EXHIBIT 10.35
ASSET PURCHASE AGREEMENT
DATED AS OF JANUARY 24, 2003
AMONG
CERAMICA Y VIDRIO DE NUEVO LEON, SA. DE C.V.
MAQUILADORA PRODUR, S.A. DE C.V.,
INDUSTRIAS TROMEX CORPORATION, S.A. DE C.V.,
AND
HI CERAMICS, S.A. DE C.V.
TABLE OF CONTENTS
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Page No.
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ASSET PURCHASE AGREEMENT..........................................................................................1
ARTICLE 1 PURCHASE OF ASSETS......................................................................................1
SECTION 1.1 PURCHASE AND SALE OF ASSETS..................................................................1
SECTION 1.2 INITIAL PAYMENT AT SECOND CLOSING............................................................2
SECTION 1.3 DEFERRED PAYMENT FOLLOWING SECOND CLOSING....................................................2
SECTION 1.4 LIABILITIES..................................................................................3
SECTION 1.5 HOLD-BACK OF XANADU FUNDS....................................................................3
ARTICLE 2 CLOSINGS................................................................................................3
SECTION 2.1 CLOSINGS.....................................................................................3
SECTION 2.2 TRANSFER OF ASSETS TO SELLER AT THE FIRST CLOSING............................................4
SECTION 2.3 TRANSFER OF ASSETS TO BUYER AT THE SECOND CLOSING; PAYMENT...................................5
SECTION 2.4 VALUE ADDED TAX..............................................................................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES..........................................................................6
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF ORIGINAL OWNERS............................................6
(a) Organization, Standing and Corporate Power of Produr..................................................6
(b) Organization, Standing and Corporate Power of Tromex..................................................6
(c) Authority; Noncontravention...........................................................................7
(d) Financial Statements..................................................................................7
(e) Undisclosed Liabilities...............................................................................7
(f) Litigation............................................................................................8
(g) Taxes.................................................................................................8
(h) Brokers...............................................................................................8
(i) Compliance with Laws; Environmental Laws..............................................................8
(j) Title to Properties; Liens............................................................................8
(k) Owned and Leased Real Property........................................................................9
(l) Employee Relations....................................................................................9
(m) Insurance............................................................................................10
(n) Customers and Suppliers..............................................................................10
(o) Leased Personal Property.............................................................................11
(p) Acquired Assets are Freely Transferable..............................................................11
(q) Transactions With Related Parties....................................................................11
(r) Material Agreements..................................................................................11
(s) No Additional Representations........................................................................12
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF SELLER....................................................12
(a) Organization, Standing and Corporate Power of Seller.................................................13
(b) Authority; Noncontravention..........................................................................13
(c) Undisclosed Liabilities..............................................................................13
(d) Absence of Certain Changes or Events with respect to Seller..........................................13
(e) Litigation...........................................................................................14
(f) Taxes................................................................................................14
(g) Brokers..............................................................................................14
(h) Compliance with Laws; Environmental Laws.............................................................14
(i) Title to Properties; Liens...........................................................................14
(j) Owned and Leased Real Property.......................................................................15
(k) Accounts Receivable..................................................................................16
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(l) Employees............................................................................................16
(m) Insurance............................................................................................16
(n) Leased Personal Property.............................................................................16
(o) Transactions With Related Parties....................................................................16
(p) Material Agreements..................................................................................16
(q) No Additional Representations........................................................................18
SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF BUYER.....................................................18
(a) Organization, Standing and Corporate Power of Buyer..................................................18
(b) Authority; Noncontravention..........................................................................18
(c) Litigation...........................................................................................19
(d) Brokers..............................................................................................19
(e) Disclosure...........................................................................................19
(f) No Additional Representations........................................................................19
ARTICLE 4 COVENANTS RELATING TO CONDUCT OF BUSINESS..............................................................19
SECTION 4.1 CONDUCT OF BUSINESS BY SELLER...............................................................19
SECTION 4.2 OTHER ACTIONS...............................................................................20
ARTICLE 5 ADDITIONAL AGREEMENTS..................................................................................20
SECTION 5.1 ACCESS TO INFORMATION; CONFIDENTIALITY......................................................20
SECTION 5.2 REASONABLE EFFORTS; NOTIFICATION............................................................21
SECTION 5.3 FEES AND EXPENSES; TAXES....................................................................21
SECTION 5.4 PUBLIC ANNOUNCEMENTS........................................................................22
SECTION 5.5 BANK ACCOUNTS...............................................................................22
SECTION 5.6 CREDIT LINE.................................................................................22
SECTION 5.7 PAYMENT OF INDEBTEDNESS.....................................................................22
SECTION 5.8 EMPLOYEE MATTERS............................................................................23
ARTICLE 6 CONDITIONS PRECEDENT TO FIRST CLOSING..................................................................23
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE FIRST CLOSING...........................23
(a) Authorizations, Consents, and Approvals..............................................................24
(b) No Injunctions or Restraints.........................................................................24
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF SELLER.........................................................24
(a) Representations and Warranties.......................................................................24
(b) Performance of Obligations of Original Owners........................................................24
(c) Performance of Obligations of Buyer..................................................................24
(d) Directors Authorizations.............................................................................24
(e) No Suit or Judgment..................................................................................24
(f) Delivery of Notarial Instruments and Invoices........................................................24
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF BUYER..........................................................25
(a) Representations and Warranties.......................................................................25
(b) Performance of Obligations of Original Owners and Seller.............................................25
(c) Directors Authorizations.............................................................................25
(d) No Suit or Judgment..................................................................................25
(e) Opinion of Counsel...................................................................................25
(f) Board and Lender Authorizations......................................................................25
(g) Mortgagee's Policy of Title Insurance................................................................25
SECTION 6.4 CONDITIONS TO OBLIGATIONS OF ORIGINAL OWNERS................................................25
(a) Representations and Warranties.......................................................................26
(b) Performance of Obligations of Seller and Buyer.......................................................26
SECTION 6.5 FRUSTRATION OF CLOSING CONDITIONS...........................................................26
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ARTICLE 7 CONDITIONS PRECEDENT TO SECOND CLOSING.................................................................26
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE SECOND CLOSING..........................26
(a) Authorizations, Consents, and Approvals..............................................................26
(b) No Injunctions or Restraints.........................................................................26
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF BUYER..........................................................26
(a) Representations and Warranties.......................................................................26
(b) Performance of Obligations of Seller.................................................................27
(c) Board Authorizations.................................................................................27
(d) No Suit or Judgment..................................................................................27
(e) Opinion of Counsel...................................................................................27
(f) Material Adverse Change..............................................................................27
(g) Board and Lender Authorizations......................................................................27
(h) Delivery of Notarial Instruments and Invoices........................................................27
(i) Payment and Compromise of Indebtedness...............................................................27
(j) Cancellation of Lien Securing the Xanadu Debt........................................................27
(k) Owner's Policy of Title Insurance....................................................................28
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF SELLER.........................................................28
(a) Representations and Warranties.......................................................................28
(b) Performance of Obligations of Buyer..................................................................28
SECTION 7.4 FRUSTRATION OF CLOSING CONDITIONS...........................................................28
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER......................................................................28
SECTION 8.1 TERMINATION.................................................................................28
SECTION 8.2 EFFECT OF TERMINATION.......................................................................29
SECTION 8.3 AMENDMENT...................................................................................29
SECTION 8.4 EXTENSION: WAIVER...........................................................................29
SECTION 8.5 PROCEDURE FOR TERMINATION...................................................................29
ARTICLE 9 INDEMNIFICATION........................................................................................29
SECTION 9.1 INDEMNIFICATION.............................................................................29
(a) By Seller and the Original Owners....................................................................29
(b) By Buyer.............................................................................................30
(c) Direct Liability.....................................................................................30
(d) Third Party Claim....................................................................................30
(e) Limitation of Indemnity..............................................................................31
SECTION 9.2 RIGHT TO SET-OFF............................................................................32
SECTION 9.3 LIMITATIONS ON LIABILITY IN CONNECTION WITH FAILURE TO MAKE ADVANCES........................32
ARTICLE 10 GENERAL PROVISIONS....................................................................................32
SECTION 10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS....................................32
SECTION 10.2 NOTICES..................................................................................32
SECTION 10.3 DEFINITIONS..............................................................................34
SECTION 10.4 INTERPRETATION; GOVERNING LANGUAGE.......................................................36
SECTION 10.5 COUNTERPARTS; FACSIMILES.................................................................36
SECTION 10.6 ENTIRE AGREEMENT: NO THIRD PARTY BENEFICIARIES...........................................36
SECTION 10.7 GOVERNING LAW............................................................................36
SECTION 10.8 ASSIGNMENT...............................................................................37
SECTION 10.9 ENFORCEMENT..............................................................................37
SECTION 10.10 EXHIBITS AND SCHEDULES...................................................................37
SECTION 10.11 ARBITRATION..............................................................................37
SECTION 10.12 CURRENCY AND PAYMENT.....................................................................38
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EXHIBITS
Exhibit A - Xanadu Release
Exhibits B-1 and B-2 - No-Lien Certificates
Exhibit C - Property Tax Invoices
SCHEDULES
Schedule 1.1(a) - Acquired Assets
Schedule 1.1(b) - Excluded Assets
Schedule 1.4 - Assumed Liabilities
Schedule 2.2(iii) - Property Requiring Import Permit
Schedule 3.1(d) - Financial Statements
Schedule 3.1(f) - Litigation
Schedule 3.1(g) - Taxes
Schedule 3.1(h) - Brokers of Original Owners
Schedule 3.1(k) - Real Property
Schedule 3.1(l) - Employee Relations
Schedule 3.1(m) - Insurance
Schedule 3.1(n) - Customers and Suppliers
Schedule 3.1(o) - Leases
Schedule 3.1(p) - Freely Transferable Assets
Schedule 3.1(r) - Material Agreements
Schedule 3.2(c) - Undisclosed Liabilities
Schedule 3.2(g) - Brokers of Seller
Schedule 3.2(j) - Real Property
Schedule 3.2(m) - Insurance
Schedule 3.2(n) - Leases
Schedule 3.2(p) - Material Agreements
Schedule 3.3(d) - Brokers of Buyer
Schedule 5.3 - Expenses
Schedule 5.7 - Payment of Indebtedness
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of January
24, 2003, among CERAMICA Y VIDRIO DE NUEVO LEON, S.A. DE C.V., a Mexico
corporation ("Seller"), MAQUILADORA PRODUR, S.A. DE C.V., a Mexico corporation
("Produr"), INDUSTRIAS TROMEX CORPORATION, S.A. DE C.V., a Mexico corporation
("Tromex"), and H I CERAMICS, S.A. DE C.V., a Mexico corporation ("Buyer").
Produr and Tromex are sometimes referred to as the "Original Owners." Other
capitalized terms used in this Agreement are defined or cross-referenced to the
applicable definition in Section 10.3 of this Agreement.
ARTICLE 1
PURCHASE OF ASSETS
SECTION 1.1 Purchase and Sale of Assets.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the First Closing (as defined in Section 2.1), Original Owners
shall sell to Seller, all of the assets of every type and description, real,
personal and mixed, tangible or intangible (if any such intangible assets
exist), and wherever located, used or held for use by or on behalf of Original
Owners, in connection with their ceramics, glass and metal fabrication
businesses as they are currently conducted on the date hereof (together, the
"Business"), together with all property acquired by Original Owners hereafter to
and through the First Closing, including, without limitation, the assets listed
on Schedule 1.1(a) (the "Acquired Assets"), in consideration of the payment by
Seller on behalf of the Original Owners of certain liabilities of Original
Owners not to exceed FIVE MILLION THREE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100
DOLLARS ($5,375,000.00) in the aggregate (the "Designated Liabilities"). The
Designated Liabilities shall include, without limitation, Taxes due by Original
Owners, amounts due by Original Owners to trade creditors, amounts due to
employees of Original Owners, and amounts due by Original Owners to Home
Interiors & Gifts, Inc., a Texas corporation, under that certain Pagare
(Promissory Note) dated December 19, 2002, executed by Produr and that certain
Account Transfer Agreement dated December 19, 2002, in the stated principal
amount of $1,000,000.00 executed by Produr and Tromex (collectively, the "Home
Interiors Debt"), and the Xanadu Debt. The term "Xanadu Debt" shall be defined
as amounts due by Original Owners to Xanadu Candle International, Ltd., a
British Virgin Islands corporation, under that certain Reconocimiento de Adeudo
dated December 1, 2002, as amended January 24, 2003, among Original Owners and
Xanadu. The amount of the Xanadu Debt will be adjusted by audit performed by
Buyer so that it includes only sums advanced to or for the direct benefit of
Original Owners and interest at eight percent (8%); however, in no event shall
the Xanadu Debt exceed the sum of U.S. One Million Two Hundred Twenty Six
Thousand Nine Hundred Forty-Seven and 28/100 Dollars ($1,226,947.28). The
definition of the Xanadu Debt noted herein shall control over any other
definition noted in any other document executed by the parties on the same date
herewith.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, at the First Closing, Seller shall grant to Buyer an irrevocable
option to purchase the Acquired Assets (the
ASSET PURCHASE AGREEMENT - PAGE 1
"Option"), in consideration of the agreement by Buyer to establish a revolving
line of credit (the "Credit Line") for the benefit of Seller in the maximum
amount of FIVE MILLION THREE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 DOLLARS
($5,375,000.00), in strict accordance with Section 5.6. However, the Option
shall not entitle Buyer to purchase accounts receivable of Seller, and all
accounts receivable of Original Owners and Seller together with those other
assets listed on Schedule 1.1(b) shall be excluded from assets to be sold to
Buyer (the "Excluded Assets").
