, jointly and severally,
represent and warrant to Buyer, except as set forth on the Disclosure Schedules
attached hereto, the following:
(a) Organization and Qualification. The Company is a private
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Thailand limited company duly organized, validly existing and in good
standing under the laws of Thailand and has the requisite corporate power
and authority to carry on its business as it is now being conducted. The
Company is duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified
and in good standing would have a Material Adverse Effect. Copies of the
Memorandum of Association, Articles of Association, Certificate of
Registration and Affidavit along with Statement of Purpose (collectively,
the "Company Documents") of the Company heretofore delivered to the Buyer
are accurate and complete as of the date hereof.
(b) Subsidiaries. The Company does not have any direct or
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indirect Subsidiaries other than Harlyn Thailand, a private Thailand
limited company, all of the shares of capital stock of which shall be
Transferred by the Company prior to the Settlement Date.
(c) Capitalization. The Company has authorized 150,000 ordinary
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shares, with a par value of 100 baht per share, all of which are issued
and outstanding. There are no other shares of capital stock or other
equity securities of the Company outstanding, and no other outstanding
options, warrants, rights to subscribe (including
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any preemptive rights), calls or commitments of any character whatsoever to
which the Company is a party or may be bound, requiring the issuance or
sale of shares of any capital stock or other equity securities of the
Company or securities or rights convertible into or exchangeable for such
shares or other equity securities, and there are no contracts, commitments,
understandings or arrangements by which the Company is or may become bound
to issue additional shares of its capital stock or other equity securities
or options, warrants or rights to purchase or acquire any additional shares
of its capital stock or other equity securities or securities convertible
into or exchangeable for such shares or other equity securities.
(d) Authority Relative to Agreement. The Company has the
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requisite power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby
have been duly approved by the board of directors and shareholders of the
Company. No other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that
such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, or by equitable
principles, relating to or limiting the rights of creditors generally and
(b) limitations imposed by law or equitable principles upon the
availability of specific performance, injunctive relief or other equitable
remedies.
(e) No Conflict or Violation. Neither the execution and delivery
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of this Agreement by the Company, nor the consummation of the transactions
contemplated hereby, will (i) violate, conflict with, or result in a breach
of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Encumbrance upon any of the properties or assets of the
Company under, any of the terms, conditions or provisions of (A) the
Company Documents or (B) except as set forth on Schedule 4.1(e) of the
Disclosure Schedules, to the actual knowledge of the Seller and the
Company, any note, bond, mortgage, indenture, deed of trust, security or
pledge agreement, license, lease, franchise, Permit, partnership agreement
or other instrument or obligation to which the Company is a party or to
which the Company or any of its properties or assets may be subject, (ii)
subject to compliance with the statutes and regulations referred to in
Section 4.1(f) hereof, to the actual knowledge of the Seller and the
Company, violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its
properties or assets; except, in the case of each of clauses (i) and (ii)
above, for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of Encumbrances which, in the aggregate, would
not have a Material Adverse Effect or (iii) except as set forth on Schedule
4.1(e) of the Disclosure Schedules, to the actual knowledge of the Seller
and the
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Company, result in the payment by, or the creation of any obligation
(absolute or contingent) to pay on behalf of, the Company of any severance,
termination, "golden parachute" or other similar payments pursuant to any
employment or other agreements of the Company.
(f) Consents and Approvals. Except as set forth on Schedule
----------------------
4.1(f) of the Disclosure Schedules and except for the approval of the Board
of Investment of the Government of Thailand of the Transfer of the Stock,
to the actual knowledge of the Seller and the Company, no notice to,
declaration, filing or registration with, or authorization, consent or
approval of, or Permit from, any domestic or foreign governmental or
regulatory body or authority, or any other person or entity, is necessary
in connection with the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated by this Agreement.
(g) Financial Statements. The Financial Statements as of and for
--------------------
the year ended June 30, 1996 have been examined by Deloitte Touche Komatsu,
employees of which are the Company's statutory auditors. The Financial
Statements have been prepared in conformity with generally accepted
accounting principles consistently applied throughout the periods covered
thereby. The Financial Statements fairly and accurately present the
assets, liabilities and financial position of the Company as of the date
thereof and the results of operations and changes in shareholders' equity
and cash flows for the period then ended. At the Balance Sheet Date, there
were no material liabilities of the Company required to be reflected on the
Financial Statements in accordance with generally accepted accounting
principles other than the liabilities shown or reflected in the Financial
Statements or the notes thereto. On the Execution Date, the Company will
deliver to Buyer the Execution Financial Statements. The Execution
Financial Statements will have been prepared in conformity with generally
accepted accounting principles consistently applied throughout the periods
covered thereby. The Execution Financial Statements will fairly and
accurately present the assets, liabilities and financial position of the
Company as of the date thereof and the results of operations and changes in
shareholders' equity and cash flows for the periods then ended. At the
Execution Financial Statements Date, there will be no material liabilities
of the Company required to be reflected on the Execution Financial
Statements in accordance with generally accepted accounting principles
except liabilities shown or reflected in the Execution Financial Statements
or the notes thereto.
(h) Books and Records.
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(i) The Company has made and kept (and given Buyer access
to) the Books and Records and accounts, which, in reasonable detail,
accurately reflect the activities, transactions and business of the
Company.
