EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
Dated March 11, 1999
by and among
▇▇▇▇▇ ▇▇▇▇▇▇
Global Source Network, Ltd.
and
The ▇▇▇▇▇▇▇▇▇▇ Corporation
TABLE OF CONTENTS
ARTICLE I - DEFINED TERMS
1.01 Defined Terms
1.02 Accounting Terms
1.03 Other Rules of Construction
ARTICLE II - THE TRANSACTION
2.01 Purchase and Sale of Shares
2.02 Purchase Price
2.03 Closing
2.04 [Reserved]
2.05 Post-Closing Purchase Price Adjustment
2.06 Payment
2.07 12-31-98 and Closing Balance Sheets
2.08 Set-Off
2.09 Contingent Purchase Price
2.10 Further Assurances
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF GSN AND SELLER
3.01 Organization
3.02 Authorization; Enforceability
3.03 Shares; Capitalization
3.04 Subsidiaries and Investments
3.05 Qualification
3.06 No Violation of Laws or Agreements; Consents
3.07 Financial Information
3.08 Undisclosed Liabilities
3.09 No Changes
3.10 Taxes
3.11 Inventory; Tangible Personal Property
3.12 Receivables
3.13 Condition of Assets; Title; Business
3.14 No Pending Litigation, Proceedings or Y2K Problems
3.15 Contracts; Compliance
3.16 Permits; Compliance With Law
3.17 Real Property
3.18 Transactions With Related Parties
3.19 Labor Relations
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3.20 Products Liability; Warranties
3.21 Insurance
3.22 Intellectual Property Rights
3.23 Employee Benefits
3.24 Environmental Matters
3.25 Compensation
3.26 Customer Relations
3.27 Absence of Certain Business Practices
3.28 Finders' Fees
3.29 Disclosure
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.01 Organization
4.02 Authorization; Enforceability
4.03 No Violation of Laws; Consents
4.04 No Pending Litigation or Proceedings
4.05 Finders' Fee
4.06 Financial Ability
4.07 Disclosure
ARTICLE V - FURTHER COVENANTS AND AGREEMENTS
5.01 Conduct of Business
5.02 Access; Information
5.03 Consents
5.04 Notification of Certain Matters
5.05 Insurance
5.06 Prohibition of Solicitation
ARTICLE VI - CONDITIONS TO CLOSING: TERMINATION
6.01 Conditions Precedent to Obligation of Purchaser
6.02 Conditions Precedent to Obligation of Seller
6.03 Deliveries and Proceedings at Closing
6.04 Termination
ARTICLE VII - SURVIVAL AND INDEMNIFICATION
7.01 Survival of Representations
7.02 Indemnification by Seller
7.03 Indemnification of Purchaser
7.04 Notice of Claims
7.05 Third-Party Claims
7.06 Set-Off
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ARTICLE VIII - NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
8.01 Seller
8.02 Purchaser
8.03 Damages
ARTICLE IX - TAXES AND BENEFIT PLANS
9.01 Certain Tax Matters
9.02 Transfer Taxes
9.03 Expenses of Benefit Plans
ARTICLE X - MISCELLANEOUS
10.01 Costs and Expenses
10.02 Further Assurances
10.03 Notices
10.04 Offset; Assignment; Governing Law
10.05 Amendment and Waiver; Cumulative Effect
10.06 Entire Agreement; No Third-Party Beneficiaries
10.07 Severability
10.08 Counterparts
10.09 Bulk Transfer Laws
10.10 Choice of Forum
10.11 Headings
10.12 Publicity
10.13 Specific Performance
Schedules
2.01 Seller's Shares
2.09(a) Chart
2.09(a) Pre-Tax Profit and Target Statement
3.03 Shareholders
3.04 Equity Interests; Predecessors
3.05 Jurisdictions
3.06 Consents
3.08 Liabilities
3.10 Taxes
3.11 Tangible Personal Property
3.12 Receivables
3.14 Litigation or Proceedings
3.15 Contracts
3.16 Permits
3.17 Real Property
3.18 Related Party Transactions
3.20 Product Warranties
3.21 Insurance
3.22 Intellectual Property Rights
3.23 Employee Benefits
3.24 Environmental Matters
3.25 Compensation
6.01(g) Required Employment Agreements
Exhibits
A [RESERVED]
B [RESERVED]
3.07 Financial Statements
6.03(a)(vii) Legal Opinion of Mezan, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.
6.03(b)(vi) Legal Opinion of Scolaro, Shulman, ▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AGREEMENT dated , 1999, by and among
THE ▇▇▇▇▇▇▇▇▇▇ CORPORATION, a Delaware corporation (the
"Parent" or the "Purchaser"), ▇▇▇▇▇ ▇▇▇▇▇▇ ("PL" or "Seller")
with an office at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ and GLOBAL SOURCE NETWORK, LTD., a New York
corporation with its principal office located at ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇., ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("GSN" or "Company").
WHEREAS, Purchaser, PL and Company have entered into a certain
binding Letter Agreement, dated December 11, 1998 (the "LOI"); and
WHEREAS, Pursuant to the LOI, the parties have prepared this
definitive agreement; and
WHEREAS, All of the issued and outstanding capital stock of
GSN is owned as follows: PL 50 shares
WHEREAS, Seller intends to sell to Purchaser, and Purchaser
intends to acquire from Seller all of the shares in the Company upon the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, the
parties, each intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINED TERMS
1.01 Defined Terms. The following terms, not defined elsewhere in this
Agreement, shall have the following meanings:
"Accelerating Disposition" has the meaning given that term in
Section 2.09(e).
"Additional Stock Payment" has the meaning given that term in
Section 2.09(g).
"Adjusted Closing Balance Sheet" has the meaning given that
term in Section 2.07(a)(iii).
"Adjusted 12-31-98 Balance Sheet" has the meaning given that
term in Section 2.07(a)(iii).
"Affiliate" shall mean, as to the party specified, any Person
which directly or indirectly through ownership of stock or through any other
arrangement either controls, is controlled by or is under common control with,
such party. The term "control" shall mean the power to direct the affairs of
such Person by reason of ownership of equity interests, by contract or
otherwise.
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"Agreement" means this Stock Purchase Agreement, as it may be
amended from time to time.
"Applicable Accounting Principles" or "GAAP" shall mean United
States Generally Accepted Accounting Principles, applied on a
consistent basis throughout the periods indicated except as disclosed
in footnotes to the financial statements.
"Auditors" means the certified public accounting firm of
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇.
"Balance Sheet Date" means December 31, 1998.
"Benefit Plan" has the meaning given that term in Section
3.23(a).
"Business" shall mean the business presently operated and
conducted by Seller through GSN, including, without limitation, the
merchandising and sourcing of tailored clothing and dress shirts to
value-priced apparel retailers.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which banks are authorized to be closed in New
York City.
"Cash Purchase Price" has the meaning given that term in
Section 2.02(a).
"CERCLIS" means the Comprehensive Environmental Response
Compensation Liability Information System List pursuant to Superfund.
"Chart" has the meaning given that term in Schedule 2.09(a).
"Closing" has the meaning given that term in Section 2.03.
"Closing Date" has the meaning given that term in Section
2.03.
"Code" means the Internal Revenue Code of 1986, as amended and
the applicable rulings and regulations thereunder.
"Company Group" has the meaning given that term in Section
3.23(b).
"Company Plan" has the meaning given that term in Section
3.23(a).
"Contingent Purchase Price" has the meaning given that term in
Section 2.02(c).
"Contract" and "Contracts" have the respective meanings given
those terms in Section 3.15.
"Contracts" shall mean the leases; rental agreements;
insurance policies; royalty agreements; commission agreements;
collective bargaining agreements; union contracts; licenses;
agreements; permits; sales order and purchase orders which either
individually or in the aggregate total Twenty-Five Thousand Dollars
($25,000.00) or more; commitments; and any and all other contracts or
binding arrangements (including, capital commitments), whether written
or oral, express or implied, of the Business or by which GSN is bound.
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"Damages" has the meaning given that term in Section 7.04.
"Defined Benefit Plan" has the meaning given that term in
Section 3.23(e).
"Delayed Obligation" has the meaning given that term in
Section 2.09(c).
"Distributable Personal Property" shall mean the personal
property described on Exhibit B attached hereto.
"Dollars" and "$" shall mean, unless otherwise specified,
United States Dollars.
"Encumbrance" means any liability, debt, mortgage, deed of
trust, pledge, security interest, encumbrance, option, right of first refusal,
agreement of sale, adverse claim, easement, lien (including liens for Taxes),
charge, restriction, assessment, restrictive covenant, encroachment,
right-of-way, burden or charge of any kind or nature whatsoever or any item
similar or related to the foregoing.
"Environmental Laws" shall mean all applicable Federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards and
regulations, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree or judgment, imposing liability or standards of conduct for the
protection, preservation or restoration of the environment (including ambient
air, surface water, groundwater, drinking water, wetlands, land surface or
subsurface strata, animal life and vegetation) and human health and safety,
including common law, property damage and similar common law theories.
Environmental Laws include the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. ▇▇.▇▇. 9601 et seq.)
("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49
U.S.C. ▇▇.▇▇. 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. ▇▇.▇▇. 136 et seq.); the Solid Waste Disposal Act (42 U.S.C.
▇▇.▇▇. 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. ▇▇.▇▇. 2601 et
seq.); the Clean Air Act (42 U.S.C. ▇▇.▇▇. 7401 et seq.); the Federal Water
Pollution Control Act (33 U.S.C. ▇▇.▇▇. 1251 et seq.); the Occupational Safety
and Health Act (29 U.S.C. ▇▇.▇▇. 651 et seq.); and the Safe Drinking Water Act
(42 U.S.C. ▇▇.▇▇. 300(f) et seq.), each as amended and in effect on the date
hereof, and any and all regulations promulgated thereunder, and all analogous
state, local and foreign counterparts or equivalents and any transfer of
ownership notification or approval statutes.
"Environmental Permits" shall mean all material permits,
licenses and authorizations of all governmental authorities required by GSN for
the conduct of the Business as currently conducted under all applicable
Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the applicable rulings and regulations thereunder.
"Final Closing Balance Sheet" has the meaning given to that
term in Section 2.07(d).
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"Financial Statements" has the meaning given that term in
Section 3.07(b).
"Forfeited Obligation" has the meaning given that term in
Section 2.09(c).
"Governing Documents" means, with respect to any Person who is
not a natural Person, the certificate or articles of incorporation, bylaws, deed
of trust, formation or governing agreement and other charter documents or
organization or governing documents or instruments of such Person.
"Governmental Body" means any court, government (federal,
state, local or foreign), department commission, board, bureau, agency, official
or other regulatory, administrative or governmental authority or
instrumentality.
"Hazardous Material" shall mean any substance, material or
waste which is regulated by or forms the basis of liability under any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Law, (b) polychlorinated
biphenyls (PCB's) or (c) any radioactive substance.
"Income Taxes" shall mean all Taxes on or measured by net
income, gross profits or net profits, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority, domestic or foreign.
"Indemnified Party" has the meaning given that term in Section
7.05.
"Indemnifying Party" has the meaning given that term in
Section 7.05.
"Intellectual Property" has the meaning given that term in
Section 3.22.
"Intercompany Note" has the meaning given that term in
Schedule 2.09(a).
"IPO" shall mean an initial public offering of the ▇▇▇▇▇▇▇▇▇▇
Stock.
"Installment" has the meaning given that term in Section
2.09(b).
"IRS" means the Internal Revenue Service.
"Law" means any applicable federal, state, municipal, local or
foreign statute, law, ordinance, rule, regulation, judgment or order of any kind
or nature whatsoever including any public policy, judgment or order of any
Governmental Body or priniciple of common law.
"LOI" has the meaning given that term in the introductory
paragraphs to this Agreement.
"Litigation" has the meaning given that term in Section 3.14.
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"Multiemployer Plan has the meaning given that term in Section
3.23(f).
"Note" has the meaning given that term in Section 2.02(b).
"Notice of Disagreement" has the meaning given that term in
Section 2.09(a).
"Obligation Shortfall" had the meaning given that term in
Section 2.09(g).
"Other Agreement" means each other agreement or document
contemplated hereby to be executed and delivered in connection with the
transactions contemplated by this Agreement.
"Patents" shall mean patents (including all reissues,
divisions, continuations, continuations in part and extensions thereof), patent
applications and patent disclosures docketed.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" and "Permits" have the respective meanings given
those terms in Section 3.16.
"Permitted Encumbrances" shall mean, to the extent applicable,
Encumbrances which (a) are liens for Taxes not yet due and payable, or (b) are
mechanics', carriers', materialmen's, landlords', workers' or other similar
liens incurred in the ordinary course of business.
"Person" means and includes, without limitation, whether
foreign or domestic, a natural person, a corporation, an association, a
partnership, a limited liability company, a trust, a joint venture, an
unincorporated organization, a business, any other legal entity, and a
Governmental Body.
"▇▇▇▇▇▇▇▇▇▇ Stock" shall mean the common stock of the Parent
issued pursuant to the IPO.
"Post-Closing Purchase Price Adjustment" means the
post-closing adjustment to the Purchase Price pursuant to Section 2.05.
"Preliminary Closing Balance Sheet" has the meaning given that
term in Section 2.07(a).
"Prohibited Activity(ies) of the Company" means an activity
(or activities) described in Section 5.01(b).
"Pre-Tax Income" shall mean the net income of the Business for
financial reporting purposes prepared in accordance with Applicable Accounting
Principles before any provision for Federal and state income taxes, excluding
any goodwill amortization expense arising out of the purchase of stock pursuant
to this Agreement.
"Proposed Acquisition Transaction" has the meaning given that
term in Section 5.06.
"Purchase Price" has the meaning given that term in Section
2.02.
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"Purchaser Damages" has the meaning given that term in Section
7.02.
"Purchaser Indemnitees" has the meaning given that term in
Section 7.02.
"Purchaser Parties" shall mean the Partnership and the
Purchaser.
"Qualified Plan" has the meaning given that term in Section
3.23(d).
"Real Property" has the meaning given that term in Section
3.17.
"Receivables" has the meaning given that term in Section 3.12.
"Regulated Material" means any hazardous substances as defined
by any applicable Environmental Law and any other material regulated by any
applicable Environmental Law, including polychlorinated biphenyls, petroleum,
petroleum-related material, crude oil or any fraction thereof and other
hazardous materials.
"Related Party" means (i) Seller, (ii) any Affiliate of
Seller, (iii) any officer or director of any Person identified in clauses (i) or
(ii) preceding, and (iv) any spouse, sibling, ancestor or lineal descendent of
any natural Person identified in any one of the preceding clauses.
"Security Right" means, with respect to any security, any
option, warrant, subscription right, pre-emptive right, other right, proxy, put,
call, demand, plan, commitment, agreement, understanding or arrangement of any
kind relating to such security, whether issued or unissued, or any other
security convertible into or exchangeable for any such security. "Security
Right" includes any right relating to issuance, sale, assignment, transfer,
purchase, redemption, conversion, exchange, registration or voting and includes
rights conferred by statute, by the issuer's Governing Documents or by
agreement.
"Seller Damages" has the meaning given that term in Section
7.03.
"Seller Indemnitee" has the meaning given that term in Section
7.03.