(c) Upon the terms and subject to the conditions set forth in this
Agreement, at the Second Closing (as defined in Section 2.1), upon the exercise
by Buyer of the Option, Seller shall sell to Buyer, all of the assets of every
type and description, real, personal and mixed, tangible or intangible, and
wherever located, used or held for use by or on behalf of Seller, in connection
with the Business, including, without limitation, the Acquired Assets and all
property acquired following the date of the First Closing and through the date
of the Second Closing, but excluding the Excluded Assets, in consideration of
the payment by Buyer to Seller of the following amounts (the "Option Exercise
Price"):
(i) The Initial Payment (as defined in Section 1.2); and
(ii) The Deferred Payment (as defined in Section 1.3).
The Acquired Assets shall be transferred by Seller to Buyer free of Liens of any
kind or character. It is understood by the parties that immediately prior to the
Second Closing a Lien will exist in favor of Buyer to secure the Credit Line and
a Lien will exist in favor of Xanadu to secure the Xanadu Debt; however, all
releases and other instruments evidencing the release of Lien securing the
Xanadu Debt, satisfactory to Buyer in its sole discretion, shall be provided to
Buyer at Closing as a condition to Buyer's obligation to effect the Second
Closing.
SECTION 1.2 Initial Payment at Second Closing. At the Second Closing,
following repayment by the Seller to Buyer of the amount due under Section 5.6,
with respect to the Credit Line, Buyer will pay to the Seller in cash the
Initial Payment, which shall be an amount equal to:
(a) the Repayment Amount; PLUS
(b) fifty percent (50%) of the value of unsold inventory manufactured
by the Original Owners and Seller during the month of January 2003 and on hand
on the date of the Second Closing, which shall be valued at the lesser of
wholesale value and fair market value; PLUS
(c) fifty percent (50%) of the amount (if positive) calculated by
subtracting (i) the Repayment Amount from (ii) $5,375,000.00.
SECTION 1.3 Deferred Payment Following Second Closing. If (a) the
Revenue of Buyer from all sources other than HIG and HIG Affiliates for the
fiscal year ending December 31, 2003 is greater than U.S.$10,000,000.00, and (b)
the Revenue of Buyer for the fiscal year ending December 31, 2003 received from
Pottery Barn is $7,000,000.00 or more, Buyer will make a payment of
U.S.$125,000.00 to the Seller (or its designee), within thirty days following
completion
ASSET PURCHASE AGREEMENT - PAGE 2
of internal audits necessary for the calculation of Revenue, but not later than
ninety (90) days following December 31, 2003, (such potential payment to be
referred to as the "Deferred Payment"). "Revenue" shall mean gross revenue from
sales of inventory of Buyer made in the ordinary course of business (but
excluding Revenue from sales to HIG and HIG Affiliates). Calculation of Revenue
will be in accordance with U.S. GAAP.
SECTION 1.4 Liabilities. In connection with the purchase of the
Acquired Assets at the First Closing, Seller shall assume the Home Interiors
Debt and the Xanadu Debt. In connection with the purchase of the Acquired Assets
at the Second Closing, Buyer shall only assume only those liabilities
specifically listed on the attached Schedule 1.4 ("Assumed Liabilities").
Schedule 1.4 shall be updated at Closing, subject to approval by Buyer in its
sole discretion. Seller agrees that it will be solely responsible for the
satisfaction and discharge of all liabilities of Seller other than the Assumed
Liabilities, that accrue prior to as well as after the Second Closing Date, and
further, if necessary, Seller will contribute a portion of the Initial Payment,
or cause Xanadu to accept reduced payment of the Xanadu Debt or otherwise
provide sufficient funds to make satisfactory arrangements with all creditors,
such that all material liabilities of Original Owners and Seller (other than the
Xanadu Debt) are satisfied and all Liens on Acquired Assets are released, prior
to or simultaneously with the Second Closing. Buyer agrees that it will be
solely responsible for the satisfaction and discharge of all Assumed
Liabilities. Buyer further agrees that it will be solely responsible for all
liabilities relating to the Business which arise following the Second Closing
Date.
SECTION 1.5 Hold-back of Xanadu Funds. Seller will cause Xanadu to
allow the sum of Two Hundred Thousand and No/100 Dollars ($200,00.00) otherwise
payable to Xanadu in satisfaction of the Xanadu Debt to be remitted to and held
by Buyer at the Second Closing in order to satisfy the claims of unpaid
creditors of Original Owners or Seller arising prior to the Second Closing Date
("Creditor Claims"), to the extent that (a) such liabilities have not been paid
in full or compromised and paid in accordance with an agreement by such creditor
to accept less than full payment as of the date of the Second Closing, and (b)
Buyer agrees to effect the Second Closing, notwithstanding the existence of such
unpaid liabilities of Original Owners or Sellers as of the date of the Second
Closing. Nothing in the preceding sentence shall be construed as a waiver by
Buyer of any of its rights under this Agreement before, at, or following the
Second Closing. Funds so held by Buyer shall not accrue interest in favor of
Xanadu. Seller and Xanadu shall be entitled for ninety (90) days following
Closing to control the negotiation and settlement of Creditor Claims and Buyer's
consent to any compromise and settlement of Creditor Claims shall not be
unreasonably withheld. Buyer shall be entitled to establish a reserve of any
portion of the funds held, to pay Creditor Claims, prior to entering into a
compromise and settlement with any such creditor (the "Creditor Reserve").
Twelve (12) months following the Second Closing, Buyer shall remit to Xanadu or
Xanadu's designee all remaining sums which were not used to pay Creditor Claims
or are not included in a Creditor Reserve.
ARTICLE 2
CLOSINGS
SECTION 2.1 Closings. The purchase by Buyer of the Acquired Assets will
be affected through two closings. The first closing ("First Closing") will take
place on or before January 24,
ASSET PURCHASE AGREEMENT - PAGE 3
2003 (the "First Closing Date"), at the offices of Bell Nunnally & Martin LLP,
3232 McKinney Avenue, Suite 1400, Dallas, Texas, 75204, unless another time,
date or place is agreed to in writing by the parties thereto. The second closing
("Second Closing") will take place on or before February 17, 2003 (the "Second
Closing Date"), at the offices of Bell Nunnally & Martin LLP, 3232 McKinney
Avenue, Suite 1400, Dallas, Texas, 75204, unless another time, date or place is
agreed to in writing by the parties thereto.
SECTION 2.2 Transfer of Assets to Seller at the First Closing.At the
First Closing, the Original Owners shall do and take all steps reasonable and
necessary to transfer, assign and convey to Seller all of the right, title and
interest of Original Owners in and to the Acquired Assets. On and following the
First Closing, the Acquired Assets will be free of any Lien, except for the a
first priority Lien securing liabilities of Seller to Buyer arising under the
Credit Line and remaining unpaid Home Interiors Debt, if any, as described in
Section 5.6 and a subordinate Lien securing the Xanadu Debt.
At the First Closing the Original Owners shall deliver, or cause to be
delivered the following items:
(i) Certified copies of the Original Owners' incorporation
deeds, as well as evidence of registration of the same in the Public
Registry of Commerce;
(ii) Certified copies of the public deeds through which the
powers of attorney of Original Owners' legal representatives to
complete the transactions noted herein are evidenced;
(iii) Copies of all permits, authorizations or licenses to be
granted by any Governmental Entities necessary in order for the
Acquired Assets to be transferred by Original Owners to Seller,
including without limitation any permit (pedimentos de importacion)
necessary to transfer any imported asset (the "Import Permit"),
provided, however, it is agreed by the parties that with respect to the
property described in Schedule 2.2(iii) (the "Imported Property") the
required Import Permit shall have been requested promptly following the
First Closing and received prior to the Second Closing;
(iv) A notarial instrument, executed by a properly empowered
notary public and the Original Owners, in form and substance
satisfactory to Seller and Buyer and their legal counsel, evidencing
the conveyance to Seller of good and marketable title in fee simple
absolute to the Real Property;
(v) Invoices, executed by Original Owners, in form and
substance satisfactory to Seller and Buyer and their legal counsel, to
convey to Seller good and marketable title to all personal and
intangible property; and
(vi) Such other documents, certificates of title,
endorsements, assignments and instruments in form and substance
reasonably satisfactory to Seller and Buyer and their legal counsel, as
shall be reasonably necessary to vest in Seller title to the Acquired
Assets.
ASSET PURCHASE AGREEMENT - PAGE 4
At the First Closing the Seller shall deliver, or cause to be delivered
the following items:
(i) Certified copies of the Seller's incorporation deeds, as
well as evidence of registration of the same in the public registry of
commerce;
(ii) Certified copies of the public deeds through which the
powers of attorney of Seller's legal representatives to complete the
transactions noted herein are evidenced;
(iii) The agreements and instruments described in Section 5.6,
executed by Seller, in form and substance satisfactory to Buyer and its
legal counsel, to establish the Credit Line and to secure payment of
the Credit Line by all Acquired Assets; and
(iv) Such other documents, certificates of title,
endorsements, assignments and instruments in form and substance
reasonably satisfactory to Buyer and its legal counsel, as shall be
reasonably necessary, advisable or desirable to grant to Buyer a first
priority Lien on and the Option.
SECTION 2.3 Transfer of Assets to Buyer at the Second Closing; Payment.
At the Second Closing, upon exercise by Buyer of the Option and full payment of
that portion of the Purchase Price due at the Second Closing, Seller shall do
and take all steps reasonable and necessary to transfer, assign and convey to
Buyer all of the right, title and interest of Seller in and to the Acquired
Assets. Buyer shall deliver to Seller the Initial Payment in cash at the Second
Closing. On and following the Second Closing, the Acquired Assets will be free
of any Lien, and the Lien securing the Xanadu Debt will be released at the
Second Closing, whether or not the Xanadu Debt is paid in full. If all
conditions to the Second Closing are satisfied, and that portion of the Purchase
Price due at the Second Closing has been paid in full, Seller shall cause Xanadu
to agree to such Release of Lien in substantially the form attached to this
Agreement as Exhibit "A" (the "Xanadu Release"). At the Second Closing, Seller
shall deliver, or cause to be delivered, the following items:
(i) Certified copies of the Seller's incorporation deeds, as
well as evidence of registration of the same in the public registry of
commerce;
(ii) Certified copies of the public deeds through which the
powers of attorney of Seller's legal representatives to complete the
transactions noted herein are evidenced;
(iii) Copies of all permits, authorizations or licenses needed
to be granted by any Governmental Entities in order for the Acquired
Assets to be transferred by Seller to Buyer, including, without
limitation, the Import Permit referenced in Section 2.2(iii);
(iv) A notarial instrument, executed by a properly empowered
notary public and the Seller, in form and substance satisfactory to
Buyer and its legal counsel, evidencing the conveyance to Buyer of good
and marketable title in fee simple absolute to the Real Property, free
of any Lien;
ASSET PURCHASE AGREEMENT - PAGE 5
(v) Invoices, executed by Seller, in form and substance
satisfactory to Buyer and its legal counsel, to convey to Buyer good
and marketable title to all personal and intangible property, free of
any Lien; and
(vi) Such other documents, certificates of title,
endorsements, assignments and instruments in form and substance
reasonably satisfactory to Buyer and its legal counsel, as shall be
reasonably necessary to vest in Buyer title to the Acquired Assets.
SECTION 2.4 Value Added Tax. It is agreed that if Value Added Tax is
incurred at the First Closing as a result of the transfer of the Acquired Assets
from Original Owners to Seller, then Seller shall bear responsibility for
payment and be entitled to all refunds or other tax benefits relating to
Seller's payment of the Value Added Tax. Further, it is agreed that if Value
Added Tax is incurred at the Second Closing as a result of the transfer of the
Acquired Assets from Seller to Buyer, then Buyer shall bear responsibility for
payment and be entitled to all refunds or other tax benefits relating to Buyer's
payment of the Value Added Tax at the Second Closing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Original Owners. As an
inducement to Seller and Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Original Owners hereby jointly and
severally represent and warrant to Seller and Buyer that the following
statements are true and correct as of the date of this Agreement and will be
true and correct with equal force and effect as of the First Closing Date and,
as applicable, thereafter.
(a) Organization, Standing and Corporate Power of Produr.
Produr is a corporation, duly organized and validly existing under the laws of
the United Mexican States, as evidenced in Public Deed No. 20,356 dated March 9,
1988, before Mr. Jesus Montano Garcia, Notary Public No, 60 for the Federal
District, duly registered with the Public Registry of Commerce of Monterrey,
Nuevo Leon, under No. 499 Folio 165, Volume 303, Book No. 3, second auxiliary,
Commerce Section, and has the requisite corporate power and authority to carry
on its business as now being conducted. Its legal representative in this act,
Mr. Harold Lynn Blankemeyer, has sufficient authority to execute this Agreement
as evidenced in the Public Deed described above, which authority to date has not
been revoked nor amended or limited in any manner whatsoever.
(b) Organization, Standing and Corporate Power of Tromex.
Tromex is a corporation, duly organized and validly existing under the laws of
the United Mexican States, as evidenced in Public Deed No. 704 dated February
20, 1981, before Mr. Ramiro A. Bravo Rivera, Notary Public No. 18 for Monterrey,
Nuevo Leon, and duly registered with the Public Registry of Commerce of
Monterrey, Nuevo Leon, under No. 410 Folio 259, Volume 243, Book No. 3, second
auxiliary, Commerce Section, and has the requisite corporate power and authority
to carry on its business as now being conducted. Its legal representative in
this act has sufficient power and authority in order to execute this Agreement
as evidenced in Public Deed No. 5190 granted on March 17, 1993, by Mr. Carlos
Rousseau Garza, Notary Public No. 74 of Guadalupe, Nuevo Leon, which true first
copy was recorded before the Public Registry of Commerce at Monterrey, Nuevo
Leon,
ASSET PURCHASE AGREEMENT - PAGE 6
under commercial folio 1816, Volume 199-37, Book No. 4, third auxiliary,
Commerce Section, which authority to date has not been revoked or amended or
limited in any manner whatsoever.
(c) Authority; Noncontravention. Original Owners have the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Original Owners and the consummation by Original
Owners of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Original Owners,
including, but not limited to the authorizations granted by the Board of
Directors Meetings of Original Owners to execute this Agreement on behalf of
Original Owners, including powers of attorney for acts of domain or a valid
special power of attorney to enter into this specific transaction. This
Agreement has been duly executed and delivered by Original Owners and
constitutes a valid and binding obligation of Original Owners, enforceable
against Original Owners in accordance with its terms. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to the
loss of any benefit under, or result in the creation of any Liens upon (except
as set forth in Section 5.6), any of the properties or assets of Original Owners
under (i) the incorporation deeds or bylaws of Original Owners, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Original
Owners or their properties or assets or any other Material Agreement, or (iii)
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Original Owners or their properties or assets. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity, is required by or with respect to Original Owners
in connection with the execution and delivery of this Agreement by Original
Owners or the consummation by Original Owners of the transactions contemplated
by this Agreement.
(d) Financial Statements. Schedule 3.1(d) contains the
unaudited balance sheets of Original Owners as of December 31, 2001 and for the
eleven (11) month period ending November 30, 2002, as prepared by Original
Owners and the related statements of operations for the fiscal years then ended,
including the footnotes thereto, (collectively, the "Financial Statements").
Such Financial Statements have been prepared in conformity with Mexican GAAP,
and present fairly, in all material respects, the financial position of and
results of operations, changes in Stockholders' equity and cash flows of
Original Owners as of and for the periods then ended.
(e) Undisclosed Liabilities. Except (i) as disclosed,
reflected or reserved against in the Financial Statements, or (ii) for
liabilities and obligations incurred in the ordinary course of business
consistent with past practices since the date of the Financial Statements,
Original Owners do not have any Knowledge of material liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) required by
Mexican GAAP to be set forth on the Financial Statements of Original Owners. No
facts or circumstances exist whereby any employee, officer, director or agent of
Original Owners would be entitled to make a material claim for indemnification
under the incorporation deed or bylaws of Original Owners or under the Federal
Labor Law or other applicable law of Mexico.
ASSET PURCHASE AGREEMENT - PAGE 7
(f) Litigation. Except as set forth in Schedule 3.1(f), there
is no suit, action or legal proceeding pending or, to the Knowledge of Original
Owners, threatened against or affecting Original Owners, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Original Owners.
(g) Taxes. Except as set forth in Schedule 3.1(g), all Taxes
that are due and payable by Original Owners have been timely paid, and Original
Owners have timely and accurately filed (and, through the First Closing Date,
will timely and accurately file) all Tax reports and returns required by law to
be filed by Original Owners.
(h) Brokers. Except as set forth in Schedule 3.1(h), no
broker, investment banker, financial advisor or other person, the fees and
expenses of which will be paid by Original Owners, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Original Owners.
(i) Compliance with Laws; Environmental Laws. Original
Owners have in effect all Permits necessary for them to own,
lease or operate their properties and assets and to carry on
the Business substantially as now conducted, and there has
occurred no default under any such Permit. Original Owners are
and have been in compliance with all applicable statutes,
laws, ordinances, regulations, rules, judgments, decrees or
orders of any Governmental Entity, which could result in a
material fine or a forfeiture or other Material Adverse
Effect.
(ii) Original Owners have not received any written
communication from a Governmental Entity alleging that
Original Owners are not in compliance in any material respect
with, or have liability under, any Environmental Laws.
Original Owners hold, and have complied with and are in
compliance with, all Permits required for Original Owners to
conduct their business under Environmental Laws, and Original
Owners are in compliance with all Environmental Laws.
(iii) Original Owners have not at any time
maintained, any Hazardous Materials within their property,
which could affect the Acquired Assets.
(j) Title to Properties; Liens. Original Owners have good
title to, or valid leasehold interests in, all of their tangible properties and
assets, including, without limitation, the Acquired Assets. All such tangible
assets and properties, other than assets and properties in which they have a
leasehold interest, are free and clear of all Liens, except those in favor of
Home Interiors & Gifts, Inc., Buyer and Xanadu. Upon consummation of the
transactions proposed herein to be consummated at the First Closing, Seller will
own the Acquired Assets free and clear of all Liens except for a first priority
Lien in favor of Buyer and a subordinate Lien securing the Xanadu Debt. In
connection with First Closing, Original Owners shall provide evidence reasonably
satisfactory to Buyer that indicate whether the Acquired Assets are imported and
whether their sale relates to a first sale. The Acquired Assets constitute all
of the assets and properties, real, personal, tangible and intangible that are
used or useable in the conduct of the Business as presently being conducted.
ASSET PURCHASE AGREEMENT - PAGE 8
None of the Acquired Assets are required to be registered with any Mexican
Public Registry. Additionally, none of the Acquired Assets are subject to any
Mexican governmental program, such as Pitex or maquila, that could limit the
transferability of the Acquired Assets.
(k) Owned and Leased Real Property. Schedule 3.1(k) contains a
list and brief description of all of the owned and leased real property of
Original Owners (the "Real Property"). The Real Property constitutes all real
properties used or occupied by Original Owners in connection with the Business.
Except as set forth on Schedule 3.1(k), with respect to the Real Property:
(i) No portion thereof is subject to any pending
condemnation proceeding by any public or quasi-public
authority and, to the Knowledge of Original Owners, there is
no threatened condemnation proceeding with respect thereto as
evidenced by the No-Lien Certificate issued by the Public
Registry of Property of Monterrey, Nuevo Leon and of
Guadalajara, Jalisco, Mexico, attached hereto as Exhibit "B-1
and B-2";
(ii) All buildings and structures located on the Real
Property, as well as the operation and maintenance thereof,
comply in all material respects with all applicable legal
requirements, and do not violate in any material respect the
rights of any third party and, except as set forth in Schedule
3.1(k), all buildings and structures are in good and operable
condition, in all material respects;
(iii) Except as set forth in Schedule 3.1(k), no
written notice of any increase in the assessed valuation of
the owned Real Property and no written notice of any
contemplated special assessment has been received by Original
Owners and, to the Knowledge of Original Owners, there is no
threatened increase in assessed valuation or threatened
special assessment pertaining to any of the Real Property;
(iv) There are no contracts, agreements, instruments,
licenses, commitments, leases or similar document, written or
oral, to which Original Owners are a party, granting to any
one or more persons the right of use or occupancy of any
portion of the parcels of the Real Property;
(v) There are no persons (other than Original Owners
and Seller) in possession of the Real Property; and
(vi) Original Owners have complied in paying any and
all property taxes and all other rights and fees regarding the
Real Property as evidenced by the corresponding invoices for
the last five (5) years attached hereto as Exhibit "C".
(l) Employee Relations. Schedule 3.1(l) hereto sets forth a
list of (x) all employees, commission salespersons and independent contractors
of Original Owners as of December 31, 2002, (y) then current annual compensation
of, and a description of fringe benefits provided by Original Owners to any such
employees, commission salespersons and independent contractors, and (z) any
increase, effective on or after
ASSET PURCHASE AGREEMENT - PAGE 9
December 31, 2002, in the rate or manner of compensation of
any employees, commission salespersons or independent
contractors.
(ii) Original Owners have no employment, consulting,
labor union or collective bargaining agreement with any
director, officer or employee of Original Owners, except as
set forth on Schedule 3.1(l).
(iii) Original Owners are and have complied with all
laws, rules and regulations which relate to hiring,
termination, wages, hours, discrimination in employment,
working conditions, including without limitation, laws, rules
and regulations relating to equal employment opportunities,
fair employment practices and occupational health and safety,
and collective bargaining and are not liable for any material
arrears of wages or any Taxes (including penalties) for
failure to so comply with any of the foregoing.
(iv) Except as set forth on Schedule 3.1(l), Original
Owners have duly paid all taxes and contributions in
connection with their actual or former employees, including
those related with the Mexican Social Security Institute
(IMSS), National Workers Housing Fund (INFONAVIT) and the
Retirement Administration System (SAR).
(v) There is no unfair labor practice charge or
material complaint against Original Owners pending before any
Governmental Entity. There is no charge or complaint against
Original Owners pending, or to the Knowledge of Original
Owners, threatened under any Legal Requirement. There is no
labor strike, dispute or stoppage, or any union organizing
campaign or petition for certification actually pending or, to
the Knowledge of Original Owners, threatened against or
involving Original Owners. No labor grievance has been filed
with Original Owners, has arisen out of or under a collective
bargaining or other labor agreement and is pending, and no
claim therefore has been asserted. Original Owners have not
experienced any work stoppage over the past two years.
(m) Insurance. Schedule 3.1(m) sets forth a list of all
policies of insurance maintained, owned or held by or for the benefit of
Original Owners on the date hereof. Original Owners shall use reasonable efforts
to keep or cause such insurance or comparable insurance to be kept in effect
through the Closing Date. Original Owners have complied with their obligations
under each of such insurance policies, and to the Knowledge of Original Owners,
have not failed to give any notice or present any claim thereunder in a due and
timely manner.
(n) Customers and Suppliers. Schedule 3.1(n) sets forth a list
of names and addresses of all customers and all suppliers, individually
accounting for $50,000.00 or more of Original Owners' sales or purchases during
the twelve (12) calendar months prior to December 31, 2002. To the Knowledge of
the Original Owners, there exists no actual termination or cancellation of the
business relationship of Original Owners with any material customer or material
group of
ASSET PURCHASE AGREEMENT - PAGE 10
customers or with any supplier or group of suppliers listed therein with respect
to which Original Owners have received written or oral notice of such
termination or cancellation, as the case may be.
(o) Leased Personal Property. Schedule 3.1(o) contains a list
of all leases involving aggregate lease payments over the life of such lease in
excess of $1,000.00 under which Original Owners are a lessee of or holds or
operates any personal property owned by any third person, and true, complete and
correct copies (or, in the case of oral leases, written descriptions) of such
leases have been previously furnished to Buyer.
(p) Acquired Assets are Freely Transferable. Except as set
forth on Schedule 3.1(p), all of the Acquired Assets that were imported into
Mexico are freely transferable.
(q) Transactions With Related Parties. Neither the
Stockholders of the Original Owners, nor any spouse, child, parent, sibling or
any other person or entity closely related to or affiliated with the
Stockholders of the Original Owners, as the case may be, nor any employee,
officer or director of Original Owners (i) owns any equity interest, directly or
indirectly in, or is an officer or director of, any proprietorship, firm,
company, corporation, partnership or other entity which: (a) is a competitor of
Original Owners; (b) is a customer or supplier of Original Owners; or (c) has
any contractual or business relationship whatsoever with either (i) Original
Owners (provided that the foregoing does not apply to the ownership by any of
them of not more than five percent (5%) of any outstanding security (or any
class thereof) of any corporation or partnership listed on a national securities
exchange); or (ii) has or claims to have any direct or indirect interest in any
tangible or intangible property of Original Owners, except with respect to the
Stockholders of Original Owners as holders of common stock of Original Owners.
(r) Material Agreements. Schedule 3.1(r) contains a true and
complete list of all written and oral contracts, agreements, instruments and
other understandings and commitments to which Original Owners are a party (all
such contracts, agreements, instruments and other understandings and
commitments, together with those listed on the other Schedules hereto, being
collectively called "Original Owners' Material Agreements" herein). Except as
set forth on Schedule 3.1(r), Original Owners are not a party to any of the
following, whether written or oral:
(i) distributorship, dealer, sales, advertising,
agency, manufacturer's representative or other contract
relating to the payment of a commission;
(ii) collective bargaining agreement or other
contract with or commitments to any labor union or proposed
labor union;
(iii) contract for future sales;
(iv) contract or commitment for the employment of any
officer, employee or consultant or any other type of contract
or understanding with any officer, employee or consultant,
including any agreement or understanding relating to severance
payments;
ASSET PURCHASE AGREEMENT - PAGE 11
(v) indenture, mortgage, promissory note, loan
agreement, pledge agreement, guarantee or other agreement or
commitment for the borrowing of money, for a line of credit or
for a leasing transaction of a type required to be
capitalized;
(vi) contract or commitment for capital expenditures
in excess of either $10,000.00 individually, or $25,000.00 in
the aggregate;
(vii) agreement or arrangement for the sale of any
assets, properties or rights or services or products other
than the sale thereof in the ordinary course of business at
normal profit margins;
(viii) contract with respect to the lending or
investing of funds;
(ix) contract or indemnification with respect to any
form of intangible property, including any intellectual
property rights or confidential and proprietary information
(except prepackaged software used in the ordinary course of
business);
(x) contract which restricts Original Owners from
engaging in any aspect of their business anywhere in the
world;
(xi) agreement for the acquisition or disposition of
any entity or a division of an entity made within the
preceding ten (10) years; or
(xii) any other contract material to the business of
Original Owners.
(xiii) All Original Owners' Material Agreements are
in full force and effect, constitute legal, valid and binding
obligations of the respective parties thereto, and are
enforceable in accordance with their respective terms.
Original Owners have in all material respects performed all of
the obligations required to be performed by it to date
pursuant to Original Owners' Material Agreements, and there
exists no material default, or any event which upon the giving
of notice or the passage of time, or both, would give rise to
a claim of a material default in the performance by Original
Owners or, to the Knowledge of Original Owners, any other
party to any of Original Owners' Material Agreements.
(s) No Additional Representations. ORIGINAL OWNERS DO NOT MAKE
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER
WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT.
SECTION 3.2 Representations and Warranties of Seller. As an inducement
to Buyer to enter into this Agreement and to consummate the transactions
contemplated hereby, Seller hereby represents and warrants to Buyer that the
following statements are true and correct as of the date of this Agreement
(except as otherwise noted) and will be true and correct with equal force and
effect as of the Second Closing Date.
ASSET PURCHASE AGREEMENT - PAGE 12
(a) Organization, Standing and Corporate Power of Seller.
Seller is a corporation, duly organized and validly existing under the laws of
the United Mexican States, as evidenced in Public Deed No. 145 dated December
16, 2002, before Mr. Fernando Hernandez Gomez, Public Broker No. 9 for the State
of Jalisco, duly registered with the Public Registry of Commerce of Guadalajara,
Jalisco, under Commercial File 16789 and has the requisite corporate power and
authority to carry on its business as now being conducted. Its legal
representative in this act, Mr. Armando Araujo, has sufficient authority to
execute this Agreement as evidenced in the Public Deed described above, which
authority to date has not been revoked nor amended or limited in any manner
whatsoever.
(b) Authority; Noncontravention. Seller has the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Seller, including, but not limited to the
authorizations granted by the Board of Directors Meetings of Seller to execute
this Agreement on behalf of Seller, including powers of attorney for acts of
domain or a valid special power of attorney to enter into this specific
transaction. This Agreement has been duly executed and delivered by Seller and
constitutes a valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of any benefit under, or result in
the creation of any Liens upon (except as set forth in Section 5.6), any of the
properties or assets of Seller under (i) the incorporation deed or bylaws of
Seller, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Seller or their properties or assets or any other Material
Agreement, or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Seller or their properties or assets. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity, is required by or with respect to Seller in
connection with the execution and delivery of this Agreement by Seller or the
consummation by Seller of the transactions contemplated by this Agreement.
(c) Undisclosed Liabilities. Except for liabilities to Buyer
and the Xanadu Debt, and as set forth in Schedule 3.2(c), Seller does not have
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise). No facts or circumstances exist whereby any employee,
officer, director or agent of Seller would be entitled to make a claim for
indemnification under the incorporation deed or bylaws of Seller or under the
Federal Labor Law or other applicable law of Mexico.
(d) Absence of Certain Changes or Events with respect to
Seller. Since the date of Seller's formation, Seller has conducted its business
in the ordinary course, and there has not been (i) any Material Adverse Change
in or to Seller, (ii) any debt incurred or assumed other than the Credit Line
and accounts payable in the ordinary course of business, (iii) any granting by
Seller to any employee of Seller of any increase in compensation, or any
granting by Seller to any employee
ASSET PURCHASE AGREEMENT - PAGE 13
of any severance or termination pay, (iv) any damage, destruction or loss,
whether or not covered by insurance, that has or could reasonably be expected to
have a Material Adverse Effect on the Acquired Assets, (v) any change in
accounting methods, principles or practices by Seller, materially affecting its
assets, liabilities or business, except insofar as any have been required by a
change in generally accepted accounting principles, (vi) any acquisition of real
property or undertaking or commitment to undertake capital expenditures, (vii)
any cancellation of any debts owed to or claims held by Seller, or (viii) any
sale, lease, transfer or other disposition of, or mortgage, pledge or creation
of any encumbrance on any assets of Seller other than a Lien in favor of Buyer.
(e) Litigation. There is no suit, action or legal proceeding
pending or, to the Knowledge of Seller, threatened against or affecting Seller,
nor is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Seller.
(f) Taxes. All Taxes that are due and payable by Seller have
been timely paid, and Seller has timely and accurately filed (and, through the
Second Closing Date, will timely and accurately file) all Tax reports and
returns required by law to be filed by Seller.
(g) Brokers. Except as set forth in Schedule 3.2(g), no
broker, investment banker, financial advisor or other person, the fees and
expenses of which will be paid by Seller, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller.
(h) Compliance with Laws; Environmental Laws. Seller has in
effect all Permits necessary for it to own, lease or operate its properties and
assets and to carry on its business substantially as now conducted, and there
has occurred no default under any such Permit. Seller is and has been in
compliance with all applicable statutes, laws, ordinances, regulations, rules,
judgments, decrees or orders of any Governmental Entity.
(ii) Seller has not received any written
communication from a Governmental Entity alleging that Seller
is not in compliance in any material respect with, or have
liability under, any Environmental Laws. Seller holds, and
have complied with and are in compliance with, all Permits
required for Seller to conduct their business under
Environmental Laws, and Seller is in compliance with all
Environmental Laws.
(iii) Seller has not at any time maintained, and will
not maintain from this date to the Second Closing, any
Hazardous Materials within its property, which could affect
the Acquired Assets.
(i) Title to Properties; Liens. Seller has good title to, or
valid leasehold interests in, all of its tangible properties and assets,
including without limitation, the Acquired Assets. All such tangible assets and
properties, other than assets and properties in which it has a leasehold
interest, are free and clear of all Liens, except for Liens in favor of Buyer
and Xanadu. Upon consummation
ASSET PURCHASE AGREEMENT - PAGE 14
of the transactions to occur at the Second Closing, Buyer will own the Acquired
Assets free and clear of all Liens. In connection with Second Closing, Seller
shall provide invoices that indicate whether the Acquired Assets are imported
and whether their sale relates to a first sale. The Acquired Assets constitute
all of the assets and properties, real, personal, tangible and intangible that
are used or useable in the conduct of the Business. None of the Acquired Assets
are required to be registered with any Mexican Public Registry. Additionally,
none of the Acquired Assets are subject to any Mexican governmental program,
such as Pitex or maquila, that could limit the transferability of the Acquired
Assets.
(j) Owned and Leased Real Property. The Real Property
constitutes all real properties used or occupied by Seller in
connection with its business.
(ii) Except as set forth on Schedule 3.1(j), with
respect to the Real Property:
(A) No portion thereof is subject to any
pending condemnation proceeding by any public or
quasi-public authority and, to the Knowledge of
Seller, there is no threatened condemnation
proceeding with respect thereto as evidenced by the
No-Lien Certificate issued by the Public Registry of
Property of Monterrey, Nuevo Leon, Mexico, to be
provided to Buyer at the Second Closing;
(B) All buildings and structures located on
the Real Property, as well as the operation and
maintenance thereof, comply in all material respects
with all applicable legal requirements, and do not
violate in any material respect the rights of any
third party and, except as set forth in Schedule
3.2(j), all buildings and structures are in good and
operable condition, in all material respects;
(C) Except as set forth in Schedule 3.2(j),
no written notice of any increase in the assessed
valuation of the owned Real Property and no written
notice of any contemplated special assessment has
been received by Seller and, to the Knowledge of
Seller, there is no threatened increase in assessed
valuation or threatened special assessment pertaining
to any of the Real Property;
(D) There are no contracts, agreements,
instruments, licenses, commitments, leases or similar
document, written or oral, to which Seller is a
party, granting to any one or more persons the right
of use or occupancy of any portion of the parcels of
the Real Property;
(E) There are no persons (other than Seller)
in possession of the Real Property; and
(F) Seller has complied in paying any and
all property taxes and all other rights and fees
regarding the Real Property.
ASSET PURCHASE AGREEMENT - PAGE 15
(k) Accounts Receivable. All accounts of Seller have arisen
from bona fide arms length transactions by Seller in the ordinary course of
business, and Seller has performed all of its obligations in connection with
such accounts receivable.
(l) Employees. Seller has and will have through the date of
the Second Closing, no employees.
(m) Insurance. Schedule 3.2(m) sets forth a list of all
policies of insurance maintained, owned or held by or for the benefit of Seller
as of the First Closing Date. Seller shall use reasonable efforts to keep or
cause such insurance or comparable insurance to be kept in effect through the
Second Closing Date. Seller will comply with its obligations under each of such
insurance policies, and will not fail to give any notice or present any claim
thereunder in a due and timely manner.
(n) Leased Personal Property. Schedule 3.2(n) contains a list
of all leases involving aggregate lease payments over the life of such lease in
excess of $1,000.00 under which Seller is a lessee of or holds or operates any
personal property owned by any third person, and true, complete and correct
copies (or, in the case of oral leases, written descriptions) of such leases
have been previously furnished to Buyer.
(o) Transactions With Related Parties. Neither the
Stockholders of Seller, nor any spouse, child, parent, sibling or any other
person or entity closely related to or affiliated with the Stockholders of
Seller, as the case may be, nor any employee, officer or director of Seller (i)
owns any equity interest, directly or indirectly in, or is an officer or
director of, any proprietorship, firm, company, corporation, partnership or
other entity which: (a) is a competitor of Seller; (b) is a customer or supplier
of Seller; or (c) has any contractual or business relationship whatsoever with
either (i) Seller; provided that the foregoing does not apply to the ownership
by any of them of not more than five percent (5%) of any outstanding security
(or any class thereof) of any corporation or partnership listed on a national
securities exchange; or (ii) has or claims to have any direct or indirect
interest in any tangible or intangible property of Seller, except with respect
to the Stockholders of Seller as holders of common stock of Seller.
(p) Material Agreements. Schedule 3.2(p) contains a true and
complete list of all written and oral contracts, agreements, instruments and
other understandings and commitments to which Seller is a party (all such
contracts, agreements, instruments and other understandings and commitments,
together with those listed on the other Schedules hereto, being collectively
called "Seller's Material Agreements" herein). Except as set forth on Schedule
3.2(p), Seller is not a party to any of the following, whether written or oral:
(i) distributorship, dealer, sales, advertising,
agency, manufacturer's representative or other contract
relating to the payment of a commission;
(ii) collective bargaining agreement or other
contract with or commitments to any labor union or proposed
labor union;
ASSET PURCHASE AGREEMENT - PAGE 16
(iii) continuing contract for the purchase of
products, materials, supplies, equipment or services under
which the undelivered balance thereof has a selling price in
excess of $10,000.00 and under which Seller are obligated to
perform for a period in excess of ninety (90) days after
Closing, which is not terminable by Seller with less than
thirty (30) days prior written notice without cost, forfeiture
or other liability at or at any time after the Closing;
(iv) contract for sales under which the undelivered
balance thereof has a selling price in excess of $10,000.00
and under which Seller are obligated to perform for a period
in excess of ninety (90) days after Closing, which is not
immediately terminable by Seller without cost or other
Liability at or at any time after the Closing;
(v) contract for future sales which is not
immediately terminable by Seller without cost or other
liability at or at any time after the Closing;
(vi) contract or commitment for the employment of any
officer, employee or consultant or any other type of contract
or understanding with any officer, employee or consultant,
including any agreement or understanding relating to severance
payments;
(vii) indenture, mortgage, promissory note, loan
agreement, pledge agreement, guarantee or other agreement or
commitment for the borrowing of money, for a line of credit or
for a leasing transaction of a type required to be
capitalized;
(viii) contract or commitment for capital
expenditures in excess of either $10,000.00 individually, or
$25,000.00 in the aggregate;
(ix) agreement or arrangement for the sale of any
assets, properties or rights or services or products other
than the sale thereof in the ordinary course of business at
normal profit margins;
(x) contract with respect to the lending or investing
of funds;
(xi) contract or indemnification with respect to any
form of intangible property, including any intellectual
property rights or confidential and proprietary information
(except prepackaged software used in the ordinary course of
business);
(xii) contract which restricts Seller from engaging
in any aspect of their business anywhere in the world;
(xiii) contract or group of related contracts with
the same person (excluding purchase orders entered into in the
ordinary course of business which are to be completed within
three (3) months of entering into such purchase orders) for
the purchase or sale of products or services under which the
undelivered balance thereof has a selling price in excess of
$10,000.00;
ASSET PURCHASE AGREEMENT - PAGE 17
(xiv) any other contract material to the business of
Seller.
(xv) All Seller's Material Agreements are in full
force and effect, constitute legal, valid and binding
obligations of the respective parties thereto, and are
enforceable in accordance with their respective terms. Seller
have in all material respects performed all of the obligations
required to be performed by it to date pursuant to the
Seller's Material Agreements, and there exists no material
default, or any event which upon the giving of notice or the
passage of time, or both, would give rise to a claim of a
material default in the performance by Seller or, to the
Knowledge of Seller, any other party to any of Seller's
Material Agreements.
(q) No Additional Representations. SELLER DOES NOT MAKE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER WITH
RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT.
SECTION 3.3 Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Seller that the following statements are true and
correct as of the date of this Agreement and will be true and correct with equal
force and effect as of the Closing Date:
(a) Organization, Standing and Corporate Power of Buyer. Buyer
is a corporation, duly organized and validly existing under the laws of the
United Mexican States, as evidenced in Public Deed No. 32,806 dated December 16,
2002, before Mr. Jose Moria Morera Gonzalez, Notary Public No. 102 for the
Federal District, duly registered with the Public Registry of Commerce of
Monterrey, Nuevo Leon, under No. 12737, Volume 3, first book on December 20,
2002 , and has the requisite corporate power and authority to carry on its
business as now being conducted. Its legal representative in this act, Mr.
Kenneth J. Cichocki, has sufficient authority to execute this Agreement as
evidenced in the Public Deed described above, which authority to date has not
been revoked nor amended or limited in any manner whatsoever.
(b) Authority; Noncontravention. Buyer has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement has been duly executed and delivered by Buyer and
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of the incorporation deed or bylaws of Buyer. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to Buyer in
connection with the execution and delivery of this Agreement or the consummation
by Buyer, of any of the transactions contemplated by this Agreement.
ASSET PURCHASE AGREEMENT - PAGE 18
(c) Litigation. There is no suit, action or proceeding pending
or, to the Knowledge of Buyer, threatened against or affecting Buyer that,
individually or in the aggregate, could reasonably be expected to (i) impair the
ability of Buyer to perform its obligations under this Agreement or (ii) prevent
the consummation of any of the transactions contemplated by this Agreement, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Buyer having, or which, insofar as
reasonably can be foreseen, would have any such effect in the future.
(d) Brokers. Except as set forth in Schedule 3.3(d), no
broker, investment banker, financial advisor or other person, the fees and
expenses of which will be paid by Buyer, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer.
(e) Disclosure. Buyer, through the conducting of its due
diligence, is not aware of any material inaccuracy in the representations and
warranties of Original Owners and Seller; however, the parties agree that any
Knowledge by Buyer of an inaccuracy in any representation of warranty of
Original Owners and Seller shall not result in any liability of Buyer or
prejudice the right of Buyer to pursue all rights and remedies set forth in this
Agreement.
(f) No Additional Representations. BUYER DOES NOT MAKE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER WITH
RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT.
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by Seller. During the period from the
date of this Agreement to the Second Closing Date, Original Owners and Seller,
as applicable, shall carry on the Business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, provided that
Buyer funds on a timely basis requested Advances under the Credit Line in
accordance with Section 5.6. Unless Seller advises Buyer in writing to the
contrary, Seller shall own the Acquired Assets, but Original Owners shall
continue to operate the Business. Further, Original Owners and Seller, as
applicable, shall use all reasonable efforts to preserve intact the Business'
current business organization, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with it
to the end that the goodwill relating to the Business, ongoing business and the
Acquired Assets shall be unimpaired at the Second Closing Date. Without limiting
the generality of the foregoing, but with the exceptions provided in this
Agreement, during the period from the date of this Agreement to the Second
Closing Date, without the prior written consent of Buyer, neither Original Owner
nor Seller shall:
(a) acquire or agree to acquire (i) by merging or
consolidating with, or by
ASSET PURCHASE AGREEMENT - PAGE 19
purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof, or (ii)
any assets that are material, individually or in the aggregate, to it;
(b) mortgage or otherwise encumber or subject to any Lien or
sell, lease or otherwise dispose of any of its material properties or
assets (including, without limitation, the Acquired Assets);
(c) (i) incur any indebtedness for borrowed money, guarantee
any indebtedness of another person, issue or sell any debt securities
or warrants or other rights to acquire any debt securities of it, or
guarantee any debt securities of another person, except in accordance
with Section 5.6, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person;
(d) make or agree to make any new capital expenditures;
(e) enter into any employment, bonus or severance agreements
(or amend any of the foregoing) with any of its present employees or
officers; or
(f) amend, modify, terminate or breach any Material Agreement
or enter into any agreement that would constitute a Material Agreement
hereunder; or
(g) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 4.2 Other Actions. Original Owners, Seller and Buyer shall not
take any action that would result in (i) any of the representations and
warranties of such party set forth in this Agreement becoming untrue, or (ii)
any of the conditions to the Closings set forth in Article 6 and Article 7not
being satisfied.
ARTICLE 5
ADDITIONAL AGREEMENTS
SECTION 5.1 Access to Information; Confidentiality. Original Owners and
Seller shall afford to Buyer reasonable access, during normal business hours
during the period prior to the Closing Dates, to Original Owners' and Seller's
respective properties, books, contracts, licenses, commitments, personnel and
operating and other records and, during such period, each of Original Owners and
Seller shall furnish promptly to Buyer all information concerning its business,
properties and personnel as Buyer may reasonably request with regard to the
Business and the Acquired Assets. Each party shall treat in confidence all
documents, materials and other information which it shall have obtained
regarding the other party during the course of the negotiations leading to the
consummation of the transactions contemplated hereby (whether obtained before or
after the date of this Agreement), and, in the event the transactions
contemplated hereby shall not be consummated, each party will return to the
other party all copies of nonpublic documents and materials which have been
furnished in connection therewith. Such documents, materials and information
shall not be communicated to any third person (other than to the respective
counsel, accountants, financial advisors, engineers, or the lenders of any
party). Prior to the Closing, Buyer
ASSET PURCHASE AGREEMENT - PAGE 20
shall not use any confidential information in any manner whatsoever except
solely for the purpose of evaluating the proposed purchase and sale of the
Acquired Assets, or the negotiation or enforcement of this Agreement or any
agreement contemplated hereby. The obligation of each party to treat such
documents, materials and other information in confidence shall not apply to any
information that (i) is or becomes lawfully available to such party from a
source other than the furnishing party, provided that such confidential
information is not known by the receiving party to be subject to another
confidentially agreement with or other obligation of secrecy to the furnishing
party, (ii) is or becomes generally available to the public other than as a
result of disclosure by such receiving party or its agents, or (iii) is required
to be disclosed under applicable law or judicial process, but only to the extent
it must be disclosed, and after notice to the furnishing party.
SECTION 5.2 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, the parties shall use all reasonable efforts to take, or cause
to be taken, all reasonable actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things reasonably
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner reasonably practicable, the Closings, and the other
transactions contemplated by this Agreement, including (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of any of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
(b) Original Owners and Seller shall give prompt notice to
Buyer, and Buyer shall give prompt notice to Original Owners and
Seller, of (i) any representation or warranty made by such party
contained in this Agreement that has become untrue or inaccurate in any
material respect, or (ii) the failure by it to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement; provided, however, that such notification
shall not, in and of itself, excuse or otherwise affect the
representations, warranties, covenants or agreements of the parties or
the conditions to the obligations of the parties under this Agreement.
SECTION 5.3 Fees and Expenses; Taxes.
(a) Except as set forth in Schedule 5.3 and Subsection 5.3(b),
all fees and expenses incurred by the parties in connection with the
Closings, this Agreement and the transactions contemplated by this
Agreement (the "Expenses") shall be paid by the party incurring such
expenses.
ASSET PURCHASE AGREEMENT - PAGE 21
(b) In the case of a willful and material breach of this
Agreement by any party, all Expenses incurred by the prevailing,
nonbreaching party or parties in connection with such breach, shall be
paid by the party breaching this Agreement.
(c) Seller shall be responsible for the payment, if any, of
any and all importation taxes, Value Added Taxes, and other related
expenses to the Mexican customs and tax authorities necessary to modify
the import regime on the Acquired Assets from temporary to definitive.
SECTION 5.4 Public Announcements. Buyer, Original Owners and Seller
will consult with each other before issuing, and will provide to each other the
opportunity to review and comment upon, any press release or other public
statements with respect to the transactions contemplated by this Agreement, and
shall not issue any press release or make any public statement prior to such
consultation and prior to the Closing Dates, except as may be required by
applicable law, court process or obligations pursuant to any listing agreement
with any national securities exchange, in which case the party required to make
the release or announcement shall allow the other parties reasonable time to
comment on such release or announcement in advance of such issuance.
SECTION 5.5 Bank Accounts. Prior to the Second Closing Date, Seller
will deliver to Buyer a list of all bank accounts, accounts with any other type
of financial institution and safe deposit boxes of Seller and persons authorized
to sign or otherwise act with respect thereto as of the date thereof.
SECTION 5.6 Credit Line. At the First Closing, Buyer shall establish in
favor of Seller a Revolving Line of Credit which shall provide for advances in
the maximum principal amount at any one time outstanding of $5,375,000.00, on
terms and conditions satisfactory to Buyer in Buyer's sole discretion. The sole
purpose of the Credit Line shall be to fund certain liabilities of Original
Owners in such amounts and on such dates as Buyer shall approve. The Credit Line
shall be evidenced by a Revolving Promissory Note, and payment of amounts due
under the Credit Line shall be secured by a first priority Lien on all Acquired
Assets, as evidenced by a mortgage and pledge of assets executed by Seller. The
Credit Line shall be subject to terms and conditions set forth in the Revolving
Credit Agreement dated January 24, 2003, between Seller and Buyer (the "Credit
Agreement"). All amounts advanced by Buyer to Seller under the Credit Line shall
be due on demand, or if no demand is made, on the Second Closing Date. Principal
outstanding under the Credit Line plus accrued interest and other amounts due,
if any, under the Credit Agreement shall be referred to as the "Repayment
Amount". If the transactions contemplated by this Agreement to occur at the
Second Closing are consummated, then, and only in such event, amounts due under
the Credit Line shall be satisfied through the payment by Seller to Buyer of the
Repayment Amount, less the sum of (a) one-half ( 1/2) of the U.S. GAAP cash
operating loss of the Business for the month of January 2003, and (b) the lesser
of U.S. $50,000.00 and one-half (1/2) of the U.S. GAAP cash operating loss of
the Business for the period from February 1, 2003 through February 7, 2003, as
more fully set forth in the Credit Agreement.