(ii) The minute books of the Company previously delivered to
Buyer accurately reflect all action previously taken by the
shareholders, boards of directors and committees of the boards of
directors of the Company and contain a
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true and complete copy of each of the Company Documents, and all
amendments thereto, of the Company. The stock book records of the
Company previously delivered to Buyer are true, correct and complete.
(i) Litigation. Except as set forth on Schedule 4.1(i) of the
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Disclosure Schedules, there are no Actions pending or, to the actual
knowledge of the Seller and the Company, threatened (i) against the Company
or the Seller which would have a Material Adverse Effect or (ii) seeking to
enjoin the transactions contemplated hereby. Except as set forth on
Schedule 4.1(i) of the Disclosure Schedules, to the actual knowledge of
Seller and the Company, the Company is not subject to any order, judgment,
writ, injunction or decree which would have a Material Adverse Effect.
(j) Compliance with Law. To the actual knowledge of the Seller
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and the Company, (i) the Company has not violated or failed to comply with
any statute, law (including, without limitation, any Environmental Laws),
ordinance, regulation, rule, decree or order of any foreign, federal, state
or local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to its business or
operations, (ii) the conduct of the Company's business is in conformity
with all building code, health and environmental requirements and (iii) the
conduct of the Company's business is in conformity with all energy, public
utility, zoning and all other foreign, federal, state and local
governmental and regulatory requirements, except, with respect to clauses
(i), (ii) and (iii) above, where the aggregate of all such violations,
failures to comply and non-conformities would not have a Material Adverse
Effect.
(k) Permits. To the actual knowledge of the Seller and the
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Company, the Company has all Permits from governmental agencies required to
conduct its present Business as now being conducted, except such Permits
the failure of which to obtain would not have a Material Adverse Effect.
All Permits of the Company are valid and in full force and effect.
(l) Changes. Except as described on Schedule 4.1(l) of the
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Disclosure Schedules, since the Balance Sheet Date, none of the following
have occurred:
(i) material adverse change in the financial condition,
working capital, shareholders' equity, assets, liabilities, reserves,
revenues, income or Condition of the Company;
(ii) change in accounting methods, principles or practices
by the Company affecting its assets, liabilities or Condition;
(iii) revaluation by the Company of any of its assets,
including, without limitation, writing down the value of inventory or
writing off notes or accounts receivable;
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(iv) damage, destruction or loss (whether or not covered by
insurance) which had or will have a Material Adverse Effect;
(v) cancellation of any indebtedness or waiver or release of
any right or claim of the Company relating to its business activities
or properties which had or will have a Material Adverse Effect;
(vi) declaration, setting aside or payment of dividends or
distributions by the Company in respect of the Stock, or any
redemption, purchase or other acquisition of any stock or other
securities of the Company;
(vii) issuance by the Company of, or commitment of the
Company to issue, any shares of stock or other equity securities or
securities or other rights convertible into or exchangeable for shares
of stock or other equity securities;
(viii) adoption of a plan of liquidation or resolutions
providing for the liquidation, dissolution, merger, consolidation or
other reorganization of the Company;
(ix) increase in the rate of compensation payable or to
become payable to any director, officer or other employee of the
Company or any consultant, representative or agent of the Company,
including without limitation, the making of any loan to, or the
payment, grant or accrual of any bonus, incentive compensation,
service award or other similar benefit to, any such person;
(x) adverse change in employee relations which has or is
reasonably likely to have an adverse effect on the productivity, the
financial condition, results of operations or Condition of the Company
or the relationships between the employees of the Company and the
management of the Company;
(xi) amendment, cancellation or termination of any material
contract, agreement, lease or Permit relating to the Company or its
Business or operations or entry into any commitment, contract or
transaction which is not in the ordinary course of business,
including, without limitation, any employment or consulting
agreements;
(xii) mortgage, pledge or other encumbrance of any assets
of the Company;
(xiii) sale, assignment or transfer of any of the assets or
properties of the Company, other than in the ordinary course of
business;
(xiv) except in the ordinary course of business, incurrence
of indebtedness by the Company for borrowed money or commitment to
borrow
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money entered into by the Company, or loans made or agreed to
be made by the Company, or the guaranty of any indebtedness by the
Company;
(xv) incurrence of any material amount of liabilities,
except liabilities incurred in the ordinary course of business and
consistent with past practice, or material increase or change in any
assumptions underlying or methods of calculating, any doubtful account
contingency or other reserves;
(xvi) payment, discharge or satisfaction of any material
liabilities other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the Financial Statements
or incurred in the ordinary course of business since the Balance Sheet
Date;
(xvii) except in the ordinary course of business, capital
expenditure by the Company, the execution of any lease by the Company
or the incurring of any obligation by the Company to make any capital
expenditure or execute any lease;
(xviii) failure to pay or satisfy when due any obligation
of the Company except where the failure would not have a Material
Adverse Effect;
(xix) failure to diligently carry on the Business of the
Company in the ordinary course so as to keep available to the Buyer
the services of the Company's employees, and to preserve for the Buyer
the Business of the Company and the goodwill of the Company's
suppliers, customers and others having business relations with it;
(xx) disposition or lapsing of any Proprietary Rights or any
disposition or disclosure to any person of any Proprietary Rights not
theretofore a matter of public knowledge;
(xxi) any other event or condition which has or might
reasonably be expected to have a Material Adverse Effect; or
(xxii) agreement by the Company to do any of the things
described in the preceding clauses (i) through (xxi) other than as
expressly provided for herein.
