Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 19, 1999
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CGI HOLDING CORPORATION
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(Exact name of registrant as specified in its charter)
NEVADA 33-19980-D 87-0450450
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(State of (Commission file (IRS Employer
incorporation) Number) Identification Number)
8400 BROOKFIELD AVENUE, BROOKFIELD, ILLINOIS 60513
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 387-0900
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ITEM 2. ACQUISITION
On March 5, 1999, CGI Holding Corporation (the "Company") acquired substantially
all of the assets of Salle International, L.L.C. ("Salle"), pursuant to an Asset
Purchase Agreement dated March 2, 1999 (the "Purchase Agreement") by and between
the Company and Salle. Salle is a manufacturer, distributor and marketer of
personal care products and is headquartered in Waukegan, Illinois.
Pursuant to the Purchase Agreement, the Company's newly formed and wholly-owned
subsidiary, Personal Care Products, Inc., an Illinois corporation ("PCP"),
acquired substantially all of the assets used by Salle in the operation of its
personal care products manufacturing, distribution and marketing business (the
"Acquired Assets"). On March 5, 1999 (the "Closing") in consideration for the
acquisition of the Acquired Assets, PCP
(i) agreed to paid Salle up to $525,000,
(ii) agreed to pay or assume Salle's $470,000 indebtedness owed to its senior
secured creditor, and
(iii) assumed Salle's obligations under the lease for its operating facility and
certain other leases.
On March 5, 1999, in events related to the acquisition:
(i) (A) PCP, pursuant to an agreement dated March 5, 1999 by and between it and
Michael Balkin, a member of Salle (the "Balkin Agreement"), acquired from Mr.
Balkin the $1,693,600 indebtedness that Salle owed to Mr. Balkin. In
consideration for the acquisition, PCP agreed to pay Mr. Balkin (i) $300,000 at
the Closing or within 15 days thereof subject to $150,000 of that amount being
escrowed as provided in the Balkin Agreement, (ii) $342,000 at the Closing and
(iii) $1,000,000 in ten equal semi-annual payments on January 1 and July 1
commencing January 1 of the year that is two fiscal years after the first fiscal
year in which PCP has earnings before taxes, as defined therein, of as least
$400,000.00.
(B) Subsequent to the Closing, PCP and Mr. Balkin agreed to amend the terms of
the $300,000 and the $342,000 payments. As amended, PCP agreed to pay Mr. Balkin
the $300,000 and the $342,000 by April 30, 1999. PCP and Mr. Balkin further
agreed that so long as at least $150,000 of the moneys owed him remained unpaid
no amounts would have to be escrowed.
(C) As part of the Balkin Agreement, which the Company agreed to, Mr. Balkin has
the right at any time on and after January 1, 2001 to convert the then
outstanding indebtedness owed him into common stock of CGI Holding Corporation
pursuant to a conversion price formula. The minimum conversion price would be no
less than $1.00 per share. PCP has the right to set-off against the then
outstanding amounts payable to Mr. Balkin and, if that amount is not adequate,
any stock of the Company he received due to his exercise of conversion rights
the amount of any and all loss, damage, claim, costs or expenses incurred by PCP
or the Company arising from the Purchase Agreement and/or any obligation of
Salle. Pursuant to the Balkin Agreement, PCP agreed to appoint Mr. Balkin and a
person designed by him as directors to the Board of Directors of PCP.
(ii) PCP, pursuant to an agreement dated March 5, 1999 by and between it and
Neil Seltzer, a member of Salle (the "Seltzer Agreement"), acquired from Mr.
Seltzer the $50,000.00 indebtedness that Salle owed to Mr. Seltzer. In
consideration for the acquisition, PCP agreed to paid Mr. Seltzer $50,000 in ten
equal semi-annual payments commencing January 1, 2001. As part of the Seltzer
Agreement, which the Company agreed to, Mr. Seltzer has the right at any time on
and after January 1, 2001 to convert the then outstanding indebtedness owed him
into common stock of CGI Holding Corporation pursuant to a conversion price
formula. The minimum conversion price would be no less than $1.00 per share.
On March 8, 1999, in events related to the acquisition:
Pursuant to a Subscription Agreement dated March 8, 1999 by and between PCP and
PCP Partners, an Illinois general partnership of which Mr. Balkin is the
managing partner ("PCP Partners"), PCP issued 35,000 shares of the Class B
Common Stock of PCP for and in consideration of PCP Partners' payment of
$35,000. As a result of such subscription, PCP Partners' ownership interest in
PCP is 35%.
The payment obligations of PCP under the Purchase Agreement for the Acquired
Assets are being funded pursuant to loans extended by the Company to PCP. The
Company has funded such loans from moneys made available to it by its
subsidiaries, Roli Ink Corporation ("RIC") and Safe Environment Corp. ("SECO").
SECO has funded its loans to the Company by drawing upon its $1.35 million
revolving line of credit with CIB Bank and RIC has funded its loans to the
Company by drawing upon its $150 thousand revolving line of credit with CIB
Bank.
The payment obligations of PCP to Mr. Balkin and to Mr. Seltzer will be
satisfied from the available funds of PCP.
The consideration received by Salle and by Balkin, Seltzer and PCP Partners
pursuant to the events related to the acquisition was based upon arms-length
negotiations between the Company, Salle, Balkin, Seltzer and PCP Partners. Prior
to the acquisition, there was no material relationship between Salle, Balkin,
Seltzer or PCP Partners and the Company, any affiliates of the Company, any
director or officer of the Company or any associate of any such director or
officer.
The PCP acquired the sales office and the manufacturing and warehouse
facilities, used in the manufacturing, distribution and marketing of the
personal care products, which facilities were leased by Salle prior to the
acquisition. The Company intends that PCP shall engage in the same business and
use the Acquired Assets in the same manner as Salle did prior to the
acquisition.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of business acquired
The required financial statements will be filed by the Company, under cover of
Form 8-K/A, as soon as practicable, but not later than May 18, 1999.
(b) Pro forma financial information
The required pro forma financial information will be filed by the Company, under
cover of Form 8-K/A, as soon as practicable, but not later than May 18, 1999.
(c) Exhibits
2.1 Asset Purchase Agreement dated March 2, 1999, by and between CGI Holding
Corporation and Salle International, L.L.C. (without schedules*).
2.2 Agreement dated March 5, 1999, by Personal Care Products, Inc. and Michael
Balkin and Amendment dated as of March 16, by Personal Care Products, Inc. and
Michael Balkin.
2.3 Agreement dated March 5, 1999, by Personal Care Products, Inc. and Neil
Seltzer.
2.4 Subscription Agreement dated March 8, 1999, by Personal Care Products, Inc.
and PCP Partners.
* The Company agrees to furnish supplementally a copy of any omitted schedules
to the Securities and Exchange Commission upon request.
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 thereunto duly authorized.
Dated: March 19, 1999
CGI HOLDING CORPORATION
(Registrant)
By /s/ John Giura
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John Giura, President and Director
(Principal Executive Officer)
EXHIBIT INDEX
Number Subject Matter
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2.1 Asset Purchase Agreement dated March 2, 1999, by and between CGI Holding
Corporation and Salle International, L.L.C.
2.2 Agreement dated March 5, 1999, by and between Personal Care Products, Inc.
and Michael Balkin and Amendment dated as of March 16, by Personal Care
Products, Inc. and Michael Balkin.
2.3 Agreement dated March 5, 1999, by and between Personal Care Products, Inc.
and Neil Seltzer.
2.4 Subscription Agreement dated March 8, 1999, by and between Personal Care
Products, Inc. and PCP Partners.
Exhibit 2.1
Asset Purchase Agreement dated March 2, 1999, by and between CGI Holding
Corporation and Salle International, L.L.C.
ASSET PURCHASE AGREEMENT
AGREEMENT made this second day of March, 1999, by and between CGI HOLDING
CORPORATION, a Nevada corporation ("CGI"), and SALLE' INTERNATIONAL, L.L.C., an
Illinois limited liability company ("Seller").
W I T N E S S E T H:
WHEREAS, CGI desires to have its wholly owned subsidiary Personal Care Products,
Inc., an Illinois corporation ("Buyer") purchase and Seller desires to sell
substantially all of the assets used by Seller in the operation of its personal
care products manufacturing, distribution and marketing business located in Lake
County, Illinois and its offices and warehouses at other locations, on the terms
and conditions contained in this Agreement.
NOW THEREFORE, it is mutually agreed as follows:
I. ASSETS
At the Closing (as hereinafter defined), Seller shall sell and transfer, and
Buyer shall purchase the Assets, including all those Assets acquired, less those
disposed of in the ordinary course of business or otherwise permitted by this
Agreement, between the date of this Agreement and the Date of Closing. For the
purpose of this Agreement, "Assets" shall mean and include:
(A) All furniture, fixtures, equipment and other personal property and
interests therein owned by Seller and its affiliates including those described
in Exhibit A attached hereto, wherever located and whether or not appearing on
the books of Seller (herein called "Machinery and Equipment");
(B) All inventories of raw materials, supplies, work in progress and
finished goods of Seller, excluding, however, the inventory of scents acquired
by Seller from Herbanario, L.L.C. a Rhode Island limited liability company,
wherever located on the Date of Closing and which are used or usable in the
Seller's business (the "Inventory"),
(C) All cash, cash equivalents, accounts receivables, deposits and
investments owned by Seller and its affiliates, (herein after referred to as
"Cash Equivalents") and
(D) All other assets of Seller employed in connection with the
operation of Seller, tangible or intangible, wherever located, and whether or
not any value therefor is reflected on the Seller's balance sheet,such as,
without limiting the generality thereof, maintenance and manufacturing supplies
and parts not carried as inventory, all rights and privileges of the Seller
under the leases and agreements (excluding Permit No. SDA - IL-2630 from the
Bureau of Alcohol, Tobacco and Firearms), including but not limit to those set
forth in Exhibit B hereto and incorporated herein, patents, application,
licenses (excluding, however, the License Agreement with James Dean, Inc. dated
May 23, 1997) including those set forth in Exhibit C hereto and non-exclusive
shop rights (rights to developments made by employees of the Seller and relating
to the operation of Seller), names, (including but not limited to the name
"Salle"), slogans, trademarks, trade names, service marks, and the goodwill of
the business connected therewith (excluding, however, the marks "Herbanario" and
"Rebel"), including those set forth on Exhibit D, copyrights, royalty agreements
and brand or private label names of which the Seller is owner, licensor or
licensee, bonds and surety agreements, surety deposits, trade secrets,
contractual rights, actions, telephone numbers, customer lists, customer
contract rights, correspondence files and records, accounts payable records,
customer files, computer programs (wherever located, including but not limited
to programs for payroll, general ledger, operating statements, monthly profit
and loss statements and balance sheets), production records, purchasing records,
inventory records, employment files, and all other assets necessary for the
continued conduct Seller's business by Buyer (hereinafter referred to as the
"Intangibles").