SECTION 5.7 Payment of Indebtedness. Prior to the Second Closing,
Original Owners, in consultation with Seller, will repay the liabilities
described in Schedule 5.7. At least three (3)
ASSET PURCHASE AGREEMENT - PAGE 22
business days prior to the Second Closing, Seller shall, unless Buyer agrees
otherwise, obtain from the creditors listed in Schedule 5.7:
(a) a letter certifying the entire amount due as of the Second
Closing Date to each such creditor; and
(b) wire transfer instructions for the payoff of such
liabilities.
SECTION 5.8 Employee Matters.From the First Closing Date through the
Second Closing Date or earlier termination of this Agreement, Buyer and Original
Owners will consult with each other with respect to communications with
employees or employees' labor unions. The parties intend that Buyer become the
substitute employer for some, but not all of the employees of Original Owners,
if the Second Closing occurs. To that end, Buyer will determine prior to the
Second Closing Date, which employees of Original Owners Buyer desires to employ.
Buyer understands that the employees are represented by a labor union and that
discussions relating to any change of terms of employment for the employees must
be agreed by the labor union, in accordance with Mexican Labor Law. Upon Second
Closing, Buyer will employ the designated employees of Original Owners on the
same terms and conditions as such employees were employed by Original Owners,
unless otherwise agreed by the labor unions, in accordance with Mexican Labor
Law; however, prior to Second Closing, nothing in this Agreement shall be
construed to require Buyer to hire or continue the employment of any particular
number of employees of Original Owners or to continue in effect any particular
employee benefit plan or arrangement of Seller or Original Owners. Prior to the
Second Closing, Buyer shall notify Original Owners and Seller of the employees
whom Buyer does not intend to employ, with the understanding that Original
Owners will lay off such employees. Buyer will pay severance payments for
employees that Original Owners lay off up to $250,000.00. Except for the
employees that Buyer designates to be laid off, Buyer agrees to be the
substitute employer for all employees of Original Owners after the Second
Closing. Buyer agrees that for each employee that it maintains as substitute
employer, it will, unless the employees' labor unions agree otherwise, as it may
be allowed under Mexican Labor Law, allow employees to maintain the seniority
and all other conditions attained by such employees when employed by Original
Owners and otherwise provide benefits required under the employees' labor
agreement with Original Owners and/or the labor union, as the case may be .
However, Buyer shall have no liability whatsoever with respect to any matter
relating to the employment of any person by Seller or Original Owners prior to
the Second Closing Date or the costs of laying off employees of Original Owners
prior to the Second Closing, except for the Assumed Liabilities. Similarly,
Seller and Original Owners shall have no liability whatsoever with respect to
any matter relating to the employment of any person by Buyer after the Second
Closing Date or the costs of laying off employees of Buyer after the Second
Closing.
ARTICLE 6
CONDITIONS PRECEDENT TO FIRST CLOSING
SECTION 6.1 Conditions to Each Party's Obligation to Effect the First
Closing. The respective obligations of each party to effect the Closing are
subject to the satisfaction, or waiver on or prior to the First Closing Date of
the following conditions:
ASSET PURCHASE AGREEMENT - PAGE 23
(a) Authorizations, Consents, and Approvals. Any
authorizations, consents, approvals, orders or waivers required to be obtained,
and all filings, notices or declarations required to be made with any Federal,
foreign, state or local governmental regulatory agency, shall have been obtained
or made.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
First Closing shall be in effect; provided, however, that each of the parties
shall have used such party's reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered.
SECTION 6.2 Conditions to Obligations of Seller. The obligations of
Seller to effect the First Closing and to purchase the Acquired Assets pursuant
to this Agreement shall, at the option of Seller, be subject to the
satisfaction, on or prior to the First Closing Date, of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Original Owners, set forth in this Agreement, in each case as of
the date of this Agreement, and as of the First Closing Date as though made on
and as of the First Closing Date, shall be true and correct, and Seller shall
have received a certificate to such effect, signed on behalf of Original Owners
by authorized officers of Original Owners with respect to representations and
warranties of Original Owners.
(b) Performance of Obligations of Original Owners. Original
Owners shall have performed all obligations required to be performed by them
under this Agreement at or prior to the First Closing Date, and Seller shall
have received a certificate to such effect signed on behalf of each of Original
Owners by an authorized officer of each.
(c) Performance of Obligations of Buyer. Buyer shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the First Closing Date, and Seller shall have received a certificate
to such effect signed on behalf of Buyer by an authorized officer of it.
(d) Directors Authorizations. Original Owners shall have
received approval of the sale of the Acquired Assets, pursuant to meetings of
their Board of Directors, as prescribed by the charter and bylaws of Original
Owners.
(e) No Suit or Judgment. There shall be no suit or proceeding
instituted to prohibit or otherwise challenge the legality or validity of the
transactions contemplated hereby, and there shall be no judgment, order or
decree by any court with proper jurisdiction prohibiting consummation of such
transactions.
(f) Delivery of Notarial Instruments and Invoices. Subject to
the terms of this Agreement, Original Owners shall have delivered and shall have
caused such instruments of transfer or conveyance, and of assignment, as are
reasonably requested by Buyer to vest in Seller good and marketable title to the
Acquired Assets, including, without limitation, a notarial instrument, executed
ASSET PURCHASE AGREEMENT - PAGE 24
by a properly empowered notary public and Original Owners, evidencing the
transfer of the Real Property and invoices, executed by Original Owners,
evidencing the transfer of the Acquired Assets other than the Real Property.
SECTION 6.3 Conditions to Obligations of Buyer. The obligations of
Buyer to effect the First Closing and to establish the Credit Line pursuant
Section 5.6 of this Agreement shall, at the option of Buyer, be subject to the
satisfaction, on or prior to the First Closing Date, of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Original Owner and Seller, set forth in this Agreement, in each
case as of the date of this Agreement, and as of the First Closing Date as
though made on and as of the First Closing Date, shall be true and correct, and
Buyer shall have received a certificate to such effect, signed on behalf of
Original Owners by authorized officers of Original Owners with respect to
representations and warranties of Original Owners, and signed on behalf of
Seller by an authorized Officer of Seller with respect to representations and
warranties of Seller.
(b) Performance of Obligations of Original Owners and Seller.
Original Owners and Seller shall have performed all obligations required to be
performed by them under this Agreement at or prior to the First Closing Date,
and Buyer shall have received a certificate to such effect signed on behalf of
each of Original Owners and Seller by an authorized officer of each.
(c) Directors Authorizations. Original Owners shall have
received approval of the sale of the Acquired Assets, pursuant to meetings of
its Board of Directors of Original Owners, as prescribed by the charter and
bylaws of Original Owners.
(d) No Suit or Judgment. There shall be no suit or proceeding
instituted to prohibit or otherwise challenge the legality or validity of the
transactions contemplated hereby, and there shall be no judgment, order or
decree by any court with proper jurisdiction prohibiting consummation of such
transactions.
(e) Opinion of Counsel. Buyer shall have received written
opinions, dated as of the Closing Date, from counsel for Seller in form
reasonably satisfactory to Buyer.
(f) Board and Lender Authorizations. Buyer shall have received
approval of the sale and purchase of the Acquired Assets by the Board of
Directors of Buyer, as well as any authorizations, consents or waivers required
to be obtained by Buyer from its lenders in order for Buyer to enter into the
transactions made the subject of this Agreement.
(g) Mortgagee's Policy of Title Insurance. Buyer shall have
received a Mortgagee's Policy of Title Insurance in form and content and
containing such exceptions to title as are reasonably acceptable to Buyer.
SECTION 6.4 Conditions to Obligations of Original Owners. The
obligations of Original Owners to effect the First Closing and to sell the
Acquired Assets pursuant to this Agreement shall,
ASSET PURCHASE AGREEMENT - PAGE 25
at the option of Original Owners, be subject to the satisfaction, on or prior to
the First Closing Date, of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller and Buyer, set forth in this Agreement, in each case as of
the date of this Agreement, and as of the First Closing Date as though made on
and as of the Closing Date, shall be true and correct, and Original Owners shall
have received a certificate to such effect, signed on behalf of Seller by an
authorized officer of Seller and Buyer with respect to representations and
warranties of Seller and by an authorized officer of Buyer with respect to
representations and warranties of Buyer
(b) Performance of Obligations of Seller and Buyer. Seller and
Buyer shall have performed all obligations required to be performed by them
under this Agreement at or prior to the First Closing Date, and Original Owners
shall have received a certificate to such effect signed on behalf of each of
Seller and Buyer by an authorized officer of each.
SECTION 6.5 Frustration of Closing Conditions. Buyer, Seller and the
Original Owners may not rely on the failure of any condition set forth on this
Article 6 to be satisfied, if such failure was caused by such party's failure to
act in good faith or to use its reasonable efforts to cause the First Closing to
occur.
ARTICLE 7
CONDITIONS PRECEDENT TO SECOND CLOSING
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Second
Closing. The respective obligations of each party to effect the Second Closing
are subject to the satisfaction, or waiver on or prior to the Second Closing
Date of the following conditions:
(a) Authorizations, Consents, and Approvals. Any
authorizations, consents, approvals, orders or waivers required to be obtained,
and all filings, notices or declarations required to be made with any Federal,
foreign, state or local governmental regulatory agency, shall have been obtained
or made.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
Second Closing shall be in effect; provided, however, that each of the parties
shall have used such party's reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered.
SECTION 7.2 Conditions to Obligations of Buyer. The obligations of
Buyer to effect the Second Closing and to purchase the Acquired Assets pursuant
to this Agreement shall, at the option of Buyer, be subject to the satisfaction,
on or prior to the Second Closing Date, of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller, set forth in this Agreement, in each case as of the date
of this Agreement, and as of the Second
ASSET PURCHASE AGREEMENT - PAGE 26
Closing Date as though made on and as of the Second Closing Date, shall be true
and correct, and Buyer shall have received a certificate to such effect, signed
on behalf of Seller by an authorized officer of Seller with respect to
representations and warranties of Seller.
(b) Performance of Obligations of Seller. Seller shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the Second Closing Date, and Buyer shall have received a certificate
to such effect signed on behalf of Seller by an authorized officer of Seller.
(c) Board Authorizations. Seller shall have received approval
of the sale of the Acquired Assets, pursuant to meetings of its Board of
Directors, as prescribed by the charter and bylaws of Seller.
(d) No Suit or Judgment. There shall be no suit or proceeding
instituted to prohibit or otherwise challenge the legality or validity of the
transactions contemplated hereby, and there shall be no judgment, order or
decree by any court with proper jurisdiction prohibiting consummation of such
transactions.
(e) Opinion of Counsel. Buyer shall have received written
opinions, dated as of the Second Closing Date, from counsel for Seller in form
reasonably satisfactory to Buyer.
(f) Material Adverse Change. From and after the date of this
Agreement, there shall not have been any Material Adverse Change to any of the
operations, financial condition, revenues or properties of Seller and the
Business.
(g) Board and Lender Authorizations. Buyer shall have received
approval of the sale and purchase of the Acquired Assets by the Board of
Directors of Buyer, as well as any authorizations, consents or waivers required
to be obtained by Buyer from its lenders in order for Buyer to enter into the
transactions made the subject of this Agreement.
(h) Delivery of Notarial Instruments and Invoices. Subject to
the terms of this Agreement, Seller shall have delivered and shall have caused
such instruments of transfer or conveyance, and of assignment, as are reasonably
requested by Buyer to vest in Buyer good and marketable title to the Acquired
Assets, including, without limitation a notarial instrument, executed by a
properly empowered notary public and Seller, evidencing the transfer of the Real
Property and invoices, executed by Seller evidencing the transfer of the
Acquired Assets, other than the Real Property.
(i) Payment and Compromise of Indebtedness. Buyer shall have
determined, within its sole discretion, that indebtedness of Original Owners has
been compromised, settled and paid to such an extent that the Acquired Assets
are subject to no Liens and, in the opinion of Buyer, are not subject to any
material claims of any kind, whether valid or invalid.
(j) Cancellation of Lien Securing the Xanadu Debt. Seller
shall cause Xanadu to take all steps necessary to effect the cancellation of the
Lien securing the Xanadu Debt, including, but not limited to, executing and
delivering the Xanadu Release.
ASSET PURCHASE AGREEMENT - PAGE 27
(k) Owner's Policy of Title Insurance. Buyer shall have
received a Owner's Policy of Title Insurance in form and content and containing
such exceptions to title as are reasonably acceptable to Buyer.
SECTION 7.3 Conditions to Obligations of Seller. The obligations of
Seller to effect the Second Closing and to transfer and convey the Acquired
Assets pursuant to this Agreement shall, at the option of Seller, be subject to
the satisfaction, on or prior to the Second Closing Date, of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement, in each case as of the date of
this Agreement, and as of the Second Closing Date as though made on and as of
the Second Closing Date, shall be true and correct, and Seller, shall have
received a certificate to such effect signed on behalf of Buyer by an authorized
officer of Buyer.
(b) Performance of Obligations of Buyer. Buyer shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the Second Closing Date, and Seller shall have received a
certificate to such effect, signed on behalf of Buyer by an authorized officer
of Buyer.
SECTION 7.4 Frustration of Closing Conditions. Buyer, Seller and the
Stockholders may not rely on the failure of any condition set forth on this
Article 7 to be satisfied, if such failure was caused by such party's failure to
act in good faith or to use its reasonable efforts to cause the Second Closing
to occur.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated at any time
prior to the Second Closing Date without liability:
(a) by the unanimous written consent of Buyer, Seller and the
Original Owners;
(b) by Buyer or Seller if the Second Closing shall not have
occurred on or before February 17, 2002, unless the failure to effect
the Closing is the result of a material breach of this Agreement by the
party seeking to terminate;
(c) by Buyer, Seller or the Original Owners:
(i) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the First
Closing or Second Closing and such order, decree, ruling or
other action shall have become final and nonappealable, as
long as the party seeking termination of the Agreement is not
responsible for the issuance of such order, decree, ruling or
action; and
ASSET PURCHASE AGREEMENT - PAGE 28
(ii) in the event of any breach by Buyer, Seller or
the Original Owners, respectively, of its or their respective
agreements, representations or warranties contained herein and
the failure of such party to cure such breach within ten (10)
days after receipt of notice from any other party requesting
such breach to be cured; and
(d) by Buyer prior to the Second Closing if, in Buyer's sole
discretion in the course and scope of conducting due diligence on the
Seller, it is of the opinion that the Acquired Assets are
unsatisfactory for purchase or that the conditions to the Second
Closing set forth in Section 7.2 cannot be satisfied by February 17,
2002, provided, however, that Buyer shall provide Seller with written
notice as to the basis of Buyer's opinion, providing reasonable detail
of the basis of such opinion, and prior to Buyer's right to terminate
the Agreement, Buyer shall allow Seller a reasonable period of time,
not in excess of the later to occur of February 17, 2002, and fourteen
(14) days following notice, to remedy the matters addressed in such
notice.
SECTION 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of any
party, other than the provisions of this Section 8.2 and Article 9. In the event
that Buyer, Seller or the Original Owners, shall terminate this Agreement
pursuant to Section 8.1(b) or (c) hereof, the rights of the parties, as the case
may be, to pursue any and all rights they may have at law or equity or hereunder
shall survive unimpaired.
SECTION 8.3 Amendment. This Agreement may be amended by the parties at
any time prior to each Closing Date by an instrument in writing signed on behalf
of each of the parties hereto.
SECTION 8.4 Extension: Waiver. At any time prior to each Closing Date,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement, or (c) waive compliance with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 8.5 Procedure for Termination. A termination of this Agreement
pursuant to Section 8.1 in order to be effective, shall require action by its or
their respective Board of Directors or the duly authorized designee of its or
their Board of Directors.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 Indemnification.(a) By Seller and the Original Owners.
Subject to the limitations set forth in Section 9.1(e), from and after the First
Closing Date, Seller and the Original Owners, shall, jointly and severally, (i)
indemnify and hold harmless Buyer and Buyer's officers, directors, employees and
attorneys from and against any and all losses which Buyer or such persons may
suffer
ASSET PURCHASE AGREEMENT - PAGE 29
or incur, resulting from, related to or arising out of (a) any misrepresentation
or breach of warranty of Seller or the Original Owners contained in or made
pursuant to this Agreement; (b) any breach by Seller or the Original Owners of
any of their agreements or obligations contained in or made pursuant to this
Agreement; (c) any material liability or expense related to Buyer being treated
as a substitute employer under Mexican federal labor laws with respect to
Original Owners' or Seller's employees; (d) any material liability or expense
related to the acts or omissions of Seller or the Original Owners as related to
the Acquired Assets, or any liabilities, other than the Assumed Liabilities,
arising out of an event occurring prior to the Second Closing; or (e) any and
all claims or litigation arising out of any of the foregoing; and (ii) reimburse
Buyer and each of its officers, directors, employees and attorneys for any and
all reasonable fees, costs and expenses related thereto (including without
limitation, reasonable legal expenses) ((i) and (ii), collectively, "Buyer's
Indemnifiable Losses").
(b) By Buyer. From and after the Second Closing Date, Buyer
shall (i) indemnify and hold harmless Seller and the Original Owners and their
successors and assigns, from and against any and all losses, which any of them
may suffer or incur, resulting from, related to or arising out of (x) any
misrepresentation or breach of warranty of Buyer which is contained in or made
pursuant to this Agreement; (y) any breach by Buyer of any of its agreements or
obligations contained in or made pursuant to this Agreement; and (z) any and all
claims or litigation arising out of any of the foregoing; and (ii) reimburse the
Seller and Original Owners and their officers, directors, employees and
attorneys for any and all reasonable fees, costs and expenses related thereto
(including, without limitation, reasonable legal expenses) ((i) and (ii),
collectively, "Seller's Indemnifiable Losses").
(c) Direct Liability. In the event that the person or entity
seeking indemnification under this Article 9 (the "Indemnified Party") shall
become aware of an event which will give rise to or result in an Indemnifiable
Loss, he, she or it shall, within thirty (30) days thereafter, give written
notice to the party from whom indemnification under this Article 9 is sought
(the "Indemnifying Party") of the amount of the Indemnifiable Loss, together
with sufficient information to enable the Indemnifying Party to determine the
accuracy and nature of the claimed Indemnifiable Loss (the "Indemnity Notice").
The failure of the Indemnified Party to give the Indemnifying Party an Indemnity
Notice shall not release the Indemnifying Party from liability under this
Article 8; provided, however, that the Indemnifying Party shall not be liable
for losses which would not have been incurred but for the delay in the delivery
of, or the failure to deliver, the Indemnity Notice. Within thirty (30) days
after the receipt by the Indemnifying Party of the Indemnity Notice, the
Indemnifying Party shall either (i) pay to the Indemnified Party an amount equal
to the Indemnifiable Loss, or (ii) object to such claim, in which case the
Indemnifying Party shall give written notice to the Indemnified Party of such
objection together with the reasons therefore, it being understood that the
failure of the Indemnifying Party to so object shall preclude the Indemnifying
Party from asserting any claim, defense or counterclaim relating to the
Indemnifying Party's failure to pay any Indemnifiable Loss.
(d) Third Party Claim. In the event the facts giving rise to
the claim for indemnification under this Article 9 shall involve any action or
threatened claim or demand by any third party against the Indemnified Party (a
"Third Party Claim"), within the earlier of, as applicable, ten (10) days after
receiving notice of the filing of a lawsuit or thirty (30) days after receiving
notice
ASSET PURCHASE AGREEMENT - PAGE 30
of the existence of a claim, demand, suit or proceeding (each a "Claim") giving
rise to the claim for indemnification, the Indemnified Party shall send written
notice of such Claim to the Indemnifying Party (the "Claim Notice") . The
failure of the Indemnified Party to give the Indemnifying Party the Claim Notice
shall not release the Indemnifying Party from liability under this Article 9;
provided, however, that the Indemnifying Party shall not be liable for losses
incurred by the Indemnified Party which would not have been incurred but for the
delay in the delivery of, or the failure to deliver, the Claim Notice. Except as
set forth below, the Indemnifying Party shall be entitled to defend such Claim
in the name of the Indemnified Party at his or its own expense and through
counsel of his or its own choosing. The Indemnifying Party shall give the
Indemnified Party notice in writing within ten (10) days after receiving the
Claim Notice from the Indemnified Party in the event the Claim is one involving
an instituted suit or proceeding, or otherwise within thirty (30) days, of his
or its intent to do so. If the Indemnifying Party chooses to defend or prosecute
a Third Party Claim, all the Indemnified Parties shall cooperate in the defense
or prosecution thereof. Such cooperation shall include the retention and (upon
the Indemnifying Party's request) the provision to the Indemnifying Party of
records and information that are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Whether or not the Indemnifying Party assumes the defense of a Third Party
Claim, the Indemnified Party shall not admit any liability with respect to, or
settle, compromise or discharge, such Third Party Claim without the Indemnifying
Party's prior written consent, which consent shall not be unreasonably withheld,
delayed or conditioned. The Indemnified Party may elect, by notice in writing to
the Indemnifying Party, to continue to participate through his or its own
counsel, at his or its expense, but the Indemnifying Party shall have the right
to control the defense of the Claim with counsel reasonably acceptable to the
Indemnified Party. In the event that the Indemnifying Party is controlling the
defense of the Claim and shall have negotiated a settlement thereof, which
proposed settlement is final and unconditional as to the parties thereto and
contains an unconditional release of the Indemnified Party, without the
Indemnified Party being liable for damages of any kind or nature or being
otherwise required to pay any amount of money to any third party and does not
include the imposition of any restrictions on the part of the Indemnified Party
or require that the Indemnified Party make an admission of guilt or liability or
deliver a confession of judgment, or any other non-financial obligation which,
in the reasonable judgment of the Indemnified Party, renders such settlement
unacceptable, the Indemnified Party shall consent to such settlement.
(e) Limitation of Indemnity. Anything herein to the contrary
notwithstanding,
(i) neither Buyer, on the one hand, nor Seller and
the Original Owners on the other hand, shall be required to
indemnify the other for any Indemnifiable Losses unless and
until (x) the aggregate amount for which all Indemnifiable
Losses such party would otherwise (but for this provision) be
liable on account thereof exceeds Fifty Thousand and No/100
Dollars ($50,000.00) (the "Threshold Amount"), but following
the exceeding of the Threshold Amount the Indemnifying Party
shall be liable for all Indemnifiable Losses (including those
below the Threshold Amount);
(ii) in no event shall Seller and the Original
Owners, in the aggregate, be required to indemnify Buyer for
Indemnifiable Losses in excess of $5,375,000.00 and
ASSET PURCHASE AGREEMENT - PAGE 31
in no event shall Buyer be required to indemnify Seller and
the Original Owners, in the aggregate, for Indemnifiable
Losses in excess of $5,375,000.00; and
(iii) neither party shall be entitled to make a claim
for indemnity with respect to a misrepresentation or breach of
warranty after the Expiration Date thereof as set forth in
Section 10.1.
SECTION 9.2 Right to Set-Off. To secure the indemnification provided
for in Section 9.1(a) hereof, and to compensate Buyer for any claim having as
its basis the indemnification provided for in Section 9.1(a) hereof, Buyer shall
have a right of set-off from any sum due to any of Seller as a Deferred Payment
or from any sum due to Original Owners.
SECTION 9.3 Limitations on Liability in Connection with Failure to Make
Advances. Notwithstanding provisions to the contrary in this Agreement, it is
agreed that if Buyer refuses to advance Five Million Three Hundred Seventy Five
Thousand and No/100 Dollars ($5,375,000.00) under the Credit Line for the
purposes set forth in Section 5.6, Original Owners and Seller shall have no
obligation to Buyer other than repayment of amounts due under the Credit Line.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.1 Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Second Closing Date for a period of
two (2) years, except that (i) the representations in Section 3.1(h) and 3.2(f)
shall survive so long as any claim may be made in respect of such matters by a
taxing authority; and (ii) the representations in Section 3.1(j) and 3.2 (h) to
the extent same relate to Environmental Laws shall survive for so long as any
claim may be made in respect of such matters by any third party. The date on
which a representation or warranty ceases to survive as above set forth shall be
its "Expiration Date". This Section 10.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Second Closing Date.
SECTION 10.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally when received if or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Buyer, to :
H I Ceramics, S.A. de C.V.
1649 Frankford Road West
Carrollton, Texas 75007
United States of America
Attn: Michael D. Lohner
ASSET PURCHASE AGREEMENT - PAGE 32
with a mandatory copy to:
Mr. Eduardo Siqueiros T.
Barrera, Siqueiros Y Torres Landa, S.C.
Montes Urales 470 - Piso 1
Lomas de Chapultepec
Mexico, D.F., 11000, Mexico
and
William E. Swart
Bell Nunnally & Martin LLP
3232 McKinney Avenue, Suite 1400
Dallas, Texas 75204-2429
United States of America
(b) if to Original Owners, to:
Maquiladora Produr, S.A. de C.V.
Km.14, 5-70, Carretera Roosevelt
Zona 2 de Mixco
Guatemala, Guatemala, C.A.
Attn: Armando Araujo
and
Industrias Tromex Corporation, S.A. de C.V.
Km.14, 5-70, Carretera Roosevelt
Zona 2 de Mixco
Guatemala, Guatemala, C.A.
Attn: Armando Araujo
with a mandatory copy to:
Fernando Hernandez Gomez
Hernandez, Mayorquin, Rodriguez Y Castillo
Av. Toreros Sur #830
Colonia Jardines de Guadalupe
Zapopan, Jalisco, Mexico 45030
ASSET PURCHASE AGREEMENT - PAGE 33
(c) if to Seller, to:
Ceramica Y Vidrio de Nuevo Leon, S.A. de C.V.
Km.14, 5-70, Carretera Roosevelt
Zona 2 de Mixco
Guatemala, Guatemala, C.A.
Attn: Armando Araujo
with a mandatory copy to:
Fernando Hernandez Gomez
Hernandez, Mayorquin, Rodriguez Y Castillo
Av. Toreros Sur #830
Colonia Jardines de Guadalupe
Zapopan, Jalisco, Mexico 45030
SECTION 10.3 Definitions.For purposes of this Agreement, the following
terms shall have the following respective meanings:
"Acquired Assets": As defined in Section 1.1(a).
"Assumed Liabilities": As defined in Section 1.4.
"Business": As defined in Section 1.1(a).
"Buyer's Indemnifiable Losses": As defined in Section 9.1(a).
"Claim": As defined in Section 9.1(d).
"Claim Notice": As defined in Section 9.1(d).
"Closings": As defined in Section 2.1.
"Closing Dates": means the First Closing Date and the Second Closing
Date.
"Credit Agreement": as defined in Section 5.6.
"Credit Line": as defined in Section 5.6.
"Deferred Payment": As defined in Section 1.3.
"Designated Liabilities": As defined in Section 1.1(a).
"Environmental Laws" means, as of the Closing Date, any applicable
treaties, laws, regulations, enforceable requirements, order, decrees
or judgments issued, promulgated or entered into by any Governmental
Entity, which relate to (x) pollution or protection of the environment
or (y) Hazardous Materials generation, storage, use, handling, disposal
or transportation, and any similar or implementing state or local law,
and all amendments or regulations promulgated thereunder.
"Excluded Assets": As defined in Section 1.1(b).
"Expenses": As defined in Section 5.3(a).
"Expiration Date": As defined in Section 10.1.
"Financial Statements": As defined in Section 3.1(e).
"First Closing": As defined in Section 2.1.
"First Closing Date: As defined in Section 2.1.
"GAAP": means those generally accepted accounting principles and
practices, applied on
ASSET PURCHASE AGREEMENT - PAGE 34
a consistent basis, which are recognized as such by the applicable
financial accounting standards boards of the U.S. or Mexico and/or
their respective successors and which are applicable in the
circumstances as of the date in question.
"Governmental Entity": Any court or any foreign, federal, state,
municipal or other governmental department, commission, board, bureau,
agency, authority or instrumentality.
"Hazardous Materials" means all explosive or regulated radioactive
materials or substances, hazardous or toxic substances, wastes or
chemicals, petroleum or petroleum distillates, asbestos or asbestos
containing materials and all other materials or chemicals regulated
pursuant to any Environmental Law.
"Import Permit": as defined in Section 2.2.
"Imported Property": as defined in Section 2.2.
"Indemnified Party": As defined in Section 9.1(c).
"Indemnifying Party": As defined in Section 9.1(c).
"Indemnity Notice": As defined in Section 9.1(c).
"Initial Payment": As defined in Section 1.2.
"Knowledge": of a party means, the current actual knowledge of a person
obtained (through the exercise of due diligence of any of its officers
or agents).
"Legal Requirement": means any federal, state, local, municipal,
foreign, international, multi-national, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty as in effect on the date in question.
"Liens": All mortgages, deeds of trust, claims, liens, security
interests, pledges, leases, conditional sale contracts, rights of first
refusal, options, charges, liabilities, obligations, agreements,
easements, rights-of-way, powers of attorney, limitations,
reservations, restrictions and other encumbrances of any kind.
"Material Adverse Change" or "Material Adverse Effect": Any change
(individually or in the aggregate) that has a material adverse effect
on the business, results of operations or financial condition of a
party that is likely to result in a cost, expense, charge or liability
equal to or greater than $25,000.00. The use of the term "material" in
this Agreement shall refer to a fact or circumstance in which the
damage or loss resulting therefrom would cause a Material Adverse
Effect.
"Material Agreements": means Original Owners' Material Agreements and
Seller's Material Agreements.
"Option": As defined in Section 1.1(b).
"Option Exercise Price": As defined in Section 1.1(c).
"Order": Any judgment, writ, decree, injunction, order, stipulation,
compliance agreement or settlement agreement issued or imposed by,
entered into with, a Governmental Entity, whether or not having the
force of law.
"Original Owners' Material Agreements": As defined in Section 3.1(r).
"Permits": All permits, authorizations, certificates, approvals,
registrations, variances, exemptions, rights-of-way, franchises,
privileges, immunities, grants, ordinances, licenses and other rights
of every kind and character (a) under any (1) federal, state, local or
foreign statute, ordinance or regulation, (2) Order or (3) contract
with any Governmental Entity or (b) granted by any Governmental Entity.
"Real Property": As defined in Section 3.1(k).
ASSET PURCHASE AGREEMENT - PAGE 35
"Repayment Amount": As defined in Section 5.6.
"Revenue": As defined in Section 1.3.
"Second Closing": As defined in Section 2.1.
"Second Closing Date": As defined in Section 2.1.
"Seller's Indemnifiable Losses": As defined in Section 9.1(b).
"Seller's Material Agreements": As defined in Section 3.2(p).
"Stockholders": means the owners of all shares, options, warrants,
general or limited partnership interests, membership interests, or
other ownership interests (regardless of how designated) of or in a
corporation, partnership, limited liability company, trust, or other
entity, whether voting or nonvoting, including common stock, preferred
stock, or any other equity security.
"Taxes": Any federal, state, local or foreign income, sales, excise,
real or personal property franchise, capital stock, gross receipts,
license, payroll, employment, unemployment, social security, stamp,
occupation, intangible, estimated tax or other taxes, assessments,
fees, levies, imposts, duties, deductions or other charges of any
nature whatsoever (including, without limitation, interest and
penalties) imposed by any law, rule or regulation.
"Third Party Claim": As defined in Section 9.1(d).
"Threshold Amount": As defined in Section 9.1(e)(i).
"Value Added Tax": means the Value Added Tax arising under applicable
Mexican law.
"Xanadu": as defined in Section 1.4.
"Xanadu Debt": as defined in Section 1.4.
SECTION 10.4 Interpretation; Governing Language. When a reference is
made in this Agreement to a Section, such reference shall be to a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. This Agreement is in
the English language only, and all communications between the parties relative
to this Agreement shall be conducted in the English language only. Any version
of this Agreement in the Spanish language, whether or not executed by the
parties, is and shall be prepared solely for the benefit of Seller and
Stockholders and shall be considered a non-binding translation of the Agreement.
SECTION 10.5 Counterparts; Facsimiles. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties. Facsimile
signatures shall be effective.
SECTION 10.6 Entire Agreement: No Third Party Beneficiaries. This
Agreement constitutes the entire agreement and supersedes all prior
representations, agreements or understandings among the parties with respect to
the subject matter of this Agreement both written and oral. This Agreement is
not intended to confer upon any person other than the parties any rights or
remedies hereunder.
SECTION 10.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, regardless of the
laws that might otherwise govern
ASSET PURCHASE AGREEMENT - PAGE 36
under applicable principles of conflict of laws thereof; provided, however, that
to the extent the law of Mexico expressly provides for application of the law of
Mexico to real property and personal property situated within Mexico, the law of
Mexico shall apply to that limited extent. Each of the parties hereby agrees
that the laws of the State of Texas bear a reasonable relationship to the
transaction. Buyer is a subsidiary of DWC GP, Inc., a Texas corporation.
SECTION 10.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by Seller without the prior written
consent of the other. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 10.9 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Texas, County of Dallas, or in any Texas State court located in the
County of Dallas, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit himself, herself or itself to the personal jurisdiction of
any Federal court located in the State of Texas, County of Dallas, or in any
Texas State court located in the County of Dallas, in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that he, she or it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that he, she or it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a Federal court located in the State of Texas, County of Dallas, or a
Texas State court located in the County of Dallas.
SECTION 10.10 Exhibits and Schedules. Any matter set forth on any
Schedule shall be deemed set forth on all other Schedules to the extent
relevant. Except when the context requires otherwise, any reference in this
Agreement to any Article, Section, clause, Schedule or Exhibit shall be to the
Articles, Sections and clauses of, and Schedules and Exhibits to, this
Agreement. The words "include," "includes" and "including" are deemed to be
followed by the phrase "without limitation." Any reference to the masculine,
feminine or neuter gender shall include such other genders and any reference to
the singular or plural shall include the other, in each case unless the context
otherwise requires. All Exhibits and Schedules annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. When a reference is made in this Agreement to a Section,
Exhibit or Schedule, such reference shall be to a Section of, or an exhibit or
Schedule to, this Agreement unless otherwise indicated.
SECTION 10.11 Arbitration. The parties agree that except as otherwise
set forth in this Agreement, any disputes arising out of or in connection with
this Agreement shall be finally settled by arbitration under the then current
rules of arbitration of the United Nations Commission for International Trade
Law ("UNCITRAL"). There shall be three arbitrators. Each of Buyer and Seller
shall select one arbitrator at will, and the third arbitrator shall be selected
by the two arbitrators
ASSET PURCHASE AGREEMENT - PAGE 37
previously chosen by Buyer and Seller. The arbitration shall take place in
Dallas, Texas and shall be conducted in English. The decision of the arbitrators
shall be final and shall be enforceable in any court of competent jurisdiction.
The non-prevailing party in arbitration will pay its own expenses, the fees of
each arbitrator, the administrative costs of the arbitration and the expenses,
including reasonable attorneys' fees and witness fees and costs, incurred by the
other party to the arbitration. Each party hereby irrevocable consents to the
jurisdiction of the UNCITRAL solely for the purposes of arbitration described in
this Section 10.11.
SECTION 10.12 Currency and Payment. All amounts payable hereunder shall
be calculated and payable in United States dollars.
SIGNATURE PAGE FOLLOWS
ASSET PURCHASE AGREEMENT - PAGE 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
ORIGINAL OWNERS:
MAQUILADORA PRODUR, S.A. DE C.V.,
a Mexico corporation
By: /s/ ARMANDO ARAUJO
--------------------------------------
Name: Armando Araujo
Title: President
INDUSTRIAS TROMEX CORPORATION, S.A. DE
C.V., a Mexico corporation
By: /s/ ARMANDO ARAUJO
--------------------------------------
Name: Armando Araujo
Title: President
SELLER:
CERAMICA Y VIDRIO DE NUEVO LEON,
S.A. DE C.V., a Mexico corporation
By: /s/ ARMANDO ARAUJO
--------------------------------------
Name: Armando Araujo
Title: President
ASSET PURCHASE AGREEMENT - PAGE 39
BUYER:
H I CERAMICS, S.A. DE C.V.
a Mexico corporation
By: /s/ KENNETH J. CICHOCKI
--------------------------------------
Name: Kenneth J. Cichocki
Title: Legal Representative
ASSET PURCHASE AGREEMENT - PAGE 40
EXHIBIT "A"
Xanadu Release
EXHIBIT "B-1"
No-Lien Certificates
EXHIBIT "B-2"
No-Lien Certificates
EXHIBIT "C"
Property Tax Invoices