(m) Liabilities. The Company has no liabilities, obligations or
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commitments of any nature (whether accrued, absolute, contingent or
otherwise and whether matured or unmatured), including, without limitation,
Tax liabilities due or to become due, except (i) liabilities reflected or
provided for in the Financial Statements, (ii) liabilities for lease
obligations under the leases listed on Schedule 4.1(p) of the Disclosure
Schedules, (iii) liabilities not required to be reflected on a balance
sheet or in the notes thereto in accordance with generally accepted
accounting principles which do
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not exceed $25,000 in the aggregate, and (iv) liabilities incurred since
the Balance Sheet Date in the ordinary course of business and consistent
with the Company's past practice which do not, in any case, exceed $100,000
in the aggregate.
(n) Taxes and Tax Returns.
---------------------
(i) The Company (and any affiliated group of which the
Company is now or has been a member) has timely filed with the
appropriate taxing authorities all returns in respect of Taxes
required to be filed through the date hereof. The information filed
is complete and accurate in all material respects. Except as
specified on Schedule 4.1(n) of the Disclosure Schedules, neither the
Company nor any group of which the Company is now or was a member, has
requested any extension of time within which to file returns in
respect of any Taxes.
(ii) All Taxes in respect of periods ending on or before
June 30, 1996 have been timely paid or will be timely paid by the
Company and the Seller, or an adequate reserve has been established
therefor, as set forth on Schedule 4.1(n) of the Disclosure Schedules
or in the Financial Statements, and the Company has no material
liability for Taxes in excess of the amounts so paid or reserves so
established.
(iii) Except as set forth on Schedule 4.1(n) of the
Disclosure Schedules, no deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental authority
against the Company or the Seller with respect to the operations of
the Company. Except as set forth in Schedule 4.1(n) of the Disclosure
Schedules, there are no pending or, to the actual knowledge of the
Seller and the Company, threatened audits, investigations or claims
for or relating to any liability in respect of Taxes.
(o) Fixed Assets; Inventory. The fixed assets of the Company
-----------------------
shown on the Financial Statements are valued at or below actual cost less a
depreciation charge calculated in accordance with the description contained
in the footnotes to the Financial Statements. The values at which the
inventories are shown on the Financial Statements have been determined in
accordance with the normal valuation policy of the Company, in conformity
with generally accepted accounting principles consistently applied
throughout the periods covered thereby, with adequate provisions or
adjustments for excess inventory, slow-moving inventory and inventory
obsolescence and skrinkage and are valued at the lower of cost or
realizable value. Except as set forth on Section 4.1(o) of the Disclosure
Schedules or in the Financial Statements and the notes thereto, the Company
has good and marketable title to all land, buildings, machinery, equipment,
fixtures, furnishings, real property improvements and other assets
(tangible or intangible) reflected in the Financial Statements or acquired
after the Balance Sheet Date, free and clear of all Encumbrances. Schedule
4.1(o) of the Disclosure Schedules contains a complete and accurate list of
all real property owned or leased by the Company and a list
-12-
of each location where the Company maintains a Facility. The Company enjoys
peaceful and undisturbed possession of all such real property and all of
the buildings, machinery, equipment, fixtures, furnishings, real property
improvements (including leasehold improvements) and other tangible assets
located thereon, and there are no pending or threatened condemnation
proceedings relating to any of the same. To the actual knowledge of the
Seller and the Company, all of such buildings, machinery, equipment,
fixtures, furnishings, real property improvements (including leasehold
improvements) and other tangible assets owned, leased or used by the
Company in the conduct of its business are (a) insured to the extent and in
a manner customary in the industry in which the Company is engaged, (b)
structurally sound with no known material defects, (c) in good operating
condition and repair, subject to ordinary wear and tear, (d) not in need of
maintenance or repair except for ordinary, routine maintenance and repair
the cost of which would not be material, (e) sufficient for the operation
of the Company's Business as presently conducted and (f) in conformity with
all applicable laws, ordinances, orders, regulations and other requirements
(including applicable zoning, environmental, motor vehicle safety,
occupational safety and health laws and regulations) relating thereto
currently in effect, except where the failure to conform would not have a
Material Adverse Effect.
(p) Leases. Schedule 4.1(p) of the Disclosure Schedules contains
------
a complete and accurate list of all leases pursuant to which the Company
leases real or personal property. To the actual knowledge of the Seller
and the Company, except as set forth on Schedule 4.1(e) of the Disclosure
Schedules, (i) all such leases are valid, binding and enforceable in
accordance with their terms and are in full force and effect and (ii) no
event of default has occurred which (whether with or without notice, lapse
of time or both or the happening or occurrence of any other event) would
constitute a default thereunder on the part of the Company.
(q) Contracts and Commitments. All executory contracts, plans,
-------------------------
undertakings and commitments to which the Company is a party or by which
the Company is bound (collectively, the "Contracts"), of the following
categories are listed on Schedule 4.1(q) of the Disclosure Schedules:
(i) partnership or joint venture agreements;
(ii) Contracts not made in the ordinary course of business;
(iii) employment contracts, including without limitation,
contracts to employ executive officers and other contracts with
present or former officers, directors or shareholders;
(iv) labor or union contracts;
(v) distribution, franchise, license, sales, agency or
advertising contracts that are material to the Business of the Company
or which are not terminable on thirty (30) days notice or less,
whether or not material;
-13-
(vi) options with respect to any property, real or personal,
whether as grantor or grantee;
(vii) Contracts made in the ordinary course of business
involving expenditures or liabilities, actual or potential, in excess
of $50,000;
(viii) Contracts or commitments relating to commission
arrangements with others;
(ix) promissory notes, loans, agreements, indentures,
evidences of indebtedness, guarantees or other instruments relating to
the lending of money individually in excess of $25,000 or in the
aggregate in excess of $100,000, whether as borrower, lender or
guarantor (excluding credit supplied by the Company in the ordinary
course of business); and
(x) Contracts containing covenants limiting the freedom of
the Company or any officer, director or shareholder of the Company to
engage in any line of business or compete with any person.
True copies of all of the Contracts, including all amendments and
supplements thereto, have been, or will be prior to the Settlement Date, made
available to the Buyer.
(r) Absence of Breaches or Defaults. To the actual knowledge of
-------------------------------
the Seller and the Company, except as set forth on Schedule 4.1(e) of the
Disclosure Schedules, (i) all of the Contracts are valid and in full force
and effect and (ii) no default or breach under any Contract by the Company
has occurred.
(s) Employee Benefit Plans. True, complete and correct
----------------------
copies of each Benefit Arrangement which covers or has covered employees or
former employees of the Company (with respect to their relationship with
the Company) have been delivered by the Company to Buyer.
(t) Brokers and Finders. Except with respect to all fees to be
-------------------
paid to Barrington Associates which shall be the sole responsibility of
Seller, neither the Company nor any of its officers, directors, employees
or agents have employed any broker, finder or similar agent or incurred any
liability for any brokerage fees, commissions, finder's fees or similar
payments in connection with the transactions contemplated by this
Agreement.
(u) Proprietary Rights. Schedule 4.1(u) of the Disclosure
------------------
Schedules sets forth (a) all of the Company's federal, state and foreign
registrations of trademarks and of other marks, trade names or other trade
rights, and all pending applications for any such registrations and (b) all
other trademarks and other marks, trade names and other trade rights used
by the Company in connection with its Business (collectively, the
"Proprietary Rights") The Proprietary Rights listed on Schedule 4.1(u) of
the Disclosure Schedules are all those used in the Business of the Company.
No person has a right to
-14-
receive any royalty or similar payment in respect of any Proprietary Rights
pursuant to any contractual arrangements entered into by the Company. The
Company has not granted any license nor sold or otherwise transferred any
interest in any of the Proprietary Rights to any other person. All of the
Proprietary Rights of the Company are valid and enforceable rights of the
Company and will not cease to be valid and in full force and effect by
reason of the execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement.
(v) Insurance. Schedule 4.1(v) of the Disclosure Schedules
---------
contains a complete and accurate list of all policies or binders of fire,
liability, title, worker's compensation and other forms of insurance
(showing as to each policy or binder the carrier, policy number, coverage
limits, expiration dates, annual premiums and a general description of the
type of coverage provided) maintained by the Company on its Business,
property or employees. Such insurance provides coverage to the extent and
in a manner (a) customary for the industry in which the Company is engaged
and (b) as may be required pursuant to applicable law and any and all
Contracts to which the Company is a party. The Company is not in default
under any of such policies or binders, and the Company has not failed to
give any notice or to present any claim under any such policy or binder in
a due and timely fashion. There are no outstanding material unpaid claims
under any such policies or binders. All policies and binders provide
sufficient coverage for the risks insured against, are in full force and
effect on the date hereof and shall be kept in full force and effect by the
Company through the Settlement Date.
(w) Severance Arrangements. The Company has not entered into any
----------------------
agreement, oral or written, with any present or former employee of the
Company that will result in any commitment or obligation (absolute or
contingent) of Buyer to make any payment to any present or former employee
of the Company following his or her termination of employment.
(x) No Other Agreements to Sell the Company. Neither the Company
---------------------------------------
nor the Seller has any commitment or legal obligation, absolute or
contingent, to any person or firm other than Buyer to (i) sell, assign or
transfer any material portion of the assets of the Company or any of the
capital stock of the Company, (ii) effect any merger, consolidation or
other reorganization of the Company or (iii) enter into an agreement to do
any of the foregoing.
(y) Labor Matters. The Company is not a party to any labor
-------------
agreement with respect to its employees with any labor organization, union,
group or association. There is no labor strike or labor disturbance
pending or threatened against the Company and in the past five (5) years
the Company has not experienced a work stoppage or other labor difficulty.
To the actual knowledge of the Company and the Seller, the Company is in
compliance with all applicable laws respecting employment practices, terms
and conditions of employment, wages and hours and is not engaged in any
unfair labor practice. There is no unfair labor practice charge or
complaint against the Company pending before any governmental agency.
-15-
(z) Banking Relationships. Schedule 4.1(z) of the Disclosure
---------------------
Schedules sets forth a complete and accurate description of all
arrangements that the Company has with any banks, savings and loan
associations or other financial institutions providing for checking or
savings accounts, safe deposit boxes, borrowing arrangements, and
certificates of deposit or otherwise, indicating account numbers if
applicable, and the person or persons authorized to act on behalf of the
Company in respect thereof.