II. CONSIDERATION
As consideration for the sale and transfer of the Assets, at Closing:
(A) Buyer shall assume, pay-off or acquire Seller's current debt to
Harris Bank, Chicago, in an amount not to exceed Four Hundred Seventy Thousand
Dollars ($470,000), plus current interest, and shall, as part of such
transaction, obtain the release of any guarantees which may have been given to
such bank in connection with such loan. Buyer may cause a third party to acquire
from Harris Bank its rights in such debt and any security interests granted by
Seller securing such indebtedness.
(B) Buyer shall acquire the balance of the indebtedness of Seller to
Michael Balkin ("Balkin") which existed as of January 18, 1999 and which exists
on the Date of Closing including the outstanding amount of new loans made by
Balkin to Seller after January 18, 1999, which are approved in writing in
advance by CGI, which indebtedness shall be payable on terms and conditions
which are mutually acceptable to Buyer and Balkin. Notwithstanding any such
approval, CGI and Buyer shall have no obligation with respect to such
indebtedness if the transaction contemplated herein does not close.
(C) Buyer shall acquire the balance of the indebtedness of Seller to
Neil Seltzer ("Seltzer",) on the Date of Closing, on terms and conditions which
are mutually acceptable to Buyer and Seltzer.
(D) Buyer shall at Closing agree to pay to Seller up to Five Hundred
Twenty-Five Thousand Dollars ($525,00.00) to be used exclusively to pay those
obligations of Seller as are listed on Exhibit E attached hereto with such
changes as Buyer and Seller agree upon at Closing. Such amounts shall be paid to
Seller or through an escrow as Buyer directs from time to time. Buyer may
off-set against the balance of such amount any claims paid by Buyer or CGI in
their discretion relating to such obligations or any other obligations of Seller
or arising form any breach of any agreement, covenant, representation or
warranty of Seller hereunder.
(E) Buyer will assume Seller's obligations under such leases and other
agreements which Buyer agrees to assume at Closing.
F) At the Closing, Buyer and Seller shall agree upon an allocation of
the purchase price for Internal Revenue Service Form 8594.
III. ADDITIONAL AGREEMENTS
(A) Employees
Buyer shall prior to closing designate such employees of Seller who it desires
to have be employed by Buyer from and after the Closing. Seller agrees to
attempt to induce such employees to accept such employment by Buyer as of the
Closing Date. Subject to the foregoing, Buyer shall not be obligated to hire,
but may in its discretion hire, any of Seller's employees and Seller shall be
solely responsible for the buyout of any employment agreements to which Seller
is subject or the payment of any severance packages to any of Seller's
employees. Seller shall remain obligated for all employment matters relating to
its employees, including but not limited to accrued salaries, vacations and
other employment benefits, none of which shall be assumed by Buyer except on the
terms provided below, and shall indemnify, defend and hold Buyer on CGI harmless
against any such claims.
(B) Real Estate Lease
Seller's lease for its existing facilities is identified on Exhibit F. Seller
agrees to assist Buyer in obtaining any required consents of the lessors
thereunder for the assignment to Buyer or at Buyer's request assist Buyer to
negotiate a new or amended leases for such facilities.
(C) Equipment Leases
All of Seller's leases, other than the leases identified in Exhibit G, are
listed on Exhibit I attached hereto.
(D) Executory Agreements
Buyer shall assume, effective from and after the Closing, Seller's executory
obligations (that is, obligations to be performed after the Date of Closing) for
performance of, and, to the extent possible under the terms thereof without
incurring additional monetary obligations or personal guaranties, secure the
release of Seller after Closing from its liability under, the executory
contracts of Seller listed in Exhibit H of this Agreement. Seller agrees, except
as may expressly assumed by Buyer, to pay all monetary obligations and shall be
responsible for all nonmonetary obligations under or arising out of such
agreements prior to the Date of Closing.
(E) Change of Name
Upon the Closing Seller shall change its name to some name which does not
contain the name Salle or any name similar thereto.
IV. CLOSING AND DELIVERIES
(A) Closing
The closing shall be held at 10:00 a.m. on March 5, 1999, (the "Closing," the
"Closing Date"or the "Date of Closing") but in any event shall be deemed
effective on and as of the close of business on the preceding day. All
transfers, assumptions, computation of the purchase price and prorations shall
be on and as of the close of business on the day preceding the Closing. Closing
shall be at the offices of Jolivette & Templer, P.C., 10 South LaSalle Street,
Chicago, Illinois or at such other place as mutually agreed upon. If all
conditions to be met on or before the specified date for the Closing have not
been met, then the party whose obligations are subject to such unfulfilled
conditions shall have the right to defer the Closing to another date not later
than 30 days thereafter.
(B) Transfer of Assets and Other Agreements
(1) Seller At the Closing, Seller shall:
(i) Convey to Buyer by bill of sale absolute with warranty of title and
free and clear of any liens or encumbrances other than those specifically
assumed by Buyer, but otherwise "as is, where is" and without any warranty as to
quality or fitness, the Machinery and Equipment and the Inventory;
(ii) Assign to Buyer the Cash Equivalents free and clear of any liens or
encumbrances. In addition Seller shall deliver to Buyer a specific assignment of
all claims relating to accounts receivable of Seller due from General Nutrition
Corporation.
(iii) Assign to Buyer all leases, contracts and agreements which are to be
assigned to Buyer pursuant to this Agreement with any required consents;
(iv) Assign to Buyer all the patents and trademarks and applications
therefor listed on Exhibits C and D and the goodwill connected therewith and
other Intangibles and assign to Buyer all of Seller's right, title and interest
in and to any licenses held by Seller as listed on Exhibits C and D;
(v) Amend its Articles of Organization and Operating Agreement to change
its name to take out the word Salle or any name similar thereto. At the Closing,
Articles of Amendment to such effect shall, at its cost, be filed by Seller;
(vi) Deliver UCC Code searches, for both the Illinois Secretary of State
and Lake County, Illinois, and any other counties where its assets are located,
and judgment, tax and federal tax lien searches dated no more than five (5) days
prior to Closing showing no liens or encumbrances on any of the Assets other
than liens which will and shall be released at the Closing or have been waived
by Buyer;
(vii) Deliver releases form the Illinois Department of Revenue and Illinois
Department of Employment Security (collectively the "Departments") of any
liability for sales, use, withholding, income and other monies owed up to and
including the Date of Closing. In the event either of the Departments shall
issue an order to Buyer to withhold a certain amount form the purchase price
pending its examination of accounts and issuance of releases does not occur
until the filing for such returns, such amount of money shall be held out of any
cash portion of the purchase price payable to Seller and such withheld amount
shall be deposited with Jolivette & Templer, P.C. to be held by them as security
in compliance with the order of either or both Departments until such time as
written releases are received. Upon issuance of such written releases, the
withheld money shall be paid over to Seller after deducting therefrom whatever
amount of deficiency may be found due to the Departments. Jolivette & Templer,
P.C. are hereby authorized to pay such deficiency due to the appropriate
Department and to remit the balance, if any to Seller;
(viii) Deliver to Buyer the agreements of Balkin and Seltzer in forms
acceptable to Buyer relating to the assignment of the indebtedness of Seller to
such individuals.
(ix) Deliver the opinion of Seller's attorney as provided herein.
(x) Deliver a Certificate of Good Standing of Seller from the Illinois
Secretary of State dated not more than thirty (30) days prior to the Closing and
certified resolutions of the managers and members of Seller that the
transactions contemplated herein have been directly authorized by such parties
and that Balkin is authorized on behalf of Seller to execute and deliver this
Agreement and any and all documents required of Seller hereunder, and
(xi) Such other documents which CGI and Buyer deem reasonably necessary to
vest in Buyer title to the Assets free and clear of all liens, claims,
encumbrances, pledges and security interests.
(2) Buyer
At the Closing, Buyer shall:
(i) Assume payoff or acquire Seller's loan from Harris Bank Chicago, up
to the amount of Four Hundred Seventy Thousand Dollars ($470,000), plus current
interest, provided, however, if Buyer has not as of the Closing received the
capital referred to in XII (D) (1) and waives such requirement, then Buyer need
not assume, pay or acquire such indebtedness until fifteen (15) days after the
Closing.
(ii) Assume the executory contracts listed on Exhibit H.
(iii) Deliver a Certificate of Good Standing of Buyer from the Illinois
Secretary of State dated not more than thirty (30) days prior to Closing and
certified resolutions of Buyer's Board of Directors that the transactions
contemplated herein have been duly authorized by its directors; and
(iv) Deliver the opinion of Buyer's attorney as provided herein.
(3) CGI
At the Closing, CGI shall:
(i) Deliver the opinion of CGI's attorneys or provided herein;
(ii) Deliver a Certificate of Good Standing of CGI from the Nevada
Secretary of State dated not more than thirty (30) days prior to Closing and
certified resolutions of CGI's Board of Directors that the transactions
contemplated herein have been duly authorized by its directors.
(4) Additional Closing Documents
Seller and Buyer shall execute and deliver all additional documents and
instruments which Buyer's counsel and Seller's counsel may mutually and
reasonably determine are necessary to the proper consummation of this
transaction.