"Selling Group" means and includes, without limitation, a
member, whether past or present, of Seller's affiliated group of corporations,
if any, within the meaning of Code Section 1504(a), or any Affiliate.
"Seller's Representative" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇.
"Shares" has the meaning given that term in Section 2.01.
"Stock Payment" has the meaning given that term in Section
2.09(g).
"Stockholders' Equity" means the excess of the assets of a
Company over the liabilities of such Company, as adjusted and calculated in
accordance with the applicable provisions of this Agreement.
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"Subsidiary" means any corporation, partnership, joint venture
or other entity in which the Company owns, directly or indirectly, more than 20%
of the outstanding voting securities or equity interests.
"Superfund" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901 et seq., as
amended.
"Target" has the meaning given that term in Section 2.09(a).
"Target Statement" has the meaning given that term in Section
2.09(a).
"Tax or Taxes" shall mean all taxes on, or measured by or
referred to as, income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, customs, duties or
similar assessments or charges, together with any interest and any penalties,
additions to tax or additional similar amounts imposed by any taxing authority,
domestic or foreign, with respect thereto.
"Tax Returns" shall mean any returns, declarations, claims for
refund, information returns, reports and statements relating to Taxes that are
required to be filed with any appropriate domestic or foreign taxing authority,
including any schedule or attachment thereto, and including any amendment
thereof.
"Terminating Distribution" has the meaning given that term in
Section 2.09(d).
"Trademarks" shall mean trademarks, service marks, brand
names, brand marks, trade dress, logos and all other names and slogans
associated with products of GSN, whether or not registered, and all
registrations thereof and pending applications therefor.
"Trade Names" shall mean trade names embodying goodwill of
GSN, whether or not registration has been obtained or an application for
registration is pending.
"12-31-98 Balance Sheet" has the meaning given that term in
Section 3.07(b).
1.02 Accounting Terms. Any accounting terms used in this Agreement
shall, unless otherwise specifically provided, have the meanings given them in
accordance with, and all financial computations hereunder shall, unless
otherwise specifically provided, be computed in accordance with, the Applicable
Accounting Principles.
1.03 Other Rules of Construction. References in this Agreement to
sections, schedules and exhibits are to sections of, and schedules and exhibits
to, this Agreement unless otherwise indicated. Words in the singular include the
plural and in the plural include the singular. The word "or" is not exclusive.
The words "including", "includes", "included" and "include", when used, are
deemed to be followed by the words "without limitation".
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ARTICLE II
THE TRANSACTION
2.01 Purchase and Sale of Shares. Upon the terms and subject to the
conditions of this Agreement, in consideration of the Purchase Price, Seller
shall sell, assign, transfer and deliver to Purchaser fifty (50) shares of GSN's
common voting stock (the "Shares"), which Shares shall, as of Closing, represent
100% of each and every class of GSN's issued and outstanding capital stock and
Purchaser shall purchase from Seller and take delivery of the Shares, at
Closing, free of all Encumbrances. The number of Shares to be sold by each
Seller is set forth on Schedule 2.01.
2.02 Purchase Price. The aggregate purchase price for the Shares shall
be Four Million Four Hundred Thousand Dollars ($4,400,000) ("Purchase Price"),
decreased, if at all, by the Closing Purchase Price Adjustment and the
Post-Closing Purchase Price Adjustment, and shall be payable as follows:
(a) by wire transfer of immediately available funds to a bank
account designated by Sellers, the amount of One Million Four Hundred Thousand
Dollars ($1,400,000.00) (the "Cash Purchase Price"); and
(b) the Purchaser shall deliver to Seller on the Closing Date, its
promissory note in the principal amount of Eight Hundred Thousand Dollars
($800,000.00) on the form attached hereto as Exhibit 2.02 (the "Note") subject
to the adjustments pursuant to Section 2.05 below . Seller acknowledges that the
Note shall be unsecured and subordinate to all existing and future debt of
Purchaser, except for trade debt incurred in the ordinary course, and Seller
agrees to execute and deliver without further consideration all subordination
agreements necessary to effect the foregoing; and
(c) by deferred payment of the unsecured contingent earn-out
portion of Two Million Two Hundred Thousand Dollars ($2,200,000.00) to be paid
upon the terms and subject to the conditions set forth in Section 2.09
("Contingent Purchase Price").
2.03 Closing. The consummation of the purchase and sale of the Shares
and the other transactions contemplated hereby (the "Closing") shall take place
at 10:00 a.m., local time, on June 30, 1999, at the offices of Seller's counsel
in New York, New York, or at such other time or place as the parties may agree.
2.04 [RESERVED]
2.05 Post-Closing Purchase Price Adjustment Based Upon Closing Date
Stockholders' Equity. If the Stockholders' Equity of the Company at the close of
business on the Closing Date, as reflected in the Final Closing Balance Sheet,
is less than zero ($0.00), then the Note portion of the Purchase Price shall be
reduced dollar-for-dollar by the amount of such deficiency. If the Stockholder's
Equity of the Company as reflected on the Final Closing Balance Sheet is greater
than zero ($0.00), the Purchase Price shall not be increased.
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2.06 Payment. Upon the terms and subject to the conditions of this
Agreement, (i) at Closing, Purchaser shall deliver the Cash Purchase Price to
Sellers by wire transfer of federal funds, and (ii) within five (5) Business
Days after the determination of the Post-Closing Purchase Price Adjustment is
made, Purchaser shall be entitled to an immediate credit against the principal
balance of and interest on the Note equal to the Post-Closing Purchase Price
Adjustment, if any. In the event of an IPO and acceleration of the Note in
accordance with the terms thereof, the amount of any Post-Closing Purchase Price
Adjustment shall be immediately refunded by the Seller.
2.07 12-31-98 and Closing Balance Sheets.
(a) Preliminary and Closing Balance Sheets. Promptly after the
Closing, Seller (in consultation with, and with such assistance as Seller shall
reasonably request of, Purchaser) shall prepare a balance sheet and related
notes of the Company as of the close of business on the Closing Date (the
"Preliminary Closing Balance Sheet"). The Preliminary Closing Balance Sheet
shall be prepared in accordance with GAAP applied on a basis consistent with the
12-31-98 Balance Sheet, except that (A) no item shall fail to be included
therein or excluded therefrom on the basis of materiality, individually or
collectively, (B) at Purchaser's option, the effect of any breaches of the
representations and warranties of Seller or the Company made herein and
discovered by Purchaser on or before the date that the Adjusted Closing Balance
Sheet is delivered by Purchaser to Seller shall be fully reserved therein, (C)
accruals shall be made, if necessary, to reflect the distribution of cash for
the payment of employee bonuses, and the distribution to the Seller of the
Distributable Personal Property, and (D) accounts relating to Related Parties
shall be eliminated so as to reflect accurately the Company's financial
condition on a stand-alone basis.
The Company shall provide all documentation necessary to establish the
true and complete amount of its inventory, if any, as of the close of business
on the Closing Date, which count may be verified by either or both the Auditors
and Seller's accountants. Purchaser shall engage the Auditors, at the expense of
Purchaser, to examine the Preliminary Closing Balance Sheet in accordance with
generally accepted auditing standards and, based upon such examination, make
such adjustments, if any, to the Preliminary Closing Balance Sheet as shall in
the Auditors' judgment be required to cause the Preliminary Closing Balance
Sheet to reflect fairly those items required to be reflected therein in
accordance with the accounting principles described above (after such
examination and any adjustment, the "Adjusted Closing Balance Sheet,"
respectively).
(b) Delivery of Adjusted Balance Sheets. As soon as practicable
following the Closing, but in no event later than September 30, 1999, the
Adjusted Closing Balance sheet shall be delivered by Purchaser to Seller,
together with a written statement setting forth the Prohibited Activities of the
Company, if any. Seller and its representatives shall be provided complete
access to all work papers and other information used by Purchaser in preparing
the Adjusted Closing Balance Sheet. The Adjusted Closing Balance Sheet and the
statement of Prohibited Activities of the Company, when delivered by Purchaser
to Seller, shall be deemed conclusive and binding on the parties for purposes of
determining the Post-Closing Purchase Price Adjustment, unless the Seller
notifies Purchaser in writing within thirty (30) Business days after receipt of
the Adjusted Closing Balance Sheet of its disagreement therewith, which notice
shall state with reasonable specificity the reasons for any disagreement and
identify the items and amounts in dispute.
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(c) Arbitration. If any disagreement concerning the Post-Closing
Purchase Price Adjustment is not resolved by Purchaser and Seller within thirty
(30) Business Days following the receipt by Seller of the Adjusted Closing
Balance Sheet with statement of Prohibited Activity of the Company, the
undisputed amount or credit shall be paid or taken in accordance with Section
2.06, and Purchaser and Seller shall promptly engage on standard terms and
conditions for a matter of such nature a nationally recognized firm of
independent accountants to resolve such dispute. The firm of independent
accountants shall be proposed in writing by Purchaser to Seller. In the absence
of prompt agreement (within five (5) Business Days) on the identity of the
independent accountants, the New York office of one of the "big five"
international certified public accounting firms, other than the accounting firm
of Ernst & Young, shall be engaged by the parties. The engagement agreement with
the independent accountants shall require the independent accountants to make
their determination with respect to the items in dispute within ninety (90)
Business Days following the receipt by Seller of the Adjusted Closing Balance
Sheet. Seller shall pay all of the cost of the fees and expenses of such
independent accountants at the time of payment of the Post-Closing Purchase
Price Adjustment unless the independent accountants determine that the aggregate
of all adjustments result in a change in favor of Seller that is greater than
ten percent (10%) of the difference between the stockholder equity of the
Company on the Preliminary Closing Balance Sheet and the Adjusted Closing
Balance Sheet. The resolution by the independent accountants of any dispute
concerning the Post-Closing Purchase Price Adjustment shall be final, binding
and conclusive upon the parties and shall be the parties' sole and exclusive
remedy regarding any dispute concerning the Post-Closing Purchase Price
Adjustment.
(d) Final Closing Balance Sheet. The Adjusted Closing Balance
Sheet, as modified by the parties' agreement and by any determination by the
independent accountants as described in this Section 2.07, shall be the "Final
Closing Balance Sheet".
2.08 Set-Off. Any amounts due to Purchaser from Seller pursuant to
Sections 2.05 and 2.06 of this Agreement may, after completion of all dispute
resolution procedures established in Section 2.07 of this Agreement, in the sole
and absolute discretion of Purchaser, be set off against and deducted from any
amounts due as Contingent Purchase Price or as otherwise provided herein.
2.09 Contingent Purchase Price.
(a) Within one hundred twenty (120) days after the end of each of
Purchaser's fiscal years, commencing with fiscal year 1999 and ending upon the
close of fiscal year 2003, Purchaser shall cause to be prepared and delivered to
the Seller a statement setting forth the Pre-Tax Profit (as defined below) of
the Company for such year, prepared by the Auditors in accordance with GAAP
("Target Statement"). Pre-Tax Profits and the Target Statements shall be
prepared in accordance with the terms and procedures set forth in Schedule 2.09
(a) hereto. If requested, Seller shall use his best efforts to assist Purchaser
and its representatives in the preparation of the Target Statements. During the
forty-five (45) Business Day period following Seller receipt of the Target
Statement, Seller, at his sole expense, shall be permitted to review, or have
his accountants or counsel review, all relevant working papers and books and
records of the Purchaser relating to the Target Statement. Purchaser shall
provide reasonable cooperation with this review. The Target Statement shall
become final and binding upon the parties on the forty-fifth (45th) Business Day
following receipt thereof by Seller's Representative unless before such date
Seller delivers written notice to the Purchaser ("Notice of Disagreement") which
sets forth in detail the basis for Seller's disagreement with the Target
Statement. If a Notice of Disagreement is received by the Parent in a timely
manner, then the Target Statement (as revised in accordance with clause (x) or
(y) below) shall become final and binding upon the parties on the earlier of (x)
the date the parties hereto resolve in writing any differences they have with
respect to any matter specified in the Notice of Disagreement, or (y) the date
any disputed matters are finally resolved in writing by the arbitrator in
accordance with the arbitration provision set forth in this Section 2.09(d)
hereto.
(b) Subject to Section 2.09(a) above, in the event that the Target
Statement reveals that the Company has achieved the Pre-Tax Profit targets
("Target") for any of the fiscal years 1999 through and including 2003, as set
forth below, then Purchaser shall pay to Seller, without interest, the
applicable additional Contingent Purchase Price attributable to such year (the
"Installment") as set forth below:
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Fiscal Year Target Installment
----------- ------ -----------
1999 $1,100,000 $400,000
2000 $1,180,000 $390,000
2001 $1,260,000 $440,000
2002 $1,350,000 $460,000
2003 $1,442,000 $510,000
(c) Pursuant to the table set forth above, in each year that the
Company, has Pre-Tax Profits (as defined below) in an amount equal to or greater
than the Target for such year Seller shall be paid 100% of the Installment for
such year. In the event that the Company has Pre-Tax Profits in an amount
greater than 80%, but less than 100%, of the Target for such year, Seller shall
be paid 50% of the Installment for such year, with payment of the remaining 50%
deferred for five (5) years from the date the Installment is paid in accordance
herewith ("Delayed Obligation") subject to the terms hereof. If in any year
where the Company has Pre-Tax Profits in an amount less than 80%, but greater
than or equal to 60% of the Target for such year, then 100% of the unpaid
Installment for such year shall be deferred for five (5) years from the date the
Installment would otherwise be paid in accordance herewith ("Deferred
Obligation") subject to the terms hereof. In any year where the Company has
Pre-Tax Profits in an amount less than 60% of the Target for such year, Seller
shall forfeit payment of 100% of the Installment for such year ("Forfeited
Obligation") subject to the terms hereof. In the event that the Companies have
Pre-Tax Profits in a year in excess of the Target for such year, then Seller may
elect to have the total amount of such excess carried back and applied to the
Target for either 1999, 2000, 2001 or 2002 in which there was a Delayed or
Deferred Obligation for the purpose of reapplying the percentage tests set forth
above, rather than crediting such excess to the year in which it is actually
earned. Any Delayed (or Deferred Obligation which is resurrected because of the
carry back election) shall be paid within ten (10) Business Days after the final
determination that such carry back is correct. All amounts or any portion
thereof to be paid to Seller shall be paid when due in immediately available
funds or at the option of Purchaser in freely tradable unrestricted shares of
▇▇▇▇▇▇▇▇▇▇ Stock in accordance with the terms and conditions set forth below. No
portion of any Installment due shall be payable during or with respect to any
period in which any Seller is in breach of a material contractual obligation to
the Purchaser, or any of its Affiliates; provided, further, that any amounts due
to Seller from Purchaser pursuant to this Section 2.09 or pursuant to this
Article II shall be subject to set-off and deduction for amounts due the Seller
under this Agreement, including Sections 2.04, 2.05, 2.06 and Article VII
hereof.
(d) If after the Closing Seller experiences two (2) consecutive
years of Forfeited Obligations, then Purchaser shall be entitled, at its sole
and absolute discretion, to, at any time, discontinue, reorganize, or otherwise
transfer or dispose of GSN, its assets and/or business ("Terminating
Disposition"), and all Delayed, Deferred and Forfeited Obligations which arose
on or prior to the closing of such Terminating Disposition, if any, and all
remaining unpaid Installments, if any, as set forth above shall expire and
terminate upon the closing of such Terminating Disposition without further
liability or obligation of Purchaser to Seller.
14
(e) If prior to the occurrence of a Terminating Disposition as set
forth in "(d)" above, Purchaser sells or otherwise disposes of (i) its stock in
GSN, or (ii) substantially all of the assets and/or business of GSN, in each
case to an unrelated third party or other than in the ordinary course of
business ("Accelerating Disposition"), all Deferred Obligations that are more
than one (1) year old at the time of the final closing of the Accelerating
Disposition, if any, and all Delayed Obligations which arose prior to the final
closing of such Accelerating Disposition, if any, and all remaining unpaid
Installments, if any, shall become due and payable in full by Purchaser to
Seller upon the final closing of such Accelerating Disposition. All Deferred
Obligations that are one (1) year or less old and all Forfeited Obligations
shall expire and terminate upon the final closing of such Accelerating
Disposition without further liability or obligation of Purchaser to Seller.
(f) Arbitration. In the event any dispute set forth in a timely
and valid Notice of Disagreement is not resolved by Purchaser and Seller within
thirty (30) Business Days following the receipt by Purchaser of such notice,
Purchaser and Seller shall promptly engage on standard terms and conditions for
a matter of such nature a nationally recognized firm of independent accountants
to resolve such dispute. The firm of independent accountants shall be proposed
in writing by Purchaser to Seller. In the absence of prompt agreement (within
five (5) Business Days) on the identity of the independent accountants, the New
York office of one of the "big five" international certified public accounting
firms, other than the accounting firm of Ernst & Young, shall be engaged by the
parties. The engagement agreement with the independent accountants shall require
the independent accountants to make their determination with respect to the
items in dispute within ninety (90) Business Days following the receipt by
Seller of the disputed Target Statement. Sellers shall pay all of the cost of
the fees and expenses of such independent accountants unless the independent
accountants determine that the aggregate of all adjustments result in a change
in favor of Seller that is greater than ten percent (10%) of the difference
between the amount of Pre-Tax Profits set forth on the Purchaser's prepared
Target Statement and the amount of Pre-Tax Profits finally determined by the
arbitrator. The resolution by the independent accountants of any dispute set
forth in the Notice of Disagreement shall be final, binding and conclusive upon
the parties and shall be the parties' sole and exclusive remedy regarding any
dispute concerning the determination of Pre-Tax Profits and/or a Target
Statement.
(g) Subject to the terms and conditions hereof, any amounts due to
Seller under this Section 2.09 shall be paid to Seller as follows:
(i) Purchaser shall deliver the Installment in the amount set
forth above along with and at the same time as the Target Statement is
due; or
(ii) If a Notice of Disagreement is timely filed, any balance
remaining, if any, shall be due and payable upon final resolution of
the matter; and
(iii) One hundred twenty (120) days after the end of
Purchaser's 2008 fiscal year Purchaser shall, subject to the foregoing,
have paid to Seller the amount of any remaining Delayed Obligations;
provided, however, at the sole and absolute discretion of the Purchaser, any
amounts due to Seller from Purchaser pursuant to this Agreement shall be subject
to set off and deduction from any or all amounts due the Seller under this
Agreement, including Sections 2.05 and 2.06 and Article VII hereof; provided,
further, that with respect to payments made by Purchaser under this subparagraph
(c) by the issuance (each such issuance, a "Stock Payment") of shares of
▇▇▇▇▇▇▇▇▇▇ Stock in respect of all or any portion of an Installment, the
following provisions apply:
15
(i) the number of shares of ▇▇▇▇▇▇▇▇▇▇ Stock issued to Seller
in respect of any Installment shall not exceed the average trading
volume of shares of ▇▇▇▇▇▇▇▇▇▇ Stock in the preceding five (5) trading
days, it being understood and agreed that if no shares of ▇▇▇▇▇▇▇▇▇▇
Stock are traded on any one or more of the preceding five (5) trading
days, the volume of shares traded for such day(s), which is zero (0),
will still be included for such day(s) in calculating the average
trading volume of shares of ▇▇▇▇▇▇▇▇▇▇ Stock for such five (5) trading
day period;
(ii) all shares issued (except with respect to shares issued
in respect of an Additional Stock Payment, as defined below) shall be
valued at the average of the closing price for such shares for the
twenty (20) trading days preceding such payment;
(iii) in the event that Seller sells all of the shares
comprising such Stock Payment within five (5) business days after its
receipt of such shares and such sale of shares results in gross cash
proceeds, less reasonable brokerage fees, to Seller that are less than
the portion of the Installment paid by such Stock Payment (such
difference, the "Obligation Shortfall"), the Purchaser shall issue to
Seller an additional number of shares of ▇▇▇▇▇▇▇▇▇▇ Stock (the
"Additional Stock Payment") equal to the quotient of the Obligation
Shortfall divided by the closing price of ▇▇▇▇▇▇▇▇▇▇ Stock on the
trading day immediately preceding such sale of shares and if gross cash
proceeds, less reasonable brokerage fees, to Seller from the Additional
Stock Payment are less than the Obligation Shortfall, Purchaser shall
issue Seller additional shares for the difference;
(iv) in the event of a sale, in accordance with the time
period set forth in (iii) above of any shares included in a Stock
Payment results in per share gross cash proceeds to Seller in excess of
the per share value of such shares used to determine the number of
shares of ▇▇▇▇▇▇▇▇▇▇ Stock issued in such Stock Payment (such excess
the "Per Share Windfall Amount"), the Seller shall pay to Purchaser,
within five (5) business days of such sale of shares, an amount equal
to the Per Share Windfall Amount multiplied by the number of shares of
▇▇▇▇▇▇▇▇▇▇ Stock included in such sale; and
(v) Purchaser represents and warrants that all shares issued
to Seller under this Section shall be freely tradeable and
unrestricted.
2.10 Further Assurances. From and after the Closing, upon written
request from the Purchaser, Seller shall without further consideration execute,
acknowledge and deliver all such further acts, assurances, deeds, assignments,
transfers, conveyances and other instruments and papers as may be reasonably
required to sell, assign, transfer, convey and deliver the Shares or Business to
Purchaser.
16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GSN AND SELLER
As an inducement to Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, PL and the Company jointly and
severally represent and warrant to the Purchaser as follows:
3.01 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
the corporate power and authority and all authorizations, licenses and permits
necessary to own or lease its properties, carry on its business as now
conducted, enter into this Agreement and the Other Agreements to which it is or
is to become a party and perform its obligations hereunder and thereunder.
3.02 Authorization; Enforceability. This Agreement and each Other
Agreement to which Seller or the Company, or all of them, is a party have been
duly executed and delivered by and constitute the legal, valid and binding
obligations of such party, enforceable against it in accordance with their
respective terms. Each Other Agreement to which the Seller or the Company, or
all of them, is to become a party pursuant to the provisions hereof, when
executed and delivered by such party, will constitute the legal, valid and
binding obligation of such party, enforceable against such party in accordance
with the terms of such Other Agreement. All actions contemplated by this Section
have been duly and validly authorized by all necessary proceedings by Sellers
and the Companies.
3.03 Shares; Capitalization. The authorized capital stock of the GSN
consists solely of two hundred (200) shares of common stock, no ($0.00) par
value per share, of which fifty (50) shares are issued and outstanding and none
are held in its treasury. The Shares constitute all of the issued and
outstanding shares of capital stock of the Company. All of the Shares are owned
of record, legally, beneficially and exclusively by Seller. The Shares are free
and clear of any and all Encumbrances, and upon delivery of the Shares
hereunder, Purchaser will acquire good and valid legal and exclusive title
thereto, free and clear of any and all Encumbrances. There are no Security
Rights relating to any of the Shares. All rights and powers to vote the Shares
are held exclusively by the Seller. All of the Shares are validly issued, fully
paid and nonassessable, were not issued in violation of the terms of any
agreement or other understanding, and were issued in compliance with all
applicable federal, state and foreign securities or "blue sky" laws and
regulations. The holders of the Shares and the number of Shares owned by each
are set forth on Schedule 3.03 attached hereto.
3.04 Subsidiaries and Investments. The Company does not own nor has it
ever owned, any shares of capital stock of or other equity interest in any
Subsidiary. The Company has good, marketable and exclusive title to the shares
or other equity interests disclosed on Schedule 3.04 as being owned by it, free
and clear of all Encumbrances. All rights and powers to vote such shares or
other equity interests are held exclusively by the Company. Set forth in
Schedule 3.04 is a listing of all names of all predecessor companies of the
Company, including the names of any entities from whom the Company previously
acquired significant assets. Except as disclosed in Schedule 3.04, the Company
has never been a subsidiary or division of another corporation nor been a part
of an acquisition which was later rescinded.
3.05 Qualification. The Company is duly qualified and in good standing
as a foreign corporation and is duly authorized to transact business in each
jurisdiction wherein the character of the properties owned or leased by it or
the nature of the activities conducted by it makes such qualification and good
standing necessary; and all such jurisdictions are set forth on Schedule 3.05.
17
3.06 No Violation of Laws or Agreements; Consents. Neither the
execution and delivery of this Agreement or any Other Agreement to which Seller
or the Company, or all of them, is or is to become a party, the consummation of
the transactions contemplated hereby or thereby nor the compliance with or
fulfillment of the terms, conditions or provisions hereof or thereof by Seller
or the Company, or any of them, will: (i) contravene any provision of the
Governing Documents of the Company, (ii) conflict with, result in a breach of,
constitute a default or an event of default (or an event that might, with the
passage of time or the giving of notice or both, constitute a default or event
of default) under any of the terms of, result in the termination of, result in
the loss of any right under, or give to any other Person the right to cause such
a termination of or loss under, any asset of the Company, including any Permit,
Intellectual Property, license, franchise, indenture, mortgage or any other
contract, agreement or instrument to which Seller or Company is a party or by
which any of their assets may be bound or affected, which individually or in the
aggregate would have an adverse effect on the Company, (iii) result in the
creation, maturation or acceleration of any liability or obligation of the
Company (or give to any other Person the right to cause such a creation,
maturation or acceleration), (iv) violate any Law or violate any judgment or
order of any Governmental Body to which Seller or the Company is subject or by
which any of their respective assets may be bound or affected, or (v) result in
the creation or imposition of any Encumbrance upon any of the Shares or any
asset of the Company or give to any other Person any interest or right therein.
Except as set forth on Schedule 3.06 attached hereto, no consent, approval or
authorization of, or registration or filing with, any Person is required in
connection with the execution or delivery by Seller or the Company, or all of
them, of this Agreement or any of the Other Agreements to which any or all of
them is or is to become a party pursuant to the provisions hereof or the
consummation by Seller or the Company, or all of them, of the transactions
contemplated hereby or thereby.
3.07 Financial Information.
(a) Records. The books of account and related records of the
Company reflect accurately and in detail its assets, liabilities, revenues,
expenses and other transactions.
(b) Financial Statements. Attached as Exhibit 3.07 are the audited
balance sheets, income statements and statements of cash flows for the Company
for the years ended December 31, 1997 and 1998 (collectively, the "Financial
Statements"). The Financial Statements (i) are accurate, correct and complete in
accordance with the books of account and records of each of the Company, (ii)
have been prepared in accordance with GAAP on a consistent basis throughout the
indicated periods, except that the interim financial statements contain no
footnotes or year-end adjustments, (iii) present fairly the consolidated
financial condition, assets and liabilities and results of operation of the
Company at the dates and for the relevant periods indicated in accordance with
GAAP, and (iv) conform in all respects to the requirements of the Security and
Exchange Commission's regulation S-X. The Closing Balance Sheet, when delivered,
shall be accurate, correct and complete in accordance with the books of account
and records of the Company as of the date of Closing in accordance with the
Applicable Accounting Principles, as modified in Section 2.07. All references in
this Agreement to the "12-31-98 Balance Sheet" mean the Company's balance sheet
dated 12-31-98 attached hereto as part of Exhibit 3.07.
18
3.08 Undisclosed Liabilities.
(a) The Company has no debt, obligation or liability, absolute,
fixed, contingent or otherwise, of any nature whatsoever, whether due or to
become due, including any unasserted claim, whether incurred directly or by any
predecessor thereto, and whether arising out of any act, omission, transaction,
circumstance, sale of goods or services, state of facts or other condition,
except: (i) those reflected or reserved against on the Preliminary Closing
Balance Sheet in the amounts shown therein; (ii) those not required under GAAP
to be reflected or reserved against in the Preliminary Closing Balance Sheet
that are expressly quantified and set forth in the Contracts identified pursuant
to Section 3.15; (iii) those disclosed on Schedule 3.08; and (iv) those of the
same nature as those set forth on the Preliminary Closing Balance Sheet that
have arisen in the ordinary course of business of the Companies after the
Balance Sheet Date through the date hereof, all of which have been consistent in
amount and character with past practice and experience, and none of which,
individually or in the aggregate, has had or is expected to have an adverse
effect on the business, financial condition or prospects of the Company and none
of which is a liability for breach of contract or warranty or has arisen out of
tort, infringement of any intellectual property rights, or violation of Law or
is claimed in any pending or threatened legal proceeding. The liabilities and
obligations of the Company combined do not exceed [$ ], nor are they materially
different from such items set forth on the Preliminary Closing Balance Sheet.
(b) Schedule 3.08 will set forth at Closing, all liabilities or
obligations of the Company and any liabilities or obligations incurred after the
Balance Sheet Date up to and including Date of Closing in the ordinary course of
business and liabilities or obligations of any kind, character and description,
whether accrued, absolute, secured or unsecured, contingent or otherwise. For
each such liability or obligation for which the amount is not fixed or is
contested, Schedule 3.08 sets forth the following information:
(i) a summary description of the liability or obligation
together with the following:
(A) copies of all relevant documentation relating thereto;
(B) amounts claimed and any other action or relief sought;
and
(C) name of claimant, and all other parties to any claim,
suit or proceeding.
(ii) the name of each court or agency, if any, before which a
claim, suite or proceeding is pending;
(iii) the date such claim, suite or proceeding was instituted.
3.09 No Changes. Since the Balance Sheet Date, the Company has
conducted its business only in the ordinary course. Except as disclosed on
Schedule 3.18, without limiting the generality of the foregoing sentence, since
the Balance Sheet Date, there has not been any: (i) material adverse change in
the financial condition, assets, liabilities, net worth, earning power, business
or prospects of the Company; (ii) damage or destruction to any asset of the
Company, whether or not covered by insurance; (iii) strike or other labor
trouble at the Company; (iv) creation of any Encumbrance on any asset of the
Company; (v) declaration or payment of any dividend or other distribution on or
with respect to or redemption or purchase by the Company of any shares of
capital stock of the Company, including any of the Shares; (vi) increase in the
salary, wage or bonus of any employee of the Company, except for payments that
do not reduce the Company's Stockholder's Equity below zero; (vii) asset
acquisition or expenditure, including capital expenditure, in excess of $10,000
in the aggregate, other than the purchase of inventory in the ordinary course of
business or as permitted under Section 5.03 hereof; (viii) change in any Company
Plan; (ix) change in any method of accounting; (x) payment to or transaction
with any Related Party, which payment or transaction is not specifically
disclosed on Schedule 3.18, except for payments that do not reduce the Company's
Stockholder's Equity below zero; (xi) disposition of any asset (other than
inventory in the ordinary course of business) for more than $10,000 in the
aggregate or for less than fair market value, except as permitted under Section
5.03 hereof; (xii) payment, prepayment or discharge of any liability other than
in the ordinary course of business or any failure to pay any liability when due;
(xiii) write-offs or write-downs of any assets of the Company in excess of
$10,000 in the aggregate; (xiv) creation, termination or amendment of, or waiver
of any right under, any agreement of the Company; or (xv) agreement or
commitment to do any of the foregoing.
