EXHIBIT 2.1
RECAPITALIZATION AGREEMENT
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THIS RECAPITALIZATION AGREEMENT is entered into this 11th day of March
1998 by and between:
THE DERBY CYCLE CORPORATION (d.b.a. Raleigh USA Bicycle Company) a
corporation organized and existing under the laws of Delaware, having its
principal office at 00000 00xx Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxx 00000 (the
"Company");
DERBY INTERNATIONAL CORPORATION S.A., a corporation (societe anonyme)
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organized and existing under the laws of the Grand Duchy of Luxembourg, having
its registered office at 0 Xxxxxxxxx xx xx Xxxxx, X-0000 Xxxxxxxxxx, Grand Duchy
of Luxembourg ("Derby International") and DERBY FINANCE S.a.r.l., a corporation
(societe a responsibilite limitee) organized and existing under the laws of the
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Grand Duchy of Luxembourg, having its registered office at 0 Xxxxxxxxx xx xx
Xxxxx, X-0000 Xxxxxxxxxx, Grand Duchy of Luxembourg ("DFS") (Derby International
and DFS being referred to together as the "Sellers"); and
DC CYCLE, L.L.C., a limited liability company organized and existing
under the laws of Delaware, having its registered office at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx ("LLC") and PERSEUS CYCLE, L.L.C., a limited liability
company organized and existing under the laws of Delaware, having its principal
office at Xxxxx 000, 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000 ("Perseus" and,
together with LLC, the "Buyer").
WHEREAS, at or before the Closing (as defined below), Derby
International has agreed to cause to be effected the restructuring (the
"Restructuring") of the Company and the other Subsidiaries (as defined below)
outlined in the Transaction Outline, as defined below; and
WHEREAS, as a result of the Restructuring, at the Closing, DFS will
own thirty thousand (30,000) shares of the Company's Class A Common Stock;
WHEREAS, at the Closing, the Company shall issue to Perseus ten
thousand (10,000) shares of the Company's Class A Common Stock (the "Perseus
Common Shares"), and to LLC twelve thousand five hundred (12,500) shares of the
Company's Class A Common Stock ("LLC Common Shares" and, together with the
Perseus Common Shares, the "Buyer Common Shares") and twenty-five thousand
(25,000) shares of the Company's Preferred Stock, Series A (the "Preferred
Shares" and, together
with the Buyer Common Shares, the "Buyer Shares"), in exchange for sixty million
United States dollars ($60,000,000) cash (the "Stock Purchase"); and
WHEREAS, the Buyer has proposed, and the Company, Derby International
and DFS have agreed, that, at the Closing, the Company will: (i) enter into a
senior credit facility with Chase Manhattan Bank or one of its subsidiaries (as
lender and as agent), comprised of a revolving credit facility in the aggregate
principal amount of up to two hundred fifteen million German deutschemarks (DM
215,00,000) (the "Senior Credit Facility"); (ii) issue bonds in an aggregate
principal amount of up to one hundred seventy-five million United States dollars
($175,000,000) pursuant to an offering under Rule 144A and Regulation S of the
Securities Act of 1933, as amended (the "Bond Financing") (subparagraphs (i) and
(ii) are collectively referred to as the "Debt Financing," which will provide
for available credit at the Closing having a value of at least two hundred
seventy million United States dollars ($270,000,000)); and (iii) issue and sell
to DFS (the "DFS Stock Purchase") in exchange for $9,500,000 cash the following:
(A) three thousand (3,000) shares of the Company's Preferred Stock, Series B,
(the "DFS Series B Preferred") and (B) six thousand five hundred (6,500) shares
of Class B Common (the "DFS Class B Common" and, together with the DFS Series B
Preferred, the "DFS Shares").
WHEREAS, immediately after the Closing, Perseus shall own
approximately 19.05%, LLC shall own approximately 23.81% and the Sellers shall
own approximately 57.14% of the issued and outstanding Class A Common Stock of
the Company, DFS will own 100% of the issued and outstanding Preferred Stock,
Series B, and Class B Common Stock of the Company and LLC will own one hundred
percent (100%) of the issued and outstanding Preferred Stock, Series A, of the
Company;
WHEREAS, at the Closing, the Company shall pay in full the aggregate
amount of one hundred fifty nine million four hundred seventy-five thousand
United States dollars ($159,475,000) to DFS in accordance with the Transaction
Outline (the "DFS Payment") less the amount of eight million five hundred
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thousand United States dollars ($8,500,000);
WHEREAS, the Restructuring, the Stock Purchase, the DFS Stock
Purchase, the Debt Financing and the DFS Payment are referred to herein
collectively as the "Recapitalization" and the transactions required to
accomplish the Recapitalization are referred to as the "Recapitalization
Transactions"; and
WHEREAS, it is intended that the Recapitalization be recorded as a
recapitalization for United States accounting reporting purposes;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties contained in this Agreement, the parties hereby agree
as follows:
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1. CERTAIN DEFINITIONS
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For the purposes of this Agreement, the following words and terms
shall have the meanings set forth below:
1.1 "Accounting Principles" shall mean, with respect to a Person (as
defined below), generally accepted accounting principles, consistently applied,
in the country of incorporation of such Person.
1.2 "Additional Payment" shall have the meaning ascribed to it in Section
16.4.
1.3 "Additional Payment Date" shall have the meaning ascribed to it in
Section 16.4.
1.4 "Affiliate" shall mean, with respect to any Person (as defined below),
an individual, corporation, partnership, limited liability company, firm,
association, unincorporated organization or other entity directly or indirectly
controlling, controlled by or under common control with such Person. A Person
will be deemed to "control" another Person if such Person possesses, directly or
indirectly, the power to: (i) vote fifty percent (50%) or more of the voting
securities of such Person; or (ii) direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, partnership interests or other equity interests, by contract
or otherwise.
1.5 "Another Transaction" shall have the meaning ascribed to it in
Section 8.8.
1.6 "Assigned Debt " shall have the meaning ascribed to it in Section
8.10.
1.7 "Bond Financing" shall have the meaning ascribed to it in the
preamble.
1.8 "Business" shall mean the business carried on by the Subsidiaries
immediately prior to the Closing, which consists primarily of designing,
manufacturing, distributing and selling bicycles, bicycle components and
accessories.
1.9 "Business Day" shall mean any calendar day other than Saturdays,
Sundays or any other days on which banks are authorized to close in the United
Kingdom, the Grand Duchy of Luxembourg or the United States of America.
1.10 "Buyer" shall have the meaning ascribed to it in the preamble.
1.11 "Buyer Indemnified Parties" shall have the meaning ascribed to it in
Section 9.1.
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1.12 "Buyer Shares" shall have the meaning ascribed to it in the preamble.
1.13 "Centum" shall have the meaning ascribed to it in Section 6.1(b)(iv).
1.14 "Closing" shall have the meaning ascribed to it in Section 3.1.
1.15 "Closing Date" shall have the meaning ascribed to it in Section 3.1.
1.16 "COBRA" shall mean the requirements of Part 6 of Subtitle B of Title 1
of ERISA (as defined below) and Code (S)4980B.
1.17 "Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
1.18 "Company" shall have the meaning ascribed to it in the preamble.
1.19 "Company Intellectual Property" shall have the meaning ascribed to it
in Section 6.6(d)(i).
1.20 "Confidential Information" shall have the meaning ascribed to it in
Section 14.1.
1.21 "Contracts" shall have the meaning ascribed to it in Section
6.11(c)(xiii).
1.22 "Cut-Off Date" shall be April 16, 1998; provided that the Cut-Off Date
shall be extended one Business Day for each Business Day the delivery of the
U.S. GAAP Audited Financials are delayed after March 16, 1998 solely as the
result of the Sellers not delivering to Buyer and Xxxxxx Xxxxxxxx the default
waivers (in form and substance reasonably satisfactory to Xxxxxx Xxxxxxxx and
Buyer) whereby (i) the purchasers of the Senior Notes have waived all defaults
under the Credit Agreements and (ii) the lending institutions party to a certain
multi-currency revolving credit facility agreement, dated March 6, 1997 (the
"Revolver Agreement"), between Derby Holding B.V. and such lending institutions
(arranged by Banque Nationale De Paris) have waived all defaults under the
Revolver Agreement; and further provided that under no circumstances shall the
Cut-Off Date be extended beyond April 30, 1998.
1.23 "Debt Financing" shall have the meaning ascribed to it in the
preamble.
1.24 "Deductible" shall have the meaning ascribed to it in Section 9.3(c).
1.25 "DFS" shall have the meaning ascribed to it in the preamble.
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1.26 "DFS Class B Common" shall have the meaning ascribed to it in the
preamble.
1.27 "DFS Payment" shall have the meaning ascribed to it in the preamble.
1.28 "DFS Price" shall have the meaning ascribed to it in Section 2.3(b).
1.29 "DFS Series B Preferred" shall have the meaning ascribed to it in the
preamble.
1.30 "DFS Shares" shall have the meaning ascribed to it in the preamble.
1.31 "DHBV" shall have the meaning ascribed to it in Section 9.1.
1.32 "Employment Agreement" shall have the meaning ascribed to it in
Section 8.12.
1.33 "Environmental Law" shall mean any federal, state, local or foreign
law, statute, regulation, ordinance or similar provision having the force or
effect of law of any governmental entity in effect prior to or on the Closing
Date which applies to a relevant Subsidiary, including all common law relating
to pollution, protection of the environment, waste generation, handling,
treatment, storage, distribution, processing, testing, labeling, release or
threatened release, disposal or transportation, and exposure to hazardous or
toxic substances or wastes, public health and safety and worker health and
safety.
1.34 "Environmental Lien" means a lien, either recorded or unrecorded, in
favor of any governmental entity, relating to any liability arising under any
Environmental Law.
1.35 "Environmental Assessment Reports" means all reports or documents
prepared by or on behalf of the Sellers by Dames & Xxxxx (including reports and
studies referenced therein) and by or on behalf of the Buyer by Environmental
Resources Management (including reports and studies referenced therein) with
respect to Environmental Law.
1.36 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as amended.
1.37A "Escrow Amount" shall have the meaning ascribed to it in Section 16.6.
1.37B "Exchange Agreement" shall have meaning ascribed to it in Section
3.2(b)(viii).
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1.38 "Excluded Assets" shall have the meaning ascribed to it in Section
8.10.
1.39 "Financial Statements" shall mean the audited consolidated balance
sheets and the related consolidated statements of profit and loss and cash flows
of Derby International and of each of the Principal Subsidiaries (other than
Probike S.A. (Pty) Limited) at and for the years ended (i) December 31, 1994,
(ii) December 31, 1995, and (iii) December 31, 1996, which are attached to this
Agreement as Exhibit D and made a part hereof.
1.40 "Financing Documents" means the Senior Credit Facility and the
indenture relating to the issue of the Bond Financing, in each case as may be
amended, modified, renewed, refunded, replaced, extended, restated or refinanced
from time to time, provided, however, that the terms of such Financing Documents
may not be more restrictive or onerous with respect to payment of the Additional
Payment referred to in Section 16.4 than the original Senior Credit Facility and
the Bond Financing documentation unless such additional restrictions are, in the
good faith determination of the Company's board of directors, required in order
to refinance, replace, refund or amend the Bond Financing or the Senior Credit
Facility and such refinancing, replacement, refunding or amendment is required
to avoid or obtain waivers of a default under or acceleration of such financing
prior to its maturity.
1.41A "GAAP" shall mean generally accepted accounting principles
consistently applied in the jurisdiction of incorporation of the relevant Person
at the time of determination.
1.41B "German Basket Representation" shall have the meaning ascribed to it
in Section 6.4(p).
1.42 "Xxxx-Xxxxx-Xxxxxx Act" shall mean the United States Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended.
1.43 "Indebtedness" of any Person at any date shall mean, without
duplication: (a) all indebtedness of such Person for borrowed money (including
without limitation accrued interest, fees, penalties and premiums or other
payments in addition to principal with respect thereto), (b) indebtedness
representing the deferred purchase price of property or services which, in
accordance with GAAP, would be required to be shown as a liability on the face
of a balance sheet of such Person on such date (other than trade payables and
accrued expenses incurred in the ordinary course of business and payable in
accordance with customary practices), (c) any other indebtedness of such Person
which is evidenced by a promissory note, bond, debenture or similar instrument,
(d) all capitalized lease obligations of such Person, (e) all obligations of
such Person in respect of banker's
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acceptances issued or created for the account of such Person, (f) all
obligations of such Person in respect of letters of credit issued for the
account of such Person (other than standby letters of credit not drawn), (g) all
guarantees of such Person of any indebtedness or obligations of any other Person
of the types referred to in the preceding clauses (a) through (f), and (h) all
indebtedness or obligations of the types referred to in the preceding clauses
(a) through (g) of any other Person secured by any Lien on any assets of such
Person to the extent attributable to such Person's interest in such assets, even
though such Person has not assumed or otherwise become liable for the payment
thereof but excluding customer deposits and interest payable thereon in the
ordinary course of business.
1.44 "Indemnification Notice" shall have the meaning ascribed to it in
Section 11.1(a).
1.45 "Indemnified Liability" shall have the meaning ascribed to it in
Section 9.1.
1.46 "Indemnified Party" shall have the meaning ascribed to it in Section
10.
1.47 "Intellectual Property" shall mean all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
1.48 "IRS" shall mean the United States Internal Revenue Service, or any
successor agency thereto.
1.49 "Leases" shall have the meaning ascribed to it in Section 6.6(a)(ii).
1.50 "Leased Property" shall have the meaning ascribed to it in Section
6.6(a)(ii).
1.51 "LIBOR" shall have the meaning ascribed to it in Section 2.2(b).
1.52 "Licenses" shall have the meaning ascribed to it in Section 6.7A.(b)
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1.53 "Lien" shall mean, with respect to any property or asset, any
mortgage, pledge, security interest, lien (statutory or other), charge,
encumbrance, lease, claim, option, right of first refusal, easement, servitude,
transfer restriction, or other similar restrictions or limitations of any kind
or nature whatsoever on or with respect to such property or asset.
1.54 "LLC" shall have the meaning ascribed to it in the preamble.
1.55 "Make-Whole Amount" shall have the meaning ascribed to it in Section
9.1.
1.56 "Merger Control Approvals" shall have the meaning ascribed to it in
Section 4.10.
1.57 "Minimum Balance" shall have the meaning ascribed to it in Section
16.6.
1.58 "Modified Make-Whole Amount" shall have the meaning ascribed to it in
Section 9.1.
1.59 "MS Sport Agreement" shall have the meaning ascribed to it in Section
16.5.
1.60 "Note Purchase Agreement" shall have the meaning ascribed to it in
Section 9.1.
1.61 "Owned Property" shall have the meaning ascribed to it in Section
6.6(a)(i).
1.62 "PBGC" shall mean the United States Pension Benefit Guaranty
Corporation.
1.63 "Permitted Liens" shall mean: (i) Liens for taxes or other
governmental charges other than Environmental Liens or levies which are not
delinquent or are being contested in good faith and by appropriate proceedings;
(ii) mechanic's, worker's, materialmen's and other like Liens arising in the
ordinary course of business in respect of obligations which are not delinquent
or which are being contested in good faith and by appropriate proceedings; (iii)
Liens arising in the ordinary course of business either for sums being contested
in good faith and by appropriate proceedings or for sums not due; (iv) other
matters which do not materially impair the occupancy or use of the property or
asset burdened by such matter for the purposes for which it is currently used in
connection with the Business; and (v) Real Estate Permitted Liens.
1.64 "Perseus" shall have the meaning ascribed to it in the preamble.
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1.65 "Person" shall mean any individual, corporation, partnership, limited
liability company, firm, association, unincorporated organization or other
entity.
1.66 "Preferred Shares" shall have the meaning ascribed to it in the
preamble.
1.67 "Price" shall have the meaning ascribed to it in Section 2.2(b).
1.68 "Primary Representation" shall have the meaning ascribed to it in
Section 6.18.
1.69 "Principal Subsidiaries" shall mean the companies named on Exhibit B
attached hereto and made a part of the Agreement.
1.70 "Principal Subsidiaries Shares" shall mean shares representing the
entire issued and outstanding shares of the Principal Subsidiaries.
1.71 "Real Estate" shall have the meaning ascribed to it in Section
6.6(a)(ii).
1.72 "Real Estate Permitted Liens" shall mean: (i) Liens for taxes or
assessments and similar charges, which either are: (A) not delinquent or (B)
being contested in good faith and by appropriate proceedings, and adequate
reserves (as determined in accordance with GAAP, consistently applied) have been
established on the applicable Subsidiaries' books with respect thereto; (ii)
mechanics', materialmen's or contractors' Liens or encumbrances or any similar
statutory Lien or restriction incurred in the ordinary course of business and
which are for amounts not yet due and payable; (iii) zoning, entitlement,
building and other land use regulations imposed by governmental agencies having
jurisdiction over the Real Estate which are not violated by the current use and
operation of the Real Estate; and (iv) covenants, conditions, restrictions,
easements and other similar matters of record affecting title to the Real Estate
which do not materially impair the value of the Real Estate or occupancy or use
of the Real Estate for the purposes for which it is currently used in connection
with the Business. Notwithstanding anything to the contrary set forth in this
section, Real Estate Permitted Liens do not include Environmental Liens.
1.73 "Recapitalization" shall have the meaning ascribed to it in the
preamble.
1.74 "Recapitalization Transactions" shall have the meaning ascribed to it
in the preamble.
1.75A "Restructuring" shall have the meaning ascribed to it in the preamble.
1.75B "Senior RIC Shares" shall have the meaning ascribe to it in the
Exchange Agreement.
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1.76 "Securities Act" shall have the meaning ascribed to it in Section
7(e)(ii).
1.77 "Seller Affiliate" shall have the meaning ascribed to it in Section
8.10.
1.78 "Sellers" shall have the meaning ascribed to it in the preamble.
1.79 "Senior Credit Facility" shall have the meaning ascribed to it in the
preamble.
1.80 "Senior Notes" shall have the meaning ascribed to it in Section 9.1.
1.81 "Shares" shall mean, as the context requires, with respect to a
Subsidiary, all of the issued and outstanding shares of such Subsidiary.
1.82 "Shareholders' Agreements" shall have the meaning ascribed to it in
Section 3.2(b)(vi).
1.83 "Special Environmental Liability" shall have the meaning ascribed to
it in Section 9.1.
1.84 "Special Product Liabilities" shall have the meaning ascribed to it in
Section 9.1.
1.85 "Special Tax Liabilities" shall have the meaning ascribed to it in
Section 9.1.
1.86 "Stock Purchase" shall have the meaning ascribed to it in the
preamble.
1.87 "Subsidiaries" shall mean the Principal Subsidiaries and each of the
companies or corporations named in Exhibit C attached to this Agreement and made
a part hereof.
1.88 "Tax" shall mean any federal, state, local, or foreign income, gross
receipts, VAT, employment or other similar tax, including any undisputed
interest, penalty, or addition thereto.
1.89 "Taxing Authority" shall mean any federal, state, local or foreign
government or governmental agency with authority to collect Taxes or audit or
review Tax Returns.
1.90 "Tax Return" shall mean any mandatory return, declaration or report
relating to Taxes, including any amendment thereof.
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1.91 "Topping Agreement" shall have the meaning ascribed to it in Section
18.3.
1.92 "Topping Fee" shall have the meaning ascribed to it in Section 18.3.
1.93 "Transaction Expenses" shall have the meaning ascribed to it in
Section 15.6.
1.94 "Transaction Outline" shall have the meaning ascribed to it in Section
2.1.
1.95 "Trigger Tax Notice" shall mean a written notice that Sellers desire
to add to the definition of Triggered Tax Liability for taxes assessed by one or
more jurisdictions other than The Netherlands which notice shall specify such
jurisdictions.
1.96A "Triggered Tax Liability" shall have the meaning ascribed to it in
Section 9.3(f).
1.96B "UK GAAP" shall mean GAAP as applied in the United Kingdom.
1.97 "U.S. GAAP" shall mean GAAP as applied in the United States of
America.
1.98 "U.S. GAAP Audited Financials" shall have the meaning ascribed to it
in Section 8.9.
1.99 "WARN" shall have the meaning ascribed to it in Section 6.16.
2. THE RECAPITALIZATION
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2.1 Restructuring. Subject to the terms and conditions set out in this
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Agreement, DFS agrees to deliver or cause the delivery of any share
certificates, duly endorsed, together with appropriate deeds of transfer,
required to effect the Restructuring. The Sellers and the Company agree to
take, prior to the Closing, the steps necessary to effect the transactions
specified in a memorandum to be agreed to by representatives of the Buyer and
the Sellers outlining the transactions necessary or desirable to effect the
reorganization and recapitalization of the Derby International Group (the
"Transaction Outline").
2.2 Buyer's Investment.
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(a) Agreement to Purchase and Sell. Subject to the terms and
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conditions set out in this Agreement, the Company hereby agrees to sell to the
Buyer, and the Buyer hereby agrees to purchase from the Company, the Buyer
Shares, with each of
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LLC and Perseus purchasing the number of shares of Class A Common Stock and
Preferred Stock, Series A, of the Company set forth opposite its name on the
attached Exhibit 2.2(a).
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(b) Price. The Company and the Buyer hereby agree that the price (the
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"Price") for the Buyer Shares shall be sixty million United States dollars
($60,000,000), with the aggregate consideration paid for such shares by LLC and
Perseus set forth on the attached Exhibit 2.2(a). Unless otherwise agreed in
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writing by the parties, at the Closing, the Buyer shall pay an additional amount
equal to the simple interest accruing on the sum of the DFS Payment at a rate
per annum equal to the London Interbank Offer Rate for United States dollars
("LIBOR") from and including March 1, 1998 through March 28, 1998, and at a rate
per annum equal to four percent (4%) from and including March 29, 1998, through
the Closing Date.
2.3 DFS' Investment.
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(a) Agreement to Purchase and Sell. Subject to the terms and
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conditions set out in this Agreement, the Company hereby agrees to sell to DFS,
and DFS hereby agrees to purchase from the Company, the DFS Shares.
(b) Price. The Company and DFS hereby agree that the price (the "DFS
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Price") for the DFS Shares shall be nine million five hundred thousand United
States dollars ($9,500,000).
3. CLOSING
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3.1 Date and Place of the Closing. The completion of the Recapitalization
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Transactions (the "Closing") shall take place at the New York offices of
Xxxxxxxx & Xxxxx, or at such other place as shall be agreed between the parties,
at 10:00 a.m. on the later of (i) April 14, 1998, or (ii) the third Business Day
after all conditions to Closing set forth in Sections 4 and 5 have been
satisfied or waived (the "Closing Date"), but in no event later than the Cut-Off
Date (as defined in Section 18.1(e)).
3.2 Action at Closing. In addition to any other action to be taken and
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any other instrument required to be executed and/or delivered pursuant to this
Agreement, at the Closing:
(a) the Sellers shall deliver or cause to be delivered:
(i) to the Company, the certificates representing ownership
(directly or indirectly) of the Principal Subsidiaries Shares duly endorsed for
transfer or with duly executed stock transfer forms attached, in each case, in a
form sufficient to effect
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the transfer of the Principal Subsidiaries Shares to the Company, together with
the original share certificates (if and to the extent ownership of such Shares
is evidenced by certificates or similar instruments) representing the issued and
outstanding shares of the Subsidiaries other than the Principal Subsidiaries;
(ii) to the Buyer, copies of the resignations of those
directors and officers of the Subsidiaries which shall be designated by the
Buyer no later than five (5) Business Days before the Closing, each original
resignation having been duly delivered to the relevant Subsidiary;
(iii) to the Buyer, an opinion of counsel for the Sellers
addressed to the Buyer with respect to the matters set out in Exhibit
3.2(a)(iii) to this Agreement and made a part hereof;
(iv) to the Buyer, a certificate executed on behalf of the
Sellers in substantially the form set out in Exhibit 3.2(a)(iv) to this
Agreement and made a part hereof;
(v) to the Buyer, certified resolutions of the Sellers and the
Company authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby;
(vi) to the Buyer, evidence of the corporate organization and
existence and, to the extent ordinarily available in the jurisdiction of
incorporation, good standing of the Sellers and the Principal Subsidiaries under
the laws of their respective jurisdictions of incorporation, in each case in
form reasonably satisfactory to Buyer;
(vii) to the Company, a license agreement to use the trade name
"Derby" in connection with the Business on substantially the terms and
conditions set forth in Exhibit 3.2(a)(vii) attached hereto and made a part
hereof; and
(viii) such other documents relating to the transactions
contemplated by this Agreement as Buyer or its counsel may reasonably request
within a reasonable time prior to the Closing;
(b) the Buyer shall:
(i) pay to the Company the Price for the Buyer Shares in
immediately available funds by transfer in United States dollars to the accounts
of the Company at such bank or banks as the Company shall designate not less
than five (5) days before the Closing;
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(ii) deliver to the Sellers and the Company opinions of counsel
for LLC and Perseus addressed to the Sellers and the Company with respect to the
matters set out in Exhibit 3.2(b)(ii) to this Agreement and made a part hereof;
(iii) deliver to the Sellers and the Company certified
resolutions of LLC and Perseus authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated hereby;
(iv) deliver to the Sellers and the Company evidence of the
organization, existence and good standing of each of LLC and Perseus under the
laws of Delaware, each in form reasonably satisfactory to the Sellers and the
Company; and
(v) deliver to the Sellers a certificate executed on behalf of
the Buyer in substantially the form set out in Exhibit 3.2(b)(v) to this
Agreement and made a part hereof;
(vi) execute and deliver a shareholders' agreement and
registration agreement with the Company and DFS in substantially the form
attached hereto as Exhibit 3.2(b)(vi) and made a part hereof (collectively, the
"Shareholders' Agreements");
(vii) cause to be delivered such other documents relating to the
transactions contemplated by this Agreement as the Sellers or their counsel may
reasonably request within a reasonable time prior to the Closing; and
(viii) execute and deliver an exchange agreement in substantially
the form attached hereto as Exhibit 3.2(b)(viii) and made a part hereof (the
"Exchange Agreement");
(c) the Company shall:
(i) pay in full to DFS the DFS Payment (less the amount of
eight million five hundred thousand United States dollars ($8,500,000)) in
immediately available funds by transfer in United States dollars to the accounts
of DFS at such bank or banks as DFS shall designate not less than five (5) days
before the Closing, provided that, if and to the extent the DFS Price is not
paid by DFS at the Closing, the Company shall be entitled to offset the DFS
Price against such amount;
(ii) deliver to Perseus fully executed stock certificates dated
the Closing Date representing the Perseus Common Shares, registered in the name
of Perseus (or in the names of such nominees as Perseus shall direct) in such
denominations as Perseus shall direct;
-14-
(iii) deliver to LLC fully executed stock certificates dated
the Closing Date representing the Preferred Shares and the LLC Common Shares,
registered in the name of LLC (or in the names of such nominees as LLC shall
direct) in such denominations as LLC shall direct;
(iv) execute and deliver the Shareholders' Agreements;
(v) deliver to DFS fully executed stock certificates dated the
Closing Date representing the DFS Shares, registered in the name of DFS (or in
the names of such nominees as DFS shall direct) in such denominations as DFS
shall direct; and
(vi) execute and deliver the Exchange Agreement;
(d) DFS shall:
(i) pay to the Company the DFS Price for the DFS Shares in
immediately available funds by transfer in United States dollars to the accounts
of the Company at such banks as the Company shall designate not less than five
(5) days before the Closing;
(ii) execute and deliver the Shareholders' Agreement; and
(e) Derby International shall execute and deliver the Exchange
Agreement.
3.3 Simultaneous Action. All actions to be taken at the Closing shall be
-------------------
deemed to have occurred simultaneously and every such action shall be
conditional upon:
(a) the occurrence at the Closing of every other such action; and
(b) the prior occurrence of every action to be taken or event to have
occurred hereunder before the Closing pursuant to Sections 4 and 5 below unless
otherwise waived as provided therein.
3.4 Acknowledgment. The Sellers agree that the payment by the Buyer of
--------------
the Price for the Buyer Shares in accordance with this Agreement shall
constitute full and complete satisfaction of the obligations of the Buyer to pay
for the Buyer Shares.
3.5 The DFS Payment. The Company hereby agrees to repay in full the DFS
---------------
Payment less the amount of eight million five hundred thousand United States
dollars ($8,500,000) on the Closing Date.
-15-
4. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
-----------------------------------------------
Each and all of the obligations and duties of the Buyer under this
Agreement are expressly conditioned upon, and subject to the fulfillment before
or at the Closing, of each of the following conditions, provided, however, that
LLC may waive any conditions specified in this Section 4 by executing a writing
so stating at or prior to the Closing:
4.1 Accuracy of Representations and Conditions to Closing. The
-----------------------------------------------------
representations and warranties of the Sellers contained in Section 6 of this
Agreement shall be true and correct in all material respects at the time of the
Closing as though made at that time, and the Sellers shall have performed all
obligations and complied in all material respects with all covenants and
conditions to be performed or complied with under this Agreement before or at
the Closing unless otherwise waived by LLC.
4.2 Government Orders and Third-Party Consents and Approvals. There shall
--------------------------------------------------------
not have been any order entered by any court or governmental agency in any
jurisdiction prohibiting or making illegal the transactions contemplated to be
performed by the Sellers or the Company by this Agreement, and all governmental
and third-party consents and approvals: (a) required for the legal and valid
consummation of the transactions contemplated by this Agreement by the Sellers
or the Company, or (b) required for each of the Principal Subsidiaries to
conduct their respective businesses in all material respects after the Closing
on the same basis as conducted prior to the Closing, or (c) set forth on Exhibit
6.1(d), shall be given or obtained in a form reasonably acceptable to LLC.
4.3 No Material Adverse Change. No material adverse change shall have
--------------------------
occurred since December 31, 1996 in the business, operations or condition,
financial or otherwise, of the Subsidiaries taken as a whole, and no event shall
have occurred since December 31, 1996, which would reasonably be expected to
have a material adverse effect on the business, operations or condition,
financial or otherwise, of the Subsidiaries, taken as a whole.
4.4 Absence of Litigation. There shall not be in effect any injunction,
---------------------
writ or restraining order or any order of any nature with respect to the Buyer,
the Sellers, the Company or any of the Principal Subsidiaries issued by a court
or governmental agency of competent jurisdiction: (a) restraining or prohibiting
the consummation of the transactions provided for herein; (b) causing any of the
transactions contemplated by this Agreement to be rescinded following
consummation; or (c) affecting adversely the right of any of the Principal
Subsidiaries to own its assets and operate its business (and no such injunction,
judgment, order, decree, ruling or charge shall be in effect); and immediately
before the Closing, no proceeding or lawsuit shall be pending or have been
threatened by any
-16-
governmental or regulatory agency with respect to the transactions contemplated
by this Agreement which the Buyer, acting in good faith and with the advice of
legal counsel, believes is likely to result in any of the foregoing.
4.5 Recapitalization Transactions. The consummation of the
-----------------------------
Recapitalization Transactions shall occur on or prior to the Closing.
4.6 Certificate. On the Closing Date, the Sellers shall have delivered to
-----------
the Buyer a certificate to the effect that each of the conditions specified in
Sections 4.1 through 4.5 is satisfied in all respects; provided, however, that
-----------------
in the event that: (a) the condition specified in Section 4.1 shall not be
satisfied because one or more specific representations or warranties of the
Sellers is not true as of the Closing, and (b) LLC agrees to waive satisfaction
of such condition so that the transactions contemplated herein will be
consummated; then the Sellers shall nevertheless provide the certificate
referred to in this Section 4.6, but such certificate shall exclude those
specific representations and warranties which were not true as of the Closing.
4.7 Financing. The Company shall have obtained the funding of the Debt
---------
Financing on terms reasonably acceptable to the Buyer.
4.8 Recapitalization. The Recapitalization shall be treated as a
----------------
recapitalization under GAAP as applied in the United States by the United States
Securities and Exchange Commission for financial reporting purposes.
4.9 Shareholders' Agreements. On the Closing Date, DFS and the Company
------------------------
shall have executed the Shareholders' Agreements.
4.10 Reporting Requirements. All applicable mandatory waiting periods (and
----------------------
any extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
been terminated and all approvals shall have been obtained or notices given as
required under any similar laws of the jurisdictions of incorporation of the
Principal Subsidiaries or of the jurisdictions where the Business is conducted
(collectively, the "Merger Control Approvals").
4.11 Restated Certificate of Incorporation. The Certificate of
-------------------------------------
Incorporation of the Company shall have been amended and restated to read in its
entirety substantially as set forth in Exhibit 4.11 attached hereto.
4.12 U.S. GAAP Audited Financials. The report of Xxxxxx Xxxxxxxx, L.L.P.
----------------------------
("Xxxxxx Xxxxxxxx") on the U.S. GAAP Audited Financials shall have been
delivered to the Buyer as provided in Section 8.9, and such report shall be
without limitation as to the scope of the audit.
-17-
4.13 Stock Purchase. DFS shall have paid the DFS Price for the DFS Shares.
--------------
LLC may waive any conditions specified in this Section 4 if it executes a
writing so stating at or prior to the Closing.
4.14 Repayment of the Senior Indebtedness. All senior Indebtedness and
------------------------------------
similar obligations of the Subsidiaries, including the Senior Notes and the
Indebtedness evidenced by the Multi-Currency Revolving Credit Facility dated
March 6, 1997, arranged by Banque Nationale de Paris for Derby Holding B.V.,
shall have been repaid in full at the Closing.
5. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS
------------------------------------------------
Each and all of the obligations and duties of the Sellers and the
Company under this Agreement are expressly conditioned upon, and subject to the
fulfillment before or at the Closing, of each of the following conditions:
5.1 Accuracy of Representations and Conditions to Closing. The
-----------------------------------------------------
representations and warranties of the Buyer contained in Section 7 of this
Agreement shall be true and correct in all material respects at the time of the
Closing as though made at that time, and the Buyer shall have performed all
obligations and complied in all material respects with all covenants and
conditions to be performed or complied with under this Agreement before or at
the Closing unless otherwise waived by the Sellers.
5.2 Government Orders and Third-Party Consents and Approvals. There shall
--------------------------------------------------------
not have been any order entered by any court or governmental agency in any
jurisdiction prohibiting or making illegal the transactions contemplated to be
performed by the Buyer by this Agreement, and all governmental and third-party
consents and approvals required for the legal and valid consummation of the
transactions contemplated by this Agreement by the Buyer shall be given or
obtained in a form reasonably acceptable to the Sellers and the Company.
5.3 Absence of Litigation. There shall not be in effect any injunction,
---------------------
writ or restraining order or any order of any nature with respect to the Buyer,
the Sellers, the Company or any of the Principal Subsidiaries issued by a court
or governmental agency of competent jurisdiction (a) restraining or prohibiting
the consummation of the transactions provided for herein, (b) causing any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect), and immediately before the Closing, no proceeding or
lawsuit shall be pending or have been threatened by any governmental or
regulatory agency with respect to the transactions contemplated by this
Agreement which the Sellers,
-18-
acting in good faith and with the advice of legal counsel, believe is likely to
result in any of the foregoing.
5.4 Certificate. The Buyer shall have delivered to the Sellers a
-----------
certificate to the effect that each of the conditions specified in Sections 5.1
through 5.3 is satisfied in all respects; provided, however, that in the event
-----------------
that (a) the condition specified in Section 5.1 shall not be satisfied because
one or more specific representations or warranties of the Buyer is not true as
of the Closing, and (b) the Sellers agree to waive satisfaction of such
condition so that the transactions contemplated herein will be consummated, then
the Buyer shall nevertheless provide the certificate referred to in this Section
5.4, but such certificate shall exclude those specific representations and
warranties which were not true as of the Closing.
5.5 Financing. The Company shall have obtained the funding of the Debt
---------
Financing providing for an aggregate amount of available credit at the Closing
having a value of at least two hundred seventy million United States dollars
($270,000,000) on terms substantially as set forth in the commitment letter
attached as Exhibit 5.5A to this Agreement (with respect to the Senior Credit
Facility) and on terms substantially as set forth in the "highly confident"
letter attached hereto as Exhibit 5.5B (with respect to the Bond Financing) or,
in either case, on such other terms as shall be reasonably acceptable to the
Company.
5.6 Shareholders' Agreements. LLC and Perseus shall have executed the
------------------------
Shareholders' Agreements.
5.7 Stock Purchase. The Buyer shall have paid the Price for the Buyer
--------------
Shares.
5.8 Reporting Requirements. All applicable mandatory waiting periods (and
----------------------
any extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
been terminated and all approvals shall have been obtained or notices given as
required under any similar laws of the jurisdictions of incorporation of the
Principal Subsidiaries or of the jurisdictions where the Business is conducted.
5.9 Repayment of the Senior Indebtedness. All senior Indebtedness and
------------------------------------
similar obligations of the Subsidiaries, including the Senior Notes and the
Indebtedness evidenced by the Multi-Currency Revolving Credit Facility dated
March 6, 1997, arranged by Banque Nationale de Paris for Derby Holding B.V.,
shall have been repaid in full at the Closing.
5.10 Senior RIC Shares. Raleigh Industries of Canada Limited ("RIC") shall
-----------------
have issued the Senior RIC Shares (as defined in the Exchange Agreement) to
Derby International, free and clear of any and all Liens.
-19-
5.11 Derby International Shareholder Approval. The shareholders of Derby
----------------------------------------
International shall have approved the Recapitalization Transactions.
6. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
The Sellers hereby represent and warrant that the statements contained
in this Section 6 are true and correct as of the date of this Agreement and,
except as such changes may be necessary to effect the transactions contemplated
in this Agreement, shall be true and correct at the time of the Closing:
6.1 Incorporation and Capitalization.
--------------------------------
(a) Each of Derby International and DFS is a corporation duly
organized, validly existing and in good standing under the laws of the Grand
Duchy of Luxembourg, with requisite power and authority and all material
licenses, permits and authorizations required to own and lease its properties
and to conduct its business as now conducted. The execution and delivery of this
Agreement by the Sellers and the performance of the transactions contemplated
herein have been duly authorized by all necessary corporate action on the part
of the Sellers. This Agreement has been executed and delivered by duly
authorized representatives of the Sellers and constitutes the legal, valid and
binding obligations of the Sellers, enforceable against each in accordance with
its terms and conditions.
(b) (i) At the date of this Agreement, the capitalization (including
class or series and number of shares of authorized and outstanding capital
stock) of the Subsidiaries is as set forth in Exhibit 6.1(b) attached to this
Agreement and made a part hereof. Except as contemplated in this Agreement or as
disclosed in Exhibit 6.1(b), neither of the Sellers nor any of their respective
Affiliates is a party to any option, warrant, purchase right, or other
commitment that could require such Seller or any of its Affiliates to sell,
transfer, or otherwise dispose of any capital stock of any of the Subsidiaries.
(ii) Except as disclosed in Exhibit 6.1(b), there are no
outstanding:
(A) securities or bonds of any Subsidiary convertible into or
exchangeable for any share of capital stock or other securities
of such Subsidiary;
(B) subscriptions, options, warrants or other rights entitling
any third party to acquire from any Subsidiary any shares of
capital stock or other securities of such Subsidiary; or
-20-
(C) contractual obligations of any Subsidiary to purchase,
redeem or otherwise acquire any outstanding quotas or shares of
the capital stock of such Subsidiary.
(iii) Except as disclosed in Exhibit 6.1(b), the Shares of
each Subsidiary have been duly and validly issued and are fully-paid and non-
assessable.
(iv) Except as disclosed in Exhibit 6.1(b), the Principal
Subsidiaries Shares are owned, directly or indirectly, by the Sellers on the
date of this Agreement and, except as disclosed in Exhibits 8.3, will be owned,
directly or indirectly, by the Company or, in the case of the Company, by DFS at
the Closing, free and clear of any Lien (other than those created in connection
with the Recapitalization Transactions except for Liens arising from (A) the
transfers of (1) capital stock and assets from Derby International to DFS or
from DFS or Centum Investments N.V. ("Centum") to the Company or (2) capital
stock or assets by Derby International, DFS or Centum which directly results in
the issuance of securities of the Company or RIC to Derby International, DFS or
Centum; (B) the issuance of notes or payment of cash or cash equivalent
consideration to Derby International, DFS or Centum which are part of or
directly related to the DFS Payment; (C) the transfer of shares of capital stock
of the Company from Derby Holding B.V. to Derby International or DFS; (D) the
transactions described in Section 8.10 herein; and (E) any breach of agreements
or contracts not disclosed hereunder caused by the Recapitalization
Transactions).
(v) Except as disclosed in Exhibit 6.1(b) or as contemplated in
Exhibit 8.3, each of the Principal Subsidiaries owns the Shares of the
applicable Subsidiaries as set forth in Exhibit 6.1(b) attached to this
Agreement and made a part hereof, free and clear of all Liens.
(vi) Except as disclosed in Exhibit 6.1(b) or as contemplated in
Exhibit 8.3, all of the issued and outstanding capital stock of each of the
Subsidiaries other than the Company is owned by the Sellers or one or more
Subsidiaries.
(vii) Except as disclosed in Exhibit 6.1(b) or as contemplated in
Exhibit 8.3, at and immediately after the Closing, the Company will own,
directly or indirectly, all shares of the capital stock of the Subsidiaries
other than the Company, free and clear of all Liens (other than those created in
connection with the Recapitalization Transactions except for Liens arising from
(A) the transfers of (1) capital stock and assets from Derby International to
DFS or from DFS or Centum Investments N.V. ("Centum") to the Company or (2)
capital stock or assets by Derby International, DFS or Centum which directly
results in the issuance of securities of the Company or RIC to Derby
International, DFS or Centum; (B) the issuance of notes or payment of cash or
cash equivalent consideration to Derby International, DFS or Centum which are
part of or directly related
-21-
to the DFS Payment; (C) the transfer of shares of capital stock of the Company
from Derby Holding B.V. to Derby International or DFS; (D) the transactions
described in Section 8.10 herein; and (E) any breach of agreements or contracts
not disclosed hereunder caused by the Recapitalization Transactions).
(c) Except as disclosed in Exhibit 6.1(c), each of the Company and
the Principal Subsidiaries is a company duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
power to own, lease and operate its properties and to conduct the Business of
such Subsidiary as now conducted.
(d) Except as disclosed in Exhibit 6.1(d), neither the execution and
delivery of this Agreement by the Sellers, nor the consummation of the
transactions contemplated herein, will:
(i) conflict with any court or administrative order or process
or conflict with, result in a breach or violation or default or loss of any
benefit under, or accelerate the performance required by, any agreement or
commitment to which the Sellers, the Company or any Principal Subsidiary is a
party or by which any of them (or any of their respective properties or assets)
is bound or affected;
(ii) conflict with or result in any violation or loss of benefit
under any provision of the certificate of incorporation, bylaws or any other
organizational or governing document of a Seller, the Company or any of the
Principal Subsidiaries;
(iii) result in the creation of, or give any party the right to
create, any material lien, charge, encumbrance or other security interest upon
the property and assets of the Company or any Principal Subsidiary;
(iv) require any action by or in respect of, or filing with, any
governmental body, agency or official other than the Merger Control Approvals
and state and federal securities filings relating to the offer and sale of the
Buyer Shares; and
(v) contravene, or constitute a default under, any provision of
applicable law, rule or regulation or any agreement, judgement, injunction,
order, decree or other instrument binding upon it.
6.2 Books and Records. All accounts, books, ledgers and other records of
-----------------
the Principal Subsidiaries:
(a) have been properly and accurately maintained and contain true and
proper records of all matters required by law to be entered therein; and
-22-
(b) report or reflect all matters which are required to be reflected
in the books and records of the Business in order to prepare the Financial
Statements in accordance with the Accounting Principles.
6.3 Financial Statements.
--------------------
(a) Each of the Financial Statements has been prepared in accordance
with the requirements of all relevant statutes and in accordance with the
Accounting Principles, are true and complete, correctly reflect and present a
fair view of the assets and liabilities and fairly present the financial
condition and operating results of Derby International or the relevant Principal
Subsidiary and its subsidiaries on a consolidated basis for the years ended
December 31, 1994, 1995 and 1996. The unaudited consolidated management accounts
of Derby International as of September 28, 1997 (copies of which are attached
hereto as Exhibit 6.3 and made a part hereof) have been prepared (without notes
or schedules) in accordance with GAAP applicable to interim financial statements
in the United Kingdom, subject to any changes resulting from normal year-end
audit adjustments.
(b) Adequate provision or reserve has been made in the respective
Financial Statements for the liabilities of Derby International and each
Principal Subsidiary, as the case may be, as of December 31, 1996.
6.4 Taxes, Social Security and Labor Insurance Matters. The Sellers have
--------------------------------------------------
delivered or made available to the Buyer correct and complete copies of all Tax
Returns filed by the Principal Subsidiaries through the date of the Closing,
together with examination reports, and statements of deficiencies assessed
against, or agreed to by, any of the Principal Subsidiaries since December 31,
1994. Exhibit 6.4 includes a list of the current status of tax computations of
the Principal Subsidiaries for years through 1996. Except as otherwise
disclosed in Exhibit 6.4 attached to this Agreement and made a part hereof:
(a) Each Principal Subsidiary has filed within the statutory periods
(and extensions thereof) all Tax Returns, social security and insurance returns
which were due to be filed up to the date hereof or has obtained or applied for
extensions to file such returns in accordance with applicable law.
(b) Each Principal Subsidiary has paid all Taxes and duties that were
shown to be due on the Tax Returns, and has made all necessary and adequate
provision for Taxes and administrative charges pertaining to the Business of
such Principal Subsidiary, that have accrued before the date hereof but are not
yet due.
-23-
(c) Each Principal Subsidiary has withheld all required withholding
Taxes or made the necessary provisions for the payment of all withholding Taxes
and has paid or deposited all such withholdings as and when due.
(d) There is no material dispute or claim concerning any Tax
liability of any of the Principal Subsidiaries either: (i) claimed or raised by
any Tax Authority in writing; or (ii) as to which any of the Sellers has
knowledge based upon personal contact by a Seller with any agent of such Tax
Authority. No audit or other investigation by a Tax Authority is presently being
made or threatened with respect to any Principal Subsidiary.
(e) None of the Subsidiaries has filed a consent under Code (S)341(f)
concerning collapsible corporations.
(f) None of the Subsidiaries has made any payments, or is obligated
to make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any "excess parachute" payments that
will not be deductible under Code (S)280G.
(g) There are no Liens other than Permitted Liens on any assets of
the Subsidiaries that arose in connection with any failure or alleged failure to
pay any Tax.
(h) Each of the Subsidiaries that is required to file a United States
federal income tax return has disclosed on its United States federal income tax
returns the relevant facts affecting the tax treatment of any item that could
give rise to a substantial understatement of United States federal incomes taxes
within the meaning of Code (S)6662 and for which there is or was not
"substantial authority" for such treatment within the meaning of Code (S)6662.
(i) To the knowledge of the Sellers, no claim has ever been made by a
Taxing Authority in a jurisdiction where any of the Principal Subsidiaries does
not file Tax Returns that such Subsidiary is or may be subject to taxation by
such jurisdiction.
(j) None of the Subsidiaries (i) has been a member of an affiliated
group filing a consolidated United States federal income tax return (other than
one of which one of the Sellers or the Company was the common parent), or (ii)
has any liability for the Taxes of any Person under Reg. (S)1.1502-6 under Code
(S)1502 (or corresponding provision of state, local, or foreign law) as a
transferee or successor, by contract or otherwise.
(k) None of the Principal Subsidiaries is a party to or bound by any
tax allocation or tax sharing arrangement or has a current or potential
contractual obligation to
-24-
indemnify any other Person with respect to Taxes, excluding, however, any
arrangements with or obligations with respect to other Principal Subsidiaries.
(l) None of the Principal Subsidiaries has been a "United States Real
Property Holding Corporation" as defined in Code (S)897.
(m) None of the Subsidiaries will be required: (i) as a result of a
change in method of accounting for a taxable period ending on or prior to the
Closing Date, to include any adjustment in taxable income for any taxable period
ending after the Closing Date, (ii) as a result of any closing agreement as
described in Code (S)7121 (or any corresponding provision of state, local, or
foreign income tax law) to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period ending after the Closing
Date or (iii) as a result of any deferred intercompany gain described in
Treasury Regulation 1.1502-13 or any excess loss account described in Treasury
Regulation Section 1.1502-19 under Code (S)1502 (or any corresponding provision
of state, local, or foreign income tax law) to include any item of income in
taxable income for any taxable period ending after the Closing Date.
(n) None of the Subsidiaries which is not a Principal Subsidiary has
any liability for Taxes not provided for in any financial statements delivered
prior to the date hereof which liability would have a material adverse effect on
the financial condition of the Principal Subsidiaries considered as a whole.
(o) None of the Subsidiaries has waived any statute of limitations in
respect of any Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(p) The tax equity baskets of Derby Holding (Deutschland) GmbH at
December 31, 1993 and December 31, 1997 as represented to in the opinion of
Xxxxxx Xxxxxxxx, Hamburg attached hereto as Exhibit 6.4A is correct (the "German
Basket Representation") unless after the Closing the Company, any Subsidiary,
Buyer or any Affiliate of Buyer takes or omits to take any action that causes
such representation to be untrue.
6.5 Litigation and Claims.
---------------------
(a) Except as otherwise disclosed in Exhibit 6.10 or Exhibit 6.5
attached to this Agreement and made a part hereof, none of the Sellers or the
Subsidiaries is: (i) subject to any material outstanding injunction, judgment,
order, decree, ruling, settlement or charge; or (ii) is a party or, to the
knowledge of the Sellers, is threatened to be made a party to any material
action, suit, proceeding, hearing, or investigation of, before
-25-
any court or quasi-judicial or administrative agency or any federal, state,
local or foreign jurisdiction or before any arbitrator.
(b) No director of any Principal Subsidiary is currently subject to
any judicial proceeding or has received notice of any threatened judicial
proceeding related to his power or activity as a director of such Subsidiary.
To the best knowledge of the Sellers, no director of any Subsidiary other than a
Principal Subsidiary is currently subject to any judicial proceeding or has
received notice of any threatened judicial proceeding related to his power or
activity as a director of such Subsidiary.
6.6 Title to Assets.
---------------
(a) Real Estate.
-----------
(i) Attached as Exhibit 6.6(a) is a list of each parcel of real
property owned by the Sellers and used in the conduct of the Business of the
Subsidiaries or owned by any Subsidiary (collectively, the "Owned Property").
Copies of the legal descriptions of the Owned Properties have been previously
delivered by the Sellers to the Buyer.
(ii) Attached as Exhibit 6.6(a) is a list of all leases, sub
leases and other occupancy agreements to which any Subsidiary is a party (the
"Leases"). Copies of the Leases, including all amendments, extensions and
modifications thereto, have been delivered to the Buyer by the Sellers (the
premises demised by such leases, subleases and occupancy agreements are
hereinafter referred to collectively as the "Leased Property"; the "Owned
Property" and the "Leased Property" are collectively referred to as the "Real
Estate").
(iii) The Real Estate constitutes all of the real property
which the Sellers or any Subsidiary currently own, lease, occupy or have the
right to occupy in connection with the Business. All permits, licenses and
other approvals required to be obtained by the Subsidiaries to occupy and use
the Real Estate as currently used and occupied have been obtained, are in full
force and effect, and have not been violated in any material respect.
(iv) Other than the Subsidiaries, there are no parties in
possession or parties having any current or future right to occupy any of the
Owned Property or to occupy or use any of the Leased Property during the term of
any lease for such Leased Property, except as disclosed in Exhibit 6.6(a).
(v) Except as otherwise disclosed in Exhibit 6.6(a), neither
the Sellers nor any Subsidiary has received notice that any permit, license and
other approval
-26-
required to be obtained by any Subsidiary to occupy and use the Real Estate as
currently used and occupied has not been obtained or is not in full force and
effect.
(vi) Except as otherwise disclosed in Exhibit 6.6(a), none of
the Subsidiaries has received any notice that it is in violation of any permit,
license, approval, covenant, condition, restriction, easement, agreement or
order affecting any portion of the Real Estate, which violation remains
outstanding, and neither the Sellers nor any of the Subsidiaries has any
knowledge of any such violation which would have a material adverse effect on
the value, occupancy or use by the Subsidiaries of the relevant Real Estate.
(vii) Except as otherwise disclosed in Exhibit 6.6(a), there
is no pending, or to the knowledge of the Sellers, any threatened condemnation
proceeding, or material lawsuit or administrative action affecting the ability
of the Subsidiaries to occupy and use the Real Estate.
(viii) Except as described in the title documents, valuations
listed in Exhibit 6.6(a) or as otherwise disclosed in Exhibit 6.6(a), all of the
Real Estate is in operating condition and repair reasonably adequate for use in
the conduct of the Business. Except as described in the title documents and
valuations previously provided to the Buyer or as otherwise disclosed in Exhibit
6.6(a), no improvements, buildings or facilities located on the Real Estate and
no accessways thereto encroach on land not included in the Real Estate and no
such improvement is dependent for its access, operation or utility on any land,
building or other improvement not included in the Real Estate. Except as
described in the valuations listed in Exhibit 6.6(a) or as otherwise disclosed
in Exhibit 6.6(a) or Exhibit 6.7, none of the Sellers nor any of the
Subsidiaries has received any notice of violation of any zoning, fire, building,
environmental and administrative regulations to the extent relevant for such
use.
(ix) Except as disclosed in Exhibit 6.6(a), the Sellers or the
relevant Subsidiaries have good and marketable title to the Owned Property, free
and clear of all Liens, except for the Real Estate Permitted Liens. With
respect to the Leased Property, except as disclosed in Exhibit 6.6(a): (A) the
Subsidiaries have a good and valid leasehold interest in and to all of the
Leased Property, free and clear of all Liens, except for the Real Estate
Permitted Liens; (B) each Lease is in full force and effect and is enforceable
in accordance with its terms and none of the Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
such Lease; (C) there exists no material default by any Subsidiary, or
condition which, with the giving of notice, the passage of time, or both, could
become a material default by any Subsidiary under any such lease or, to the
knowledge of the Sellers or the Subsidiaries, by any other party to such lease;
and (D) except as otherwise disclosed in Exhibit 6.6(a), the execution of this
Agreement or the consummation of the transactions contemplated hereby
-27-
shall not give rise to a material default or requirement for consent under any
such lease agreement for Leased Property.
(x) As of the Closing Date, all of the Real Estate shall be in
substantially the same condition and repair as on the date of this Agreement,
damage by casualty (if and to the extent covered by insurance) and reasonable
wear and tear excepted.
Except as expressly set forth in this Section 6.6(a), neither the Sellers nor
any Subsidiary makes any representation or warranty concerning the condition of
the Real Property or its fitness for any particular purpose. The Sellers
further disclaim any implied warranties of condition or fitness for use, and the
Buyers acknowledge and accept such disclaimer.
(b) Inventory. Except for the items of inventory reserved against in
---------
the Financial Statements, all inventories included in the Business are current
and within the qualitative standards of the Subsidiaries and capable of being
sold or used in the ordinary course of business.
(c) Assets. The Principal Subsidiaries have good and marketable title
------
to, or a valid leasehold interest in or right to use, the material properties
and material assets used in the Business, free from all Liens other than
Permitted Liens. The Principal Subsidiaries' material tangible assets required
for the conduct of the Business are in good operating condition and are fit for
use in the ordinary course of business of the Principal Subsidiaries as
presently conducted. Except as disclosed on Exhibit 6.6(c) attached hereto and
made a part of this Agreement, the Principal Subsidiaries own, or have the right
to use, or at the Closing will own or have the right to use, all material
assets, rights and privileges necessary for the conduct of the Business. Except
as disclosed in Exhibit 6.6(c), none of the Sellers or any of their Affiliates
other than the Subsidiaries owns, leases or otherwise holds any of the assets,
rights or privileges necessary for or historically used in the conduct of the
business carried on by the Subsidiaries, which consists primarily of designing,
manufacturing, distributing and selling bicycles, bicycle components and
accessories.
(d) Intangibles.
-----------
(i) Exhibit 6.6(d) attached to this Agreement and made a part
hereof sets forth a complete and accurate list of: (A) patented or registered
Intellectual Property of the Subsidiaries and pending applications by the
Subsidiaries for the patenting or registration of Intellectual Property; and (B)
licenses or similar agreements covering Intellectual Property to which the
Company or any Subsidiary is a party, either as licensee or licensor, which are
material to the operation of the Business as presently conducted, but excluding
any licenses solely between or among Subsidiaries ("Company Intellectual
Property").
-28-
(ii) Except as described in Exhibit 6.6(d) attached hereto, to
the best knowledge of the Sellers, the Company Intellectual Property does not
violate, misappropriate, interfere with or infringe upon any proprietary or
other rights of any third party, and there are no claims by any third party
pending or threatened in respect of the Company Intellectual Property.
(iii) Except as noted in Exhibit 6.6(d), each registered
trademark, patent and copyright has been duly registered with, filed in or
issued by, as the case may be, the United States Patent and Trademark Office or
other appropriate governmental entities, domestic or foreign.
(iv) Except as disclosed in Exhibit 6.5 or 6.6(d), each
trademark registration, copyright registration and patent constituting the
Company Intellectual Property remains in full force and effect, and each
Subsidiary has taken all necessary action to maintain and protect all of the
Company Intellectual Property.
(v) To the knowledge of the Sellers, except as described in
Exhibit 6.6(d), no third party has interfered with, infringed upon,
misappropriated, or otherwise violated any Company Intellectual Property rights.
(vi) Except as described in Exhibit 6.6(d), to the knowledge of
the Sellers, no third party has contested the validity, enforceability, use or
ownership of any Company Intellectual Property.
(vii) Except as described in Exhibit 6.6(d), none of the
Subsidiaries is infringing, misappropriating, or otherwise violating any
Intellectual Property of any other Person, and no claim is pending or threatened
to the effect that the conduct by any Subsidiary conflicts with or infringes in
any way upon the Intellectual Property of any other Person, which infringement,
violation or claim would result in a material adverse effect on such Subsidiary.
(viii) Except as disclosed in Exhibit 6.6(d) or in Exhibit
6.11, neither the Sellers nor any of the Subsidiaries has granted any license,
franchise or permit to any Person to use any of the Company Intellectual
Property.
(ix) Except as disclosed in Exhibit 6.6(d) or in Exhibit 6.11,
immediately subsequent to the Closing, the Company Intellectual Property will be
owned or available for use by the Subsidiaries on terms and conditions
substantially similar to those under which such Subsidiaries owned or used such
Intellectual Property immediately prior to the Closing.
-29-
6.7 Authorizations, Permits, Compliance with Environmental Law.
----------------------------------------------------------
(a) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, each Principal Subsidiary has operated and is operating in
compliance with Environmental Law, except for such noncompliance which would not
have a material adverse effect on the financial condition of the Principal
Subsidiaries, considered as a whole.
(b) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, each of the Principal Subsidiaries has obtained all material
environmental permits and authorizations required under Environmental Law as
necessary for the operation of its business. Except as described in Exhibit 6.7
or in the Environmental Assessment Reports, (i) all material permits and
authorizations issued pursuant to Environmental Law are valid and are in full
force and effect; (ii) neither the Sellers nor any Principal Subsidiary has
received any notice of any material default under such permit or authorization;
and (iii) there are no outstanding notices or claims against any of the
Principal Subsidiaries for damages, penalties, or other obligations or
liabilities regarding any actual or alleged material violation of any
Environmental Law.
(c) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, none of the Principal Subsidiaries has received any written
notice, report or other information within the past five years regarding any
actual or alleged material violation of, or any material liabilities or
potential liabilities arising thereunder, any Environmental Law (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligation, relating to any of them or its
facilities arising under any Environmental Law.
(d) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, none of the following exists at any property or facility on
the Real Estate which is in material violation of Environmental Law, and any of
which have a material adverse effect on the financial condition of the Principal
Subsidiaries: (i) underground storage tanks, (ii) asbestos-containing material
in any damaged form or condition, (iii) landfills, surface impoundments, or
disposal areas, or (iv) materials or equipment containing polychlorinated
biphenyls.
(e) Except as noted in Exhibit 6.7 or in the Environmental Assessment
Reports, none of the Principal Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or released any
hazardous substance, or owned or operated any property or facility (and no such
property or facility is contaminated by any such substance) in a manner that has
given or would give rise to material liabilities, including liabilities for
response costs, corrective action costs, personal injury, property
-30-
damage, natural resources damages or attorney fees pursuant to any Environmental
Law, which would also have a material adverse effect on the financial condition
of the Principal Subsidiaries, considered as a whole.
(f) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, none of the Principal Subsidiaries or the Subsidiaries has,
either expressly or by operation of law, assumed, undertaken, or otherwise
become subject to any material liability of any other Person relating to
Environmental Law, including without limitation any obligation for corrective or
remedial actions.
(g) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, no facts, events or conditions relating to the past or
present facilities, properties or operations of the Principal Subsidiaries (or
of the Subsidiaries) will prevent, hinder, or limit continued material
compliance with Environmental Laws as in effect at present, give rise to any
material investigatory, remedial or corrective obligations as a result of a
violation of Environmental Law as in effect at present, or give rise to any
other material liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise) pursuant to any violation of Environmental Law as in effect at
present, including without limitation any relating to onsite or offsite releases
or threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage which would have a material
adverse effect on the financial condition of the Principal Subsidiaries,
considered as a whole.
(h) This Section 6.7 contains the sole and exclusive representations
and warranties of the Seller with respect to Environmental Law, including
without limitation any representation or warranty arising out of Environmental
Law or other matters arising out of any environmental, health and safety
matters.
6.7A. Authorizations, Permits, Compliance with Laws.
---------------------------------------------
(a) Except as otherwise disclosed in Exhibit 6.7A attached to this
Agreement and made a part hereof, each Principal Subsidiary currently operates
in all material respects in compliance with the laws and regulations from time
to time in force in the countries where such Principal Subsidiary is
incorporated and/or operates or conducts the Business. Except as otherwise
disclosed in Exhibit 6.7A, each Subsidiary other than the Principal Subsidiaries
currently operates in all material respects in compliance with the laws and
regulations from time to time in force in the countries where such Subsidiary is
incorporated and/or operates or conducts business, and no failure of such
Subsidiary to comply with such laws and regulations would have a material
adverse effect on the financial condition of the Principal Subsidiaries,
considered as a whole.
-31-
(b) Except as otherwise disclosed in Exhibit 6.7A, each Principal
Subsidiary currently owns or validly holds all material licenses, permits or
authorizations (other than licenses, permits or authorizations under
Environmental Law addressed in Section 6.7(b) above) required to conduct the
Business as currently conducted (the "Licenses"). All of the Licenses are
valid, binding and in full force and effect. Except as otherwise disclosed in
Exhibit 6.7A, none of the Principal Subsidiaries is in material default under
any of the Licenses and, to the knowledge of the Sellers, no failure of a
Subsidiary to hold or default by a Subsidiary with respect to any License would
have a material adverse effect on the financial condition of the Business.
6.8 No Infringement. No agreement, practice or arrangement carried on by
---------------
any Subsidiary, or to which any Subsidiary is a party, infringes any
competition, any restrictive trade practice or any antitrust legislation
applicable in the Grand Duchy of Luxembourg or the jurisdiction of incorporation
or location or market in which any portion of the Business is conducted by such
Subsidiary. None of the Subsidiaries has given any assurance or undertaking to
the competition authorities in Germany, the Netherlands, the United States of
America or the United Kingdom or to the Commission of the European Union or is
subject to any act, decision, regulation, order, settlement or other instrument
made by any of them relating to any matter referred to in this Section 6.8.
6.9 No Prejudicial Effect. The consummation of the transactions
---------------------
contemplated by this Agreement, including the transfer of the Principal
Subsidiaries Shares by the Sellers to the Company in compliance with the terms
of this Agreement, will not cause any Principal Subsidiary to lose the benefit
of any material right or privilege it enjoys at present, except as disclosed in
Exhibit 6.9 attached hereto and made a part hereof.
6.10 Insurance. Exhibit 6.10 attached to this Agreement and made a part
---------
hereof contains a list of all insurance policies which are material or necessary
to the conduct of the Business. Exhibit 6.10 contains the most recent insurance
claims histories prepared by the Subsidiaries' regular insurance brokers.
Except as described in Exhibit 6.5 or Exhibit 6.10, with respect to each such
insurance policy: (i) the policy is in full force and effect; (ii) neither the
Principal Subsidiaries nor, to the knowledge of the Sellers, any other party to
the policy, is in material breach or default (including, with respect thereto,
the payment of premiums or the giving of notices); (iii) no pending claim made
by any Subsidiary is being disputed by the Subsidiaries' insurers; and (iv) no
event has occurred which, with notice or lapse of time, would constitute a
material breach or default on the part of any Subsidiary or, to the knowledge of
the Sellers, on the part of any other party, or would permit termination,
modification or acceleration under such policy by the insurer.
6.11 Agreements. Except as disclosed in Exhibit 6.6(a), Exhibit 6.6(d)
----------
or Exhibit 6.11 (including Exhibit 6.11(v)) or as contemplated in this
Agreement, no Subsidiary has entered into or undertaken (whether orally or in
writing) any agreement,
-32-
transaction, obligation, commitment, arrangement or liability which has not been
fully performed by the relevant Subsidiary and has not been terminated
(excluding, however, agreements or commitments for the purchase of raw materials
which have terms of less than six (6) months and agreements or arrangements
solely with other Subsidiaries) and:
(a) is a lease or a contract for hire or rent, hire purchase or
purchase by way of credit sale or periodical payments whereby such Subsidiary is
required to pay amounts exceeding two hundred fifty thousand United States
dollars ($250,000) in the aggregate in any calendar year;
(b) requires payment of any commission or royalty;
(c) is one of the following types of contracts or agreements:
(i) contracts or commitments for capital expenditures or
acquisitions in excess of two hundred fifty thousand United States dollars
($250,000) per project;
(ii) distribution, dealer or sales agency agreements involving
payments to parties other than Affiliates in excess of two hundred fifty
thousand United States dollars ($250,000) per year;
(iii) guarantees of third-party obligations;
(iv) agreements (including non-compete agreements) which
restrict the kinds of businesses in which any of the Subsidiaries may engage or
the geographical areas in which any of them may conduct their business;
(v) indentures, mortgages, loan agreements or other agreements
relating to Indebtedness for borrowed money, the granting of Liens or lines of
credit;
(vi) collective bargaining agreements;
(vii) material licenses, agreements, assignments or contracts
(whether as licensor or licensee, assignor or assignee) with third parties
relating to any of the Company Intellectual Property;
(viii) joint venture agreements, partnership agreements or
similar agreements with any party which is not a Subsidiary;
(ix) stock purchase agreements, asset purchase agreements or
other acquisitions or divestiture agreements entered into after January 1, 1992
involving
-33-
the acquisition or disposition of assets having a market value in excess of one
hundred thousand United States dollars ($100,000);
(x) employment, consulting or management agreements requiring the
payment of annual compensation in excess of one hundred fifty thousand United
States dollars ($150,000);
(xi) agreements or other arrangements with any director, officer,
employee or shareholder of any of the Subsidiaries other than as disclosed in
subsection (x) above which involve annual payment in excess of one hundred fifty
thousand United States dollars ($150,000);
(xii) any agreement or contract which is not of the foregoing type
and is material to any of the Principal Subsidiaries or involves consideration
in excess of five hundred thousand United States dollars ($500,000); and
(xiii) brokerage or finder's agreements.
All items collectively in Exhibit 6.11 are referred to as "Contracts". True and
correct copies of all written Contracts have been delivered or made available to
Buyer. Except as disclosed in Exhibit 6.11: (a) all Contracts are valid and
subsisting and binding and enforceable obligations of the Subsidiary party
thereto; and (b) no material breach or default thereunder by the Subsidiaries
party thereto, or to the knowledge of the Sellers, by any other party thereto,
has occurred and is continuing uncured.
6.12 Accounts Receivable. All accounts receivable of the Business
-------------------
reflected in the Financial Statements represent sales actually made and
commercial transactions carried out in the ordinary course of the Business.
6.13 Absence of Certain Transactions. Except as necessary to effect the
-------------------------------
Recapitalization Transactions or as set forth on Exhibit 6.13 and Exhibit 8.3,
since December 31, 1996:
(a) each Subsidiary has carried on its business in the usual and
ordinary course consistent with past practice;
(b) none of the Subsidiaries has:
(i) declared or paid dividends or made any other distribution
with respect to its capital stock (other than to a Subsidiary);
-34-
(ii) redeemed, purchased, canceled or otherwise acquired, directly
or indirectly, any outstanding shares of its capital stock (other than from a
Subsidiary);
(iii) issued additional stock (other than exercise or conversion of
outstanding options, warrants, or convertible securities), warrants, options or
any other similar rights to acquire capital stock (other than to a Subsidiary);
(iv) made (or committed to make) any payments or transfer of assets
or rights to or for the benefit of a Seller or any Affiliate of a Seller (other
than the Subsidiaries); or
(v) engaged in any transaction with a Seller or any Affiliate of a
Seller for the purpose of effecting a payment or distribution of the type
described in clauses (i) through (iv) above to such Seller or Affiliate.
(c) none of the Subsidiaries has filed a voluntary petition in bankruptcy;
(d) none of the Subsidiaries has incurred any Indebtedness; made any
material loans, advances or capital contributions to, or investments in, any
other Person (other than to or in a Subsidiary); pledged or otherwise encumbered
shares of its capital stock, mortgaged or pledged any of its property, or
created any Liens with respect to such property (other than Permitted Liens)
(other than to a Subsidiary); or entered into or modified any material contract,
agreement, lease, license, commitment or arrangement with a third party (other
than to a Subsidiary) with respect to the foregoing, except in the ordinary
course of business consistent with past practice;
(e) none of the Principal Subsidiaries has granted any increase in
compensation to any salaried employees or paid any bonus, except for increases
in salary or wages in the ordinary course of business consistent with past
practice;
(f) other than provisions of services or sales in the ordinary course
of business and consistent with past practice or involving only one or more
Subsidiaries, none of the Principal Subsidiaries has: (i) sold, leased,
licensed, transferred or otherwise disposed of any assets or property having a
book or market value, individually, in excess of two hundred fifty thousand
United States dollars ($250,000), or in the aggregate in excess of one million
United States dollars ($1,000,000); or (ii) entered into, or consented to the
entering into of, any agreement granting a preferential right to sell, lease,
license, or otherwise dispose of any of such assets;
(g) none of the Subsidiaries has:
-35-
(i) entered into any new line of business;
(ii) changed its investment, liability management or other
material policies in any material respect;
(iii) incurred or committed to incur any capital expenditures,
obligations or liabilities that individually exceed two hundred and fifty
thousand United States dollars ($250,000), or in the aggregate are in excess of
one million United States dollars ($1,000,000) (other than with one or more
Subsidiaries);
(iv) acquired or agreed to acquire by merging or consolidating
with, or acquired or agreed to acquire by purchasing a substantial portion of
the assets of, or in any other manner, any business or Person (other than with
one or more Subsidiaries); or
(v) otherwise acquired or agreed to acquire any other assets or
made any lease or license commitments for a total individual consideration in
excess of two hundred and fifty thousand United States dollars ($250,000), or in
aggregate in excess of one million United States dollars ($1,000,000) (other
than with one or more Subsidiaries);
(h) none of the Subsidiaries has granted any license or sublicense
of any material rights with respect to any of its Company Intellectual Property
to any Person other than a Subsidiary;
(i) there has been no change made or authorized in the charter,
bylaws or other constituting documents of any of the Principal Subsidiaries;
(j) none of the Principal Subsidiaries has suffered any event that
is material and adverse to such Principal Subsidiary;
(k) no Subsidiary which is not a Principal Subsidiary has suffered
any event that is material and adverse to the Principal Subsidiaries' financial
condition considered as a whole;
(l) each Principal Subsidiary has made all reasonable efforts
consistent with past practices to keep their respective businesses and
properties substantially intact and to preserve existing relationships with
customers, suppliers, lessors, licensors, employees and others with whom such
Principal Subsidiaries deal;
-36-
(m) no Subsidiary has settled or compromised any legal proceeding,
action, suit, arbitration or other controversy which, after insurance
reimbursement, is material individually or in the aggregate to the Subsidiaries;
and
(n) no Subsidiary has authorized or entered into an agreement,
whether in writing or otherwise, to do any of the foregoing.
6.14. Undisclosed Liabilities. None of the Subsidiaries has any material
-----------------------
liability (whether known, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, due or to become due) except
(i) as otherwise described in Exhibit 6.3, Exhibit 6.7, Exhibit 6.11, Exhibit
6.13, Exhibit 6.14, Exhibit 6.15 or (ii) as described on the face of the
Financial Statements or quantified in the notes to the Financial Statements or
(iii) liabilities owed to another Subsidiary or (iv) liabilities which have
arisen after December 31, 1996, in the ordinary course of business and
consistent with past practice.
6.15. Employee Plans.
--------------
(a) Exhibit 6.15 lists each of the following plans which currently is
sponsored, maintained or contributed to by (or required to be contributed to by)
the Company or any Principal Subsidiary for the benefit of any current or former
employee, director or other personnel: (i) any "employee benefit plan," as such
term is defined in Section 3(3) of ERISA, whether or not subject to the
provisions of ERISA; and (ii) any other stock option, stock bonus, stock
purchase, phantom stock, incentive, bonus, deferred compensation, retirement,
severance, vacation, medical or dental policy or arrangement which is not an
employee benefit plan as defined in Section 3(3) of ERISA (each such plan,
policy and arrangement being herein referred to as an "Employee Plan").
(b) With respect to each Employee Plan, except for any multi-employer
plan within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan") and
except as set forth on Exhibit 6.15, the Sellers have made available to the
Buyer true and complete copies of each current plan document, policy statement,
summary plan description and other written material governing or describing the
Employee Plan (including, without limitation, any related trust agreement,
insurance company contract, most recent IRS determination letter, and the prior
year's IRS Form 5500) or, if there are no such written materials, a summary
description of the Employee Plan.
(c) With respect to each Employee Plan which is an "employee benefit
plan" within the meaning of Section 3(3) of ERISA or which is a "plan" within
the meaning of Section 4975(e) of the Code, there has occurred no transaction
which is prohibited by Section 406 of ERISA or which constitutes a "prohibited
transaction" under Section
-37-
4975(c) of the Code and with respect to which a prohibited transaction exception
has not been granted and is not currently in effect.
(d) Exhibit 6.15 identifies each funded Employee Plan which is an
employee pension benefit plan within the meaning of Section 3(2) of ERISA (other
than a Multiemployer Plan within the meaning of Section 3(37) of ERISA). With
respect to each such funded Employee Plan that is intended to be qualified under
Section 401(a) of the Code: (i) the Employee Plan is a qualified plan under
Section 401(a) of the Code, and its related trust is exempt from federal income
taxation under Section 501(a) of the Code; (ii) there has been no termination or
partial termination within the meaning of Section 411(d)(3) of the Code; (iii)
no such Employee Plan is covered by Section 412 of the Code; and (iv) no such
Employee Plan is covered by Title IV of ERISA. With respect to all funded
Employee Plans, the assets held in each such plan exceed the benefits accrued
under such plan determined as of the Closing Date based on assumptions used in
the most recent actuarial valuation of such plan. The Company has not ceased
operations at a facility so as to become subject to the provisions of Section
4062(c) of ERISA, or withdrawn as a substantial employer so as to become subject
to the provisions of Section 4063 of ERISA, withdrawn as a sponsor of a
Multiemployer Plan, or ceased making contributions on or before the Closing Date
to any Employee Plan which is a pension plan subject to Section 4064(a) of
ERISA.
(e) Except as set forth on Exhibit 6.15, the consummation of the
transactions contemplated by this Agreement will not entitle any employee or
other person to receive severance or other compensation which would not
otherwise be payable absent the consummation of the transactions contemplated by
this Agreement or cause the acceleration of the time of payment or vesting of
any award or entitlement under any Employee Plan.
(f) Except as set forth on Exhibit 6.15 hereto, (i) each Employee
Plan and any related trust, insurance contract or fund has been maintained,
funded and administered in compliance with its respective terms and in
compliance with ERISA and the Code; (ii) there has been no application for or
waiver of the minimum funding standards imposed by Section 412 of the Code with
respect to any Employee Plan, and the Sellers are not aware of any facts or
circumstances that would materially change the funded status of any such
Employee Plan; and (iii) no Principal Subsidiary has incurred any liability
under Title IV of ERISA. Each funded Employee Plan located outside of the United
States satisfies all applicable requirements that govern the funding of such
plan and such assets held under such plan exceed the benefits accrued under such
plan determined as of the Closing Date based on assumptions used in the most
recent actuarial valuation of such plan.
-38-
(g) Except as set forth on Exhibit 6.15 hereto, (i) each Principal
Subsidiary which is subject to COBRA has complied with the health care
continuation requirements of COBRA; and (ii) no Principal Subsidiary has any
obligation under any Employee Plan or otherwise to provide health or life
insurance benefits to former employees of any Principal Subsidiary or any other
Person, except as specifically required by COBRA.
(h) Except as set forth on Exhibit 6.15 hereto, (i) no Employee Plan
subject to Title IV of ERISA which is a Multiemployer Plan has been terminated
since September 2, 1974; (ii) no proceeding has been initiated to terminate any
such Multiemployer Plan and there has been no "reportable event" (within the
meaning of Section 4043(c) of ERISA) since September 2, 1974 with respect to any
such Multiemployer Plan; (iii) no such Multiemployer Plan is in reorganization
as described in Section 4241 of ERISA and no such Multiemployer Plan is
insolvent as described in Section 4245 of ERISA; (iv) no Principal Subsidiary
has incurred any liability on account of a "partial withdrawal" or a "complete
withdrawal" (within the meaning of Sections 4205 and 4203, respectively, of
ERISA) from any Multiemployer Plan, no such liability has been asserted, and
there are no events or circumstances which could result in any such partial or
complete withdrawal; and (v) no Principal Subsidiary is bound by any contract or
agreement or has any obligation or liability described in Section 4204 of ERISA.
(i) No Principal Subsidiary has any liability with respect to any
"employee benefit plan" (as defined in Section 3(3) of ERISA) not listed on
Exhibit 6.15 solely by reason of being treated as a single employer under
Section 414 of the Code with any trade, business or entity other than the
Subsidiaries.
(j) Except as set forth on Schedule 6.15 hereto, no Principal
Subsidiary contributes to, maintains or sponsors or has any liability with
respect to any Employee Plan or other employee benefit plan, agreement or
arrangement applicable to employees located outside the United States (the
"Foreign Plans").
(k) All contributions (including all employer contributions and
employee salary reduction contributions), premiums or other payments which are
due have been paid to each Employee Plan (including each Foreign Plan) and all
contributions, premiums or other payments for any period ending on or before the
date of this Agreement which are not yet due have been paid to each Employee
Plan or properly accrued.
(l) No Subsidiary which is not a Principal Subsidiary has any
liability with respect to any Employee Plan, which liability would have an
material adverse effect on the financial condition of the Principal Subsidiaries
considered as a whole.
-39-
6.16. Employees. Except as disclosed in Exhibit 6.16 attached hereto and
---------
made a part hereof, to the knowledge of any of the Sellers, no executive, key
employee, or significant group of employees plans to terminate employment with
any of the Principal Subsidiaries within the next twelve (12) months. Except as
disclosed in Exhibit 6.16, none of the Subsidiaries is a party to or bound by
any collective bargaining agreement, nor has any of the Subsidiaries experienced
any strike or material grievance, claim of unfair labor practices, or other
collective bargaining disputes within the last five years. Except as disclosed
in Exhibit 6.16, none of the Principal Subsidiaries has committed any material
unfair labor practice. Except as disclosed in Exhibit 6.16, none of the
Subsidiaries which are not Principal Subsidiaries has committed any unfair labor
practice which practice would result in a material adverse effect on the
financial condition of the Subsidiaries taken as a whole. None of the Sellers
has any knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Subsidiaries. No Subsidiary subject to the Worker Adjustment Retraining
and Notification Act of 1988, as amended ("WARN"), has implemented any plant
closing or mass layoff of employees as those terms are defined in WARN or any
similar state or local law or regulation, and no layoffs that could implicate
such laws or regulations will be implemented before the Closing without advance
notification to Buyer.
6.17. Affiliated Transactions. Except for:
-----------------------
(a) those agreements or transactions listed in Exhibit 6.11, Exhibit
6.13 and Exhibit 6.17 attached hereto and made a part hereof, or as otherwise
expressly contemplated by this Agreement;
(b) fees paid to directors not exceeding fifty thousand United States
dollars ($50,000) per annum;
(c) salaries paid to officers over one hundred fifty thousand United
States dollars ($150,000) and disclosed pursuant to Section 6.11 above; and
(d) transactions not exceeding fifty thousand United States dollars
($50,000) or set of related transactions not exceeding one hundred and fifty
thousand United States dollars ($150,000) in the aggregate;
since January 1, 1993, no Subsidiary has: (x) paid, loaned or advanced to any of
the officers, directors, stockholders or Affiliates of any of the Principal
Subsidiaries or either of the Sellers any amount of which an amount remains
outstanding; (y) sold, transferred or leased to or from any of the officers,
directors, stockholders or Affiliates of any of the Principal Subsidiaries or
either of the Sellers any properties or assets; or (z) entered into or continued
any agreement, arrangement or understanding (written or otherwise) with any of
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the officers, directors, stockholders or Affiliates of any of the Principal
Subsidiaries or either of the Sellers.
6.18. Cross-References. The Sellers have disclosed information and
----------------
agreements in exhibits attached to this Agreement which have been included as a
disclosure against the representation and warranty that most closely describes
the information or agreement (the "Primary Representation"). Such information
and agreements shall also be deemed to be disclosed with respect to
representations and warranties other than the Primary Representation where it is
reasonably apparent from the face of the agreement or nature of the disclosure
provided that such disclosure may reasonably be deemed to be disclosed against
such other representations and warranties, regardless of whether specific cross-
references to such other representations and warranties are made.
7. REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
Each of LLC and Perseus hereby represents and warrants (but only with
respect to itself) that the statements contained in this Section 7 are true and
correct as of the date of this Agreement and shall be true and correct at the
time of the Closing;
(a) each of LLC and Perseus is a limited liability company duly
organized and validly existing under the laws of Delaware, with the requisite
power and authority to own and lease its properties and conduct its business as
now conducted;
(b) the execution and delivery of this Agreement by Perseus and LLC,
and the consummation by each of the transactions contemplated herein, have been
duly authorized by all necessary corporate action on the part of Perseus and
LLC, respectively;
(c) this Agreement has been executed and delivered by the legal
representatives of LLC and Perseus, and this Agreement constitutes the legal,
valid and binding obligations of LLC and Perseus, enforceable against each of
them in accordance with its terms and conditions;
(d) there are no restrictions in any agreement or instrument to which
LLC or Perseus is a party or by which LLC or Perseus is bound or in any
applicable law and regulation which would prevent LLC or Perseus from purchasing
the Buyer Shares to be purchased by it hereunder or consummating the
transactions contemplated in this Agreement, and, other than Merger Control
Approvals, the execution or consummation of the transactions contemplated in
this Agreement, requires no action by or in respect of, or filing with, any
governmental body, agency or official and does not and will not contravene, or
constitute a default under, any provision of applicable law or regulation or of
its certificate of incorporation or other comparable organizational documents or
any
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agreement, judgement, injunction, order, decree or other instrument binding upon
Perseus or LLC;
(e) each of LLC and Perseus:
(i) is acquiring the Buyer Shares being purchased by it
hereunder for its own account for investment purposes only and not with a view
to the re-sale, distribution or transfer thereof within the meaning of the
Securities Act;
(ii) acknowledges that the offering and sale of the Buyer
Shares is intended to be exempt from registration under the United States
Securities Act of 1933, as amended (the "Securities Act");
(iii) is an "accredited investor" as defined in Regulation D
under the Securities Act,
(iv) has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of
purchasing the Buyer Shares;
(v) is able to bear the economic risk of such investment,
including the complete loss of the funds invested in the Buyer Shares;
(vi) meets all suitability standards imposed by applicable law;
(vii) has carefully considered and has, to the extent it
believes such discussion necessary, discussed with legal, tax, accounting and
financial advisers the suitability of an investment in the Buyer Shares for the
its particular tax and financial situation and has determined that the Buyer
Shares being subscribed for by the Buyer are a suitable investment for the
Buyer; and
(viii) is not purchasing the Buyer Shares with funds that
constitute, directly or indirectly, the assets of an employee benefit plan
subject to Title I of the United States Employee Retirement Income Security Act
of 1974 ("ERISA") or Section 4975 of the United States Internal Revenue Code of
1986, as amended (the "Code").
(f) Financing. The Buyer has received and has furnished to the
---------
Sellers a copy of (i) a commitment letter with respect to the Senior Credit
Facility and (ii) "highly confident" letters with respect to the Bond Financing,
true and correct copies of which are attached hereto as Exhibit 5.5A and made a
part hereof, each of which (other than those delivered by Derby International as
to which the Buyer makes no representation) is (A) valid, binding and
enforceable against the Buyer in accordance with their terms and (B) to
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the knowledge of the Buyer, valid, binding and enforceable against the other
parties thereto in accordance with their terms.
(g) Adequate Equity. Each of LLC and Perseus has equity or equity
---------------
commitments in amounts sufficient to consummate the transactions contemplated in
this Agreement and to meet the obligations of LLC and Perseus, respectively,
arising out of this Agreement and the agreements (to which it is a party) to be
entered into pursuant to this Agreement.
8. CONDUCT OF BUSINESS UP TO CLOSING
---------------------------------
8.1. Access. From the date of this Agreement until the Closing, the
------
Sellers shall and shall cause the Subsidiaries to provide to representatives of
the Buyer upon request full and complete information on the current operating
performance, financial condition and business prospects of the Business, as well
as the Subsidiaries' projected, actual and budgeted, as applicable, operating
and financial performance for calendar years 1997 and 1998, and access to all
such documents and financial records (certified to be true copies, if requested)
with respect to the affairs of the Subsidiaries as the Buyer may reasonably
request. From the date of this Agreement until the Closing, the Buyer shall have
reasonable access to the management, and the premises, properties, books,
contracts, commitments, records and accountants pertaining to each of the
Subsidiaries at mutually acceptable times and places, subject to restrictions
required by any confidentiality agreements by which the Subsidiaries may be
bound.
8.2. Management Responsibility. Notwithstanding anything contained in this
-------------------------
Agreement, the sole responsibility for management, control and operation of the
Subsidiaries until the Closing shall remain with the board of directors and
executive officers of the Sellers and the Subsidiaries, subject only to the
terms and conditions of this Agreement.
8.3. Restrictions on Actions before Closing. Except as may be required to
--------------------------------------
effect the transactions contemplated by this Agreement, from the date hereof
until the Closing or as requested by or with the consent of LLC or as disclosed
in Exhibit 8.3 attached hereto and made a part of this Agreement, the Sellers
shall not permit any of the Subsidiaries to:
(a) sell, transfer, dispose of or encumber, or negotiate or grant any
options or other rights to purchase, its Shares or any of the Subsidiaries'
material assets;
(b) sell, transfer, lease, dispose of or encumber in any way any
material part of the assets, business, Company Intellectual Property, customer
lists or goodwill of the Subsidiaries (other than the sale of inventory or of
equipment in the ordinary course of business consistent with past practice),
except with prior agreement by LLC;
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(c) incur any Indebtedness for borrowed money without prior agreement
by LLC, except as required to effect the Recapitalization Transactions
contemplated in this Agreement, or under existing bank facilities to finance
budgeted working capital needs (including budgeted capital expenditures);
(d) acquire any material assets or incur any material liabilities or
capital commitments without prior agreement by LLC;
(e) terminate any existing distribution arrangements or agreements,
or enter into any new arrangements or agreements for the sale, licensing or
distribution of the main products of the Subsidiaries, which arrangements or
agreements are material to the Business considered as a whole, without prior
agreement by LLC;
(f) change or commit to change any significant terms of employment of
any management executives, directors or officers or any employee whose current
salary exceeds one hundred and fifty thousand United States dollars ($150,000)
per year of the Subsidiaries or negotiate any changes to their terms of
employment without prior agreement by LLC, which shall not be unreasonably
withheld;
(g) amend its certificate of incorporation, by-laws or other
governing document or agreement;
(h) issue or sell (or agree to issue or sell) any shares of its
capital stock of any class or series, or any options, warrants, conversion or
other rights to purchase any such shares of any securities convertible into or
exchangeable for such shares (other than upon the exercise or conversion of
options, warrants, or convertible securities outstanding on the date hereof), or
grant or agree to grant, any such options to modify or alter the terms of any of
the above;
(i) discharge or satisfy any material Lien (other than a Permitted
Lien) or pay or satisfy any material obligation or liability other than existing
revolving bank facilities, except in the ordinary course of business consistent
with past practice, or commence any voluntary petition, proceeding or action
under any bankruptcy, insolvency, or other similar laws;
(j) split, combine or reclassify its outstanding capital stock or
declare, set aside, make or pay any dividend or other distribution in respect of
its capital stock (in cash or otherwise);
(k) prepay any principal or accrued interest in respect of any
Indebtedness for borrowed money; or
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(l) make (or commit to make) any payment or transfer of rights or
assets (including cash or evidences of indebtedness) to or on behalf of a Seller
or any Affiliate of a Seller (other than the Subsidiaries).
8.4. Consents and Approvals. The Sellers shall, and shall cause each of
----------------------
the Principal Subsidiaries to, give any notices to third parties, and the
Sellers shall, and shall cause each of the Principal Subsidiaries to, use their
respective commercially reasonable best efforts to, obtain any third party
consents that LLC or Perseus may reasonably request in connection with the
satisfaction of the condition set forth in Section 4.2. Each of Perseus and LLC
shall, and shall cause its respective Affiliates to, give any notices to third
parties, and each of Perseus and LLC shall, and shall cause its respective
Affiliates to, use their respective commercially reasonable best efforts to,
obtain any third party consents that Sellers may reasonably request in
connection with the satisfaction of the condition set forth in Section 5.2.
8.5. Supplemental Disclosure.
-----------------------
(a) From time to time during the period from the date of this
Agreement until the Closing, upon becoming aware of any such matter, condition
or occurrence, the Sellers will promptly disclose to LLC and Perseus: (i) any
material development affecting the ability of the Sellers to consummate the
transactions contemplated by this Agreement, (ii) any matter, condition,
occurrence or knowledge which, if existing or occurring at the date of this
Agreement, would have been required to be excepted from any representation or
warranty of the Sellers contained herein in order for such representation or
warranty to be true and correct on the date hereof or otherwise set forth or
described in an Exhibit hereto, (iii) any breach of any covenant or agreement of
the Sellers contained in this Agreement of which either of the Sellers has
knowledge, and (iv) any material transaction entered into or consummated by any
Subsidiary. No disclosure pursuant to this Subsection 8.5(a), however, shall be
deemed to amend or supplement this Agreement (including the Exhibits hereto) or
to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(b)(i) From time to time during the period from the date of this
Agreement until the Closing, upon becoming aware of any such matter, condition
or occurrence, each of Perseus and LLC will promptly disclose (with respect to
itself) to the Sellers: (A) any material development affecting the ability of
Perseus or LLC, as the case may be, to consummate the transactions contemplated
by this Agreement, (B) any matter, condition, occurrence or knowledge which, if
existing or occurring at the date of this Agreement, would have been required to
be excepted from any representation or warranty of Perseus or LLC, as the case
may be, contained herein in order for such representation or warranty to be true
and correct on the date hereof, and (C) any breach of any covenant or agreement
of
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Perseus or LLC, as the case may be, contained in this Agreement of which Perseus
or LLC, as the case may be, has knowledge. No disclosure pursuant to this
Subsection 8.5(b)(i), however, shall be deemed to amend or supplement this
Agreement or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
(ii) From time to time prior to the Closing if and to the extent LLC
or Perseus has actual knowledge thereof, LLC or Perseus, as the case may be,
will promptly disclose to the Sellers and the Company: (A) any material
development affecting the ability of the Sellers to consummate the transactions
contemplated by this Agreement; (B) any matter, condition, occurrence or
knowledge which, if existing or occurring at the date of this Agreement, would
have been required to be excepted from any representation and warranty contained
herein in order for such representation or warranty to be true and correct on
the date hereof or otherwise set forth or described in an Exhibit hereto; and
(C) any breach of any covenant or agreement contained in this Agreement. No
disclosure pursuant to this Subsection 8.5(b)(ii), however, shall be deemed to
amend or supplement this Agreement or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
8.6. Fulfillment of Conditions. The Sellers shall use commercially
-------------------------
reasonable efforts to fulfill or obtain the fulfillment of all conditions to the
Closing set forth in Section 4. Each of Perseus and LLC shall (with respect to
itself) use commercially reasonable efforts to fulfill or obtain the fulfillment
of all conditions to the Closing set forth in Section 5. The parties to this
Agreement shall use commercially reasonable efforts to avoid any breach of their
respective representations and warranties.
8.7. Indebtedness. The Sellers have made available to the Buyer and its
------------
representatives copies of all agreements, commitments to fund or outstanding
letters of credit evidencing all Indebtedness of the Principal Subsidiaries.
The parties to this Agreement shall use their best efforts to negotiate the
prepayment at the Closing of such Indebtedness, the release of any Liens in
existence before the Closing Date on the capital stock of the Subsidiaries and
all assets securing such Indebtedness and all guarantees, suretyships and
comfort letters given in connection with such Indebtedness, other than the
Indebtedness of Probike S.A. (Pty) Limited.
8.8. Exclusivity. Without prior written approval from or the involvement
-----------
of both Perseus and LLC, the Sellers shall not, and the Sellers shall not permit
any Subsidiary or any officer, director, agent, representative or Affiliate of
the Sellers to, directly or indirectly, enter into any written or oral agreement
or understanding with any Person regarding Another Transaction (as defined
below). As used herein, the term "Another Transaction" means the sale of any
material assets of the Sellers or any Principal Subsidiary (other than the sale
of assets in the ordinary course of business) or any sale,
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merger, consolidation, public offering, reorganization, dissolution,
recapitalization, business combination or similar transaction involving any of
the Sellers or any Principal Subsidiary, or any of the Seller's or any Principal
Subsidiary's capital stock (or rights to acquire such capital stock).
8.9. GAAP Financial Statements. Before the Closing, the Sellers shall: (a)
-------------------------
commence the preparation of (i) combined financial statements of the
Subsidiaries as of December 31, 1997, and the related statements of earnings and
of cash flows for the fiscal year then ended in accordance with U.K. GAAP (the
"1997 U.K. GAAP Financials"); (ii) combined financial statements of the
Subsidiaries as of December 31, 1997 and 1996, and the related statements of
earnings and of cash flows for each of the three fiscal years ended December 31,
1997, 1996, and 1995 in accordance with U.S. GAAP and in accordance with
Regulation S-X as promulgated by the United States Securities Exchange
Commission ("Regulation S-X") (the financial information for the period ended
December 31, 1997 is referred to as the "U.S. GAAP Audited Financials") and the
financial information related to periods ending prior to December 31, 1997 are
referred to as the "Prior Years U.S. GAAP Financials"); and (b) instruct Xxxxxx
Xxxxxxxx to audit (i) the 1997 U.K. GAAP Financials; and (ii) the 1997 U.S. GAAP
Financials and the Prior Years U.S. GAAP Financials. Together, the 1997 U.S.
GAAP Financials and the Prior Years U.S. GAAP Financials are referred to herein
as the U.S. GAAP Audited Financials." Together, the U.S. GAAP Financials and the
1997 U.K. GAAP Financials are referred to herein as the "GAAP Audited
Financials." Delivery of the 1997 U.K. GAAP Financials shall constitute a
representation by the Sellers and the Company that the 1997 U.K. GAAP Financials
are true and complete, correctly reflect and present a fair view of the assets
and liabilities and fairly present the financial condition and operating results
of the Subsidiaries on a combined basis for the year ended December 31, 1997.
Delivery of the 1997 U.S. GAAP Financials shall constitute a representation by
the Sellers that any information provided by the Company to Xxxxxx Xxxxxxxx
solely for the purpose of the translation of the 1997 U.K. GAAP Financials into
U.S. GAAP format is true and correct in all material respects and that the
Sellers have no knowledge of any error in such translation. Delivery of the
Prior Years U.S. GAAP Financials shall constitute a representation by the
Sellers that the information with respect to the Subsidiaries contained in the
Financial Statements is true and correct in all material respects and that the
Sellers have no knowledge of any error in the translation to the Prior Years
U.S. GAAP Financials. The Sellers shall instruct Xxxxxx Xxxxxxxx to deliver the
GAAP Audited Financials in draft form to the Buyer after completion of such
audit at least five (5) Business Days prior to delivering their report thereon,
and the Buyer shall be entitled to provide the Sellers with comments on such
GAAP Audited Financials for two (2) Business Days after such delivery. In the
event that the Sellers and the Buyer disagree as to whether the Buyer's comments
should be incorporated into the final GAAP Audited Financials, the Sellers and
the Buyer shall use their best efforts to resolve such dispute. The Sellers
shall use commercially reasonable efforts to deliver, or to cause Xxxxxx
Xxxxxxxx to deliver, the GAAP Audited Financials
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and an unqualified and unmodified opinion of Xxxxxx Xxxxxxxx with respect
thereto, to both LLC and Perseus at least five (5) Business Days prior to the
Closing Date. The Buyer and the Sellers shall use commercially reasonable
efforts to obtain the consent of Xxxxxx Xxxxxxxx to the use of its opinion with
respect to the U.S. GAAP Audited Financials in any registration statement filed
by the Buyer or any of the Subsidiaries with the SEC.
8.10 Transfers and Intercompany Obligations. Prior to the Closing, the
--------------------------------------
Sellers shall cause the assets identified on the Schedule of Excluded Assets
attached as Exhibit 8.10A to this Agreement and made a part hereof (the
"Excluded Assets") to be transferred and sold to one or more Affiliates of the
Sellers for the prices indicated on such Schedule of Excluded Assets. None of
the Excluded Assets is necessary for or has been used since January 1, 1997 by
the Subsidiaries in the business of designing, manufacturing, distributing and
selling bicycles, bicycle components and accessories. Except (A) for those
intercompany obligations arising out of any costs, Taxes, fees and other
expenses incurred by the Subsidiaries in connection with the establishment and
financing of DFS and (B) to the extent otherwise provided in the Transaction
Outline, prior to the Closing, the Sellers shall cause all of the intercompany
obligations between the Sellers and the Subsidiaries as identified on the
Schedule of Intercompany Obligations attached as Exhibit 8.10B to this Agreement
and made a part hereof to be first offset against other intercompany debt. The
remaining net amounts owed by (i) the Subsidiaries (the "Assigned Debt") to
Derby International and any Affiliate of Derby International that is not a
Subsidiary (a "Seller Affiliate") shall be assigned by the relevant lender to
the Subsidiary or Subsidiaries designated by the Buyer not less than ten (10)
Business Days before the Closing or (ii) Derby International and any Seller
Affiliate to the Subsidiaries shall be assigned, canceled, contributed to
capital or otherwise settled (without the payment of cash) as the Buyer and
Sellers may agree. At or after the Closing, the Buyer shall use, and shall
cause the Subsidiaries and their Affiliates to use, commercially reasonable
efforts to replace or remove all guarantees, suretyships and similar obligations
of the Sellers and Seller Affiliates given, issued or made with respect to any
obligations of the Subsidiaries.
8.11 Business Opportunities. If and when requested by the Buyer during the
----------------------
two (2) year period following the Closing, the Sellers shall assign, or cause to
be assigned, to the Company for no additional consideration (above cost) all
rights held by either of them or any of their Affiliates (other than the
Subsidiaries) with respect to the acquisition of businesses or business assets
in the same line of business as the Business as conducted prior to the Closing.
8.12 Xxxxxxx X. Xxxxxx, Xx. Employment Contract. At the Closing, the
------------------------------------------
Sellers shall retain all responsibility for payment of the Stock Appreciation
Fund as defined in subclause 1(g) of Appendix B to the Amended & Restated
Employment Agreement dated August 29, 1997 by and between Derby International
and Xxxxxxx X. Xxxxxx, Xx. (the "Employment Agreement") and the increase in such
Stock Appreciation Fund due on the
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Closing Date as a result of the Recapitalization Transactions, on the condition
that such Employment Agreement is terminated at the Closing and replaced with a
new employment agreement in accordance with Section 18.1(b).
9. INDEMNIFICATION BY THE SELLERS
------------------------------
9.1. Obligation To Indemnify. Subject to the provisions of Sections 9.2
-----------------------
and 9.3 and the procedures set forth in Section 11, the Sellers jointly and
severally agree to hold harmless and indemnify, if prior to the Closing, Perseus
and LLC, their respective directors, officers, members and Affiliates, or, if on
or after the Closing, the Subsidiaries and their Affiliates (collectively, the
"Buyer Indemnified Parties") with respect to any liabilities, losses, damages,
or costs (including reasonable legal fees and court costs) of any kind, which
shall be suffered or incurred as a result of: (a) any circumstances or state of
facts constituting a breach of any representation or warranty made by the
Sellers in this Agreement; (b) the breach of any covenants of the Sellers
contained in this Agreement; (c) any Indemnified Liability; (d) any Special
Environmental Liability; or (e) without giving effect to the disclosure of such
liabilities on the exhibits attached hereto, any Special Tax Liabilities or
Special Product Liabilities. "Special Tax Liabilities" means any Netherlands tax
liability, including penalties and interest, resulting from the disallowance of
interest deduction on loans owed to the Company and deducted by extending the
fiscal year of certain Dutch Subsidiaries in 1996 and 1997. "Special Product
Liabilities" means damages, losses, costs or expenses of the Company (including
reasonable attorneys' fees) arising from product liability claims based on
products sold prior to the Closing by the Company which exceed in the aggregate
four hundred thousand United States dollars ($400,000). "Indemnified Liability"
shall mean: (1) all amounts payable in respect of the "Make-Whole Amount" or
"Modified Make-Whole Amount" as such terms are defined in the Note Purchase
Agreement dated as of September 1, 1993 among Derby Holding B.V. ("DHBV"), Derby
International and the purchasers named therein (the "Note Purchase Agreement")
with respect to the purchase and sale of three series of Senior Notes of DHBV
(the "Senior Notes"), less any profits realized under the interest rate swaps
(the interest rate component and not the foreign exchange component) under the
ISDA Master Agreement, dated September 15, 1994, between DHBV and Bankers Trust
International plc; (2) all amounts accrued, paid or payable as interest in
respect of the Senior Notes from November 11, 1997 through the January 31, 1998,
plus fifty percent (50%) of amounts paid or payable in respect of accrued
interest on the Senior Notes from and including February 1, 1998 to March 29,
1998, plus one hundred percent (100%) of amounts paid or payable in respect of
accrued interest on the Senior Notes from and including March 29, 1998 to the
Closing Date; (3) any interest accrued and payable after the Closing Date until
the date of prepayment (or amounts payable in lieu of interest payable to enable
prepayment on or about the Closing Date) in the event that the holders of the
Senior Notes do not agree to the repayment of the Senior Notes on the Closing
Date, provided, however,
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that the parties shall use all commercially reasonable efforts to obtain the
consent of the holders of the Senior Notes to ensure the prepayment of the
Senior Notes on or as soon as possible after the Closing Date; (4) any
liabilities or obligations, whether accrued, absolute or contingent, whether
known or unknown, whether due or to become due, which are unrelated to the
Business or arise out of assets disposed of by the Business prior to the
Closing; (5) any liability or obligation owed with respect to intercompany
payables or other liabilities owed to the Sellers or any Affiliate of the
Sellers (other than the Subsidiaries) and not assigned or transferred to the
Company or one of the Subsidiaries; (6) all taxes, fees, expenses and other
costs (i) arising from (A) the transfers of capital stock and assets from Derby
International to DFS or from DFS or Centum to the Company, (B) the transfer of
assets by Derby International, DFS or Centum which directly results in the
issuance of securities of the Company or RIC to Derby International, DFS or
Centum or (C) the issuance of notes or payment of cash or cash equivalent
consideration to Derby International, DFS or Centum which are part of or
directly related to the DFS Payment, (ii) arising from the issuance or exchange
of the Senior RIC Shares (as defined in the Exchange Agreement) or (iii) arising
out of the transactions contemplated in the third and fourth sentences of
Section 8.10 or those parts of the Transaction Outline which relate to the
repayment, cancellation, contribution or offset of the intercompany obligations
of the type described in the third sentence of Section 8.10 herein; (7) any
liabilities, costs or expenses arising from or relating to any default under the
Senior Notes caused by the payment of dividends in September or December 1997 in
violation of the Note Purchase Agreement, provided, however, that such
indemnification shall not apply unless the Senior Notes are repaid as soon as
permitted by the holders of the Senior Notes on or after the Closing Date; and
(8) all costs, Taxes, fees and other expenses incurred by the Subsidiaries in
connection with the establishment and financing of DFS and all outstanding
amounts borrowed from any Subsidiary by Derby International, DFS or any Seller
Affiliates in connection therewith. Except in the case of the Indemnified
Liabilities, all liability of the Sellers shall be reduced by and to the extent
of any provisions made on the books and records of the Subsidiaries and
reflected on the Financial Statements or any unaudited financial statements
delivered prior to the date hereof with respect to the obligations or
liabilities upon which a claim for indemnification is based. "Special
Environmental Liability" shall mean all costs, liabilities or obligations
arising from or relating to soil or groundwater contamination on, or migrating
from, any Real Estate prior to the Closing Date, whether or not such
contamination would constitute a breach of the Sellers' representations and
warranties made in Section 6.7 hereof, but only if the cost of remediation of
such contamination of any particular site exceeds one million United States
dollars ($1,000,000) per year for at least five (5) consecutive years.
Notwithstanding anything in this Section 9.1 of the contrary, except as
specifically provided in Section 15.6, the Sellers shall have no liability to
the Buyers under this Section 9.1 for Transaction Expenses.
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9.2. Survival of Representations and Warranties. Subject to the
------------------------------------------
limitations in Section 9.3, all the representations and warranties of the
Parties contained in this Agreement shall survive the Closing hereunder and
continue in full force and effect thereafter for the periods noted in Section
9.3 below.
9.3. Exclusions and Limitations.
--------------------------
(a) The Sellers' obligations under this Section 9 shall remain in
full force and effect:
(i) with respect to any Indemnification Notice (as defined in
Section 11 below) (other than in relation to the matters referred to in
subsections (ii) and (iii) below) which is delivered to the Sellers no later
than thirty (30) days after the second (2nd) anniversary of the Closing;
(ii) with respect to any Indemnification Notice containing
claims relating to Environmental Law submitted by the Buyer pursuant to Section
11 which is delivered to the Sellers no later than thirty (30) days after the
third (3rd) anniversary of the Closing (the parties agreeing that the Sellers
shall remain obligated pursuant to clause (d) of Section 9.1 with respect to
claims relating to matters which may subsequently constitute Special
Environmental Liabilities if but only if an Indemnification Notice identifying
such claim as relating to a potential Special Environmental Liability is
delivered to the Sellers no later than thirty (30) days after the third (3rd)
anniversary of the Closing Date); and
(iii) with respect to any Indemnification Notice containing
claims relating to Tax submitted by the Buyer pursuant to Section 11 which is
delivered to the Sellers no later than thirty (30) days after the fifth (5th)
anniversary of the Closing.
(b) Subject to the applicable limitations period noted above, the
obligations of the Sellers to indemnify the Buyer Indemnified Parties shall be
reduced to the extent that any liabilities for which the Sellers have an
Indemnification obligation are covered under existing insurance policies (and
any renewals or replacements thereof) to the extent of any reimbursement or
benefit of comparable value actually received by the Buyer, any Subsidiary or
any Affiliate of the Buyer or any Subsidiary or any lender of any such Persons
under any such insurance policy.
(c) Notwithstanding anything to the contrary contained in this
Section 9, the Sellers' obligation hereunder shall be reduced by an amount equal
to ten million United States dollars ($10,000,000) (the "Deductible"), and the
Sellers shall have no liability for any individual claim unless the loss
incurred in respect thereof is greater than four hundred fifty thousand United
States dollars ($450,000). For purposes of determining the Sellers' obligations
under Section 9 of this Agreement, the existence of a breach of any
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representation or warranty shall be determined without regard to any
qualification that any fact, event or circumstance be or not be "material," or
be accurate in "all material respects" or have or not have or caused a "material
adverse effect" except to the extent that such materiality relates to claims by
the Buyers for relief other than monetary damages. For purposes of clarity and
for the avoidance of doubt, all losses incurred in respect of any single fact,
circumstance or occurrence or any group of related facts, circumstances or
occurrences that alone or together constitute a misrepresentation, violation of
law, inaccuracy or omission shall be deemed to be an individual claim. All
amounts in excess of such Deductible shall be payable to the Buyer Indemnified
Party designated by LLC, as appropriate with interest at a rate equal to LIBOR
within forty-five (45) Business Days after the date of the Indemnification
Notice for such claim.
(d) this Agreement and for any losses, damages or costs incurred by
the Buyer Indemnified Parties in connection herewith shall be fifty million
United States dollars ($50,000,000).
(e) The limitations set forth in Sections 9.3(a), (b) and (c) shall
not apply to any claim for indemnification: (i) pursuant to clause (c) of
Section 9.1; (ii) as a result of a knowing or intentional breach or fraud on the
part of either Seller; or (iii) as a result of the breach of any representation
or warranty set forth in Section 6.1(b), Section 6.13(b) or Section 6.14 (with
respect only to the principal amount of Indebtedness for borrowed money); (iv)
pursuant to clause (b) of Section 9.1; provided, however, that the
Indemnification Notice with respect to the foregoing subclauses (i) and (iii)
must be submitted on or before the thirtieth day after the sixth anniversary of
the Closing Date and the Indemnification Notice with respect to the foregoing
subclause (iv) in respect of covenants which are required to be performed on or
prior to the Closing Date must be submitted on or before the thirtieth day after
the fifth anniversary of the Closing Date (except for claims relating to
breaches of covenants set forth in Section 8.3, the Indemnification Notice for
which claims must be submitted on or before the thirtieth day after the third
anniversary of the Closing Date). The limitations set forth in Section 9.3(d)
shall not apply to any claim for indemnification: (i) as a result of or pursuant
to clauses (6) and (8) of the Indemnified Liability definition set forth in
Section 9.1 above; (ii) as a result of intentional fraud on the part of either
Seller; or (iii) as a result of the breach of any representation or warranty set
forth in Section 6.1(b). Notwithstanding anything to the contrary in this
Section 9, the covenants set forth in Sections 8.2 (Management Responsibility),
8.4 (Consents and Approvals), 8.6 (Fulfillment of Conditions), 8.7
(Indebtedness), 8.8 (Exclusivity), 8.9 (GAAP Financial Statements) and 16.3
(Hedging) shall not survive the Closing.
(f) Notwithstanding anything to the contrary herein, Sellers shall
have no indemnification liability under this Section 9 arising from a "Triggered
Tax Liability." A "Triggered Tax Liability" is (i) any liability for income or
other taxes under Netherlands law due to a reopening or reinvestigation of prior
taxable periods, but only to the extent
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that any additional tax liabilities (including interest and penalties) for prior
periods arises from the reorganization or recapitalization in order to
accommodate the placement of debt in such Subsidiaries and (ii) any liability
for any steps taken or omitted to be taken by the Company or any Subsidiary
after the Closing that causes the representation of the Sellers contained in
Section 6.4(p) above to be untrue. In the event that Sellers deliver a Trigger
Tax Notice on or before March 17, 1998, and LLC does not exercise its right to
terminate this Agreement under Section 18.1(g), the reference to Netherlands law
in this Section 9.3(f) shall be amended to include the laws of each other
jurisdiction included in such Trigger Tax Notice.
(g) If, pursuant to Section 9.1, the Sellers make to one or more
Buyer Indemnified Parties a payment or payments in respect of a breach or
alleged breach of the representations and warranties made in Section 6.6(b),
6.6(c) or 6.12 of this Agreement, which breach gave rise to reduction or
depreciation in value of an asset of a Subsidiary (including, without
limitation, any item of inventory or any account receivable), and the amount of
such payment or payments equals or exceeds: in the case of an item of inventory,
its book value (without regard to the reduction in value resulting from the
breach or alleged breach); in the case of an account receivable, the written-
down value of such account (without regard to any further reductions resulting
from the breach or alleged breach); and in the case of any other asset, the fair
market value of such asset (determined by an independent appraiser without
regard to the reduction or depreciation in value resulting from the breach or
alleged breach); then, in each such case, the Sellers shall have the right to
acquire such Subsidiary's entire right, title and interest in such asset at the
depreciated or recoverable value of such asset (determined after giving effect
to the reduction or depreciation in value resulting from the breach or alleged
breach). Notwithstanding anything to the contrary contained in this Section
9.3(g), the obligations of the relevant Subsidiary to sell any such assets to
the Sellers shall be limited to the extent that:
(i) the Financing Documents or any other agreement or
documentation evidencing material indebtedness of such Subsidiary prohibit such
sale or disposal (the "Subsidiary Loan Documents");
(ii) such sale or disposal would cause a default under the terms
of the Financing Documents or the Subsidiary Loan Documents; or
(iii) such sale or disposal would interfere with the business
of such Subsidiary in any material way or would cause the Company or any
Subsidiary to incur any loss, expense, or damages in respect of which it is not
entitled to indemnification under this Section 9.
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(h) The Sellers shall have no liability for any breach of the German
Basket Representation contained in Section 6.4(p) except in the event and to the
extent that the Buyer and/or the Company and their Affiliates have first pursued
in good faith all possible courses of action against Xxxxxx Xxxxxxxx with
respect to any inaccuracy contained in their opinion attached as Exhibit 6.4A
and have been unable to fully recover from Xxxxxx Xxxxxxxx their losses arising
as a result of the breach of such representation; provided that, nothing herein
shall limit the right of Buyer and/or the Company and their Affiliates from
delivering to the Sellers an Indemnification Notice during the period the Buyer
and/or the Company and their Affiliates are pursuing courses of action against
Xxxxxx Xxxxxxxx as required hereunder; and further provided that such
Indemnification Notice is delivered within the time limitations disclosed in
Section 9.3(a) above.
10A. INDEMNIFICATION BY PERSEUS
--------------------------
Subject to the procedures set forth in Section 11, Perseus agrees to
hold harmless and indemnify the Sellers and their respective directors,
officers, members and Affiliates (other than the Subsidiaries) with respect to
any liabilities, losses, damages or costs (including reasonable legal fees and
court costs) of any kind which shall be suffered or incurred as a result of: (a)
any breach of any representation or warranty made by Perseus in this Agreement;
(b) the breach of any covenants of Perseus contained in this Agreement; and (c)
as a result of a knowing or intentional breach or fraud on the part of Perseus;
provided that the Sellers must make a written claim for indemnification against
Perseus no later than thirty (30) days after (i) the second (2nd) anniversary of
the Closing for claims made under subsection (a) above and (ii) the fifth (5th)
anniversary of the Closing for claims made under subsection (b) above its
respect of covenants which are required to be performed on or prior to the
Closing Date, and further provided, that no such time limitation shall apply to
any claim made with under subsection (c) above. Notwithstanding anything to the
contrary in this Section 10A, the covenants set forth in Sections 8.2
(Management Responsibility), 8.4 (Consents and Approvals), 8.6 (Fulfillment of
Conditions), 8.7 (Indebtedness), 8.8 (Exclusivity), 8.9 (GAAP Financial
Statements) and 16.3 (Hedging) shall not survive the Closing.
10B. INDEMNIFICATION BY LLC
----------------------
Subject to the procedures set forth in Section 11, LLC agrees to hold
harmless and indemnify the Sellers and their respective directors, officers,
members and Affiliates (other than the Subsidiaries) with respect to any
liabilities, losses, damages or costs (including reasonable legal fees and court
costs) of any kind which shall be suffered or incurred as a result of: (a) any
breach of any representation or warranty made by LLC in this Agreement; (b) the
breach of any covenants of LLC contained in this Agreement; and (c) as a result
of a knowing or intentional breach or fraud on the part of LLC; provided that
the Sellers must make a written claim for indemnification against LLC no later
than thirty (30) days after (i) the second (2nd) anniversary of the Closing for
claims made under
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subsection (a) above and (ii) the fifth (5th) anniversary of the Closing for
claims made under subsection (b) above its respect of covenants which are
required to be performed on or prior to the Closing Date, and further provided,
that no such time limitation shall apply to any claim made with under subsection
(c) above. Notwithstanding anything to the contrary in this Section 10B, the
covenants set forth in Sections 8.2 (Management Responsibility), 8.4 (Consents
and Approvals), 8.6 (Fulfillment of Conditions), 8.7 (Indebtedness), 8.8
(Exclusivity), 8.9 (GAAP Financial Statements) and 16.3 (Hedging) shall not
survive the Closing.
10C. INDEMNIFICATION BY THE COMPANY
------------------------------
Subject to the procedures set forth in Section 11, following the
Closing the Company agrees to hold harmless and indemnify the Sellers and their
respective directors, officers, members and Affiliates (other than the
Subsidiaries) (each a "Company Indemnified Party") (other than in their capacity
as shareholders of the Company or any other Subsidiary) with respect to any
liabilities, losses, damages or costs (including reasonable legal fees and court
costs) of any kind which shall be suffered or incurred as a result of: (a) any
failure of any Subsidiary following the Closing to comply with (i) any agreement
referred to in Section 6.11 (so long as a Subsidiary is a party thereto) or (ii)
any Environmental Law applicable to it, in each case, so long as such failure
was caused by the Subsidiaries after the Closing Date; (b) any claims against
any guarantee, suretyship or similar contingent obligation of the Sellers with
respect to any Indebtedness or other obligations of the Subsidiaries which was
not released or discharged at the Closing in accordance with Exhibit 8.3 unless
the Buyer is entitled, pursuant to Section 9, to indemnification in respect of
such Indebtedness or other obligations of the Subsidiaries, (c) any waiver,
cancellation, forgiveness, assignment or other disposition after the Closing
Date of any portion of the Assigned Debt, if any (other than by payment in
accordance with the terms of such Assigned Debt except to the extent such
payment would violate agreements with taxing authorities); (d) from all expenses
and costs incurred and tax liabilities of any kind resulting from the actions
described in the Transaction Outline other than (i) those liabilities, costs or
expenses in respect of which the Sellers have agreed to indemnify the Buyer
under clause (6) of Section 9.1 and (ii) legal fees and related expenses as
provided in Section 15.6 and (e) any steps taken or failed to be taken by the
Company or the Subsidiaries after the Closing which causes the German Basket
Representation (as set forth in Section 6.4(p) above) to be untrue.
11. INDEMNIFICATION PROCEDURE
-------------------------
11.1. Procedure. Upon the Buyer's knowledge that any event has occurred
---------
which could give rise to the Sellers' liability under Section 9 of this
Agreement, the following provisions shall apply:
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(a) Either Perseus or LLC shall give prompt written notice to the
Sellers of such event (an "Indemnification Notice") and shall provide all
reasonable particulars thereof, provided, that any delay in giving such notice
shall not relieve the Sellers of their obligations except to the extent of any
damages actually suffered by the Sellers as a result of such delay.
(b) During a period of twenty (20) Business Days following the giving
of an Indemnification Notice to the Sellers, the Buyer and the Sellers will
attempt in good faith to resolve any differences which they may have with
respect to any matters constituting the subject matter of such notice. If, at
the end of such period, the Sellers and the Buyer fail to reach agreement with
respect to all such matters, then any matter as to which agreement is not so
reached may, thereafter, be submitted to the competent court pursuant to Section
17 of this Agreement.
(c) Notwithstanding the submission of any dispute to the competent
court pursuant to Section 11.1(b) above, in the case of liabilities arising with
respect to any Tax or social security matters, the Sellers shall pay all amounts
required to be paid as directed by the issuing Taxing Authority (or, in the case
of a disputed social security matter, the government authority having
jurisdiction over such matter) assessing such amounts within the time period
indicated by such authority to avoid incurring any interest, penalties or other
liabilities. The Buyer shall promptly furnish the Sellers with adequate
documentation of such amounts, such as copies of a tax invoice. In the event of
the successful resolution of such dispute, the Sellers shall be entitled to
receive from the relevant Buyer Indemnified Party the full amount paid by the
Sellers under this Section 11.1(c), or such lesser amount as the Buyer
Indemnified Party or any Affiliate of such Buyer Indemnified Party shall be
entitled to receive as a refund, rebate, credit or other benefit as a result of
the successful resolution of such dispute, including any interest received in
respect of such refund, rebate or credit. If the Sellers fail to timely make
payment as required by this Section 11.1(c), any payment by Buyer (or the
applicable Subsidiary) shall in no event absolve the Sellers of their
obligations to indemnify the Buyer and its Affiliates for such payment.
(d) The Sellers shall have the right to participate, and, to the
maximum extent permitted by law, join, at their cost and by counsel of their
choosing, in the defense of any claim, action, suit or proceeding asserted or
initiated against the Buyer or any Subsidiary constituting the subject matter of
any Indemnification Notice. If and to the extent the Sellers indemnify a Buyer
Indemnified Party with respect to any matter hereunder, such Buyer Indemnified
Party shall assign to the Sellers any claims such Buyer Indemnified Party may
have against other Persons with respect thereto and shall receive in trust for,
and shall pay over to, the Sellers any amounts received by it from any such
Person in respect thereof.
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(e) If a party to an action, the Buyer shall properly and diligently
defend, and whether or not the Buyer is a party to an action, shall cause each
Subsidiary that is a party thereto to properly and diligently defend, any claim,
suit, action or proceeding referred to in the Indemnification Notice and shall
refrain, and shall cause each Subsidiary to refrain, from taking any action
which could prejudice the defense of the Sellers' interest hereunder.
(f) No settlement shall be effected by the indemnifying party without
the consent of the person seeking indemnification (which consent shall not be
unreasonably withheld) unless, in connection with such settlement, the person
seeking indemnification is fully and unconditionally released from such asserted
liability (without any liability for payment), and the settlement does not
contain other terms or conditions that are adverse to the interests of the
person seeking indemnification. No settlement shall be effected by a person
seeking indemnification without the consent of the indemnifying party, such
consent not to be unreasonably withheld, unless the person seeking
indemnification would be liable for at least fifty percent (50%) of any payments
due pursuant to the terms of such settlement.
11.2. Procedure in Case of the Buyer's Liability. The provisions of Section
------------------------------------------
11.1 shall apply, mutatis mutandis, in case of Perseus', LLC's or the Company's
----------------
liability under Section 10A, 10B and 10C, respectively.
12. INVESTMENT BANKING FEES
-----------------------
(a) The Sellers shall indemnify and hold the Buyer and its Affiliates
(including, after the Closing, the Company) harmless against any claim by any
banker, broker, investment banker or agent for any fees or expenses claimed to
be due to such party in connection with the transactions provided for in this
Agreement as a result of any agreement with or commitment by the Sellers or the
Subsidiaries, excluding, however, any claim made by any party in connection with
the Debt Financing based on or arising out of any agreement entered into or
action taken or caused by the Buyer or its Affiliates or by the Sellers or any
of their Affiliates with the prior knowledge of the Buyer.
(b) Each of Perseus and LLC shall (but only with respect to itself)
indemnify and hold the Sellers and their Affiliates harmless against any claim
by any banker, broker, investment banker or agent for any fees or expenses
claimed to be due to such party in connection with the transactions provided for
in this Agreement as a result of any agreement with or commitment by Perseus or
its Affiliates (with respect to Perseus) or LLC or its Affiliates (with respect
to LLC).
13. PUBLIC ANNOUNCEMENTS
--------------------
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Except as otherwise required under any law, rule or regulation issued
by any government, regulatory, stock exchange or other agency or authority
having jurisdiction over any party, none of the parties to this Agreement, nor
the Affiliates of any of them shall make any public announcement relating to the
transactions provided for in this Agreement without the prior consent of the
other parties, which shall not be unreasonably withheld. The text of any public
announcement which any party proposes to make with respect to the transaction
shall be submitted to the other parties not less than five (5) Business Days
before the day on which the announcement is to be made, and the parties shall
consult not less than forty-eight (48) hours before the time of such public
announcement to agree the final text of such announcement.
14. CONFIDENTIALITY
---------------
14.1. Undertakings of the Parties. Except as mutually agreed in accordance
---------------------------
with Section 13 above, the Parties will keep confidential all provisions of this
Agreement, the Shareholders' Agreement and each of the Non-Competition
Agreements entered into by the Company with Xxxx Finden-Crofts and A. Xxxxxx
Xxxxxxxxx on the date hereof. Prior to the Closing, each of Perseus and LLC
agrees (with respect to itself) to keep and to cause its respective
representatives and Affiliates to keep confidential and not to use in its
business or operations any of the information, data, projections or budget
forecasts of a confidential nature obtained by Perseus and LLC, as the case may
be, from the Sellers or any of the Subsidiaries ("Confidential Information").
The obligations contained in this Section 14 shall not prohibit disclosure by
the Buyer of such confidential information to the extent required by law or its
legal advisers, accountants, bankers, financial or other advisers to the extent
necessary to carry out the transactions contemplated by this Agreement. The
parties shall obtain from any Person to whom such confidential information is
disclosed an undertaking to abide by the provisions of this Section 14, or, in
the case of disclosure required by law, the parties shall use their best efforts
to obtain confidential treatment of such disclosure.
14.2. Obligations in the Event of Termination. In the event that the
---------------------------------------
transactions contemplated by this Agreement are not consummated, Perseus and LLC
will return to the Sellers and will cause their respective representatives and
Affiliates to return to the Sellers upon request, and the Sellers will return to
the Buyer and will cause its representatives and Affiliates to return to the
Buyer, upon request, all documents and other materials (and copies thereof)
obtained from any of the other parties in connection with the transactions
contemplated by this Agreement, including all Environmental Assessments Reports
prepared by Buyer or received by Buyer with respect to the Sellers' and the
Subsidiaries' operations and Real Estate.
14.3. Obligations after the Closing. After the Closing, the Sellers will
-----------------------------
treat and hold as such all Confidential Information, refrain from using any
Confidential Information
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except in connection with this Agreement, and deliver promptly to LLC or
destroy, at the request and option of Buyer, all tangible embodiments (and all
copies) of Confidential Information which are in the Sellers' possession. In the
event that the Sellers are requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, the Sellers will notify Perseus and LLC promptly of the request or
requirement so that Perseus and LLC may seek an appropriate protective order or
waive compliance with the provisions of this Section 14.3. If, in the absence of
a protective order or the receipt of a waiver hereunder, the Sellers are, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Sellers may disclose the
Confidential Information to the tribunal; provided, however, that the Sellers
shall use its reasonable best efforts to obtain, at the request of Perseus or
LLC, an order or other assurance that confidential treatment will be accorded to
such portion of the Confidential Information required to be disclosed as Perseus
or LLC shall designate.
15. GENERAL TERMS
-------------
15.1. In case at any time any further action is necessary to carry out the
purposes of this Agreement, each of the parties will take such further action
(including the execution and delivery of additional instruments and documents)
as any other party reasonably may request, all at the sole cost and expense of
the requesting party (unless the requesting party is entitled to indemnification
under Sections 9, 10A, 10B or 10C above). The Sellers acknowledge and agree
that from and after the Closing, Perseus and LLC will be entitled to access to
all documents, books, records, agreements, and financial data relating to the
Subsidiaries.
15.2. Amendments. This Agreement may not be waived, changed, modified or
----------
discharged orally, unless an agreement in writing is signed by all parties to
this agreement.
15.3. Assignment. Except as otherwise specifically provided herein, no
----------
party may assign any of its rights, interests or obligations hereunder without
the prior written consent of the other parties, which consent shall not be
unreasonably withheld; provided, however, that Perseus and LLC may collaterally
assign its rights hereunder to any Person providing financing to Perseus and
LLC.
15.4. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which shall constitute one agreement, and each such
counterpart shall be deemed to have been made, executed and delivered on the
date set out at the head of this Agreement, without regard to the date when any
of such counterparts may actually have been made, executed or delivered.
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15.5. Entire Agreement. This Agreement (including Exhibits hereto) and the
----------------
other documents and certificates referred to herein or delivered pursuant hereto
contains the entire agreement of the parties with respect to the transfer of the
Principal Subsidiaries Shares and the purchase and sale of the Buyer Shares and
supersedes all prior agreements between the parties, whether written or oral,
with respect to the proposed transactions. No representation or statement with
respect to the Sellers, the Subsidiaries or the Business shall have any force or
effect unless set forth in this Agreement (or any Exhibit hereto or certificate
delivered in connection herewith).
15.6. Expenses. Unless this Agreement is terminated prior thereto, at the
--------
Closing, the Company or the Subsidiaries shall reimburse: (i) Perseus and LLC
(or their respective Affiliates) for all reasonable out-of-pocket fees and
expenses incurred in connection with the transactions contemplated by this
Agreement ("Transaction Expenses"), and (ii) the Sellers for up to seventy-five
thousand dollars ($75,000) of their legal fees and related expenses incurred in
connection with the negotiation, documentation and implementation of the tax
structuring of the Recapitalization Transactions, other than fees and expenses
related to the transfer of shares of capital stock of the Principal Subsidiaries
from Derby International to DFS, and (iii) LLC, Perseus and the Sellers for all
reasonable legal fees and expenses incurred by or on behalf of LLC, Perseus and
the Sellers in connection with possible acquisitions by the Company or any of
the Subsidiaries of, or possible business combinations of the Company or any of
the Subsidiaries with, other businesses. At the Closing, the Company shall also
pay the following closing fees: one million two hundred thousand United States
dollars ($1,200,000) to Xxxxxx Capital Partners; one million United States
dollars ($1,000,000) to Perseus Cycle, L.L.C.; and seven hundred thousand United
States dollars ($700,000) to Centenary Corporation. If this Agreement is
terminated other than pursuant to Section 18.1(c), (d), (e), (f), (g) or (h)
hereof, upon termination of this Agreement, the Company shall reimburse Perseus
and LLC (or their respective Affiliates) for all Transaction Expenses other than
the costs of preparing the Environmental Assessment Reports and sixty-six and
sixty-seven hundredths percent (66.67%) of the fees and expenses payable to
Chase Manhattan Bank N.A. and its affiliates under the commitment letter for the
Senior Credit Facility. If this Agreement is terminated pursuant to either
Section 18.1(c) or (d) hereof, the breaching party shall reimburse the
terminating party and the Company for all Transaction Expenses incurred by the
terminating party or the Company.
15.7. Headings. The descriptive headings contained in this Agreement are
--------
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
15.8. Notices. Any consent, communication or notice required or permitted
-------
to be given under this Agreement shall be made in writing and shall be deemed to
have been duly and validly given: (i) in the case of notice sent by letter or
cable, upon receipt of
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same; and (ii) in the case of notice sent by telefax, upon express
acknowledgment (also by telefax) of receipt of transmission by the receiving
party, addressed, in each case, as follows:
(a) if to the Buyer, to LLC and Perseus at the addresses indicated at
the head of this Agreement with copy to:
Xxxxxxxx & Xxxxx
000 00xx Xxxxxx X.X.
Xxxxxxxxxx X.X. 00000
Attention: Xxxx X. Xxxxx, Esquire
Facsimile: 000-000-0000
(b) if to the Sellers, to either or both at :
Derby International Corporation S.A.
0 Xxxxxxxxx xx xx Xxxxx
X-0000 Xxxxxxxxxx
Xxxxx Xxxxx of Luxembourg
Telefax: 352-451-23201
Attention: Chairman
with a copy to :
Xxxxxxxxx Xxxxx & Partners
0 Xxx Xxxxxx Xxxx
Xxxxxx XX0X 0XX
Telefax: 00-000-000-0000
Attention: Xxxxx X. Park
and a copy to:
Peabody & Xxxxxx LLC
00 Xxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esquire
Facsimile: 617-951-2125
or at such other address and/or telefax number as either party may hereafter
furnish to the other by written notice, as herein provided.
15.9. No Waiver. The failure to enforce or to require the performance at any
---------
time of any of the binding provisions of this Agreement shall not be construed
to be a waiver of such provisions and shall not affect either the validity of
this Agreement or any part thereof
-61-
or the right of either party to this Agreement thereafter to enforce each and
every provision in accordance with this Agreement.
16. POST CLOSING COVENANTS
----------------------
16.1. Litigation Support. In the event and for so long as any party is
------------------
actively contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, or demand in connection with: (a) any
transaction contemplated under this Agreement; or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving any of the Subsidiaries; each of the other parties will cooperate and
make available their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense.
16.2. Cooperation on Tax Matters.
--------------------------
(a) The Buyer, the Subsidiaries and the Sellers shall cooperate fully
as and to the extent reasonably requested by the other party in connection with
the filing of Tax Returns and any audit, litigation or other proceedings with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The parties
agree to cause the Subsidiaries to (i) retain all books and records with respect
to Tax matters pertinent to the Subsidiaries relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective Tax periods, and to abide by all record retention
agreements entered into with any Taxing Authority, and (ii) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records, and if the other party so requests, the relevant
Subsidiary shall allow the other party to take possession of such books and
records.
(b) The Buyer and the Sellers further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transaction contemplated hereby).
16.3 Hedging. Within seven (7) days after execution of this Agreement, the
-------
Company shall use its best efforts to agree with the Buyer on the purchase of
foreign currency option contracts which will result in hedging for the period
from the date of this Agreement until the Closing Date, the amount of cash
payable at the Closing in accordance
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with the Price in Section 2.2(b) above against an agreed amount of British
pounds sterling, Dutch guilders, German deutschemarks and Canadian dollars.
16.4 Additional Payment. On or before the sixtieth (60th) day following
------------------
the delivery of audited financial statements for the Company and its
subsidiaries for the 1998 fiscal year (the "Additional Payment Date"), the
Company shall pay to the Sellers the additional payment, if any, provided for in
Exhibit 16.4 attached hereto and made a part hereof (the "Additional Payment"),
provided, however, that payment of the Additional Payment, or a portion thereof,
may be deferred if and to the extent that such payment would itself cause a
default under the Financing Documents; and, provided further, that to the extent
the Company is required to defer the payment of any portion of the Additional
Payment in accordance with the foregoing clause, the Additional Payment (or
unpaid portion thereof) shall accrue interest from the Additional Payment Date
until paid at an annual rate equal to nine and three-quarters percent (9.75%),
provided further, that Perseus, LLC and the relevant Subsidiary shall use
commercially reasonable efforts to negotiate with the banks parties to the
Financial Documents to exempt the payment of 12% of the Additional Payment to
DFS under the Financial Documents. The Additional Payment (and any accrued but
unpaid interest thereon) shall be fully paid (A) upon the consummation of an
Approved Sale (as defined in the Shareholders' Agreement) unless such Approved
Sale is a transaction whereby the shareholders of the Company will become the
beneficial owners of securities of the surviving entity in substantially the
same proportion and no cash distributions are made to any shareholder of the
Company in connection with the consummation of such Approved Sale and (B) prior
to any distribution (other than a distribution of the securities of the Company)
to the Company's shareholders (other than payments of the Additional Payment to
DFS).
16.5. MS Sport Group Acquisition Price. For purposes of this Section 16.5,
--------------------------------
capitalized terms not otherwise defined in this Agreement shall have the same
meanings used in the Share Purchase Agreement dated August 8, 1997 by and
between Xxxxxx Xxxxxx and Univega Beteiligungen GmbH (fka PIA Zweite Verwaltungs
GmbH) (the "MS Sport Agreement"). The Sellers agree to reimburse the relevant
Subsidiary which pays the Purchase Price for the acquisition of the MS Group
Shares if and to the extent that the Base Price exceeds eighty percent (80%) of
an amount equal to five and one-half times (5.5x) the applicable average PBT for
the MS Group, all as defined and determined in accordance with the MS Sport
Agreement.
16.6 Minimum Net Worth. For a period of five (5) years after the Closing
-----------------
Date, the Sellers jointly agree to maintain a minimum net worth (excluding
goodwill) as determined in accordance with U.S. GAAP of fifty million United
States dollars ($50,000,000). For a period of two (2) years after the Closing
Date and for so long thereafter as any claims for indemnity made by any Buyer
Indemnified Party pursuant to Section 11 on or prior to the second (2nd)
anniversary of the Closing Date remain
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outstanding, DFS shall maintain on hand a balance in cash, government bonds,
and cash equivalents (i) until the thirtieth (30th) day after the second (2nd)
anniversary of the Closing Date, an amount equal to no less than nine million
----
United States dollars ($9,000,000) less the amount of all indemnification
payments made by DFS pursuant to Section 9 (other than amounts paid by DFS under
clauses (1), (2), (3) and (7) in the definition of "Indemnified Liability"
contained in Section 9.1 above) and (ii) after the thirtieth (30/th/) day after
the second (2nd) anniversary of the Closing Date for so long thereafter as any
claims for indemnity made up by any Buyer Indemnified Party pursuant to Section
11 on or prior to the thirtieth (30/th/) day after the second (2nd) anniversary
of the Closing Date remain outstanding, an amount equal to the lower of (x) nine
million United States dollars ($9,000,000) less the amount of all
----
indemnification payments made by DFS pursuant to Section 9 or (y) the aggregate
amount of all outstanding claims for indemnity made by Buyer Indemnified Parties
pursuant to Section 11 on or prior to the thirtieth (30/th/) day after the
second (2nd) anniversary of the Closing Date less all amounts paid to the
----
Buyer Indemnified Parties after the second (2nd) anniversary of the Closing
Date in respect of such claims (in either case, the "Minimum Balance"). At the
Closing, a portion of the Minimum Balance, in the amount of one million eighty
thousand United States dollars ($1,080,000) (the "Escrow Amount") shall be
placed by DFS in escrow with a bank or trust company acceptable to the Sellers
and the Buyer, as escrow agent, pursuant to an escrow agreement substantially in
the form of Exhibit 16.6 attached hereto. In the event that, prior to the later
of (i) the thirtieth (30/th/) day after second (2nd) anniversary of the Closing
Date and (ii) the date on which all of the indemnity claims by Buyer Indemnified
Parties outstanding on the thirtieth (30/th/) day after the second (2nd)
anniversary of the Closing Date have been satisfied or resolved, the balance of
cash and cash equivalents (including the Escrow Amount) on hand at DFS shall be
less than the then-required Minimum Balance, and to the extent that DFS then
becomes obligated pursuant to Section 9 to make any indemnity payments to a
Buyer Indemnified Party in an aggregate amount in excess of the actual amount of
cash and cash equivalents (including the Escrow Amount) then on hand at DFS, A.
Xxxxxx Xxxxxxxxx, Xxxx X. Finden-Crofts and Xxxxx X. Xxxxx, severally and not
jointly, in proportion to their respective direct and indirect ownership
interests in Derby International as of the Closing Date, shall contribute to DFS
for use solely to satisfy DFS's indemnification obligation, an aggregate amount
equal to the difference between the Minimum Balance and the actual amount of
cash and cash equivalents (including the Escrow Amount) then on hand at DFS.
16.7 Further Assistance. Each of the Sellers, Perseus and LLC shall
------------------
execute and deliver such further instruments of conveyance and transfer and take
such other additional action as the other parties to the Agreement may
reasonably request to effect, consummate and confirm the transactions
contemplated in this Agreement.
16.8 Modification of the Assigned Debt. Each of LLC and Perseus, in its
---------------------------------
capacity as a shareholder of the Company, shall use all reasonable efforts
(including,
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without limitation, by giving instructions to members of the Company's board of
directors nominated by it pursuant to the Shareholders' Agreement) to cause the
Company and its subsidiaries not to modify, cancel, assign, transfer, repay or
otherwise amend the terms of the Assigned Debt without the prior written consent
of the Sellers, which consent shall not be unreasonably withheld.
16.9 Payment Obligations. Each of LLC and Perseus, in its capacity as a
-------------------
shareholder of the Company, shall use all reasonable efforts (including, without
limitation, by giving instructions to members of the Company's board of
directors nominated by it pursuant to the Shareholders' Agreement) to cause the
Company and its subsidiaries to honor all payment and other obligations with
respect to which any one or more of the Sellers or their Affiliates (other than
the Subsidiaries) have given guarantees, suretyships, security or similar
undertakings which have not been discharged at the Closing; provided, however,
that the obligations of LLC and Perseus under this Section 16.9 shall not be
deemed to require LLC or Perseus to provide additional capital to meet such
obligations or to make any direct payment of such obligations.
17. GOVERNING LAW AND JURISDICTION
------------------------------
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO ANY MATTER ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
THE SUBJECT MATTER HEREOF MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY ACCEPTS
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO HEREBY WAIVES, AND
AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING PROVIDED
FOR IN THIS SECTION 17 THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT
OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT
THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY SAID COURTS OR THAT ITS PROPERTY IS
EXEMPT OR IMMUNE FROM EXECUTION, THAT THE SUIT, ACTION OR
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PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR (PROVIDED THAT PROCESS SHALL BE SERVED IN
ANY MANNER REFERRED TO IN THE FOLLOWING SENTENCE) THAT SERVICE OR PROCESS UPON
SUCH PARTY IS INEFFECTIVE. EACH OF THE PARTIES HERETO AGREES THAT SERVICE OF
PROCESS IN ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE MADE UPON IT IN ANY MANNER
PERMITTED BY THE LAWS OF THE STATE OF NEW YORK OR THE FEDERAL LAWS OF THE UNITED
STATES OR AS FOLLOWS: (A) BY PERSONAL SERVICE OR BY CERTIFIED OR REGISTERED MAIL
TO THE PARTY'S DESIGNATED AGENT FOR SUCH SERVICE IN SUCH STATE, OR (B) BY
CERTIFIED OR REGISTERED MAIL TO THE PARTY FOR WHICH INTENDED AT ITS ADDRESS SET
FORTH HEREIN. SERVICE OF PROCESS IN ANY MANNER REFERRED TO IN THE PRECEDING
SENTENCE SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF PROCESS UPON
SUCH PARTY.
18. TERMINATION.
-----------
18.1. Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) by the mutual agreement of the Sellers and the Buyer;
(b) by LLC at any time prior to the Closing, if the Company or
another Subsidiary has not entered into arrangements satisfactory to LLC in its
sole discretion in respect of the employment of each of the management employees
set forth on Exhibit 18.1, provided, however, that the terms and conditions of
the arrangements with such management employees shall not be less advantageous
to such management employees than the terms and conditions in effect at present;
(c) by LLC, if the Buyer is prepared to close and the Sellers have
breached in any material respect any of their material representations,
warranties, covenants or agreements contained in this Agreement, and such breach
has not been remedied within five (5) Business Days after receipt of notice
specifying such breach and demanding such breach to be remedied;
(d) by the Sellers, if the Sellers are prepared to close and either
Perseus or LLC has breached in any material respect any of its material
representations, warranties, covenants or agreements contained in this
Agreement, and such breach has not been remedied within five (5) Business Days
after receipt of notice specifying such breach and demanding such breach to be
remedied;
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(e) by any one of LLC, Perseus or the Sellers in the event the
Closing has not occurred on or before the Cut-Off Date, unless the failure of
such consummation or the failure to satisfy a condition precedent to Closing, as
applicable, shall be due to any action or inaction or due to a breach of any
representation or warranty made by the party seeking to terminate this Agreement
or the failure of such terminating party to comply in all material respects with
the agreements and covenants contained herein to be performed by such party on
or before the Cut-Off Date;
(f) by any one of LLC, Perseus or the Sellers if, prior to 5:00 p.m.,
Eastern Standard Time, on March 16, 1998, LLC, Perseus and Sellers have not yet
agreed on the Transaction Outline satisfactory to each party in its sole
discretion and the terminating party has delivered a written termination notice
to the other parties prior to 5:00 p.m. Eastern Standard Time, March 17, 1998;
(g) by LLC or Perseus in the event Sellers deliver a "Trigger Tax
Notice" on or before 5:00 p.m. Eastern Standard Time on March 17, 1998 and the
terminating party has delivered a written termination notice to the other
parties prior to 5:00 p.m. Eastern Standard Time on March 19, 1998;
(h) by LLC, Perseus or the Sellers if such party receives advice from
its counsel or tax advisors concerning tax consequences of the transactions
contemplated by this Agreement which are unacceptable to such party and such
terminating party has delivered a written termination notice to the other
parties prior to 5:00 p.m. Eastern Standard Time on the second Business Day
after the date of this Agreement; or
(i) by the Sellers, notwithstanding any waiver by LLC under Section
4.6(b) above, if, (A) as a result of one or more breaches, inaccuracies or
violations of the Sellers' representations or warranties, the Sellers determine
that, save for any such waiver, they would be unable to deliver at the Closing
the certificate required pursuant to Section 4.6 above, and any such breaches,
inaccuracies or violations would, in the reasonable opinion of the Sellers, be
likely to give rise to any liabilities, losses, damages or costs in excess of
six million United States dollars ($6,000,000) in the aggregate, (B) the Sellers
deliver a written notice to the Buyer to such effect, and (C) the Buyer does not
agree in writing that it shall have no right to indemnification under Section
9.1 after the Closing in respect of such breaches.
18.2. Procedure and Effect of Termination.
-----------------------------------
In the event of the termination and abandonment of this Agreement by
the Sellers, Perseus or LLC pursuant to Section 18.1 hereof, written notice
thereof shall forthwith be given to the other party or parties. If the
transactions contemplated by this
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Agreement are terminated as provided herein, this Agreement shall become void
and of no further force and effect, except for the provisions of Section 12
relating to investment banking fees, Section 13 relating to publicity, Section
14 relating to Confidentiality, Section 15.6 relating to expenses, and Section
18.3 relating to a Topping Fee and this Section 18.2; provided that such
termination shall not relieve any party then in breach of any representation,
warranty, covenant or agreement contained in this Agreement from liability in
respect of any such breach.
18.3 Topping Fee.
-----------
In the event that the Sellers terminate this Agreement pursuant to
Section 18.1(e) and within one hundred twenty (120) days after such termination
enter into any agreement with respect to a merger, recapitalization, sale of
stock or material assets or similar transaction involving one or more of the
Principal Subsidiaries or the Business and such transaction implies an equity
value for the Business of in excess of one hundred ninety-five million United
States dollars ($195,000,000) (a "Topping Agreement"), the Sellers shall
immediately upon consummation of the transactions contemplated by the Topping
Agreement pay to Perseus and LLC (in proportion to their respective investment
in the Subsidiaries as contemplated herein) in cash the sum of five million
United States dollars ($5,000,000) (the "Topping Fee").
9. SEVERABILITY
------------
If any provision of this Agreement is held to be invalid or
unenforceable by any judgement of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
* * * *
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:___________________________ By:___________________________
Title: Title:
By:___________________________ By:___________________________
Title: Title:
DC CYCLE, L.L.C. THE DERBY CYCLE
CORPORATION
By:___________________________ By:___________________________
Title: Title:
PERSEUS CYCLE, L.L.C.
By:___________________________
Title:
[CONTINUED ON NEXT PAGE]
The undersigned hereby join as parties to the foregoing Agreement
solely for the purposes of Sections 15, 16.6 and 17. Any notice, consent or
communications required or permitted to be given under this Agreement to any of
the undersigned shall be given, in the manner provided in Section 15.8,
addressed to him at the address set forth beneath his signature below.
------------------------ -------------------------- --------------------------
A. Xxxxxx Xxxxxxxxx Xxxx X. Finden-Xxxxxx Xxxxx H. Pearl
8 New Xxxxxx Xxxx Xxxxxxxxxxx Xxxxx Xxxxx 000
Xxxxxx XX0X 0XX Tamarisk Way 0000 X Xxxxxx, X.X.
England The Xxxxxxxxxxx Xxxxxxxxxx, XX 00000
East Preston USA
Xxxxxxxxxxxxx
Xxxx Xxxxxx XX00 0XX
Xxxxxxx
The undersigned hereby joins as a party to the foregoing Agreement as
a guarantor of the obligations of DC Cycle, L.L.C. under the foregoing Agreement
and under each of the other agreements to be entered into by DC Cycle, L.L.C. in
connection with the foregoing Agreement.
XXXXXX EQUITY PARTNERS, III
By: _______________________
Title:
EXHIBIT 2.2(A)
------------- ------------------ ------------------ ------------------ -------------------
ENTITY NUMBER OF AGGREGATE NUMBER OF AGGREGATE
SHARES OF PRICE PAID SHARES OF PRICE PAID
CLASS A FOR THE PREFERRED FOR THE
COMMON SHARES OF STOCK, SHARES OF
STOCK CLASS A SERIES A, PREFERRED
PURCHASED COMMON PURCHASED STOCK,
STOCK SERIES A,
PURCHASED PURCHASED
LLC 12,500 $12,500,000 25,000 $37,500,000
------------------ ------------------ ------------------ -------------------
Perseus 10,000 $10,000,000 -0- -0-
------------------ ------------------ ------------------ -------------------
TOTAL 22,500 $22,500,000 25,000 $37,500,000
CERTIFICATION
-------------
The undersigned, being the direct or indirect beneficial owners of not
less than seventy-five percent (75%) of the issued and outstanding common stock
of Derby International Corporation S.A. ("Derby International"), hereby agree,
represent and warrant as follows:
(a) that they shall vote and cause all Persons under their control to
vote in favor of the approval of the Recapitalization Transactions described in
a certain Recapitalization Agreement of even date herewith by and among Derby
International, The Derby Cycle Corporation, Derby Finance S.a.r.l., DC Cycle,
L.L.C. and Perseus Cycle, L.L.C. (the "Recapitalization Agreement"); and
(b) that the number of votes to which the undersigned and the Persons
under their control are entitled is sufficient to approve the Transactions under
the terms of the Articles of Incorporation and the Third Amended and Restated
Shareholders' Agreement by and among Derby International and its shareholders.
Capitalized terms not otherwise defined herein shall have the same meanings used
in the Recapitalization Agreement.
Executed this 11th day of March, 1998.
CENTUM INVESTMENTS LIMITED ___________________________________
A. XXXXXX XXXXXXXXX
By:_____________________________
Name:
Title:
___________________________________
XXXXX X. XXXXX
___________________________________
XXXX X. FINDEN-CROFTS
