SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported) APRIL 24, 1997
First South Africa Corp., Ltd.
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(Exact name of registrant as specified in its charter)
Bermuda 0-27494 N/A
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(State or other Jurisdiction (Commission (IRS Employer
or incorporation) File Number) Identification No.)
Clarendon House, Church Street, Hamilton HM CX, Bermuda
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (441) 295-1422
Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
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On April 24, 1997 First South Africa Corp., Ltd., through it's wholly
owned subsidiary corporation, First South African Holdings (Pty) Ltd., acquired
all of the outstanding stock and assets of Gull Foods CC ("Gull") from Alan
James, Ian Store, Douglas Varkevisser and Marlys Store. Gull is engaged in the
business of manufacturing a broad range of prepared foods. First South Africa
Corp., Ltd., intends to continue to operate the existing business of Gull.
The consideration for all of the stock and assets of Gull was 48
million South African Rand ( approximately $10.79 million). This price was
calculated based on a multiple of Gull's audited net earnings for fiscal year
ended February 28, 1997. Such payment will be made as follows.
1. On closing an amount equal to 14 million South African
Rand (approximately $3.15 million) in cash. An additional 245,000 First South
African Holdings, Class B shares. Such shares are valued at $1,347,500 at a
price of $5.50 a share.
2. A second payment of 4 million South African Rand
(approximately $900,000) will be made on the earlier of the listing of First
South Africa Corp., Ltd. Food subsidiary on the Johannesburg Stock Exchange or
September 30, 1997.
3. A third payment shall be made based on the results of the
year-ended June 30, 1998. The amount payable will be 4 (four) times the pre-tax
profits for the year ended June 30, 1998 multiplied by a factor of 16% (the
"third installment"). The third installment will be payable 50% in cash and 50%
in First South African Holdings Class B Shares. The price of the First South
African Holdings shares, for the purpose of the second installment will be
allotted at a price equal to the June 30, 1998 exchange rate multiplied by the
closing price of the shares of Common Stock of First South Africa Corp., Ltd, a
Bermuda registered company quoted on NASDAQ, on June 30, 1998.
4. A fourth payment shall be made based on the results of the
year-ended June 30, 1999. The amount payable will be 4 (four) times the pre-tax
profits for the year ended June 30, 1999 multiplied by a factor of 16% (the
"fourth installment"). The fourth installment will be payable 50% in cash and
50% in First South African Holdings Class B Shares. The price of the First South
African Holdings shares, for the purpose of the fourth installment, will be
allotted at a price equal to the June 30, 1999 exchange rate multiplied by the
closing price of the shares of Common Stock of First South Africa Corp., Ltd, a
Bermuda registered company quoted on NASDAQ, on June 30, 1999.
5. A fifth payment shall be made based on the results of the
year-ended June 30, 2000. The amount payable will be 4 (four) times the pre-tax
profits for the year ended June 30, 2000 multiplied by a factor of 16% (the
"fifth installment"). The fifth installment will be payable 50% in cash and 50%
in First South African Holdings Class B Shares. The price of the First South
African Holdings shares, for the purpose of the fifth installment, will be
allotted at a price equal to the June
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30, 2000 exchange rate multiplied by the closing price of the shares of Common
Stock of First South Africa Corp., Ltd, a Bermuda registered company quoted on
NASDAQ, on June 30, 2000.
First South Africa Corp., Ltd., paid the initial cash component
through its own cash resources and bank borrowings.
Item 7. FINANCIAL STATEMENT AND EXHIBITS.
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(a) Financial Statements of Businesses Acquired. Pursuant to
Instruction (b) (2) of Item 7, Form K, the registrant shall file the required
financial statements of Gull Foods CC within sixty days after May 8, 1997.
(b) Pro Forma Financial Information. Pursuant to Instruction
(b) (2) of Item 7, Form K, the registrant shall file the required financial
statements of Gull Foods CC within sixty days after May 8, 1997.
(c) Exhibits, The following exhibits are attached hereto:
1. Sale of Business Agreement between Gull Foods CC and Ian
Store, Alan James, Douglas Varkevisser, and Marlys Store and First South African
Holdings (Proprietary) Limited and First South Africa Corp., Ltd.
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SIGNATURES
Pursuant to the requirements of the securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST SOUTH AFRICA CORP. LTD.
By: /s/ Clive Kabatznik
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President
DATED: May 8, 1997
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SALE OF BUSINESS AND SHARES AGREEMENT
between
GULL FOODS CC
and
IAN STUART STORE
and
ALLEN VIVIAN JAMES
and
MARLYS STORE
and
DOUGLAS VARKEVISSER
and
FIRST SOUTH AFRICAN HOLDINGS (PROPRIETARY) LIMITED
and
FIRST SOUTH AFRICA CORP., LTD
and
JENKINSON INVESTMENTS (PROPRIETARY) LIMITED
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Webber Wentzel Bowens
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TABLE OF CONTENTS
1. Introduction
2. Definitions and interpretation
3. Suspensive conditions
4. The effective date accounts
5. The sale
6. Risk
7. Purchase price
8. Restrictions on disposal of FSAH "B" shares
9. Put options
10. Security for payment of the purchase price
11. Set-off of damages against instalments of the purchase price
12. Completion
13. Contracts and unfulfilled orders
14. Insolvency Act - section 34
15. Employees
16. Provident funds
17. Guarantees, suretyships and indemnities
18. Warranties
18.1.1 registration of Trek
18.1.2 shares of Trek
18.1.3 auditing and returns
18.1.4 change in financial position
18.1.5 dividends
18.1.6 liabilities
18.1.7 assets
18.1.8 suretyship
18.1.9 assets
18.1.10 manner of carrying on business
18.1.11 goodwill and scope of business
18.1.12 contracts
18.1.13 intellectual property rights
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18.1.14 laws, regulations, consents, licences and permits
18.1.15 labour laws, regulations, determinations,
agreements and disputes
18.1.16 insurance
18.1.17 employment, leave, remuneration and pension
18.1.18 restraint of trade
18.1.19 warranties regarding books of account
18.1.20 environmental warranties
19. Confidentiality
20. Restraints
21. Value-added tax
22. Breach
23. Arbitration
24. Costs
25. Miscellaneous matters
25.1 postal addresses
25.2 addresses for service of legal documents
25.3 entire contract
25.4 no representations
25.5 variation, cancellation, waiver
25.6 indulgences
25.7 cession
25.8 applicable law
25.9 jurisdiction
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1. INTRODUCTION
1.1 The seller carries on the business, as defined. The business is a going
concern.
1.2 The Trek sellers own the total membership interests in Trek.
1.3 The seller wishes to sell and the purchaser wishes to purchase the
business as a going concern, and the Trek sellers wish to sell their
shareholdings in Trek once Trek has been converted into a private limited
liability company on terms of the Companies Act, 1973, which shareholdings
the purchaser wishes to purchase on the terms and conditions set out
below. The purchaser also requires warranties and restraints of trade from
the warrantors, the seller and the Trek sellers, which these persons are
prepared to give.
1.4 The parties accordingly wish to enter into an agreement on the terms and
conditions set out below.
2. DEFINITIONS AND INTERPRETATION
2.1 In this agreement, unless inconsistent with the context, words referring
to:
2.1.1 one gender include a reference to the other genders;
2.1.2 the singular include the plural and vice versa;
2.1.3 natural persons include artificial persons and vice versa.
2.2 Whenever a number of days is prescribed in this agreement, such number
shall be calculated excluding the first and including the last day, unless
the last day falls on a Saturday, Sunday or official public
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2
holiday, in which case the last day shall be the next day which is not a
Saturday, Sunday or official public holiday.
2.3 Any schedules to this agreement shall be deemed to form part of this
agreement.
2.4 The following expressions shall, unless otherwise stated or inconsistent
with the context in which they appear, bear the following meanings and
cognate expressions shall bear corresponding meanings:
2.4.1 "THE BUSINESS" - means the business of the seller
conducted under the name "Gull
Foods" using the sale assets and
involving the manufacture of
biltong and dried meat products
and of value-added foods;
2.4.2 "THE CASH ON HAND" - the cash on hand and at bank of
the business at the effective
date, as reflected in the
effective date accounts;
2.4.3 "CLAIMS" - the claims of the Trek sellers
on loan account against Trek;
2.4.4 "THE COMPLETION DATE" - the 60th day after the signature
date, or such other date as may
be determined pursuant to clause
12.3;
2.4.5 "THE CONTRACTS" - those contracts of the seller
relating to the business;
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3
2.4.6 "CONVERSION DATE" - date on which Trek is converted
into a private company with
limited liability, in terms of
the Companies Act, 1973;
2.4.7 "THE CREDITORS" - all trade creditors of the
seller as at the effective date,
as reflected in the effective
date accounts;
2.4.8 "DEBTS" - all of the claims of the seller
against the debtors of the
business as at the effective
date, as reflected in the
effective date accounts;
2.4.9 "THE EFFECTIVE DATE" - 1 January 1997;
2.4.10 "THE EFFECTIVE DATE
ACCOUNTS" - the management accounts for the
seller and for Trek for the
period ended 31 December 1996 to
be prepared in accordance with
clause 4;
2.4.11 "THE EMPLOYEES" - those individuals employed by
the seller in the business on
the effective date;
2.4.12 "THE ESCROW
AGREEMENTS" - the escrow agreements
substantially in the forms of
the drafts annexed as Schedules
1 and 2;
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4
2.4.13 "FSAF" - First SA Food Holdings Limited,
formerly Cardington Investments
(Proprietary) Limited, a company
incorporated in accordance with
the laws of South Africa, which
has been established to hold the
food interests of FSAC and FSAH;
2.4.14 "FIXED ASSETS" - those fixed assets used by the
seller in the conduct of the
business at the effective date;
2.4.15 "THE FIRST INSTALMENT" - the first instalment of the
purchase price specified in
7.1.1;
2.4.16 "THE FOURTH INSTALMENT" - the fourth instalment of the
purchase price specified in
7.1.4;
2.4.17 "FSAC" - First South Africa Corp., Ltd,
registration number EC 21106, a
company incorporated under the
laws of Bermuda, certain of the
shares of which are quoted on
NASDAQ;
2.4.18 "FSAH" - First South African Holdings
(Proprietary) Limited,
registration number 95/03959/07,
a private company incorporated
according to the laws of the
Republic of
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5
South Africa, the "A" shares of
which are owned by FSAC;
2.4.19 "FSAH "B" SHARES" - "B" shares in the capital of
FSAH;
2.4.20 "THE INTELLECTUAL
PROPERTY" - the trademarks and all recipes,
know-how, copyright and other
intellectual property owned by
the seller;
2.4.21 "THE JSE" - The Johannesburg Stock Exchange;
2.4.22 "THE LANDLORDS" - The Mpumalanga Development
Corporation, from whom the
seller leases the premises;
2.4.23 "THE MANAGEMENT
AGREEMENT" - the management agreement
substantially in the form of the
draft annexed as Schedule 3;
2.4.24 "NEDBANK" - Nedbank, a division of Nedcor
Limited;
2.4.25 "THE PREMISES" - the premises from which the
seller conducts the business;
2.4.26 "THE PURCHASER" - Jenkinson Investments
(Proprietary) Limited,
registration number 96/14694/07,
a private company incorporated
according
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6
to the laws of the Republic of
South Africa, which is a wholly
owned subsidiary of FSAH;
2.4.27 "THE RETAINED
LIABILITIES" - all the liabilities of the
business as at the effective
date, whether actual or
contingent, other than the sale
liabilities;
2.4.28 "THE SALE ASSETS" - the aggregate of:-
2.4.28.1 the fixed assets;
2.4.28.2 the stock;
2.4.28.3 the debts;
2.4.28.4 the cash on hand;
2.4.28.5 the intellectual property;
2.4.28.6 the rights of the seller
arising on or after the
effective date under the
contracts;
2.4.29 "THE SALE LIABILITIES" - the aggregate of:
2.4.29.1 the creditors; and
2.4.29.2 the obligations of the
seller arising on or after
the effective date under the
contracts;
2.4.30 "THE SECOND INSTALMENT" - the second instalment of
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7
the purchase price specified in
7.1.2;
2.4.31 "THE SELLER" - Gull Foods cc, registration
number CK 85/01201/23, a close
corporation incorporated
according to the laws of the
Republic of South Africa;
2.4.32 "SIGNATURE DATE" - the date on which this agreement
is signed by the last party to
do so;
2.4.33 "THE STOCK" - means the stocks of ingredients,
work-in-progress and finished
goods intended for resale by the
seller, on hand at the
commencement of business on the
effective date, as reflected in
the effective date accounts;
2.4.34 "THE TRADEMARKS" - the unregistered trademarks and
trade names "Gull Foods" and
"Trek Biltong" and all other
trade and brand names used by
the seller in the business;
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8
2.4.35 "THIS AGREEMENT" - this agreement, and all the
appendices to this agreement;
2.4.36 "THE THIRD INSTALMENT" - the third instalment of the
purchase price specified in
7.1.3;
2.4.37 "TREK" - Trek Biltong cc, registration
number CK85/15837/23, a close
corporation incorporated
according to the laws of the
Republic of South Africa;
2.4.38 "TREK SELLERS" - means Ian Stuart Store, Allen
Vivian James, Marlys Store and
Douglas Varkevisser, the sole
members of Trek, who will be the
sole beneficial shareholders of
Trek once it has been converted
into a private company with
limited liability;
2.4.39 "TREK SHARES" - means the entire issued share
capital of Trek, once Trek has
been converted into a private
company with limited liability;
2.4.40 "THE WARRANTORS" - Ian Stuart Store and Allen
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9
Vivian James, members of the
seller and of Trek.
3. SUSPENSIVE CONDITIONS
3.1 The rights and obligations of the parties under this agreement (other than
those set out in this clause 3 and clauses 4, 19, 22, 23 and 24) are
subject to and conditional upon the fulfilment of the following suspensive
conditions on or before the dates specified in each condition, and failing
specification, on or before the completion date, or such later date as may
be determined pursuant to clause 3.3, provided that no condition shall be
extended beyond the completion date:
3.1.1 the written consents of the Industrial Development Corporation,
Stannic and the landlords to the assignment of the contracts entered
into between these persons and the seller;
3.1.2 the conclusion, contemporaneously with this agreement, of the
management agreement and the escrow agreements, and the fulfilment
of all conditions to which those agreements are subject, other than
any condition relating to this agreement;
3.1.3 the preparation, by 28 February 1997, of the effective date accounts
in accordance with clause 4;
3.1.4 the conversion of Trek, by 30 April 1997 from a close corporation
into a private company with limited liability, in terms of the
Companies Act, 1973;
3.1.5 the ratification, on or before 3 April 1997, of the transactions
contained in this agreement by the boards of directors of the
purchaser, FSAF, FSAH and FSAC; and
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10
3.1.6 the completion, on or before 3 April 1997, by the purchaser or its
agents, of a due diligence investigation into the affairs of the
sellers yielding results satisfactory to the purchaser, FSAF, FSAH
and FSAC. In this regard the sellers and the warrantors undertake to
make available to the purchaser or its agents all documents and
information which may reasonably be requested by them in the conduct
of the due diligence. The scope of the due diligence will include,
without limitation, a limited review by Price Waterhouse of the
effective date accounts.
3.2 Each of the parties shall use its best endeavours to procure fulfilment of
the suspensive conditions.
3.3 The suspensive conditions, other than that set out in 3.1.2, are for the
benefit of the purchaser, which may by written notice given to the seller
and the Trek sellers prior to the time specified for the fulfilment of any
condition, be entitled to waive, or extend the period for, the fulfilment
of that condition. The suspensive condition set out in 3.1.2 is for the
benefit of the purchaser, the seller and the Trek sellers who may, by
written agreement entered into prior to the time specified for the
fulfilment of the condition, be entitled to waive, or extend the period
for the fulfilment of, such condition.
3.4 If any of the suspensive conditions fail (and fulfilment thereof is not
waived in terms of 3.3), this agreement, (save for the provisions of this
clause and clauses 4, 19, 22, 23 and 24) shall cease to be of any further
force and effect and the parties shall be restored as nearly as may be
possible to the positions in which they would have been had this agreement
not been entered into. No party shall have any claim against any other as
a result of the failure of the conditions, except for such claims, if any,
as may result from a breach of the provisions of this clause.
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11
4. THE EFFECTIVE DATE ACCOUNTS
The seller and the warrantors warrant that the effective date accounts:-
4.1 have been prepared in all material respects in accordance with the Close
Corporations Act of 1984 and with South African generally accepted
accounting practice, provided that certain expenses in relation to
improvements have not been capitalised for accounting purposes, as
disclosed to the purchaser or its agent;
4.2 have been be prepared on the same basis and applying the same accounting
policies as for all prior years;
4.3 do not reflect any revaluation of assets; and
4.4 fairly present the financial position and state of affairs of the seller
and of Trek at 31 December 1996 and the results of operations of the
seller and Trek for the period ended 31 December 1996.
5. THE SALES
5.1 With effect from the effective date the seller sells and the purchaser
purchases the business as going concerns. Such sale encompasses inter alia
the acquisition by the purchaser of the sale assets and the assumption by
the purchaser of the sale liabilities. Also with effect from the effective
date, the Trek sellers sell the Trek shares and assign the claims to the
purchaser. The sales constitute one indivisible transaction.
5.2 To give effect to the obligation to sell the Trek shares, the Trek sellers
undertake to procure, as soon as is reasonably possible, that Trek is
converted from a close corporation to a private company with limited
liability.
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12
5.3 The sale of the business will be deemed to have taken effect on the
effective date, and the sale of the Trek shares and the claims will be
deemed to have taken effect on the effective date notwithstanding the date
on which this agreement is signed.
5.4 Nothing contained in this agreement will operate to transfer to the
purchaser any asset or liability in respect of the business other than the
sale assets and the sale liabilities. In particular the sales exclude the
retained liabilities.
5.5 The seller shall discharge the retained liabilities and all other debts,
liabilities and obligations in connection with the business not expressly
assumed by the purchaser under this agreement and shall indemnify the
purchaser against all costs, claims, demands and liabilities in respect of
any of those obligations or any failure of the seller to discharge them.
5.6 The parties agree that:-
5.6.1 the sale of the business comprises the sales of the seller's
business as a going concern;
5.6.2 the business was an income-earning activity on the effective date
and will be an income-earning activity on the completion date;
5.6.3 the sale of the business encompasses the sale of all assets
necessary for the conduct of the business.
6. RISK
The risk in and the benefit of the businesses, the Trek shares and the
claims will be deemed to have passed to the purchaser on the effective
date.
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7. PURCHASE PRICE AND RELATED MATTERS
7.1 The purchase price of the business, the Trek shares and the claims shall
be R48898000. This amount shall be settled as follows:-
7.1.1 a first instalment of R24000000 payable as to:-
7.1.1.1 R6000000 by the issue on the completion date of FSAH "B" shares.
The FSAH "B" shares shall be issued at a price equal to the US
Dollar denominated closing price of the ordinary NASDAQ listed
shares of FSAC on 3 February 1997, converted into Rand at the
average of the spot buy and sell exchange rates of US Dollars for
South African Rand quoted by Nedbank at close of business on that
date. This rate shall be established, in the event of a dispute,
by a certificate given by any manager of Nedbank whose
appointment and designation it shall not be necessary to prove
and whose determination shall be proof of the rate until the
contrary is proved;
7.1.1.2 R14000000 in cash, payable on the completion date;
7.1.1.3 R4000000 in cash, payable on the earlier of the date on which the
shares of FSAF are listed on the JSE or 30 September 1997;
7.1.2 a second instalment of R6240000, which amount may be increased or
reduced (as the case may be) by the difference between such amount
and P as derived, using the following formula:-
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14
P = PTZ98 x 4 x 0,16
where
P is the value to be determined; and
PTZ98 is the pre-tax profits of the purchaser for the year ended 30
June 1998.
The second instalment shall be paid in cash and by the issue to the
seller and the Trek sellers of FSAH "B" shares, provided that the
seller and the Trek sellers may elect to receive listed shares of
FSAF of equivalent value to the value of the FSAH "B" shares, in
place of FSAH "B" shares. Such election will be notified in writing
by the seller and the Trek sellers to the purchaser on or before 30
September 1998. In the absence of such notification the seller and
the Trek sellers will be deemed to have elected to receive FSAH "B"
shares. The amount payable in shares will be 50% of the value of the
second instalment. The balance of the second instalment will be paid
in cash. Any FSAH "B" shares shall be issued at a price equal to the
US Dollar denominated closing price of the ordinary NASDAQ listed
shares of FSAC on 30 June 1998, converted into Rand at the average
of the spot buy and sell exchange rates of US Dollars for South
African Rand quoted by Nedbank at close of business on 30 June 1998.
This rate shall be established, in the event of a dispute, by a
certificate given by any manager of Nedbank whose appointment and
designation it shall not be necessary to prove and whose
determination shall be proof of the rate until the contrary is
proved. Any FSAF shares to be
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15
delivered will be valued at the closing price for such shares on the
JSE on 30 June 1998;
7.1.3 a third instalment of R8112000, which amount may be increased or
reduced (as the case may be) by the difference between such amount
and P as derived, using the following formula:-
P = PTZ99 x 4 x 0,16
where
P is the value to be determined; and
PTZ99 is the pre-tax profits of the purchaser for the year ended 30
June 1999.
The third instalment shall be paid in cash and by the issue to the
seller and the Trek sellers of FSAH "B" shares, provided that the
seller and the Trek sellers may elect to receive listed shares of
FSAF of equivalent value to the value of the FSAH "B" shares, in
place of FSAH "B" shares. Such election will be notified in writing
by the seller and the Trek sellers to the purchaser on or before 30
September 1999. In the absence of such notification the seller and
the Trek sellers will be deemed to have elected to receive FSAH "B"
shares. The amount payable in shares will be 50% of the value of the
third instalment. The balance of the third instalment will be paid
in cash. Any FSAH "B" shares shall be issued at a price equal to the
US Dollar denominated closing price of the ordinary NASDAQ
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16
listed shares of FSAC on 30 June 1999, converted into Rand at the
average of the spot buy and sell exchange rates of US Dollars for
South African Rand quoted by Nedbank at close of business on 30 June
1999. This rate shall be established, in the event of a dispute, by
a certificate given by any manager of Nedbank whose appointment and
designation it shall not be necessary to prove and whose
determination shall be proof of the rate until the contrary is
proved. Any FSAF shares to be delivered will be valued at the
closing price for such shares on the JSE on 30 June 1999;
7.1.4 a fourth instalment of R10546000, which amount may be increased or
reduced (as the case may be) by the difference between such amount
and P as derived, using the following formula:-
P = PTZ2000 x 4 x 0,16
where
P is the value to be determined; and
PTZ2000 is the pre-tax profits of the purchaser for the year ended
30 June 2000.
The fourth instalment shall be paid in cash and by the issue to the
seller and the Trek sellers of FSAH "B" shares, provided that the
seller and the Trek sellers may elect to receive listed shares of
FSAF of equivalent value to the value of the FSAH "B" shares, in
place of FSAH "B" shares. Such election will be notified in writing
by
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17
the seller and the Trek sellers to the purchaser on or before 30
September 2000. In the absence of such notification the seller and
the Trek sellers will be deemed to have elected to receive FSAH "B"
shares. The amount payable in shares will be 50% of the value of the
fourth instalment. The balance of the fourth instalment will be paid
in cash. Any FSAH "B" shares shall be issued at a price equal to the
US Dollar denominated closing price of the ordinary NASDAQ listed
shares of FSAC on 30 June 2000, converted into Rand at the average
of the spot buy and sell exchange rates of US Dollars for South
African Rand quoted by Nedbank at close of business on 30 June 2000.
This rate shall be established, in the event of a dispute, by a
certificate given by any manager of Nedbank whose appointment and
designation it shall not be necessary to prove and whose
determination shall be proof of the rate until the contrary is
proved. Any FSAF shares to be delivered will be valued at the
closing price for such shares on the JSE on 30 June 2000.
7.2 Each of the second, third and fourth instalments will be paid within
14 days of the finalisation of the consolidated audited accounts of
the purchaser for the year concerned. The purchaser and FSAH
undertake to use all reasonable endeavours to ensure that each such
audit is finalised by no later than 30 September of the relevant
year. From that date until date of payment the purchaser shall pay
the seller and the Trek sellers interest on the cash portion of the
relevant instalment at the prime overdraft rate quoted from time to
time by Nedbank. Such rate shall be established by a certificate
given by any manager of Nedbank whose appointment and designation it
shall not be necessary to prove and whose determination shall be
proof of the rate until the contrary is proved.
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7.3 In determining the pre-tax profits of the purchaser in any given year for
the purposes of calculating the value of any the second, third or fourth
instalments, the following principles will be taken into account:-
7.3.1 pre tax profits will be calculated in accordance with generally
accepted accounting practice and applicable laws, based on the
accounting policies adopted by the seller and Trek in the three
financial years preceding the conclusion of this agreement. In
particular, but without limitation, assets will be depreciated on a
consistent basis with the preceding three years. New assets acquired
will be depreciated on a straight-line basis over a 10 year period;
7.3.2 interest on new capital expenditure will be calculated at a rate
equivalent to the bankers acceptance rate quoted by Nedbank from
time to time, plus one per cent, plus all commissions and bank
charges, provided that interest will only be charged on one third of
the borrowings;
7.3.3 any head office and other expenses of FSAH (if FSAH appoints a
nominee as purchaser) or FSAF allocated to the purchaser will be
excluded from the pre-tax profit calculation, as will interest on
monies borrowed to finance any one or more of the first, second,
third or fourth instalments.
7.4 In the event of a dispute over the calculation of pre-tax profit which
remains unresolved after 7 days, the dispute will be referred to the
senior partner, (or equivalent person) of Price Waterhouse for summary
determination, acting as an expert and not as an arbitrator. The
determination will be binding on the parties in the absence of manifest
error.
7.5 Notwithstanding anything to the contrary in this agreement, if at any
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19
time during which any one or more of the second, third or fourth
instalments are outstanding:-
7.5.1 the purchaser or any one or more of the legal entities through which
the purchaser is directly or indirectly held (including where
appropriate FSAC, FSAH or FSAF) undergoes a change of de facto
control; or
7.5.2 all or a part of the business of the purchaser is disposed of by the
purchaser to a person within or outside of the group of companies of
which FSAC is currently the controlling company; or
7.5.3 the nature of the business as conducted by the seller or Trek at the
signature date changes substantially;
the full outstanding balance of the purchase price shall, at the
election of the seller and the Trek sellers communicated in writing
to the purchaser within 60 days of the relevant event, forthwith
become due and payable on the basis set out in 7.6.
7.6 In the circumstances set out in 7.5 the outstanding balance of the
purchase price shall be paid in cash. In these circumstances the minimum
aggregate purchase price, inclusive of instalments already paid, will be
an amount of R48898000. The value of the outstanding instalments shall be
calculated as follows: -
7.6.1 the instalment next due shall be calculated on notional profits
which are the greater of:-
7.6.1.1 125% of the previous year's pre-tax profits, calculated in
accordance with 7.3; and
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20
7.6.1.2 a figure derived by annualising the pre-tax profits of the
current year from the commencement of such year to the date of
the relevant event. This profit figure will be converted to a
percentage of the previous year's profits for purposes of making
the required comparison with the 125% figure set out in 7.6.1.1;
7.6.2 the profits on which any further instalments are based will be
determined by escalating the profits determined pursuant to 7.6.1 by
the greater of the percentages set out in 7.6.1.1 and 7.6.1.2, on a
compounded basis.
7.6.3 For the purposes of 7.6.1 and 7.6.2 the base year's pre-tax profits
will be those reflected in the effective date accounts;
7.7 The purchase price shall be allocated as follows: -
7.7.1 to the debts, their face value as at the effective date, as
reflected in the effective date accounts;
7.7.2 to the claims, their face value as at the effective date, as
reflected in the effective date accounts;
7.7.3 to the stock, its face value as at the effective date as reflected
in the effective date accounts;
7.7.4 to the Trek shares, their net asset value on the effective date;
7.7.5 to the cash on hand, its face value;
7.7.6 to the intellectual property, R35545000 being an independent
valuation of the intellectual property by Price Waterhouse;
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21
7.7.7 to the fixed assets, their tax value; and
7.7.8 the balance as to goodwill.
No value is attributed to the contracts.
7.8 The purchaser indemnifies the seller and the Trek sellers against any
additional tax the seller or the Trek sellers may incur as a result of any
recoupment arising pursuant to any allocation referred to in 7.7.7 or
7.7.8.
7.9 In addition to the purchase price, FSAH and the purchaser will, in the
event of a listing of the shares of FSAF on the JSE, procure that 2000000
shares of FSAF will be made available to the seller and the Trek sellers
or their nominees, at a subscription price per share equal to the price at
which such shares are listed on the JSE. Should the vendors of Piemans
Pantry (Pty) Ltd, Astoria Bakery cc and Seemann's Meat Products cc not
take up their full equivalent allocation of FSAF shares the seller, the
Trek sellers or their nominees (who for this purpose will be regarded as
one party) and such of the other vendors who wish to take up the excess
shares will be entitled to step into the shoes of those persons and
subscribe for the shares not taken up. The excess shares will be allocated
equally among the persons wishing to take them up.
8. RESTRICTIONS ON DISPOSAL OF FSAH "B" SHARES
8.1 The seller, the Trek sellers and the warrantors undertake that they shall
not dispose of or attempt to dispose of, or cede, pledge, assign or
otherwise encumber any of the FSAH "B" shares or FSAF shares forming part
of any instalment of the purchase price, prior to 31 December 1998,
provided that this clause shall not prevent a disposal or distribution of
the shares by the seller and the Trek sellers to the
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22
warrantors or trusts of which any of the warrantors are beneficiaries.
8.2 Any sale in contravention of 8.1 shall be void and the directors of FSAH
shall not enter the name of the transferee in the share register of FSAH
or otherwise recognise any title of the purported purchaser of the shares.
In addition FSAC shall be entitled to purchase the affected FSAH "B"
shares from the defaulting holder of such shares at par. The rights
conferred on FSAC and the obligations imposed on the seller and the Trek
sellers shall not prejudice any other rights available to the purchaser
FSAC or FSAH arising from such breach.
9. PUT OPTIONS
9.1 FSAC undertakes to procure that a non-resident third party, ("THE FOREIGN
OPTION GRANTOR"), will undertake to purchase from the seller and/or the
Trek sellers and/or the warrantors and/or their nominees and/or
successors-in-title all of the FSAH "B" shares to be issued by FSAH to the
sellers pursuant to this agreement, ("THE FOREIGN PUT OPTION").
9.2 The material terms of the foreign put option will be the following:-
9.2.1 it will only be exercisable when the seller, the Trek sellers or the
warrantors become entitled to sell the FSAH "B" shares, determined
in accordance with 8;
9.2.2 the price at which the foreign put option may be exercised shall be
the net price received by the foreign option grantor from the sale
on the open market in the United States of an equivalent number of
shares of FSAC. For this purpose "net price" shall mean the price
for which the FSAC shares are sold less all costs normally
associated with the sale, including any broker's commission;
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23
9.2.3 although the foreign put option may be exercised in tranches each
tranche shall comprise a minimum of 100 shares;
9.2.4 for so long as South African exchange control regulations prescribe
that South African residents shall repatriate foreign currency to
South Africa, the seller and the Trek sellers acknowledge that any
proceeds from any sale of the option shares shall be repatriated to
South Africa.
9.3 FSAH grants to the seller and the Trek sellers a put option ("THE LOCAL
PUT OPTION") over the FSAH "B" shares comprised in the first instalment of
the purchase price on the following terms:-
9.3.1 the local put option is subject to the suspensive condition that the
shares of FSAF are listed on the JSE prior to 31March 1999. If such
listing does not occur prior to this date the local put option will
lapse;
9.3.2 the provisions of 9.2.1 and 9.2.3 will apply, mutatis mutandis;
9.3.3 the local put option will not be cash settled but will be settled by
the delivery of FSAF JSE listed shares. The total number of FSAF
listed shares to be delivered in satisfaction of an exercise of the
local put option in respect of the total number of FSAH "B" shares
to be issued to the seller and the Trek sellers as part of the first
instalment will be determined by dividing R6000000 by the listing
price per share at which the shares of FSAF are admitted to listing
on the JSE;
9.3.4 any exercise of the local put option shall be in writing;
9.3.5 the local put option shall lapse on 31 March 1999; and
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24
9.3.6 as security for the obligations imposed on FSAH by the local put
option FSAH shall, within 30 days of the listing of FSAF on the JSE,
deliver to Webber Wentzel Bowens, to hold in escrow, the FSAF shares
required for settlement of the local put option. Such shares may be
included in the shares to be delivered to Webber Wentzel Bowens
pursuant to clause 10.1. FSAH undertakes to procure that Webber
Wentzel Bowens will deliver these shares (or the applicable
proportion of these shares should the local put option be exercised
in part) to the seller and the Trek sellers within 30 days of the
exercise of the local put option.
10. SECURITY FOR PAYMENT OF THE PURCHASE PRICE
10.1 As security for the payment of the second, third and fourth instalments of
the purchase price by the purchaser, FSAH shall deliver to Webber Wentzel
Bowens, to hold in escrow, share certificates evidencing 60% of the issued
shares of the purchaser, together with blank signed transfer forms in
respect of those shares, provided that if FSAF is listed such shares will
be substituted by shares of equivalent value of FSAF, accompanied by blank
signed transfer forms. The property held by Webber Wentzel Bowens pursuant
to this sub-clause is referred to as "THE SECURITY DOCUMENTATION".
10.2 The FSAH will procure that Webber Wentzel Bowens shall hold the security
documentation and deal with it as follows:-
10.2.1 if the second instalment is paid FSAH will be entitled to recover
from Webber Wentzel Bowens, and have released from escrow, one third
of the shares in escrow, less any FSAF shares required to settle any
exercise of the local put option;
10.2.2 if the third instalment is paid FSAH will be entitled to recover
<PAGE>
25
from Webber Wentzel Bowens one third of the shares originally placed
in escrow (being in aggregate 20% of the shares of the purchaser or
the equivalent value of FSAF shares), less the FSAF shares required
to settle any exercise of the local put option;
10.2.3 if the fourth instalment of the purchase price is paid FSAH will be
entitled to recover from Webber Wentzel Bowens the remaining shares
in escrow, less any FSAF shares required to settle the local put
option;
10.2.4 if the purchaser breaches its obligations to pay any instalment of
the purchase price in accordance with this agreement, and fails to
remedy such breach in accordance with this agreement Webber Wentzel
Bowens shall, upon receipt of either:-
10.2.4.1 written notice signed by the seller and the Trek sellers and the
purchaser that the security documentation is to be delivered to
the seller and the Trek sellers; or
10.2.4.2 written notice signed by the seller and the Trek sellers and
accompanied by a copy of any judgment or arbitral award finding
in the seller's and the Trek sellers' favour that the purchase
price has not been paid in full;
deliver all or part of the security documentation to the seller
and the Trek sellers in accordance with 10.3; and
10.2.5 if the local put option is exercised in whole or in part Webber
Wentzel Bowens will comply with 9.3.6.
10.3 In the event of the unremedied non-payment of any instalment of the
purchase price FSAH will procure that Webber Wentzel Bowens will
<PAGE>
26
deliver all of the security documentation to the seller and the Trek
sellers, less any security documentation which FSAH was entitled to have
returned to it by virtue of the payment of any previous instalment, (which
excludes FSAF listed shares which are required to settle any exercise of
the local put option), provided that if the instalment which is unpaid is
the second instalment all the security documentation will be delivered and
FSAH will deliver to Webber Wentzel Bowens additional FSAF shares for
settlement of the local put option.
10.4 If the seller and the Trek sellers enforce the provisions of 10.2.4 prior
to the substitution of FSAF listed shares for the shares of the purchaser
lodged in escrow with Webber Wentzel Bowens then, in addition to the
remedies set out in 10.2.4.1 and 10.2.4.2, the seller and the Trek sellers
shall have an option to purchase from FSAF all of the shares of the
purchaser. This option will lapse as soon as FSAF listed shares are so
substituted for shares of the purchaser. This option will, if FSAF shares
are not substituted for shares of the purchaser, expire 60 days after the
giving of the relevant notice specified in 10.2.4 unless the seller and
the Trek sellers notify the purchaser in writing within 60 day period that
they intend to exercise the option in this clause 10.4. Any exercise of
the option will be in writing. The price at which the shares subject to
this option will be purchased will be determined by multiplying R48000000
by the percentage shareholding of the purchaser not delivered to the
seller and the Trek sellers pursuant to 10.2.4.
10.5 FSAH warrants that it will not cause the purchaser to effect any
acquisition or disposal of any fixed assets in excess of R500000, or
change the de facto control of the purchaser, or cause the purchaser to
dispose of its business in whole or in part, or cause the purchaser to
change substantially the nature of its business or substantially change
the way in which it carries on the business, without the
<PAGE>
27
consent of the seller and the Trek sellers.
11. SET-OFF OF DAMAGES AGAINST INSTALMENTS OF THE PURCHASE PRICE
11.1 Should the seller and the Trek sellers or the warrantors breach any
provision of this agreement the purchaser shall be entitled to deduct from
the next instalment of the purchase price the amount of any loss or
damages suffered by the purchaser arising from that breach, as determined
by a court or an arbitrator. Should the damages exceed the amount of the
next instalment the excess may, at the purchaser's discretion, be carried
forward and be deducted from future instalments of the purchase price
until satisfaction.
11.2 The provisions of this clause shall be without prejudice to any other
right of the purchaser arising from a breach of this agreement. In
particular, the purchaser shall not be obliged to wait until the date of
payment of the next instalment to recover its damages.
11.3 In the event of a dispute over whether the purchaser has suffered any loss
or damages arising from a breach of this agreement, or in respect of the
quantum of such damages, the purchaser shall pay the amount claimed, to a
maximum of the cash portion of the following instalment, to Webber Wentzel
Bowens to invest in an interest-bearing trust account in accordance with
the provisions of section 78(2A) of the Attorneys Act No 53 of 1979. The
balance of the cash portion in excess of the amount claimed shall be paid
to the seller and the Trek sellers. Upon determination of the amount of
the loss or damages in accordance with this agreement the difference, if
any, between the amount paid into trust and the amount of the damages,
together with a pro rata portion of interest earned on the trust deposit,
shall be paid to the seller and the Trek sellers and the balance refunded
to the purchaser.
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28
11.4 Subject to 11.1 to 11.3 instalments of the purchase price shall be paid to
an account nominated by the seller and the Trek sellers, free of exchange
and without deduction or set-off. Bank and other charges will be for the
account of the purchaser.
12. COMPLETION
12.1 Completion shall take place at the premises at 11h00 on the completion
date.
12.2 On the completion date:
12.2.1 the seller shall deliver the business to the purchaser by placing
the purchaser in possession of the business, and grant the purchaser
occupation of the premises;
12.2.2 the seller shall deliver to the purchaser such documents, duly
completed, as may be necessary to -
12.2.2.1 cede the contracts to the purchaser; and
12.2.2.2 transfer ownership of the other sale assets to the sellers,
including all necessary consents of third parties;
12.2.3 the seller shall deliver to the purchaser comprehensive lists of its
suppliers and customers and of the prices and other material terms
agreed to with its customers, and all records of the business,
excluding books of account;
12.2.4 the seller shall deliver a reconciliation statement to the purchaser
reflecting movements in stock, debtors, creditors and cash from the
effective date to the completion date; and
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29
12.2.5 the seller shall perform all such other reasonable acts as may be
necessary or required by the purchaser to facilitate completion;
12.2.6 the Trek sellers shall deliver to the purchaser, share certificates
in respect of the Trek shares, accompanied by share transfer forms
signed and dated that day by the registered shareholders and blank
as to the transferee, provided that if Trek has not been converted
into a private limited liability company at the completion date, the
share certificates and transfer forms in respect of the Trek shares
shall be delivered within 3 days of the conversion date;
12.2.7 certified copies of such shareholders' and/or directors' resolutions
and such other documents as may be necessary:
12.2.7.1 to sanction the sale and transfer of the Trek shares to the
purchaser;
12.2.7.2 to appoint Messrs John Welch, Corrie Roodt, Ian Stuart Store and
Allan Vivian James as directors of Trek;
12.2.7.3 to waive any pre-emptive or other rights which any person may
have in relation to the Trek shares; and
12.2.7.4 to amend the articles of association of Trek, if necessary, to
allow the directors of Trek appointed by FSAH from time to time
as many votes, at each directors' meeting, as all other directors
of Trek together, plus one vote;
12.2.8 subject to the performance by the seller and the Trek sellers of
their obligations as set out above the purchaser shall pay R14000000
in cash to the seller and the Trek sellers, and
<PAGE>
30
deliver to the seller and the Trek sellers share certificates in
respect of the FSAH class B shares comprised in the first
instalment.
12.3 If for any reason the provisions of clause 12.2 are not fully complied
with on the completion date or any reasonable agreed extension thereof,
not exceeding 14 days, either the seller and the Trek sellers or the
purchaser may elect (in addition to and without prejudice to all other
rights or remedies available to them) to rescind this agreement.
13. CONTRACTS AND UNFULFILLED ORDERS
13.1 It is recorded that from the effective date the purchaser shall be deemed
to have been entitled to the benefit of the contracts.
13.2 The seller shall indemnify the purchaser against all actions, proceedings,
costs, damages, claims and demands in respect of any act or omission on
the part of the seller in relation to the contracts on or before the
effective date.
13.3 Insofar as the benefit or burden of any of the contracts cannot
effectively be assigned to the purchaser except with the consent to the
assignment from the person, firm or company concerned then:
13.3.1 the seller shall use all reasonable endeavours to procure the
consent to assignment;
13.3.2 until the contract is assigned the purchaser shall, as the seller's
sub-contractor, perform all the obligations of the seller under the
contract to be discharged after the effective date and shall
indemnify the seller against all actions, proceedings, costs,
damages, claims and demands in respect of any failure on the part of
the purchaser to perform those obligations; and
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31
13.3.3 until the contract is assigned the seller shall (so far as it
lawfully may) give all reasonable assistance to the purchaser to
enable the purchaser to enforce its rights under the contract.
13.4 The purchaser shall execute for its own benefit any unfulfilled order
accepted by the seller in the ordinary course of business prior to the
effective date.
14. INSOLVENCY ACT - SECTION 34
14.1 The sale of the business will not be published in terms of section 34(1)
of the Insolvency Act, 1936.
14.2 The seller, the warrantors and the warrantors' successors-in title jointly
and severally indemnify the purchaser against any loss or damage which the
purchaser may suffer as a result of notice of this transaction not being
published in terms of the Insolvency Act.
14.3 The purchaser shall have no duty to resist any proceedings to attach or to
take possession of any of the assets by any persons against whom this
transaction is void in terms of the Insolvency Act as a consequence of
notice of this transaction not being published as aforesaid; provided that
the purchaser shall be obliged to give written notice to the seller as
soon as it becomes aware of any such proceedings.
14.4 Should the purchaser give notice to the seller in terms of 14.3, and
should the seller fail within 7 days of receipt by them of such notice to
procure that the assets concerned are released from attachment or are
returned to the purchaser, as the case may be, then the purchaser shall be
entitled to settle the liability and recover the amount thereof from the
seller or, at the purchaser's discretion, to exercise the remedies
conferred on the purchaser by clause 22.
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32
15. EMPLOYEES
15.1 The seller and the purchaser acknowledge that because the sale of the
business constitutes the transfer of the whole or part of a business,
trade or undertaking, as defined in section197(1) of the Labour Relations
Act 66 of 1995, ("THE ACT") the provisions of section197(2) of the Act
apply. Accordingly, and given the absence of agreement as referred to in
section197(3) of the Act:-
15.1.1 all the rights and obligations between the seller, as the "old
employer", and each employee of the business as at the effective
date, will continue in force as if they were rights and obligations
between the purchaser, as the "new employer", and each such
employee;
15.1.2 anything done before the transfer of the business by or in relation
to the old employer will be considered to have been done by or in
relation to the new employer.
15.2 Notwithstanding the provisions of 15.1 it is recorded that it is the
seller's and the purchaser's intention (and the seller and the purchaser
agree) that as between the purchaser and the seller all liabilities or
potential liabilities of the seller of any nature whatsoever to the
employees in respect of their service with the seller prior to the
effective date will be borne in full by the seller. Such liabilities
(referred to as "SELLER RESPONSIBILITIES") include, without limitation,
liabilities for accrued leave, accrued portions of bonuses, any claims for
any monies owing in respect of wages, salaries or overtime, employer
contributions to pension or provident funds, medical aid contributions and
any liability of the seller to any of the employees imposed by any third
party in respect of any dispute between the seller and any of the
employees. However, to the extent that any seller responsibility is
covered by a provision in the effective date accounts the purchaser
<PAGE>
33
shall assume such seller responsibility to the maximum amount of such
provision.
15.3 The warrantors jointly and severally indemnify the purchaser against any
claim, cost, expense, action, proceeding, liability, loss or damage
(collectively "CLAIM") which the purchaser may suffer or incur in relation
to any seller responsibility. If any claim is made against the purchaser
in respect of a seller responsibility the purchaser shall forthwith give
notice thereof to the warrantors, who shall, once the claim is
substantiated by judgment, arbitral award settlement or otherwise, make
payment of the full amount of the claim to the purchaser. If the seller
wishes to defend such claim the purchaser shall render to the seller, at
the seller's cost, such assistance as the seller may reasonably require to
defend the claim, against a full indemnity to the purchaser's satisfaction
from the warrantors in respect of all costs, (and not as limited by any
scale), incurred by the purchaser in defending the claim, and against any
award that may be made against the purchaser. If so required by the
seller, the purchaser will defend the proceedings in its name on behalf of
the seller. The seller will be entitled to appoint the legal
representatives to defend the claim and to control the proceedings.
16. PROVIDENT FUND
The seller and the purchaser shall procure that the purchaser is
substituted for the seller as employer under the existing provident fund
arrangements. These arrangements will be maintained in force and the
existing funds will not be merged with any other fund of the purchaser or
the group of which the purchaser forms part, without the prior written
consent of the seller and the warrantors.
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34
17. GUARANTEES, SURETYSHIPS AND INDEMNITIES
17.1 The purchaser undertakes to procure that the seller, and the Trek sellers
and the warrantors will be released from any guarantees and suretyships
given by any of them in respect of the business and Trek, as the case may
be, within 60 days of the completion date. The seller and the Trek sellers
undertake to give the purchaser all necessary co-operation to assist the
purchaser in procuring the seller's and the Trek sellers' release by such
date.
17.2 If the purchaser is not able to obtain the release from the guarantees and
suretyships referred to in 17.1 or has not done so at the time a claim is
made against the seller, the Trek sellers or warrantors under any such
guarantee or suretyship, the purchaser will indemnify the seller, the Trek
sellers and the warrantors and hold them harmless against any claim made
against them under the guarantee or suretyship concerned and against all
reasonable costs incurred by them in obtaining their release from the
guarantees. In the event that such a claim is made the seller, the Trek
sellers and the warrantors shall forthwith notify the purchaser of the
fact that the claim has been made and of full particulars thereof and the
purchaser shall place the affected persons in funds to enable them to
discharge their liability under the suretyship or guarantee.
18. WARRANTIES
18.1 The following warranties are, unless otherwise stated in respect of any
warranty, (in which case the specified period shall apply), given as at
the effective date, the completion date and for the entire period between
those dates in respect of Trek and the business. Each of the seller, the
Trek sellers and the warrantors accordingly warrants to the purchaser that
except as disclosed in Schedule 4:
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35
18.1.1 REGISTRATION OF TREK
18.1.1.1 Trek shall be, on the conversion date, a private company duly
registered in accordance with the provisions of the Companies
Act, 1973.
18.1.1.2 No steps have been taken, nor will have been taken on the
conversion date, nor are the warrantors aware of any steps
threatened or any facts likely to give rise to steps being taken
in respect of Trek in terms of section73 of the Companies Act,
1973 or similar provision of any legislation.
18.1.2 SHARES OF TREK
18.1.2.1 Neither Trek nor its directors will have, by the conversion date,
issued or agreed to issue any further shares in the capital of
Trek (including without limitation, bonus, capitalisation and
rights offer shares), nor will they have passed or agreed to pass
any resolution for the increase or reduction of its capital for
the creation or issue of any debentures or securities.
18.1.2.2 No person has any option or right of first refusal to acquire any
shares in Trek, nor to subscribe for or take up any of the
unissued shares in Trek, nor with any shares be subject to any
lien or other preferential right, at the conversion date. In
particular, the warrantors warrant that the Trek sellers, at the
conversion date, will be entitled to dispose of the Trek shares
to the purchaser and that upon delivery the purchaser will be the
beneficial owner of the Trek shares, to the exclusion of all
others.
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36
18.1.2.3 No person will, on the conversion date, have any right to obtain
an order for the rectification of the register of members of
Trek.
18.1.3 FINANCIAL STATEMENTS
18.1.3.1 The financial statements of Trek were/will be prepared in
conformity with generally accepted accounting principles and on a
basis of accounting similar to that employed for all previous
accounting periods for which financial statements are available;
18.1.3.2 fairly/will fairly present the financial position of Trek and
make full provision for all liabilities of Trek, ascertained or
contingent, as at that date, including all taxation of whatsoever
nature, and for all bad and doubtful debts, possible
over-valuation of inventories and stocks and for leave pay.
18.1.4 CHANGE IN FINANCIAL POSITION
On the date of delivery of the Trek shares there will be no material
change in the financial position of Trek from that recorded in the
effective date accounts and such change as there may be will have
arisen in the ordinary, normal and regular course of Trek's
business.
18.1.5 DIVIDENDS
18.1.5.1 Between the conversion date and the date of delivery of the
shares, Trek will not have declared or paid any dividends in
respect of any period of trading prior to the date of delivery of
the Trek shares, and at the date of
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37
delivery of the Trek shares no dividends will have been declared
which will not have been paid in full.
18.1.5.2 No person is, and at the date of delivery of the Trek shares will
be, entitled to participate in or to receive a commission on the
profits or dividends of Trek except as a shareholder.
18.1.6 LIABILITIES
At the date of delivery of the Trek shares Trek had no liabilities
of any nature whatsoever, actual or contingent, of which the Trek
sellers were or ought to be aware, other than those which appear in
the effective date accounts. All liabilities that have been incurred
since have been incurred, and all liabilities that will have been
incurred at the date of delivery of the shares, will have been
incurred in the ordinary, normal and regular course of Trek's
business.
18.1.7 ASSETS
18.1.7.1 At the conversion date Trek shall own the assets which are
reflected in the effective date accounts and had good and
marketable title to those assets, and, except for agreements
entered into in the ordinary course of business no other persons
had any rights to or in respect of such assets, and this position
will prevail on the date of delivery of the shares in respect of
assets acquired since the effective date.
18.1.7.2 Trek's assets are, and on the date of delivery of the shares will
be, in good order and condition, fair wear and tear excepted, and
fully operational apart from
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38
breakdowns (in the ordinary course) and any loss or damage to or
destruction of such assets beyond the control of the company;
provided that any such loss, damage or destruction will have been
fully insured for the benefit of Trek.
18.1.7.3 At date of delivery of the Trek shares none of the assets of Trek
will be subject to any mortgage, debenture or notarial bond,
cession or pledge or any other encumbrance, or had been purchased
under any hire-purchase or suspensive sales agreement or subject
to any lease, and this position will prevail on the date of
delivery of the shares.
18.1.7.4 On the date of delivery of the Trek shares none of the assets of
Trek will be subject to any option or right of first refusal in
favour of any person.
18.2 SURETYSHIP
Trek is not, and on the date of delivery of the shares will not be,
bound by any suretyship for the obligations of any person, or by any
other guarantee or indemnity;
18.2.1 ASSETS
18.2.1.1 The sellers owns the sale assets and have good and marketable
title thereto, and except for agreements entered into in the
ordinary course of business, no other person has any rights to or
in respect of the sale assets.
18.2.1.2 The fixed assets are in good order and condition and fully
operational apart from breakdowns (in the ordinary
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39
course) on the basis that:
18.2.1.2.1 the purchaser shall be entitled to have the same use and
enjoyment of such assets as that which the sellers had prior
to the effective date;
18.2.1.2.2 the sellers are unaware of any defects therein or any facts or
circumstances which may cause any of such assets to break down
after the effective date.
18.2.1.3 The sellers have each maintained a register of the fixed assets
in accordance with generally accepted and sound accounting
practice.
18.2.1.4 Save as set out in Schedule 4, none of the sale assets are
subject to any mortgage, debenture or notarial bond, cession or
pledge or any other encumbrance, or have been purchased under any
hire-purchase or suspensive sale agreement or are subject to any
lease.
18.2.1.5 None of the sale assets is subject to any option or right of
first refusal of any person.
18.2.1.6 As at the effective date the seller had net current assets of not
less than R6000000 excluding income tax liabilities. The income
tax liability for the 1997 tax year will be borne by the
purchaser and all other tax liabilities will be borne by the
seller and the warrantors.
18.2.2 MANNER OF CARRYING ON BUSINESS
Between the effective date and the completion date-
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40
18.2.2.1 the seller has continued to carry on the business in the ordinary
and regular course;
18.2.2.2 the seller has not changed its normal manner and method of
carrying on business;
18.2.2.3 there has been no material adverse change in the financial
position of the business;
18.2.2.4 no assets have been acquired or sold otherwise than in the
ordinary, normal and regular course of the business;
18.2.2.5 the seller has not incurred or become committed to incur any
capital expenditure in respect of the business save with the
consent or knowledge of the purchaser;
18.2.2.6 the seller has not entered into any transaction save in the
ordinary and regular course of conduct of its business;
18.2.3 GOODWILL AND SCOPE OF BUSINESS
Between the effective date and the completion date the seller will
not have done or omitted to do anything which has or will-
18.2.3.1 materially prejudice the goodwill; or
18.2.3.2 reduce the scope of the business; or
18.2.3.3 result in any customer or supplier of the seller ceasing to do
business with, or varying the terms on which it does business
with, the business.
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41
18.2.4 CONTRACTS
18.2.4.1 All the contracts have been entered into under normal credit
terms and are subject to payment in accordance with those terms.
18.2.4.2 The seller is not party to any contract with any of its employees
requiring more than one month's notice of termination, or
entitling any of them to compensation on termination of
employment, or to participation in or entitlement to a commission
on profit.
18.2.4.3 The seller is not party to any agreement which has not been
entered into on an arms-length basis and on terms which are not
normal having regard to the nature of its business.
18.2.4.4 Copies of all contracts and other documents submitted to the
purchaser in connection with this agreement fully and correctly
reflect all the terms and conditions thereof, are not, to the
best of the seller's knowledge and belief subject to any claim
for rectification, and have not been amended in any respect.
18.2.4.5 The contracts are in full force and effect and the seller is not
in material breach of any contract entered into between it and
any other person and has complied in all material respects with
its obligations under such contracts.
18.2.4.6 The seller and the warrantors are not aware of any facts, matters
or circumstances which may give rise to the cancellation of any
of the contracts as a result of
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42
any breach thereof by the seller.
18.2.4.7 The transaction provided for in this agreement does not
constitute a breach of any of the seller's contractual
obligations in respect of the business nor will it entitle any
person to terminate any contract to which the seller is party in
respect of the businesses.
18.2.5 INTELLECTUAL PROPERTY RIGHTS
18.2.5.1 The businesses conducted by the seller and Trek do not infringe
any patent, copyright, trademark or other industrial property
rights or any other rights of any other person and no person is
entitled to an order requiring the seller or Trek to change their
names or trading style, or any of the marks and designs applied
by them to their products.
18.2.5.2 The seller is the owner of the intellectual property.
18.2.5.3 No person has any option or right of first refusal to purchase
any of the intellectual property and no person has been granted
any right to use any of the intellectual property.
18.2.6 LAWS, REGULATIONS, CONSENTS, LICENCES AND PERMITS
18.2.6.1 To the best of the warrantors' knowledge and belief the condition
of the premises from which the business is conducted and Trek
conducts its business satisfies the requirements of all relevant
authorities for the grant of the same trade licences as are
presently held by the sellers in respect of the business on terms
at least as
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43
favourable as those which apply to the seller.
18.2.6.2 All instructions which have, from time to time, been issued by
any inspector appointed in terms of the Factories Act have been
carried out in respect of the premises.
18.2.6.3 To the best of the warrantors' knowledge and belief Trek and the
seller have complied with all laws and regulations affecting
their affairs and businesses.
18.2.6.4 The seller and Trek are in possession of all consents, permits
and licences necessary for the conduct of their businesses and
affairs, and the seller, the Trek sellers and the warrantors are
not aware of any facts which may give rise to the cancellation
of, or failure to renew, any such licences, permits or consents
or to their only being renewed subject to the imposition of
onerous conditions not presently applicable thereto.
18.2.7 LABOUR LAWS, REGULATIONS, DETERMINATIONS, AGREEMENTS AND DISPUTES
18.2.7.1 The seller and Trek have complied with all wage determinations
and industrial conciliation agreements which apply to them, their
businesses and their employees.
18.2.7.2 The seller and Trek have complied with the grievance procedures
agreed to by them with regard to grievances of and relations with
their employees.
18.2.7.3 The seller and Trek have complied with the labour union
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44
recognition agreements (if any) to which they are party.
18.2.7.4 The seller and Trek are not party to any labour disputes and are
not obliged by law, agreement, judgment or order of court, to
reinstate employees who have been dismissed or will be dismissed.
18.2.8 INSURANCE
18.2.8.1 The seller and Trek carry insurance cover in respect of their
businesses and the sale assets against loss arising from
accident, fire, earthquake, flood, burglary, theft, employer's
liability, workmen's compensation, public liability, storm
damage, civil commotion, riot or political risk and loss of
profits, and such insurance will continue to be effective for a
period terminating not earlier than thirty days after the
completion date; all premiums due in respect of such insurance
have been paid and the seller and Trek have complied with all of
the conditions to which the liability of the insurers under the
policies of insurance will be subject.
18.2.8.2 None of the seller, Trek nor the warrantors are aware of any
facts, matters or circumstances which may give rise to the
cancellation of the policies of insurance referred to in clause
18.1.8.1 or the repudiation of any claims thereunder or to such
policies not being renewed in the future or only being renewed
subject to the imposition of onerous conditions not presently
applicable.
18.2.9 EMPLOYMENT, LEAVE, REMUNERATION AND PENSION
18.2.9.1 No employee or official of the seller or Trek is entitled to
any exceptional leave privileges, accumulated leave, payment in
lieu of leave, pension or the like and none of the terms on which
any employee of the business or Trek is employed (including
without limitation any terms relating to compensation or benefits
payable to that employee upon his retrenchment or redundancy)
will have been changed since the effective date.
18.2.9.2 On the completion date the seller or Trek will not in any
material respect have improved the terms of employment of or
remuneration payable to any of their employees from that
prevailing at the effective date.
18.2.10 RESTRAINT OF TRADE
The seller or Trek are not bound by any restraint of trade
agreement.
18.2.11 WARRANTIES REGARDING BOOKS OF ACCOUNT
The books and records of the business and Trek are up-to-date and
have been properly kept according to law and will be capable of
being written up within a reasonable time.
18.2.12 ENVIRONMENTAL WARRANTIES
18.2.12.1 The seller and Trek comply with all conditions, limitations,
obligations, prohibitions and requirements contained in any
environmental legislation or regulations, by-laws, or ordinances
("ENVIRONMENTAL LEGISLATION") and the warrantors are not aware of
any facts or circumstances which may lead to any breach of any
environmental legislation;
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45
18.2.12.2 no poisonous, noxious, hazardous, polluting, dangerous or
environmentally harmful substances or articles have been
produced, treated, kept at or deposited at the premises where the
seller and Trek carry on business, or have been released or
discharged from such premises and in particular no matter or
thing been discharged into any public sewer or into any drain or
sewer connecting the public sewer and has not contaminated the
land surrounding the premises or any water;
18.2.12.3 there are no deficiencies in the waste disposal arrangements
carried on at or in respect of the premises which may lead to a
failure by the seller or Trek to comply with any existing
environmental legislation or which will harm the environment;
18.2.12.4 there have been no disputes claims or investigations or other
proceedings pending or threatened regarding the use of the
seller's and Trek's premises, or the release of any substances
from such premises;
18.2.12.5 there are no environmental claims, investigations or other
proceedings pending or threatened against the seller or Trek in
respect of their businesses and there is no actual or contingent
liability of any of the seller, Trek or the warrantors to make
good, repair, reinstate or clean up any property;
18.2.12.6 no water, whether surface or ground water, has been contaminated,
polluted or the quality thereof altered in such a way that the
provisions of any water law, whether common law or statutory law
will have been breached.
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46
19. CONFIDENTIALITY
19.1 Without the prior written consent of the other parties, each party will
keep confidential and will not disclose to any person -
19.1.1 the details of this agreement, the details of the negotiations
leading to this agreement, and the information handed over to such
party during the course of negotiations, as well as the details of
all the transactions or agreements contemplated in this agreement;
and
19.1.2 all information relating to the business or the operations and
affairs of the parties (together "CONFIDENTIAL INFORMATION").
19.2 The parties agree to keep all confidential information confidential and to
disclose it only to their officers, directors, employees, consultants and
professional advisers who:
19.2.1 have a need to know (and then only to the extent that each such
person has a need to know);
19.2.2 are aware that the confidential information should be kept
confidential;
19.2.3 are aware of the disclosing party's undertaking in relation to such
information in terms of this agreement; and
19.2.4 have been directed by the disclosing party to keep the confidential
information confidential and have undertaken to keep the
confidential information confidential.
19.3 The obligations of the parties in relation to the maintenance and
non-disclosure of confidential information in terms of this agreement
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47
do not extend to information that:
19.3.1 is disclosed to the receiving party in terms of this agreement but
at the time of such disclosure such information is known to be in
the lawful possession or control of that party and not subject to an
obligation of confidentiality;
19.3.2 is or becomes public knowledge, otherwise than pursuant to a breach
of this agreement by the party who disclosed such confidential
information;
19.3.3 is required by the provisions of any law, statute or regulation, or
during any court proceedings, or by the rules or regulations of any
recognised stock exchange to be disclosed and subject to the
provisions of clause 19.4, the party required to make the disclosure
has taken all reasonable steps to oppose or prevent the disclosure
of and to limit, as far as reasonably possible, the extent of such
disclosure and has consulted with the other parties prior to making
such disclosure.
19.4 Before any announcement or statement is made as required by any law,
statute or regulation, or the rules or regulations of any recognised stock
exchange, the parties shall use their best endeavours to provide the other
parties with a written draft of the proposed announcement at least 48
hours before the proposed time of the announcement and the participants
shall also use their best endeavours to agree the wording and timing of
all public announcements and statements relating to confidential
information. If a written draft of the proposed announcement cannot be
provided to the other parties or agreement cannot be reached, by the time
that any such announcement or statement must be made, the party in
question shall be free to make the relevant announcement or statement
notwithstanding that such agreement has not been reached, but in so doing
it shall not disclose
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48
more than the minimum information that it is compelled to disclose. Copies
of any public announcement or statement shall be given to each other party
in the most expeditious manner reasonably available.
20. RESTRAINTS
20.1 The seller, the Trek sellers and the warrantors undertake to the purchaser
that for a period commencing on the effective date and terminating on 31
December 2002 they will not, whether directly or indirectly, compete with
the purchaser or be interested in any business which trades in any field
of activity which is similar to any of the fields of activity referred to
in 20.2 and within any of the areas of restraint set out in 20.3.
20.2 The fields of activity is respect of which the restraint applies will be -
20.2.1 each and every activity conducted by the sellers on the effective
date or the preceding 12 month period;
20.2.2 any activity which is similar to an activity contemplated in clause
20.2.1;
20.2.3 any new activity which is planned to be undertaken by the sellers as
at the effective date.
20.3 The areas of restraint referred to in 20.1 shall be South Africa, Lesotho,
Swaziland, Mozambique, Zimbabwe, Botswana, Namibia and the Indian Ocean
Islands.
20.4 For purposes of this clause, the seller, the Trek sellers and the
warrantors shall be deemed to be so "INTERESTED IN A BUSINESS", or
"COMPETING WITH THE PURCHASER" if any of them becomes engaged or
interested, whether directly or indirectly, and whether as proprietor,
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49
partner, shareholder, agent, consultant, financier or otherwise, in any
company, firm, business or undertaking which carries on business in any of
the fields referred to in 20.2 or in any of the areas referred to in 20.3,
save for any passive investment of not more than 5% of the shares of any
company listed on the JSE.
20.5 The seller, the Trek sellers and the warrantors acknowledge that:
20.5.1 the clients of the purchaser are or could be drawn from all of the
areas in which the restraints are to be operative;
20.5.2 the purchaser would suffer substantial damage if the seller or the
Trek sellers or the warrantors were to operate a business similar to
that carried on by the purchaser within the area to which, and
during the time in which, the restraints are to apply; and
20.5.3 the restraints are the minimum restraints required by the purchaser
to provide protection against unfair competition. Should the
reasonableness of any provision contained in this clause be
disputed, the onus of providing that the provision is unreasonable
will rest on the party alleging that the provision is unreasonable.
20.6 Each and every restraint contained in this clause is separate and
divisible from every other restraint in this clause and from any
other restraint so that if any one of the restraints is or becomes
unenforceable for any reason that restraint will be severable and
will not affect the validity of any other restraint contained in
this clause.
20.7 Notwithstanding the provisions of this clause the restraints will
fall away with immediate effect in the circumstances contemplated in
any sub-clause of 7.5.
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50
21. VALUE-ADDED TAX
21.1 The seller and the purchaser record their understanding that the sale of
the business falls within the ambit of section 11(1)(e) of the Value Added
Tax Act, 89 of 1991, as amended, and accordingly value-added tax is
payable on the sale at the rate of zero percent.
21.2 However, it is recorded that if the sale of the business in terms of this
agreement is subject to value-added tax, the purchaser will pay to the
seller value-added tax at the prescribed rate on the purchase price
against presentation of the relevant tax invoice.
22. BREACH
22.1 If a party breaches any provision of this agreement and remains in breach
for 14 days after written notice to that party requiring that party to
rectify that breach, the aggrieved party shall be entitled, at its option:
22.1.1 to sue for immediate specific performance of any of the defaulting
party's obligations under this agreement, whether or not such
obligation is then due and to require the defaulting party to
provide security to the satisfaction of the aggrieved party for the
defaulting party's obligations; or
22.1.2 to cancel this agreement, in which case written notice of the
cancellation shall be given to the defaulting party, and the
cancellation shall take effect on the giving of the notice. Neither
party shall be entitled to cancel this agreement unless the breach
is a breach of a term which goes to the root of this agreement, and
the remedy of specific performance or damages would not adequately
prevent the aggrieved party from being materially prejudiced.
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51
22.2 If the breach is a breach of warranty as at a particular date,
notice to remedy such breach shall be given and the breach shall be
deemed to have been remedied if:
22.2.1 the defaulting party is able, within the period of the notice, to
prevent the aggrieved party from being prejudiced or to make good
any prejudice suffered, and does so; or
22.2.2 the defaulting party is able, but not within the period of the
notice, to prevent the aggrieved party from being prejudiced or
to make good any prejudice suffered within the period of the
notice, and undertakes to do so and furnishes such security in
support of the undertaking as the aggrieved party may require.
22.3 If the defaulting party is the purchaser or FSAH, and the breach is the
non-payment of any instalment of the purchase price and if the purchaser
fails to remedy such breach after having been given notice to do so in
accordance with this clause, the seller and the Trek seller shall be
entitled to cancel this agreement and if the seller and the Trek seller do
so the purchaser shall deliver the security documentation referred to in
clause 10 to the seller and the Trek sellers. The seller and the Trek
sellers shall be entitled to register the shares comprised in such
security documentation in its name and (prior to its lapsing), to exercise
the option referred to in 10.4. Alternatively, and at the election of the
seller, the seller and the Trek sellers may claim damages.
22.4 The aggrieved party's remedies in terms of this clause are without
prejudice to any other remedies to which the aggrieved party may be
entitled in law.
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52
23. ARBITRATION
23.1 DISPUTES SUBJECT TO ARBITRATION
Any dispute arising out of or in connection with this agreement or the
subject matter of this agreement shall be decided by arbitration in terms
of this clause, notwithstanding that the rest of the agreement may be void
or voidable or may have terminated or been cancelled, this clause being a
separate, divisible agreement. Claims in delict or based on unjust
enrichment or for rectification of the agreement are included.
23.2 NOTICE TO STATE WHETHER CLAIM IS DISPUTED
A party may call on the other party in writing to state in writing whether
a claim is disputed or not. If the other party fails to do so within 7
days the first party may proceed by way of litigation, and if the other
party then defends such litigation the first party may elect to continue
with the litigation or to refer the matter to arbitration. In the latter
event the other party shall immediately pay the costs incurred by the
first party in the litigation on an attorney and own client basis and
shall not be entitled to recover that party's own costs from the first
party.
23.3 APPOINTMENT OF ARBITRATOR
The arbitrator shall be an attorney or advocate nominated at the request
of either party by the president for the time being of the Law Society of
the Transvaal, or its principal successor in title.
23.4 VENUE AND PERIOD FOR COMPLETION OF ARBITRATION
The arbitration shall be held in Johannesburg and the parties shall
endeavour to ensure that it is completed within 90 days after notice
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53
requiring the claim to be referred to arbitration is given.
23.5 ARBITRATION ACT
The arbitration shall be governed by the Arbitration Act 1965 or any
replacement Act.
23.6 PROCEDURE
The procedure to be followed in the arbitration shall be determined by the
arbitrator, with due regard to 23.4=REF1, at the request of either party.
23.7 ARBITRATOR'S POWERS
The arbitrator shall have full and unrestricted powers in relation to the
arbitration. In particular, but without limitation, the arbitrator:
23.7.1 shall have the powers set out in section 21(1) of the Arbitration
Act 1965;
23.7.2 need not strictly observe the rules of evidence;
23.8 need not strictly observe the principles of law and may decide the matters
submitted to him according to what he considers equitable in the
circumstances;
23.8.1 may have regard to his personal knowledge of the facts, and any
expert knowledge he may have, relating to the issues in dispute, but
is to afford the parties an opportunity of challenging the knowledge
he claims to have;
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54
23.8.2 may make such award or awards, whether interim, provisional or
final, as he may consider appropriate, including without limitation
ex parte awards, declaratory orders, interdicts, and awards for
specific performance, restitution, damages, penalties, interest and
security for costs or restitution.
23.9 REASONS FOR AWARD
The arbitrator shall give his reasons for his award, if so requested by
either party.
23.10 COSTS
23.10.1 If the arbitrator's charges and any other costs have to be paid
before the arbitrator has made his award in respect of costs, the
parties shall pay the costs in equal shares, and if a party fails to
pay that party's share the arbitrator may make his award in respect
of the claim and costs in the absence of that party.
23.10.2 It is recorded that the parties intend that the substantially
successful party should be awarded a full indemnity for all the
costs reasonably incurred by that party and not merely the costs on
the supreme court or any other scale.
24. COSTS
24.1 Each party will bear its own costs of and incidental to the negotiation,
preparation and implementation of this agreement.
24.2 Any costs, including attorney and own client costs, incurred by a party
arising out of the breach by any other party of any of the provisions of
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55
this agreement shall be borne by the party in breach.
25. MISCELLANEOUS MATTERS
25.1 ADDRESSES FOR SERVICE OF LEGAL DOCUMENTS
25.1.1 The parties choose the following physical addresses at which
documents in legal proceedings in connection with this agreement may
be served (ie their domicilia citandi et executandi):
25.1.1.1 the seller, the Trek sellers and the warrantors:
Stand 204/2
Manganese Rd
Ekandustria
Mpumalanga
25.1.1.2 the purchaser, FSAH and FSAC:
Europair Building
Grader Rd
Spartan Ext 3
Kempton Park
25.1.2 The notice shall be deemed to have been duly given on delivery. All
notices will be delivered.
25.1.3 A party may change that party's address for this purpose, by notice
in writing to the other party.
25.1.4 A party may change that party's address for this purpose to another
physical address in the Republic of South Africa, by notice in
writing to the other party.
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56
25.2 ENTIRE CONTRACT
This agreement contains all the express provisions agreed on by the
parties with regard to the subject matter of the agreement and the parties
waive the right to rely on any alleged express provision not contained in
the agreement.
25.3 APPOINTMENT OF ARBITRATOR
The arbitrator shall be an attorney or advocate nominated at the request
of either party by the president for the time being of the Law Society of
the Transvaal, or its principal successor in title.
25.4 VENUE AND PERIOD FOR COMPLETION OF ARBITRATION
The arbitration shall be held in Johannesburg and the parties shall
endeavour to ensure that it is completed within 90 days after notice
requiring the claim to be referred to arbitration is given.
25.5 ARBITRATION ACT
The arbitration shall be governed by the Arbitration Act 1965 or any
replacement Act.
25.6 PROCEDURE
The procedure to be followed in the arbitration shall be determined by the
arbitrator, with due regard to 23.4=REF1, at the request of either party.
25.7 ARBITRATOR'S POWERS
The arbitrator shall have full and unrestricted powers in relation to the
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57
arbitration. In particular, but without limitation, the arbitrator:
25.7.1 shall have the powers set out in section 21(1) of the Arbitration
Act 1965;
25.7.2 need not strictly observe the rules of evidence;
25.8 need not strictly observe the principles of law and may decide the matters
submitted to him according to what he considers equitable in the
circumstances;
25.8.1 may have regard to his personal knowledge of the facts, and any
expert knowledge he may have, relating to the issues in dispute, but
is to afford the parties an opportunity of challenging the knowledge
he claims to have;
25.8.2 may make such award or awards, whether interim, provisional or
final, as he may consider appropriate, including without limitation
ex parte awards, declaratory orders, interdicts, and awards for
specific performance, restitution, damages, penalties, interest and
security for costs or restitution.
25.9 REASONS FOR AWARD
The arbitrator shall give his reasons for his award, if so requested by
either party.
25.10 COSTS
25.10.1 If the arbitrator's charges and any other costs have to be paid
before the arbitrator has made his award in respect of costs, the
parties shall pay the costs in equal shares, and if a party fails to
pay that party's share the arbitrator may make his
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58
award in respect of the claim and costs in the absence of that
party.
25.10.2 It is recorded that the parties intend that the substantially
successful party should be awarded a full indemnity for all the
costs reasonably incurred by that party and not merely the costs on
the supreme court or any other scale.
26. COSTS
26.1 Each party will bear its own costs of and incidental to the negotiation,
preparation and implementation of this agreement.
26.2 Any costs, including attorney and own client costs, incurred by a party
arising out of the breach by any other party of any of the provisions of
this agreement shall be borne by the party in breach.
27. MISCELLANEOUS MATTERS
27.1 ADDRESSES FOR SERVICE OF LEGAL DOCUMENTS
27.1.1 The parties choose the following physical addresses at which
documents in legal proceedings in connection with this agreement may
be served (ie their domicilia citandi et executandi):
27.1.1.1 the seller, the Trek sellers and the warrantors:
Stand 204/2
Manganese Rd
Ekandustria
Mpumalanga
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59
27.1.1.2 the purchaser, FSAH and FSAC:
Europair Building
Grader Rd
Spartan Ext 3
Kempton Park
27.1.2 The notice shall be deemed to have been duly given on delivery. All
notices will be delivered.
27.1.3 A party may change that party's address for this purpose, by notice
in writing to the other party.
27.1.4 A party may change that party's address for this purpose to another
physical address in the Republic of South Africa, by notice in
writing to the other party.
27.2 ENTIRE CONTRACT
This agreement contains all the express provisions agreed on by the
parties with regard to the subject matter of the agreement and the parties
waive the right to rely on any alleged express provision not contained in
the agreement.
27.3 NO REPRESENTATIONS
No party may rely on any representation which allegedly induced that party
to enter into this agreement, unless the representation is recorded in
this agreement.
27.4 VARIATION, CANCELLATION AND WAIVER
No contract varying, adding to, deleting from or cancelling this
agreement, and no waiver of any right under this agreement, shall be
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60
effective unless reduced to writing and signed by or on behalf of the
parties.
27.5 INDULGENCES
If any party at any time breaches any of that party's obligations under
this agreement, the other party ("THE AGGRIEVED PARTY"):
27.5.1 may at any time after that breach exercise any right that became
exercisable directly or indirectly as a result of the breach, unless
the aggrieved party has expressly elected in writing or by clear and
unambiguous conduct, amounting to more than mere delay, not to
exercise the right. (If the aggrieved party is willing to relinquish
that right the aggrieved party will on request do so in writing.) In
particular, acceptance of late performance shall for a reasonable
period after performance be provisional only, and the aggrieved
party may still exercise that right during that period;
27.5.2 shall not be estopped (ie precluded) from exercising the aggrieved
party's rights arising out of that breach, despite the fact that the
aggrieved party may have elected or agreed on one or more previous
occasions not to exercise the rights arising out of any similar
breach or breaches.
27.6 CESSION
No party may cede that party's rights or delegate that party's obligations
without the prior written consent of the other parties, which shall not be
unreasonably withheld.
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27.7 APPLICABLE LAW
This agreement shall be interpreted and implemented in accordance with the
law of the Republic of South Africa.
27.8 JURISDICTION
The parties consent to the non-exclusive jurisdiction of the Witwatersrand
Local Division of the Supreme Court.
Signed at ______________ on ________________________ 1997.
AS WITNESS: for GULL FOODS CC
_____________________________ ________________________________
who warrants that he is duly authorised
Signed at ______________ on ________________________ 1997.
AS WITNESS: IAN STUART STORE
_____________________________ ________________________________
<PAGE>
62
Signed at ______________ on ________________________ 1997.
AS WITNESS: ALLEN VIVIEN JAMES
_____________________________ ________________________________
Signed at ______________ on ________________________ 1997.
AS WITNESS: MARLYS STORE
_____________________________ ________________________________
Signed at ______________ on ________________________ 1997.
AS WITNESS: DOUGLAS VARKEVISSER
_____________________________ ________________________________
<PAGE>
63
Signed at ______________ on ________________________ 1997.
AS WITNESS: for FIRST SOUTH AFRICAN
HOLDINGS (PROPRIETARY)
LIMITED
_____________________________ ________________________________
who warrants that he is duly authorised
Signed at ______________ on ________________________ 1997.
AS WITNESS: for FIRST SOUTH AFRICA
CORP., LTD
_____________________________ ________________________________
who warrants that he is duly authorised
<PAGE>
64
Signed at ______________ on ________________________ 1997.
AS WITNESS: for JENKINSON INVESTMENTS
(PROPRIETARY) LIMITED
_____________________________ ________________________________
who warrants that he is duly authorised
<PAGE>
65
<PAGE>
SCHEDULES 1 AND 2
ESCROW AGREEMENTS
ESCROW AGREEMENT
among
GULL FOODS CC
and
IAN STUART STORE
and
ALLEN VIVIAN JAMES
and
MARLYS STORE
and
DOUGLAS VARKEVISSER
(COLLECTIVELY "THE SELLERS")
and
FIRST SOUTH AFRICAN HOLDINGS (PROPRIETARY) LIMITED
(Registration No. 95/03959/07)
("FSAH")
and
WEBBER WENTZEL BOWENS
("THE ESCROW AGENT")
- --------------------------------------------------------------------------------
WEBBER WENTZEL BOWENS
<PAGE>
1. INTRODUCTION
1.1 The sellers and FSAH have entered into a sale of business and shares
agreement ("THE SALE OF BUSINESS AND SHARES AGREEMENT"), pursuant to which
the sellers have agreed to sell and FSAH or its nominee has agreed to
purchase the business of Gull cc ("THE BUSINESS") as a going concern and
the issued shares in Trek cc ("THE SHARES"). FSAH will appoint a nominee,
referred to in this agreement as "THE PURCHASER".
1.2 In terms of the sale of business agreement, the purchase price of the
business and the shares will be payable in four instalments.
1.3 The sale of business and shares agreement provides that issued shares of
the purchaser will be lodged in escrow with Webber Wentzel Bowens, ("THE
ESCROW AGENT") to serve as security for the payment of the second, third
and fourth instalments of the purchase price and the obligations imposed
on FSAH by clause 9.2 of the sale of business agreement. The number of
shares to be lodged in escrow will be 60% of the issued shares of the
purchaser. However, if First South African Food Holdings ("FSAF") is
listed, FSAH will deliver to the escrow agent FSAF shares of equivalent
value to the shares of the purchaser, in substitution for the shares of
the purchaser. Blank signed transfer forms will accompany such FSAF
shares. The number of FSAF shares to be delivered will be determined by
dividing R28800000 by the listing price of the FSAF shares. The shares
held in escrow from time to time are referred to in this agreement as "THE
ESCROW SHARES".
1.4 The parties accordingly wish to enter into an escrow agreement in respect
of the escrow shares on the terms and conditions set out below.
<PAGE>
2
2. INTERPRETATION
Terms not otherwise defined in this agreement shall, unless otherwise
stated or inconsistent with the context, have the meanings given them in
the sale of business and shares agreement.
3. APPOINTMENT
The parties appoint the escrow agent, which accepts the appointment, as
escrow agent on the terms and conditions of this agreement.
4. DELIVERY
4.1 Within 30 days of the completion date FSAH shall deliver to the escrow
agent, to hold and deal with in accordance with the provisions of this
agreement:-
4.1.1 the share certificates representing the 60% of the issued shares of
the purchaser, being the initial escrow shares; and
4.1.2 share transfer forms in respect of such escrow shares signed by the
registered shareholder, and blank as to date and transferee ("THE
SHARE TRANSFER FORMS").
4.2 The escrow agent shall acknowledge receipt of the escrow shares and the
share transfer forms in writing to the sellers and FSAH and shall hold and
deal with the escrow shares and the share transfer forms in accordance
with this agreement. The period of time from the date on which the escrow
shares and the share transfer forms are delivered to the escrow agent
until the last of the escrow shares are released from escrow in accordance
with the terms of this agreement is referred to as the "ESCROW PERIOD".
<PAGE>
3
5. ESCROW PROPERTY
5.1 During the escrow period, a percentage of any further shares issued by the
purchaser or FSAF as the case may be (including any capitalisation or
rights issue shares) shall be delivered to the escrow agent together with
undated share transfer forms signed by the registered shareholder but
blank as to transferee and such additional shares shall be held by the
escrow agent on the terms and conditions of this agreement. The percentage
of new shares to be delivered will be the same as the percentage of shares
of the purchaser held by the escrow agent in escrow at the date of issue
of the further shares.
5.2 The provisions of 5.1 shall also apply to any shares arising pursuant to
any share subdivision, consolidation, reclassification into different
classes or conversion of the escrow shares and any shares referred to in
5.1.
5.3 The escrow shares, the share transfer forms and all property contemplated
in 5.1 and 5.2 is referred to as "THE ESCROW PROPERTY". Ordinary cash or
scrip dividends declared by the purchaser or FSAF to its shareholders
shall not form part of the escrow property and shall be paid directly to
the purchaser, or FSAH, as the case may be.
5.4 FSAH shall not dispose of any of the escrow property, and the purchaser
shall not dispose of its business or place itself in liquidation unless
the prior written consent of the sellers is obtained therefor. Such
consent will not be unreasonably withheld and will not prejudice any of
the sellers' rights under the sale of business and shares agreement. The
proceeds received on a sale of the escrow property, on liquidation of the
purchaser or on disposal of the business or shares shall, unless otherwise
agreed, be paid to the escrow agent and shall be held by the escrow agent
as security for payment of the second, third and fourth instalments of the
purchase price.
<PAGE>
4
6. RELEASE OF ESCROW PROPERTY
6.1 The escrow agent shall hold the escrow property, until receipt of one of
the following:-
6.1.1 a written notice substantially in the form set out in schedule 1,
signed by the sellers and the purchaser, specifying that the second
or the third or the fourth instalments of the purchase price, as the
case may be, has been paid by the purchaser or that the local put
option has been exercised in whole or in part. Such notice shall be
given within 14 days of the relevant event. If such notice is given
the escrow agent may release escrow property to FSAH or the sellers
on the following basis:-
6.1.1.1 if the second instalment is paid FSAH will be entitled to recover
from Webber Wentzel Bowens, and have released from escrow, one
third of the escrow property, less, (if listed FSAF shares are
held in escrow), the FSAF shares required to settle any exercise
of the local put option;
6.1.1.2 if the third instalment is paid FSAH will be entitled to recover
from Webber Wentzel Bowens one third of the escrow property
(being 20% of the shares of the purchaser or the equivalent value
of FSAF shares), less any FSAF shares required to settle the
local put option;
6.1.1.3 if the fourth instalment of the purchase price is paid FSAH will
be entitled to recover from Webber Wentzel Bowens the remaining
escrow property;
6.1.2 if the local put option is exercised in whole or in part Webber
Wentzel Bowens will deliver the FSAF shares required to settle
<PAGE>
5
such exercise to the sellers, less any FSAF shares required to
settle the local put options;
6.1.3 a written notice substantially in the form set out in schedule 2
signed by the sellers and the purchaser specifying that the
purchaser has breached the sale of business agreement by failing to
make payment of the second and/or the third and/or the fourth
instalment and that the purchaser has failed to remedy such breach
as provided for in the sale of business agreement; or
6.1.4 a written notice substantially in the form set out in schedule 3
signed by the sellers and the purchaser specifying that the escrow
property has been sold to a third party.
6.2 In the event of either the purchaser or the sellers refusing to sign a
notice because of a dispute, the dispute shall be referred to arbitration
pursuant to clause 23 of the sale of business and shares agreement and the
decision of the arbitrator shall be final and binding on the parties and
the notice shall be prepared and signed in accordance with such decision.
7. DISTRIBUTION OF ESCROW PROPERTY
The escrow property shall be distributed in accordance with the
following:-
7.1 upon receipt by the escrow agent of a written notice in terms of 6.1.1,
the escrow agent shall deliver to FSAH or the sellers, as appropriate, the
certificates representing the relevant escrow shares, together with the
share transfer forms and all other escrow property associated therewith;
7.2 upon receipt by escrow agent of a written notice in terms of 6.1.2
<PAGE>
6
during the escrow period and prior to any distribution of the escrow
property, the escrow agent shall deliver all or a portion of the escrow
property to the sellers, determined in accordance with 7.3.
7.3 The percentage of escrow property to be delivered pursuant to 7.2 shall be
determined as follows:
7.3.1 if the second instalment of the purchase price is not paid, 100% of
the escrow property shall be delivered. In these circumstances FSAH
will deliver to Webber Wentzel Bowens additional FSAF shares
required to settle any future exercise of the local put option;
7.3.2 if the third instalment is not paid but the second instalment is
paid, 66,67% of the escrow property shall be delivered In these
circumstances FSAH will, if necessary, deliver to Webber Wentzel
Bowens additional FSAF shares required to settle any future exercise
of the local put option;
7.3.3 if the fourth instalment is paid but the fourth instalment is not,
33,33% of the escrow property shall be delivered In these
circumstances FSAH will, if necessary, deliver to Webber Wentzel
Bowens additional FSAF shares required to settle any future exercise
of the local put option.
7.4 Upon delivery of escrow shares to the sellers pursuant to a notice in
accordance with 6.1.2, the sellers shall become the owner of the delivered
escrow shares and shall be entitled to procure the re-registration of the
escrow shares into their names; moreover, the sale of business and shares
agreement shall be deemed to have been terminated owing to a material
unremedied breach by the purchaser and the provisions of clause 22.3 of
the sale of business and shares agreement shall apply;
<PAGE>
7
7.5 upon receipt by the escrow agent of a written notice in terms of 6.1.3,
the escrow agent shall deal with the escrow property in accordance with
instructions contained in that notice.
8. ESCROW AGENT
It is understood and agreed by the parties to this agreement as follows:-
8.1 the escrow agent is not and shall not be deemed to be a trustee for any
party for any purpose and is merely acting as a depository and in a
ministerial capacity hereunder with the limited duties prescribed by this
agreement;
8.2 the escrow agent does not have and shall not be deemed to have any
responsibility in respect of any instruction, certificate or notice
delivered to it or of the escrow shares or any related escrow property
other than faithfully to carry out the obligations undertaken in this
agreement and to follow the directions in such instruction or notice
provided in accordance with the terms of this agreement;
8.3 the escrow agent is not and shall not be deemed to be liable for any
action taken or omitted by it in good faith and may rely upon, and act in
accordance with, the advice of its legal advisers without liability on its
part for any action taken or omitted in accordance with such advice. In
any event, its liability hereunder shall be limited to liability for gross
negligence, wilful misconduct or bad faith on its part;
8.4 the escrow agent may conclusively rely upon and act in accordance with any
certificate, instruction, notice, letter, telegram, cablegram facsimile or
other written instrument believed by it to be genuine and to have been
signed by the proper party or parties;
8.5 FSAH agrees:-
<PAGE>
8
8.5.1 to pay the escrow agent's reasonable fees and to reimburse it for
its reasonable expenses including reasonable attorney's fees
incurred in connection with duties hereunder; and
8.5.2 to hold harmless, indemnify and defend the escrow agent for, from
and against any loss, damage, liability, judgment, cost and expense
whatsoever, including reasonable attorney's fees, suffered or
incurred by it by reason of, or on account of, any misrepresentation
made to it or its status or activities as escrow agent under this
agreement except for any loss, damage, liability, judgment, cost or
expense resulting from gross negligence, wilful misconduct or bad
faith on the part of the escrow agent;
8.6 the escrow agent shall not be required to defend any legal proceeding
which may be instituted against it in respect of the subject matter of
this agreement unless requested to do so by a party hereto and indemnified
to the escrow agent's satisfaction against the cost and expense of such
defence by the party requesting such defence. If any such legal proceeding
is instituted against it, the escrow agent agrees promptly to give notice
of such proceeding to the sellers and the purchaser. The escrow agent
shall not be required to institute legal proceedings of any kind;
8.7 the escrow agent shall not, by act, delay, omission or otherwise, be
deemed to have waived any right or remedy it may have either under this
agreement or generally, unless such waiver be in writing, and no waiver
shall be valid unless it is in writing, signed by the escrow agent, and
only to the extent expressly therein set forth. A waiver by the escrow
agent under the term of this agreement shall not be construed as a bar to,
or waiver of, the same or any other such right or remedy which it would
otherwise have on any other occasion;
<PAGE>
9
8.8 the escrow agent may resign as such by giving 30 days written notice
thereof to the sellers, the purchaser and FSAH. Within 20 days after
receipt of such notice, the sellers, FSAH and the purchaser shall furnish
to the escrow agent written instructions for the release of the escrow
property to a substitute escrow agent which, (whether designated by
written instructions from the sellers and the purchaser jointly or in the
absence thereof by instructions from a court of competent jurisdiction to
the escrow agent), shall be a bank or trust company or firm of auditors or
attorneys organised and doing business under the laws of the Republic of
South Africa. Such substitute escrow agent shall thereafter hold any
escrow shares and any related escrow property received by it pursuant to
the terms of this agreement and otherwise act hereunder as if it were the
escrow agent originally named herein;
8.9 The escrow agent's duties and responsibilities hereunder shall terminate
upon the release of all shares and escrow property then held in escrow
according to such written instruction or upon such delivery as herein
provided. This agreement shall not otherwise be assignable by the escrow
agent without the prior written consent of the parties hereto.
9. VOTING RIGHTS IN RESPECT OF THE ESCROW SHARES
FSAH or its subsidiary First South African Food Holdings Limited, ("FSAF")
shall have the sole power to vote in respect of the escrow shares and any
securities deposited in escrow under this agreement while they are being
held pursuant to this agreement and during the escrow period, provided
that FSAH and FSAF undertake at all times to act in the best interests of
the businesses conducted by the purchaser.
<PAGE>
10
10. DISPOSAL AND ENCUMBERING OF THE ESCROW SHARES
10.1 FSAH agrees that during the term of this agreement it will not create or
permit to be created any security interest in any or all of the escrow
shares which will rank in preference to the sellers' security interest
therein.
10.2 The purchaser and FSAH will take any action necessary or appropriate,
including the execution of any further documents or agreements, in order
to effect the transfer of the escrow shares if required pursuant to the
provisions of this agreement.
11. NOTICES
11.1 Each notice, instruction or other certificate required or permitted by the
terms hereof shall be in writing and shall be communicated by personal
delivery to the parties hereto at the addresses set forth below, or at
such other address as any of them may designate by notice to each of the
others:
11.1.1 if to the sellers, to:
Stand 204/2
Manganese Rd
Ekandustria
Mpumalanga
Attention I Store
11.1.2 if to the purchaser, to:
Europair Building
Grader Rd
Spartan Ext 3
<PAGE>
11
11.1.3 if to FSAH, to:
Europair Building
Grader Rd
Spartan Ext 3
11.1.4 if to the escrow agent to:
Webber Wentzel Bowens
60 Main Street
Johannesburg, South Africa
Attention: John Bellew
11.2 All notices, instructions or certificates given hereunder to the escrow
agent shall be effective upon receipt by the escrow agent. All notices
given hereunder by the escrow agent shall be effective and deemed received
upon personal delivery by the escrow agent.
12. IMPACT OF THIS AGREEMENT ON THE SALE OF BUSINESS AGREEMENT
Except as expressly provided herein, this agreement shall not otherwise
affect the sale of business agreement, as it may be amended from time to
time, the terms of which shall remain of full force and effect.
13. SUCCESSOR IN TITLE
In the event of the sequestration, liquidation or deregistration of the
sellers the rights and obligations of the sellers under this agreement
will be assigned to Mr Ian Store, Mr Allen Vivian James, Mr Douglas John
Varkevisser and Ms Marlys Frances Store, or trusts of which they are
beneficiaries.
<PAGE>
12
Signed at ________________________________ on __________________ 1997.
AS WITNESS: for Gull Foods cc, duly authorised
_____________________________ ________________________________________
Signed at ________________________________ on __________________ 1997.
AS WITNESS:
_____________________________ ________________________________________
Ian Stuart Store
Signed at ________________________________ on __________________ 1997.
AS WITNESS:
_____________________________ ________________________________________
Allen Vivian James
<PAGE>
13
Signed at ________________________________ on __________________ 1997.
AS WITNESS:
_____________________________ ________________________________________
Marlys Store
Signed at ________________________________ on __________________ 1997.
AS WITNESS:
_____________________________ ________________________________________
Douglas Varkevisser
Signed at ________________________________ on __________________ 1997.
AS WITNESS: for First South African Holdings
(Proprietary) Limited, duly authorised
_____________________________ ________________________________________
Name:
Title:
<PAGE>
14
Signed at ________________________________ on __________________ 1997.
AS WITNESS: for Webber Wentzel Bowens
_____________________________ ________________________________________
Name:
Title:
<PAGE>
15
SCHEDULE 1
To Webber Wentzel Bowens, 60 Main Street, Johannesburg
We, the undersigned,
GULL FOODS CC, IAN STUART STORE, ALLAN VIVIAN JAMES, MARLYS STORE AND DOUGLAS
VARKEVISSER ("THE SELLERS")
and
JENKINSON INVESTMENTS (PROPRIETARY) LIMITED ("THE PURCHASER")
hereby give notice in terms of clause 6.1.1 of the escrow agreement entered into
between you, First South African Holdings (Proprietary) Limited and ourselves on
[] ("THE ESCROW AGREEMENT") that the [number] instalment of the purchase price
payable by the purchaser to the sellers in terms of the sale of and shares
business agreement entered into between us on has been paid in full/that the put
option has been exercised in respect of [number] shares.
You are accordingly directed, in terms of clause 7.2 of the escrow agreement, to
deliver to FSAH the escrow property/to deliver to the sellers [number] FSAF
shares.
Signed at ________________________________ on __________________ 1997.
WITNESS: for Gull Foods cc, Ian Stuart Store,
Allan Vivian James, Marlys Store and
Douglas Varkevisser
_____________________________ ________________________________________
<PAGE>
16
Signed at ________________________________ on __________________ 1997.
WITNESS: for Jenkinson Investments (Proprietary)
Limited
_____________________________ ________________________________________
<PAGE>
17
SCHEDULE 2
To Webber Wentzel Bowens, 60 Main Street, Johannesburg
We, the undersigned,
GULL FOODS CC,IAN STUART STORE, ALLAN VIVIAN JAMES, MARLYS STORE AND DOUGLAS
VARKEVISSER ("THE SELLERS")
and
JENKINSON INVESTMENTS (PROPRIETARY) LIMITED ("THE PURCHASER")
hereby give notice in terms of clause 6.1.2 of the escrow agreement entered into
between you, First South African Holdings (Pty) Ltd and ourselves on [] ("THE
ESCROW AGREEMENT") that payment of the instalment(s) of the purchase price
payable in terms of the sale of business and shares agreement entered into
between us on has not been made.
You are accordingly directed, in terms of clause 7.2 of the escrow agreement, to
deliver to the sellers the following escrow property:
[SPECIFY]
Signed at ________________________________ on __________________ 1997.
WITNESS: Gull Foods cc, Ian Stuart Store, Allan
Vivian James, Marlys Store and Douglas
Varkevisser
_____________________________ ________________________________________
<PAGE>
18
Signed at ________________________________ on __________________ 1997.
WITNESS: for Jenkinson Investments (Proprietary)
Limited
_____________________________ ________________________________________
<PAGE>
19
SCHEDULE 3
To Webber Wentzel Bowens, 60 Main Street, Johannesburg
We, the undersigned,
GULL FOODS CC, IAN STUART STORE, ALLAN VIVIAN JAMES, MARLYS STORE AND DOUGLAS
VARKEVISSER ("THE SELLERS")
and
JENKINSON INVESTMENTS (PROPRIETARY) LIMITED ("THE PURCHASER")
hereby give notice in terms of clause 6.1.3 of the escrow agreement entered into
between you, First South African Holdings (Pty) Ltd and ourselves on [] ("THE
ESCROW AGREEMENT") that the escrow property has been sold to a third party.
You are accordingly directed, in terms of clause 7.3 of the escrow agreement, to
deal with the escrow shares as follows:-
insert instructions
Signed at ________________________________ on __________________ 1997.
WITNESS: Gull Foods cc, Ian Stuart Store, Allan
Vivian James, Marlys Store and Douglas
Varkevisser
_____________________________ ________________________________________
<PAGE>
20
Signed at ________________________________ on __________________ 1997.
WITNESS: for Jenkinson Investments (Proprietary)
Limited
_____________________________ ________________________________________
<PAGE>
SCHEDULE 3
MANAGEMENT AGREEMENT
<PAGE>
21
MANAGEMENT AGREEMENT
between
IAN STORE
and
ALAN VIVIEN JAMES
(collectively "THE MANAGERS")
and
FIRST SOUTH AFRICAN HOLDINGS (PROPRIETARY) LIMITED
(Registration No. 95/03959/07)
("FSAH")
- --------------------------------------------------------------------------------
WEBBER WENTZEL BOWENS
<PAGE>
1. INTRODUCTION
1.1 FSAH has entered into an agreement to purchase the businesses of Trek
Biltong cc and Gull Foods cc, ("THE SALE AGREEMENT"). The sale agreement
provides that FSAH may nominate a company to act as purchaser in its
stead, and FSAH intends to do so. The Managers consent to such nomination.
Such company is referred to in this agreement as "THE COMPANY". FSAH
undertakes to procure that the Company will adopt and be bound by this
agreement.
1.2 The parties wish to enter into an agreement on the terms and conditions
set out below.
2. PERIOD
Notwithstanding its date of signature, this agreement shall be effective
from 1 January 1997 and, save for the provisions of clauses 13 and 14,
which shall endure for the period specified therein and for clauses 15, 16
and 17, which shall endure until all matters and disputes arising from
this agreement have been resolved, shall continue for a period of 3 years
terminating on 31 December 1999.
3. APPOINTMENT
The Company appoints the Managers as its Managers to render to the Company
the services set out in this agreement, and the Managers accept this
appointment, on the terms and conditions of this agreement. The
relationship of the Company and the Managers shall be that of employer and
employee.
4. DIRECTORSHIPS AND RELATED MATTERS
4.1 FSAH and the Company undertake to procure that Messrs Store and
<PAGE>
2
James will be appointed as managing director and Chairman of the Company.
They will not be subject to rotation or retirement.
4.2 One of the Managers shall be entitled to be appointed to the board of
directors of First South African Food Holdings Limited, ("FSAF"). The
identity of this person will be determined by the Managers.
4.3 Each Manager who is a director of the Company or FSAF may appoint an
alternate director in respect of each of those companies.
5. MANAGEMENT OF THE BUSINESS
5.1 Subject to clause 6 the Managers will be responsible for planning and
supervising the operations of the Company and its subsidiaries in
accordance with this agreement. The Managers shall ensure that the
businesses of the Company and its subsidiaries are run on proper business
principles and that proper provision is made for the ongoing growth and
development of such businesses. In particular the Managers shall ensure
that the businesses are not run so as to maximise short term profit at the
expense of longer term interests.
5.2 The Managers shall devote such time and attention (both during and after
business hours) to the performance of their duties as the businesses of
the Company and its subsidiaries may require. It is recorded (without
limiting the obligations of Managers to perform their duties) that the
parties anticipate that the Managers will be required to devote 100% of
their working time to the affairs of the Company and its subsidiaries.
5.3 The parties record that it is their intention and the spirit of their
relationship that the expertise of the Managers in running the business,
and the Managers' understanding of the market should be relied upon,
exploited for the benefit of the Company and its subsidiaries and
<PAGE>
3
transferred to other members of management. Accordingly, the Managers
undertake, as part of their responsibilities, to train the staff of the
Company and its subsidiaries and shall actively transfer their knowledge
concerning the Company's and its subsidiaries' business to other staff
members.
6. MATTERS REQUIRING CONSENT OF FSAH
Decisions in respect of the following fundamental matters affecting the
Company and each of its subsidiaries shall require the prior written
consent of FSAH, which shall not be unreasonably withheld:-
6.1 the approval of the annual budget, annual business plan, lease expenditure
and capital expenditure budgets and any amendment of the annual business
plan or the budgets;
6.2 the conclusion of any material contracts outside the ordinary course of
business;
6.3 the voluntary liquidation of the company concerned;
6.4 any capital investment or expenditure, however financed, in excess of
R500000 or any disposal of any of the capital assets of the company, the
sale proceeds or book value of which is in excess of R500000;
6.5 any sale, assignment, transfer or other disposition by the company of any
intangible assets such as goodwill, logos, names, trademarks, copyright,
patents or licences, or trademark, patent or licence agreements;
6.6 any material change in the accounting policies as used for the audited
financial statements of any such company;
<PAGE>
4
6.7 the furnishing by any such company of any encumbrances over any of its
assets or of any guarantees, suretyships, undertakings, indemnities or
other forms of intercession for the obligations of third parties;
6.8 the acquisition or incorporation of any direct or indirect subsidiaries;
6.9 the acquisition of any shares or interest in any company, other form of
legal entity, business, partnership or other undertaking of whatever
nature;
6.10 the cessation of any material contract;
6.11 the incurrence of any general banking facilities, whether or not utilised,
any liability or borrowing, whether interest-bearing or not, (collectively
"BORROWINGS") where such borrowings exceed R100000;
6.12 the disposal by any such company of:
6.12.1 its business; or
6.12.2 any asset not in the ordinary course of business;
6.13 the payment of remuneration or fees to directors in their capacity as
directors or employees;
6.14 the appointment or removal of the auditors of any such company;
6.15 any increase or reduction in the salaries payable to any of the Managers;
and
6.16 any material change to the core nature of the business of such company or
in the way such business is conducted.
<PAGE>
5
7. REMUNERATION
7.1 The remuneration of the Managers and the manner in which that remuneration
is structured shall be determined by agreement of the parties from time to
time, it being the intention of the parties that the Managers shall be
remunerated at market-related rates for services rendered pursuant to this
agreement. It is recorded that the remuneration has been calculated on the
assumption that the Managers will devote 100% of their working time to the
performance of their duties under this agreement.
7.2 The Company undertakes to accommodate, where possible, reasonable requests
from the Managers relating to the structuring of their remuneration,
provided that there are no negative taxation or other consequences to the
Company arising from such structuring. The initial remuneration of Messrs
Store and James is R500000 payable monthly in arrear in 12 equal monthly
instalments, commencing 1 January 1997.
7.3 The remuneration of the Managers shall be reviewed annually by FSAH.
7.4 The Managers shall be entitled to become members of the medical aid scheme
utilised by the Company and the Company shall pay 100% of the Managers'
membership fees.
7.5 The Managers shall be entitled to life and disability cover, on the same
basis as senior employees of the Company, in terms of the Company's group
life scheme, (if any), from time to time.
8. REFUND OF DISBURSEMENTS AND EXPENSES
The Company shall refund to the Managers any disbursements made or
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6
expenses incurred by the Managers in the course of the exercise of their
duties provided that vouchers supporting claims are submitted.
9. HOLIDAY LEAVE
The Managers shall each be entitled to 30 working days leave on full pay
for each 12 month period, which leave shall accrue on a pro rata monthly
basis and shall be taken at a time mutually acceptable to the Managers and
the Company. Any leave accruals in excess of 10 days at the end of the
Company's financial year shall, save with the written agreement of the
board of the Company, be forfeited.
10. SICK LEAVE
10.1 Subject to 10.2, each of the Managers shall be entitled to 30 days sick
leave per completed 12 month cycle of employment.
10.2 Notwithstanding 10.1, should a Manager be precluded through medically
substantiated chronic ill health from performing his duties, then the
Company undertakes-
10.2.1 for the first 90 days of such indisposition, to pay the Manager at
the full rate of his remuneration; and
10.2.2 for the next 90 days of such indisposition, to pay the Manager at
the rate of half of his remuneration;
provided that if, after the lapse of an aggregate of 180 days, the
Manager is unable to resume or properly perform his duties, the
Manager shall be deemed to be in default and the provisions of
clause 15 shall apply.
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11. COPYRIGHT
11.1 The Managers acknowledge that the Company or its nominee shall become the
owner of the copyright in any work which is eligible for copyright and
which is created or executed by any Manager, whether alone or with others,
in the course and scope of the performance of his duties under this
agreement.
11.2 In so far as it may be necessary, each of the Managers assigns to the
Company or, in the event of the Company appointing a nominee, such
nominee, the copyright in any such work.
12. ACCESS TO INFORMATION
There shall be made available to the Managers full and free access to all
information for investigating and verifying the affairs of the Company and
its assets, liabilities and financial position including, without
prejudice to the generality of the foregoing, full and free access to all
trading records, accounts, books, bank statements and other financial
records of the Company.
13. CONFIDENTIALITY
13.1 No Manager shall, during the period of this agreement and thereafter,
disclose to any person whomsoever any information of any nature regarding
the Company, its group companies, its licensors, trading partners or other
associates or their businesses except to the extent that:-
13.1.1 it is required for or in the discharge of his duties and functions
hereunder; or
13.1.2 he is reasonably required to so so in order to protect his
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8
rights under this agreement, or is required to do so under the
provisions of any law which is binding on the Manager; or
13.1.3 such information is in the public domain other than as a result of a
breach of this clause by a Manager.
13.2 No Manager shall, during his employment or thereafter, directly or
indirectly use or divulge (except as required by the terms and nature of
his employment) any of the trade secrets of the Company, its group
companies, licensors, trading partners or other associates. For this
purpose the term "trade secrets" shall include but shall not be limited to
the following matters:-
13.2.1 knowledge of and factors which constitute an influence over the
Company's clients and business associates;
13.2.2 the contractual arrangements between the Company and its business
associates;
13.2.3 the financial details of the Company's relationship with its
business associates;
13.2.4 the financial details (including terms) relating to the Company's
clients;
13.2.5 the names of clients and prospective clients;
13.2.6 details of the Company's financial structure and operating results;
13.2.7 details of the remuneration paid by the Company to its various
employees and their duties;
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9
13.2.8 the systems employed by the Company in the conduct of its business;
13.2.9 the know-how and other information and techniques employed by the
Company in the conduct of its business; and
13.2.10 other matters which relate to the business of the Company and in
respect of which information is not readily available in the
ordinary course of business to a competitor of the Company.
14. RESTRAINTS AND COMPETING BUSINESSES
14.1 Each of the Managers undertakes to FSAH, First South African Food Holdings
Ltd ("FSAF") the Company and each of the Company's subsidiaries that for a
period of 6 years commencing on 1 January 1997 and terminating on 31
December 2002 he will not, without the prior written consent of FSAH, FSAF
and the Company, and whether directly or indirectly as shareholder,
employee, financier, director, agent, officer, consultant, adviser or
otherwise-
14.1.1 compete with the Company in the fields of activity referred to in
14.2 within the areas of restraint set out in 14.3;
14.1.2 persuade, induce, encourage or procure any employee of the Company,
or any person who was an employee of the Company during the previous
twelve months, to become employed by or interested in any manner
whatever in any field of activity referred to in 14.2, or to
terminate his employment with the Company.
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10
14.2 The fields of activity in respect of which the restraint applies will be -
14.2.1 the business of the manufacture, distribution and retailing of value
added food products, meat, biltong, dry wors or other dried meat
products;
14.2.2 (as a separate restraint) any new business actively carried on, or
which the Company or any of its subsidiaries can demonstrate in
writing is actively contemplated by the Company or such subsidiary
at the date of termination of this agreement or any extension of
this agreement.
14.3 The areas of restraint referred to in this 14 shall be:-
14.3.1 the Republic of South Africa;
14.3.2 (as a separate restraint) Lesotho;
14.3.3 (as a separate restraint) Swaziland;
14.3.4 (as a separate restraint) Botswana;
14.3.5 (as a separate restraint) Namibia;
14.3.6 (as a separate restraint) Zimababwe;
14.3.7 (as a separate restraint) Mozambique; and
14.3.8 (as a separate restraint) the Indian Ocean Islands.
14.4 The Managers acknowledge-
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11
14.4.1 that the customers of the Company and its subsidiaries are or could
be drawn from all of the areas in which the restraints are to be
operative;
14.4.2 that the Company, its subsidiaries, FSAF and FSAH would suffer
substantial damage if any of the Managers were to operate a business
similar to that carried on by the Company or any of its subsidiaries
within the area to which, and during the time in which, the
restraint is to apply;
14.4.3 that the restraint is the minimum restraint required by FSAH, FSAF,
the Company and the Company's subsidiaries to provide protection
against unfair competition upon termination of employment and,
moreover, that the restraint will not prevent any Manager from
obtaining a comparable position elsewhere should his employment
terminate and that in the circumstances it is fair and reasonable,
and necessary for the protection of the interests of the Company,
its subsidiaries, FSAF and FSAH that the Managers should be
restrained in the manner set out in this clause. Should the
reasonableness of any provision contained in this clause be
disputed, the onus of proving that the provision is unreasonable
will rest on the Manager.
14.5 Each and every restraint contained in this clause is separate and
divisible from every other restraint in this clause and from any other
restraint so that if any one of the restraints is or becomes unenforceable
for any reason, that restraint will be severable and will not affect the
validity of any other restraint contained in this 14 or otherwise.
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12
14.6 Insofar as the restraints are considered by the parties to be reasonable
in all the circumstances, they agree that if the restraints, taken
together, are adjudged to go beyond what is reasonable in all the
circumstances but would be adjudged reasonable if part or parts of the
wording of the restraints were deleted or modified, the restraints shall
apply with such words deleted or modified.
14.7 The restraints contained in this clause will be capable of being enforced
by FSAH, FSAF, or the Company or any of the Company's subsidiaries,
individually or collectively by any of them.
14.8 FSAF and each subsidiary of the Company may at any time accept the
benefits conferred on them by this clause by notice in writing given to
the Company and the Manager.
14.9 Notwithstanding the preceding provisions of this clause the restraints set
out above will immediately fall away and this agreement will terminate in
any of the following circumstances:-
14.9.1 the Company or any one or more of the legal entities through which
the Company is directly or indirectly held (including where
appropriate FSAC, FSAH or FSAF) undergoes a change of de facto
control; or
14.9.2 all or portion of the business of the Company is disposed of by the
Company, whether within or outside of the group of companies of
which FSAC is currently the controlling company; or
14.9.3 the nature of the business as conducted by the sellers at the
signature date (as defined in the sale of business agreement)
changes substantially.
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13
14.10 If the restraints fall away and this agreement terminates in the
circumstances contemplated in 14.9 prior to 31 December 1999, then each
Manager shall receive, as a severance package, an amount equal to the
amount that Manager would have received had this agreement continued until
31 December 1999.
15. DEFAULT
15.1 If a party:-
15.1.1 commits a material breach of any provision going to the root of this
agreement and fails to remedy the breach within 10 days of written
notice to do so;
15.1.2 commits a second or subsequent breach of this agreement after having
remedied an earlier similar breach during the preceding 12 months
after written notice to do so;
15.1.3 takes steps to place itself, or is placed, in liquidation or
sequestration, whether voluntary or compulsory, or in judicial
management, in either case whether provisionally or finally;
15.1.4 (in the case of a Manager) does or omits to do anything, and such
act or omission would justify the summary dismissal of the Manager;
the party shall be in default.
15.2 If a party is in default any other party ("THE AGGRIEVED PARTY") shall be
entitled, in addition to all other remedies at law, to:
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14
15.2.1 cancel the agreement against the party in default; or
15.2.2 uphold the agreement, in which event the aggrieved party may require
the party in default to provide security to the reasonable
satisfaction of the aggrieved party for the payment of all amounts,
and the performance of all other obligations, owed by the party in
default.
15.3 If a party is in default and the default is of a continuing nature, or if
the party is in breach of any provision of this agreement and has been
given written notice to remedy the breach, the aggrieved party:
15.3.1 may suspend performance of the aggrieved party's obligations during
the default or breach;
15.3.2 shall be entitled to a reasonable additional period for the
performance of the aggrieved party's obligations.
16. MEDIATION AND ARBITRATION
16.1 Should any disputes or differences arise at any time between the parties
concerning this agreement or its construction or effect or as to the
rights, duties and/or liabilities of the parties or either of them under
or by virtue of this agreement or otherwise or as to any other matter in
any way arising out of the subject matter of this agreement then either
party:
16.1.1 may declare a dispute by delivering the details of the dispute to
the other party, and
16.1.2 request that the dispute be referred by the parties, without legal
representation, to mediation by a single mediator at a place and
time to be determined by him.
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15
16.2 If, within 30 days of the delivery of the declaration of a dispute, the
parties have not agreed to accept mediation then the dispute shall be
determined by arbitration as prescribed below.
16.3 If the parties agree to mediation then the mediator shall be:
16.3.1 selected by agreement between the parties, or, failing agreement,
16.3.2 nominated on the application of either party by the president for
the time being of Independent Mediation Service of South Africa.
16.4 The mediator shall, at his entire discretion, determine whether the
reference to him shall be made in the form of written and/or oral
representations provided that, in making this determination, he shall
consult the disputing parties and be guided by their desires of the form
in which the representations are to be made.
16.5 The mediator shall, within a reasonable period after receiving the
representations, express in writing an opinion on the matter and shall
include his detailed reasons leading to the opinion.
16.6 The mediator shall deliver a copy of his opinion to each party.
16.7 The opinion so expressed by the mediator shall be final and binding on the
parties unless either party within 30 days of the delivery of the opinion,
notifies the other party of the first party's unwillingness to accept the
opinion.
16.8 The costs of mediation shall be determined by the mediator and shall
comprise:
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16
16.8.1 the mediator's expenses, and
16.8.2 a fee which shall have been previously agreed by the parties.
The costs shall be borne equally by the parties to the dispute and
shall be due and payable to the mediator on presentation to them of
his written account.
16.9 Each party shall bear the costs of any legal advice that party may have
obtained in connection with the mediation.
16.10 The expressed opinion of the mediator shall not prejudice the rights of
the parties in any manner whatsoever in the event of their proceeding to
arbitration.
16.11 Any decision given by any representative of the parties in accordance with
any provision of this agreement prior to or during the mediation shall not
disqualify him from being called as a witness and giving evidence before
the arbitrator on any matter whatsoever relevant to the dispute or
difference so referred to the arbitrator as provided in this clause.
16.12 If either party to this agreement be unwilling to accept mediation or be
unwilling to accept the opinion expressed by the mediator then either
party may, by written notice delivered to the other, within 30 days of the
declaration of the dispute if there be no mediation or within 30 days of
the issue of the mediator's opinion if mediation takes place, require that
the dispute be referred to arbitration.
16.13 Such arbitration shall be by a single arbitrator who shall be an advocate
of not less than 10 years standing if the dispute is primarily a legal
matter and a practising auditor of not less than 10 years
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17
standing if the matter is primarily an accounting matter:
16.13.1 selected by agreement between the parties or, failing such
agreement;
16.13.2 nominated on the application of either party by the chairman for the
time being of the Association of Arbitrators.
16.14 The arbitrator shall have power to open up, review and revise any
certificate, opinion, decision, requisition or notice relating to all
matters in dispute submitted to him and to determine all such matters in
the same manner as if no such certificate, opinion, decision, requisition
or notice had been issued.
16.15 Upon every or any such reference, the costs of and incidental to the
reference and award shall be in the discretion of the arbitrator, who may
determine the amount of the costs, or direct them to be taxed as between
attorney and client or as between party and party and shall direct by whom
and to whom and in what manner they shall be borne and paid.
16.16 The award of the arbitrator shall be final and binding on the parties.
16.17 In all respects the arbitration shall be conducted in accordance with the
Rules for the Conduct of Arbitrations published by the Association of
Arbitrators and current at the date the arbitrator is appointed or
nominated.
17. MISCELLANEOUS MATTERS
17.1 ADDRESSES FOR SERVICE OF LEGAL DOCUMENTS
17.1.1 The parties choose the following physical addresses at
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18
which documents in legal proceedings in connection with this
agreement may be served (ie their domicilia citandi et executandi):
17.1.1.1 the Managers:
Stand 204/2
Manganese Rd
Ekandustria
Mpumalanga
17.1.1.2 the Company and FSAH:
Europair Building
Grader Rd
Spartan Ext 3
Kempton Park
17.1.2 The notice shall be deemed to have been duly given on delivery. All
notices will be delivered.
17.1.3 A party may change that party's address for this purpose, by notice
in writing to the other party.
17.1.4 A party may change that party's address for this purpose to another
physical address in the Republic of South Africa, by notice in
writing to the other party.
17.2 ENTIRE CONTRACT
This agreement contains all the express provisions agreed on by the
parties with regard to the subject matter of the agreement and the parties
waive the right to rely on any alleged express provision not contained in
the agreement.
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19
17.3 NO REPRESENTATIONS
No party may rely on any representation which allegedly induced that party
to enter into this agreement, unless the representation is recorded in
this agreement.
17.4 VARIATION, CANCELLATION AND WAIVER
No contract varying, adding to, deleting from or cancelling this
agreement, and no waiver of any right under this agreement, shall be
effective unless reduced to writing and signed by or on behalf of the
parties.
17.5 INDULGENCES
If any party at any time breaches any of that party's obligations under
this agreement, the other party ("THE AGGRIEVED PARTY"):
17.5.1 may at any time after that breach exercise any right that became
exercisable directly or indirectly as a result of the breach, unless
the aggrieved party has expressly elected in writing or by clear and
unambiguous conduct, amounting to more than mere delay, not to
exercise the right. (If the aggrieved party is willing to relinquish
that right the aggrieved party will on request do so in writing.) In
particular, acceptance of late performance shall for a reasonable
period after performance be provisional only, and the aggrieved
party may still exercise that right during that period;
17.5.2 shall not be estopped (ie precluded) from exercising the aggrieved
party's rights arising out of that breach, despite the fact that the
aggrieved party may have elected or agreed on one or more previous
occasions not to exercise the rights arising out of any similar
breach or breaches.
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20
17.6 CESSION
No party may cede that party's rights or delegate that party's obligations
without the prior written consent of the other parties, which shall not be
unreasonably withheld.
17.7 APPLICABLE LAW
This agreement shall be interpreted and implemented in accordance with the
law of the Republic of South Africa.
17.8 JURISDICTION
The parties consent to the non-exclusive jurisdiction of the Witwatersrand
Local Division of the Supreme Court.
17.9 GOOD FAITH
The parties shall act towards each other in the utmost good faith in
giving effect to this agreement.
Signed at __________________________ on ______________________ 1997.
AS WITNESS:
________________________________ ________________________________
IAN STONE
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21
Signed at __________________________ on ______________________ 1997.
AS WITNESS:
________________________________ ________________________________
ALAN VIVIEN JAMES
Signed at __________________________ on ______________________ 1997.
AS WITNESS:
________________________________ ________________________________
For FIRST SOUTH AFRICAN HOLDINGS
(PROPRIETARY) LIMITED
<PAGE>
SCHEDULE 4
DISCLOSURE SCHEDULE
A full disclosure list will be provided within 30 days of the signature date. In
the interim it is disclosed that certain assets are encumbered in favour of
Stannic. All such encumbrances are normal when regard is had to the relevant
underlying financing transaction and have been entered into in the ordinary
course of business.