19
3.10 Taxes.
(a) Tax Returns; Payment. The Company has filed or caused to be
filed on a timely basis, or will file or cause to be filed on a timely basis,
all Tax Returns that are required to be filed by it prior to or on the Closing
Date, pursuant to the law of each governmental authority with taxing power over
it. All such Tax Returns were or will be, as the case may be, correct and
complete. The Company has paid all Taxes that have become due as shown on such
Tax Returns or pursuant to any assessment received as an adjustment to such Tax
Returns, except (i) such Taxes, if any, as are being contested in good faith and
disclosed on Schedule 3.10, (ii) such Taxes that are fully reserved against on
the Financial Statement for the year ended 12-31-98, and (iii) Taxes accruing
after the Balance Sheet Date that are not yet due. The Company is currently not
the beneficiary of any extension of time within which to file any Tax Return. No
claim has been made by a taxing authority or of a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation in that
jurisdiction. Without limiting the foregoing, the Company has no liability for
any Tax except (x) Taxes disclosed on Schedule 3.10, (y) Taxes fully reserved on
the Financial Statement for the year ended 12-31-98, and (z) Taxes accrued after
the Balance Sheet Date and fully reserved on the Final Closing Balance Sheet.
(b) Withholding. Each Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party.
(c) Assessments. There is no pending, or, to the knowledge of
Seller or the Company, threatened or anticipated, assessment of any additional
Tax against any member of the Selling Group for any taxable period during which
either Company or any predecessor company was a member of the Selling Group. No
member of the Selling Group has waived any statute of limitations in respect of
any Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency for any taxable period during which either of the Companies was a
member of the Selling Group. No Tax audit or examination is now pending or
currently in progress with respect to the Company or Seller or any Affiliate of
Seller.
(d) Other Matters. Except as disclosed on Schedule 3.10, Company
is not a party to any income Tax allocation or sharing agreement. Company has
not filed a consent under Code Section 341(f) concerning collapsible
corporations. Company has not made any payment, nor is it obligated to make any
payment, nor is it a party to any agreement that under certain circumstances
could obligate it to make any payment, that will not be deductible under Code
Sections 280G or 162(m). Company has not been (nor does it have any liability
for unpaid Taxes because it once was) a member of an affiliated group during any
part of any consolidated return year within any part of which consolidated
return year any other corporation was also a member of such group. The Company
is not nor has it been during the applicable period specified in Code Section
987(c)(1)(A)(ii) a United States real property holding corporation as defined in
Code Section 987(c)(2).
20
3.11 Inventory; Tangible Personal Property.
(a) Inventory. All of the inventory owned by the Company, if any,
is valued on the books and records of such Company and in the Financial
Statements at lower of cost or market, the cost thereof being determined on a
first-in-first-out basis in accordance with GAAP. All of the finished goods
inventory of the Company are in good, merchantable and usable condition and are
saleable in the ordinary course of business within a reasonable time and at
normal profit margins, and all of the raw materials and work-in-process
inventory of the Company, if any, can reasonably be expected to be consumed in
the ordinary course of business within a reasonable period of time. None of the
Company's inventories is obsolete, slow-moving, has been consigned to others or
is on consignment from others.
(b) Tangible Personal Property. Schedule 3.11 attached hereto is a
true and complete list (including the location and address) of all machinery,
equipment, furniture, fixtures, office equipment and other tangible personal
property (other than inventory) owned by, leased by, in the possession of, or
used by of the Company ("Tangible Personal Property"). None of such Tangible
Personal Property owned by the Company is subject to mortgage, pledge, lien,
conditional sale agreement, security agreement, encumbrance or other charge
except as specifically disclosed in said Schedule 3.11. With respect to Tangible
Personal Property included in Schedule 3.11 which is not owned by the Company,
Schedule 3.11 indicates the owners and the circumstances under which the
property is used by the Company and whether the Company has the exclusive right
to use such Tangible Personal Property. All the Tangible Personal Property has
been maintained in all respects in accordance with the Company's normal
maintenance policies and procedures and is in good operation condition and
repair, ordinary wear and tear excepted, substantially complies with all
applicable laws and regulations and is sufficient to carry on the business of
the Company.
3.12 Receivables. Schedule 3.12 discloses all trade and other accounts
receivable of the Company ("Receivables") outstanding as of the date of Closing
presented on an aged basis and separately identifies the name of each account
debtor and the total amount of each related Receivable. All Receivables
disclosed on Schedule 3.12 arose from bona fide sale transactions of the
Company, and no portion of any Receivable is subject to counterclaim, defense or
set-off or is otherwise in dispute, except to the extent of the recorded reserve
for doubtful accounts specified on the Closing Balance Sheet, all of the
Receivables are collectible in the ordinary course of business and will be fully
collected within 120 days after having been created using commercially
reasonable efforts.
3.13 Condition of Assets; Title; Business. The Company is engaged in
the Business and no other business. The buildings, fixtures, improvements,
machinery, equipment, tools, furniture, improvements and tangible personal
property of the Company, if any, including those reflected on the Closing
Balance Sheet, are in good operating condition and repair and are suitable for
the purposes for which they are used in the Business. The Company has good,
marketable and exclusive title to all of its assets; all of such assets are
reflected on the Closing Balance Sheet or, under GAAP, are not required to be
reflected thereon; such assets (after of the Distributable Personal Property)
include all assets that are necessary for use in and operation of the Business;
and none of such assets are subject to any Encumbrance or impairment, whether
due to its condition, utility, collectibility or otherwise.
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3.14 No Pending Litigation, Proceedings or Y2K Problems. Except as set
forth on Schedule 3.14 attached hereto, no action, suit, investigation, claim or
proceeding of any nature or kind whatsoever, whether civil, criminal or
administrative, by or before any Governmental Body or arbitrator ("Litigation")
is pending or, to the knowledge of Seller and/or the Company, threatened against
or affecting the Seller, the Company, the Business, any of the Company's assets,
any of the Shares, or any of the transactions contemplated by this Agreement or
any other Agreement, and there is no basis for Litigation. Except as set forth
on Schedule 3.14 attached hereto, the Company has not been a party to any other
Litigation. There is presently no outstanding judgment, decree or order of any
Governmental Body against or affecting the Seller, the Company, the Business,
any assets of the Company, any of the Shares, or any of the transactions
contemplated by this Agreement or any Other Agreement. Except as set forth on
Schedule 3.14 attached hereto, the Company does not have pending any Litigation
against any third party. Except as set forth on Schedule 3.14 attached hereto,
the Company does not have any reason to believe it has a Year 2000 date-handling
problem relating to the Year 2000 date change that would cause a material
adverse effect on the Company.
3.15 Contracts; Compliance. Disclosed on Schedule 3.15, 3.21, 3.22 or
3.23 is a brief description of each contract, lease, indenture, mortgage,
instrument, commitment or other agreement, arrangement or understanding, oral or
written, formal or informal, to which the Company is a party or by which it or
its assets may be affected and that (i) is material to the Business of the
Company's assets or operations, individually or in the aggregate, (ii) involves
the purchase, sale or lease of any asset, materials, supplies, inventory or
services in excess of $10,000.00 per year, (iii) has an unexpired term of more
than six (6) months from the date hereof, taking into account the effect of any
renewal options; (iv) relates to the borrowing or lending of any money or
guarantee of any obligation, (v) limits the right of the Company to compete in
any line of business or otherwise restricts the right that the Company may have,
(vi) is an employment or consulting contract involving payment of compensation
and benefits in excess of $10,000.00 per year, (vii) was not entered into in the
ordinary course (each, a "Contract" and collectively, the "Contracts"). Each
Contract is a legal, valid and binding obligation of the Company and is in full
force and effect, except for an unconfirmed sales order or purchaser order. The
Company and each other party to each Contract has performed all obligations
required to be performed by it thereunder and is not in breach or default, and
is not alleged to be in breach or default, in any respect thereunder, and no
event has occurred and no condition or state of facts exists (or would exist
upon the giving of notice or the lapse of time or both) that would become or
cause a breach, default or event of default thereunder, would give to any Person
the right to cause such a termination or would cause an acceleration of any
obligation thereunder. The Company is not currently renegotiating any Contract
nor has the Company received any notice of non-renewal or price increase or
sales or production or import quota allocation with respect to any Contract.
Company shall terminate all commission and royalty agreements, if any, effective
as of the Closing Date.
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3.16 Permits; Compliance With Law. The Company holds all permits,
certificates, licenses, franchises, privileges, approvals, registrations and
authorizations required under any applicable Law or otherwise advisable in
connection with the operation of its assets and Business (each, a "Permit" and
collectively, "Permits"), which Permits are listed on Schedule 3.16 attached
hereto. Each Permit is valid, subsisting and in full force and effect. The
Company is in compliance with and has fulfilled and performed its obligations
under each Permit, and no event or condition or state of facts exists (or would
exist upon the giving of notice or lapse of time or both) that could constitute
a breach or default under any Permit. The Company has not been nor is it
currently in violation of any Law and has received no notice of any violation of
Law, and no event has occurred or condition or state of facts exists that could
give rise to any such violation. The Company has not received any notice of
non-renewal of any Permit.
3.17 Real Property. The Company does not own, use or lease or have any
interest in any real property (collectively, the "Real Property"), except as
disclosed and described on Schedule 3.17 attached hereto.
3.18 Transactions With Related Parties. No Related Party is or has been
a party to any transaction, agreement or understanding with the Company except
pursuant to arrangements disclosed on Schedule 3.18 and except for dividends
properly reflected as such in the Financial Statements. No Related Party uses
any assets of the Company except directly in connection with the Business, and
no Related Party owns any asset used in the Business. No Related Party has any
claim of any nature, including any inchoate claim, against the Company, and the
Company has no claim of any nature, including any inchoate claim, against any
Related Party. Except as disclosed on Schedule 3.18, as otherwise expressly
provided hereby or by any Other Agreement or as otherwise may be mutually agreed
after Closing, (i) no Related Party will at any time after Closing for any
reason, directly or indirectly, be or become entitled to receive any payment or
transfer of money or other property of any kind from the Company, and (ii) the
Company will not at any time after Closing for any reason, directly or
indirectly, be or become subject to any obligation to any Related Party.
3.19 Labor Relations. The relations of the Company with its employees
are good. No employee of the Company is represented by any union or other labor
organization. No representation election, arbitration proceeding, grievance,
labor strike, dispute, slowdown, stoppage or other labor trouble is pending or,
to the knowledge of Seller or the Company, threatened against, involving,
affecting or potentially affecting the Company. No complaint against the Company
is pending or, to the knowledge of Seller or the Company, threatened before the
National Labor Relations Board, the Equal Employment Opportunity Commission or
any similar state or local agency, by or on behalf of any employee of the
Company. The Company does not have any contingent liability for sick leave,
vacation time, severance pay or any similar item not fully reserved on the
Preliminary 12-31-98 Balance Sheet. The Company does not have any contingent
liability for any occupational disease of any of its employees, former employees
or others. Neither the execution and delivery of this Agreement, the performance
of the provisions hereof nor the consummation of the transactions contemplated
hereby will trigger any severance pay obligation under any contract or under any
Law.
3.20 Products Liability; Warranties. The Company shall not have any
liability after the Closing Date not fully covered by insurance relating to any
product manufactured, distributed or sold by the Company prior to the Closing
Date, whether or not such liability relates to products that are defective or
improperly designed or manufactured or in breach of any express or implied
product warranty, other than as fully reserved in the warranty reserve on the
Final Closing Balance Sheet. Schedule 3.20 discloses and describes the terms of
all express product warranties under which the Company may have liability after
the Closing Date.
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3.21 Insurance. Schedule 3.21 discloses all insurance policies with
respect to which the Company is the owner, insured or beneficiary. Such policies
are reasonable, in both scope and amount, in light of the risks attendant to the
Business and are reasonably comparable in coverage to policies customarily
maintained by others engaged in similar lines of business. The Company will not
have any liability after the Closing for retrospective or retroactive premium
adjustments, and no events have occurred that would give rise to any adjustment
in premiums paid. All insurance policies covering products liability and general
liability maintained by or for the benefit of a Company have been "occurrence"
policies and not "claims made" policies. Schedule 3.21 discloses the manner in
which the Company provides coverage for workers' compensation claims.
3.22 Intellectual Property Rights. Schedule 3.22 discloses all of the
trademark and service ▇▇▇▇ rights, applications and registrations, trade names,
fictitious names, service marks, logos and brand names, copyrights, copyright
applications, letters patent, patent applications, software and licenses of any
of the foregoing owned or used by the Company in or applicable to the Business.
The Company has the entire right, title and interest in and to, or has the
exclusive perpetual royalty-free right to use, the intellectual property rights
disclosed on Schedule 3.22 and all other processes, know-how, show-how,
formulae, trade secrets, inventions, discoveries, improvements, blueprints,
specifications, drawings, designs, patterns and other proprietary rights
necessary or applicable to or advisable for use in the Business ("Intellectual
Property"), free and clear of all Encumbrances. Schedule 3.22 separately
discloses all Intellectual Property under license. The Intellectual Property is
valid and not the subject of any interference, opposition, reexamination or
cancellation. To the knowledge of the Seller or the Company, no Person is
infringing upon nor has any Person misappropriated any Intellectual Property.
The Company is not infringing upon the Intellectual Property rights of any other
Person.
3.23 Employee Benefits.
(a) Benefit Plans; Company Plans. Schedule 3.23 discloses all
written and unwritten "employee benefit plans" within the meaning of Section
3(3) of ERISA, and any other written and unwritten profit sharing, pension,
savings, deferred compensation, fringe benefit, insurance, medical, medical
reimbursement, life, disability, accident, post-retirement health or welfare
benefit, stock option, stock purchase, sick pay, vacation, employment,
severance, termination or other plan, agreement, contract, policy, trust fund or
arrangement (each, a "Benefit Plan"), whether or not funded and whether or not
terminated, (i) maintained or sponsored by the Company, or (ii) with respect to
which the Company (or Seller with respect to the Company) has or may have
liability or is obligated to contribute, or (iii) that otherwise covers any of
the current or former employees of the Company or their beneficiaries, or (iv)
as to which any such current or former employees or their beneficiaries
participated or were entitled to participate or accrue or have accrued any
rights thereunder (each, a "Company Plan").
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(b) Company Group Matters; Funding. Neither the Company nor any
corporation that may be aggregated with the Company under Sections 414(b), (c),
(m) or (o) of the Code (the "Company Group") has any obligation to contribute to
or any direct or indirect liability under or with respect to any Benefit Plan of
the type described in Sections 4063 and 4064 of ERISA or Section 413(c) of the
Code. The Company does not have any liability, and after the Closing the Company
will not have any liability, with respect to any Benefit Plan of any other
member of the Company Group, whether as a result of delinquent contributions,
distress terminations, fraudulent transfers, failure to pay premiums to the
PBGC, withdrawal liability or otherwise. No accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code) exists nor has any
funding waiver from the IRS been received or requested with respect to any
Company Plan or any Benefit Plan of any member of the Company Group and no
excise or other Tax is due or owing because of any failure to comply with the
minimum funding standards of the Code or ERISA with respect to any of such
plans.
(c) Compliance. Each of the Company Plans and all related trusts,
insurance contracts and funds have been created, maintained, funded and
administered in all respects in compliance with all applicable Laws and in
compliance with the plan document, trust agreement, insurance policy or other
writing creating the same or applicable thereto. No Company Plan is or is
proposed to be under audit or investigation, and no completed audit of any
Company Plan has resulted in the imposition of any Tax, fine or penalty.
(d) Qualified Plans. Schedule 3.23 discloses each Company Plan
that purports to be a qualified plan under Section 401(a) of the Code and exempt
from United States federal income tax under Section 501(a) of the Code (a
"Qualified Plan"). With respect to each Qualified Plan, a determination letter
(or opinion or notification letter, if applicable) has been received from the
IRS that such plan is qualified under Section 401(a) of the Code and exempt from
federal income tax under Section 501(a) of the Code. No Qualified Plan has been
amended since the date of the most recent such letter. No member of the Company
Group, nor any fiduciary of any Qualified Plan, nor any agent of any of the
foregoing, has done anything that would adversely affect the qualified status of
a Qualified Plan or the qualified status of any related trust.
(e) No Defined Benefit Plans. No Company Plan is a defined benefit
plan within the meaning of Section 3(35) of ERISA (a "Defined Benefit Plan"). No
Defined Benefit Plan sponsored or maintained by any member of the Company Group
has been terminated or partially terminated after September 1, 1974, except as
set forth on Schedule 3.23. Each Defined Benefit Plan identified as terminated
on Schedule 3.23 has met the requirement for standard termination of
single-employer plans contained in Section 4041(b) of ERISA. During the five
year period ending on the Closing Date, no member of the Company Group has
transferred a Defined Benefit Plan to a corporation that was not, at the time of
transfer, related to the transferor in any manner described in Sections 414(b),
(c), (m) or (o) of the Code.
(f) Multiemployer Plans. No Company Plan is a multiemployer plan
within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"). No member of the Company Group has withdrawn from any
Multiemployer Plan or incurred any withdrawal liability to or under any
Multiemployer Plan. No Company Plan covers any employees of any member of the
Company Group in any foreign country or territory.
(g) Prohibited Transactions; Fiduciary Duties; Post-Retirement
Benefits. No prohibited transaction (within the meaning of Section 406 of ERISA
and Section 4975 of the Code) with respect to any Company Plan exists or has
occurred that could subject either Company to any liability or Tax under Part 5
of Title I of ERISA or Section 4975 of the Code. No member of the Company Group,
nor any administrator or fiduciary of any Company Plan, nor any agent of any of
the foregoing, has engaged in any transaction or acted or failed to act in a
manner that will subject either Company to any liability for a breach of
fiduciary or other duty under ERISA or any other applicable Law. With the
exception of the requirements of Section 4980B of the Code, no post-retirement
benefits are provided under any Company Plan that is a welfare benefit plan as
described in ERISA Section 3(1).
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3.24 Environmental Matters. Except as disclosed in Schedule 3.24:
(a) Compliance; No Liability. The Company has operated the
Business and each parcel of Real Property in compliance with all applicable
Environmental Laws. The Company is not subject to any liability, penalty or
expense (including legal fees) and will not hereafter suffer or incur any loss,
liability, penalty or expense (including legal fees) by virtue of any violation
of any Environmental Law occurring prior to the Closing, any environmental
activity conducted on or with respect to any property at or prior to the Closing
or any environmental condition existing on or with respect to any property at or
prior to the Closing, in each case whether or not the Company permitted or
participated in such act or omission.
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(b) Treatment; CERCLIS. The Company has not treated, stored,
recycled or disposed of any Regulated Material on any real property, and no
other Person has treated, stored, recycled or disposed of any Regulated Material
on any part of the Real Property. There has been no release of and there is not
present any Regulated Material at, on or under any Real Property. The Company
has not transported any Regulated Material or arranged for the transportation of
any Regulated Material to any location that is listed or proposed for listing on
the National Priorities List pursuant to Superfund, on CERCLIS or any other
location that is the subject of federal, state or local enforcement action or
other investigation that may lead to claims against the Company for cleanup
costs, remedial action, damages to natural resources, to other property or for
personal injury including claims under Superfund. None of the Real Property is
listed or, to the knowledge of Seller or the Company, proposed for listing on
the National Priorities List pursuant to Superfund, CERCLIS or any state or
local list of sites requiring investigation or cleanup.
(c) Notices; Existing Claims; Certain Regulated Materials; Storage
Tanks. The Company has not received any request for information, notice of
claim, demand or other notification that it is or may be potentially responsible
with respect to any investigation, abatement or cleanup of any threatened or
actual release of any Regulated Material. The Company is not required to place
any notice or restriction relating to the presence of any Regulated Material at
any Real Property or in any deed to any Real Property. The Company has provided
to Purchaser a list of all sites to which the Company has transported any
Regulated Material for recycling, treatment, disposal, other handling or
otherwise. There has been no past, and there is no pending or contemplated,
claim by a Company under any Environmental Law or Laws based on actions of
others that may have impacted on the Real Property, and the Company has not
entered into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. All storage tanks
located on the Real Property, whether underground or aboveground, are disclosed
on Schedule 3.24, and all such tanks and associated piping are in sound
condition and are not leaking and have not leaked.
3.25 Compensation. Schedule 3.25 sets forth an accurate schedule
showing all officers, directors and key employees of the Company and the current
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively), the date of last increase in compensation and
the expected date of current increase in compensation, if any.
3.26 Customer Relations. There exists no condition or state of facts or
circumstances involving the Company's customers, suppliers, distributors or
sales representatives that the Company or Seller can reasonably foresee could
adversely affect the Business after the Closing Date.
3.27 Absence of Certain Business Practices. Neither GSN nor any
officer, employee, agent or shareholder of the Company, nor any other Person
acting on behalf of any of them, has, directly or indirectly, within the past
five (5) years given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other Person who is or may be in a
position to help or hinder the Business (or assist GSN and/or the Business in
connection with any actual or proposed transaction) with might subject the
Company or any of their officers, employees, agents or shareholders or any other
Person acting on their behalf, to any damage or penalty in any civil, criminal
or governmental litigation or proceeding.
3.28 Finders' Fees. Neither the Seller nor the Company nor any of its
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fee, commission or finders' fee in
connection with any of the transactions contemplated hereby or by any Other
Agreement.
3.29 Disclosure. Seller has disclosed all events, conditions and facts
adversely affecting the future operations, profits or business of the Company.
None of the representations or warranties of Sellers and a Company contained
herein and none of the information contained in any Schedules, Exhibit,
certificate or other instrument furnished to Purchaser under or in connection
with this Agreement is false or misleading in any respect or omits to state a
fact herein or therein necessary to make the statements herein or therein not
misleading in any respect.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and consummate
the transactions contemplated hereby, Purchaser represents and warrants to
Seller as follows:
4.01 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, and has
the corporate power and authority to own or lease its properties, carry on its
business, enter into this Agreement and the Other Agreements to which it is or
is to become a party and perform its obligations hereunder and thereunder.
4.02 Authorization; Enforceability. This Agreement and each Other
Agreement to which Purchaser is a party have been duly executed and delivered by
and constitute the legal, valid and binding obligations of Purchaser,
enforceable against it in accordance with their respective terms. Each Other
Agreement to which Purchaser is to become a party pursuant to the Provisions
hereof, when executed and delivered by Purchaser, will constitute the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with the terms of such Other Agreement. All actions contemplated by
this Section have been duly and validly authorized by all necessary proceedings
by Purchaser.
4.03 No Violation of Laws; Consents. Neither the execution and delivery
of this Agreement or any Other Agreement to which Purchaser is or is to become a
party, the consummation of the transactions contemplated hereby or thereby nor
the compliance with or fulfillment of the terms, conditions or provisions hereof
or thereof by Purchaser will: (i) contravene any provision of the Governing
Documents of Purchaser, or (ii) violate any Law or any judgment or order of any
Governmental Body to which Purchaser is subject or by which any of its assets
may be bound or affected. No consent, approval or authorization of, or
registration of, or registration or filing with, any Person is required in
connection with the execution or delivery by Purchaser of this Agreement or any
of the other Agreements to which Purchaser is or is to become a party pursuant
to the provisions hereof or the consummation by Purchaser of the transactions
contemplated hereby or thereby.
4.04 No Pending Litigation or Proceedings. No Litigation is pending or,
to the knowledge of Purchaser, threatened against or affecting Purchaser in
connection with any of the transactions contemplated by this Agreement or any
other Agreement to which Purchaser is or is to become a party. There is
presently no outstanding judgment, decree or order of any Governmental Body
against or affecting Purchaser in connection with the transactions contemplated
by this Agreement or any other Agreement to which Purchaser is or is to become a
party.
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4.05 Finders' Fee. Neither Purchaser nor any of its officers, directors
or employee has employed any broker or finder or incurred any liability for any
brokerage fee, commission or finders' fee in connection with any of the
transactions contemplated hereby.
4.06 Financial Ability. Purchaser has, or as of the Closing will have,
sufficient cash as a result of financing (or other means) in immediately
available funds to pay the Cash Purchase Price and to consummate the
transactions contemplated by this Agreement.
4.07 Disclosure. Purchaser is not aware of any event, condition, fact,
occurrence, change or failure to act or omission, which is reasonably likely to
result in a material adverse affect on the operations, profits or business of
Purchaser. None of the representations or warranties of Purchaser contained
herein and none of the information contained in any other communication with
Seller under or in connection with this Agreement is false or misleading in any
respect or omits to state a fact herein or therein necessary to make such
statement not misleading in any respect.
ARTICLE V
FURTHER COVENANTS AND AGREEMENTS
5.01 Conduct of Business.
(a) Except as otherwise expressly provided herein, from and after
the date of this Agreement and until the Closing, Seller and the Company shall:
(i) operate the Business in substantially the same manner as
it has heretofore and not introduce any new method of management,
operation or accounting;
(ii) use their best efforts to maintain and preserve intact
the Business and to maintain satisfactory relationships with its
customers, suppliers, distributors and any other person having business
relations with it;
(iii) maintain its properties and facilities, including those
held under leases, in good working order and repair, ordinary wear and
tear excepted;
(iv) perform punctually all obligations under each Contract,
and keep each Contract in full force and effect, free from any right of
cancellation, forfeiture or termination;
(v) retain the services of its key officers and employees;
(vi) promptly notify the Parent of any material adverse change
in the business, assets, financial condition or results of operations
of Seller or Company;
(vii) maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments; and
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(b) From the date hereof to the Closing, neither Seller nor the
Company will take any action or engage in any transaction which would render the
representations and warranties of Seller inaccurate in any material respect as
of the Closing Date. In addition, except as expressly permitted by the terms of
this Agreement, neither Seller nor the Company will do any of the following
("Prohibited Activity of the Company") without the prior written consent of
Parent (such consent not to be unreasonably withheld):
(i) amend GSN's Certificate of Incorporation;
(ii) redeem or otherwise acquire any of GSN's capital stock or
issue any capital stock or any call, commitment, option, warrant or
right relating thereto;
(iii) grant to any employee any increase in compensation,
except as has been previously disclosed to and approved in writing by
the Purchaser, except for payments that do not reduce the Stockholder's
Equity of the Company below zero;
(iv) incur any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or
indebtedness in excess of $10,000 or which requires performance over
more than one year;
(v) cancel any material indebtedness owed to the Company,
other than in the ordinary course of business consistent with past
practice, except for payments that do not reduce the Stockholder's
Equity of the Company below zero;
(vi) make any material change in any method of accounting or
accounting practice or policy;
(vii) acquire or agree to acquire by merging or consolidating
with, or by purchasing stock or a substantial portion of the assets of,
or by any other manner, any material operating business, corporation,
partnership, association or other business organization (or division
thereof);
(viii) sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets with a value in excess
of $10,000, except in the ordinary course of business consistent with
past practice;
(ix) enter into any lease of real property;
(x) modify, amend or terminate any lease of, or other material
agreement pertaining to, real property (except for non-material
modifications or amendments associated with renewals of leases in the
ordinary course of business);
(xi) make capital expenditures or purchases in excess of
$10,000 in the aggregate;
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(xii) agree, whether in writing or otherwise, to do any of the
foregoing or to take any other action which would in any manner
interfere with, impedes, delays or make more costly the consummation of
the transaction completed hereby;
(xiii) create, assume or permit to exist any mortgage, pledge
or other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired;
(xiv) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the normal course of business
consistent with past practices;
(xv) negotiate for the acquisition of any business or the
start-up of any new business;
(xvi) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
(xvii) waive any of its rights or claims;
(xviii) knowingly breach or permit a breach, amend or
terminate any Contract or Permit; or
(xix) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
5.02 Access; Information. From the date hereof to and including the
Closing Date, Seller and the Company shall afford to the officers, employees,
attorneys, accountants and other authorized representatives of Purchaser full
and free access to the offices, management, employees, plants, properties,
assets, customers, contracts, books and records of the Company in order that the
Purchaser may have the full opportunity to make such legal, financial,
accounting and other reviews or investigations of the Company and the Seller as
they shall desire to make. Seller and the Company shall furnish promptly to the
Purchaser such financial and operating information as Purchaser may reasonably
request, including copies of any documents requested before or after the date
hereof. Purchaser and/or its representatives shall not contact any third party
(e.g., customer, supplier, agent, etc.) without the express written consent of
the Seller which consent shall be unreasonably withheld or delayed.
5.03 Consents. From the date hereof to and including the Closing Date,
the Seller and the Company agree (i) to obtain all consents, authorizations,
orders, exemptions and approvals of any third parties, including governmental
bodies and landlord under leases, required to be obtained by it in connection
with any of the transactions contemplated hereby, (ii) to take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on or applicable to it with respect to the Closing and (iii) to promptly
cooperate with and furnish information to Purchaser in connection with any such
legal requirements.
5.04 Notification of Certain Matters. Seller and the Company shall give
prompt written notice to the Purchaser, and the Purchaser shall give prompt
written notice to Seller, as the case may be, of the occurrence, or failure to
occur, of any event that would be likely to cause any representation or warranty
by such notifying party contained in this Agreement to be untrue or inaccurate
in any material respect at any time between or including the date of this
Agreement and the Closing Date.
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5.05 Insurance. The Seller agrees to keep all insurance policies set
forth in Schedule 3.16, or replacements thereof, in full force and effect
through the close of business on the Closing Date.
5.06 Prohibition of Solicitation. From the date hereof through the
Closing or the earlier termination of this Agreement, Seller and the Company
shall not, and shall cause their respective directors, officers, shareholders,
affiliates, agents, advisers and other representatives (including investment
bankers) not to, directly or indirectly, enter into, solicit or initiate any
discussions or negotiations with, or encourage or respond to any inquiries or
proposals by, or participate in any negotiations with, or provide any
information to, or otherwise cooperate in any other way with, any Person, other
than the Purchaser and its directors, officers, members, affiliates, agents,
advisers and other representatives, concerning any sale of all or a portion of
the Company's shares or assets, or any merger, consolidation, liquidation,
dissolution or similar transaction involving Seller (each such transaction being
referred to herein as a "Proposed Acquisition Transaction"). Sellers and each
Company will immediately notify the Parent if any discussions or negotiations
are sought to be initiated, any inquiry or proposal is made, or any information
is requested with respect to any Proposed Acquisition Transaction and notify the
Parent of the terms of any proposal which it may receive after the date hereof
in respect of any such Proposed Acquisition Transaction, including without
limitation the identity of the prospective purchaser or soliciting party.
ARTICLE VI
CONDITIONS TO CLOSING: TERMINATION
6.01 Conditions Precedent to Obligation of Purchaser. The obligation of
Purchaser to proceed with the Closing under this Agreement is subject to the
fulfillment prior to or at Closing of the following conditions, any one or more
of which may be waived in whole or in part by Purchaser at Purchaser's sole
option:
(a) Bringdown of Representations and Warranties; Covenants. Each
of the representations and warranties of Seller and the Company contained in
this Agreement shall be true and correct in all respects on and as of the
Closing Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to the Closing Date. The
Seller and the Company shall have performed in all respects all of the covenants
and complied with all of the provisions required by this Agreement to be
performed or complied with by him, it or them or before the Closing.
(b) Litigation. No statute, regulation or order of any
Governmental Body shall be in effect that restrains or prohibits the
transactions contemplated hereby or that would limit or adversely affect
Purchaser's ownership of the Shares or control or operation of the Company, and
there shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any Governmental Body challenging the lawfulness of or
seeking to prevent or delay any of the transactions contemplated by this
Agreement or any of the Other Agreements or seeking monetary or other relief by
reason of the consummation of any of such transactions or that would adversely
affect the Business or the Seller.
32
(c) No Adverse Change. Between the date hereof and the Closing
Date, there shall have been no adverse change, regardless of insurance coverage
therefor, in the business or any of the assets, results of operations,
liabilities, prospects or condition, financial or otherwise, of the Company.
(d) Closing Certificate. Seller shall have delivered a
certificate, dated the Closing Date, in such detail as Purchaser shall request,
certifying to the fulfillment of the conditions set forth in subparagraphs (a),
(b) and (c) of this Section 6.01. Such certificate shall constitute a
representation and warranty of Seller with regard to the matters therein for
purposes of this Agreement.
(e) Due Diligence Review. Prior to the Closing Date, Purchaser
shall have completed its review of the financial condition of the Company and
the Business and such review shall be reasonably satisfactory to Purchaser.
(f) Regulatory and Environmental Review. Purchaser, through its
authorized representatives, may, at its option, have completed to its reasonable
satisfaction a review of the regulatory practices and procedures of each
Company, including, but not limited to, compliance with federal, state and local
laws and regulations governing the operations of each Company with respect to
environmental, occupational safety and health and federal and state medical
reimbursement matters. Purchaser may, at its option, have environmental
assessments conducted on all Real Property owned, leased or used by a Company,
and may, at its option, secure current tank tests for all underground storage
tanks or have such tests conducted. If the assessments disclose that the leased
Real Property is contaminated or the tanks situated thereon leak, or is subject
to any Environmental Claim, violates any Environmental Law or requires any
Environmental Permit that the Seller or the Company does not have, Purchaser may
at is sole discretion terminate this Agreement as provided in Section 6.04.
(g) Employment Agreements. PL shall have executed and delivered
the Employment Agreement attached as Exhibit 6.01(g).
(h) Additional Liabilities and Obligations. Seller shall have
delivered to Purchaser a schedule, dated the Closing Date, setting forth all
liabilities and obligations of the Company known to the Seller and arising since
the date of Schedule 3.08.
(i) Additional Contracts. Sellers shall have delivered to
Purchaser a schedule, dated the Closing Date, showing all Contracts, together
with copies thereof, entered into by a Company known to the Sellers and arising
since the date of Schedule 3.15.
(j) Closing Documents. Purchaser shall have received the other
documents referred to in Section 6.03(a). All agreements, certificates, opinions
and other documents delivered by Seller or the Company to Purchaser hereunder
shall be in form and substance satisfactory to counsel for Purchaser in the
exercise of such counsel's reasonable professional judgment.
(k) Consents. The Company shall have received the consents,
approvals and actions of the Persons referred to in Section 3.06 and no other
such consents, approvals or actions by any other Person shall be required,
necessary or advisable.
33
(l) Financing. Purchaser shall have successfully closed a loan to
fund the Cash Purchase Price.
(m) Defaults. None of GSN's liabilities or obligations shall be in
default or otherwise subject to acceleration.
(n) Approvals. All consents, authorizations or approvals of or by
any general partner and shareholder of Purchaser, by their respective Boards of
Directors, shall have been obtained.
(o) Drop Dead Date. Closing of the transactions set forth in this
Agreement shall not have occurred on or before June 30, 1999.
6.02 Conditions Precedent to Obligation of Seller. The obligation of
Seller to proceed with the Closing under this Agreement is subject to the
fulfillment prior to or at Closing of the following conditions, any one or more
of which may be waived in whole or in part by Seller at Seller's sole option:
(a) Bringdown of Representations and Warranties; Covenants. Each
of the representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all respects on and as of the Closing
Date, with the same force and effect as though such representations and
warranties had been made on, as of and with reference to the Closing Date.
Purchaser shall have performed all of the covenants and complied in all respects
with all of the provisions required by this Agreement to be performed or
complied with by it at or before the Closing.
(b) Litigation. No statute, regulation or order of any
Governmental Body shall be in effect that restrains or prohibits the
transactions contemplated hereby, and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any Governmental
Body challenging the lawfulness of or seeking to prevent or delay any of the
transactions contemplated by this Agreement or the Other Agreements or seeking
monetary or other relief by reason of the consummations of such transactions.
(c) Closing Certificate. Purchaser shall have delivered a
certificate, dated the Closing Date, in such detail as Seller shall request,
certifying to the fulfillment of the conditions set forth in subparagraphs (a)
and (b) of this Section 6.02. Such certificate shall constitute a representation
and warranty of Purchaser with regard to the matters therein for purposes of
this Agreement.
(d) Closing Documents. Seller shall also have received the other
documents referred to in Section 6.03(b). All agreements, certificates, opinions
and other documents delivered by Purchaser to Seller hereunder shall be in form
and substance satisfactory to counsel for Seller, in the exercise of such
counsel's reasonable professional judgment.
(e) No Adverse Change. Between the date hereof and the Closing
Date, there shall have been no adverse change, regardless of insurance coverage
therefor, in the business or any of the assets, results of operations,
liabilities, prospects or condition, financial or otherwise, of the Purchaser.
(f) Drop Dead Date. Closing of the transactions set forth in this
Agreement shall not have occurred on or before June 30, 1999.
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6.03 Deliveries and Proceedings at Closing.
(a) Deliveries by Seller. Seller shall deliver or cause to be
delivered to Purchaser at Closing.
(i) Certificates representing the Shares duly endorsed in
negotiable form or accompanied by stock powers duly executed in blank
with all transfer taxes, if any, paid in full.
(ii) Certificates of the appropriate public officials to the
effect that the Company has a validly existing corporation in good
standing in its state of incorporation as of date not more than 30 days
prior to the Closing Date.
(iii) Incumbency and specimen signature certificates dated the
Closing Date, signed by the officers of the Company and certified by
the Company's Secretary.
(iv) True and correct copies of (A) the Governing Documents
(other than the bylaws) of the Company as of a date not more than 30
days prior to the Closing Date, certified by the Secretary of State of
its state of incorporation and (B) the bylaws of the Company as of the
Closing Date, certified by its Secretary.
(v) Certificate of the Secretary of the Company (A) setting
forth all resolutions of the Board of Directors of the Company and, if
necessary, the stockholders of the Company, as the case may be,
authorizing the execution and delivery of this Agreement and the
performance by the Company of the transactions contemplated hereby, and
(B) to the effect that the Governing Documents of such Company
delivered pursuant to Section 6.03(a)(iv) were in effect at the date of
adoption of such resolutions, the date of execution of this Agreement
and the Closing Date.
(vi) General releases by all officers and directors of the
Company and by the Seller, of all liability of the Company to them and
of any claim that they or any of them may have against the Company.
(vii) The minute books, stock ledgers and corporate seal of
the Company.
(viii) The opinion of Mezan, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.,
legal counsel to Seller and the Company, in substantially the form of
Exhibit 6.03(a)(vii).
(ix) Resignations of the officers and directors of the Company
effective at the Closing.
(x) Such other agreements and documents as Purchaser may
reasonably request.
35
(b) Deliveries by Purchaser. Purchaser shall deliver or cause to
be delivered to Seller at the Closing:
(i) A wire transfer of federal funds in accordance with
Section 2.06 pursuant to complete wire transfer instructions delivered
by Seller to Purchaser in writing at least one (1) day prior to
Closing.
(ii) A certificate of the appropriate public official to the
effect that Purchaser is a validly existing corporation in its state of
incorporation as of a date not more than ten (10) days prior to the
Closing Date.
(iii) Incumbency and specimen signature certificates signed by
the officers of Purchaser and certified by the Secretary of Purchaser.
(iv) True and correct copies of (A) the Governing Documents
(other than the bylaws) of Purchaser as of a date not more than ten
(10) days prior to the Closing Date, certified by the Secretary of
State of the state of Purchaser's incorporation and (B) the bylaws of
Purchaser as of the Closing Date, certified by the Secretary of
Purchaser.
(v) A certificate of the Secretary of Purchaser (A) setting
forth all resolutions of the Board of Directors of Purchaser
authorizing the execution and delivery of this Agreement and the
performance by Purchaser of the transactions contemplated hereby,
certified by the Secretary of Purchaser and (B) to the effect that the
Governing Documents of Purchaser delivered pursuant to Section
6.03(b)(iv) were in effect at the date of adoption of such resolutions,
the date of execution of this Agreement and the Closing Date.
(vi) The opinion of Scolaro, Shulman, ▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, P.C., Purchaser's legal counsel, in substantially the form of
Exhibit 6.03(b)(vi).
(vii) Such other agreements and documents as Seller may
reasonably request.
6.04 Termination. This Agreement may be terminated at any time prior to
Closing by:
(a) Mutual written consent of Purchaser and Seller's
Representative.
(b) Purchaser, if any of the conditions specified in Section 6.01
hereof shall not have been fulfilled on or before June 30, 1999 and shall not
have been waived by Purchaser.
(c) Seller, if any of the conditions specified in Section 6.02
hereof shall not have been fulfilled on or before June 30, 1999 and shall not
have been waived by Seller.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
36
7.01 Survival of Representations. Notwithstanding any investigation or
knowledge of any Purchaser, the representations, warranties and covenants
contained in this Agreement, and in any agreements, certificates or other
instruments delivered pursuant to this Agreement, shall generally survive the
Closing, the consummation of the transactions contemplated hereby and any
investigation or audit made by any party and shall remain in full force and
effect after the Closing Date for a period of three (3) years, except that any
representations, warranties and covenants pertaining or involving Taxes,
Environmental Laws or ERISA shall survive for the applicable statute of
limitations period.
7.02 Indemnification by Sellers. Seller, jointly and severally, and if
there shall be no Closing, jointly and severally with the Company, shall
indemnify, defend, save and hold Purchaser and its officers, directors,
employees, agents and affiliates (including, after the Closing, the Company;
collectively, "Purchaser Indemnitees") harmless from and against all demands,
claims, allegations, assertions, actions or causes of action, assessments,
losses, damages, deficiencies, liabilities, costs and expenses (including
reasonable legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not any
such demands, claims, allegations, etc., of third parties are meritorious;
collectively "Purchaser Damages") asserted against, imposed upon, resulting to,
required to be paid by or incurred by any Purchaser Indemnitees, directly or
indirectly, in connection with, arising out of, which could result in, or which
would not have occurred but for (i) a breach of any representation or warranty
made by Seller or the Company in this Agreement, in any certificate or document
furnished pursuant hereto by Seller or the Company or any Other Agreement to
which Seller or the Company, or all of them, are to become a party, (ii) a
breach or nonfulfillment of any covenant or agreement made by Seller or the
Company in or pursuant to this Agreement or in any Other Agreement to which
Seller or the Company, or all of them, is or is to become a party , and (iii)
any and all liabilities of the Company of any nature whatsoever, whether due or
to become due, whether accrued, absolute, contingent or otherwise, existing on
the Closing Date or arising out of any transaction entered into, or any state of
facts existing prior to the Closing Date, including without limitation any
royalty or commission arrangement, except for liabilities fully reserved on the
Final Closing Balance Sheet, but only to the extent reserved for therein, and
those liabilities not required under GAAP to be reserved in the Final Closing
Balance Sheet that are expressly quantified and set forth in the Contracts;
provided, however, Purchaser shall not be entitled to be paid any indemnified
amount until the amount of such Purchaser Damages equals or exceeds Twenty-Five
Thousand Dollars ($25,000.00) and then Purchaser shall be fully indemnified for
any and all such Purchaser Damages.
7.03 Indemnification of Purchaser. Purchaser shall indemnify, defend,
save and hold Seller ("Seller Indemnitee") harmless from and against any and all
demands, claims, actions, assessments, losses, damages, deficiencies,
liabilities, costs and expenses (including reasonable legal fees, interest,
penalties, and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing, whether or not any such demands, claims,
allegations, etc., of third parties are meritorious, collectively, "Seller
Damages") asserted against, imposed upon, resulting to, required to be paid by
or incurred by any Seller Indemnitees, directly or indirectly, in connection
with, arising out of, which could result in , or which would not have occurred
but for, (i) breach of any representation or warranty made by Purchaser in this
Agreement or in any certificate or document furnished pursuant hereto by
Purchaser or any Other Agreement to which Purchaser is a party and (ii) a breach
or nonfulfillment of any covenant or agreement made by Purchaser in or pursuant
to this Agreement and in any Other Agreement to which Purchaser is a party;
provided, however, Seller shall not be entitled to be paid any indemnification
amount until the amount of Seller Damages equals or exceeds Twenty-Five Thousand
Dollars ($25,000.00) and then Seller shall be fully indemnified for any and all
such Seller Damages.
37
7.04 Notice of Claims. If any Purchaser Indemnitee or Seller Indemnitee
(an "Indemnified Party") believes that it has suffered or incurred or will
suffer or incur any Purchaser Damages or Seller Damages, as the case may be
("Damages"), for which it is entitled to indemnification under this Article VII,
such Indemnified Party shall so notify the party or parties from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party shall promptly notify
the Indemnifying Party of such action or suit. The failure of an Indemnified
Party to give any notice required by this Section shall not affect any such
party's rights under this Article VII or otherwise except and to the extent that
such failure is actually prejudicial to the rights or obligations of the
Indemnified Party.