C. Non-Assumption of Liabilities
Except for the obligations under contracts assigned to and specifically assumed
by Buyer at Closing, Buyer does not assume and shall not be obligated to pay or
discharge any liability or obligation (absolute, contingent, disclosed or
undisclosed) of Seller arising from the operation of the Seller's businesses or
the sale of the Assets to Buyer, or otherwise. Without limiting the generality
of the foregoing, Seller shall pay or discharge, and Seller shall indemnify and
hold Buyer and CGI harmless from all liabilities of Seller including but not
limited to: (i) all taxes incurred or arising prior to or as a result of Closing
including, but not limited to, the payment of federal, state or local sales,
income or withholdings taxes; or (ii) any claims made by any employee of Seller
arising from their employment by Seller including, but not limited to, claims
for discharge, back pay, unearned vacation pay, unpaid employment benefits and
future employment with Buyer or (iii) any claims, known or unknown, fixed or
contingent, including but not limited to those listed on Exhibit E, made by any
creditors of Seller which are not specifically assumed by Buyer in writing.
Seller represents that all of its employees other than Ray Schumer are "at will"
and Seller specifically agrees that Buyer has not and will not agree to and is
not obligated to employ any of Seller employees. Seller may discharge some or
all of its employees as of the Closing and Seller shall be liable for any and
all liabilities arising from any such discharges. All taxes and similar amounts
due and owing to any governmental agency relating to Seller's employees shall be
paid by Seller on or before their due dates. No adjustment shall be made under
the foregoing if Buyer's unemployment compensation contribution rate is changed
as a result of the transactions contemplated by this Agreement.
V. PRORATION AND COST ALLOCATION
(A) Lease Payments
Except as otherwise set forth herein, Seller shall pay at or prior to Closing
all rents, real estate taxes and other obligations under its leases of its
facilities which have become due and payable prior to Closing and any other
leases to be assigned to Buyer. Buyer shall receive a proration credit at
Closing for any accrued obligations under such leases. Buyer shall be
responsible for any year end adjustments under such leases for real estate taxes
or operating expenses.
(B) Other Costs
Each party shall pay its own attorney's fees, accountants' fees and other
fees and expenses incurred by each party related to this transaction.
(C) Accrued Vacation and other Pay
Seller shall at Buyer's election pay Buyer at Closing for all of Seller's
employees hired by Buyer an amount equal to the unused and/or unpaid vacation
benefits and emergency leave and sick leave to which Seller's employees are
entitled through the Date of Closing. To the extent it receives the foregoin
payment, Buyer hereby covenants and agrees to be responsible for all vacation
benefits and emergency leave and sick leave due or alleged to be due to such
employees as of, and after the Date of Closing. Seller agrees to indemnify,
defend and hold Buyer harmless from any and all loss, liability, damage, claims,
costs or expenses, including reasonable attorneys fees, incurred by Buyer for
vacation benefits and emergency leave and sick leave for Seller's employees for
which Buyer has not received such payment.
(D) Severance Packages, Incentive Bonuses
Seller shall be responsible for paying any obligations to buyout any employment
contracts and/or severance packages, none of which are being assumed by Buyer.
Seller shall be responsible for and pay any incentive bonuses directly to the
recipients thereof, if any, consistent with Seller's prior practices for the
period to the Date of` Closing. Seller shall at the Date of Closing pay to the
service company handling its payroll an amount equal to any FICA, unemployment
compensation or similar tax levied against the employer in connection therewith.
(E) Salaries
To the extent any salaries or wages are due or accrued to Seller's employees who
are hired by Buyer, Seller covenants and agrees to pay such salaries or wages
and taxes when due and payable in the normal course of business and Seller
agrees to indemnify, defend and hold Buyer harmless against any claims for such
amounts by Seller's employees and for any taxes related thereto.
(F) Contracts, Utilities, Etc.
Except as otherwise provided herein, all amounts due under the contracts, leases
and agreements being assigned as listed on Exhibit B or otherwise assumed by
Buyer shall be prorated as of Closing. Except as otherwise provided herein, all
utility charges shall be prorated as of Closing, or final meter reading shall be
made and Seller shall pay such amounts as per the final bills. Sales commissions
due to commissioned sales agents shall not be prorated, and Seller covenants and
agrees to pay all amounts due from Seller to such agents.
(G) Proration Payments To the extent any of Seller's costs or prorations are not
paid at Closing, such amounts shall be included as part of Seller's obligations
referred to in II (D) above.
VI. REPRESENTATIONS AND WARRANTIES OF SELLER
(A) Representations and Warranties of Seller In addition to those warranties
contained elsewhere herein, Seller represents and warrants to Buyer and CGI the
following, both as of the date this Agreement is fully executed and as of the
Date of Closing, except where specific reference is made to another date or
dates, in which case such date or dates will be applied hereunder:
(1) Organization and Authority
Seller is a limited liability company organized, validly existing, and in good
standing under the laws of the State of Illinois, and has the power to carry on
its operations as they are now being conducted. The execution of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action of Seller. This Agreement is valid and
binding on Seller, and neither the execution of this Agreement nor the Closing
of the transactions contemplated hereby is or will be in violation of Seller's
Articles of Organization or Operating Agreement or any of the agreements to be
assigned to Buyer except for any such violations which shall have been waived at
or prior to Closing.
(2) Results of Operations and Cost of Sales
Seller has heretofore delivered to Buyer unaudited financial statements for
1998, a copy of which is attached hereto as Exhibit I, which fairly present the
financial condition and the assets and business of the Seller for the periods
covered thereby.
(3) Changes Since December 31, 1998
Since December 31, 1998, to the best of Seller's knowledge and except as may
have been previously disclosed to Buyer in writing, there has not been:
(i) any change which would have a material adverse affect on the
financial condition of Seller as reflected in the statements referred to in the
preceding sub-paragraph, or
(ii) any material loss, damage or destruction to any of its owned or
leased property which has not been repaired or will not be repaired or replaced
by the Closing Date (whether or not covered by insurance).
(4) Defaults Under Contracts
To the best of Seller's knowledge, all third parties with whom Seller has
contractual relationships materially affecting the continued operation of its
business are in substantial compliance therewith and are not in default
thereunder except as set forth in Exhibit J hereto. Except as set forth in
Exhibit J, Seller is not in default in any material respect under contracts to
which it is a party or in respect to obligations owed by it materially affecting
the continued operation of its business.
(5) Reports.
To the best of Seller's knowledge, all reports currently required by any
federal, state or local governmental agency pertaining to occupational health
and safety or environmental matters which would affect the continued operations
of its business have been timely filed by it and to the best of the knowledge of
Seller and its managers the Seller is in substantial compliance with all laws,
regulations and orders which could have a material affect on the continued
operation of its current businesses.
(6) Environmental Matters
The Seller's facilities and the operation of Seller's business at such locations
are not in violation of any federal, state or local environmental laws, rules or
regulations, there have been no discharges of any hazardous or toxic substances,
as defined in any federal, state or local laws, rules or regulations, on or
about such facilities and there is no friable asbestos on or about such
premises. Seller has not received any actual notices of any alleged violation or
the alleged violation of such premises of any federal, state or local
environmental laws, rules or regulations. Seller is not required to obtain any
licenses under any federal, state or local environmental laws for the operation
of its business as now conducted.
(7) Business Licenses and Permits.
To the best of Seller's knowledge, Seller has secured any and all permits,
licenses or authorizations necessary from federal, state, municipal and other
governmental agencies to conduct its business as presently operated and all such
permits, licenses and authorizations are listed on Exhibit K attached hereto.
(8) Taxes.
There are no tax liens on any Assets, nor have any tax claims been asserted
insofar as they relate to such Assets or Seller's facilities, and no basis for
any such claims exist.
(9) Title to Assets.
The Seller owns outright and has good and marketable title to, all of the Assets
free and clear of all liens, pledges, mortgages, security interest, conditional
sales contracts or encumbrances of any nature whatsoever except for such
interests which will be released as to the Assets at Closing or have been waived
by Buyer.
(10) Right to Assign
Seller has the right to assign to Buyer all the assets, leases and agreements
being assigned to Buyer without the consent of other parties, except for such
consents as are listed on Exhibit L attached hereto, all of which consents shall
be given prior to or at the Closing.
(11) Collective Bargaining Agreements, Retirement Benefits
Seller is not subject to any collective bargaining agreements or multi-employer
pension or benefit plans and to the best of its knowledge is not subject to any
current or threaten labor or union organizational efforts. Seller does not have,
and has not previously had any pension, profit sharing, 401(k) or similar
employment benefit plans and has no obligations for any unfunded retirement
benefits.
(12) Other Instruments
Neither the entering into nor the carrying out of this Agreement or the
transactions contemplated hereby will, except as shall be waived on or before
the Closing, result in any breach, violation of or conflict with, or will
accelerate or permit the acceleration of the performance required by or the
cancellation or termination of, any term or provision of any agreement or lease
being assumed by Buyer or any agreement or lease materially affecting the
continued operations of Seller's facilities or will create or result in any lien
on the Assets except as provided herein.
(13) Other Matters.
(i) To the best of Seller's knowledge, there is no litigation threatened
or pending involving Seller or its facilities except as listed on Exhibit M
hereto;
(ii) Seller is the owner of all the patents, patent applications,
trademarks, service marks, business names and copyrights being assigned pursuant
hereto, has not assigned or licensed any rights with regard thereto and has not
received any claim contesting the validity or enforceability of any of the
foregoing.
(14) Year 2000 Software Warranty
Except as expressly set forth in Exhibit N:
(i) None of the computer systems owned or operated by Seller, and none of
the computer systems operated by any third party for the benefit of the Seller,
including without limitation any mainframe computer systems, computer networks
and personal computer systems, contain any software which is incapable of
recognizing and correctly calculating dates on or after January 1, 2000, or
which would otherwise cause such computer systems to fail to perform any of its
intended functions in a proper manner in connection with data containing any
date on or after January 1, 2000 (the "Year 2000 Problem"), and none of such
computer systems will result in the failure or disruption of any of the Seller's
business, operations, financial reporting, tax reporting, inventory management,
accounts receivable systems, accounts payable systems, invoicing, delivery,
personnel management or records, benefits records or administration, or any
other records or systems, as a result of the Year 2000 Problem.
