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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 15, 1997
(June 30, 1997)
Group Technologies Corporation
(Exact Name of Registrant as Specified in Charter)
Florida 0-24020 59-2948116
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
10901 Malcolm McKinley Drive, Tampa, Florida 33612
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (813) 972-6000
Item 2. DISPOSITION OF ASSETS
On June 30, 1997, Group Technologies Corporation and its wholly-owned
subsidiary Group Technologies Mexican Holding Company (collectively, "the
Company") sold to SCI Systems, Inc., SCI Systems De Mexico S.A De C.V. and
SCI Holdings, Inc. (collectively, "SCI"), all of the Company's investment
in the common stock and/or equity interests of three of its wholly-owned
subsidiaries, Group Technologies S.A. de C.V., Group Technologies
Suprimentos de Informatica Industria E Comercio Ltda., and Group
Technologies Integracoes em Electronica Ltda. These three subsidiaries
comprised all of the Company's Latin American operations. The Company also
sold or assigned to SCI certain assets principally used in or useful to the
operations being sold, including accounts receivable, inventory, equipment,
accounts payable and equipment leases.
The initial sales price of the aforementioned assets amounted to
$18,000,000 in cash and the assumption by SCI of certain liabilities. The
price is subject to subsequent adjustment, upward or downward, based upon,
among other things, the value of the net assets of the Latin American
operations at June 29, 1997.
Item 7. PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
(in thousands, except for per share data)
The following selected pro forma consolidated financial data are
unaudited. The pro forma statement of operations data for the year ended
December 31, 1996 is based upon the historical statement of operations of
the Company and reflects the pro forma effects of the sale to SCI of all
the Company's investment in the capital stock and/or other equity interests
of Group Technologies S.A. de C.V., Group Technologies Suprimentos de
Informatica Industria E Comercio Ltda., and Group Technologies Integracoes
em Electronica Ltda., the sale to SCI of certain assets used in or useful
to the Latin American operations (collectively, "the Latin American
Operations") and the use of proceeds therefrom. The pro forma statement of
operations data for the three months ended March 30, 1997 and the balance
sheet data at March 30, 1997 are based upon the historical financial
statements of the Company and also reflect the disposition of the Latin
American Operations and the use of proceeds therefrom. The Company
utilized a portion of the sale proceeds to fully extinguish its debt
payable to its primary lender and has terminated its credit agreement with
that lender effective June 30, 1997.
The pro forma consolidated financial data are based upon certain
assumptions and estimates and are not necessarily indicative of the results
which would actually have been attained if the transaction had been
consummated at the beginning of the indicated periods or as of the date
specific, or which may be attained in the future.
The pro forma consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes
thereto as presented in the Company's annual report on Form 10-K for the
year ended December 31, 1996 and its quarterly report on Form 10-Q for the
period ended March 30, 1997.
STOCK AND ASSET PURCHASE AND SALE AGREEMENT
THIS STOCK AND ASSET PURCHASE AND SALE AGREEMENT (this
"Agreement") is made and entered into as of the 30th day of June, 1997, by
and among GROUP TECHNOLOGIES MEXICAN HOLDING COMPANY, a Florida corporation
("Seller"), GROUP TECHNOLOGIES CORPORATION, a Florida corporation ("GTC"),
SCI SYSTEMS, INC., a Delaware corporation ("SCI"), SCI SYSTEMS DE MEXICO
S.A. DE C.V., a Mexico corporation ("SCI Mexico") and SCI HOLDINGS, INC., a
Delaware corporation ("SCI Holdings") (SCI Mexico and SCI Holdings are,
collectively, "Buyers").
RECITALS:
A. Seller owns 49,999 of the issued and outstanding shares of
capital stock of Group Technologies S.A. de C.V. ("GTC Mexico"), a Mexico
corporation and Seller owns 102,299 of the issued and outstanding quotas of
Group Technologies Suprimentos de Informatica Industria E Comercio Ltda., a
limited liability company under the laws of Sao Paulo, Brazil ("GTC Brazil
1");
B. GTC Brazil 1 owns 999 of the issued and outstanding quotas
of Group Technologies Integracoes em Electronica Ltda., a limited liability
company under the laws of Sao Paulo, Brazil ("GTC Brazil 2") (GTC Mexico,
GTC Brazil 1 and GTC Brazil 2 may be referred to collectively as the
"Companies");
C. GTC owns 28,800,001 of the issued and outstanding shares of
capital stock of GTC Mexico, 448,801 of the issued and outstanding quotas
of GTC Brazil 1 and 1 of the issued and outstanding quotas of GTC Brazil 2;
D. Seller desires to sell to SCI Mexico 49,999 shares of
capital stock of GTC Mexico, GTC desires to sell to SCI Mexico 28,800,000
shares of capital stock of GTC Mexico and GTC desires to sell to SCI 1
share of capital stock of GTC Mexico (collectively, the "SCI Mexico
Purchased Shares"); Seller desires to sell to SCI Holdings 102,299 quotas
of GTC Brazil 1 and GTC desires to sell to SCI Holdings 448,800 quotas of
GTC Brazil 1 and GTC desires to sell to SCI 1 quota of GTC Brazil 1 and to
SCI Holdings 1 quota of GTC Brazil 2 (collectively, the "SCI Holdings
Purchased Shares") (the SCI Mexico Purchased Shares and the SCI Holdings
Purchased Shares are, collectively, the "Purchased Shares"), the Purchased
Shares together with the 999 quotas of GTC Brazil 2 held by GTC Brazil 1
constituting all of the issued and outstanding shares of capital stock or
quotas, as applicable, of the Companies (collectively, the "Shares"), and
SCI, SCI Mexico and SCI Holdings, as applicable, desire to purchase the
Purchased Shares from Seller and GTC subject to and upon the terms and
conditions set forth herein;
E. SCI Mexico and SCI Holdings are wholly-owned subsidiaries of
SCI; and
F. GTC further desires to join in this Agreement to sell,
transfer and assign to SCI Holdings, and SCI Holdings desire to purchase
and acquire from GTC, on the terms and subject to the conditions set forth
in this Agreement, certain assets used or useful in the conduct of the
Companies' business of commercial contract manufacturing services for
customers in the electronics products industry involving circuit card
assembly, test and procurement (the "Business"), and assume certain
liabilities associated therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and intending to be legally
bound, the parties hereto agree as follows:
1. Purchase of Shares. Upon the terms and conditions set forth
herein, at the Closing, Seller and GTC, as applicable, shall sell,
transfer, convey, assign and deliver (i) the SCI Mexico Purchased Shares to
SCI Mexico and SCI, as applicable, and SCI Mexico and SCI, as applicable,
shall purchase, acquire and take title to the SCI Mexico Purchased Shares
from Seller and GTC, as applicable, and (ii) the SCI Holdings Purchased
Shares to SCI Holdings and SCI, as applicable, and SCI Holdings and SCI, as
applicable, shall purchase, acquire and take title to the SCI Holdings
Purchased Shares from Seller and GTC, as applicable.
2. Sale of Assets and Assumption of Certain Liabilities.
A. Assets Sold and Retained.
1. Assets Sold and Purchased. At the Closing GTC shall
sell, transfer, convey, assign and deliver to SCI Holdings and SCI
Holdings shall purchase and acquire, under the terms and conditions of
this Agreement, all of GTC's right, title, and interest in and to the
following assets and properties of, or properties used or useful in
the operation of, the Business on the Closing Date, some of which
assets and properties are physically located at the facility of GTC
Mexico or the facility of GTC in Tampa, Florida as reflected on the
Schedules set forth below (all such assets referred to collectively as
the "Purchased Assets"):
a. the personal property leases listed on Schedule
2.A.1.a attached hereto (the "Personal Property Leases");
b. the contracts, including customer contracts,
employment agreements, and vendor or supply agreements, in
respect of the Business listed on Schedule 2.A.1.b attached
hereto (collectively, the "Contracts");
c. the accounts receivable or other rights to receive
payment for services performed as of the Closing Date
preliminarily identified on Schedule 2.A.1.c attached hereto,
which Schedule will be updated upon preparation of the Closing
Balance Sheet (hereinafter defined) (the "Accounts Receivable");
d. the inventory including supplies, raw materials,
component parts, work-in-progress and finished goods
preliminarily listed on Schedule 2.A.1.d attached hereto, which
Schedule will be updated upon preparation of the Closing Balance
Sheet (the "Inventory");
e. the machinery, equipment, spare parts, fittings,
office furniture, fixtures, supplies and other tangible personal
property preliminarily identified on Schedule 2.A.1.e attached
hereto, which Schedule will be updated upon preparation of the
Closing Balance Sheet (the "Fixed Assets"); and
f. the equipment leases (the "Equipment Leases")
identified on Schedule 2.A.1.f attached hereto, together with, at
no cost to SCI Holdings, the accessories owned by GTC and used in
connection with the leased chip on board line located in Tampa,
Florida.
2. Assets Retained. The parties to this Agreement
expressly understand and agree that GTC is not hereunder selling,
assigning, transferring or conveying to Buyers any assets other than
the Purchased Assets.
3. Delivery of Tangible Assets. The tangible assets
included in the Purchased Assets which are located at GTC shall be
delivered to SCI Holdings at the offices of SCI Holdings in
Huntsville, Alabama, FOB GTC's facility in Tampa, Florida, in
accordance with the procedures and subject to the provisions set forth
in Section 2.F, and title to such assets shall be transferred to SCI
Holdings in Alabama.
B. Risk of Loss. The risk of loss and all obligations to
insure the Purchased Assets shall remain with GTC until the Closing, and
shall be assumed by SCI Holdings at the time of Closing.
C. Assumption of Obligations Related Thereto. As of the
Closing, Buyers shall assume the obligations under the Personal Property
Leases, the Contracts and the Equipment Leases (collectively, the
"Transferred Rights, Obligations and Agreements") as set forth in Section
2.D hereof.
To the extent that the assignment or novation hereunder of any of
the Transferred Rights, Obligations and Agreements shall require the
consent of any other party (or in the event that any of the same shall be
non-assignable), neither the agreements contemplated by this Agreement nor
any actions taken thereunder pursuant to the provisions of any such
agreements shall constitute an assignment or novation or an agreement to
assign or novate if such assignment or novation or attempted assignment or
novation would constitute a breach thereof or result in the loss or
diminution thereof; provided, however, that in each such case, GTC and
Buyers shall use commercially reasonable efforts to obtain the consent of
such other party to an assignment or novation to Buyers.
If such consent is not obtained, GTC shall cooperate with Buyers
in any reasonable arrangement designed to provide Buyers with the benefits
under any such Transferred Rights, Obligations and Agreements, including
appointing Buyers to act as its agent to perform all of GTC's obligations
under such Transferred Rights, Obligations and Agreements and to collect
and promptly remit to Buyers all compensation payable pursuant to those
Transferred Rights, Obligations and Agreements and to enforce, for the
account and benefit of Buyers, any and all rights of GTC against any other
person arising out of the breach or cancellation of such Transferred
Rights, Obligations and Agreements by such other person or otherwise (any
and all of which arrangements shall constitute, as between the parties
hereto, a deemed assignment or transfer); provided that, to the extent that
Buyers require GTC to undertake any services or take any actions in
furtherance of the performance of such Transferred Rights, Obligations and
Agreements, any such services or actions shall be the subject of a separate
agreement that the parties shall, in good faith, negotiate as promptly as
possible and which shall be mutually acceptable to the parties. Each party
shall be responsible for all of its costs and expenses incurred by it in
connection with the actions required of it under this Section 2.C.
D. Assumption of Certain Liabilities by Buyers. As of the
Closing, Buyers shall assume and be liable and responsible for the
following liabilities and obligations arising out of or related to the
ownership of the Purchased Assets (the "Assumed Liabilities"):
1. SCI Holdings shall assume all liabilities and
obligations of GTC under all Personal Property Leases, Contracts, and
Equipment Leases assigned or transferred to SCI Holdings pursuant to
Section 2 which arise or are to be performed following the Closing;
2. the Buyers shall assume all liabilities and obligations
with respect to [i] the warranty policies and agreements of GTC or the
Companies related to the Business; or [ii] the Inventory as identified
on Schedule 2.D.2; and
3. the Buyers shall assume all accounts payable
preliminarily listed on Schedule 2.D.3 attached hereto, which Schedule
will be updated upon preparation of the Closing Balance Sheet, and all
accrued liabilities of the Business payable by GTC for supplies,
materials, services and other expenses or obligations incurred in the
ordinary course of business.
E. All Other Liabilities Excluded. GTC agrees that Buyers are
assuming only those liabilities and obligations of GTC related to the
Business or the Purchased Assets enumerated in Section 2.D, and no other
liability of GTC is being assumed by Buyers.
F. Costs Related to Purchased Assets and Related Matters. As
of the Closing Date certain of the tangible Purchased Assets, and the
equipment leased under the Equipment Leases are located at the premises of
GTC. SCI Holdings shall remove these assets from the premises of GTC
within thirty (30) days after the Closing Date (and repair any damage to
such premises caused by such removal) and SCI Holdings shall assume the
full costs for removing and transporting such assets (including licenses
and duties) to Brazil, Mexico or any other location designated by SCI
Holdings and related matters. GTC will allow SCI Holdings to inspect all
such assets located at GTC's facility in Tampa, Florida and GTC will assist
SCI Holdings in arranging for the crating of such assets located at GTC's
facility in Tampa, Florida which are to be shipped to Brazil. While such
assets are on the premises of GTC, (i) SCI Holdings shall keep such assets
insured in such amounts, and with such coverages, as customary and prudent
in the industry and shall name GTC as an additional insured under such
policies of insurance, and (ii) GTC shall treat such assets with the same
care as it uses with its own assets.
G. As Is Condition. Except for the representations and
warranties expressly provided in this Agreement, the Purchased Assets to be
sold and transferred hereunder, and the other assets of the Companies, are
sold and transferred to, or are accepted by, Buyers AS IS, WHERE IS.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, GTC AND SELLER
MAKE NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AS TO
SUCH ASSETS, INCLUDING BUT NOT LIMITED TO ANY REPRESENTATION OR WARRANTY AS
TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
H. Prorations. All property taxes and other assessments that
are assessed against the Purchased Assets or the Purchased Shares and other
similar items, if any, shall be prorated between Seller, GTC and Buyers as
of the Closing Date.
3. Purchase Price; Payment; Adjustment.
A. Purchase Price.
1. Price. Subject to the adjustment as provided for below
and in Section 3.C hereof, the purchase price for the sale and
transfer of the Purchased Assets, the Purchased Shares and the
noncompetition covenant in Section 7.C shall be Eighteen Million
Dollars ($18,000,000), plus the assumption of the Assumed Liabilities.
2. Allocation. Seller, GTC and Buyers hereby agree that
the Purchase Price paid for the Purchased Assets, the Purchased Shares
and the noncompetition covenant in Section 7.C shall preliminarily be
allocated for purposes of this Agreement and for tax purposes as set
forth in Schedule 3.A.2 attached hereto. Schedule 3.A.2 shall be
updated upon preparation of the Closing Balance Sheet (subject to the
parameters established by Schedule 3.A.2). Seller, GTC and Buyers
covenant and agree that each shall prepare its tax returns employing
the allocation made pursuant to Schedule 3.A.2 and shall not take a
position in any tax proceeding or audit inconsistent with such
allocation. Seller, GTC and Buyers shall give prompt notice to each
other of the commencement of any tax audit or the assertion of any
proposed deficiency or adjustment by any taxing authority or agency
which challenges such allocation.
B. Payment of the Purchase Price. At the Closing, Buyers
shall, subject to the terms and conditions herein, pay [i] the Purchase
Price (less the payment in [ii] below) in immediately available funds to
the bank accounts of Seller and GTC in such amounts and as identified on
Schedule 3.B attached hereto, and [ii] $250,000 to Bank One, Kentucky, N.A.
to fund the escrow account contemplated by Section 7.C hereof.
C. Adjustment to and Payment of the Balance of the Purchase
Price. The Closing Date payment of the Purchase Price has been derived by
and agreed upon by the parties based in part on the net book value of the
Companies and the Purchased Assets as of April 27, 1997, as shown on
Exhibit A hereto (the "Opening Balance Sheet"). The Purchase Price is
subject to a dollar for dollar adjustment, upward or downward, based upon
the change in the net book value of the Companies and the Purchased Assets
as shown on the Opening Balance Sheet from the date thereof to the "Final
Book Value" reflected on the "Closing Balance Sheet" (defined below). Such
adjustment shall be the "Differential." The Differential shall be
determined as follows:
1. Unless the parties mutually agree to an extension of
time, within forty-five (45) days after the Closing Date, Seller and
GTC shall prepare and deliver to SCI a balance sheet showing the net
book value of the Companies and the Purchased Assets as of the Closing
Date (the "Final Book Value") (the "Closing Balance Sheet"). The
Closing Balance Sheet shall be prepared [i] from the balance sheets of
GTC Brazil 1 (which includes GTC Brazil 2) and GTC Mexico as of June
29, 1997, which will be prepared in accordance with United States
generally accepted accounting principles, consistently applied, and
audited by Seller's independent auditors, and [ii] from the schedule
of Purchased Assets as of June 29, 1997, which also will be prepared
in accordance with United States generally accepted accounting
principles, consistently applied, and subjected to certain procedures
applied by Seller's and GTC's independent auditors which have been
agreed upon by SCI, GTC and Seller. The Closing Balance Sheet will
also be prepared using the same methodology as was used in the
preparation of the Opening Balance Sheet except that [i] where
estimates were used for the preparation of the Opening Balance Sheet,
actual data will be used in preparing the Closing Balance Sheet, and
[ii] cash of the Companies will be included on the Closing Balance
Sheet. Buyers will provide Seller, GTC and their employees,
accountants and representatives access, during normal business hours,
to the books and records and employees of the Companies and the
Business in connection with the preparation of the Closing Balance
Sheet, at no cost or expense to Seller.
Along with the submission of the Closing Balance Sheet, Seller
and GTC shall deliver a statement to SCI and Buyers which contains the
following information:
a. Seller's and GTC's determination of the amount of
any increase or decrease in the Purchase Price resulting from the
change in the net book value of the Business described above,
i.e., the Differential; and
b. Seller's and GTC's determination of the adjustment
to the purchase price allocation (Schedule 3.A.2) necessary to
reflect any post closing adjustment to the Purchase Price.
2. Unless the parties mutually agree to an extension of
time, SCI and Buyers shall then have thirty (30) days after the
receipt thereof to confirm or contest in writing the Closing Balance
Sheet and the corresponding impact on the Purchase Price. Failure of
SCI and Buyers to timely contest such matters within such thirty (30)
day period will be deemed confirmation thereof by SCI and Buyers. If
the results are confirmed, either a payment shall be made to Seller
and GTC or a refund shall be made to SCI and Buyers for the amount of
the Differential, as the case may be, by wire transfer of immediately
available funds within five (5) days after the date of confirmation.
If the results are contested, Ernst & Young shall review the work and
render a final and binding ruling within thirty (30) days of
engagement of such firm. The cost of any such review shall be borne
by the nonprevailing party as determined by Ernst & Young. Any
payment due Seller and GTC or refund due SCI and Buyers shall be made
within five (5) days after such ruling and made as set forth above.
3. For purposes of preparing the Opening Balance Sheet the
parties have agreed to exclude accounts related to cash, accounts
receivable reserves and inventory reserves. For purposes of preparing
the Closing Balance Sheet the parties have agreed to exclude accounts
related to accounts receivable reserves and inventory reserves. In
addition, in preparing the Closing Balance Sheet (i) Seller and GTC
will retain (and thus remove from the balance sheet) all IBM inactive
inventory for the IBM Pluto, Plum, Opie and Blitzen programs which is
located at GTC's facility in Tampa, Florida, located at GTC Mexico's
facility, and located in Laredo, Texas; (ii) Seller will establish a
warranty reserve in the amount of $30,000 to provide for potential
warranty obligations; (iii) Seller and GTC will write off $30,000 for
a reflow oven identified by Buyers and located in Brazil, (iv) Seller
and GTC will record a $250,000 reserve for the potential buy-out of
leases included in the Purchased Assets for the Genrad tester in
Mexico, the Fuji line in Tampa, Florida, and the Cob line in Tampa,
Florida; (v) Seller and GTC will retain (and thus remove from the
balance sheet) all identifiable uncollectible Plantronics accounts
receivable; and (vi) Seller and GTC will not make adjustments to their
purchase accounting in its Mexico operation nor its reserve policies
for either its Brazil or Mexico operations, provided such methods and
reserves are in compliance with United States generally accepted
accounting principles, consistently applied. Concerning the reflow
oven, Buyers will send a technician to evaluate the possible repair of
the reflow oven, and if determined repairable, Buyers will reimburse
Seller for the difference between the net book value of the reflow
oven on the books of GTC Brazil 1 prior to writeoff and the cost to
repair the oven. Buyers will provide Seller with a reasonable amount
of time after the Closing to dispose of or otherwise take care of the
inventory that is to be retained by Seller as described above. Until
removed by Seller, Seller shall keep such inventory insured in such
amounts, and with such coverages, as customary and prudent in the
industry and shall name Buyers as additional insureds and Buyers shall
treat such assets with the same care as they use with their own
assets.
D. Closing Date. The closing of this transaction (the
"Closing") shall take place in the offices of Group Financial Partners,
Inc., 455 Fourth Avenue, Louisville, Kentucky at 10:00 a.m. local time on
June 30, 1997, effective as of 11:59 and 59 seconds p.m. EDT on June 29,
1997 (the "Closing Date"), or at a date and time to be mutually agreed upon
between the parties.
E. Waiver of Bulk Transfer Provisions. Buyers hereby waive
compliance with all provisions of the bulk sales laws of any state or
country, if applicable, to the sale of the Purchased Assets herein
contemplated, and in consideration of such waiver GTC shall indemnify
Buyers against and hold them harmless from any and all loss, cost, damage,
liability, deficiency or expense (including reasonable attorneys' fees)
resulting from or arising out of such noncompliance.
4. Representations and Warranties of Seller. Seller represents and
warrants to Buyers as follows as of the date of this Agreement and as of
the Closing Date (as to the latter, subject to any exceptions set forth in
the certificate delivered pursuant to Section 10.A hereof).
A. Title to Personal Property and Condition of Assets.
1. Except as set forth on Schedule 4.A attached hereto,
the Companies have (i) good and valid title to all of the tangible
personal property and assets which are used in the operation of their
business and which the Companies own or purport to own, and (ii) valid
leasehold interests in all leases of tangible personal property which
are used in the operation of their business and which the Companies
lease or purport to lease, in each case free and clear of any Liens,
other than Permitted Liens. Except as set forth on Schedule 4.A, all
equipment of the Companies and, to the knowledge of Seller, the
Companies' plant structure is in good operating condition and repair,
(in all material respects as to the plant structure) subject to normal
wear and tear and the provision of usual and customary maintenance and
repair performed in the ordinary course with respect to similar
equipment of like age and assembly.
2. The Companies do not own and have never owned in fee
any real property. The Companies enjoy peaceful and undisturbed
possession under all leases of personal property under which they are
operating. Except as set forth on Schedule 4.A, there are no existing
defaults, or events which with the passage of time or the giving of
notice, or both, would constitute defaults by the Companies or, to the
knowledge of the Seller, by any other party to any such lease.
3. Except for leasehold interests and other leased
properties specifically identified on Schedule 4.A hereto, and
customer owned assets used in the ordinary course of business and
except for the Purchased Assets, there are no assets owned by any
third party which are used by the Companies.
4. As used herein, the term "Lien" means any mortgage,
pledge, hypothecation, lien, security interest, financing statement,
charge or other similar encumbrance. The term "Permitted Liens" means
(a) Liens for taxes not yet due and payable or being contested in good
faith by appropriate proceedings and as to which adequate reserves
have been established on the Companies' books and records, (b)
easements, covenants, conditions and restrictions of record, as to
which no material violation or encroachment exists or, if such
violation or encroachment exists, as to which the cure of such
violation or encroachment would not materially interfere with the
conduct of the Companies' business, (c) workers or unemployment
compensation Liens arising in the ordinary course of business, and (d)
mechanic's, materialman's, supplier's, vendor's, landlord's or similar
Liens arising in the ordinary course of business securing amounts
which are not delinquent.
B. Real Property.
1. Schedule 4.B attached hereto sets forth a list and a
brief description of all real property leased, subleased or otherwise
occupied by the Companies, indicating the nature of the Companies'
interest therein (collectively, the "Real Property"). The Companies
have valid leasehold interests in all leases of Real Property which
they lease or purport to lease, free and clear of any Liens, other
than Permitted Liens. To Seller's knowledge, there are no pending or
threatened condemnation, expropriation, eminent domain or similar
proceedings affecting all or any portion of the Real Property.
2. The Companies enjoy peaceful and undisturbed possession
under all Real Property leases under which the Companies are
operating. All of such leases are valid, subsisting and in full force
and effect, no notice of termination has been received by the
Companies with respect thereto and there are no existing defaults, or
events which with the passage of time or the giving of notice, or
both, would constitute defaults by the Companies or, to the knowledge
of Seller, by any other party thereto.
3. There are no leases, subleases, licenses, concessions
or other agreements, written or oral, by the Companies granting to any
party or parties the right to use or occupancy of any portion of the
Real Property.
C. Organization and Qualification.
1. Seller is a corporation validly existing and in good
standing under the laws of the State of Florida with corporate power
to own its properties and to carry on its business as it is now being
conducted and Seller is duly qualified to do business and in good
standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business makes such qualification
necessary. GTC Mexico is a corporation validly existing and in good
standing under the laws of Mexico with corporate power to own its
properties and to carry on its business as it is now being conducted
and is duly qualified to do business and in good standing in each
jurisdiction in which the ownership or leasing of its properties or
the conduct of its business makes such qualification necessary. Each
of GTC Brazil 1 and GTC Brazil 2 is a limited liability company
validly existing and in good standing under the laws of Sao Paulo,
Brazil with limited liability company power to own its properties and
to carry on its Business as it is now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in
which the ownership or leasing of its properties or the conduct of its
business makes such qualification necessary.
2. Seller has delivered to Buyers true, correct and
complete copies of the charter and bylaws (or comparable organization
documents) of the Companies and all amendments thereto as in effect on
the date hereof.
3. The minute books and stock record books (if applicable)
of the Companies, all of which have been made available to Buyers, are
complete and correct and have been maintained in accordance with sound
business practices. The books of account and other records of the
Companies, all of which have been made available to Buyers, are
complete and in accordance with applicable United States generally
accepted accounting principles, consistently applied, and applicable
laws and generally accepted accounting principles of their
jurisdiction of operation, consistently applied, in all material
respects, and have been maintained in accordance with sound business
practices. The minute books of the Companies contain accurate and
complete records of all meetings held of, and corporate action taken
by, the stockholders, the boards of directors, and committees of the
boards of directors of the Companies, and no meeting of any such
stockholders, boards of directors, or committee has been held for
which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be
in the possession of the Companies, or a designated representative of
the Buyers.
4. Except as set forth in Schedule 4.C attached hereto,
the Companies have no direct or indirect equity interest by stock
ownership, contract or otherwise in any other corporation,
partnership, joint venture, firm, association or business enterprise.
5. Schedule 4.C sets forth a complete and correct list of
the officers and directors of each Company as of the date of this
Agreement.
6. Schedule 4.C sets forth a true and complete list of
each bank where the Companies have an account or safe deposit box, the
number of each account or box (and the names of all persons authorized
to draw thereon or to have access thereto) of the Companies.
7. None of the Companies holds assets located in the
United States (other than assets excluded pursuant to 16 CFR '802.50)
having an aggregate book value of $15,000,000 or more; or made
aggregate sales into the United States of $25,000,000 or more in its
most recent fiscal year.
D. Power and Authority. Seller has the corporate power to
execute and deliver this Agreement and to incur and perform its obligations
hereunder. The execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Seller, and
this Agreement is the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms.
E. Approvals and Consents; Noncontravention. Except as set
forth on Schedule 4.E attached hereto, the execution, delivery, and
performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby, will not (i) violate any statute,
regulation or ordinance of any governmental authority or require any filing
with or authorization, consent or approval of any government or
governmental agency or of any third party under any material agreement or
instrument, required to be obtained by Seller or any of the Companies, (ii)
conflict with, result in the breach of, or constitute a violation or
default under any of the provisions of the Articles of Incorporation or By
Laws of Seller or similar constituent documents of the Companies, (iii)
conflict with or result in a breach of any material agreement, deed,
contract, mortgage, indenture, writ, order, decree, contractual obligation
or instrument to which Seller or any of the Companies is a party, or
constitute a default (or an event which, with the lapse of time or the
giving of notice, or both, would constitute a default) thereunder or result
in the right of any party to exercise any remedy or to accelerate maturity
or performance thereunder or terminate or modify any such item, (iv) result
in the creation or imposition of any lien, charge or encumbrance, or
restriction of any nature whatsoever on or with respect to the Shares or
any of the assets of the Companies, or (v) impose a withholding obligation
on Buyers or SCI under Mexican law with respect to any capital gain
resulting from the transactions contemplated by this Agreement.
F. Tax Returns; Withholdings. The Companies have filed all tax
returns which are required to have been filed, and have paid all taxes and
governmental charges due and payable by any of them, subject to the good
faith contesting of any such items. Each such tax return as filed was
true, correct and complete in all material respects and has been made
available to Buyers. All amounts required to be withheld by the Companies
from employees for income tax, social security contributions, unemployment
tax, or workers' compensation (or similar items under applicable foreign
law) have been withheld and paid to the appropriate governmental agencies.
The provisions for taxes on the Financial Statements of the Companies and
contained in their other books and records are in compliance with United
States generally accepted accounting principles, consistently applied, and
applicable laws and generally accepted accounting principles, consistently
applied, of their jurisdictions of operations, in all material respects,
and are sufficient thereunder for the payment of all taxes for which the
Companies may be liable for the periods through the date of Closing that
were not yet due and payable as of the date of Closing. Except as set
forth on Schedule 4.F attached hereto, there is no claim or assessment
pending or, to the knowledge of Seller, threatened against any Company for
any alleged deficiency in taxes. There are no pending audits of any tax
returns of any Company. No Company is a party to any written agreement
providing for the allocation or sharing of taxes. No Company has executed
a waiver or consent extending any statute of limitations for the assessment
or collection of any taxes which remains outstanding. Except as set forth
on Schedule 4.F, no Company has ever filed or been included in any combined
or consolidated tax return with any other person or been a member of an
affiliated group (as defined in Section 1504 of the Internal Revenue Code
of 1986 (the "Code"), or comparable statute of the laws of an applicable
foreign jurisdiction) filing a consolidated tax return. Following the
Closing, no Company shall have any direct or indirect liability or
obligation resulting from its inclusion in any such consolidated or
affiliated group. The Companies have withheld and paid to the appropriate
governmental agencies all amounts for taxes or other governmental charges
with respect to any payment or distributions made by any of the Companies
to Seller, GTC, or any of their affiliates.
G. Compliance with Laws. The Companies have complied in all
material respects with all applicable laws and regulations of foreign,
federal, state and local governments and all agencies thereof, and no
claims have been filed alleging a violation of any such law or regulation
which have not been heretofore settled. The Companies hold all permits,
licenses, certificates and other authorizations of foreign, federal, state
and local governmental agencies necessary to conduct the Business as it is
presently being conducted. All such permits, licenses and certificates are
listed on Schedule 4.G attached hereto and are in full force and effect
(and shall remain in full force and effect immediately following the
Closing), and Seller and the Companies have not received any notice of
violation, or intent to revoke or to not renew, any of such permits,
licenses and certificates. Neither the Companies nor any director, officer
or, to Seller's knowledge, employee or agent (without inquiry as to agents)
of the Companies has engaged in any action in violation of the Foreign
Corrupt Practices Act (or any comparable law of any jurisdiction in which
the Companies are conducting business).
H. Litigation. Except as set forth on Schedule 4.H attached
hereto, there are no legal actions, suits, arbitrations, administrative or
other governmental proceedings pending or, to Seller's knowledge,
threatened against or affecting the Companies or the Business at law or in
equity or by or before any governmental department, commission, board,
agency, bureau, tribunal or instrumentality which, if determined adversely
to the Companies would have a material adverse effect on the Business or
the financial condition or results of operations of the Companies taken as
a whole or materially and adversely affect the ability of Seller to
consummate the transactions contemplated hereby.
I. Financial Statements. Seller has delivered to Buyer copies
of the audited financial statements of the Companies, consisting of a
balance sheet, income statement and cash flow statement, as of and for the
period ended December 31, 1996 (collectively, the "Financial Statements").
The Financial Statements (i) have been prepared from and are in accordance
with the Companies' books and records, (ii) are complete and correct and
fairly and accurately present, in accordance with United States generally
accepted accounting principles, consistently applied, in all material
respects the financial condition and results of operations of the Companies
as of the date thereof and for the period covered thereby, and (iii) were
prepared in accordance with United States generally accepted accounting
principles and the Companies' accounting practices, policies and
procedures, applied on a consistent basis throughout the period indicated.
The Opening Balance Sheet attached hereto as Exhibit A, was
prepared from the books and records of the Companies and in accordance with
this Section 4.I, reflects the elimination of (i) cash balances, (ii)
accounts receivable reserves, and (iii) inventory reserves and, subject to
such matters and the use of certain estimates therein, fairly and
accurately presents in all material respects the financial condition of the
Companies as of the date thereof.
J. Absence of Undisclosed Liabilities. Except for the
obligations or liabilities (i) reflected or reserved against in the
Financial Statements or the Opening Balance Sheet, (ii) incurred by the
Companies in the ordinary course of business and otherwise not required
under United States generally accepted accounting principles, consistently
applied, to be reflected or reserved against in, or disclosed in the
footnotes to, financial statements prepared in accordance with United
States generally accepted accounting principles, consistently applied, or
(iii) reflected or reserved against in the Closing Balance Sheet, the
Companies have no obligations or liabilities (whether fixed or contingent).
K. Employees and Employee Benefits. Except as set forth on
Schedule 4.K.1(i) attached hereto, the Companies are not a party or subject
to any collective bargaining or similar labor agreement.
1. Schedule 4.K.1(ii) attached hereto lists each bonus,
pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or
former employee, officer or director of the Companies, and any
employment, consulting, severance, termination or indemnification
agreement, arrangement or understanding with any employee of the
Companies (collectively, "Benefit Plans").
2. Seller has delivered to Buyers true, complete and
correct copies of (a) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (b) the most recent
summary plan description for each Benefit Plan for which such summary
plan description is required, and (c) the most recent actuarial and
financial reports and most recent annual reports, if any, filed with
any governmental agency with respect to each Benefit Plan; (d) each
trust agreement, group annuity contract or other funding arrangement
relating to any Benefit Plan.
L. Contracts. Schedule 4.L attached hereto lists the following
material contracts and leases of the Companies (AMaterial Agreements@)
affecting the Business:
1. Contracts or other agreements calling for the purchase
of raw materials or supplies in any one year of more than $100,000 in
any case (or $500,000 in the aggregate in any one year, in the case of
any related series of contracts and agreements);
2. Contracts or other agreements calling for the sale of
products or goods in any one year of more than $100,000 in any case
(or $500,000 in the aggregate in any one year, in the case of any
related series of contracts and agreements);
3. Contracts or other agreements with sales
representatives, agents or similar persons;
4. Contracts or other agreements for the lease or use of
real property;
5. Contracts or other agreements for the lease or use of
personal property or equipment with the lease payments thereunder of
more than $50,000 per year in any one case;
6. Contracts with customers which accounted for more than
five (5%) percent of any Company's revenues for the 12 months ended
December 31, 1996;
7. Contracts to which any Company is a party which were
entered into outside the ordinary course of business;
8. Any other contract material to the business of any
Company; and
9. Contracts between the Companies and Seller or any
affiliate of the Companies or Seller.
Except as set forth on Schedule 4.L, all of the Material Agreements are in
full force and effect, and no breach or default by the Companies or, to the
best of Seller's knowledge, by any other party has occurred with respect
to any material provision of such agreements. Except as identified on
Schedule 4.L, no approval or consent of any person is needed in order that
the Material Agreements set forth on Schedule 4.L continue in full force
and effect following the consummation of the transactions contemplated by
this Agreement.
M. Employment.
1. A true and complete list of each of the Companies'
employees and their respective current salary and other compensation
(including regular bonuses) is set forth in Schedule 4.M attached
hereto. Except as set forth on Schedule 4.M, the Companies have made
no commitment or agreement to increase the wages or compensation, or
modify the terms of employment, of any employee. The Companies are in
compliance in all material respects with all applicable laws
respecting employment and employment practices, including terms and
conditions of employment, equal opportunity, collective bargaining and
wages and hours. Except as disclosed on Schedule 4.M, the Companies
have not, during the immediately preceding 12 months, experienced any
material dispute with any of its present employees.
2. To the knowledge of Seller, no employee of any Company
is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights
agreement, between such employee and any other person that in any way
materially adversely affects (i) the performance of his duties as an
employee of such Company, or (ii) the ability of such Company to
conduct its business. No officer, or other key employee of any
Company has notified such Company of his intent to terminate his
employment with the Company.
N. Capitalization. GTC Mexico has authorized capital stock
consisting of twenty-eight million eight hundred fifty thousand
(28,850,000) shares of common stock, of which twenty-eight million eight
hundred fifty thousand (28,850,000) shares are issued and outstanding. GTC
Brazil 1 has authorized quotas consisting of five hundred fifty-one
thousand one hundred (551,100) quotas, of which five hundred fifty-one
thousand one hundred (551,100) quotas are issued and outstanding. GTC
Brazil 2 has authorized quotas consisting of one thousand (1,000) quotas,
of which one thousand (1,000) quotas are issued and outstanding. Except as
noted on Schedule 4.N, all of the issued and outstanding stock or quotas,
as applicable, of the Companies are duly authorized and validly issued,
fully-paid and nonassessable. There are no outstanding options, warrants
or other rights to subscribe for or purchase, or any contracts or
commitments providing for the issuance of, or the granting of rights to
acquire, and no securities have been issued which are convertible into or
exchangeable for, any shares of capital stock or quotas or any other equity
ownership interest of the Companies. There are no outstanding equity
securities of the Companies other than the Shares and there are no declared
or accrued but unpaid dividends with respect to the Shares.
O. Title to Stock. Seller, GTC Brazil 1 and GTC are the
beneficial and record owners of all of the Shares as set forth on Schedule
4.O attached hereto. Each of Seller and GTC has the sole right to sell the
Purchased Shares owned by it. Except as identified on Schedule 4.O, As of
the Closing each of Seller and GTC will transfer to Buyer good and valid
title to the Purchased Shares, free and clear of any Liens. As of the
Closing there will be no restrictions on the right of Seller, GTC Brazil 1
or GTC to vote, pledge, sell or otherwise dispose of the Shares, other than
any restrictions on transfer imposed by applicable securities laws.
P. No Material Adverse Change; Operations in Ordinary Course.
Since December 31, 1996, the Companies have operated only in the usual and
ordinary course, consistent with past practice, and, except as set forth in
Schedule 4.P attached hereto, there has not been: (i) any material adverse
change in the business, assets, financial condition or results of
operations of any Company; (ii) any damage, destruction or loss (whether or
not covered by insurance) materially and adversely affecting the business,
assets, financial condition or operating results of any Company; (iii) any
distribution or transfer by sale or otherwise of any assets or other
properties of any Company, except in the ordinary course of business; (iv)
any cancellation, termination, amendment or waiver of any material contract
of any Company or of any rights or claims arising thereunder except in the
ordinary course of business; (v) any increase in the compensation payable
or to become payable to any employee of or consultant of any Company or any
bonus payment or arrangement made to or with any such employee, other than
increases or bonuses in the ordinary course of business or required by any
contract or employee benefit plan identified in Schedule 4.K or Schedule
4.M; (vi) any agreement, transaction or other arrangement to which any
Company is a party entered into, amended or terminated in anticipation of
any of the transactions contemplated by this Agreement; (vii) any failure
by any Company to maintain in full force and effect insurance providing
coverage and amounts in accordance with past practice; or (viii) any
agreement by any Company to take any actions identified in clauses (i)
through (vii) above.
Q. Transactions with Affiliates. Schedule 4.Q sets forth a
complete and correct list of any material contract, agreement, business
arrangement or relationship between the Companies and any affiliate of the
Companies.
R. Powers of Attorney. Except as noted on Schedule 4.R, other
than in the ordinary course of business, no Company has granted any power
of attorney to any person for any purpose whatsoever, which power of
attorney is currently in force.
S. Environmental Matters. Except as set forth in Schedule 4.S,
the operations of GTC Mexico, and of GTC Brazil 1 and GTC Brazil 2, comply
in all material respects with all Mexican Environmental Laws and Brazilian
Environmental Laws, respectively; (i) neither GTC Mexico, GTC Brazil 1 or
GTC Brazil 2, nor, to Sellers knowledge without inquiry, any prior owner or
tenant of GTC Mexico's, GTC Brazil 1's or GTC Brazil 2's assets, caused or
contributed to any release of any hazardous or toxic waste, substance or
constituent into the environment; (ii) none of the operations of GTC
Mexico, GTC Brazil 1 or GTC Brazil 2 is subject to any pending or
threatened judicial or administrative proceeding alleging the violation of
any Mexican Environmental Law or Brazilian Environmental Law, respectively;
(iii) none of the operations of GTC Mexico, GTC Brazil 1 or GTC Brazil 2 is
subject to any pending or, to Seller's knowledge, threatened judicial or
administrative proceeding alleging the violation of any Mexican
Environmental Law or Brazilian Environmental Law, respectively; (iv) none
of the operations of GTC Mexico, GTC Brazil 1 or GTC Brazil 2 is subject to
any compliance agreement or settlement agreement resulting from an alleged
violation of any Mexican Environmental Law or Brazilian Environmental Law,
respectively; (v) none of the operations of GTC Mexico, GTC Brazil 1 or GTC
Brazil 2 is the subject of any international, national, state, provincial,
regional, local or foreign investigation or threatened investigation
regarding a violation or alleged violation of any Mexican Environmental Law
or Brazilian Environmental Law, respectively; (vi) none of the operations
of GTC Mexico, GTC Brazil 1 or GTC Brazil 2 is required to file a notice or
report pursuant to any Mexican Environmental Law or Brazilian Environmental
Law, respectively, of any past or present spill or release of hazardous or
toxic substance or constituent into the environment; (vii) none of the
businesses of GTC Mexico, GTC Brazil 1 or GTC Brazil 2 involves the
unpermitted generation, transportation, treatment, storage or disposal of
hazardous or toxic waste; (viii) to Seller's knowledge, without inquiry,
there are no hazardous wastes or toxic substances in, on, over or under the
Companies' facilities except as generated or used in the ordinary course of
business of the Companies, and (ix) GTC Mexico, GTC Brazil 1 and GTC Brazil
2 possess all material environmental permits and authorizations required by
any Mexican Environmental Law or Brazilian Environmental Law, respectively,
to conduct their operations as presently conducted. "Mexican Environmental
Laws" shall mean all applicable Mexican federal, state, regional and local
laws, statutes, ordinances, judgments, rulings, orders, directives and
regulations relating to any matters of pollution or of environmental
regulation or control or protection of the environment. "Brazilian
Environmental Laws" shall mean all applicable Brazilian federal,
provincial, state and local laws, statutes, ordinances, judgments, rulings,
orders, directives and regulations relating to any matters of pollution or
of environmental regulation or control or protection of the environment.
T. Customers. Except as disclosed on Schedule 4.T, the
Companies are not involved in any material controversy with any of the
Companies' customers, nor have the Companies received written notice from a
customer that any of the Companies' customers intends to terminate or
materially adversely alter its relationship with the Companies or with
Buyers after the Closing.
U. Intellectual Property.
1. Schedule 4.U attached hereto contains an accurate and
complete list of all material Intellectual Property that is owned by
or registered in the name of the Companies or to which the Companies
have any rights as licensees or otherwise. The Companies own (or
possesses adequate and enforceable rights to use without payment of
royalties) all Intellectual Properties necessary for the conduct of,
or use in, the business of the Companies as the same is presently
being conducted.
2. Except as set forth in Schedule 4.U, there are no
claims of patent, trade name, trademark, or copyright infringement, or
of misappropriation or misuse of the trade secrets, know-how or
confidential information of any person, pending or to Seller's
knowledge threatened against the Companies. To the best of Seller's
knowledge, the Companies do not employ any employee in a manner which
violates any non-competition or non-disclosure agreement which such
employee entered into in connection with any former employment.
3. The term "Intellectual Property" as used herein means
all know-how, processes, formulations, trade secrets, trade names,
trademarks, trade styles, service marks, patents, patent applications,
copyrights, copyright applications, trademark registrations, trademark
applications or other intellectual property of any nature whatsoever
used by the Companies, other than off-the-shelf software licensed to
the Companies which is not material to the Companies' operations or
their business.
V. Insurance. Schedule 4.V hereto sets forth a complete and
correct list of all insurance policies currently in effect which are owned
or held by the Companies, insuring the products, assets, business and
operations of the Companies and their potential liabilities to third
parties, and all general liability policies maintained by the Companies.
All such policies are in full force and effect and all premiums due and
payable in respect thereof have at all times been paid when due, except to
the extent set forth on Schedule 4.V. The Companies have at all times
complied in all material respects with the provisions of such policies.
Since the respective dates of such policies, no notice of cancellation or
non-renewal with respect to any such policy has been received by the
Companies. Schedule 4.V sets forth a list of all pending claims with
respect to all such policies.
W. No Third Party Options. There are no existing agreements,
options, commitments or rights with, of or to any person to acquire any of
the Companies' assets, properties, or rights or any interest therein,
except for those contracts entered into in the normal course of business
consistent with past practice for the sale of inventory of the Companies.
X. Warranty and Product Liability Claims.
1. Each product manufactured, sold, leased or delivered by
the Companies through the Closing has been in conformity in all
material respects with all applicable contractual commitments and
applicable laws and all express and implied warranties to customers.
Under the historic warranty experience of the Companies, the Companies
have not been required, pursuant to United States generally accepted
accounting principles, consistently applied, to create a reserve for
product warranty claims. No product manufactured, sold, leased or
delivered by the Companies prior to the Closing is subject to any
guaranty, warranty or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Schedule 4.X sets forth the
standard terms and conditions of sale or lease for the Companies
(including applicable guaranty, warranty and indemnity provisions).
2. Except for routine warranty claims for the return of
defective or nonconforming merchandise, there exist no claims and to
the knowledge of Seller there is no reasonable basis for the assertion
of any claim against the Companies for injury to persons or property
suffered by any person as a result of the sale or manufacture of any
product by the Companies prior to the Closing, including, but not
limited to, claims arising out of the defective or unsafe nature of
the products of the Companies. Schedule 4.X sets forth a complete and
correct list and brief description of all product liability claims
that have been filed or made against the Companies since January 1,
1994.
Y. Inventory and Accounts Receivable.
1. The Inventory or the inventory of the Companies is of a
quality and quantity usable and salable in the ordinary course of
business, except for the IBM inventory referred to in Section 3.C.3.
Buyers' sole recourse for breach of this representation and warranty
shall be under the provisions of Section 7.C hereof.
2. The accounts receivable of the Companies are bona fide
and arose out of arm's length transactions in the ordinary course of
business of the Companies in accordance with the terms and provisions
contained in any documents relating thereto. There are no material
setoffs, counterclaims or disputes asserted or conditions precedent to
payment therefor with respect to any such accounts receivable, and no
discount or allowance from any such accounts receivable has been made
or agreed to. Except to the extent of eliminating the prior
Plantronics accounts receivable as described in Section 3.C.3.(v) in
connection with preparation of the Closing Balance Sheet, all such
accounts receivable are collectible in full in the ordinary course of
business. Buyer's sole recourse for breach of this representation and
warranty shall be under the provisions of Section 7.C hereof.
Z. Full Disclosure. No representation or warranty by Seller
contained in this Agreement and no statement contained in any certificate
or other instrument furnished or to be furnished to Buyers hereunder
contains or will contain any untrue statement of a material fact, or omits
or will omit to state any material fact necessary to make the statements
contained herein or therein not misleading.
5. Representations and Warranties of GTC. GTC represents and
warrants to Buyers as follows as of the date of this Agreement and as of
the Closing Date (as to the latter, subject to any exceptions set forth in
the certificate delivered pursuant to Section 10.A hereof).
A. Title to and Condition of Assets.
1. Except as set forth on Schedule 5.A attached hereto,
GTC has (i) good and valid title to the Purchased Assets owned by it
and valid leasehold interests in the Equipment Leases, in each case
free and clear of any Liens, other than Permitted Liens. Except as
set forth on Schedule 5.A, the equipment included in the Purchased
Assets is in good operating condition and repair, subject to normal
wear and tear and the provision of usual and customary maintenance and
repair performed in the ordinary course with respect to equipment of
like age and assembly.
2. GTC enjoys peaceful and undisturbed possession under
all leases included in the Purchased Assets. Except as set forth on
Schedule 5.A, there are no existing defaults, or events which with the
passage of time or the giving of notice, or both, would constitute
defaults by GTC, or to GTC's knowledge, by any other party to such
lease.
B. Organization and Qualification. GTC is a corporation
validly existing and in good standing under the laws of the State of
Florida with corporate power to own its properties and to carry on its
business as it is now being conducted.
C. Power and Authority. GTC has the corporate power to execute
and deliver this Agreement and to incur and perform its obligations
hereunder. The execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of GTC, and this
Agreement is the legal, valid and binding obligation of GTC, enforceable in
accordance with its terms.
D. Approvals and Consents; Noncontravention. Except as set
forth on Schedule 5.D, attached hereto, the execution, delivery, and
performance of this Agreement by GTC and the consummation of the
transactions contemplated hereby, will not (i) violate any statute,
regulation or ordinance of any governmental authority or require any filing
with or authorization, consent or approval of any government or
governmental agency or of any third party under any material agreement or
instrument, required to be obtained by GTC, (ii) conflict with, result in
the breach of, or constitute a violation or default under any of the
provisions of the Articles of Incorporation or By Laws of GTC, (iii)
conflict with or result in a breach of any material agreement, deed,
contract, mortgage, indenture, writ, order, decree, contractual obligation
or instrument to which GTC is a party, or constitute a default (or an event
which, with the lapse of time or the giving of notice, or both, would
constitute a default) thereunder or results in the right of any party to
exercise any remedy or to accelerate maturity or performance thereunder or
terminate or modify any such item; or (iv) impose a withholding obligation
on Buyers or SCI under Mexican law with respect to any capital gain
resulting from the transactions contemplated by this Agreement.
E. Litigation. Except as set forth on Schedule 5.E attached
hereto, there are no legal actions, suits, arbitrations, administrative or
other governmental proceedings pending or, to GTC's knowledge, threatened
against or affecting the Purchased Assets at law or in equity, by or before
any governmental department, commission, board, agency, bureau, tribunal,
or instrumentality.
F. Certain Taxes. All taxes of GTC which, if unpaid would
result in a Lien being assessed any of the Purchased Assets have been paid
by GTC.
G. Powers of Attorney. Other than in the ordinary course of
business, GTC has not granted any power of attorney to any person to deal
with the Purchased Assets, which power of attorney is currently in force.
H. No Third Party Options. There are no existing agreements,
options, commitments or rights with, of or to any person to acquire any of
the Purchased Assets or rights or any interest therein, except for those
contracts entered into in the normal course of business consistent with
past practice for the sale of inventory of GTC.
I. Warranty and Product Liability Claims.
1. The Inventory is in conformity in all material respects
with all applicable contractual commitments and applicable laws and
all express and implied warranties to customers. Under the historic
warranty experience of GTC, GTC has not been required, pursuant to
United States generally accepted accounting principles, consistently
applied, to create a reserve for product warranty claims. The
Inventory is not subject to any guaranty, warranty or other indemnity
beyond the applicable standard terms and conditions of sale or lease.
Schedule 4.X sets forth the standard terms and conditions of sale or
lease for the Inventory (including applicable guaranty, warranty and
indemnity provisions).
2. Except for routine warranty claims for the return of
defective or nonconforming merchandise, there exists no claims and to
the knowledge of GTC there is no reasonable basis for the assertion of
any claim against GTC for injury to persons or property suffered by
any person as a result of the sale or manufacture of any product
previously owned by GTC and sold as a product of the Companies prior
to the Closing, including, but not limited to, claims arising out of
the defective or unsafe nature of such products.
J. Full Disclosure. No representation or warranty by GTC
contained in this Agreement and no statement contained in any certificate
or other instrument furnished or to be furnished to Buyers hereunder
contains or will contain any untrue statement of a material fact, or omits
or will omit to state any material fact necessary to make the statements
contained herein or therein not misleading.
6. Representations and Warranties of Buyers and SCI. Each of Buyers
and SCI represents and warrants to Seller and GTC as follows as of the date
of this Agreement and as of the Closing Date (as to the latter, subject to
any exceptions set forth in the certificate delivered pursuant to Section
10.A hereof).
A. Organization and Qualification. Such Buyer or SCI is a
corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation with corporate power to own its properties
and to carry on its business as it is now being conducted.
B. Power and Authority. Such Buyer or SCI has the corporate
power to execute and deliver this Agreement and to incur and perform its
obligations hereunder. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of
such Buyer or SCI, and this Agreement is the legal, valid and binding
obligation of such Buyer or SCI enforceable in accordance with its terms.
C. Approvals and Consents; Noncontravention. The execution,
delivery, and performance of this Agreement by such Buyer or SCI and the
consummation of the transactions contemplated hereby, will not (i) violate
any statute, regulation or ordinance of any governmental authority or
require any filing with or authorization, consent or approval of any
government or government agency or any third party under any material
agreement or instrument, required to be obtained by such Buyer or SCI, (ii)
conflict with, result in the breach of, or constitute a violation or
default under any of the provisions of the Articles of Incorporation or By
Laws of such Buyer or SCI, (iii) conflict with or result in a breach of any
material agreement, deed, contract, mortgage, indenture, writ, order,
decree, contractual obligation or instrument to which such Buyer or SCI is
a party or by which it or any of its assets are or may be bound, or
constitute a default (or an event which, with the lapse of time or the
giving of notice, or both, would constitute a default) thereunder or result
in the right of any party to exercise any remedy or to accelerate maturity
or performance thereunder or terminate or modify any such item, or (iv)
cause the Buyers or SCI to incur any value added tax in Mexico and/or which
would impose a withholding or collection obligation on Seller or GTC.
D. Investment Intent. Such Buyer and SCI is acquiring the
Purchased Shares acquired by it for investment with no intent for the
resale or distribution thereof.
E. Full Disclosure. No representation or warranty by such
Buyer or SCI contained in this Agreement and no statement contained in any
certificate or other instrument furnished or to be furnished to Seller or
GTC hereunder contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary to make
the statements contained herein or therein not misleading.
7. Covenants.
A. Publicity. SCI, Buyers, Seller and GTC shall consult with
each other before issuing any press release concerning the transactions
contemplated by this Agreement and, except as may be required by applicable
law or any listing agreement with or regulation or rule of any stock
exchange or over the counter market on which the securities of SCI or GTC
are listed or traded, will not issue any such press release prior to such
consultation. If SCI or GTC is so required to issue such press release it
shall use its best efforts to inform the other parties hereto prior to
issuing such press release and give them an opportunity to comment on the
proposed disclosure.
B. Retention of and Access to Books and Records and
Personnel. For a period of seven (7) years after the Closing Date, the
parties shall retain all books or records relating to the Business, and any
party, wishing to dispose or destroy books or records within such seven (7)
year period, shall provide not less than thirty (30) days prior written
notice to the other party of such proposed action. If the recipient of
such notice desires to obtain any of such documents, it may do so by
notifying the other party in writing at any time prior to the scheduled
date for such destruction or disposal. Such notice must specify the
documents which the requesting party wishes to obtain. The parties shall
then promptly arrange for the delivery of such documents. All out-of-
pocket costs associated with the delivery of the requested documents shall
be paid by the requesting party. Buyers shall, subject to such reasonable
limitations as may be necessary to protect proprietary information, at the
expense of Seller or GTC, and on reasonable prior notice to Buyers, (a)
afford Seller or GTC, and their counsel, accountants, consultants and other
representatives reasonable access during normal business hours at the
business locations of the Purchased Assets and the Companies to examine and
copy the books, tax returns, records and files of the Companies which
relate to periods prior to the Closing Date, (b) cooperate with reasonable
requests of Seller and GTC with respect to gathering information contained
therein which may be necessary to respond to inquiries or requests made by
any governmental authority or courts which relate to any tax returns or
other documents filed by or on behalf of Seller or GTC prior to or relating
to the periods prior to the Closing Date, and (c) provide Seller and GTC
with reasonable access to employees of the Companies or of Buyers
previously associated with the Companies who have knowledge needed by
Seller or GTC with respect to the foregoing.
C. Covenants of Seller.
1. Noncompetition. For a period of three (3) years after
the Closing Date, each of Seller and GTC will not, directly or
indirectly, and will cause its affiliated corporations or other
entities not to, engage in, or own an interest in any person or entity
which engages in, any present or future business activity in Mexico or
Brazil in competition with the Business as presently conducted.
2. Protection of Confidential Information. Each of Seller
and GTC hereby agrees, for a period of three (3) years after the
Closing Date to safeguard, and to cause its affiliated corporations or
other entities to safeguard, against disclosure to third parties all
trade secrets of the Business of which it has knowledge, by using
reasonable secrecy measures and not less than the same degree of care
as for its own similar proprietary information.
3. Solicitation of Employees. For a period of three (3)
years after the Closing Date, each of Seller and GTC shall not, and
will cause its affiliated corporations or other entities not to,
without SCI's prior written consent, directly or indirectly knowingly
solicit any then-current employee of the Companies nor shall it
encourage any such employee to terminate his or her employment with
the Companies.
4. Repurchase of Accounts Receivable. In the event that
any of the Accounts Receivable or accounts receivable of the Companies
as of the Closing Date (other than any accounts receivable excluded
from the Closing Balance Sheet) remain uncollected by Buyers ninety
(90) days after the Closing Date (the "Uncollected Accounts
Receivable"), at Buyers' election, Buyers may require GTC or Seller,
as applicable, to purchase all or any portion of the Uncollected
Accounts Receivable for an amount equal to the book value as of the
Closing Date of the Uncollected Accounts Receivable as determined from
GTC's or the Companies' customary books and records (less amounts
recovered pursuant to this provision) by providing written notice to
GTC or Seller within thirty (30) days after such ninety (90) day
period. It shall be a condition to GTC's or Seller's obligation to
purchase such Accounts Receivable that [i] Buyers and SCI shall have
used "Best Efforts" to collect the Uncollected Accounts Receivable
during the ninety (90) day period following Closing, "Best Efforts"
defined as all commercially reasonable actions that Buyers or SCI
would typically employ in collecting their other accounts receivable,
including without limitation dedicating personnel to collect the
accounts, working with customers to satisfy any complaints or
problems, credit holds with customers, and any other such actions,
steps or initiatives, including the settlement of accounts receivable
for less than the Closing book value thereof with the prior written
consent and approval of GTC and Seller, and including threats of legal
actions to collect such accounts receivable (but without the
requirement of instituting litigation); [ii] each of Buyers and the
Companies shall then not be in default under any obligations it may
have with the originator of the accounts receivable (which default, as
to the Companies, did not exist as of the Closing and is the cause of
nonpayment of the accounts receivable); and [iii] Buyers and SCI shall
not then be in default under any of their material obligations under
this Agreement. During such ninety (90) day period, (a) Buyers shall
provide Seller and GTC with monthly reports detailing the status of
such accounts receivable and a summary of the collection efforts with
respect thereto, (b) Seller and GTC shall have the opportunity to
assist in such collection efforts, and (c) Buyers shall provide Seller
and GTC and their accountants and representatives with reasonable
access to and an opportunity to review the books and records of Buyer
and the Companies with respect to such accounts receivable. Upon
receipt by GTC or Seller of such notice from Buyers, GTC and Seller
shall have thirty (30) days to contest or confirm such notice by
written notification to Buyers and which Buyers must then dispute
within ten (10) days. If Buyers fail to object to a notice of contest
by GTC or Seller, GTC and Seller shall have no obligation to purchase
Uncollected Accounts Receivable. If GTC or Seller contest such
matters, and such dispute is not conceded by Buyers, the dispute shall
be submitted to binding arbitration as contemplated by Section 9.C
hereof. In the event GTC or Seller purchase such Uncollected Accounts
Receivable, Buyers shall execute such bills of sale and assignments as
are reasonably necessary to vest title to the Uncollected Accounts
Receivable in GTC or Seller, as appropriate, free and clear of any and
all liens, security interests, claims or encumbrances arising after
the Closing Date. At Closing, SCI, Seller and GTC shall enter into an
escrow agreement in substantially the form of Exhibit B hereto, with
$250,000 of the Purchase Price being deposited in escrow to fund GTC's
or Seller's potential obligation to purchase such Uncollected Accounts
Receivable and Unused Inventory (as described below) pursuant to this
Section 7.C.4 and Section 7.C.5.
5. Repurchase of Inventory. In the event that any
Inventory or inventory of the Companies as of the Closing Date (other
than any inventory excluded from the Closing Balance Sheet) remains
unused by Buyers (or Buyers have not identified a use for such
Inventory) two hundred forty (240) days after the Closing Date (the
"Unused Inventory"), at Buyers' election, Buyers may require GTC or
Seller, as applicable, to purchase all or any portion of such Unused
Inventory for an amount equal to the book value as of the Closing Date
of the Unused Inventory as determined from GTC's or the Companies'
customary books and records (less amounts recovered pursuant to this
provision) by providing written notice to GTC or Seller within thirty
(30) days after such two hundred forty (240) day period. It shall be
a condition to GTC's or Seller's obligation to purchase such Unused
Inventory that [i] Buyers and SCI shall have used "Best Efforts" to
use or sell the Unused Inventory, "Best Efforts" defined as all
commercially reasonable actions that Buyers or SCI would typically
employ to use the inventory of their business, including without
limitation the dedication of personnel to secure business that
requires the use of the inventory, working with customers to satisfy
any complaints or problems, looking for ways to use the inventory at
another plant of Buyers or their affiliates, and any other such
actions, steps or initiatives, including the use of such inventory in
a way that results in less than the Closing book value thereof being
received with the prior written consent and approval of GTC and
Seller, and including the threat of legal action (but without the
requirement of instituting litigation) and including seeking payment
by the customer for which it was purchased, that Buyers or SCI would
ordinarily pursue to use or be compensated for the inventory;
[ii] each of Buyers and the Companies shall not then be in default
under any obligations it may have with customers of the Business for
which the Unused Inventory was purchased (which default, as to the
Companies, did not exist as of the Closing); [iii] Buyers and SCI
shall not then be in default under any of their obligations under this
Agreement; and [iv] the Unused Inventory is in no worse condition than
at the Closing Date, subject to any deterioration due solely to the
passage of time, and has been maintained in accordance with the
industry standards and has been relieved on a first in, first out
basis, which shall also mean that such inventory shall be used first
by Buyers in the business of the Companies, irregardless of the
presence of other similar inventory held by Buyers or their
affiliates. During such two hundred forty (240) day period,
(a) Buyers shall provide Seller and GTC with monthly reports detailing
the status of such inventory, a summary of the efforts with respect
thereto and a chart or schedule reflecting mutually agreed upon
information detailing the use of similar inventory in other programs
or facilities of Buyers and their affiliates within the same country
as the facilities at which such inventory is located, (b) Seller and
GTC shall have the opportunity to assist in finding ways to use such
inventory, and (c) Buyers shall provide Seller and GTC and their
accountants and representatives with reasonable access to and an
opportunity to inspect the inventory and review the books and records
of Buyers and the Companies with respect to such inventory. Upon
receipt by GTC or Seller of such notice from Buyers, GTC and Seller
shall have thirty (30) days to contest or confirm such notice by
written notification to Buyers, which Buyers must then dispute within
ten (10) days. If Buyers fail to object to a notice of contest by GTC
or Seller, GTC and Seller shall have no obligation to purchase Unused
Inventory. If GTC or Seller contest such matters, and such dispute is
not conceded by Buyers, the dispute shall be submitted to binding
arbitration as contemplated by Section 9.C hereof. In the event GTC
or Seller purchase such Unused Inventory, Buyers shall execute such
bills of sale and assignments as are reasonably necessary to vest
title to the Unused Inventory in GTC or Seller, as appropriate, free
and clear of any and all liens, security interests, claims or
encumbrances arising after the Closing Date.
6. Allocation Adjustment. Any repurchase of Uncollected
Accounts Receivable or Unused Inventory pursuant to Sections 7.C.4 and
7.C.5 shall result in a deemed dollar for dollar adjustment in the
Purchase Price and an appropriate adjustment to the allocation set
forth on Schedule 3.A.2, as previously adjusted pursuant to Section
3.C hereto.
7. Fuji Equipment. Seller shall within 5 days of Closing
arrange for the delivery of free, clear and unencumbered title to the
Fuji SMT equipment currently located in Brazil, more specifically
identified in that [i] certain sales confirmation number MCS-4199
entered into by and between Nickiman Corporation and GTC dated
February 27, 1996 and [ii] that certain loan agreement entered into by
and between GTC Brazil 1 and GTC dated February 27, 1996.
8. Pension Plan. Seller will cause GTC Mexico to cancel
its existing pension plan as of the Closing Date, without any
resulting cost or expense to SCI or the Buyers.
9. IBM Equipment. Seller shall, within a reasonable
period of time after Closing, remove from the premises of GTC Mexico
equipment owned by IBM and no longer in use.
10. Best Efforts. Each of Seller and GTC will use its best
efforts and cooperate with Buyers and SCI to obtain any consents
required under the contracts of the Companies or GTC required by
virtue of the transactions contemplated by this Agreement and not
obtained as of the Closing.
11. Mexico Items. Seller shall deliver to Buyers copies of
the appointment of legal representatives in Mexico and any tax filings
related to the sale and transfer of the Shares of GTC Mexico post
closing. Seller shall also provide to Buyers a copy of any waiver
letter it receives from Mexican Federal Competition Commission ("FCC")
concerning the transactions contemplated by this Agreement.
a. If the requested waiver of notice filing
requirements under the Mexican Federal Competition Law
("Competition Law") is not approved by the FCC, Seller and GTC
shall join with SCI and Buyers, as and to the extent necessary,
in any then required notice or other filing under the Competition
Law, and shall diligently pursue the compilation and submission
to SCI and Buyers of any information required of Seller and GTC
in connection with such filing;
b. Seller and GTC will indemnify SCI and Buyers
subject to an aggregate limit of $10,000 for the expense of any
fines and other costs imposed by the FCC or other competent
Mexican authorities as a result of any such required filing
having occurred following the sale of Seller's and GTC's
interests in GTC Mexico.
c. Seller and GTC and SCI and Buyers shall comply
with any requirements applicable to them which are subsequently
imposed or decreed by the FCC or other competent Mexican
authorities.
12. Mexican Income Tax Matters. Seller and GTC shall
promptly make all necessary filings with taxing authorities in Mexico,
including without limitation the Mexican Ministry of the Treasury,
concerning the sale of their interests in GTC Mexico and provide
copies of such filings to SCI and Buyers.
13. Bonuses to Mexican and Brazilian Managers. Seller and
GTC shall retain liability for the unpaid bonuses as identified on
Schedule 4.K.1(ii), and Seller and GTC shall indemnify SCI and the
Buyers from any future costs or expenses related thereto.
D. Covenants of Buyers.
1. Employment.
a. The employees of the Companies shall remain the
employees of the Companies as of the Closing Date.
b. For purposes of determining eligibility and
vesting (but not benefit accrual) for any employee pension
benefit plan for such employees, Buyers shall include credited
service with the Companies' plans, as recognized by the Companies
as of the Closing Date.
c. The Buyers shall employ Carlos L. Soliveras and
assume all obligations under the employment contract identified
in Section 2.A.1.b.
2. Rights of Third Parties. Notwithstanding anything to
the contrary, the foregoing provisions of Section 7.D.1 of this
Agreement constitute agreements between Buyers and Seller, and no
employee of the Companies, any other employee, or any other person or
entity, shall be deemed to be a third-party beneficiary or have the
right to claim any particular benefit to aggregation of benefits as a
result of such provisions.
3. Warranty Claims. Buyers shall cause the Companies to
honor and be responsible for all warranty, repair and service
obligations (the "Warranty Claims") for the Business, including for
the Inventory as updated pursuant to Section 2.A.1.d hereof. Buyers
shall also cause the Companies to perform in-warranty service and
repair work on goods of GTC manufactured and sold in connection with
the Business prior to the Closing Date.
4. Solicitation of Employees. For a period of three (3)
years after the Closing Date, each of SCI and Buyers shall not, and
will cause its affiliated corporations or other entities not to,
without Seller's and GTC's prior written consent, directly or
indirectly knowingly solicit any then-current employee of Seller or
GTC nor shall it encourage any such employees to terminate his or her
employment with Seller or GTC.
5. Names of Companies. Promptly after the Closing, but
subject to any time constraints imposed by applicable law or
regulatory procedure, Buyers shall cause the Companies to change their
names to names dissimilar to "GTC" or "Group Technologies" or
variations thereof, and within sixty (60) days after the Closing shall
cause the Companies not to use or display such names, related service
marks or trademarks, or other similar identifiers without the prior
written consent of Seller and GTC and such permitted use during such
sixty (60) day period shall be only in the ordinary course of the
business of the Companies.
8. Circumstances Prior to Closing.
A. Obligations of Seller Prior to Closing.
From the date of this Agreement until the Closing Date, Seller
and GTC, as applicable, shall or, as applicable, shall cause the Companies
to:
1. Conduct the Business and maintain the Purchased Assets
only in the usual, regular and ordinary course, preserve the
organizational structure of the Business, and preserve intact for
Buyers the goodwill of the Business and the present relationship
between the Business and the employees, suppliers, clients, customers
and others having business relations with the Companies;
2. Not increase compensation of any kind payable or to be
payable by the Companies to any of their officers, employees or agents
except for increases and bonuses in the ordinary course of business
consistent with past practices;
3. Take all action and do all things reasonably necessary,
proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement;
4. Continue in force each of the policies of insurance
which insure the Business, the Companies and the Purchased Assets;
5. Use its best efforts to obtain prior to Closing all
consents by third parties under material agreements identified by
Buyers required to be obtained by Seller with respect to its
performance of this Agreement and cooperate fully with Buyers in
connection with Buyers' requests and applications for the governmental
authorizations, approvals and consents which are necessary for the
ownership and operation of the Business immediately following the
Closing Date; and
6. Give Buyers prompt written notification upon receipt of
knowledge of any fact which would make any representation or warranty
contained in this Agreement untrue in any material respect.
B. Obligations of Buyers Prior to Closing.
From the date of this Agreement until the Closing Date, Buyers
shall:
1. Take all action and do all things reasonably necessary,
proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement; and
2. Use their best efforts to obtain prior to Closing all
consents by third parties and all governmental authorizations which
are necessary for Buyers' performance of this Agreement or for Buyers'
ownership and operation of the Companies and the Business following
the Closing Date.
9. Indemnification.
A. Seller and GTC. Seller and GTC shall jointly and severally
indemnify, defend and hold harmless Buyers, SCI, the Companies, their
respective officers, directors and employees and their respective
successors and assigns (collectively, the "Buyer Indemnitees") from and
against, and shall reimburse the Buyer Indemnitees for, all suits, claims,
demands, actions, causes of action, losses, costs, assessments, judgments,
damages, or expenses (including, without limitation, any fines, penalties,
punitive damages, and reasonable fees and disbursements of counsel and
other expenses incurred investigating or defending any of the foregoing or
enforcing this Agreement) (collectively, "Losses") imposed upon or incurred
by any of the Buyer Indemnitees, directly or indirectly, and whether or not
the result of any third party claim, resulting from or arising out of or
with respect to (i) any inaccuracy in or breach of any of Seller's or GTC's
representations and warranties in this Agreement or in any other schedule,
certificate or instrument delivered by Seller or GTC pursuant hereto
(whether discovered before, during or after the Closing), (ii) any breach
by the Seller or GTC of its covenants and agreements in this Agreement or
in any other instrument delivered pursuant hereto at the Closing, and (iii)
Seller's or GTC's failure to pay, discharge or perform any of its
liabilities or obligations which are not expressly assumed by SCI or Buyers
under this Agreement.
B. Buyers and SCI. Buyers and SCI shall jointly and severally
indemnify, defend and hold harmless Seller, GTC their respective officers,
directors and employees and their successors and assigns (collectively, the
"Seller Indemnitees") from and against, and shall reimburse the Seller
Indemnitees for, all Losses imposed upon or incurred by any of the Seller
Indemnitees, directly or indirectly, and whether or not the result of any
third party claim, resulting from or arising out of or with respect to (i)
any inaccuracy in or breach of any of such Buyer's representations and
warranties in this Agreement or in any other schedule, certificate or
instrument delivered by such Buyer pursuant hereto (whether discovered
before, during or after the Closing), (ii) any breach by such Buyer of its
covenants and agreements in this Agreement or in any other instrument
delivered pursuant hereto at the Closing, and (iii) such Buyer's failure to
pay, discharge or perform any of the Assumed Liabilities.
C. Indemnity Procedure. Subject to the time limitations set
forth in Section 9.D below, Buyers, Seller and GTC shall each follow the
following procedures, as the case may be:
1. If By Seller and GTC. SCI or either Buyer shall
promptly notify Seller and GTC in writing of the existence of any
claim, demand or other matter ("Claim") to which, in SCI's or such
Buyer's reasonable judgment, Seller's and GTC's indemnification
obligations hereunder would apply. Seller and GTC, shall thereafter
have ten (10) business days to determine whether, in their reasonable
judgment, they are obligated to indemnify SCI or such Buyer with
respect to such claim. If Seller and GTC determine, within such ten
(10) business day period, that they are so obligated, they shall
notify SCI or such Buyer of their determination thereof. Thereafter,
Seller and GTC, upon SCI's or such Buyer's request, shall assume the
defense thereof, including retaining counsel reasonably satisfactory
to SCI or such Buyer to represent SCI or such Buyer, and shall pay the
fees and expenses of any such counsel related to such proceeding as
well as any fees or expenses incurred by SCI or such Buyer to the date
of Seller's or GTC's assumption of the defense. In any such
proceeding, SCI and Buyers shall have the right to retain their own
counsel, but the fees and expenses of such counsel shall be at the
expense of SCI and Buyers.
If Seller and GTC conclude that they are not so obligated,
or they fail to notify SCI and Buyers of their determination during
such ten (10) business day period, Seller and GTC and Buyers shall
submit the issue of whether Seller and GTC are obligated to indemnify
SCI and Buyers with respect to such Claim, to binding arbitration to
be held in Louisville, Kentucky, in accordance with, and with a single
arbitrator to be selected under, the Commercial Arbitration Rules of
the American Arbitration Association as then in effect. The
arbitrator so selected shall use his or her best efforts to resolve
this issue within thirty (30) days after his or her selection. If the
arbitrator determines that Seller and GTC are obligated to indemnify
SCI and Buyers with respect to such Claim, then Seller and GTC, as
applicable, shall immediately assume the defense thereof, reimburse
SCI and Buyers for all SCI's and Buyers' reasonable costs directly
related to the defense of such Claim, including SCI's and Buyers'
reasonable costs directly related to the arbitration, and shall pay
the fees and expenses of the arbitrator. If the arbitrator determines
that Seller and GTC are not obligated to indemnify SCI and Buyers with
respect to such Claim, then SCI and Buyers shall retain the defense
thereof, reimburse Seller and GTC for all its reasonable costs
directly related to the defense of such Claim (if any), including
their reasonable costs directly related to the arbitration, and shall
pay the fees and expenses of the arbitrator. The decision of the
arbitrator will be final, conclusive and binding on the parties to the
arbitration, and no party will institute any suit with regard to the
dispute or controversy except to enforce the award.
2. If By Buyers and SCI. Seller or GTC shall promptly
notify Buyers and SCI in writing of the existence of any claim, demand
or other matter (AClaim@) to which, in Seller's or GTC's reasonable
judgment, Buyers' and SCI's indemnification obligations hereunder
would apply. Buyers and SCI shall thereafter have ten (10) business
days to determine whether, in their reasonable judgment, they are
obligated to indemnify Seller or GTC with respect to such claim. If
Buyers and SCI determine, within such ten (10) business day period,
that they are so obligated, they shall notify Seller or GTC of their
determination thereof. Thereafter, Buyers and SCI, upon Seller's or
GTC's request, shall assume the defense thereof, including retaining
counsel reasonably satisfactory to Seller and GTC to represent Seller
and GTC, and shall pay the fees and expenses of any such counsel
related to such proceeding as well as any fees or expenses incurred by
Seller or GTC to the date of Buyers' and SCI's assumption of the
defense. In any such proceeding, Seller and GTC shall have the right
to retain their own counsel, but the fees and expenses of such counsel
shall be at the expense of Seller and GTC.
If Buyers and SCI conclude that they are not so obligated,
or they fail to notify Seller and GTC of Buyers' determination during
such ten (10) business day period, Buyers and SCI and Seller or GTC
shall submit the issue of whether Buyers and SCI are obligated to
indemnify Seller or GTC with respect to such Claim, to binding
arbitration to be held in Louisville, Kentucky, in accordance with,
and with a single arbitrator to be selected under, the Commercial
Arbitration Rules of the American Arbitration Association as then in
effect. The arbitrator so selected shall use his or her best efforts
to resolve this issue within thirty (30) days after his or her
selection. If the arbitrator determines that Buyers and SCI are
obligated to indemnify Seller or GTC with respect to such Claim, then
Buyers and SCI shall immediately assume the defense thereof, reimburse
Seller and GTC for all their reasonable costs directly related to the
defense of such Claim, including their reasonable costs directly
related to the arbitration, and shall pay the fees and expenses of the
arbitrator. If the arbitrator determines that Buyers and SCI are not
obligated to indemnify Seller or GTC with respect to such Claim, then
Seller or GTC shall retain the defense thereof, reimburse Buyers and
SCI for all Buyers' and SCI's reasonable costs directly related to the
defense of such Claim (if any), including Buyers' and SCI's reasonable
costs directly related to the arbitration, and shall pay the fees and
expenses of the arbitrator. The decision of the arbitrator will be
final, conclusive and binding on the parties to the arbitration and no
party will institute any suit with regard to the dispute or
controversy except to enforce the award.
D. Limitations of Indemnities.
1. Notwithstanding the provisions of Sections 9.A, 9.B and
9.C hereof, no payment shall be made by an indemnifying party to an
indemnified party based upon any claim of an indemnified party under
this Section 9 until the amount of all such claims (after deducting
insurance proceeds and third party recoveries paid to or for the
benefit of the indemnified party) shall total, in the aggregate
Seventy-Five Thousand Dollars ($75,000) (the "Minimum Damages"), in
which event only the amount of such claims of the indemnified party in
excess of the Minimum Damages (after deducting any insurance proceeds
and third party recoveries paid to or for the benefit of the
indemnified party) shall be subject to indemnification in accordance
with the terms of Sections 9.A, 9.B, and 9.C hereof, but in no event
shall the aggregate of such claims exceed Two Million Seven Hundred
Fifty Thousand Dollars ($2,750,000). Notwithstanding the foregoing,
the provisions of this Section 9.D.1 shall not apply to claims under
or pursuant to Sections 2.D, 2.E, 3.C, 7.C.4, 7.C.5, 7.D.3 and 12.M
hereof.
2. The parties' respective obligations to indemnify each
other under Sections 9.A, 9.B and 9.C hereof shall expire on the
following anniversaries of the Closing Date:
a. the lesser of 5 years or the applicable statute of
limitations with respect to all matters involving tax,
environmental, employment law and employee benefits claims; and
b. the second (2nd) anniversary, with respect to all
other matters (other than those set forth in Sections 4.A, 4.C.
5.A and 5.C which representations and warranties shall survive
until the fifth (5th) anniversary of the Closing Date).
E. Remedies. The indemnification provisions set forth in this
Article 9 shall be Seller's, GTC's and Buyers' sole and exclusive remedy
against each other for any breach or misrepresentation of any covenant or
representation made herein; provided that, Seller, GTC and Buyers shall
retain all remedies at law or in equity in the event of [i] any willful
misconduct or fraudulent act committed by the other party hereto in
connection with the terms of this Agreement, or [ii] the breach of any
covenants which by their very nature require performance beyond the time
limits for indemnification under this Article 9.
10. Conditions to Closing. The parties hereto agree that the
following items must be resolved to the full and complete satisfaction of
Buyers, Seller and GTC as a condition to their obligation to close the
transactions contemplated by this Agreement:
A. the representations and warranties [i] of Seller and GTC, on
the one hand, contained in Section 4 and Section 5, and [ii] of Buyers and
SCI, on the other hand, contained in Section 6, shall be true and correct
in all material respects as of the Closing with the same effect as though
such representations and warranties had been made on and as of that date;
B. Seller and GTC, on the one hand, and Buyers and SCI, on the
other, shall have performed all covenants to be performed by them including
the delivery of all closing items for the benefit of the other;
C. Seller and GTC, on the one hand, and Buyers and SCI, on the
other, shall have delivered a certificate dated on and as of the Closing,
signed by their respective president and secretary, to the effect that [i]
they have performed all of their obligations and agreements and complied
with all of their covenants contained in this Agreement to be performed or
complied with on or before the Closing; and [ii] the representations and
warranties by them contained herein are in all material respects true and
correct on and as of the Closing, with the same force and effect as though
made on and as of such date;
D. the transactions contemplated by this Agreement shall not
have been challenged by any government agency or be subject to any material
investigation by any government agency or be the subject of any material
litigation or threat of litigation made by any third party;
E. Buyers shall have completed their due diligence
investigation of the Companies and the Purchased Assets to their sole and
complete satisfaction; and
F. All required Mexican and Brazilian regulatory consents shall
have been obtained.
11. Closing Documents.
A. Provided By Buyers.
1. Funds. Wire transfer of the full amount of the
Purchase Price as set forth in Section 3.B.
2. Assumptions. Executed assumptions of lease agreements
and such other bills of sale, assignments, other instruments and
documents as shall be necessary for Buyers to assume the Assumed
Liabilities and to carry out the transactions contemplated by the
Agreement.
3. Secretary's Certificates. All resolutions of the Board
of Directors of Buyers and SCI authorizing the transactions
contemplated by this Agreement, certified by the Secretary of Buyers.
B. Provided By Seller and GTC.
1. Assignments and Bills of Sale. An executed Assignment
and Bill of Sale in the form attached hereto as Exhibit C and such
other bills of sale, assignments, other instruments and documents as
shall be necessary to vest in Buyers the Purchased Assets and to carry
out the transactions contemplated by the Agreement.
2. Secretary's Certificates. All resolutions of the Board
of Directors of Seller and GTC authorizing the transactions
contemplated by this Agreement, certified by the Secretary of Seller
and GTC.
3. Stock Certificates. Certificates representing the
Purchased Shares, if any, accompanied by duly endorsed powers for
transfer to Buyers and SCI or other appropriate instruments of
transfer.
4. Director and Officer Resignations. Resignations of all
of the officers and directors of the Companies effective upon the
Closing.
5. Corporate Minute Book. The corporate or other minute
book, corporate or other seal and stock or quota records, if any, of
the Companies.
6. Legal Opinions. Legal opinions of Mexico counsel to
Seller in substantially the form of Exhibit D attached hereto.
7. Waiver. A copy of the waiver (and the request
therefor) obtained by Seller under the Mexican competition law if
obtained on or before the Closing.
8. Instructions to Tozzini, Freire. A copy of the
Seller's and GTC's letter of instructions to the Tozzini, Friere firm
in Sao Paulo, Brazil, regarding filing of the necessary amendments to
the Articles of Association of GTC Brazil 1 and GTC Brazil 2 regarding
transfer of the quotas thereof to SCI and SCI Holdings.
12. Miscellaneous.
A. Successor and Assigns. Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder (including by operation of law) without the prior
written consent of the other parties hereto and any such attempted
assignment without such prior written consent shall be void and of no force
and effect. This Agreement shall inure to the benefit of and shall be
binding upon the successors and permitted assigns of the parties hereto.
B. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
C. Expenses. Seller, GTC, SCI and Buyers will pay their
respective costs and expenses, including the expenses of their accounting
and legal representatives, in connection with the negotiation, execution
and performance of this Agreement.
D. Force Majeure. No party hereto shall be liable for any
failure of or delay in the performance of this Agreement for the period
that such failure or delay is due to acts of God, public enemy, civil war,
strikes or labor disputes or any other cause beyond the parties' reasonable
control. Each party agrees to notify the other party promptly upon the
occurrence of any such cause and to carry out this Agreement as promptly as
practicable after such cause is terminated.
E. Severability. If any part or provision of this Agreement
shall be determined to be invalid or unenforceable by a court of competent
jurisdiction or any other legally constituted body having jurisdiction to
make such determination, such part or provision shall be valid and
enforceable to the maximum extent permitted by law and the remaining
provisions of this Agreement shall be fully effective.
F. Brokers' and Finders' Fees. Except for the retention of
J.P. Morgan & Company as broker by Seller and GTC (the fees of which Seller
and GTC shall be solely responsible for), each of the parties represents
and warrants that it has dealt with no broker or finder in connection with
any of the transactions contemplated by this Agreement and, insofar as it
knows, no broker or other person is entitled to any commission or finder's
fee in connection with any of these transactions.
G. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
to have been duly given (i) on the date of service if served personally on
the party to whom notice is to be given, (ii) on the day of transmission if
sent by facsimile transmission to the facsimile number given below, and
telephonic confirmation of receipt is obtained promptly after completion of
transmission, (iii) on the day after delivery to Federal Express or similar
overnight courier or the Express Mail service maintained by the United
States Postal Service, or (iv) on the fifth (5th) day after mailing, if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid and properly addressed, to the
party as follows:
If to Seller: Group Technologies Mexican Holding Company
c/o Group Technologies Corporation
10901 Malcolm McKinley Drive
Tampa, Florida 33612
Attention:
President and
Chief Executive Officer
Telephone: (813) 972-6142
Facsimile: (813) 972-6978
If to GTC: Group Technologies Corporation
10901 Malcolm McKinley Drive
Tampa, Florida 33612
Attention:
President and
Chief Executive Officer
Telephone: (813) 972-6142
Facsimile: (813) 972-6978
Copy to: Robert A. Heath
Wyatt, Tarrant & Combs
2800 Citizens Plaza
Louisville, Kentucky 40202
If to Buyers
or SCI: SCI Systems, Inc.
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35807
Attention: President and
Chief Executive Officer
Telephone: (205) 882-4600
Facsimile: (205) 882-4466
Copy to: Corporate Secretary
SCI Systems, Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35807
Any party may change its address for the purpose of this Section
12.G by giving the other party notice of its new address in the manner set
forth above.
H. Amendments; Waivers. This Agreement may be amended,
modified, superseded or canceled, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by
written instrument executed by the parties hereto, or in the case of a
waiver, by the party waiving compliance. Any waiver by any party of any
condition, or of the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, in any one or more
instances, shall not be deemed to be nor construed as a further or
continuing waiver of any such condition, or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
I. Entire Agreement. This Agreement and the exhibits and
schedules referred to herein and the Confidentiality Agreement between the
parties dated May 14, 1997 contain the entire agreement of the parties
hereto with respect to the sale and purchase of the Shares, the Purchased
Assets and the other transactions contemplated herein, and any reference
herein to this Agreement shall be deemed to include the exhibits and
schedules attached hereto. All oral or written agreements, statements,
representations, warranties, and understandings with respect to the subject
matter of this Agreement made or entered into by the parties prior to or
contemporaneously with the execution of this Agreement are hereby rendered
null and void and are merged herewith.
J. Further Matters. Each party agrees to execute such further
instruments of assignment and transfer and to perform such additional acts
as are necessary to consummate the transactions contemplated by this
Agreement.
K. Parties in Interest. Nothing in this Agreement is intended
to confer, or confers, any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns. Nothing in this Agreement is intended to, or does,
relieve or discharge the obligations or liability of any third persons to
any party to this Agreement. No provision of this Agreement shall give any
third persons any right of subrogation or action over or against any party
to this Agreement.
L. Survival of Representations and Warranties. The
representations and warranties of the parties set forth herein shall
survive the Closing date of this Agreement for the periods set forth in
Section 9.D hereof.
M. Transfer and Other Taxes. Buyers shall assume and pay all
applicable sales, use, transfer, value added or other similar taxes, if
any, related to the consummation of the transactions contemplated hereby.
N. Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
O. Counterparts. This Agreement may be executed in several
counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
GROUP TECHNOLOGIES MEXICAN HOLDING
COMPANY
By: /s/ Jeffrey T. Gill
Title: President
GROUP TECHNOLOGIES CORPORATION
By: /s/ Jeffrey T. Gill
Title: Chairman
SCI SYSTEMS, INC.
By: /s/ A. Eugene Sapp
Title: President
SCI SYSTEMS DE MEXICO S.A. DE C.V.
By: /s/ A. Eugene Sapp
Title: Vice President
SCI HOLDINGS, INC.
By: /s/ A. Eugene Sapp
Title: President