(aa) Material Misstatements or Omissions. No representation or
-----------------------------------
warranty by the Company or the Seller in this Agreement, or in any
document, exhibit, statement, certificate or schedule heretofore or
hereinafter furnished or made available to the Buyer pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement, including, without limitation, the Disclosure Schedules,
contains or will contain any untrue statement of a material fact, or omits
or will omit to state any material fact necessary to make the statements or
facts contained therein not misleading.
4.2 Representations Regarding the Seller
------------------------------------
The Seller hereby represents and warrants to the Buyer the following:
(a) Ownership of Shares. Seller (a) is the record and beneficial
-------------------
owner of the Stock, (b) has good and marketable title to all of such Stock
and (c) has the absolute right, power and authority to sell, transfer and
deliver such Stock free and clear of all Encumbrances. Except for the
Stock, Seller does not own any shares of capital stock of the Company.
There are no options, warrants, rights, calls, commitments or other
agreements of any character whatsoever relating to the Stock owned by the
Seller.
(b) Authority Relative to Agreement. The Seller has the
-------------------------------
requisite power and authority to enter into this Agreement, to perform
Seller's obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by Seller and constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except that such
enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, or by equitable
principles, relating to or limiting the rights of creditors generally and
(b) limitations imposed by law or equitable principles upon the
availability of specific performance, injunctive relief or other equitable
remedies.
(c) No Conflict or Violation. To the actual knowledge of Seller,
------------------------
neither the execution and delivery of this Agreement by Seller, nor the
consummation of the transactions contemplated hereby, will (a) violate,
conflict with, or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any
of the properties or assets of Seller under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust,
security or pledge agreement, license, lease, partnership
-16-
agreement or other instrument or obligation to which Seller is a party or
to which Seller's properties or assets may be subject or (b) subject to
compliance with the statutes and regulations referred to in Section 4.1(f)
hereof, violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Seller or any of Seller's
properties or assets.
(d) Indebtedness of Seller. Seller has not obtained any loans or
----------------------
incurred any indebtedness for which any property, assets or securities of
the Company is pledged as collateral and there are no Encumbrances on any
of the properties, assets or securities of the Company imposed in
connection with any indebtedness or other obligations of Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to the Seller as follows:
5.1 Organization of Buyer
---------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has the requisite
corporate power and authority to carry on its business as it is now being
conducted and as contemplated to be conducted following the consummation of the
transactions contemplated by this Agreement.
5.2 Authority Relative to Agreement
-------------------------------
Buyer has the requisite power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
have been duly approved by the board of directors of Buyer. No other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except that such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws, or by equitable principles, relating to or
limiting the rights of creditors generally and (b) limitations imposed by law or
equitable principles upon the availability of specific performance, injunctive
relief or other equitable remedies.
5.3 No Conflict or Violation
------------------------
Neither the execution and delivery of this Agreement by Buyer, nor the
consummation of the transactions contemplated hereby, will (i) violate, conflict
with, or result in a breach of any provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
-17-
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Encumbrance upon any of the properties
or assets of Buyer under, any of the terms, conditions or provisions of (A) the
Articles of Incorporation or Bylaws of Buyer or (B) to the actual knowledge of
Buyer, any note, bond, mortgage, indenture, deed of trust, security or pledge
agreement, license, lease, franchise, Permit, partnership agreement or other
instrument or obligation to which Buyer is a party or to which Buyer or any of
its properties or assets may be subject or (ii) subject to compliance with the
statutes and regulations referred to in Section 4.1(f) hereof to the actual
knowledge of Buyer, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Buyer or any of its properties
or assets; except, in the case of each of clauses (i) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of Encumbrances which, in the aggregate, would not have a material
adverse effect on the condition (financial or other), business, prospects,
assets, liabilities or operations of Buyer.
5.4 Consents and Approvals
----------------------
Except for the approval of the Board of Investment of the Government
of Thailand of the Transfer of the Stock, to the actual knowledge of Buyer, no
notice to, declaration, filing or registration with, or authorization, consent
or approval of, or Permit from, any domestic or foreign governmental or
regulatory body or authority, or any other person or entity, is necessary in
connection with the execution and delivery of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated by this Agreement.
5.5 Litigation
----------
There are no Actions pending or, to the actual knowledge of Buyer,
threatened (i) against Buyer which would have a material adverse effect on the
condition (financial or other), business, prospects, assets, liabilities or
operations of Buyer or (ii) seeking to enjoin the transactions contemplated
hereby. To the actual knowledge of Buyer, Buyer is not subject to any order,
judgment, writ, injunction or decree.
5.6 Brokers and Finders
-------------------
Except with respect to all fees to be paid to Barrington Associates
which shall be the sole responsibility of Seller, neither Buyer nor any of its
officers, directors, employees or agents have employed any broker, finder or
similar agent or incurred any liability for any brokerage fees, commissions,
finder's fees or similar payments in connection with the transactions
contemplated by this Agreement.
5.7 Material Misstatements or Omissions
-----------------------------------
No representation or warranty by Buyer in this Agreement, or in any
document, exhibit, statement, certificate or schedule heretofore or hereinafter
furnished or made available to the Seller or the Company pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement
contains or will contain any untrue statement of a material fact,
-18-
or omits or will omit to state any material fact necessary to make the
statements or facts contained therein not misleading.
ARTICLE VI
----------
ACTIONS BY SELLER, THE COMPANY
------------------------------
AND BUYER PRIOR TO THE SETTLEMENT DATE
--------------------------------------
Seller, the Company and Buyer, as applicable, covenant as follows for
the period from the date hereof through the Settlement Date:
6.1 Maintenance of Business
-----------------------
The Business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of business and
consistent with past practice, and the Company shall use its best efforts to
maintain and preserve its Business, assets, prospects, employees, suppliers,
customers and other advantageous business relationships.
6.2 Certain Prohibited Transactions
-------------------------------
Except as set forth in the Disclosure Schedules, neither the Company
nor the Seller shall, without the prior written consent of Buyer:
(a) issue, sell, pledge, dispose of or encumber any of the
capital stock of the Company;
(b) except in the ordinary course of business, sell, pledge,
dispose of or encumber any of the assets of the Company;
(c) whether or not in the ordinary course of business, sell or
dispose of any of the material assets of the Company;
(d) amend or propose to amend any of the Company Documents;
(e) split, combine or reclassify any shares of the capital stock
of the Company or declare, set aside or pay any dividend or distribution,
payable in cash, stock, property or otherwise with respect to any of the
capital stock of the Company;
(f) redeem, purchase or otherwise acquire or offer to redeem,
purchase or otherwise acquire any of the capital stock of the Company;
(g) adopt a plan of liquidation or resolutions providing for the
liquidation, dissolution, merger, consolidation or other reorganization of
the Company;
(h) issue, sell, pledge or dispose of, or authorize, propose or
agree to the issuance, sale, pledge or disposition of, any shares of, or
any options, warrants or rights of any kind to acquire any shares of, or
any securities convertible into or
-19-
exchangeable for any shares of, capital stock or any other equity
securities of, the Company;
(i) acquire (by merger, consolidation, acquisition of stock or
assets or otherwise) any corporation, partnership or other business
organization or division thereof or make any material investment either by
purchase of stock or securities, contributions to capital, transfer of
property or purchase of any material amount of property or assets, in any
other individual or entity;
(j) authorize, recommend or propose any material change in the
capitalization of the Company;
(k) enter into or terminate any material Contract, lease or other
agreement, release or relinquish any material contract right or modify any
material Contract, lease or other agreement;
(l) make any change in the management structure of the Company
including, but not limited to, the hiring of additional officers or the
termination of existing officers;
(m) take any action with respect to the grant of any severance or
termination pay or with respect to any increase of benefits payable under
the severance or termination pay policies or agreements of the Company in
effect on the date hereof;
(n) adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or other arrangement for the
benefit or welfare of any employee or increase in any manner the
compensation or fringe benefits of any employee or pay any benefit not
required by any existing plan, policy, arrangement or agreement, or pay any
salary or other compensation of any form to the Seller, except in the
ordinary course of business and consistent with past practice.
(o) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability; or
(p) do any other act which would cause any representation or
warranty of Seller or the Company in this Agreement to become untrue in any
material respect.
6.3 Investigation by Buyer
----------------------
Seller and the Company shall allow Buyer during regular business hours
through Buyer's Representatives, to make such investigation of the business,
properties, books and records of the Company, and to conduct such examination of
the condition of the Company, as Buyer deems necessary or advisable to
familiarize itself with such business, properties, books, records, condition and
other matters, and to verify the representations and warranties of Seller and
the Company hereunder.
-20-
6.4 Consents and Best Efforts
-------------------------
Seller and the Company will, as soon as possible, commence to take all
action required to obtain all consents, approvals and agreements of, and to give
all notices and make all other filings with, any third parties, including
governmental authorities, necessary to authorize, approve or permit the full and
complete sale and transfer of all of the Stock to Buyer. In addition, subject
to the terms and conditions herein provided, each of the parties hereto
covenants and agrees to use its best efforts to take, or cause to be taken, all
action or do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby and to cause the fulfillment of the parties'
obligations hereunder.
6.5 Notification of Certain Matters
-------------------------------
Seller shall give prompt notice to Buyer, and Buyer shall give prompt
notice to Seller, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
any time from the date hereof to the Settlement Date and (ii) any material
failure of Seller, the Company or Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, and each party shall use all reasonable efforts to remedy same.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligation of Seller to cause the Transfer of the Stock to Buyer
on the Settlement Date is subject, in the discretion of Seller, to the
satisfaction, on or prior to the Settlement Date, of each of the following
conditions:
7.1 Representations, Warranties and Covenants
-----------------------------------------
All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Settlement Date as if such representations and warranties were made at and as of
the Settlement 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 Settlement Date. There shall be delivered to Seller a certificate (signed
by the President of Buyer) to the foregoing effect.
7.2 Consents
--------
All consents, approvals and waivers from governmental authorities and
other parties necessary to permit Seller to cause the Transfer of the Stock to
Buyer as contemplated hereby shall have been obtained.
-21-
7.3 No Governmental Proceeding or Litigation
----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected materially to damage Seller if the
transactions contemplated hereunder are consummated.
7.4 Commitment to Purchase Inventory
--------------------------------
Buyer shall purchase from Seller certain finished goods inventory
currently owned by Seller with an approximate value of $198,780, which inventory
currently is being used as salesman samples by Messers. Vahe Kizirian and Matti
Antonen.
7.5 Certificates
------------
Buyer will furnish Seller with such certificates of its officers to
evidence compliance with the conditions set forth in this Article VII as may be
reasonably requested by Seller.
7.6 Corporate Documents
-------------------
Seller shall have received from Buyer resolutions adopted by the board
of directors of Buyer approving this Agreement and the transactions contemplated
hereby, certified by Buyer's corporate secretary.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligation of Buyer to purchase the Stock as provided hereby is
subject, in the discretion of Buyer, to the satisfaction, on or prior to the
Settlement Date, of each of the following conditions:
8.1 Representations, Warranties and Covenants
-----------------------------------------
All representations and warranties of Seller and the Company contained
in this Agreement shall be true and correct in all material respects at and as
of the Settlement Date as if such representations and warranties were made at
and as of the Settlement Date, and Seller and the Company shall have performed
in all material respects all agreements and covenants required hereby to be
performed by them prior to or at the Settlement Date. There shall be delivered
to Buyer certificates (one certificate to be signed by the President of the
Company and one certificate to be signed by the President of the Seller) to the
foregoing effect.
-22-
8.2 Consents
--------
All consents, approvals and waivers from governmental authorities and
other parties necessary to permit Buyer to purchase the Stock from Seller and
Seller to cause the Transfer of the Stock to Buyer as contemplated hereby shall
have been obtained.
8.3 No Governmental Proceeding or Litigation
----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially and adversely affect the value
of the Stock or have a Material Adverse Effect if the transactions contemplated
hereunder are consummated.
8.4 Transfer of Shares of Capital Stock by Other Shareholders
---------------------------------------------------------
On or prior to the Settlement Date, the Other Shareholders shall have
Transferred to Buyer all of the shares of the capital stock of the Company owned
by the Other Shareholders.
8.5 Certificates
------------
Seller and the Company shall furnish Buyer with such certificates of
their respective officers to evidence compliance with the conditions set forth
in this Article VIII as may be reasonably requested by Buyer.
8.6 Corporate Documents
-------------------
Buyer shall have received from the Company and the Seller resolutions
adopted by the board of directors of the Company and the Seller, respectively,
approving this Agreement and the transactions contemplated hereby, certified by
the corporate secretary of the Company and the Seller, as applicable.
8.7 Completion of Due Diligence
---------------------------
Completion of Buyer's due diligence review of the items set forth on
Schedule 8.7 attached hereto and Buyer's satisfaction with the results of such
review.
ARTICLE IX
[INTENTIONALLY OMITTED]
-----------------------
-23-
ARTICLE X
---------
ACTIONS BY SELLER, THE COMPANY
------------------------------
AND BUYER AFTER THE SETTLEMENT
------------------------------
10.1 Books and Records
---- -----------------
Seller and Buyer agree that so long as 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
Settlement Date, remain in existence, each party (at its expense) shall have the
right to inspect and to make copies of the same at any time during business
hours for any proper purpose.
10.2 Further Assurances
---- ------------------
On and after the Settlement Date, Seller, the Company and Buyer will
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.
10.3 Filing Tax Returns
---- -------------------
Buyer agrees to file the Company's tax return for the fiscal year
ended June 30, 1996 on a timely basis, Seller agrees to assist Buyer with the
preparation of such tax return and Seller shall be responsible for the payment
of all taxes due and payable in connection with such tax return.
ARTICLE XI
----------
INDEMNIFICATION
---------------
11.1 Survival of Representations, Etc.
---- ---------------------------------
All statements contained in the Disclosure Schedules or in any
certificate or instrument of conveyance delivered by or on behalf of the parties
pursuant to this Agreement or in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the parties
hereunder. The representations and warranties of each of the Company, Seller
and Buyer contained herein shall survive for a period of two (2) years from the
Settlement Date regardless of any investigation made by any of the parties
hereto.
11.2 Indemnification.
---- ----------------
(a) By Seller. Seller shall indemnify, save and hold harmless
---------
Buyer and its Representatives from and against any and all costs, losses,
Taxes, liabilities, damages, lawsuits, claims and expenses, including
without limitation, interest, penalties, attorneys' fees and all amounts
paid in investigation, defense or settlement of any of the foregoing
(collectively, "Damages"), incurred in connection with, arising out of,
resulting
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from or incident to any breach of any covenant or warranty, or the
inaccuracy of any representation, made by the Company in or pursuant to
this Agreement. Seller shall save and hold harmless Buyer and its
Representatives from and against any and all Damages incurred in connection
with, arising out of, resulting from or incident to any breach of any
covenant or warranty, or the inaccuracy of any representation, made by
Seller in or pursuant to this Agreement.
(b) Assistance. Seller shall cooperate in all reasonable
----------
respects, at its cost, risk and expense, with Buyer's attorneys in the
investigation, prosecution, trial and defense of any lawsuit, claim,
proceeding, arbitration or action that is subject to indemnification under
Section 11.2(a) above.
(c) By Buyer. Buyer shall indemnify, save and hold harmless
--------
Seller from and against any and all Damages incurred in connection with,
arising out of, resulting from or incident to any breach of any covenant or
warranty, or the inaccuracy of any representation, made by the Buyer in or
pursuant to this Agreement.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.1 Termination
---- -----------
This Agreement may be terminated and the transactions contemplated
hereby abandoned by the mutual written consent of each of the parties hereto or
by any party hereto if the conditions to such party's obligations set forth in
Articles VII and VIII, respectively, have not been satisfied on or before
October 15, 1996 (unless waived by the party entitled to the benefit thereof),
- ----------
without liability of any party hereto; provided that no party will be released
--------
from liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of willful failure of any party to have performed its
obligations hereunder. This Agreement shall terminate automatically if the
Settlement Date has not occurred on or prior to October 15, 1996, unless the
----------
parties hereto agree to extend such date. In the event that a condition
precedent to its obligations is not satisfied, nothing contained herein shall be
deemed to require any party to terminate this Agreement, rather than to waive
such condition precedent and proceed with the transactions contemplated hereby.
12.2 Assignment
---- ----------
Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by Seller without the prior written consent of Buyer, nor by
Buyer without the prior written consent of Seller, except that Buyer may,
without such consent, assign the right to acquire the Stock to any affiliate of
Buyer; provided, however, that Buyer shall continue to be a party to this
Agreement and to be bound by the provisions hereof. 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.
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12.3 Notices
---- -------
Unless otherwise provided herein, any notice, request, instruction or
other document to be given hereunder by any party to the others shall be in
writing and delivered in person or by courier or facsimile transmission (such
delivered or facsimile notice to be effective on the date of delivery) or mailed
by certified mail, postage prepaid, return receipt requested (such mailed notice
to be effective on the date such receipt is acknowledged or refused), as
follows:
If to the Seller: Harlyn Products, Inc.
--------------------------------------
--------------------------------------
Attention:
----------------------------
Telecopy No.:
-------------------------
With a copy to (which shall not
--------------------------------------
constitute notice):
--------------------------------------
--------------------------------------
Attention:
----------------------------
Telecopy No.:
-------------------------
If to the Company: Harlyn International
--------------------------------------
--------------------------------------
Attention:
----------------------------
Telecopy No.:
-------------------------
With a copy to (which shall not
--------------------------------------
constitute notice):
--------------------------------------
--------------------------------------
Attention:
----------------------------
Telecopy No.:
-------------------------
If to Buyer: The L.L. Knickerbocker Co., Inc.
30055 Comercio
Rancho Santa Margarita, CA 92688
Attention: Anthony P. Shutts
Telecopy No.: (714) 589-0339
With a copy to Allen, Matkins, Leck, Gamble & Mallory
(which shall not 18400 Von Karman Avenue, 4th Floor
constitute notice): Irvine, California 92612
Attention: Ralph H. Winter, Esq.
Telecopy No.: (714) 553-8354
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or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
12.4 Choice of Law
---- -------------
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of California.
12.5 Entire Agreement; Amendments and Waivers
---- ----------------------------------------
This Agreement, together with all exhibits and schedules hereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No supplement,
amendment or modification of this Agreement shall be binding unless executed in
writing by each of the parties hereto. No waiver of any of the provisions of
this Agreement shall be binding unless executed in writing by the party sought
to be bound. No waiver 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.
12.6 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.
12.7 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, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
12.8 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.
12.9 Expenses
---- --------
Seller, the Company and Buyer will each be liable for their own costs
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Agreement.
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12.10 Publicity
----- ---------
Except as otherwise required by law, either the Company, Seller nor
Buyer shall issue any press release or make any public statement regarding the
transactions contemplated hereby (including, but not limited to, any press
release or public statement announcing the execution of this Agreement, the
termination of this Agreement or the consummation of the transactions
contemplated hereby), without the prior written approval of the other parties
hereto. The parties hereto shall issue a mutually acceptable press release as
soon as practicable after the Execution Date announcing the Agreement and the
transactions contemplated hereby.
12.11 Confidential Information
----- ------------------------
The parties acknowledge that the transaction described herein is of a
confidential nature and shall not be disclosed except to consultants, advisors,
affiliates and Representatives, or as required by law, until such time as the
parties make a public announcement regarding the transaction as provided in
Section 12.10. In connection with the negotiation of this Agreement and the
preparation for the consummation of the transactions contemplated hereby, each
party acknowledges that it will have access to confidential information relating
to the other parties. Each party shall treat such information as confidential,
preserve the confidentiality thereof and not duplicate or use such information,
except to advisors, consultants, affiliates and Representatives in connection
with the transactions contemplated hereby. Seller, at a time and in a manner
which they reasonably determine and after prior notice to and consultation with
Buyer, may notify employees of the Company of the fact of the subject
transaction. In the event of the termination of this Agreement for any reason
whatsoever, each party shall return to the other all documents, work papers and
other material (including all copies thereof) obtained in connection with the
transactions contemplated hereby and will use all reasonable efforts, including
instructing its employees and others who have had access to such information, to
keep confidential and not to use any such information, unless such information
is now, or is hereafter disclosed, through no act or omission of such party, in
any manner making it available to the general public.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
"Seller" HARLYN PRODUCTS, INC., a California corporation
By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
"Company" HARLYN INTERNATIONAL, a private Thailand
limited company
By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
"Buyer" THE L.L. KNICKERBOCKER CO., INC.,
a California corporation
By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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