(ii) Exhibit N contains a true, correct and complete list of all written
or oral studies, audits, surveys, reports and investigations conducted by or on
behalf of the Seller with respect to the Year 2000 Problem, and a description of
the Seller's efforts to analyze, modify or replace all computer software which
the Seller has deemed necessary or appropriate in connection with the Year 2000
Problem.
(iii) The Seller is in possession of, and has the right to copy and modify,
the source code version of all software used by the Seller or by any third party
for the benefit of the Seller, the failure of which software would have a
material adverse effect on the Seller or its business, assets, condition
(financial or otherwise) or prospects.
(iv) The Seller does not receive data, whether by electronic data
interchange ("EDI") or otherwise, which is to be used or manipulated by any
computer system operated by the Seller or by any third party for the benefit of
the Seller and which is not Year 2000 Compliant.
(v) The Seller does not have any liability to any third party, pursuant
to any federal or state security laws or otherwise, arising out of the Seller's
failure to disclose reasonably foreseeable costs or liabilities relating to the
Year 2000 Problem.
(vi) The Seller has taken all appropriate steps to preserve its rights
under warranties extended to the Seller by third parties relating to any
computer system's failure to be Year 2000 Compliant, including without
limitation the delivery of appropriate notices to toll the expiration of
applicable warranty survival periods.
(vii) The Seller has not extended to any third party any warranty which
could give rise to the Seller's liability as a result of any computer system's
failure to be Year 2000 Compliant.
(15) Members
The parties to sign the Covenant Not to Compete by Members attached hereto are
all the members of Seller.
VII. REPRESENTATIONS AND WARRANTIES OF BUYER AND CGI
(A) Representations and Warranties of Buyer
In addition to those representation and warranties contained elsewhere herein,
Buyer shall represent and warrant to Seller the following, as of the Closing
date, except where specific reference is made to another date or dates, in which
case such date or dates will be applied hereunder:
(1) Corporate Standing
Buyer is a corporation duly organized validly existing and in good standing
under the laws of the State of Illinois and has the power to carry on its
operations as they are now being conducted. The transactions of Buyer
contemplated hereby have been duly authorized by all necessary action of Buyer
and the Closing of the transactions contemplated hereby are not in violation of
Buyer's Articles of Incorporation or by-laws.
(2) Authorization and Effect
This Agreement, the execution and delivery hereof, and the performance of all
the obligations of Buyer hereunder will as of the Closing have been approved by
all necessary corporate action on Buyer's part and will constitute the legal,
valid and binding obligations of Buyer in accordance with their terms and do not
violate any agreements binding on Buyer.
(B) Representations and Warranties of CGI
In addition to those representation and warranties contained elsewhere herein,
CGI shall represent and warrant to Seller the following, as of the Closing Date,
except where specific reference is made to another date or dates, in which case
such date or dates will be applied hereunder:
(1) Corporate Standing
CGI is a corporation duly organized, validly existing and in good standing under
the laws of Nevada, and has the power to carry on its operations as they are now
being conducted. The transactions of CGI contemplated hereby have been duly
authorized by all necessary action of CGI and are not in violation of CGI's
Articles of Incorporation or by-laws.
(2) Authorization and Effect
This Agreement, the execution and delivery hereof, and the performance of all
the obligations of CGI hereunder will as of the Closing have been approved by
all necessary corporate action on CGI's part and will constitute the legal,
valid and binding obligations of CGI in accordance with their terms.
VIII. BULK SALES LAW AND COMMISSIONS
(A) Waiver of Compliance.
Buyer waives compliance by Seller with the provisions of any bulk sale law,
provided that Seller will indemnify, defend and hold Buyer and CGI harmless from
any and all loss, liability, damage, costs or expenses, including reasonable
attorneys' fees, and claims against Buyer and/or CGI resulting from such
non-compliance.
(B) Commissions.
The parties hereby each represent and warrant, one to the other, that they have
not contracted or entered into any agreement with any broker, agent, finder or
any other party in connection with this transaction, and they have not taken any
action which would result in any broker's, agent's, finder's or other fees or
commissions being due or payable to with respect to the transaction contemplated
hereby. Each party hereby indemnifies and agrees to defend and hold the other
party harmless from any loss, liability, damage, cost or expense (including
reasonable attorney's fees) resulting to the other party by reason of a breach
of the representation and warranty made by such party herein.
IX. CLAIMS
It is understood and agreed that, with the exception of those liabilities
expressly assumed in writing by Buyer at Closing for debts and executory
contracts of Seller to the extent and as provided in this Agreement, all claims
arising from the operation, manufacture and sale of products, or otherwise
arising by or through the conduct of business by Seller or its predecessors
prior to Closing and for any breach of any covenants, warranties or
representations of Seller hereunder, shall be the responsibility of Seller and
all claims arising from the operation, manufacture and sale of such products
after Closing or otherwise arising by or through the conduct of the business by
Buyer and any breach of any covenants, warranties or representation of Buyer or
CGI shall be the responsibility of Buyer. Seller shall indemnify and agrees to
defend and hold Buyer and CGI harmless and Buyer shall indemnify, defend and
hold Seller and CGI harmless from any loss, liability, damage, cost or expense
(including reasonable attorney's fees) to the other parties as a result of the
breach of any representation, warranty or covenant herein or of claims which are
the responsibility of the indemnitor, and shall cooperate in all reasonable
respects in any defense thereof. Such indemnity shall extend to the parties
respective officers, directors, employees and agents.
X. NOTICE AND OPPORTUNITY TO DEFEND
If any party becomes aware of a possible claim for indemnity from another party
pursuant to this Agreement, such parties claiming indemnity shall notify the
indemnifying party promptly upon becoming aware of the claim and shall allow
such other party to assume defense or other appropriate handling of the matters
creating the claim for indemnity if such party indicates its intention to assume
the defense of the claim by notice in writing within ten (10) days of being
notified of the claim for indemnity.
XI. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligation of the Seller to consummate the transaction contemplated by this
Agreement shall be subject to the fulfillment by the Buyer and/or CGI at or
prior to the Closing of the following conditions:
(A) Opinion of Buyer's and CGI's Counsel.
On the Closing Date, Seller shall have received in writing a favorable opinion
of Buyer's and CGI's counsel to the effect that:
From CGI's counsel:
(1) CGI is a corporation duly incorporated and organized, validly
existing and in good standing under the laws of Nevada.
(2) CGI has full corporate power and authority to execute and
deliver thisAgreement and CGI has full corporate power and authority to perform
all of its obligations hereunder;
(3) Execution and delivery of this Agreement by the CGI has been duly
authorized by all requisite corporate action, this Agreement is valid and
legally binding upon CGI, subject to bankruptcy, insolvency, reorganization or
similar laws of general application, and to the best of counsel's knowledge
neither the execution or delivery of this Agreement by CGI nor the performance
by CGI of the terms and provisions of this Agreement will violate any provision
of law (except as the same may be specifically waived herein), and will not
conflict with or result in the breach of any of the terms and provisions of or
constitute a default under the Articles of Incorporation or By-Laws of CGI or
under any material indenture, mortgage, agreement, instrument or commitment
binding on CGI or any of its properties.
From Buyer's counsel:
(4) Buyer is a corporation duly incorporated and organized, validly
existing and in good standing under the laws of Illinois;
(5) Buyer has full corporate power and authority to perform all of its
obligation hereunder;
(6) The performance of this Agreement by Buyer has been duly authorized
by all requisite corporate action and, subject to bankruptcy, reorganization and
similar laws of general application, to the best of counsel's knowledge the
performance by Buyer of the terms and provisions of this Agreement will not
violate any provision of law (except as the same may be specifically waived
herein), and will not conflict with result in the breach of any of the terms and
provisions of or constitute a default under the Articles of Incorporation or
By-Laws of Buyer or under any material indenture, mortgage, agreement,
instrument or commitment binding on Buyer or any of its properties.
In giving such opinion, counsel may place reasonable reliance upon the books,
records, certificates and other material furnished to counsel by CGI and Buyer,
and upon interviews with CGI's and Buyer's officers and other employees.
(B) Representations True at Closing
All representations and warranties of Buyer and CGI contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
date, and Buyer and CGI shall not be in default under any of the terms of this
Agreement.
(C) Deliveries.
Buyer or CGI shall have executed and delivered to Seller on the Closing date
those items required hereunder.
XII. CONDITIONS PRECEDENT TO BUYER'S AND CGI'S OBLIGATIONS
The obligation of the Buyer and CGI to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the Closing
of the following conditions:
(A) Opinion of Seller's Counsel.
On the Closing date, Buyer and CGI shall have received in writing a favorable
opinion of Seller's counsel, to the effect that:
(1) Seller is duly organized and is validly existing as a limited
liability company in good standing under the laws of Illinois, with full power
and authority to own and operate its business as now conducted by it with the
Assets and to execute and deliver this Agreement and to perform all of its
obligations hereunder.
(2) The execution of this Agreement and related documents have been
duly and validly authorized, and are valid and binding upon the Seller, subject
to bankruptcy, insolvency, reorganization or similar laws of general
application, and to the best of counsel's knowledge neither the execution or
delivery of this Agreement by the Seller nor the performance by it of the
various terms and provisions of this Agreement will violate any provision of law
(except as the same may be specifically waived herein), and will not conflict
with or result in the breach of any of the terms and provisions of or constitute
an material default under the Articles of Organization or Operating Agreement of
the Seller.
(3) Except as set forth in an Exhibit to this Agreement, to the best of
counsel's knowledge, the execution, delivery and performance of this Agreement
by Seller will not constitute a default under, or a violation or breach of, any
material indenture, license, lease, franchise, instrument or other agreement to
which Seller is party which would affect Seller's ability to transfer the Assets
sold hereunder in the condition required hereunder or create any lien thereon.
(4) Counsel is not aware that any authorization, consent or approval
of any regulatory authority of the federal government or any state or local
government is necessary in connection with the consummation of this Agreement by
Seller.
In giving such opinion, counsel may place reasonable reliance upon the books,
records, certificates and other material furnished to counsel by Seller, and
upon interviews with Seller's managers and other employees.
(B) Representations True at Closing.
All representations and warranties of Seller contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date as
though made on or as of the Closing Date, and Seller shall not be in default
under any of the terms of this Agreement.
(C) Deliveries.
Seller and the other applicable parties shall have executed and delivered to
Buyer or CGI on the Closing Date those items required hereunder.
(D) Financing.
(i) Buyer shall have received firm commitments from its investors for a
total capital infusion in a form satisfactory to Buyer of at least One Million
Five Hundred Thousand Dollars ($1,500,000). Once such a firm commitment has been
received by Buyer, then this condition shall be deemed to have been fulfilled,
subject, however, to fulfilling any conditions of such commitments and the
funding of such amount by such investors.
(ii) A commitment from a financial institution for a line of credit in an
amount and on terms deemed sufficient by Buyer and the closing for such line of
credit occurs concurrent with the Closing hereunder.
(E) Balkin and Seltzer Agreements
Buyer shall have negotiated mutually agreeable terms with Balkin and Seltzer
relating to the assignment of Seller's debt to such parties and Balkin and
Seltzer shall have executed and delivered Agreements to such effect at Closing.
(F) Lease
Buyer shall have negotiated a satisfactory arrangement with the lessor of
Seller''s existing facilities or shall accept an assignment of the existing
lease for such facilities with the lessor's consent, if required.
(G) Environmental Matters.
Buyer and CGI are satisfied in their sole discretion that none of Seller's
facilities are subject to any past, current or threatened environmental matter
or condition.
(H) Litigation, Collective Bargaining Agreements, Retirement Benefits.
Buyer and CGI are satisfied in their sole discretion that Seller is not subject
to any pending or threatened material litigation or other proceedings and Seller
is not subject to any collective bargaining agreements or unfunded retirement
benefits.
(I) Shareholder and Regulatory Approval.
CGI shall have obtained all necessary approvals from its shareholders and any
regulatory bodies for the transaction contemplated hereby and the performance of
CGI's obligations hereunder and under any documents to be signed, delivered or
performed pursuant hereto.
(J) Satisfaction of Due Diligence
Buyer and CGI shall have been satisfied in their sole discretion with the
results of their due diligence examination of Seller and its affiliates.
(K) Covenant Not To Compete
The Covenant Not to Compete By Members shall be signed by Balkin and Merlo at
the Closing and by the other members within seven (7) days of the Closing.
In the event that any of the conditions precedent to the performance of Buyer's
and CGI's obligations hereunder have not been satisfied (or waived by Buyer or
CGI) prior to Closing, the Closing shall be postponed up to 30 days to allow
Seller to cure such conditions. At the end of such 30 day period, Buyer and CGI
shall either (x) close (whether such conditions have been satisfied or not)
without any reduction in the purchase price; provided, however, Seller shall
remain obligated during the period of such delay for all monetary items and/or
give Buyer or CGI a proration credit therefor and as to any unliquidated items
Seller shall indemnify Buyer and CGI therefor as provided in Paragraph IX above,
or, (y) if such conditions have not been satisfied, notify Seller that the
Agreement is terminated by reason thereof.
Upon the occurrence of the Closing hereunder all conditions precedent to the
Closing shall, subject to the above, be conclusively deemed satisfied or waived
solely for the purpose of the Closing by Buyer and CGI; provided, however, such
waiver or satisfaction shall not affect or negate any of Seller's
representations, warranties, covenants or indemnities contained herein, which
representations, warranties covenants and indemnities of Seller shall survive
the Closing. That Buyer or CGI have knowledge of any event, fact or breach shall
not be a waiver of any representation, warranty, covenant or indemnity of
Seller.
XIII. ADDITIONAL COVENANTS OF SELLER
(A) Continuing Operations
Seller covenants and agrees with Buyer that, except as required by applicable
law, from and after January 18, 1999 until the Closing;
(1) Seller has and will operate its business in the ordinary course of
business and in such manner as will not breach any of Seller's
representations, warranties and covenants contained herein.
(2) Seller has not since January 18, 1999 and will not prior to Closing
create or permit to exist any new lien, encumbrance or charge upon the Assets;
(3) Seller will not permit the transfer of any of its membership
interests, and will not issue any additional interests, except for transfers of
interests of Seller by and among its existing members;
(4) Seller shall not enter into any material contracts, or amend
existing contracts, without first providing a copy thereof to Buyer and CGI;
(5) Seller shall not lend any money to or forgive any debts owing
from its members, managers or employees or pay any bonuses to or increase the
compensation levels of its members, managers and employees.
(B) Covenant Not to Compete
Seller and Seller's members agree as a material inducement to Buyer to enter
into this Agreement that for a period of five (5) years from the Date of Closing
they shall not anywhere in the United States directly or indirectly engage in
any business competitive with the business Seller now conducts and agree that
either Buyer or CGI shall be entitled, in addition to any other remedy, to
enforce such agreement by specific performance or by injunctive relief.
XIV. RISK OF LOSS.
Seller shall bear the risk of all loss or damage of the Assets from all causes
until the Closing. If, prior to the Date of Closing, all or a part of the Assets
are damaged by fire or any other cause of whatever nature, Seller shall promptly
give Buyer written notice of such damage, and Seller shall, at its option,
either (a) repair and replace the damaged Assets; (b) abate the purchase price
to compensate Buyer for any diminution in value; or (c) providing the amount of
such loss or damage exceeds $150,000 terminate this Agreement. In the event
Seller elects repair or replacement, Seller may postpone the scheduled Closing
Date for such period of time as is reasonably required to repair the damaged
Assets.
In the event the loss or damage exceeds $150,000, Buyer shall also have the
right to terminate this Agreement. If Seller or Buyer terminates this Agreement
pursuant to this Paragraph XIV, all rights and obligations of the parties
hereunder shall also terminate.
XV. DEFAULT
(A) Seller's Default.
If Seller shall be in default after the execution of this Agreement but prior to
Closing in any one of the covenants herein contained, then Buyer shall give
written notice thereof to Seller and if such default shall continue for ten (10)
days after receipt of such notice, CGI or Buyer may, at its option:
(1) Rescind this Agreement and require Seller to reimburse CGI and Buyer
for all expenses which Buyer or CGI shall have incurred (including those
incurred for Seller's account) in connection with the proposed purchase and
sale, including but not limited to all attorney's fees and accountant's fees
incurred by Buyer or CGI; or
(2) Waive the default and proceed with Closing without reduction in the
purchase price; provided, however, Seller shall remain obligated for all
monetary items and/or give Buyer or CGI a proration credit therefor, and as to
any unliquidated items, Seller shall indemnify Buyer and CGI therefor as
provided in Paragraph IX above, Buyer and CGI having the right to enforce this
Agreement by specific performance.
(B) Buyer's Default.
If all Buyer's and CGI's preconditions for Closing have been fully satisfied and
Buyer or CGI fails or refuses to perform their obligations to close pursuant to
the terms of the Agreement and Seller has not defaulted in its obligations under
this Agreement and is willing and able to close the purchase and sale
contemplated herein, upon the terms herein set out, then Seller shall have no
further obligation hereunder and may, at its option:
(1) Require Buyer and CGI to reimburse Seller for all expenses which
Seller shall have incurred (including those incurred for Buyer's or CGI's
account) in connection with the proposed purchase and sale, including but not
limited to all attorney's fees incurred by Seller; or
(2) Pursue any and all remedies which are afforded to it at law or in
equity.
VI. DUE DILIGENCE, ACCESS TO RECORDS
(A) Due Diligence
Seller agrees to make available to CGI and Buyer and their representatives all
of its financial records and contracts and such other information which CGI or
Buyer may request, and will provide to CGI and Buyer copies of all leases,
contracts and other written agreements which relate to Seller's business. All
information obtained by CGI and Buyer prior to the Closing shall be held by then
in strict confidence for use solely in connection with the transactions
contemplated hereby and shall not be divulged by then to others except as
contemplated herein. Should the Closing not take place, all copies, memoranda,
work papers, notes or other documents compiled by CGI and Buyer shall be
delivered to Seller.
(B) Access by Seller After Closing.
The Buyer and CGI shall make available to the Seller at its request, and to
others as lawfully required, documents, records and all other materials arising
out of or relating to the obligations of the Seller surviving the Closing,
including but not limited to all information necessary for Seller's tax
purposes.
XVII. MISCELLANEOUS
(A) Captions.
The captions, headings and arrangements used in this Agreement are for
convenience only and do not in any way affect, limit, amplify or modify the
terms and provisions hereof.
(B) Number and Gender of Words
Whenever herein the singular number is used, the same shall include the plural
where appropriate, and words of any gender shall include each other gender where
appropriate.
(C) Notices.
All notices, demands, requests and other communications required or permitted
hereunder shall be in writing, and shall be personally delivered or mailed by
certified mail, first class postage prepaid, or by prepaid Federal Express or
other messenger service, to the party to which directed at its address as it
appears below, and shall be deemed to have been give on the date actually
received or refused. Any party may change its address for purposes of this
paragraph by giving written notice of such change to all other parties in the
manner hereinabove provided:
If to the Buyer or CGI:
John Giura
8400 Brookfield Avenue
Brookfield, Illinois 60513
With copy to:
David J. Jolivette
Jolivette & Templer, P.C.
10 South LaSalle Street
Suite 1017
Chicago, Illinois 60603
If to the Seller:
Salle International, L.L.C.
3740 Hawthorne Court
Waukegan, Illinois
Attention: Michael Balkin
With copy to:
Jeffrey Hechtman
Horwood, Marcus & Berk, Chtd.
333 West Wacker Drive
Suite 2800
Chicago, Illinois 60606
(D) Governing Law.
This Agreement is intended to be performed in the State of Illinois and the laws
of such State, excluding its choice of laws provisions, shall govern the
validity, construction, enforcement and interpretation of this Agreement, and
all parties agree to the venue and jurisdiction of any Court in Cook County,
Illinois.
(E) Entirety and Amendments.
This Agreement embodies the entire Agreement between the parties and supersedes
all prior agreements and understandings, if any, relating to the transaction
contemplated herein, and may be amended or supplemented only by an instrument in
writing executed by both parties.
(F) Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, such provision shall be fully
severable; the Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of the Agreement
and the remaining provisions of the Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of such
illegal, invalid, or unenforceable provision, there shall be added automatically
as a part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be legal, valid or enforceable.
(G) Multiple Counterparts.
This Agreement may be executed in a number of identical counterparts. If so
executed, each of such counterparts is to be deemed an original for all
purposes, and all such counterparts shall, collectively, constitute one
Agreement, but, in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
(H) Parties Bound.
This Agreement shall be binding upon and inure to the benefit of Seller, Buyer
and CGI.
(I) Further Acts.
In addition to the acts and deeds recited herein and contemplated to be
performed, executed and/or delivered, Seller and Buyer and CGI agree to cause to
be performed, executed and/or delivered at the Closing or after the Closing such
further acts, deeds and assurances as may be reasonably requested by any party
or necessary to consummate the transactions contemplated hereby. After the
Closing Seller agrees to cooperate with the Buyer and CGI concerning the
business and the transition, including but not limited to any legal proceeding
by or against Buyer and/or CGI with third parties for collection of receivables
or otherwise.
(J) Survival.
All of the representations, warranties, covenants and agreements set forth in
this Agreement or in writing delivered in connection with this Agreement shall
survive the Closing Date and the consummation of the transactions contemplated
hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
CGI HOLDING CORPORATION
By:
Its:
SALLE INTERNATIONAL, L.L.C.
By:
Michael Balkin, Manager
COVENANT NOT TO COMPETE BY MEMBERS
For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each of the undersigned personally agree to be bound by the
covenant not to compete contained in paragraph XIII (B) above.
Exhibit 2.2
Agreement dated March 5, 1999, by and between Personal Care Products, Inc.
and Michael Balkin
AGREEMENT
AGREEMENT made this fifth day of March, 1999, by and between PERSONAL CARE
PRODUCTS, INC., an Illinois corporation ("PCP"), and MICHAEL BALKIN, ("Balkin").
W I T N E S S E T H:
Concurrently herewith PCP as Buyer is purchasing certain assets of Salle'
International, L.L.C., an Illinois limited liability company ("Salle") pursuant
to an Asset Purchase Agreement dated March 2, 1999 (the "Salle Agreement").
Balkin is a creditor of Salle. PCP is not willing to consummate such transaction
with Salle without the agreement of Balkin contained herein.
NOW THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is mutually agreed as follows:
1. Assignment of Debt
On and subject to the terms and conditions herein contained, Balkin hereby
sells, assigns and transfers to PCP any and all indebtedness known or unknown,
liquidated or unliquidated, contingent or absolute, owed by Salle to Balkin and
any claims of Balkin against Salle related thereto. Balkin represents that the
total liquidated indebtedness of Salle to Balkin on the date hereof is
$1,693,600. Balkin agrees to execute and deliver from time to time any
additional documents which PCP may request to evidence such assignment and
agrees to cooperate with PCP to perfect and collect such indebtedness.
2. Payment
On and subject to the terms and conditions herein contained, PCP hereby agrees
to pay Balkin:
(a) PCP shall pay Balkin $300,000 upon the date hereof provided Balkin
concurrently delivers to PCP a release from Mark Fuller ("Fuller") releasing any
and all claims of Fuller against Salle and PCP. If such equity has not been
received by PCP as of the date hereof, then such amount shall be payable within
fifteen (15) days after the date hereof provided such release of Fuller is
delivered to PCP.
(b) PCP shall pay Balkin $342,000, without interest.
(c) PCP shall pay Balkin $1,000,000 as follows:
(i) Commencing on January 1 of the year immediately following the
calendar year when PCP first has earnings before taxes as defined below, of at
least Four Hundred Thousand Dollars ($400,000), the unpaid balance shall bear
interest at the rate of eight percent (8%) per annum payable with each principal
payment as provided below:
(ii) The principal of such indebtedness shall be paid in ten equal
semi-annual payments on January 1 and July 1 of each year commencing January 1
of the year that is two fiscal years after that first fiscal year in which PCP
has earnings before taxes as defined below of at least Four Hundred Thousand
Dollars ($400,000). For example, if PCP's earnings for fiscal 1999 exceed
$400,000, then payments shall begin on January 1, 2001.
(iii) PCP shall have the right to prepay such indebtedness and the interest
thereon, in whole or in part, at any time.
(d) PCP shall have the right to set-off against any of such indebtedness,
and the escrowed funds referred to in (g) below, and if such indebtedness is not
sufficient; then the stock of CGI Holding Corporation ("CGI") referred to in
paragraph 3 below, the amount of any and all loss, damage, claim, costs or
expenses incurred by PCP or CGI, including reasonable attorney fees, asserted
against or incurred by PCP or CGI arising from the payment of or defense against
any obligations of Salle in excess of the Five Hundred Twenty-Five Thousand
Dollars ($525,000) which PCP has agreed to pay pursuant to the Salle Agreement,
the breach of any covenant, representation or warranty of Salle contained in the
Salle Agreement or any agreement or instrument delivered in connection with the
Salle Agreement or the failure of Salle to indemnify PCP and CGI as required
under the Salle Agreement. Without limiting the foregoing, such claims shall
include any claims made by any taxing authorities, creditors of Salle (including
but not limited to any creditors listed or referred to on Exhibit E of the Salle
Agreement), employees of Salle, customers of Salle or purchasers or users of
products produced by Salle, any claims for environmental matters or any claims
arising out of any litigation filed against Salle or any bankruptcy proceeding
filed in respect of Salle. In addition to the amount of such claim, any interest
which may have accrued on the off-set amount shall also be off-set against such
indebtedness. PCP and CGI shall have the sole right to settle any such claims in
a manner which they deem reasonable. In the event of any bankruptcy proceeding
by or against Salle, to the extent any of the indebtedness assigned to PCP
hereunder or any payments made to Balkin are deemed to be a preference or are
required to be paid by PCP, such amount, plus any interest accrued thereon,
shall be deducted from the payments to Balkin hereunder. If as a result of any
such claim or proceeding, PCP is required to pay over an amount in excess of the
balance due to Balkin and the value of the PCP and CGI stock, Balkin shall on
demand pay such excess to PCP.
(e) If the claim for off-set exceeds the amount then owed to Balkin,
then such claim may be off-set against the shares of CGI issued pursuant to this
Agreement valued at the average closing price of CGI common stock for the five
immediately preceding business days on which such stock actually traded
including the day PCP gives written notice of such off-set.
(f) Balkin hereby agrees not to make any claims against Salle for the
indebtedness assigned to PCP except such claims as PCP may direct.
(g) Notwithstanding the foregoing, from the amounts payable to
Balkin on the execution hereof, $150,000 shall be deposited into an escrow with
regard to the amount currently owed by Salle to Transcap Trade Financing
("Transcap"). PCP may at its option either take on assignment of Salle's rights
and obligations under such agreement or cause such agreement to be terminated.
If PCP does not take an assignment of such agreement, then such funds shall
remain in escrow until such time as Transcap releases its claims against PCP and
Salle and its liens on the assets acquired by PCP and PCP may apply any and all
of such funds to obtain such release. Any of such escrowed funds remaining after
such release shall be paid to Balkin. If PCP takes an assignment of such
agreement, at such time as all the current obligations of Salle under such
agreement are satisfied and paid other than by payment by PCP (for example, if
such obligations are reduced or paid by credits and the check from Sam's Club
referred to below), such escrowed funds shall be released to Balkin. PCP may use
such escrowed funds to satisfy such obligations and at Balkin's direction shall
use such funds for such purpose. Any funds remaining in such escrow after all of
such obligations are satisfied and such claims and liens are released shall be
paid to Balkin. If such funds are used to satisfy the obligations of Salle and
if the pending payment of $80,375 has not been received from Sam's Club prior to
such payment, then such payment from Sam's Club shall be paid to Balkin. Among
such obligations to Transcap is the amount of $80,375 arising from a stopped
check from Sam's Club. At such time as a replacement check is received from
Sam's Club, such funds shall be used to reduce the obligation to Transcap, or if
escrowed funds were used to pay such obligation and obtain such releases, such
funds shall be paid to Balkin.
3. Conversion of Indebtedness into CGI Stock
a) Balkin shall have the right at any time after January 1, 2001 to
convert all of the then balance of the above referred indebtedness into common
stock of CGI at the greater of $1.00 per share or the average closing market
price of such CGI stock for the five immediately preceding business days on
which such stock actually traded including the date CGI receives written notice
from Balkin exercising such conversion right. Partial conversions shall not be
permitted.
(b) The shares of stock of CGI issued on such conversion have not and
will not be registered, may not be transferred except to CGI or other
shareholders of CGI for two years from and after the date of their issuance, are
not freely transferable except according to applicable law and the certificates
therefor will bear legends setting forth that such shares have not been
registered and the rights and restrictions set forth in this Agreement. As a
precondition of the issuance of any shares of CGI or the transfer of such stock,
the recipient shall be required to execute and deliver to CGI, as the case may
be, an acknowledgment and agreement to the foregoing. In the event that CGI
files a registration statement after the issuance of such shares of CGI, CGI
will permit such shares to piggy back on such registration on the conditions of
and to the extent the underwriter permits the same.
4. Election as Director
Upon the consummation of the closing under the Salle Agreement, PCP agrees to
appoint or elect Balkin and one other person designed by Balkin as directors of
PCP.
5. Indemnification
In addition to any other rights and remedies continued herein, Balkin hereby
agrees to indemnify, hold harmless and defend PCP and CGI and their respective
officers, directors, employees and agents, from and against any loss, costs,
(including reasonable attorney's fees and costs), claims, suits or causes of
action brought, threatened or incurred by or against them by reason of any of
the following:
(a) As a consequence of any breach of this Agreement by Balkin or the
Salle Agreement by Salle, any breach of a warranty made by Balkin or Salle
hereunder or thereunder or the failure of any representation made hereunder
thereunder to be true;
(b) Any suit or threat of suit by any party, including, without
limitation, any claims by creditors of Salle;
(c) Any suit or threat of suit by any of Salle's employees, former
employees, securities holders or lenders, except with respect to any suit or
claim arising or threatened solely by reason of PCP's acts or omissions to act
which constitute a breach of PCP's obligations under the Salle Agreement;
(d) Any product liability claims of any kind, arising with respect to
products, manufactured or sold by Salle; and
(e) Environmental liability, if any, as a result of the Salle Agreement
or any transactions contemplated by or engaged in pursuant to or on account
of such Agreement.
6. MISCELLANEOUS
(a) Captions.
The captions, headings and arrangements used in this Agreement are for
convenience only and do not in any way affect, limit, amplify or modify the
terms and provisions hereof.
(b) Number and Gender of Words
Whenever herein the singular number is used, the same shall include the plural
where appropriate, and words of any gender shall include each other gender where
appropriate.
(c) Notices.
All notices, demands, requests and other communications required or permitted
hereunder shall be in writing, and shall be personally delivered or mailed by
certified mail, first class postage prepaid, or by prepaid Federal Express or
other messenger service, to the party to which directed at its address as it
appears below, and shall be deemed to have been give on the date actually
received or refused. Any party may change its address for purposes of this
paragraph by giving written notice of such change to all other parties in the
manner hereinabove provided:
If to the PCP or CGI:
John Giura
8400 Brookfield Avenue
Brookfield, Illinois 60513
With copy to:
David J. Jolivette
Jolivette & Templer, P.C.
10 South LaSalle Street
Suite 1017
Chicago, Illinois 60603
If to the Balkin:
Michael Balkin
_ William Blair & Company
222 West Adams
Chicago, Illinois 60606
With copy to:
Jeffrey Hechtman
Horwood, Marcus & Berk, Chtd.
333 West Wacker Drive
Suite 2800
Chicago, Illinois 60606
(d) Governing Law.
This Agreement is intended to be performed in the State of Illinois and the laws
of such State, excluding its choice of laws provisions, shall govern the
validity, construction, enforcement and interpretation of this Agreement, and
all parties agree to the venue and jurisdiction of any Court in Cook County,
Illinois.
(e) Entirety and Amendments.
This Agreement embodies the entire Agreement between the parties and supersedes
all prior agreements and understandings, if any, relating to the transaction
contemplated herein, and may be amended or supplemented only by an instrument in
writing executed by both parties.
(f) Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, such provision shall be fully
severable; the Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of the Agreement
and the remaining provisions of the Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of such
illegal, invalid, or unenforceable provision, there shall be added automatically
as a part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be legal, valid or enforceable.
(g) Multiple Counterparts.
This Agreement may be executed in a number of identical counterparts. If so
executed, each of such counterparts is to be deemed an original for all
purposes, and all such counterparts shall, collectively, constitute one
Agreement, but, in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
(h) Parties Bound.
This Agreement shall be binding upon and inure to the benefit of Seller, PCP,
CGI and Balkin and their respective heirs, legatees, successors and assigns.
(i) Further Acts.
In addition to the acts and deeds recited herein and contemplated to be
performed, executed and/or delivered, PCP and Balkin agree to cause to be
performed, executed and/or delivered such further acts, deeds and assurances as
may be reasonably requested by any party or necessary to consummate the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
PERSONAL CARE PRODUCTS, INC.
By:
Its:
Michael Balkin
CGI HOLDING CORPORATION, for valuable consideration, agrees to the provision of
the foregoing Agreement for the conversion of such indebtedness and stock of PCP
into common stock of CGI on the terms and conditions contained therein.
CGI HOLDING CORPORATION
By:
Its:
FIRST AMENDMENT TO AGREEMENT
FIRST AMENDMENT TO AGREEMENT made as of March 16, 1999 by and between PERSONAL
CARE PRODUCTS, INC., and Illinois Corporation ("PCP") and MICHAEL BALKIN
("Balkin").
W I T N E S S E T H:
PCP and Balkin entered into an Agreement dated March 5,1999 (the "Agreement")
regarding the purchase by PCP of certain indebtedness of Salle' International,
L.L.C. to Balkin. PCP and Balkin desire to amend such Agreement in certain
respects:
NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is mutually agreed as follows:
1. Payments:
The equity referred to in paragraph 2(a) of the Agreement has not yet been
received. The Release from Mark Fuller has been received by PCP.
(a) It is agreed that the due date for the payments under paragraphs 2(a) and
(b) of the Agreement are extended to April 30, 1999.
(b) So long as at least $150,000 shall remain unpaid, no amounts need by
deposited into an escrow under paragraph 2 (g) of the Agreement. At such time as
the amount owed to Balkin as provided above shall be equal to or less than the
amount owed by Salle with reference to Transcap Trade Financing, such amounts,
if any, shall be placed into escrow and held pursuant to such paragraph 2 (g) of
the Agreement.
2. Continuing Agreement
Except as herein amended, the Agreement shall continue in full force and effect
according to its terms.
IN WITNESS WHEREOF, the parties have executed this instrument as of the day and
year first written above.
PERSONAL CARE PRODUCTS, INC.
By:
Its:
Michael Balkin
Exhibit 2.3
Agreement dated March 5, 1999, by and between Personal Care Products, Inc.
and Neil Seltzer
AGREEMENT
AGREEMENT made this fifth day of March, 1999, by and between PERSONAL CARE
PRODUCTS, INC., an Illinois corporation ("PCP"), and NEIL SELTZER, ("Seltzer").
W I T N E S S E T H:
Concurrently herewith PCP as Buyer is purchasing certain assets of Salle'
International, L.L.C., an Illinois limited liability company ("Salle") pursuant
to an Asset Purchase Agreement dated March 2, 1999 (the "Salle Agreement").
Seltzer is a creditor of Salle. PCP is not willing to consummate such
transaction with Salle without the agreement of Seltzer contained herein.
NOW THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is mutually agreed as follows:
1. Assignment of Debt
On and subject to the terms and conditions herein contained, Seltzer hereby
sells, assigns and transfers to PCP any and all indebtedness known or unknown,
liquidated or unliquidated, contingent or absolute, owed by Salle to Seltzer and
any claims of Seltzer against Salle related thereto Seltzer represents that the
total liquidated indebtedness of Salle to Seltzer on the date hereof is $50,000.
Seltzer agrees to execute and deliver from time to time any additional documents
which PCP may request to evidence such assignment and agrees to cooperate with
PCP to perfect and collect such indebtedness.
2. Payment
On and subject to the terms and conditions herein contained PCP hereby agrees to
pay Seltzer $50,000.00 which shall be payable as follows:
(a) Commencing on January 1 of the year when PCP first has earnings
before taxes as defined below, of at least Four Hundred Thousand Dollars
($400,000) or commencing on the date hereof if such earnings are achieved in
1999, the unpaid balance shall bear interest at the rate of eight percent (8%)
per annum payable with each principal payment as provided below.
(b) The principal of such indebtedness shall be paid in ten equal
semi-annual payments on January 1 and July 1 of each year commencing January 1,
2001.
(
c) PCP shall have the right to prepay such indebtedness and the interest
thereon, in whole or in part, at any time.
(d) In the event of any bankruptcy proceeding by or against Salle, to
the extent any of the indebtedness assumed by PCP hereunder or any payments made
to Seltzer are deemed to be a preference or are required to be paid by PCP, such
amount, plus any interest accrued thereon, shall be deducted from the
indebtedness being assumed and shall not be an obligation of PCP. If as a result
of any such claim or proceeding PCP is required to pay over an amount in excess
of the balance due to Seltzer, and the value of the CGI stock, Seltzer shall on
demand pay such excess to PCP.
(e) Seltzer hereby agrees not to make any claims against Salle
for the indebtedness assumed by or assigned to PCP except such claims as PCP may
direct.
3. Conversion of Indebtedness into CGI Stock
(a) Seltzer shall have the right at any time after January 1, 2001 to
convert all of the above referenced indebtedness into common stock of CGI at the
greater of $1.00 per share or the average closing market price of such CGI stock
for the five immediately preceding business days on which such stock actually
traded including the date CGI receives written notice from Seltzer exercising
such conversion right. Partial conversions shall not be permitted.
(b) In the event any bankruptcy proceeding is filed by or against Salle
and the insurance of such stock of PCP is deemed to be a preference, then such
stock shall be cancelled and returned to PCP.
(c) The shares of stock of CGI have not and will not be registered, may
not be transferred except to PCP, CGI or other shareholders of PCP for two years
from and after the date hereof, are not freely transferable except according to
applicable law and the certificates therefor will bear legends setting forth
that such shares have not been registered and the rights and restrictions set
forth in this Agreement. As a precondition of the issuance of any shares of CGI
or the transfer of such stock, the recipient shall be required to execute and
deliver to CGI an acknowledgment and agreement to the foregoing. In the event
that CGI files a registration statement after the issuance of such shares of
CGI, CGI will permit such shares to piggy back on such registration on the
conditions of and to the extent the underwriter permits the same.
4. Determination of Earning
As used in this Agreement, the determination of PCP's earning's before taxes
shall mean PCP's taxable earnings for federal income tax purposes before
interest, taxes, depreciation and amortization determined by PCP's accountants
according to generally accepted accounting principles consistently applied
("GAAP"), provided, however, any amounts recovered by PCP as the result of any
suit or threatened suit to collect receivables assigned to PCP by Salle shall be
deducted from such earnings.
5. MISCELLANEOUS
(a) Captions.
The captions, headings and arrangements used in this Agreement are for
convenience only and do not in any way affect, limit, amplify or modify the
terms and provisions hereof.
(b) Number and Gender of Words
Whenever herein the singular number is used, the same shall include the plural
where appropriate, and words of any gender shall include each other gender where
appropriate.
(c) Notices.
All notices, demands, requests and other communications required or permitted
hereunder shall be in writing, and shall be personally delivered or mailed by
certified mail, first class postage prepaid, or by prepaid Federal Express or
other messenger service, to the party to which directed at its address as it
appears below, and shall be deemed to have been give on the date actually
received or refused. Any party may change its address for purposes of this
paragraph by giving written notice of such change to all other parties in the
manner hereinabove provided:
If to the PCP or CGI:
John Giura
8400 Brookfield Avenue
Brookfield, Illinois 60513
With copy to:
David J. Jolivette
Jolivette & Templer, P.C.
10 South LaSalle Street
Suite 1017
Chicago, Illinois 60603
If to the Seltzer:
Neil Seltzer
_ William Blair & Company
222 West Adams
Chicago, Illinois 60606
With copy to:
Jeffrey Hechtman
Horwood, Marcus & Berk, Chtd.
333 West Wacker Drive
Suite 2800
Chicago, Illinois 60606
(d) Governing Law.
This Agreement is intended to be performed in the State of Illinois and the laws
of such State, excluding its choice of laws provisions, shall govern the
validity, construction, enforcement, and interpretation of this Agreement, and
all parties agree to the venue and jurisdiction of any Court in Cook County,
Illinois.
(e) Entirety and Amendments.
This Agreement embodies the entire Agreement between the parties and supersedes
all prior agreements and understandings, if any, relating to the transaction
contemplated herein, and may be amended or supplemented only by an instrument in
writing executed by both parties.
(f) Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, such provision shall be fully
severable; the Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of the Agreement
and the remaining provisions of the Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of such
illegal, invalid, or unenforceable provision, there shall be added automatically
as a part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be legal, valid or enforceable.
(g) Multiple Counterparts.
This Agreement may be executed in a number of identical counterparts. If so
executed, each of such counterparts is to be deemed an original for all
purposes, and all such counterparts shall, collectively, constitute one
Agreement, but, in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
(h) Parties Bound.
This Agreement shall be binding upon and inure to the benefit of Seller, PCP,
CGI and Seltzer and their respective heirs, legatees, successors and assigns.
(i) Further Acts.
In addition to the acts and deeds recited herein and contemplated to be
performed, executed and/or delivered, PCP and Seltzer agree to cause to be
performed, executed and/or delivered such further acts, deeds and assurances as
may be reasonably requested by any party or necessary to consummate the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
PERSONAL CARE PRODUCTS, INC.
By:
Its:
Neil Seltzer
CGI HOLDING CORPORATION, for valuable consideration, agrees to the provision of
the foregoing Agreement for the conversion of such indebtedness into common
stock of CGI on the terms and conditions contained therein.
CGI HOLDING CORPORATION
By:
Its:
Exhibit 2.4
Subscription Agreement dated March 8, 1999, by and between Personal Care
Products, Inc. and PCP Partners.
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT made this 8th day of March, 1999, by and between PERSONAL
CARE PRODUCTS, INC., an Illinois corporation ("PCP"), and PCP PARTNERS
("Partners").
W I T N E S S E T H:
PCP as Buyer has purchased certain assets of Salle' International, L.L.C., an
Illinois limited liability company ("Salle") pursuant to an Asset Purchase
Agreement (the "Salle Agreement"). Partner's desire to subscribe for stock of
PCP on the terms and conditions herein contained.
NOW THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is mutually agreed as follows:
1. Subscriptions
Partners hereby subscribe for 35,000 shares of Class B common stock of PCP and
agree to pay $1.00 per share for such stock, payable concurrently with the
Closing under the Salle Agreement. Such common stock shall not be registered and
may not be transferred except as provided in this Agreement . The certificate
for such shares shall bear a legend to such effect. Partners represents and
warrants that it is an accredited investor, as defined in applicable securities
laws and regulations.
2. Conversion and Repurchase Rights
(a) PCP and CGI Holding Corporation ("CGI") shall from July 1, 2000
through June 30, 2002 have the option to purchase such shares of PCP for Forty
Thousand Seven Hundred Fifteen Dollars ($40,715) for each one percent (1%) of
the issued and outstanding shares of PCP if the earnings of PCP before taxes for
the immediately preceding July 1 to January 30 period were less than Two Million
Five Hundred Thousand Dollars ($2,500,000) or for Fifty-Four Thousand Two
Hundred Eighty-Five Dollars ($54,285) if PCP's earnings before taxes for such
period were equal to or greater than Two Million Five Hundred Thousand Dollars
($2,500,000). PCP or CGI may exercise such right as to all or, from time to
time, part of such shares from such shareholders in equal or unequal amounts or
proportions as PCP or CGI shall determine.
(b) If earnings before taxes of PCP were at least One Million Five
Hundred Thousand Dollars ($1,500,000) but less than Two Million Five Hundred
Thousand Dollars ($2,500,000) for the preceding July 1 to June 30 period, then
the holders of such shares of PCP shall, for a twelve (12) month period from and
after July 1 immediately following such period, have the right to convert such
shares of PCP into common stock of CGI on the basis of Forty Thousand Seven
Hundred Fifteen Dollars ($40,715) for each one percent (1%) interest of Buyer
and if such profits of PCP before taxes were equal to or greater than Two
Million Five Hundred Thousand Dollars ($2,500,000) for such period then the
holders of such shares shall for such immediately following twelve (12) month
period have the right to convert such shares of PCP into common stock of CGI on
the basis of Fifty-Four Thousand Two Hundred Eighty-Five Dollars ($54,285) for
each one percent (1%) interest of PCP, in either case, based on the greater
$1.00 for each share of common stock of CGI or eighty-five percent (85%) of the
average closing price of CGI common stock for the five immediately preceding
business days on which such stock actually traded including the day CGI receives
written notice of the exercise of such option. To be effective, a holder of such
stock of PCP most exercise its right as to all the stock of PCP then owned by
such party.
(c) The shares of stock of PCP or CGI have not and will not be
registered, may not be transferred except to PCP, CGI or other shareholders of
PCP for two years from and after the date hereof, are not freely transferable
except according to applicable law and the certificates therefor will bear
legends setting forth that such shares have not been registered and the rights
and restrictions set forth in this Agreement. As a precondition of the issuance
of any shares of CGI or the transfer of such stock, the recipient shall be
required to execute and deliver to PCP or CGI, as the case may be, an
acknowledgment and agreement to the foregoing. In the event that CGI files a
registration statement after the issuance of such shares of CGI, CGI will permit
such shares to piggy back on such registration on the conditions of and to the
extent the underwriter permits the same.
3. Determination of Earning
As used in this Agreement, the determination of PCP's earning's before taxes
shall mean PCP's taxable earnings for federal income tax purposes before
interest, taxes, depreciation and amortization determined by PCP's accountants
according to generally accepted accounting principles consistently applied
("GAAP"), provided, however, any amounts recovered by PCP as the result of any
suit or threatened suit to collect receivables assigned to PCP by Salle shall be
deducted from such earnings.
4. Off-Set Rights
Under an Agreement to be entered into between PCP and Michael Balkin ("Balkin"),
Balkin is agreeing to indemnify PCP and CGI for certain matters arising from
Salle and is granting certain off-set rights to PCP against indebtedness of PCP
to Balkin. In the event there is not sufficient indebtedness for such off-set
and Balkin has failed to indemnify PCP and/or CGI on demand, then PCP shall have
the right to set-off against such stock of PCP and/or the stock of CGI in to
which PCP stock is converted the amount of any and all loss, damage, claim,
costs or expenses incurred by PCP or CGI, including reasonable attorney fees,
for which Balkin has failed to indemnify PCP and/or CGI at, for PCP stock the
value determined in paragraphs 2 (a) above disregarding time limitation and for
CGI stock, at the average closing price of CGI common stock for the five
immediately preceding business days on which such stock actually traded
including the day PCP or CGI gives such notice.
5. MISCELLANEOUS
(a) Captions.
The captions, headings and arrangements used in this Agreement are for
convenience only and do not in any way affect, limit, amplify or modify the
terms and provisions hereof.
(b) Number and Gender of Words
Whenever herein the singular number is used, the same shall include the plural
where appropriate, and words of any gender shall include each other gender where
appropriate.
(c) Notices.
All notices, demands, requests and other communications required or permitted
hereunder shall be in writing, and shall be personally delivered or mailed by
certified mail, first class postage prepaid, or by prepaid Federal Express or
other messenger service, to the party to which directed at its address as it
appears below, and shall be deemed to have been give on the date actually
received or refused. Any party may change its address for purposes of this
paragraph by giving written notice of such change to all other parties in the
manner hereinabove provided:
If to the PCP or CGI:
John Giura
8400 Brookfield Avenue
Brookfield, Illinois 60513
With copy to:
David J. Jolivette
Jolivette & Templer, P.C.
10 South LaSalle Street
Suite 1017
Chicago, Illinois 60603
If to the Partners:
Michael Balkin
_ William Blair & Company
222 West Adams
Chicago, Illinois 60606
With copy to:
Jeffrey Hechtman
Horwood, Marcus & Berk, Chtd.
333 West Wacker Drive
Suite 2800
Chicago, Illinois 60606
(d) Governing Law.
This Agreement is intended to be performed in the State of Illinois and the laws
of such State, excluding its choice of laws provisions, shall govern the
validity, construction, enforcement and interpretation of this Agreement, and
all parties agree to the venue and jurisdiction of any Court in Cook County,
Illinois.
(e) Entirety and Amendments.
This Agreement embodies the entire Agreement between the parties and supersedes
all prior agreements and understandings, if any, relating to the transaction
contemplated herein, and may be amended or supplemented only by an instrument in
writing executed by both parties.
(f) Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, such provision shall be fully
severable; the Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of the Agreement
and the remaining provisions of the Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of such
illegal, invalid, or unenforceable provision, there shall be added automatically
as a part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be legal, valid or enforceable.
(g) Multiple Counterparts.
This Agreement may be executed in a number of identical counterparts. If so
executed, each of such counterparts is to be deemed an original for all
purposes, and all such counterparts shall, collectively, constitute one
Agreement, but, in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
(h) Parties Bound.
This Agreement shall be binding upon and inure to the benefit of PCP, CGI and
Partners and their respective heirs, legatees, successors and assigns.
(i) Further Acts.
In addition to the acts and deeds recited herein and contemplated to be
performed, executed and/or delivered, PCP and Partners agree to cause to be
performed, executed and/or delivered such further acts, deeds and assurances as
may be reasonably requested by any party or necessary to consummate the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
PERSONAL CARE PRODUCTS, INC.
By:
Its:
PCP PARTNERS
By:
Michael Balkin, General Partner
CGI HOLDING CORPORATION, for valuable consideration, agrees to the provision of
the foregoing Agreement for the conversion of such indebtedness and stock of PCP
into common stock of CGI on the terms and conditions contained therein.
CGI HOLDING CORPORATION
By:
Its:
