STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this June 24, 1997,
By and between:
Detection Systems, Inc., a company registered under the laws of New York,
United States of America, having its headquarters at ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇.▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, represented by its Officer,
▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (hereinafter "the Buyer"),
on the one hand,
And:
Essonne Electronique, a French SOCIETE ANONYME, having its registered
address at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇*▇▇▇, with registered
capital of 1,000,000 French francs, and registered at the Register of
Commerce and Companies of Montargis under the number B 969 203 462,
represented by its President Directeur General, Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
(hereinafter the "Seller"),
on the other hand.
WHEREAS, the Seller is the owner of fourteen thousand nine hundred and
twenty eight (14,928) shares out of fifteen thousand (15,000) shares of
SERIEE SA, a French SOCIETE ANONYME having its registered office at ▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, with registered capital of 1,500,000
French francs, and registered at the Register of Commerce and Companies of
Bobigny under the number B ▇▇▇ ▇▇▇ ▇▇▇ (hereinafter the "Compnay"). As of
the date of this Agreement, the Company has issued fifteen thousand
(15,000) shares, of which seventy two shares are not the subject of this
Agreement.
As of the date of this Agreement, the owners of the shares of the Company
are:
ESSONNE ELECTRONIQUE : 14,928 shares
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇: 30 shares
MR. JACK MAGORD: 42 shares
TOTAL: 15,000 shares
The Seller' shares are hereinafter referred to as the "Shares". The Seller
wishes to sell and the Buyer agrees to buy all of the Shares subject to the
terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, THE
PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1. SHARES TO BE SOLD. At the Closing (as hereinafter defined)
the Seller shall sell and transfer all the Shares to Buyer, and Buyer shall
purchase and accept them from Seller.
1.2 PURCHASE PRICE - PAYMENT. Subject to adjustment as provided
below, the aggregate purchase price for the Shares is three million four
hundred ninety two thousand and eight hundred francs (FF 3,492,800). The
purchase price shall be payable in thirty four thousand one hundred and
forty one (34,141) shares of common stock of Detection Systems, Inc. ("DSI
Stock"), valued for purposes of this transaction, at the average of the
last five trading days prior to Closing Date, to be converted into French
francs, using the currency exchange rate published in The Wall Street
Journal of the day before Closing Date.
The certificates of the DSI Stock shall be sent by the Buyer to
the Seller by air courier within eight days from the Closing Date.
Sales and other dispositions of, and encumbrances upon, the DSI
Stock shall be restricted for at least sixty days after Closing or longer
if required by applicable U.S. securities laws and regulations. The Seller
expressly declares and warrants that he will not sell more than three
thousand (3,000) shares of DSI Stock during any given trading day.
The Seller has provided the Buyer with an unaudited balance sheet
of the Company as of May 31, 1997, a copy of which is attached in Schedule
1, (the "May Balance Sheet"), which according to Seller was prepared in
accordance with generally accepted accounting principles and in a manner
consistent with the Company's consolidated balance sheet for the twelve
months period ending on December 31, 1996 (also provided by Seller and a
copy of which is attached in Schedule 1).
To the extent that the total current assets (as stated on line DL
of the French accounting form 2051) of the May Balance sheet is less than
one million five hundred thousand francs (FF. 1,500,000), the purchase
price shall be decreased accordingly one franc of reduction per franc of
such difference.
This adjustment will be finalized as soon as practicable after
Closing based upon the May Balance Sheet audited by the Buyer's appointed
auditors and in no case later than September 30, 1997.
From the date of remittance of the certificates of the DSI Stock
until October 31, 1997, the Seller expressly undertakes not to sell any DSI
Stock in a total amount exceeding FF. 1,500,000, so as to enable the
parties hereto to settle any claim in the event the total current assets
less the total current liabilities of the then audited
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May Balance Sheet would be inferior to FF. 1,500,000, by means of a
restitution by the Seller to the Buyer of the relevant number of DSI
Stock corresponding to the reduction amount of the total current assets.
The currency exchange rate used by the parties hereto shall be the rate
published in The Wall Street Journal on the day before restitution of
the portion of the DSI Stock.
1.3. CLOSING. The Closing (the "Closing") shall take place on the
date hereof at the offices of ▇▇▇▇ & Associes, 9 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇.
1.4. DELIVERIES BY SELLER. At the Closing, Seller shall deliver the
following to the Buyer:
(a) Transfer deed of Shares (the "Ordre de mouvement") signed
by the Seller;
(b) The minutes of the meeting of the Board of Directors of the
Company approving this Agreement and other actions the Buyer may
reasonably request,
(c) The Manufacturing Agreement between the Company and Esselec,
under which Esselec commits to continue to subcontract the Seriee
line of owned products during a minimum twenty four month period from
Closing Date, extendible at Seriees request, to the life of the
products, at terms which shall in no case be inferior for Seriee than
those practised today. Such agreement must provide that Esselec is
to be considered by Seriee as a preferrential sub-contractor for new
products developed by Seriee, if such products are not subcontracted
to a factory of the Buyer's group. However, such preferrential
treatment for new products shall not be exclusive, which means that
Seriee may subcontract part of such activity to one or several other
subcontractors. Also, Seriee may decide to exclude Esselec from such
subcontracting if the price, quality or delivery terms offered by
other subcontractors are better for Seriee. Esselec commits to
continue to hold the AFNOR certification applicable to Esselec
manufacturing process, and to maintain such certification during the
duration of the subcontracting agreement.
(d) The resignation, effective as of the Closing Date of Mr
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ from his positions with the Company (including as a
consultant, if applicable), with the only payment done to him being
his remuneration (according to previous practice) to be paid up to
Closing Date.
(e) The resignation, effective as of June 28, 1997 of all
directors of the Company, without any payment nor indemnity.
(f) The letter of termination of the Service Agreement, the
Technical Agreement as well as any agreement entered into between the
Company and Essonne Electronique prior to the Date of Closing; such
letter of termination
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shall be duly accepted and signed by the
Company and Essonne Electronique. The termination of all such
agreements shall be effective on the Closing Date.
1.5. DELIVERIES BY THE BUYER. (a) Within 48 hours from the
Closing Date, the Buyer shall deliver to Seller copy of the certificates
for the 34,141 DSI Stock (b) within 3 business days from the Closing Date,
the Buyer shall deliver to Seller a check of FF. 200,000 to enable the
Company to reimburse the amount owed by the Company to Essonne Electronique
("compte courant"), which is of a total amount of FF 635,200. The balance,
I.E; FF 435,200 shall be paid by the Company to Essonne Electronique within
sixty days from Closing.
The certificates of the DSI Stock shall be sent by the Buyer to
the Seller by air courier within eight days from the Closing Date.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby makes the representations and warranties set
forth in this Article 2. For the purposes hereof, "knowledge of Seller"
shall includes matters known to the Seller or the Company. When reference
is made to any event, change or effect having a Material Adverse Effect,
this reference shall mean that this event, change or effect materially
▇▇▇▇▇ the business, operations, prospects, assets (including intangible
assets), liability (including contingent liabilities), financial situation
or operation profits of the Company.
2.1. CORPORATE ORGANIZATION. The Company is a SOCIETE ANONYME
duly organized and validly existing under French law. It has the corporate
power and authority to own or lease its properties and to carry on its
business in the manner in which it is currently conducted. The Company
does not, directly or indirectly, have any equity interest or other
property interest in any company, joint venture, partnership, association
or other entity. Complete and correct copies of the certificate of
incorporation and by-laws (the "Constitutive Documents") are attached as
Schedule 2. The Company has not stopped making payments, declared a
moratorium on payments of its debts, is not in bankruptcy or reorganization
or liquidation, has not entered into an assignment for the benefit of its
creditors and has not become subject to any reorganization procedure.
2.2. AUTHORIZATION. The Seller has the requisite capacity to
enter into this Agreement and the other agreements to be executed and
delivered by the Seller pursuant hereto (the "Additional Seller's
Documents") and to carry out the transactions contemplated hereby and
thereby. When fully executed and delivered, this Agreement and each of the
Additional Seller's Documents will constitute the valid and binding
agreements of the Seller, enforceable against the Seller in accordance with
their respective terms.
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2.3. CAPITALIZATION. As of the date of this Agreement, the
capital of the Company is as set forth in the preamble to this Agreement.
All the shares have been validly issued and are fully paid, nonassessable
and free of any lien, preemptive rights or other restrictions with respect
thereto. The Shares are held by the Seller as set out in the table in the
preamble to this Agreement. There is no agreement or commitment which
could result in the Company having to purchase, amortize, issue or transfer
the Shares of the Company in any manner whatsoever.
2.4. OWNERSHIP OF SHARES. On the date of Closing, the Buyer will
acquire all rights to the shares free of all Liens.
2.5. CONSENTS AND APPROVALS; NON-CONTRAVENTION. Neither the
execution, delivery or performance of this Agreement or of any related
documents, nor the consummation by Seller of the transactions contemplated
hereby or thereby, nor compliance by Seller with any of the provisions
hereof or thereof:
(a) violates any provision of the Constitutive Documents,
(b) requires on the part of the Seller any filing with, or
permit, authorization, consent or approval of, any court, trustee in
bankruptcy ("administrateur judiciaire"), administrative or other authority
(a "Governmental Entity"),
(c) require, in accordance with the terms of any contract, lease
or other agreement to which the Seller or the Company is a party, any
consent, approval or authorization,
(d) violate any judicial or arbitral decision, or any legal
regulatory or contractual provision applicable to the Seller or the
Company, or
(e) result in a material violation or material breach of any
agreement or result in the termination, modification, cancellation, loss of
a material benefit, or result in the creation or imposition of any lien
upon any of the respective properties or assets of the Seller or the
Company.
2.6. FINANCIAL STATEMENTS. The balance sheet of the Company as
at December 31, 1996, and the interim unaudited balance sheet prepared by
the Company as of May 31, 1997 which have been delivered to Buyer and
attached as Schedule 1 (together, the "Financial Statements") are complete,
sincere and true and prepared in accordance with generally applicable
accounting principles in France and accurately reflect the asset and
liability situation of the Company at each of the dates and for each period
indicated.
2.7. INTERIM CHANGE. Since January 1st, 1997, the Company has
not engaged in any business or transaction other than in the ordinary
course of business. In particular (but without this list being exclusive):
5
(a) the Company has not suffered any change, nor has there
arisen any event, having or which could reasonably be expected to have a
Material Adverse Effect;
(b) the Company has not forgiven or canceled any debts or claims
or waived, released or relinquished any contract right or any other rights
of its business;
(c) the Company has not consented to, or has not had imposed on
it, any liens;
(d) the Company has not suffered any damage, destruction or loss
of property, whether or not covered by insurance, which could reasonably be
expected to have a Material Adverse Effect;
(e) the Company has not accelerated the collection of, granted
any discounts with respect to or sold or assigned to third parties any
accounts receivable or delayed the payment of any payables or, other than
in the ordinary course of business and consistent with past practice, had
any reason to write off as uncollectable any accounts receivable or any
portion thereof;
(f) the Company has not assumed any loan, directly or
indirectly, or incurred or guaranteed any obligation with regards to a
loan, or made any loans, advances or capital contributions to, or
investment in, any other individual, corporation, partnership, joint
venture, association, organization or other entity (a "Person"),
(g) pledged or subjected to any lien, sold, assigned or
transferred any asset except for sales of inventory in the ordinary course
of business and consistent with past practice;
(h) the Company has not increased in any manner the wages,
salaries, bonuses, pension plans, retirement allocations or other
allocations of any officer, employee or other person,
(i) the Company has not entered into any additional pension,
profit-sharing, bonus, severance pay, or other plan, agreement or
arrangement relating to retirement of other benefits,
(j) the Company has not entered into any employment or
consulting agreement with any person,
(k) the Company has not amended any plan, agreement or
arrangement in effect as of the date hereof;
(l) with the exception of the economic dismissal of seven
employees which procedure of termination is currently underway and which
names are listed in
6
Schedule 3 the Company has not been the target of any
work stoppage or other labor difficulty;
(m) the Company has not made any investment in any business,
company, partnership, association or other entity.
(n) with the exception of the sub-contracting agreement for the
Company's line of products between Esselec and the Company, the Company has
not entered into any agreement, contract or commitment, with respect to the
manufacture of any product of the Company or any update or derivative
thereof (collectively, the "Products");
(o) the Company has not declared, paid or set aside for payment
any dividend or other distribution;
(p) the Company has not made any change in its accounting
principles or methods, except as may have been required by a change in
generally accepted accounting principles in France;
2.8. NO UNDISCLOSED LIABILITIES. Except as and to the extent of
the amounts specifically reflected or reserved against in the Financial
Statements, and obligations under agreements, commitments or contracts
entered into, in the ordinary course of business, the Company has not
incurred any liabilities or obligations of any nature (whether or not
accrued). As of the Closing date, and save for the shareholder's advance
("compte courant") in the amount of FF. 635,200 owed by the Company to
Essonne Electronique, there exists no shareholder advances owed by the
Company.
2.9. LITIGATION. There is no claim, action, suit, inquiry or
investigation by or before any judicial entity pending or, to the knowledge
of the Seller, threatened against or involving the Company or affecting any
of its assets. There is no basis known to the Seller for any such claim,
action, suit, inquiry, or investigation.
2.10. NO VIOLATION.
(a) The Seller and the Company have always been in full
compliance with the by-laws of the Company.
(b) The Seller and the Company have always been in full
compliance with (i) all legal regulations applicable to the Company and
(ii) all judicial decisions related thereto,
(c) The Seller and the Company have not breached any obligations
with regard to any contract or agreement irrespective of its purpose.
7
(d) The Company has all authorizations (from Governmental Entity
or other authority) necessary to : (i) enable it conduct its business as
currently conducted and, if necessary (ii) to enter into all transactions
contemplated by this Agreement.
2.11. TITLE TO ASSETS. With the exception of a real property
located ▇▇, ▇▇▇ ▇▇▇ ▇▇▇*▇▇▇ - ▇▇▇▇▇ La Chauss*e Saint ▇▇▇▇▇▇, duly owned
and paid by the Company, the Company does not own any real property assets.
With the exception of the liens listed in the Certificate of recordation of
liens delivered by the Commercial Court of Bobigny, attached as Schedule 4,
the Company has good and marketable title, free and clear of all liens, of
all assets, rights, trademarks, trade names, licenses and properties, which
are used in the conduct of the business conducted by the Company (the
"Assets"). The Company has valid and enforceable leases or licenses, as the
case may be, with respect to the Assets consisting of property that is
leased or licensed to the Company, under which there does not exist any
default, on the part of the Company. Since inception, the Company has
validly entered into and, as the case may be, has validily and legally
terminated any lease agreement used for carrying on its business activites.
2.12. INTELLECTUAL PROPERTY.
(a) A true and complete list, of all the Company's industrial and
intellectual property rights (collectively, "Intellectual Property") owned
by, or licensed to the Company is contained in Schedule 5. The
Intellectual Property described in Schedule 5 constitutes all Intellectual
Property necessary to operate the Company's business. The Intellectual
Property is duly and validly registered under the Company's name and all
fees for recordation or renewal have been timely paid by the Company.
(b) The Company does not own any patent nor has it filed an
application for any patent.
(c) The Company has the sole and exclusive right to use, sell,
license, dispose of or bring actions for the infringement of its rights to
the Intellectual Property as utilized in its business; there are no
royalties, honoraria, fees or other payments payable by the Company to any
Person by reason of ownership, use, licensure, sale or disposition of any
Intellectual Property.
(d) There are no license agreements, commitments or guaranteed
royalty or fee payments with respect to Intellectual Property. The Closing
of the transaction contemplated hereby will not in any way impair the right
of the Company to use, sell, license or dispose of, or any portion thereof,
or to bring any action for the infringement of any of such rights to the
Intellectual Property.
(e) None of the former or present employees or officers of the
Company hold any right, title or interest, directly or indirectly, in whole
or in part, in or to any Intellectual Property which the Company currently
owns or which is necessary for the business of the Company; no former or
present employees, officers or directors of
8
the Company or any other third
party has asserted any moral rights claim with respect to the Intellectual
Property.
(f) There is no pending or threatened claim or litigation
challenging or questioning the validity, ownership or right to use, sell,
license or dispose of any Intellectual Property nor, to the knowledge of
the Seller, is there a valid basis for any such claim, nor has the Company
received any notice asserting that the proposed use, sale, license or
disposition by the Company of any Intellectual Property conflicts or will
conflict with the rights of any other party, nor is there, to the knowledge
of the Seller, a valid basis for any such claim or assertion.
(g) There are no allegations by any third party that the Company
has infringed any copyright, patent, trademark or trade name or
misappropriated or misused any invention, trade secret or other proprietary
information entitled to legal protection, and the Company has not asserted
any claim of infringement, misappropriation or misuse in the last three
years.
2.13. CONTRACTS AND COMMITMENTS.
(a) All commercial contracts and agreements intered into by the
Company (whether written or oral), have been entered into under normal and
ordinary business conditions. There exists no fixed term commercial
contract entered into for a duration superior to one year. Save for a debt
collection agreement entered into by the Company with CAREDIF, any
commercial contract entered into by the Company is terminable by the
Company without penalty upon notice of thirty (30) days or less.
(b) The Company has duly and timely satified all the conditions
provided in the agreement entered into with Ma"tre ▇▇▇▇▇▇ on June 1st, 1995
for the acquisition of the "fonds de Commerce" of SOCIT
D'ETUDES ET DE REALISATIONS INDUSTRIELLES ELECTRIQUES - SERIEE.
(c) The Company has not entered into any credit agreement, loan
agreement with any financial institution or third party.
(d) The Company has not received any financial benefit,
investment or subsidy granted by any public agency;
(e) The Company does not have outstanding contracts with respect
to the employment of any officer, individual, employee, agent, consultant,
adviser, salesperson, representative or other person on a full-time, part-
time, contract or consulting basis which differs in any material respect
from the requirements of applicable law including provisions with respect
to termination indemnification.
(f) Except as required by law, the Company does not have any
pension, profit-sharing, bonus, severance pay, retirement, hospitalization,
insurance,
9
stock purchase, stock option or other benefit with or for the
benefit of any Person (a "Benefit Plan").
(g) The Company does not have any employee on a fixed-term
employment agreement.
(h) Save for two loans made to Mr. ▇▇▇▇▇ and ▇▇▇. ▇▇▇▇▇▇▇ (in the
respective amount of FF. 38,000 and FF. 18,000), the Company does not have
any outstanding loan to the Seller or employee.
(i) The Company has not guaranteed any obligations of the Seller
or any other person. The Seller has not guaranteed any obligations of the
Company which would still be in effect after the Closing Date.
(j) There are no shareholders agreements, voting agreement,
pledge agreement, or sale-purchase agreements relating to the Shares.
(k) The Company does not have any contract which is material to
its business, operations or prospects or any other contract, instrument,
commitment, plan or arrangement which has not been made in the ordinary
course of business.
(l) Each Material Contract: (i) is valid and binding on the other
party or parties thereto and is in full force and effect and (ii) after the
Closing of the transaction contemplated by this Agreement, shall continue
in full force and effect without penalty or other adverse consequence
arising solely from the consummation of the transactions contemplated by
this Agreement. Neither the Company nor, to the best knowledge of the
Seller, any other party to any Material Contract is in breach of, or
default under, any Material Contract.
2.14. CUSTOMERS AND SUPPLIERS. There has not been any adverse
change in the business relationship of the Company with any customer or
supplier since December 31, 1996.
2.15. INSURANCE. The Company has valid insurance policies which
adequately cover all the risks against which it is normal to insure
considering the activities of the Company. There has not been any failure
to give any notice or present any claim under any such policy in a timely
fashion or in the manner or detail required by the policy . There are no
outstanding past due premiums or claims, and there are no provisions for
retroactive or retrospective premium adjustments. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim
under, any such policy has been received by the Company. Execution of this
Agreement shall not entitle any of the insurers covered by this Section
2.16 to modify the terms of the insurance policies taken out by or on
behalf of the Company, these policies shall remain in full force and effect
after the Closing.
10
2.16. ENVIRONMENTAL MATTERS. The Company is not in breach of any
environmental regulations.
2.17. TAXES - SOCIAL SECURITY CONTRIBUTIONS.
(a) All tax and social security returns, declarations, reports,
estimates, information returns, and statements (collectively, "Tax and
Social Security Returns") required to be filed by THE COMPANY on or before
the date hereof for all periods ending on or before the Closing date have
been timely filed, and all such Tax and Social Security Returns are true,
correct and complete.
(b) THE COMPANY has timely paid (or accrued in its accounts) all
taxes and social security contributions due or claimed to be due by it by
any taxing or social security authority in respect to periods (or any
portion thereof) ending on or before the Closing date, and no failure in
this regard may be attributed to it.
(c) No audit or other proceeding by any national, local court,
governmental, regulatory, parafiscal, administrative or similar authority
are presently pending with respect to any taxes or social security
contributions of THE COMPANY.
(d) The Company is not a party to, or is bound by or has any
obligation under, any tax-consolidation agreement or similar contract or
arrangement.
2.18. TRANSACTIONS WITH AFFILIATES. The Seller does not have,
directly or indirectly, (i)an interest in any entity which furnished or
sold, or which furnishes or sells, services or products which the Company
furnishes or sells, or proposes to furnish or sell, or (ii)any interest
in any Person which purchases from or sells or furnishes to the Company any
goods or services.
2.19 ACCOUNTS RECEIVABLE. All receivables of the Company arose in
the ordinary course of business and the aggregate amounts thereof, are
collectible (except to the extent reserved against as reflected in the
Financial Statements) and are carried at values determined in accordance
with French generally accepted accounting principles. None of the
receivables is subject to any claim of offset, setoff or counterclaim and
there are no facts or circumstances that would give rise to any such claim.
No person has any lien, charge, pledge, security interest or other
encumbrance on any of such receivables and no agreement for deduction or
discount has been made with respect to any of such receivables.
2.20 MINUTE BOOKS. The minute books of the Company made
available to counsel for Buyer contain all minutes since the Company's
incorporation as normally kept in conformance with French law.
2.21 ENTIRETY OF REPRESENTATIONS. The statements related to the
above representations and warranties are complete and do not contain any
false representations nor omit any facts that are essential for the
purposes hereof.
11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby jointly and severally represent and warrant to
Seller as follows:
3.1. CORPORATE ORGANIZATION. Buyer is duly organized, validly
existing and in good standing under the laws of the State of New York.
3.2. AUTHORIZATION. Buyer has the requisite corporate power and
authority to enter into this Agreement and the other documents and
instruments to be executed and delivered by Buyer pursuant hereto (the
"Additional Buyer's Documents") and to carry out the transactions
contemplated hereby and thereby. When fully executed and delivered, this
Agreement and each of the Additional Buyer's Documents will constitute the
valid and binding agreements of Buyer, enforceable against it in accordance
with their respective terms.
3.3. CONSENTS AND APPROVALS; NON-CONTRAVENTION. Neither the
execution, delivery or performance of this Agreement or any of the
Additional Buyer's Documents by Buyer nor consummation of the transactions
contemplated hereby or thereby will (a) violate any provision of the
articles of incorporation of the Buyer, (b) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or any
of its properties or assets.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1. CONSENTS AND APPROVALS. The parties shall, and Seller shall
cause the Company to, take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed with respect to
the transactions contemplated hereby (which actions shall include, without
limitation, furnishing all information required in connection with
approvals of or filings with any Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed on any of them in connection with the
transactions contemplated hereby.
4.2. FURTHER ASSURANCES. From time to time after the Closing,
the Seller will use all reasonable efforts to obtain any licenses, permits,
waivers, consents, authorizations, qualifications and orders of
Governmental Entities or other Persons or entities as Buyer shall
reasonably request as necessary to enable the Company to continue to enjoy
after the Closing the rights and benefits presently enjoyed by the Seller
in the operation of the business conducted by the Company.
12
4.3. COMPETITION. The Seller, from the present date until the
end of a three year period, shall not, in the European Union, the United
States of America and Canada, directly or indirectly, own any capital stock
or other equity securities of, have any direct or indirect (unless the
participation is less than 1% of the capital of a publicly traded company)
equity or ownership interest in, or serve as a director, officer, employee,
consultant or agent of any individual, partnership, corporation, trust or
unincorporated association which competes with, or conducts a similar
business as that of the Company or the Buyer.
4.4. REIMBURSEMENT OF ESSONNE ELECTRONIQUE FORMER SHAREHOLDER'S
ACCOUNT ("COMPTE COURANT").
The Company will reimburse the amount it owes to Essonne
Electronique as recorded in the shareholder's account ("compte courant"),
which is of a total amount of FF 635,200, according to the following
payment schedule: FF 200,000 within three working days after Closing, and
the balance sixty days from Closing Date. As stated in Article 1.5, the
first payment installment of FF. 200,000 shall be tendered by the Buyer.
4.5. PAYMENT OF ESSELEC'S PAST DUE INVOICES AS OF THE CLOSING
DATE
The Company will remit to Esselec, within five business days from
Closing Date a note ("traite") in the amount of FF 1,012,520.78 (VAT
included), payable thirty days from issuance, to pay for the Esselec
subcontracting invoices due and payable before Closing Date (invoices
issued by Esselec in March and April 1997 in the amount of FF. 1,012,520.78
VAT included). All other invoices of Esselec shall be paid according to
regular payment terms. The Company shall pay in due course the invoices due
for July 10,1997, in the amount of FF. 801,784.66 (VAT included).
ARTICLE 5
SURVIVAL AND INDEMNIFICATION
5.1. SURVIVAL. All representations and warranties contained in
this Agreement shall survive for three (3) years after the Closing with the
exception of the representations and warranties of Section 2.18 (fiscal and
labor questions) which will survive for the applicable statutes of
limitations. All representations and warranties shall further survive
beyond such three-year period (or period of the applicable statutes of
limitation) for so long as any claim made during such three-year period (or
period of the applicable statutes of limitation) under this Article 5 are
not definitively settled. In addition, it is specified that the periods
thus defined apply to the notification of the event giving rise to
indemnification and not to its judicial or amicable settlement.
5.2. INDEMNIFICATION. The Seller agrees to indemnify and hold
harmless the Buyer and/or the Company for the period noted in Article 5.1
commencing on the date hereof (and for any further period during which a
claim for indemnification is
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pending hereunder) against and in respect of
any Damages (as hereinafter defined in Section 5.7) of which the cause
predates the Closing date and incurred as a result of any breach by the
Seller of this Agreement, including the representations, warranties and
covenants contained herein or in any agreement, document or other
instrument delivered pursuant hereto or in connection herewith. No
investigation made by or for the Buyer shall affect any representation or
warranty of the Seller contained in this Agreement or the indemnification
obligation of the Seller set forth herein.
5.3. THRESHOLD. As concerns all damages, the Seller will not be
held liable under this Article 5 for the indemnification of the Buyer,
unless the total Damages exceed the sum of fifty thousand (50,000) French
francs, in which case the Seller will be liable for any sums of Damages
exceeding FF. 50,000.
To determine whether this threshold is met, all sums for which
the Seller is liable pursuant to the provisions of this Agreement shall be
aggregated irrespective of when such sums are claimed from the Seller.
The threshold of FF. 50,000 shall be applied only to the first
claim of Damages made by the Buyer. Should a second or subsequent claims be
made by the Buyer, the Seller shall be liable for the payment of all
Damages as of the first French franc.
5.4. PROCEDURE FOR INDEMNIFICATION.
(a) The Buyer shall give prompt written notice (within 30 days)
to the Seller of any claim or event known to it which does or may give rise
to a claim for indemnification hereunder by the Buyer against the Seller;
provided that the failure of the Buyer to give notice as provided in this
Agreement shall not relieve the Seller of his obligations under this
Article 5 to the extent that such failure has not prejudiced the Seller.
(b) In the case of any claim for indemnification hereunder
arising out of a claim, action, suit or proceeding brought by any Person
who is not a party to this Agreement (a "Third Party Claim"), the Buyer
shall also give the Seller copies of any written claims, process or legal
pleadings with respect to such Third Party Claim promptly after such
documents are received by the Buyer, it being understood that any delay in
remitting such documentation by the Buyer shall not relieve the Seller of
his obligations under this Article 5 except to the extent that such failure
has prejudiced the Seller.
(c) The Seller may elect to compromise or defend the Company or
the Buyer, at his own expense and by his own counsel, any Third Party
Claim. If the Seller elects to compromise or defend a Third Party Claim,
it shall, within 30 days (or sooner, if the nature of such Third Party
Claim so requires), notify the Buyer of its intent to do so, and the Buyer
shall reasonably cooperate in the compromise of, or defense against, such
Third Party Claim. If the Seller elects not to compromise or defend
against a Third
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Party Claim, or fails to notify the Buyer of its election
as provided in this Section 5.3, the Buyer may pay, compromise or defend
such Third Party Claim at the expense of the Seller.
(d) If there is a reasonable likelihood that a Third Party Claim
may adversely affect the Buyer, other than as a result of money damages or
other money payments for which the Buyer is entitled to indemnification
hereunder, the Buyer will have the right, after consultation with the
Seller, to have sole control of the defense and settlement of such Third
Party Claim notwithstanding the provisions of Section 5.5.
5.6. PAYMENT OF AMOUNTS DUE. In case of a claim by the Buyer
under the provisions of this Article 5, the Seller shall pay the amounts
claimed as soon as there is an agreement between them with respect thereto.
The payment shall be settled by the Seller in French francs. However,
should the Seller still own DSI Stock, on the date of settlement, the Buyer
shall have the option to accept DSI Stock, corresponding to the amount due
by the Seller, as valid payment, using the currency exchange rate published
in The Wall Street Journal on the day before payment.
5.7. DEFINITION OF DAMAGES. For purposes of this Article 5,
"Damages" shall mean any loss, liability, damage, deficiency, cost and
expense including, in particular, reasonable attorneys' fees and expenses
incurred or actually disbursed in connection with any claim, suit or
proceeding brought against the Company and that had its origin prior to the
Closing.
However, Damages shall not include fees and expenses of attorneys
incurred or actually disbursed in the case of a claim not involving a Third
Party Claim except to the extent awarded or imposed by a judicial or
arbitral decision, which Buyer reserves the right to request.
Any amounts that may be due to the Buyer will be calculated after
having taken into account any tax savings benefiting the Company.
ARTICLE 6
GENERAL PROVISIONS
6.1. AMENDMENT AND WAIVER. No amendment of any provision of this
Agreement shall in any event be effective, unless the same shall be in
writing and signed by the parties hereto. Any failure of any party to
comply with any obligation, agreement or condition hereunder may only be
waived in writing by the other parties. No failure by any party to take
any action against any breach of this Agreement or default by the other
parties shall constitute a waiver of such party's right to enforce any
provision hereof or to take any such action.
6.2. DISPUTE RESOLUTION. Any dispute, controversy or claim
arising out of this Agreement or the breach thereof shall be resolved by
arbitration pursuant to the
15
rules of the International Chamber of Commerce,
before a panel of three arbitrators, one of whom shall be selected by the
Buyer, one of whom shall be selected by the Seller and the third arbitrator
shall be selected by the other two arbitrators. The arbitration take place
in Paris and shall be conducted in the English language.
6.3. BROKER'S AND FINDER'S FEES. The Seller hereby represent and
warrant to Buyer with respect to the Seller, and Buyer hereby represents
and warrants to Seller, that no Person or entity is entitled to receive
any investment banking, brokerage or finder's fee or fees for financial
consulting or advisory services in connection with this Agreement or the
transactions contemplated hereby.
6.4 LEGAL FEES. Each party will bear its own legal fees and
expenses.
6.5. NOTICES. All notices, requests and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, facsimiled (which is confirmed) or mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall
be specified by like notice):
- TO THE BUYER AT:
▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇.▇ ▇▇▇▇▇, ▇▇▇
Facsimile: 00/1 716 421 42 88
Attention: ▇▇▇▇▇▇▇▇ ▇.▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
- TO THE SELLER AT:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: 02 38 89 84 30
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
6.6. ENTIRE AGREEMENT; BINDING EFFECT. This Agreement and the
documents referred to herein (a) constitute the entire agreement and
supersede all other agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (b) shall
not be assigned by either party (by operation of law or otherwise) without
the prior written consent of the other party, except that Buyer may assign,
in its sole discretion, any of its rights, interests and obligations
hereunder to any related company.
6.7. APPLICABLE LAW. This Agreement shall be governed by and be
construed in accordance with French law.
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6.8. SEVERABILITY. In case any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining terms, provisions, covenants or
restrictions, or of such term, provision, covenant or restriction in any
other jurisdiction, shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement
as of the date first written above.
ESSONNE ELECTRONIQUE DETECTION SYSTEMS INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President Directeur General Title: Officer
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