7.05 Third-Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any
third-party claim, action or suit and the Indemnified Party may compromise or
settle the same, provided that the Indemnified Party shall give the Indemnifying
Party advance notice of any proposed compromise or settlement. The Indemnified
Party shall permit the Indemnifying Party to participate in the defense of any
such action or suit through counsel chosen by the Indemnifying Party, provided
that the fees and expenses of such counsel shall be borne by the Indemnifying
Party. If the Indemnified Party permits the Indemnifying Party to undertake,
conduct and control the conduct and settlement of such action or suit, (i) the
Indemnifying Party shall not thereby permit to exist any Encumbrance upon any
asset of the Indemnified Party; (ii) the Indemnifying Party shall not consent to
any settlement that does not include as an unconditional term thereof the giving
of a complete release from liability with respect to such action or suit to the
Indemnified Party; (iii) the Indemnifying Party shall permit the Indemnified
Party to participate in such conduct or settlement through counsel chosen by the
Indemnified Party; and (iv) the Indemnifying Party shall agree promptly to
reimburse the Indemnified Party fort he full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving the
foregoing notice to the Indemnifying Party and prior to the assumption of the
conduct and control of such action or suit by the Indemnifying Party.
7.06 Set-Off. Any amounts due to the Purchaser from a Seller pursuant
to the Sellers' indemnification obligations under this Article VII, may, in the
sole discretion of the Purchaser be set off against and deducted from amounts
due to Seller from the Purchaser under this Agreement.
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ARTICLE VIII
NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
8.01 Seller. Seller recognizes and acknowledges that they had in the
past, currently have, and in the future may possibly have, access to (i) certain
confidential information of Company, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the respective businesses and (ii) certain confidential information
about Purchaser and the companies it intends to acquire in connection with this
transaction. Seller agrees that he will not use such confidential information
for his own benefit or disclose it to any person, firm, corporation, association
or other entity for any purpose or reason whatsoever, unless such information
becomes known to the public generally through no fault of Seller or unless
Seller is required by law to disclose such information. If Seller is requested
to provide such information, he shall notify Purchaser as promptly as possible
and allow Purchaser the opportunity to oppose such a request. In the event of a
breach or threatened breach by Purchaser of the provisions of this Section,
Purchaser and Company shall be entitled to an injunction restraining Seller from
using or disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Purchaser and Company from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages. This provision shall not apply in the event Purchaser has
failed to make payments due to Seller hereunder (subject to any right of setoff
in this Agreement) and such non-payment continues for forty-five (45) Business
Days after Seller gives Purchaser written notice of such non-payment.
8.02 Purchaser. Purchaser recognizes and acknowledges that it and its
directors, officers, agents, accountants and advisors have in the past,
currently have, and prior to the Closing Date, will have access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the businesses of the Company. This confidential information has been
provided to Purchaser and its representatives for the purpose of evaluating the
transactions contemplated by this Agreement. Purchaser agrees that prior to the
Closing and following any termination it will not use such confidential
information other than for the purposes for which it has been provided and will
not disclose such confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, unless such
information becomes known to the public generally through no fault of Purchaser
or unless Purchaser is required by law to disclose such information. If
Purchaser is requested to provide such information, it shall notify the Company
as promptly as possible and allow the Company the opportunity to oppose such
request. In the event of a breach or threatened breach by Purchaser of the
provisions of this Section, Seller shall be entitled to an injunction
restraining Purchaser from disclosing, in whole or in part, such confidential
information. Nothing contained herein shall be construed as prohibiting Seller
from pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
8.03 Damages. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, Purchaser, the Company and the Seller agree that, in the event
of a breach by any of them of the foregoing covenant, the covenant may be
enforced against them by injunctions and restraining orders.
39
ARTICLE IX
TAXES AND BENEFIT PLANS
9.01 Certain Tax Matters.
(a) Tax Returns and Payments of Taxes for Periods Through the
Closing Date. The income of the Company shall be apportioned for the period up
to and including the Closing Date and the period after the Closing Date by
closing the books of the Company as of the close of business on the Closing
Date. Seller shall indemnify and hold harmless Purchaser and the Company from
income and franchise Tax liabilities for all periods through the Closing Date,
but only to the extent the Company has not fully reserved cash sufficient to pay
liabilities in full.
(b) Carrybacks. If the Company is required to carry back any
item of loss, deduction or credit that arises in any taxable period ending after
the Closing Date to a Tax Return for any taxable period ending on or before the
Closing Date, Purchaser or the Company, as the case may be, shall be entitled to
claim the refund or credit of Taxes and all amounts realized as a result
thereof.
(c) Mutual Cooperation. Purchaser and Seller shall each
provide the other, and Purchaser shall cause the Company to provide Seller, with
such assistance as may reasonably be requested by any of them in connection with
the preparation of any Tax Return, any Tax audit, or any judicial or
administrative proceedings relating to any Tax, and each return will provide the
other with any records or information that may be relevant to such Tax Return,
Tax audit, proceeding or determination. The party requesting assistance
hereunder shall reimburse the other for direct expenses incurred in providing
such assistance.
9.02 Transfer Taxes. The Seller shall be responsible for all transfer
and similar Taxes assessed or payable in connection with the Transfer of the
Shares pursuant to this Agreement.
9.03 Expenses of Benefit Plans. The Seller shall pay (or indemnify the
Purchaser Parties with respect to) the that portion of the costs of the Benefit
Plans payable by Seller for the period up to but not including the Closing Date.
Any costs relating to the Benefit Plans by Seller pursuant to this Section 9.03
shall be paid by Seller when due, but in no event more than thirty (30) days
following the request therefor from any Purchaser Party.
ARTICLE X
MISCELLANEOUS
10.01 Costs and Expenses. Purchaser and Seller shall each pay their
respective expenses, brokers' fees and commissions, and Seller or the Company
may pay all of the reasonable pre-Closing expenses of the Company incurred in
connection with this Agreement and the transactions contemplated hereby,
including all reasonable accounting, legal, appraisal fees and settlement
charges. This provision shall survive any termination of this Agreement. Seller
acknowledges and agrees that all such amounts paid by the Company shall be fully
set forth in determining the Stockholder Equity of the Company.
40
10.02 Further Assurances. Seller shall, at any time and from time to
time on and after the Closing Date, upon request by Purchaser and without
further consideration, take or cause to be taken such actions and execute ,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such instruments, documents, transfers, conveyances and assurances as may be
required or desirable for the better conveying, transferring, assigning,
delivering, assuring and confirming the Shares to Purchaser or any of the assets
used in the Business to the Company.
10.03 Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made (i) the second business day after the date of mailing, if
delivered by registered or certified mail, postage prepaid, (ii) upon delivery,
if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with
a record of receipt, or (iv) the next day after the date of dispatch, if sent by
cable, telegram, facsimile or telecopy (with a copy simultaneously sent by
registered or certified mail, postage prepaid, return receipt requested), to the
parties at the following addresses:
(a) if to Purchaser, to:
The ▇▇▇▇▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
41
with a copy to:
Scolaro, Shulman, ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (315) 471-8111 ext. 215
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Company or Seller:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone:
Facsimile:
with a copy to:
Mezan, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to the Company shall be addressed in care of Seller before Closing and
in care of Purchaser after Closing. Any party hereto may change the address to
which notice to it, or copies thereof, shall be addressed, by giving notice
thereof to the other parties hereto in conformity with the foregoing.
10.04 Offset; Assignment; Governing Law. Purchaser shall be entitled to
offset or recoup from any amounts due to any Seller from Purchaser hereunder or
under any Other Agreement against any obligation of any Seller to Purchaser
hereunder or under any Other Agreement. This Agreement and all the rights and
powers granted hereby shall bind and inure to the benefit of the parties hereto
and their respective permitted successors and assigns. This Agreement and the
rights, interests and obligations hereunder may not be assigned by any party
hereto without the prior written consent of the other parties hereto, except
that Purchaser may make such assignments to any Affiliate of Purchaser provided
that Purchaser remains liable hereunder. This Agreement shall be governed and
construed in accordance with the laws of the State of New York without regard to
its conflict of law doctrines.
10.05 Amendment and Waiver; Cumulative Effect. To be effective, any
amendment or waiver under this Agreement must be in writing and be signed by the
party against whom enforcement of the same is sought. Neither the failure of any
party hereto to exercise any right, power or remedy provided under this
Agreement or to insist upon compliance by any other party with its obligations
hereunder, nor any custom or practice of the parties at variance with the terms
hereof shall constitute a waiver by such party of its right to exercise any such
right, power or remedy or to demand such compliance. The rights and remedies of
the parties hereto are cumulative and not exclusive of the rights and remedies
that they otherwise might have now or hereafter, at law, in equity, by statute
or otherwise.
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10.06 Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the Schedules and Exhibits set forth all of the promises, covenants,
agreements, conditions and undertakings between the parties hereto with respect
to the subject matter hereof, and supersede all prior or contemporaneous
agreements and understandings, negotiations, inducements or conditions, express
or implied, oral or written, including the LOI. This Agreement is not intended
to confer upon any Person other than the parties hereto any rights or remedies
hereunder, except the provisions of Sections 7.02 and 7.03 relating to Purchaser
Indemnitees and Seller Indemnitee.
10.07 Severability. If any term or other provision of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal or incapable of
being enforced under any rule of law in any particular respect or under any
particular circumstances, such term or provision shall nevertheless remain in
full force and effect in all other respects and under all other circumstances,
and all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
10.08 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to be one and the same instrument.
10.09 Bulk Transfer Laws. The Purchaser hereby waives compliance by
Seller with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Shares. The Seller agrees to
indemnify and hold Purchaser harmless, in cash payable upon demand, against any
and all liabilities, including costs and expenses, that may be asserted by third
parties against the Purchaser as a result of any non-compliance by Seller with
any such bulk transfer law.
10.10 Choice of Forum. The parties agree that the exclusive place of
jurisdiction for any action, suit or proceeding relating to this Agreement shall
be in the courts of the United States of America sitting in the Borough of
Manhattan in the City of New York or, if such courts shall not have jurisdiction
over the subject matter thereof, in the courts of the State of New York sitting
therein, and each such party hereby irrevocably and unconditionally agrees to
submit to the jurisdiction of such courts for purposes of any such action, suit
or proceeding. Each party irrevocably waives any objection it may have to the
venue of any action, suit or proceeding brought in such courts or to the
convenience of the forum. Final judgment in any such action, suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment, a certified or true copy of which shall be conclusive evidence of the
fact and the amount of any indebtedness or liability of any party therein
described.
10.11 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The singular shall include the plural and the
masculine shall include the feminine and neuter, as the context requires.
43
10.12 Publicity. No party shall issue any press release or make any
other public announcement with respect to this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
parties (which will not be unreasonably withheld or delayed), except as may be
required by law or the regulations of any securities exchange.
10.13 Specific Performance. The parties agree that they will be
irreparably injured if this Agreement is not specifically enforced. Therefore,
notwithstanding anything to the contrary in this Agreement, the parties shall
have the right to enforce specifically the performance under this Agreement, and
agree to waive the defense in any such suit that a party has an adequate remedy
at law and to interpose no opposition, legal or otherwise, as to the propriety
of specific performance as a remedy. The specific performance remedy described
in this Section 10.13 shall be in addition to, and not in lieu of, any other
remedies at law or in equity that a party may elect to pursue.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE ▇▇▇▇▇▇▇▇▇▇ CORPORATION, Purchaser
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇., CEO
GLOBAL SOURCE NETWORK, LTD., Company
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Seller
44
EXHIBIT 6.01(g)
to Global Purchase Agreement
EMPLOYMENT AGREEMENT, dated as of , 1999 (the "Effective Date"), by and
between GLOBAL SOURCE NETWORK, LTD., a New York corporation ("GSN") and ▇▇▇▇▇
▇▇▇▇▇▇, an individual ("Executive").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Stock Purchase Agreement of even date
herewith (the "Stock Purchase Agreement"), The ▇▇▇▇▇▇▇▇▇▇ Corporation (the
"Purchaser" or "Parent") is acquiring all the capital stock of GSN; and
WHEREAS, Executive, through the date hereof, was the President and
Chief Executive Officer of GSN and was responsible for its day-to-day
operations; and
WHEREAS, GSN wishes to ensure the continuation of the services of
Executive following the effectiveness of the Stock Purchase Agreement and for
the period provided in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
(a) GSN engages and employs the Executive, and the Executive
hereby accepts engagement and employment, as President of GSN. The Executive
shall be responsible for the day-to-day operating control and management
activities of GSN, subject to the direction and control of the Board of
Directors of GSN (the "Board").
(b) The Executive shall devote such of his time and efforts as
shall be necessary to the proper discharge of his duties and responsibilities
under this Agreement.
(c) During the Term of Executive's employment with GSN he
shall: (i) not permit or cause GSN at any time to carry on its business other
than in the usual, regular and ordinary course in substantially the same manner
as previously conducted or as otherwise directed; (ii) cause GSN to use all
reasonable efforts to preserve intact its business organization, keep available
the services of its officers and employees, preserve and promote its
relationships with customers, suppliers and others having business with GSN;
(iii) not permit or cause GSN to encumber any assets, incur any long-term
indebtedness, enter into, terminate or release any material commitment, contract
or transaction without the prior written consent of the Board; and (iv) not
permit or cause GSN to take any of the following actions without the prior
written consent of the Board: (1) incur an obligation in excess of Ten Thousand
Dollars ($10,000) or which requires performance over more than one year, except
for purchase orders incurred in the ordinary course of business and obligations
related thereto; (2) transfer or otherwise dispose of any assets with a value in
excess of Ten Thousand Dollars ($10,000), except for sales made in the ordinary
course of business; (3) increase the salary or compensation paid to any director
or employee; (4) make any distributions of any kind of its earnings, including
dividends or bonuses; or (5) take any action which would in any manner interfere
with, impede, delay, or make more costly the transition of business operations
and ownership of GSN to Purchaser.
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2. TERM
The Executive's employment hereunder shall, unless earlier
terminated in accordance with Section 8, be for a term of five (5) years
commencing on the date hereof (the "Term").
3. COMPENSATION
(a) During the Term, in consideration for Executive's
performance of services hereunder and in consideration of Executive's covenants
set forth in this Agreement, GSN shall pay to Executive the following:
(i) A base salary for 1999 (the "Base Salary") of not
less than Seventy-Two Thousand Six Hundred Dollars ($72,600) per annum,
subject to an annual increase, on January 1 of each year during the
initial term hereof, of an amount equal to the lesser of (x) Six
Thousand Dollars ($6,000), or (y) the positive difference, if any,
between the Executive's existing Base Salary and the old-age,
survivors, and disability insurance ("OASDI") wage base for the then
current calendar year. The Base Salary shall be paid in equal bi-weekly
payments in arrears. In the event Executive's employment is terminated
or expires midway through a bi-weekly period, the salary payable to
Executive for such period shall be a pro-rated portion of the amount
owing for that period based upon number of days actually worked by
Executive; and
(ii) In the event the Pre-Tax Profit (as defined in
the Stock Purchase Agreement) of GSN for any fiscal year exceeds the
Target (as defined in the Stock Purchase Agreement) for such year, GSN
shall distribute to the Executive a bonus with respect to such year
equal to twenty percent (20%) of the excess. Any bonus payable pursuant
to this Section 3(a)(ii) shall be paid in cash, and shall be paid at
the same time as any Installment (as defined in the Stock Purchase
Agreement) is due pursuant to the Stock Purchase Agreement, and, if
paid by Parent, shall be charged to GSN. This provision shall be
applicable only during the initial Term hereof and only during the
initial period set forth in the Stock Purchase Agreement for the
determination of the Contingent Purchase Price as defined therein.
(b) GSN shall withhold all applicable federal, state and local
taxes, social security and workers' compensation contributions and such other
amounts as may be required by law or agreed upon by the parties with respect to
the compensation payable to the Executive pursuant to Section 3(a) or otherwise
in connection with his employment by GSN.
(c) During the Term, GSN shall reimburse the Executive no less
often than monthly for all normal, usual and necessary expenses incurred by the
Executive in furtherance of the business and affairs of GSN, including
reasonable travel and entertainment, against receipt by GSN of appropriate
vouchers or other proof of the Executive's expenditures and otherwise in
accordance with such expense reimbursement policy as may from time to time be
adopted by the Board.
3
(d) During the Term, the Executive shall be entitled to
participate in any group insurance plan or program of GSN now existing or
established hereafter to the extent that he is eligible under the general
provisions thereof.
(e) During the Term, the Executive shall be subject to, and
shall act in accordance with the policies and procedures determined by the Board
from time to time.
4. REPRESENTATIONS AND WARRANTIES
(a) The Executive hereby represents and warrants to GSN as
follows:
(i) Neither the execution and delivery of this
Agreement nor the performance by the Executive of his duties and other
obligations hereunder violate or will violate any statute, law,
determination or award, or conflict with or constitute a default under
(whether immediately, upon the giving of notice or lapse of time or
both) any prior employment agreement, contract, or other instrument to
which the Executive is a party or by which he is bound.
(ii) The Executive has the full right, power and
legal capacity to execute and deliver this Agreement and to perform his
duties and other obligations hereunder. This Agreement constitutes the
legal, valid and binding obligation of the Executive enforceable
against him in accordance with its terms. No approvals or consents of
any persons or entities are required for the Executive to execute and
deliver this Agreement or perform his duties and other obligations
hereunder.
(c) GSN hereby represents and warrants to the Executive as
follows:
(i) GSN is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York,
with all requisite powers and authority to own its properties and
conduct its business in the manner presently contemplated.
(ii) GSN has full power and authority to enter into
this Agreement and to incur and perform its obligations hereunder. This
Agreement constitutes the legal, valid and binding obligation of GSN
enforceable against GSN in accordance with its terms.
(iii) The execution, delivery and performance by GSN
of this Agreement does not conflict with or result in a breach or
violation of or constitute a default (whether immediately, upon the
giving of notice or lapse of time or both) under any agreement or
instrument to which GSN is a party or by which GSN or any of its
properties may be bound or affected.
4
5. NON-COMPETITION
(a) The Executive understands and recognizes that his services
to GSN are special and unique and agrees that during the five (5) year period
commencing on the Effective Date, the Executive shall not in any manner,
directly or indirectly, on behalf of himself or any person, firm, partnership,
joint venture, corporation or other business entity ("Person"):
(1) interfere with customer, licensor or supplier
relationships of GSN, Parent or any subsidiary, affiliate, successor or
assign thereof (collectively, the "Affiliates"); or
(2) enter into or engage in any business that: (A) is
competitive with GSN's or Parent's business; and/or (B) relates to the
merchandising, sourcing, marketing or distribution of tailored
clothing, sportswear, shirts or casual slacks, either as an individual
for his own account, or as a partner, joint venturer, executive, agent,
consultant, salesperson, officer, director or shareholder of a Person
operating or intending to operate within the area that GSN or Parent is
conducting business; provided, however, that nothing herein will
preclude Executive from holding one percent (1%) or less of the stock
of any publicly traded company.
(b) In the event that Executive breaches any provisions of
this Section 5 or there is a threatened breach, then, in addition to any other
rights which GSN may have, GSN shall be entitled, without the posting of a bond
or other security, to injunctive relief to enforce the restrictions contained
herein against Executive and any other person, firm or corporation involved. In
the event that a proceeding is brought in equity to enforce the provisions of
this Section 5, the Executive shall not urge as a defense that there is an
adequate remedy at law, nor shall GSN be prevented from seeking any other
remedies which may be available.
(c) The restrictions set forth in "(a)" above shall terminate
in the event that, after the closing of the Stock Purchase Agreement and during
the period the Contingent Purchase Price is to be determined (as set forth in
the Stock Purchase Agreement): (i) an order for relief with respect to GSN or
Parent is entered in a proceeding under the United States Bankruptcy Code; (ii)
GSN or Parent initiates, whether by filing a petition, beginning a proceeding or
in answer to a proceeding commenced by another person, any action for
liquidation, dissolution, receivership or other similar relief, or its
application for, or consent to the appointment of, a trustee, receiver or
custodian for its assets; or (iii) Executive resigns for Good Reason (as defined
in Section 8(a)(iv). For purposes of this provision, GSN's consent shall be
deemed to have been given if an order appointing a trustee, receiver or
custodian is entered by a court of competent jurisdiction and is not dismissed
within ninety (90) days after its entry.
6. NON-SOLICITATION
(a) During the five (5) year period commencing on the
Effective Date, the Executive shall not, directly or indirectly, without the
prior written consent of the Board:
(1) solicit or induce any employee of GSN, Parent or
any Affiliate to leave the employ of GSN, Parent or any Affiliate;
5
(2) hire for any purpose any person who is at such
time or has been within the preceding one (1) year an employee of GSN,
Parent or any Affiliate;
(3) solicit or accept employment or maintain any
business relationship with any party who, at any time during the Term,
was a customer, supplier, licensor or licensee of GSN, Parent or any
Affiliate; or
(4) solicit or accept the business of any customer,
supplier, licensor or licensee of GSN, Parent or any Affiliate with
respect to products similar to those supplied by GSN, Parent or any of
its Affiliates.
(b) The restrictions set forth in "(a)" above shall terminate
in the event that, after the closing of the Stock Purchase Agreement and during
the period the Contingent Purchase Price is to be determined (as set forth in
the Stock Purchase Agreement): (i) an order for relief with respect to GSN or
Parent is entered in a proceeding under the United States Bankruptcy Code; (ii)
GSN or Parent initiates, whether by filing a petition, beginning a proceeding or
in answer to a proceeding commenced by another person, any action for
liquidation, dissolution, receivership or other similar relief, or its
application for, or consent to the appointment of, a trustee, receiver or
custodian for its assets; or (iii) Executive resigns for Good Reason (as defined
in Section 8(a)(iv). For purposes of this provision, GSN's consent shall be
deemed to have been given if an order appointing a trustee, receiver or
custodian is entered by a court of competent jurisdiction and is not dismissed
within ninety (90) days after its entry.
7. CONFIDENTIAL INFORMATION
The Executive agrees that during the course of his employment
and for a period of three (3) years after termination, he will not disclose or
make accessible to any other person any information relating to GSN, Parent or
any Affiliate or any of their customers or any other information obtained by
Executive during the course of his employment with GSN (the "Confidential
Information"), except to the extent the same have become generally known to the
public other than through a breach of this Section 7. The foregoing restrictions
set forth in this provision shall not apply in the event this Agreement is
terminated pursuant to Section 8(a)(iv) hereof. The Executive agrees not to take
any such material or reproductions thereof from GSN, Parent or any Affiliate's
facilities at any time during his employment by GSN, except as required in the
ordinary performance of Executive's services hereunder. The Executive agrees to
immediately return all such material and reproductions thereof in his possession
to GSN upon request and in any event upon termination of employment, and to not
retain any such Confidential Information.
8. TERMINATION
(a) The Executive's employment hereunder shall begin on the
Effective Date and shall continue for the period set forth in Section 2 hereof
unless sooner terminated upon the first to occur of the following events:
(i) The death of the Executive;
6
(ii) The Disability (as defined below) of the
Executive;
(iii) Termination by the Board for just cause. Any of
the following actions by the Executive shall constitute "just cause":
(iv) Termination by the Executive as a result of a
resignation for "Good Reason." Resignation by the
Executive for "Good Reason" shall mean the written
resignation of Executive in the event that the GSN
fails to make payments due to Executive hereunder or
Parent fails to make payments due to Executive under
the Stock Purchase Agreement (subject to any right of
setoff in respect of such obligations under the Stock
Purchase Agreement) and such non-payment continues
for forty-five (45) days or more after Executive
gives written notice of such non-payment to GSN and
Parent.
(1) Material breach by the Executive of
Sections 5, 6 or 7 of this Agreement;
(2) Material breach by the Executive of any
provision of this Agreement other than Sections 5, 6 and 7 which is not cured by
the Executive within thirty (30) days of written notice thereof;
(3) Any misconduct or omission on the part
of the Executive which is intended to cause harm to GSN, Parent or any
Affiliate;
(4) Gross negligent performance by the
Executive of his duties as President of GSN, as determined by the Board after
notice to the Executive and an opportunity for the Executive to be heard by the
Board; or
(5) The conviction of the Executive of:
(A) any felony; or (B) any other crime involving moral turpitude.
(b) For purposes hereof, a "Disability" of the Executive shall
be deemed to have occurred in the event: (i) the Executive is absent from work
or otherwise substantially unable to assume his normal duties for a period of
forty-five (45) successive days or an aggregate of sixty (60) days during any
six (6) month period because of physical or mental disability, accident, illness
or other cause other than approved vacation or leave of absence; or (ii) the
Executive is deemed by a licensed physician designated by the Board and
reasonably acceptable to the Executive to have a permanent disability such that
Executive will be unable to perform his duties under this agreement. GSN shall
have the right to have the Executive examined by a competent physician for
purposes of determining his physical or mental incapacity.
(c) Executive's employment or termination of employment
hereunder shall not effect the rights and obligations of the Executive, GSN or
Purchaser under the Stock Purchase Agreement.
(d) Sections 5 and 6 hereof shall survive termination of this
Agreement.
7
9. NOTICES
Any notice or other communication under this Agreement shall
be in writing and shall be deemed to have been given: (i) when delivered
personally against receipt therefor; (ii) one (1) day after being sent by
Federal Express or similar overnight delivery; or (iii) three (3) days after
being mailed registered or certified mail, postage prepaid, return receipt
requested, to either party at the address set forth below, or to such other
address as such party shall give by notice hereunder to the other party.
If to GSN:
Global Source Network, Ltd.
c/o The ▇▇▇▇▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
with a copy to:
Scolaro, Shulman, ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to Executive:
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
Mezan, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
10. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a
court of competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provision shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
8
11. ENTIRE AGREEMENT; MODIFICATION
(a) This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this Agreement
shall be valid unless made in writing and signed by the parties hereto.
(b) The Executive acknowledges that any cash and non-cash
compensation received by him prior to the execution of this Agreement shall be
applied to the obligations of GSN hereunder.
12. BINDING EFFECT
The rights, benefits, duties and obligations under this
Agreement shall inure to, and be binding upon, GSN, its successors and assigns,
and upon the Executive and his legal representatives. This Agreement constitutes
a personal service agreement, and the performance of the Executive's obligations
hereunder may not be transferred or assigned by the Executive.
13. NON-WAIVER
The failure of either party to insist upon the strict
performance of any of the terms, conditions and provisions of this Agreement
shall not be construed as a waiver or relinquishment of future compliance
therewith, and said terms, conditions and provisions shall remain in full force
and effect. No waiver of any term or condition of this Agreement on the part of
either party shall be effective for any purpose whatsoever unless such waiver is
in writing and signed by such party.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York without regard
to principles of conflict of laws.
15. HEADINGS
The headings of paragraphs are inserted for convenience and
shall not affect any interpretation of this Agreement.
16. COUNTERPARTS
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute one and the same instrument.
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
GLOBAL SOURCE NETWORK, LTD.
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇., Chairman
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Executive
EXHIBIT 2.02
to Global Purchase Agreement
PROMISSORY NOTE
New York, New York
____________, 199_
FOR VALUE RECEIVED, The ▇▇▇▇▇▇▇▇▇▇ Corporation ("Maker"), hereby
promises to pay ▇▇▇▇▇ ▇▇▇▇▇▇ (hereinafter referred to as the "Holder") at the
office of Maker in New York, New York, the initial principal sum of Eight
Hundred Thousand and 00/100 Dollars ($800,000.00), together with interest on the
outstanding balance at the fixed rate of ten percent (10%) per annum from the
date hereof, in the manner provided herein. Unless there is an initial public
offering ("IPO") of the common stock of Maker ("▇▇▇▇▇▇▇▇▇▇ Stock") on or before
the third anniversary date of this Note, the entire outstanding principal
balance of this Note together with all accrued interest thereon shall be due and
payable in full on the third anniversary date hereof. Interest only shall be
payable in arrears on a monthly basis commencing thirty (30) days after the date
hereof. In the event of an IPO on or before the third anniversary date of this
Note, upon the date of such IPO the entire outstanding principal balance of this
Note together with all accrued interest thereon shall immediately become due and
payable in full in immediately available funds.
1. Acceleration Upon Default. This Note shall become immediately due
and payable upon the occurrence of any of the following events of default:
(a) The failure of Maker to make payment when due under this
Note after ten (10) days prior written notice; or
(b) The insolvency of Maker, the appointment of a receiver of
its assets, or the institution of any involuntary proceeding under any
bankruptcy or insolvency law relating to the relief of a debtor for the
readjustment or relief of any indebtedness of Maker, whether as a
reorganization, composition, extension or otherwise, which involuntary
proceeding is not terminated, dismissed or concluded in a manner not adverse to
Maker within ninety (90) days of the commencement of such proceeding; or
(c) The filing by Maker of an application or an assignment for
the benefit of creditors or for taking advantage of the same or any bankruptcy
or insolvency law.
2. Prepayment. Maker shall have the right to prepay all or any portion
of the principal balance due under this Note at anytime without premium or
penalty provided interest to the date of prepayment is also tendered.
3. Waiver. No delay or omission on the part of Holders in exercising
any right hereunder shall operate as a waiver of such right or of any other
right under this Note. A waiver on any one occasion shall not be construed as a
waiver of any right or remedy on any future occasion.
4. Attorneys' Fees and Cost of Collection. Maker agrees to pay all
reasonable costs, charges, and expenses, including reasonable attorney's fees
incurred by Holders in collecting this Note.
5. Notice. All notices, demands and requests given or required to be
given by any party hereto to the other party shall be in writing and shall be
deemed to have been properly given, made or served only if sent by registered or
certified mail, postage prepaid, addressed to the parties at their last known
address, or such other address as the parties shall give by prior notice.
6. Negotiability. This Note is non-negotiable and may not be assigned,
transferred or set over by Maker or Holder.
7. Reference. This Note is subject to the terms and conditions of a
certain Stock Purchase Agreement by and among The ▇▇▇▇▇▇▇▇▇▇ Corporation, ▇▇▇▇▇
▇▇▇▇▇▇, and Global Source Network, Ltd. ("the Stock Purchase Agreement").
Holders acknowledge and agree that Maker has the rights of reduction and of
offset under the Stock Purchase Agreement, which rights may result in the
reduction of the principal amount of this Note and/or offset against interest
due on this Note. Any reduction or offset resulting in the reduction of the
principal amount of this Note shall be treated as occurring as of the date of
this Note.
8. Jurisdiction. This Note shall be deemed to have been made and shall
be governed by the laws of the State of New York in all respects, including
matters of construction, validity and performance and none of its terms or
provisions may be waived, altered, modified or amended except as Holders may
consent thereto in writing duly signed for and on his behalf.
MAKER:
THE ▇▇▇▇▇▇▇▇▇▇ CORPORATION
By:_______________________________
Name:
Title: