EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated as of August 2, 1996, among BRAZOS SPORTSWEAR,
INC., a Texas corporation (the "Purchaser"), PLYMOUTH XXXXX, INC., a New York
corporation (the "Company"), and XXXX XXXXXXX and XXXXX XXXXXXX (together, the
"Shareholders");
W I T N E S S E T H:
WHEREAS, the parties desire that the Purchaser acquire substantially
all of the assets, rights and properties of the Company, on the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 TRANSFER OF ASSETS BY THE COMPANY. Subject to the
provisions of this Agreement, the Company agrees to sell and the
Purchaser agrees to purchase, at the Closing referred to in Section
2.1, all of the properties, assets, rights and business of the
Company of every kind and description, tangible and intangible,
wherever located, as they shall exist as of the Effective Date,
including, but not limited to, all of the following- described
assets and rights but excluding those described in Section 1.2:
(i) accounts and notes receivable;
(ii) goods and inventories, including raw materials,
work-in-process and finished goods;
(iii) machinery, equipment, motor vehicles, furniture,
fixtures, supplies, tools and other fixed assets and property,
plant and equipment;
(iv) the rights of the Company under the Real Property
Subleases described on Schedule 3.7, the Product Licenses
described on Schedule 3.12, all of the other Contracts
described on Schedule 3.13 which are identified thereon as
being assumed by the Purchaser, and all of the Contracts of
the Company of the type described in clauses (iii) through
(vi) of Section 3.13 (collectively, the "Assumed Contracts");
(v) all rights to the name "Plymouth Xxxxx," as well as
all other products and brand names used by the Company, and
all trademarks, trade names, patents, processes, copyrights,
know-
how and similar intangible rights, and all goodwill
associated with the foregoing;
(vi) all permits, licenses, customer lists, books,
records, brochures and literature, rights in unemployment
compensation, industrial accident and other similar funds, and
prepaid items (including, without limitation, prepaid
royalties); and
(vii) all other assets, rights and properties owned or
held by the Company as of the Effective Date, excluding those
described in Section 1.2.
All of the foregoing-described assets, rights and properties of the
Company to be sold, assigned and transferred to the Purchaser are
herein collectively referred to as the "Assets."
It is specifically intended that the Assets shall include, but shall
not be limited to, all assets of the Company in existence on the
Effective Date that, in accordance with GAAP, would properly be
reflected in a balance sheet on the Effective Date. At the Closing,
the Company shall convey to the Purchaser all of the Assets, free
and clear of any and all Liens.
1.2 RETAINED ASSETS. Notwithstanding Section 1.1 above, the
following properties, assets, rights and interests (the "Retained
Assets") are hereby excluded from the purchase and sale contemplated
hereby and are therefore not included in the Assets:
(i) cash and cash equivalents;
(ii) the personal items described on Schedule 1.2(ii)
hereto;
(iii) the corporate records, minutes of proceedings,
stock records and corporate seal of the Company, and any
shares of capital stock held in the treasury of the Company;
(iv) any prepaid federal, state and local income taxes
of the Company, and any rights to or claims for federal, state
and local income tax refunds; and
(v) the rights of the Company under this Agreement.
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1.3 PURCHASE PRICE. The purchase price for the
Assets (the "Purchase Price") shall, subject to
adjustment as provided in paragraph (e) below, be the SUM
of (i) $25,000,000 PLUS (ii) the Earnout Amount (as
defined in paragraph (d) below). Of the Purchase Price:
(a) The sum of $18,000,000 shall be payable to the
Company in cash at the Closing, by wire transfer to such
account or accounts in the United States as the Company shall
designate in writing at least three (3) business days prior to
the Closing.
(b) The sum of $4,000,000 shall be represented by the
Junior Subordinated Debenture of BSI Holdings, Inc., a
Delaware corporation and the Purchaser's corporate parent
("Parent"), dated the Effective Date payable to the Company in
the principal amount of such sum, such Debenture to be in
substantially the form of Exhibit A-1 attached hereto, with
the blanks completed as appropriate (the "Purchase
Debenture").
(c) The sum of $3,000,000 shall be represented by the
Junior Subordinated Debenture of Parent dated the Effective
Date payable to the Company in the principal amount of such
sum, such Debenture to be in substantially the form of Exhibit
A-2 attached hereto, with the blanks completed as appropriate
(the "Rolling Debenture"). At all times while the Rolling
Debenture is outstanding, up to (but not exceeding) $1,000,000
of the outstanding principal amount thereunder shall be
guaranteed by Equus, pursuant to the Guaranty Agreement to be
dated the Effective Date from Equus in favor of the Company
and in substantially the form of Exhibit A-4 hereto (the
"Guaranty").
(d) If the cumulative EBITDA of the Operations for the
twelve-month period of operations ending September 30, 1996 is
more than $4,500,000 ("Baseline EBITDA"), then, as additional
Purchase Price, the Purchaser shall pay the Company an amount
(the "Earnout Amount") equal to the product of (i) 2.5
MULTIPLIED BY (ii) the amount by which such cumulative EBITDA
exceeds the Baseline EBITDA. Of the Earnout Amount:
(I) Fifty percent (50%) thereof shall be paid to
the Company in cash by wire transfer to such account or
accounts in the United
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States as the Company shall designate in writing to the
Purchaser; and
(II) Fifty percent (50%) thereof shall be
represented by Parent's Junior Subordinated Debenture
dated September 30, 1996 payable to the Company in the
principal amount of such sum (in two equal annual
installments due on or before March 31, 1998 and 1999),
such Debenture to bear interest and otherwise be in
substantially the form of Exhibit A-3 attached hereto,
with the blanks completed as appropriate (the "Earnout
Debenture").
The Purchaser shall, at its own expense, cause the financial
statements of the Operations for the twelve-month period
ending September 30, 1996 to be audited by Xxxxxxx Xxxxx
Rashba & Pokart, CPA, P.C., New York, New York ("Xxxxxxx"), or
another certified public accounting firm reasonably acceptable
to the parties, and the parties shall jointly instruct such
accounting firm to deliver to the parties its calculation as
to the amount of the Earnout Amount under this paragraph (d),
calculated in accordance with such audited financial
statements. In connection with such audit, the Purchaser may
have its own accounting firm, Xxxxxx Xxxxxxxx LLP, review the
audit work of the accounting firm performing such audit. The
calculation by Xxxxxxx of the Earnout Amount shall be final
and binding on the parties unless the Company receives, within
30 days after the date of Xxxxxxx'x calculation, a written
notice from the Purchaser stating with particularity any
disagreements it has with such calculation of the Earnout
Amount. Any disagreements between the parties with respect to
the calculation of the Earnout Amount shall be resolved in
accordance with paragraph (f) below. The Purchaser's
obligation to pay the cash portion of the Earnout Amount shall
also be covered by the Guaranty, to the extent and in the
manner described in Exhibit A-4. If and to the extent the cash
portion of the Earnout Amount under clause (I) above is not
paid within ten business days after final resolution of the
calculation of the Earnout Amount, such unpaid portion shall
bear interest from and after such date at the rate of seven
and three quarters percent (7.75%) per annum, provided that
such rate shall increase, as of the last day of the full
calendar month following the month in which such interest
begins to accrue and on the last day of
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each calendar month thereafter, by one percent (1%) per annum,
up to (but not exceeding) a maximum of eighteen percent (18%)
per annum, until such cash portion of the Earnout Amount has
been paid in full.
(e) In addition to the foregoing, if the Effective Date
Net Worth is other than $11,847,150 (the "Baseline Net
Worth"), then (i) if the Effective Date Net Worth is more than
the Baseline Net Worth, the Purchaser shall pay the amount of
the difference to the Company, and (ii) if the Effective Date
Net Worth is less than the Baseline Net Worth, the Company
shall pay the amount of the difference to the Purchaser. Any
such amount payable under this paragraph (e) shall be payable
in cash by wire transfer to such account or accounts in the
United States as the payee shall designate in writing. Within
30 days after the Closing Date, the Company shall, at its own
expense, cause Xxxxxxx, or another certified public accounting
firm reasonably acceptable to the parties, to perform a review
of the balance sheet of the Operations as of the Effective
Date, and the parties shall jointly instruct such accounting
firm to deliver to the parties its calculation as to the
amount of the Effective Date Net Worth under this paragraph
(e), calculated in accordance with such reviewed balance
sheet. For purposes of determining Effective Date Net Worth,
there shall be no allowance for doubtful accounts, except for
the reserve in the amount of $150,907.62 for Doubtful Accounts
as shown on Schedule 3.9. In connection with such review, the
Purchaser may have its own accounting firm, Xxxxxx Xxxxxxxx
LLP, oversee the work of the accounting firm performing such
review. The calculation by Xxxxxxx of the Effective Date Net
Worth shall be final and binding on the parties unless the
Company receives, within 30 days after the date of Xxxxxxx'x
calculation, a written notice from the Purchaser stating with
particularity any disagreements it has with such calculation
of the Effective Date Net Worth. Any disagreements between the
parties with respect to the calculation of the Effective Date
Net Worth shall be resolved in accordance with paragraph (e)
below.
(f) If the Purchaser does not dispute the calculation of
the Earnout Amount under paragraph (d) above or the amount of
the Effective Date Net Worth under paragraph (e) above, as
applicable,
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then the appropriate amount shall be paid within ten business
days after the Purchaser's acceptance or deemed acceptance of
such calculation. However, in case of any disagreement between
the parties with respect to either such calculation, as
applicable, the parties shall meet in person in New York, New
York to attempt to resolve any and all differences, but if any
disagreement remains after 30 days following the date of the
Purchaser's protest letter, then either party may submit the
disputes to a partner in the New York, New York office of a
"big six" certified public accounting firm, other than Xxxxxx
Xxxxxxxx LLP, who, acting as an expert and not as a
consultant, taking into account such materials, information
and factors as such partner deems advisable, shall resolve all
such disputes and whose decision shall be final and binding
upon the parties. The fees and disbursements of such expert
shall be borne equally between the parties. All payments under
paragraphs (d) and (e) above (including the delivery of the
Earnout Debenture, if applicable) shall occur within ten
business days following final resolution under this paragraph
(f).
(g) At or prior to Closing the parties shall negotiate
in good faith regarding, and shall agree upon, the allocation
of the Purchase Price among the Assets in accordance with
Section 1060 of the Code, and shall file their respective
federal income Tax returns in accordance therewith.
1.4 ASSUMPTION OF LIABILITIES. The Purchaser, upon the sale
and purchase of the Assets, shall, subject to Section 1.5 below,
assume and agree to pay or discharge only the following liabilities
and obligations of the Company (collectively, the "Assumed
Liabilities"):
(i) trade and accounts payable incurred in the ordinary
course of business, and accrued expenses; and
(ii) obligations of the Company arising on or after the
Effective Date under Assumed Contracts.
The assumption by the Purchaser of the Assumed Liabilities
shall not enlarge any rights or remedies of any third parties under
any Contracts with the Company. Nothing herein shall prevent the
Purchaser from contesting in good faith any of the Assumed
Liabilities. At the Closing, the Purchaser shall deliver to the Com-
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pany an instrument, dated as of the Effective Date and reasonably
satisfactory in form and substance to the Company, pursuant to which
the Purchaser will assume the Assumed Liabilities.
1.5 LIMITATIONS ON ASSUMPTION. Notwithstanding Section 1.4
above, the Purchaser will not assume and does not agree to pay or
discharge any obligations or liabilities of the Company not
specifically included in the Assumed Liabilities and, in particular,
the Purchaser shall not assume or agree to pay or discharge any of
the following:
(i) liabilities and obligations for borrowed money
(including, without limitation, any obligations under letters
of credit issued for the account of the Company);
(ii) liabilities or obligations with respect to all
Taxes based on income or profits including, without
limitation, all Taxes of the Company arising out of or
relating to any of the transactions contemplated hereby;
(iii) liabilities of the Company or the Shareholders for
costs and expenses incurred in connection with the
preparation, negotiation, execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby;
(iv) liabilities or obligations of the Company under
this Agreement or the Documents contemplated hereby;
(v) any losses, costs, damages or expense based upon or
arising from any claims, litigation, legal proceedings or
other actions against the Company based upon any set of facts
occurring prior to the Closing;
(vi) all personal injury, product liability claims,
claims of environmental damage, claims of hazards to health,
strict liability, toxic torts, enforcement proceedings,
cleanup orders and other similar actions or claims instituted
by private parties or any Governmental Authority, with respect
to the operation of the Company prior to Closing; or
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(vii) any other liability or obligation not specifically
included within the Assumed Liabilities.
1.6 INSTRUMENTS OF TRANSFER. At the Closing, the Company shall
deliver to the Purchaser such instruments of transfer, assignment
and conveyance, including (without limitation) bills of sale,
Contract assignments and assignments of motor vehicle registrations,
all dated as of the Effective Date, transferring title to the Assets
to the Purchaser as may reasonably be requested by the Purchaser.
Such instruments shall be reasonably satisfactory in form and
substance to the Purchaser and shall vest in the Purchaser good and
marketable title to all the Assets, free and clear of all Liens.
1.7 DELIVERY OF RECORDS AND CONTRACTS. At the Closing, the
Company will deliver to the Purchaser all of the Contracts of the
Company constituting a portion of the Assets, with such assignments
thereof and consents to assignment as the Purchaser shall deem
necessary to assure the Purchaser of their full benefit.
Simultaneously with such deliveries, the Company shall take all
requisite steps to put the Purchaser in actual possession and
operating control of the Assets and all of the Com- pany's business
records, books and other data.
1.8 TAXES. Any sales or transfer taxes which may be payable in
connection with the sale of the Assets under this Agreement shall be
borne by the Purchaser.
1.9 FURTHER ASSURANCES. The Company and the Shareholders shall
from time to time after the Closing, without further consideration,
execute and deliver such instruments of transfer, conveyance and
assignment (in addition to those delivered pursuant to Section 1.6),
and shall take such other action, as the Purchaser may reasonably
request to more effectively transfer, convey and assign to and vest
in the Purchaser, and to put the Purchaser in actual possession and
control of, each of the Assets.
2. THE CLOSING.
2.1 TIME AND PLACE. The Closing shall occur at the offices of
Xxxxxx Xxxxxx Flauttau & Klimpl, L.L.P., at 9:00 a.m. on August 9,
1996, or on such other date thereafter as may be designated by the
Purchaser upon at least two business days' advance notice to the
Company, but in no event later than August 31, 1996. The date and
time of the Closing is herein called the "Closing Date". All action
to be taken at the Closing as hereinafter set
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forth, and all documents and instruments executed and delivered, and
all payments made with respect thereto, shall be considered to have
been taken, delivered or made simultaneously, and no such action or
delivery or payment shall be considered as complete until all action
incident to the Closing has been completed.
2.2 EFFECTIVE DATE. Notwithstanding any other provision of
this Agreement or any Exhibit or Schedule hereto or Document
executed in connection herewith, the Closing shall be deemed to
occur, for Tax, accounting and all other purposes, effective as of
the close of business on the Effective Date. From the Effective Date
through the Closing Date and thereafter, all operations, revenues
and assets of the Operations shall be for the account of and shall
belong to the Purchaser. During such interim period, the Operations
shall be conducted in the ordinary course and, in particular, no
principal amortization shall be made, no extraordinary payments
shall be made, and no transactions entered into or commitments made
outside the ordinary course.
2.3 RELATED TRANSACTIONS. In addition to the pur-
chase and sale of the Assets, the following transactions
shall take place at the Closing:
(i) the Purchaser shall cause Parent to issue and
deliver to the Company a Warrant, in substantially the form of
Exhibit B attached hereto (the "Effective Date Warrant"), to
purchase an aggregate of 30,000 shares of Common Stock, $.01
par value ("Common Stock"), of Parent;
(ii) the Purchaser, as tenant, and the Shareholders, as
landlord, shall execute and deliver to the other a Lease
Agreement to be dated the Effective Date and in substantially
the form of Exhibit C hereto (the "Lease Agreement"), covering
all of the Leased Real Property and improvements thereon as
described on Schedule 3.6;
(iii) the Purchaser and the Shareholders shall execute
and deliver to each other a Non- Competition Agreement to be
dated the Effective Date and in substantially the form of
Exhibit D hereto (the "Non-Competition Agreement");
(iv) the Purchaser and each Shareholder shall each
execute and deliver to the other an Employment Agreement to be
dated the Effective Date and in substantially the forms of
Exhibits E-1 and
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E-2 hereto (collectively, the "Employment Agreements"); and
(v) Parent shall cause to be executed by all of the
members of its Board of Directors a unanimous written consent
under which (x) the number of directors constituting the whole
Board of Directors of Parent shall be increased by one, and
(y) whomever of the Shareholders as they shall direct prior to
the Closing shall be elected as a member of the Board of
Directors to fill the vacancy created by such increase in the
number of directors, to serve in such position for so long as
the Shareholders shall desire until the Debentures are no
longer outstanding, provided that the person occupying such
Board position shall, if requested by Parent, immediately
resign upon payment in full of the Debentures.
The parties agree that all Warrants issued or issuable under this
Agreement shall be deemed to be issued for a value of $.01 per share
of Common Stock covered by each such Warrant.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS. The Company and the Shareholders jointly and severally
represent and warrant to and agree with the Purchaser that:
3.1 ORGANIZATION AND EXISTENCE. The Company is a corporation
duly organized, validly existing and in good standing under the laws
of the State of New York, and has all requisite corporate power to
enter into and perform its obligations under this Agreement.
3.2 OWNERSHIP OF THE COMPANY. The Shareholders collectively
own and hold all of the issued and outstanding capital stock of the
Company.
3.3 FINANCIAL STATEMENTS. The Company and the Shareholders
have delivered to the Purchaser true and complete copies of the
Financial Statements. The Financial Statements are correct and
complete, have been prepared in accordance with the books and
records of the Company and present fairly the financial positions of
the Company at the dates thereof and the results of its operations
for the periods then ended, in each case in accordance with GAAP.
3.4 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
the Company Balance Sheet, the Company has no, and none of its
assets and properties is subject to
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any, liabilities or obligations of any kind or nature, other than
unsecured trade accounts payable and accrued expenses arising in the
ordinary course of business since the date of the Company Balance
Sheet.
3.5 TITLE TO AND STATUS OF PROPERTIES. All assets, rights and
properties required in the conduct of the business of the Company
are owned by it and are included within the Assets or are validly
leased by it under Assumed Contracts, except for the showroom office
lease described in Section 7.12. The Company is in actual possession
and control of all properties (including Real Property) owned or
leased by it which are required in the conduct of its business, and
as of the Effective Date will have good and marketable title to all
of the Assets, including without limitation, all properties and
assets reflected in the Company Balance Sheet (other than properties
and assets reflected in such balance sheet that have been sold or
otherwise disposed of in the ordinary course of business subsequent
to the date of the Company Balance Sheet), free and clear of all
Liens, other than (i) Liens to be fully released and discharged at
or prior to Closing, or (ii) as otherwise described on Schedule 3.5.
3.6 REAL PROPERTY. The Company has no ownership interest in
any Real Property. Schedule 3.6 sets forth a legal description of
each parcel of the Leased Real Property. In addition, Schedule 3.6
briefly describes each building and major structure and improvement
thereon. All of the Leased Real Property described on Schedule 3.6
is all the Real Property necessary for the conduct of the Company's
business as presently conducted. The Company has not granted any
sublease, license or right to the use or possession over any portion
of any Leased Real Property to any other Person, other than under
the Real Property Subleases described on Schedule 3.6, true and
complete copies of which have been delivered to the Purchaser. Each
such Real Property Sublease is in full force and effect, and neither
the Company nor, to the Company's knowledge, the sublessee
thereunder is in default thereof. There is not pending nor, to the
knowledge of the Company, threatened any proceeding for the taking
or condemnation of the Leased Real Property or any portion thereof.
None of the buildings, structures or improvements located on any
parcel of the Leased Real Property, or the operation or maintenance
thereof as now operated or maintained, contravenes any zoning
ordinance or other administrative regulation or violates any
restrictive covenant or any provision of law, the effect of which
would interfere with or prevent their continued use for the purposes
for
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which they are now being used. None of the Leased Real Property is
located within an area that has been designated by the Federal
Insurance Administration, the Army Corp of Engineers or any other
governmental agency as being subject to special flooding hazards.
The Company is not a "foreign person" (as defined in Section
1445(f)(3) of the Code, and the regulations issued thereunder), and
the Company shall deliver at Closing a non-foreign affidavit in
recordable form containing such information as shall be required by
Code Section 1445(b)(2) and the regulations issued thereunder.
3.7 ABSENCE OF CHANGES OR EVENTS. Since the date of the
Company Balance Sheet, the Company has not, except as described on
Schedule 3.7:
(i) experienced any material adverse change in its
condition (financial or otherwise), business, assets,
liabilities or prospects;
(ii) borrowed or agreed to borrow any funds or incurred,
or become subject to, any absolute or contingent obligation or
liability, except obligations and liabilities incurred in the
ordinary course of business;
(iii) paid any obligation or liability other than
current liabilities reflected in the Company Balance Sheet and
current liabilities incurred since the date thereof in the
ordinary course of business;
(iv) except in the ordinary course of business and
consistent with the past practices of the Company, sold,
transferred or otherwise disposed of, or agreed to sell,
transfer or otherwise dispose of, any of its assets,
properties or rights, or canceled or otherwise terminated, or
agreed to cancel or otherwise terminate, any debts or claims;
(v) entered or agreed to enter into any Contract
granting any preferential rights to purchase any of its
assets, properties or rights, or requiring the consent of any
party to the transferor assignment of any of such assets,
properties or rights;
(vi) suffered any damages, destruction or physical
losses, or waived or surrendered any rights of value;
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(vii) made, directly or indirectly, any accrual or
arrangement for or payment of bonuses or special compensation
of any kind or any severance or termination pay to any present
or former officer or employee of the Company or increased or
agreed to increase the rate of compensation payable by it to
any of its employees;
(viii) terminated or otherwise made any changes in any
key employees of the Company;
(ix) experienced any labor strike or labor dispute or
entered into any collective bargaining agreement;
(x) incurred or received notice of any claim or
liability for any damages or alleged damages for (x) any
actual or alleged negligence or other tort, or (y) breach of
contract;
(xi) made any capital expenditures (or commitment
therefor) which, in the aggregate, exceed $25,000; or
(xii) entered into any other transaction other than in
the ordinary course of business.
3.8 TAX MATTERS. All Taxes due and payable by the Company on
or before the date of this Agreement have been paid. The Company has
filed all Tax returns and reports required to be filed by it with
all Governmental Authorities, and all such Tax returns and reports
are true and complete. True and complete copies of all such Tax
returns for the preceding three years have been delivered to the
Purchaser. The Company has elected, at all times since April 1,
1991, to be taxed under the provisions of Subchapter S of the Code
and the corresponding provisions of the New York Franchise Tax law,
has maintained such election for all years not closed by statute,
and there exists no basis for overturning such election for any
period prior to the date hereof. The liabilities for Taxes reflected
in the Company Balance Sheet represent adequate provision for the
payment of all accrued or unpaid or deferred Taxes of the Company,
for all periods ended on and prior to the date of the Company
Balance Sheet. No assessments of deficiencies have been made against
the Company which are presently pending or outstanding, and no
agreements, waivers or extensions of time are in effect for the
assessment of deficiencies against it. The Company has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, creditor,
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independent contractor or other third party. The Assumed Liabilities
do not include any obligation to make any payment that will be
non-deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign Tax law).
3.9 ACCOUNTS RECEIVABLE. All accounts receivable reflected on
the Company Balance Sheet were as of the date thereof, and all
accounts receivable of the Company as the Effective Date will be,
(i) bona fide claims against debtors for services rendered and/or
materials supplied, (ii) subject to no defenses, set-offs or
counter-claims, except for returns of merchandise in the ordinary
course of the Company's business consistent with its past
experience, and (iii) subject to the provisions of Section 10.5 and,
as to those accounts receivable listed on Schedule 3.9
(collectively, the "Doubtful Accounts"), subject to the reserves for
Doubtful Accounts as shown on such Schedule 3.9, current and
collectible in the full face amount thereof.
3.10 INVENTORY. The inventories reflected on the Company
Balance Sheet and all items placed in inventory since such date are
accounted for at the lower of cost or market using the first-in,
first-out method in accordance with GAAP. All such inventories are
accounted for net of reserves established in accordance with GAAP.
3.11 FIXED ASSETS. All of the Company's equipment, machinery,
leasehold improvements and other fixed assets are in good operating
condition, ordinary wear and tear excepted.
3.12 PRODUCT LICENSES. Schedule 3.12 lists all Product
Licenses held by the Company as of the date of this Agreement. Such
Schedule includes the name of the licensor, the identity of the
licensed subject matter, the date of expiration of the license, and
the amount of or formula for calculating any minimum royalties. True
and complete copies of each Product License (including all
amendments thereto) have been provided to the Purchaser. Each
Product License is in full force and effect, and neither the Company
nor, to the Company's knowledge, the licensor thereunder is in
default thereunder. Without limiting the generality of the
foregoing, the Company has complied in all material respects with
all use restrictions and royalty payment provisions under the terms
of each Product License. Except as described on Schedule 3.12, the
Company's products sold under license from a single licensor under
the Product Licenses did not account for more than 10% of the
Company's revenues during the twelve months ended
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December 31, 1995 or the three months ended March 31, 1996.
3.13 CONTRACTS. Schedule 3.13 sets forth a complete
description of every Contract of the Company, other than (i) Real
Property Subleases, which are described on Schedule 3.7; (ii)
Product Licenses, which are listed on Schedule 3.12; (iii) personal
property leases which require annual payments of less than $10,000
in the case of one such lease or $50,000 in the aggregate; (iv)
Contracts for the purchase of capital assets which do not exceed
$10,000 individually or $50,000 in the aggregate; (v) purchase
orders for the purchase of materials, and confirmations or invoices
for the sale of inventory, on open account in the ordinary course of
business, excluding those granting discounts, preferences or
extended payment terms, and (vi) Contracts which by their terms
involve an obligation on its part of less than $10,000 individually
or $50,000 in the aggregate. Each Contract described in Schedule
3.12 is valid and in full force and effect, and neither the Company,
nor, to its knowledge, any of the other parties thereto, are in
default in any material respect thereunder. A true and complete copy
of each document listed on Schedule 3.13 has been delivered to the
Purchaser by the Company.
3.14 INTANGIBLE RIGHTS. Schedule 3.14 sets forth a correct and
complete list of all patents, patent applications, patent licenses,
trademarks, trademark applications or trademark licenses, brand
names, product names or trade names, and registered copyrights
(collectively, "Intangible Rights"), owned, used by or licensed to
the Company (other than Product Licenses). The Company is not
charged with infringement of any Intangible Rights of any other
Person, nor does the Company know of any such infringement, whether
or not claimed by any person. Each license of Intangible Rights
listed on Schedule 3.14 is in full force and effect, the Company is
in compliance in all material respects with the terms thereof, and
neither the Company nor, to its knowledge, the licensor thereof, is
in default thereunder. The Company is not aware of any other person
who is infringing upon the Intangible Rights of the Company.
3.15 INSURANCE. Schedule 3.15 lists and describes all policies
of insurance held by the Company, including, without limitation, all
insurance policies that are for the benefit of, or the proceeds of
which are payable to, employees of the Company or their respective
designees. Valid policies for such insurance, true and complete
copies of which have been provided to the Purchaser, will
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be outstanding and duly in force at all times prior to the Closing.
Such policies are in such amounts, and insure against such losses
and risks, as are generally maintained for comparable businesses and
properties.
3.16 LICENSES, PERMITS, ETC. Section 3.16 lists all licenses,
franchises, permits, certificates, consents, rights and privileges
issued by any Governmental Authority that are owned or held by the
Company, which are all that are necessary for the conduct of the
Company's business as presently conducted, except for any such
license, franchise, permit, certificate, consent, right or privilege
the absence of which would not have a material adverse effect on the
condition, business, assets, liabilities or prospects of the
Company. All such items are in full force and effect and, except as
described on Schedule 3.16, are freely transferrable to the
Purchaser.
3.17 LITIGATION. Except as described on Schedule 3.17, there
is no Claim or currently effective Order pending or, to the
Company's knowledge, threatened against or affecting the Company or
any of the Assets, or that challenges the legality of this Agreement
or any action to be taken in connection therewith.
3.18 COMPLIANCE WITH LAWS. The Company has complied and is in
compliance in all material respects with all Laws.
3.19 ENVIRONMENTAL MATTERS. Subject to Section 10.6:
(a) The Company has complied and is in compliance in all
material respects with all Environmental Laws.
(b) Without limiting the generality of the foregoing,
the Company has obtained, and has complied and is in
compliance in all material respects with, all permits,
licenses and other authorizations that may be required
pursuant to Environmental Laws for the occupation of the
Leased Real Property and the operation of the Company's
business.
(c) The Company has not received any written or oral
notice, report or other information regarding any liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise) or investigatory, remedial or corrective
obligations, relating to the Company's business, any of the
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Assets or any of the Leased Real Property arising under
Environmental Laws.
(d) Except as set forth on Schedule 3.19, none of the
following exists on any portion of the Leased Real Property:
(i) Underground storage tanks or surface
impoundments;
(ii) Asbestos-containing material in any form or
condition; or
(iii) Materials or equipment containing
polychlorinated biphenyls.
(e) The Company has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported,
handled, or Released any substance, including without
limitation any Hazardous Materials, or owned or operated any
facility or property, so as to give rise to liabilities for
response costs, natural resource damages or attorneys fees
pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended,
or similar state Environmental Laws.
(f) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result
in any obligations for site investigation or cleanup, or
notification to or consent of any Governmental Authority or
third parties, pursuant to any so-called
"transaction-triggered" or "responsible property transfer"
Environmental Laws.
(g) Without limiting the foregoing, no facts, events or
conditions relating to the past or present facilities,
properties or operations of the Company will prevent, hinder
or limit continued compliance with Environmental Laws, give
rise to any investigatory, remedial or corrective obligations
pursuant to Environmental Laws, or give rise to any other
liabilities (whether accrued absolute, contingent,
unliquidated or otherwise) pursuant to Environmental Laws,
including without limitation any relating to onsite or offsite
Releases or threatened Releases of Hazardous Materials,
substances or wastes, personal injury, property damage or
natural resource damage.
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3.20 EMPLOYEES. Schedule 3.20 correctly and completely lists
the names and annual rates of salary and other compensation of all
non-hourly employees of the Company. Schedule 3.20 also sets forth
the date of the last salary increase for each employee listed
thereon, and the outstanding balances of all loans and advances made
by the Company to any such employee. No employee of the Company is
covered by any union or collective bargaining Contract. There are
not pending or threatened against the Company any general labor
disputes, strikes or concerted work stoppages, and there are no
discussions, negotiations, demands or proposals that are pending or
have been conducted or made with or by any labor union or
association with respect to any employees of the Company. The
Company believes its relations with its employees are good, and it
is not aware that any key management employee is about to terminate
his employment with the Company or would refuse to be hired by the
Purchaser in connection with the transfer of the Assets.
3.21 EMPLOYEE BENEFIT PLANS. Schedule 3.21 lists all plans,
Contracts, programs and policies (including, without limitation,
defined pension, defined contribution, profit sharing, thrift,
bonus, deferred compensation, severance, retirement, disability,
medical, life, dental and accidental insurance, vacation, sick
leave, death benefit and other similar employee benefit plans and
policies) maintained by the Company providing benefits to any
employee or former employee of the Company (collectively, the
"Plans"). The Company has delivered to the Purchaser true and
complete copies of all documents embodying the Plans. None of the
Plans constitutes a Multiemployer Plan (as defined in Section
4001(a)(3) of ERISA), any other employee benefit plan covered by
Title IV of ERISA, or any defined benefit pension plan or defined
contribution plan within the meaning of ERISA. The Company has
complied with ERISA in connection with the establishment and
administration of each Plan described on Schedule 3.21, and there
has been no prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) with respect thereto.
3.22 CUSTOMERS AND SUPPLIERS. Schedule 3.22 lists, by dollar
volume paid for the twelve-month period ended on September 30, 1995
and the six-month period ended on March 31, 1996, the ten largest
suppliers and the ten largest customers of the Company. The Company
believes that its relationship with its significant customers and
suppliers is good, and the Company is unaware that any such customer
or supplier is about to terminate such
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relationship or would terminate such relationship in the event of
the sale contemplated hereunder.
3.23 AFFILIATED PARTY TRANSACTIONS. Except as described on
Schedule 3.23, no Affiliate of the Company (i) is a party to or has
any interest in any Contract with the Company, (ii) has any
outstanding loan to or receivable from the Company, or (iii) has any
ownership interest, directly, indirectly or beneficially, in any
competitor or supplier of the Company. All Contracts, arrangements
and interests described on Schedule 3.23 have been entered into in
arms-length transactions on terms not materially less favorable to
the Company than would have been obtained from unaffiliated Persons.
3.24 BOOKS AND RECORDS. All books and records of the Company
are true, correct and complete in all material respects, have been
maintained by the Company in accordance with good business practice
and in accordance with all Laws applicable to the Company.
3.25 FINDERS. Except as described in Section 14.1, neither the
Company nor either Shareholder is a party to or in any way obligated
under any Contract, and there are no outstanding claims against any
of them, for the payment of any broker's or finder's fee in
connection with the origin, negotiation, execution or performance of
this Agreement.
3.26 AUTHORITY OF THE COMPANY. The execution, delivery and
performance by the Company of this Agreement and the Documents to
which it is a party have been duly authorized by its Board of
Directors. This Agreement has been duly executed and delivered by
the Company. This Agreement is, and such Documents upon their
execution and delivery as herein provided will be, legally binding
and enforceable against the Company in accordance with their
respective terms. Neither the execution, delivery nor performance by
the Company of this Agreement or such Documents, nor consummation of
the transactions contemplated hereby or thereby, will result in a
violation or breach of, nor constitute a default or accelerate the
performance required under, or require the consent of any other
Person pursuant to, (i) the Articles of Incorporation or bylaws of
the Company, (ii) any material term contained in any Contract to
which the Company is a party or by which it or any of the Assets are
bound, except for those Contracts for which consent is required as
described on Schedule 3.26, or (iii) any Order applicable to the
Company or any of the Assets.
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3.27 AUTHORITY OF THE SHAREHOLDERS. Each Shareholder has full
authority to enter into this Agreement and the Documents to which he
or she is a party and to perform his or her obligations hereunder
and thereunder, and neither the execution, delivery nor performance
of this Agreement or such other Documents by such Shareholder will
result in a violation or breach of any material term or provision
of, nor constitute a default under, any Contract to which such
Shareholder is a party or by which he, she or any of the Assets are
bound, or violate any Order. This Agreement is, and such other
Documents upon their execution and delivery as herein provided will
be, valid and binding obligations of the Shareholders enforceable
against each of them in accordance with their respective terms.
3.28 ACQUISITION OF THE SECURITIES. The Securities to be
acquired by the Company hereunder will be acquired by it for
investment purposes only and not with the present intention or view
to, or resale in connection with, any distribution thereof within
the meaning of the Securities Act of 1933, as amended, except that
the Company intends to distribute the Securities to the Shareholders
following the Closing, and the Shareholders have no such present
intention or view for resale. The Company and the Shareholders
understand that none of the Securities is registered under such
Securities Act or any state securities or blue sky laws, and that
the Purchaser is under no obligation to register any of the
Securities under any such laws. The Company and the Shareholders
further understand that transferability of the Securities will be
restricted in accordance with applicable state and federal
securities laws, and that a restrictive legend to such effect will
be inscribed thereon. The Company and the Shareholders have had full
opportunity to receive such information and ask such questions of
representatives of the Purchaser concerning the Purchaser and its
business, operations, assets and prospects, and concerning an
investment in the Securities, as the Company and the Shareholders
have deemed appropriate in order to make an informed investment
decision with respect to the Securities.
3.29 FULL DISCLOSURE. The representations and war- ranties
made by the Company and the Shareholders hereunder or in any
Schedules, certificates or other Documents furnished to the
Purchaser pursuant hereto or thereto, do not and will not contain
any untrue statement of a fact or omit to state a fact required to
be stated herein or therein or necessary to make the representations
or warranties herein or therein, in light of the circumstances in
which they are made, not misleading.
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3.30 SCHEDULES. The various Schedules referred to in this
Section 3 have been prepared as of the date hereof (unless the
information contained therein is required to be presented as of a
specific date), have been delivered to the Purchaser in a separate
binder or volume contemporaneously with the execution of this
Agreement and have been signed for identification by the Company and
the Shareholders.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to and agrees with the
Company and the Shareholders that:
4.1 ORGANIZATION AND EXISTENCE. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Texas, and has all requisite corporate power to
enter into and perform its obligations under this Agreement and the
Documents to which it is a party. The Purchaser is duly qualified as
a foreign corporation in the State of New York. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
4.2 AUTHORITY OF THE PURCHASER AND PARENT. The execution,
delivery and performance by the Purchaser of this Agreement and the
Documents to which it is a party have been duly authorized by its
Board of Directors. This Agreement is, and upon execution and
delivery as herein provided such other Documents will be, valid and
binding upon the Purchaser and enforceable against the Purchaser in
accordance with their respective terms. Neither the execution,
delivery or performance by the Purchaser of this Agreement or such
other Documents will conflict with or result in a violation or
breach of any term or provision of, nor constitute a default under,
the Articles of Incorporation or bylaws of the Purchaser or under
any Contract to which it is a party or by which it or its property
is bound (except for any such Contracts for which it has obtained
valid consents), or violate any Order. The issuance and delivery by
Parent of the Securities have been duly authorized by its Board of
Directors. Upon execution and delivery as herein provided, each of
the Securities will be valid and binding upon Parent and enforceable
against Parent in accordance with their respective terms. The
issuance by Parent of the Securities will not conflict with or
result in a violation or breach of any term or provision of, nor
constitute a default under, the Certificate of Incorporation or
bylaws of Parent or under any Contract to which it is a party or by
which it or its property is bound
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(except for any such Contracts for which it has obtained valid
consents), or violate any Order.
4.3 FINDERS. The Purchaser is not a party to or in any way
obligated under any contract or other agreement, and there are not
outstanding claims against it, for the payment of any broker's or
finder's fee in connection with the origin, negotiation, execution
or performance of this Agreement.
4.4 CAPITALIZATION. The authorized capital stock of the Parent
consists of (i) 1,000,000 shares of Common Stock, $.01 par value, of
which 330,555 shares are presently issued and outstanding as of the
date hereof; and (ii) 2,000,000 shares of Preferred Stock, $.01 par
value, of which (x) 650,000 shares have been designated as Series
A-1 Preferred Stock, all of which shares are issued and outstanding,
and (y) 300,000 shares have been designated as Series A-2 Preferred
Stock, all of which shares are issued and outstanding. The
outstanding shares of Common Stock, Series A-1 Preferred Stock and
Series A-2 Preferred Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. Except as disclosed on
Schedule 4.4, Parent does not have any outstanding capital stock or
securities convertible into or exchangeable for any shares of its
capital stock, or any outstanding rights (either preemptive or
other) to subscribe for or to purchase, or any outstanding rights or
options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any outstanding calls,
commitments or claims of any character relating to, any capital
stock or any stock or securities convertible into or exchangeable
for any capital stock of Parent.
4.5 FINANCIAL STATEMENTS. The Purchaser has delivered to the
Company true and complete copies of its balance sheets at December
30, 1995 and December 31, 1994 and the related statements of
operations, shareholders' equity (deficit) and cash flows for the
years then ended, together with the audit report thereon of Xxxxxx
Xxxxxxxx LLP dated April 22, 1996. Such financial statements are
correct and complete, have been prepared in accordance with the
books and records of the Purchaser and present fairly the financial
positions of the Purchaser at the dates thereof and the results of
its operations for the periods then ended, in each case in
accordance with GAAP.
4.6 FULL DISCLOSURE. The representations and warranties made
by the Purchaser hereunder or in any Schedule, certificates or other
Documents furnished to the Company and the Shareholders pursuant
hereto or
-22-
thereto, do not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
herein or therein or necessary to make the representations or
warranties herein or therein, in light of the circumstances in which
they are made, not misleading.
5. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS PENDING CLOSING.
The Company and the Shareholders jointly and severally covenant with the
Purchaser that:
5.1 CONDUCT OF BUSINESS. From the date of this Agreement to
the Closing Date, the Company will be operated only in the ordinary
course of business, and, in particular, without the prior written
consent of the Purchaser, the Company will not, and the Shareholders
will not cause or permit the Company to:
(i) cancel or permit any insurance to lapse or
terminate, unless renewed or replaced by like coverage;
(ii) enter into any Contract outside the ordinary course
of business; or
(iii) hire, fire, reassign or make any other change in
key personnel of the Company, or increase the rate of
compensation of or declare or pay any bonuses to any employee
in excess of that listed on Schedule 3.20;
(iv) cause or permit any of the events or conditions
described in Section 3.7 to occur or exist; or
(v) take any other action which would cause any of the
representations and warranties made in Section 3 hereof not to
be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if the same had
been made on and as of the Closing Date.
5.2 ACCESS TO INFORMATION. Prior to Closing, the Shareholders
and the Company will give to the Purchaser and its counsel,
accountants and other representatives, full and free access to all
of the properties, books, Contracts and records of the Company so
that the Purchaser may have full opportunity to make such
investigation as it shall desire to make of the affairs of the
Company.
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5.3 PRESERVATION OF GOODWILL. Prior to the Closing, the
Company and the Shareholders will use their best efforts to preserve
the business organization of the Company, to keep available to the
Purchaser the services of the employees of the Company and to
preserve for the Purchaser the goodwill of all suppliers, customers
and others having business relations with the Company.
5.4 CONSENTS AND APPROVALS. The Company and the Shareholders
will use their best efforts to obtain the necessary consents and
approvals of other Persons which may be required to be obtained on
their part to consummate the transactions contemplated by this
Agreement. Such consents shall include, without limitation, the
written consent, in a form reasonably acceptable to the Purchaser,
of (i) the licensors under those Product Licenses which are noted on
Schedule 3.27 as requiring consent as a condition to the Closing
hereunder, and (ii) the parties to the other Contracts listed on
Schedule 3.27 (collectively, the "Required Consents").
5.5 NO SHOP. Prior to the Closing, neither the Company nor
either Shareholder shall directly or indirectly enter into any
Contract, or initiate, solicit or encourage any offers, proposals or
expressions of interest, or otherwise hold any discussions with any
potential buyers, investment bankers or finders, with respect to the
possible sale or other disposition of all or any substantial portion
of the Assets, the sale of all or a controlling interest in the
stock of the Company, or the merger or consolidation of the Company,
other than with the Purchaser. If the Company or either Shareholder
receive any offer or expressions of interest for such a transaction,
the Company or such Shareholder shall promptly advise the Purchaser
thereof.
5.6 HSR ACT FILING. The Shareholders shall promptly prepare
and cause to be filed a premerger notification and report as the
acquired person under the HSR Act and shall request early
termination in connection therewith. The Company and the
Shareholders shall promptly respond to any inquiries of the Federal
Trade Commission or Department of Justice in connection with such
filing and shall coordinate the foregoing with the Purchaser.
5.7 SUBORDINATION. In connection with the financing to be
provided to the Purchaser as described in Section 7.10, the Company
agrees to execute and deliver in favor of the Company's lender(s)
such subordination agreements, relating to the Debentures and the
payment of
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any Earnout Amount pursuant to Section 1.3, as such lender(s) may
reasonably request.
6. COVENANTS OF THE PURCHASER PENDING CLOSING. The Pur- chaser
covenants with the Company and the Shareholders that:
6.1 CONSENTS AND APPROVALS. The Purchaser will use its best
efforts to obtain the necessary consents and approvals of other
Persons which may be required to be obtained on its part to
consummate the transactions contemplated in this Agreement.
6.2 CONFIDENTIALITY. Prior to the Closing, the Purchaser and
its representatives will hold in confidence any data and information
obtained with respect to the Company from any representative,
officer, director or employee of the Company, including their
accountants or legal counsel, or from any books or records of any of
them, in connection with the transactions contemplated by this
Agreement. If the transactions contemplated hereby are not
consummated, neither the Purchaser nor its representatives shall use
such data or information or disclose the same to others, except as
such data or information is published or is a matter of public
knowledge or is required by Law to be disclosed. If this Agreement
is terminated for any reason, all written data and information
obtained by the Purchaser from the Company or its representatives in
connection with the transactions contemplated by this Agreement
shall be returned to the Company.
6.3 HSR ACT FILING. The Purchaser shall promptly cause Equus,
the ultimate parent entity of the acquiring person, to prepare and
file a premerger notification and report for the acquiring person
under the HSR Act and shall request early termination in connection
therewith. The Purchaser shall be responsible for paying the
statutory filing fee in connection therewith. The Purchaser shall
promptly respond to any inquiries of the Federal Trade Commission or
Department of Justice in connection with such filing and shall
coordinate the foregoing with the Company and the Shareholders.
7. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of
the Purchaser under this Agreement shall be subject to the following
conditions, any of which may be expressly waived by it in writing:
7.1 REPRESENTATIONS AND WARRANTIES TRUE; COVENANTS PERFORMED.
The Purchaser shall not have discovered any material error,
misstatement or omission in the repre- sentations and warranties
made by the Company and the
-25-
Shareholders in this Agreement; the representations and warranties
made by the Company and the Shareholders herein shall be deemed to
have been made again at and as of the time of Closing and shall then
be true and correct; the Company and the Shareholders shall have
performed and complied with all agreements and conditions required
by this Agreement to be performed or complied with by them at or
prior to the Closing; and the Purchaser shall have received a
certificate, signed by the Shareholders and an executive officer of
the Company, to the effect of the foregoing provisions of this
Section 7.1.
7.2 OPINION OF COUNSEL. The Company and the Shareholders shall
have caused to be delivered to the Purchaser an opinion of Xxxxxx
Xxxxxx Flauttau & Klimpl, L.L.P., counsel for the Company and the
Shareholders, dated the Closing Date substantially in the form of
Exhibit F hereto.
7.3 CONSENTS AND APPROVALS. The Shareholders and the Company
shall have obtained all of the Required Consents.
7.4 NO LOSS OR DAMAGE. Prior to the Closing there shall not
have occurred any loss or damage to any material portion of the
Assets (regardless of whether such loss or damage was insured).
7.5 APPROVAL BY COUNSEL. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal
matters shall have been approved by counsel for the Purchaser, and
such counsel shall have been furnished with such certified copies of
actions and proceedings and other instruments and documents as they
shall have reasonably requested.
7.6 NO MATERIAL ADVERSE CHANGE. Prior to the Closing, there
shall have occurred no material adverse change in the condition
(financial or otherwise), business, assets, liabilities or prospects
of the Company since the date of the Company Balance Sheet, nor
shall the Company have lost any material customer or have received
notice of cancellation or intent to cancel from any other party to a
Product License, Real Property Sublease, or other material Assumed
Contract.
7.7 HSR ACT FILING. Any Person required in connection with the
transactions contemplated hereby to file a notification and report
form in compliance with the HSR Act shall have filed such form and
the applicable waiting period with respect to each such form
(including
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any extension thereof by reason of a request for additional
information) shall have expired or been terminated.
7.8 RELATED TRANSACTIONS. The Shareholders shall have executed
and delivered to the Purchaser the Lease Agreement, the
Non-Competition Agreement and their respective Employment
Agreements.
7.9 ENVIRONMENTAL REPORT. Provided that there shall have been
conducted prior to execution of this Agreement, at Purchaser's
expense, a Phase I (and, if deemed necessary by Purchaser, a Phase
II) environmental site assessment of the Company and the Leased Real
Property by an environmental consulting firm selected by Purchaser,
then the results of the report of such firm (together with the
remedial action, if any, taken by the Company in response thereto)
shall be satisfactory to Purchaser in its sole discretion.
7.10 FINANCING COMMITMENT. The Purchaser shall have received a
written commitment from a financial institution reasonably
acceptable to it, containing such terms and conditions and otherwise
in form and substance acceptable to the Purchaser, providing for the
extension of financing in order to provide the portion of the
Purchase Price for the Assets not furnished by the Purchaser or
obtained by the Purchaser from other sources, and such commitment
shall have been funded in such amount contemporaneously with the
Closing, subject to the satisfaction of any conditions set forth in
such commitment.
7.11 BUILDING INSPECTION. There shall have been conducted, at
the Purchaser's expense, a building inspection of the buildings and
improvements located on the Leased Real Property, and the results of
such inspection shall be satisfactory to the Purchaser in its sole
discretion.
7.12 PLYMOUTH, INC.. Plymouth, Inc., a New York corporation of
which the Shareholders are the sole shareholders, shall have sold
and assigned to the Purchaser all of its assets and properties,
consisting of rights under a showroom office lease in Manhattan, New
York, in form and substance acceptable to the Purchaser.
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
The obligations of the Company and the Shareholders under this Agreement
shall be subject to the following conditions, any of which may be
expressly waived by the Company and the Shareholders in writing:
-27-
8.1 REPRESENTATIONS AND WARRANTIES TRUE; COVENANTS PERFORMED.
The Company and the Shareholders shall not have discovered any
material error, misstatement or omission in the representations and
warranties made by the Purchaser in this Agreement; the
representations and warranties made by the Purchaser herein shall be
deemed to have been made again at and as of the time of Closing and
shall then be true and correct; the Purchaser shall have performed
and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it at or prior to the
Closing; and the Company and the Shareholders shall have received a
certificate, signed by an executive officer of the Purchaser, to the
effect of the foregoing provisions of this Section 8.1.
8.2 OPINION OF COUNSEL. The Purchaser shall have caused to be
delivered to the Company and the Shareholders an opinion of Xxxxx &
Xxxxx, A Professional Corporation, counsel for Purchaser, in
substantially the form of Exhibit G hereto.
8.3 CONSENTS AND APPROVALS. The Purchaser shall have obtained
all consents and approvals of other persons and governmental
authorities to the transactions contemplated by this Agreement.
8.4 RELATED TRANSACTIONS. Parent shall have issued and
delivered the Effective Date Warrant to the Company and shall have
elected to its Board of Directors whomever of the Shareholders as
they direct as described in Section 2.3(v), and the Purchaser shall
have executed and delivered to the Shareholders the Lease Agreement,
the Non-Competition Agreement and their respective Employment
Agreements.
8.5 APPROVAL BY COUNSEL. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal
matters shall have been approved by counsel for the Company and the
Shareholders, and such counsel shall have been furnished with such
certified copies of actions and proceedings and other instruments
and documents as they shall have reasonably requested.
8.6 HSR ACT FILING. Any Person required in connection with the
transactions contemplated hereby to file a notification and report
form in compliance with the HSR Act shall have filed such form and
the applicable waiting period with respect to each such form
(including any extension thereof by reason of a request for
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additional information) shall have expired or been terminated.
8.7 BACK-TO-BACK LETTERS OF CREDIT. The Purchaser shall have
caused Fleet National Bank, or another financial institution
reasonably acceptable to the Company, to issue and deliver to the
Company or its lender a standby letter of credit in favor of the
Company or its lender as beneficiary with respect to each
documentary letter of credit described on Schedule 3.13 hereto (true
and correct copies of which have been provided to the Purchaser,
collectively the "Company Letters of Credit"), in an amount equal to
the aggregate outstanding balance thereof as of the Closing Date,
with the same expiry dates and otherwise on substantially the same
terms as each Company Letter of Credit; or the Purchaser and its
lender shall have otherwise entered into financial accommodations
reasonably satisfactory to the Company and the issuer of Company
Letters of Credit to enable such issuer to release its Liens against
the Assets which secure the Company's reimbursement obligations
under the Company Letters of Credit.
8.8 EQUUS. Equus shall have executed and delivered to the
Shareholders (i) the Guaranty and (ii) its written agreement,
mutually acceptable in form and substance to the parties, under
which Equus agrees to vote its shares of Common Stock of Parent in
favor of the election to Parent's Board of Directors whomever of the
Shareholders may be directed by them, for so long as the Debentures
are outstanding.
9. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRAN- TIES.
9.1 NATURE OF STATEMENTS. All statements contained herein or
in any Schedule, certificate or other Document delivered by or on
behalf of any party pursuant to this Agreement, shall be deemed
representations and warranties by such party.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regardless of
any investigation made at any time by or on behalf of any party
hereto, all covenants, representations and warranties made hereunder
or pursuant hereto by any party shall not terminate on the Closing
Date but shall survive the Closing and continue in full force and
effect (i) until expiration of the applicable tax statute of
limitations under federal or state Law, as applicable, with respect
to representations and warranties under Section 3.8, (ii) for the
term of the Lease Agreement, with respect to representations and
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warranties under Section 3.19, (iii) until expiration of the
applicable state statute of limitations, with respect to
representations and warranties, under Sections 3.1, 3.2, 3.5 and
3.25 through 3.29, and (iv) until June 30, 1998, in the case of all
other representations and warranties under this Agreement, at which
time (as applicable) the same shall terminate except for any such
representation or warranty as to which a Claim has been asserted
prior to such termination, which shall survive until such Claim is
finally resolved.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY THE COMPANY AND THE SHAREHOLDERS.
Subject to the remaining provisions of this Section 10, the Company
and the Shareholders jointly and severally agree to indemnify and
hold harmless the Purchaser and its successors and assigns from and
against any and all losses, damages, liabilities, obligations, costs
or expenses (any one such item being herein called a "Loss" and all
such items being herein collectively called "Losses") which are
caused by or arise out of (i) any breach or default in the
performance by the Company and either Shareholder of any of their
respective covenants or agreements contained in this Agreement, (ii)
any breach of warranty or inaccurate or erroneous representation
made by the Company and either Shareholder herein, in any Schedule
delivered to the Purchaser pursuant hereto or in any certificate or
other Document delivered by or on behalf of any of them pursuant
hereto, (iii) any Claim made against the Purchaser in respect of any
liabilities or obligations of the Company (whether absolute or
contingent) other than the Assumed Liabilities, and (iv) any and all
actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees) incident to any of the
foregoing.
10.2 INDEMNIFICATION BY THE PURCHASER. The Purchaser agrees to
indemnify and hold harmless the Company and the Shareholders and
their respective heirs, successors and assigns from and against any
Losses which are caused by or arise out of (i) any breach or default
in the performance by the Purchaser of any covenant or agreement of
the Purchaser contained in this Agreement, (ii) any breach of
warranty or inaccurate or erroneous representation made by the
Purchaser herein or in any certificate or other Document delivered
by or on behalf of the Purchaser pursuant hereto, (iii) any Claim
made against the Company in respect of the Assumed Liabilities, (iv)
any Claim asserted against the Company in respect of the conduct of
the Operations after the
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Closing, and (v) any and all actions suits, proceedings, claims,
demands, judgments, costs and expenses (including reasonable legal
fees) incident to any of the foregoing.
10.3 THIRD PARTY CLAIMS. If any third person asserts a Claim
against an indemnified party hereunder that, if successful, might
result in a claim for indemnification against an indemnifying party
hereunder, the indemnifying party shall be given prompt written
notice thereof and shall have the right (i) to participate in the
defense thereof and be represented, at his, her or its own expense,
by advisory counsel selected by him, her or it, and (ii) to approve
any settlement if the indemnifying party is, or will be, required to
pay any amounts in connection therewith. Notwithstanding the
foregoing, if within ten business days after delivery of the
indemnified party's notice described above, the indemnifying party
indicates in writing to the indemnified party that, as between such
parties, such claims shall be fully indemnified for by the
indemnifying party as provided herein, then the indemnifying party
shall have the right to control the defense of such claim, provided
that the indemnified party shall have the right (i) to participate
in the defense thereof and be represented, at his, her or its own
expenses, by advisory counsel selected by him, her or it, and (ii)
to approve any settlement if the indemnified party's interests are,
or would be, affected thereby.
10.4 OFFSET. If the Company or either Shareholder becomes
obligated to indemnify the Purchaser pursuant to this Section 10 at
any time when either the Purchase Debenture or the Earnout Debenture
is or may become outstanding, Parent may set-off all or any part of
the amount of such indemnification obligations against the unpaid
principal balance of and unpaid accrued interest on either or both
of such Debentures. The exercise of such right of set-off by Parent
hereunder shall be evidenced by means of a written notice to such
effect given by the Purchaser or Parent to the Company and the
Shareholders. Upon the exercise by the Parent of its right of
set-off, the amount which the Parent is entitled to set-off against
such Debentures hereinabove provided, shall be, and shall be deemed
to be, applied in reduction of, and shall constitute a payment or
prepayment of, the accrued and unpaid interest then outstanding and
then to the next maturing installments of principal. The Company and
the Shareholders hereby agree, and all subsequent holders of the
Purchase and Earnout Debentures by acceptance thereof will thereby
agree, to endorse the amount of such reduction or payment or
prepayment on the reverse side of each Debenture as a credit against
the
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unpaid balance of principal of and unpaid accrued interest thereon.
Unless otherwise specified in such notice, any such offset shall be
applied on a pro rata basis among the Purchase and Earnout
Debentures in accordance with their respective outstanding balances
of principal and interest.
10.5 COLLECTION OF ACCOUNTS. Notwithstanding any other
provision of this Agreement, the Purchaser's remedy in respect of
the collectibility of the accounts receivable included in the
Assets, including any claims arising under clause (iii) of Section
3.9, shall be governed by the provisions of this Section 10.5. If,
as of December 31, 1997 (the "Receivables Reconciliation Date"),
there remain uncollected any accounts receivable included in the
Assets, other than the Doubtful Accounts (collectively, "Effective
Date Receivables"), then upon the Purchaser's written certification
to such effect given to the Company and the Shareholders, the
Company and the Shareholders shall, jointly and severally, pay to
the Purchaser the amount by which those Effective Date Receivables
which then remain uncollected ("Uncollected Effective Date
Receivables") exceed the sum of (I) the amount (if any) by which
collections on Doubtful Accounts from the Effective Date through the
Receivables Reconciliation Date exceed $150,907.62, PLUS (II)
$100,000 (the "Receivables Basket"). For purposes of this Section
10.5, an account (the "Receivables Basket Account") shall be
maintained, which on the Effective Date shall be zero, shall be
increased by any application of the Receivables Basket against
Uncollected Effective Date Receivables, and shall be reduced by the
amount of any collections on those uncollected accounts for which
there has been a prior addition thereto. For purposes hereof, if the
Purchaser factors or otherwise sells any of the accounts receivable
included in the Assets, the Company shall be given full credit for
the face amount thereof (regardless of the amount of the net
proceeds from such factoring actually received by the Purchaser),
unless the Company otherwise agrees. If and to the extent that the
Purchaser receives any collections on Effective Date Receivables
after the Receivables Reconciliation Date, then such collections
shall be applied (i) first, to the reduction of any positive balance
in the Receivables Basket Account as described above, and such
collections may therefore be retained by the Purchaser, until the
Receivables Basket Account has been reduced to zero, and (ii)
second, after the Receivables Basket Account has been reduced to
zero, any collections thereafter shall promptly be paid to the
Company. Likewise, if, as of December 31, 1998, there remain
uncollected any of the Doubtful Accounts, then
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upon the Purchaser's written certification to such effect given to
the Company and the Shareholders, the Company and the Shareholders
shall, jointly and severally, pay to the Purchaser the amount by
which those Doubtful Accounts which then remain uncollected
("Uncollected Doubtful Accounts") exceed the sum of (i) $150,907.62
PLUS (ii) the amount (if any) by which the Receivables Basket
exceeds the remaining balance, if any, in the Receivables Basket
Account. There shall be no further payments or reconciliations after
the reconciliation on December 31, 1998 as described above. The
foregoing shall in no event apply to claims in respect of clauses
(i) or (ii) of Section 3.9.
10.6 ENVIRONMENTAL INDEMNITY. Notwithstanding any other
provision of this Agreement, the Purchaser's remedy in respect of
the environmental condition of the Leased Real Property and the
Company's compliance with Environmental Laws, including any claims
arising under Section 3.19, shall be governed by the provisions of
this Section 10.6. The Company and the Shareholders jointly and
severally agree to indemnify and hold harmless the Purchaser and its
successors and assigns from and against any and all Losses which are
caused by or arise out of (i) any breach of warranty or inaccurate
or erroneous representation made by the Company and either
Shareholder in Section 3.19, (ii) any of the environmental hazards,
conditions, exposure or contingencies described on Schedule 3.19,
and (iii) any and all actions suits, proceedings, claims, demands,
judgments, costs and expenses (including reasonable legal fees)
incident to any of the foregoing; provided, however, that the
indemnification obligations of the Company and the Shareholders
under this Section 10.6 shall be limited to the extent such Losses
exceed $75,000 in the aggregate.
11. TERMINATION.
11.1 BEST EFFORTS TO SATISFY CONDITIONS. The Company and the
Shareholders agree to use their best efforts to bring about the
satisfaction of the conditions specified in Section 7 hereof and the
Purchaser agrees to use its best efforts to bring about the
satisfaction of the conditions specified in Section 8 hereof.
11.2 TERMINATION. This Agreement may be terminated prior to
Closing by:
(a) the mutual consent of the Company, the Shareholders
and the Purchaser;
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(b) the Purchaser if a material default shall be made by
the Company or the Shareholders in the observance or in the
due and timely performance by any of their covenants herein
contained, or if there shall have been a breach or
misrepresentation by the Company or the Shareholders of any of
their warranties and representations herein contained, or if
the conditions of this Agreement to be complied with or
performed by the Company or the Shareholders at or before the
Closing shall not have been complied with or performed at the
time required for such compliance or performance and such
noncompliance or nonperformance shall not have been expressly
waived by the Purchaser in writing;
(c) the Company and the Shareholders if a material
default shall be made by the Purchaser in the observance or in
the due and timely performance by the Purchaser of any of the
covenants of the Purchaser herein contained, or if there shall
have been a material breach or misrepresentation by the
Purchaser of any of its warranties and representations herein
contained, or if the conditions of this Agreement to be
complied with or performed by the Purchaser at or before the
Closing shall not have been complied with or performed at the
time required for such compliance or performance and such
noncompliance or nonperformance shall not have been expressly
waived by the Company and the Shareholders in writing;
(d) the Company, the Shareholders or the Purchaser, if
the Closing has not occurred by August 31, 1996.
11.3 LIABILITY UPON TERMINATION. If this Agreement is
terminated under paragraph (a) or (d) of Section 11.2, then no party
shall have any liability to any other party hereunder. If this
Agreement is terminated under paragraph (b) or (c) of Section 11.2,
then (i) the party so terminating this Agreement shall not have any
liability to any other party hereto, provided the terminating party
has not breached any representation or warranty or failed to comply
with any of its covenants in this Agreement, and (ii) such
termination shall not prejudice the rights and remedies of the
terminating party against any other party which has breached any of
its representations, warranties or covenants herein prior to such
termination.
12. COVENANTS FOLLOWING CLOSING.
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12.1 CHANGE OF NAME. Promptly following the Closing (but in no
event later than 30 days thereafter), the Shareholders shall cause
the Articles of Incorporation of the Company to be amended so as to
change its name to one wholly dissimilar to "Plymouth Xxxxx," and
will furnish the Purchaser with written evidence of such amendment.
12.2 EMPLOYEE MATTERS.
(a) CONTINUED EMPLOYMENT. Upon the Closing, the
Purchaser shall offer employment to all employees of the
Company at not less than their same salaries and wages as are
in effect immediately prior to the Closing, except for any
such employees identified by the Purchaser prior to the
Closing who will not be so offered employment. Each such
employee shall be entitled to all benefits available generally
to employees of the Purchaser. The foregoing shall not
prohibit the Purchaser from terminating the employment of any
such employee following the Closing, modifying or terminating
any benefits following the Closing, or changing the terms of
any employee's employment, to the extent permitted by Law and
by Contract.
(b) WELFARE PLANS. The Purchaser shall not assume any of
the Company's "employee welfare benefit plans" as that term is
defined in Section 3(1) of ERISA. The Purchaser shall,
however, provide such employees the same benefits as are
provided generally to other employees of the Purchaser. The
Purchaser agrees that all such personnel who are to be
employed by the Purchaser following the Closing as provided in
paragraph (a) above shall, to the extent allowed under any
applicable plan or insurance policy maintained by Purchaser
with respect to any of its employee welfare benefit plans, be
given credit for all years of service with the Company for
purposes of determining eligibility for, and duration and
amount of, all benefits to be extended under all employee
welfare benefit plans provided by the Purchaser (including
without limitation life insurance, medical, dental and
disability benefits and paid vacation). The Purchaser shall
assume the Company's obligations as of the Effective Date for
accrued vacation pay and sick pay.
The Company shall provide all continuation medical or
dental coverage required to be provided under any federal,
state or local law, including the Consolidated Omnibus Budget
Reconciliation Act
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of 1985 ("COBRA"), to any employees not employed by the
Purchaser under paragraph (a) above (to the extent such
employees elect such coverage), and shall continue to provide
such coverage which the Company is then providing to any
former covered employee, or to any qualified beneficiary of
any former covered employee, as of the Closing. The terms
"continuation coverage," "covered employee," "qualified
beneficiary," and "qualifying event" shall have the meanings
given such terms in Section 4980B of the Code or Sections 601
through 608 of ERISA.
(c) EMPLOYEE WITHHOLDING. With respect to withholding,
F.I.C.A. and similar tax collections applicable to employees
of the Company, the Company and the Purchaser agree to adopt
the alternative procedure described in Section 5 of Revenue
Procedure 84-77 promulgated by the Internal Revenue Service
("IRS").
12.3 TAXES. The Company and the Shareholders shall be fully
responsible for paying all income Taxes, and for preparing and
filing all income Tax returns and reports, for all periods prior to
the Closing. If, as a result of any step-up in the federal income
Tax basis of property, plant and equipment included within the
Assets as a result of the allocation of the Purchase Price among the
Assets as contemplated in Section 1.3(g), the Company becomes
subject to additional federal income Tax liability that it would not
otherwise had become subject to if no step-up in basis of such
property had occurred, then promptly following the Company's filing
of its federal income Tax return in respect of such Tax liability
and payment of such additional Taxes, the Purchaser shall reimburse
the Company for the amount of such additional federal income Tax so
due. As a condition to such payment, the Company and the
Shareholders shall deliver to the Purchaser their written
certification of the additional federal income Tax payment to which
the Purchaser's reimbursement obligation hereunder applies, and if
the Purchaser disagrees with any portion of such certification, then
the parties shall observe the same procedures for resolving such
dispute that are outlined in Section 1.3(f). In no event shall the
Purchaser's obligations under this Section 12.3 apply to any tax on
net recognized built-in gains which may be imposed pursuant to Code
Section 1374.
12.4 ADDITIONAL WARRANTS. If, as provided in the Rolling
Debenture, the "Maturity Date" (as defined therein) is extended for
any of the twelve-month periods
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described therein, then promptly following each such extension the
Purchaser shall cause Parent to issue and deliver to the Company (or
to the Shareholders, if they are then the "Holders," as defined in
the Rolling Debenture, of the Rolling Debenture) Warrants to
purchase shares of Common Stock of Parent (herein referred to as
"Additional Warrants"), each Additional Warrant having the same
exercise price, term and other general provisions and conditions of
the Effective Date Warrant, substantially in the form of Exhibit B
hereto, except that the number of shares of Parent's Common Stock
covered by each Additional Warrant upon each such extension of the
Maturity Date shall be equal to the product of (i) a fraction, the
numerator of which is the outstanding principal balance of the
Rolling Debenture on the date of such extension and the denominator
of which is $3,000,000, MULTIPLIED BY (ii) the number of shares
shown below applicable to such extension:
Then the Number of
Shares to be Covered
If Maturity Date by the Additional
is Extended Past Warrant To Then Be
December 31, Issued Is
---------------- --------------------
1997 6,000
1998 6,000
1999 6,000
2000 6,000
2001 6,000
2002 6,000
12.5 SKY-LITE LITIGATION. The Purchaser agrees that, if the
Purchaser receives in cash any settlement, judgment or other similar
proceeds from any claim, proceeding or litigation arising from the
Sky-Lite Fashion matter described under Item 3 on Schedule 3.17, the
Purchaser will pay 100% of the net proceeds therefrom (after
deducting unreimbursed expenses, fees and other costs associated
therewith) to the Company, PROVIDED THAT (i) the Company and the
Elensons jointly and severally agrees to be fully responsible for,
and shall indemnify the Purchaser in respect of, all such costs,
fees and expenses of maintaining any such action or proceedings,
(ii) the Purchaser shall have a reasonable right of control over the
conduct of such action or proceedings, and (iii) the Company and the
Shareholders jointly and severally shall indemnify the Purchaser for
any Losses (as defined in Section 10.1) arising from any
counterclaim or cross claim asserted against the Purchaser in
connection therewith.
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13. DEFINITIONS. For purposes of this Agreement:
"1994 ANNUAL FINANCIAL STATEMENTS" means the audited Balance
Sheets of the Company at September 30, 1994 and 1993 and the related
audited Statements of Income, Retained Earnings and Cash Flows for
the respective twelve-month periods of operations then ended,
together with the footnotes and other supplementary information
thereto and the audit report thereon of Xxxxxxx dated December 9,
1994.
"1995 ANNUAL FINANCIAL STATEMENTS" means the audited Balance
Sheets of the Company at September 30, 1995 and 1994 and the related
audited Statements of Income, Retained Earnings and Cash Flows for
the respective twelve-month periods of operations then ended,
together with the footnotes and other supplementary information
thereto and the audit report thereon of Xxxxxxx dated November 17,
1995.
"ADDITIONAL WARRANTS" means all Warrants, if any, which may be
issued by Parent to the Company pursuant to Section 12.4.
"AFFILIATE," with respect to any Person, means any Person
directly or indirectly controlling, controlled by or under common
control with such Person.
"AGREEMENT" means this Asset Purchase Agreement, as amended or
supplemented in accordance with the provisions hereof, together with
all Schedules and Exhibits hereto.
"ASSETS" means all of the assets, rights and properties
described in Section 1.1.
"ASSUMED CONTRACTS" means the Real Property Subleases, the
Product Licenses and the other Contracts referred to in Section
1.1(v).
"ASSUMED LIABILITIES" means the liabilities and obligations of
the Company to be assumed by the Purchaser pursuant to Section 1.4,
subject to Section 1.5.
"BASELINE EBITDA" has the meaning given such term in Section
1.3(d).
"BASELINE NET WORTH" has the meaning given such term in
Section 1.3(e).
"CLAIM" means any action, suit, claim or legal, administrative
or arbitral proceeding or investigation.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means shares of Common Stock, $.01 par value,
of the Purchaser.
"COMPANY" means Plymouth Xxxxx, Inc., a New York corporation.
"COMPANY BALANCE SHEET" means the Balance Sheet of the Company
at September 30, 1995 that is included in the 1995 Annual Financial
Statements.
"CONTRACT" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, conditional sale contract, mortgage,
license (including, without limitation, any trademark license),
trust, joint venture, franchise, sales order, purchase order,
commitment or other binding arrangement, whether or not in writing.
"DEBENTURES" means, collectively, the Purchase Debenture, the
Rolling Debenture and (if and when issued) the Earnout Debenture.
"DOCUMENT" means any instrument or document required or
contemplated by this Agreement to be executed and delivered by any
party at or prior to the Closing for the purposes of consummating
the transactions contemplated by this Agreement.
"EARNOUT AMOUNT" has the meaning given such term in Section
1.3(d).
"EARNOUT DEBENTURE" means Parent's Junior Subordinated
Debenture issued to the Company pursuant to Section 1.3(d),
substantially in the form of Exhibit A-3 hereto.
"EBITDA" means net income calculated in accordance with GAAP
and consistent with the 1995 Annual Financial Statements, PLUS to
the extent deducted for purposes of determining such net income,
without duplication, interest, federal income taxes, depreciation
and amortization, all cash compensation paid to the Shareholders
during the period in question in excess of $200,000, and all legal
fees, accounting fees and fees paid to CoView Capital, Inc., but
only to the extent that it can be demonstrated that such fees are
directly attributable to the transactions contemplated by this
Agreement.
"EFFECTIVE DATE" means August 2, 1996.
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"EFFECTIVE DATE NET WORTH" means the sum of (i) amount by
which the total Assets of the Company that are acquired by the
Purchaser pursuant to this Agreement exceeds the total of the
Assumed Liabilities assumed by the Purchaser pursuant to this
Agreement, both as of the close of business on the Effective Date
and both determined in accordance with GAAP and consistent with the
Company's March 31, 1995 balance sheet, including in such
determination employee bonus accruals (even though not included in
such balance sheet) but excluding vacation accruals; PLUS (ii)
eleven percent (11%) of the net revenues (gross revenues LESS
returns and allowances) of the Operations from the close of business
on the Effective Date through the commencement of business on the
Closing Date.
"EFFECTIVE DATE WARRANT" means the Warrant to be issued by
Parent pursuant to Section 2.3(i), substantially in the form of
Exhibit B, representing the right to purchase an aggregate of 30,000
shares of Common Stock of Parent.
"EMPLOYMENT AGREEMENTS" has the meaning given such term in
Section 2.3(iv).
"ENVIRONMENTAL LAWS" means all Laws concerning pollution or
protection of the environment (including without limitation all
those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release,
threatened Release, control or cleanup of any Hazardous Materials,
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or
radiation).
"EQUUS" means Equus II Incorporated, a Delaware corporation.
"ERISA" means the Employee Retirement and Income Security Act
of 1974, as amended.
"FINANCIAL STATEMENTS" means the 1994 Annual Financial
Statements, the 1995 Annual Financial Statements and the Company's
unaudited Balance Sheet at March 31, 1995.
"GAAP," as applied to the preparation of any financial
statements, means generally accepted accounting principles in the
United States applied on a consistent basis.
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"GOVERNMENTAL AUTHORITY" means (i) any government or political
subdivision thereof, whether federal, state, local or foreign, and
(ii) any agency, department, division, court, tribunal or
instrumentality of any such government or political subdivision.
"GUARANTY" means the Guaranty Agreement to be executed by
Equus in favor of the Company pursuant to Section 1.3(c), in
substantially the form of Exhibit A-4 hereto.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"HAZARDOUS MATERIALS" means any hazardous, toxic, dangerous or
other waste, substance of material defined as such in, regulated by
or for purposes of any Environmental Law.
"LAW" means any applicable law, statute, code, ordinance,
rule, regulation or other requirement, of any Governmental
Authority, or any Order.
"LEASE AGREEMENT" has the meaning given such term in Section
2.3(ii).
"LEASED REAL PROPERTY" means all of the Real Property covered
by the Lease Agreement.
"LIEN" means any lien, pledge, mortgage, deed of trust,
security interest, lease, charge, option, right of first refusal,
easement, servitude, restrictive covenant, encroachment or other
survey defect, transfer restriction under any shareholder or other
agreement or other encumbrance of any nature whatsoever.
"NON-COMPETITION AGREEMENT" has the meaning given such term in
Section 2.3(iii).
"OPERATIONS" means (i) for all periods prior to the Effective
Date, the Company, and (ii) for all periods on and after the
Effective Date, the business, assets and operations as a going
concern which are acquired by the Purchaser from the Company
pursuant to this Agreement and are thereafter operated by the
Purchaser as a division or unit of operations.
"ORDER" means any order, directive, writ, injunction,
judgment, ruling, award, edict, or decree, of any Governmental
Authority.
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"PARENT" means BSI Holdings, Inc., a Delaware corporation.
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust,
unincorporated organization, or other organization, whether or not a
legal entity, and any Governmental Authority.
"PLAN" means an employee benefit plan of the type described in
Section 3.21.
"PRODUCT LICENSE" means a license to use names, logos,
insignia, mascots, cartoon and animated characters and other images
for decorating items of apparel. The term includes, but is not
limited to, character licenses, professional and college sports
teams licenses, and cross-licenses.
"PURCHASE DEBENTURE" means the Junior Subordinated Debenture
of Parent to be issued to the Company in the original principal
amount of $4,000,000 pursuant to Section 1.3(b), substantially in
the form of Exhibit A-1.
"PURCHASER" means Brazos Sportswear, Inc., a Texas
corporation.
"REAL PROPERTY" means all interests in real property,
including (without limitation) fee simple title, leasehold, license
and any rights in and to any easements, rights-of-way or other
similar rights and interests.
"REAL PROPERTY SUBLEASES" means all leases under which the
Company subleases any of the Leased Real Property to any other
Person.
"RELEASE" has the meaning set forth in CERCLA.
"REQUIRED CONSENTS" means those consents described in Section
5.4.
"RETAINED ASSETS" means the assets and properties to be
retained by the Company pursuant to Section 1.2.
"ROLLING DEBENTURE" means Parent's Junior Subordinated
Debenture issued to the Company pursuant to Section 1.3(c),
substantially in the form of Exhibit A-2 hereto.
"SECURITIES" means, collectively, the Debentures and the
Warrants.
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"SHAREHOLDERS" means Xxxx Xxxxxxx and Xxxxx Xxxxxxx.
"TAXES" means all federal, state, local or foreign taxes,
including income taxes, estimated taxes, excise taxes, sales taxes,
use taxes, gross receipts taxes, franchise taxes, employment and
payroll related taxes, property taxes and import duties, whether or
not measured by income, and all deficiencies, additions to tax,
interest and penalties in connection with such tax.
"WARRANTS" means, collectively, the Effective Date Warrant and
all Additional Warrants which may be issued pursuant to Section
12.4.
14. MISCELLANEOUS.
14.1 EXPENSES. The parties shall each pay its or his own
legal, accounting and other expenses in connection with the
negotiation, preparation and carrying out of this Agreement and the
consummation of the transactions contemplated herein. All
commissions, finder's fees and other sums due CoView Capital, Inc.
in connection with the transactions hereunder shall be paid by the
Company on the Shareholders, and the same shall not be the
responsibility of the Purchaser. In no event shall any such fees or
expenses be included within the Assumed Liabilities under Section
1.4.
14.2 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to
have been given on the date personally delivered or mailed, first
class, registered or certified mail, postage prepaid, or when sent
by telex or the telecopy and receipt is confirmed, as follows:
(i) if to the Company or either Shareholder, to:
Plymouth Xxxxx, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx Xxxxxxx
with a copy to:
Xxxxxx Xxxxxx Flauttau & Klimpl, L.L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
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(ii) if to the Purchaser, to:
Brazos Sportswear, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: President
with a copy to:
Xxxxx & Xxxxx, A Professional Corporation
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Mr. W. Xxxxxxxxxxx Xxxxxxxx
or to such other address as shall be given in writing by any party
to the other parties hereto.
14.3 ASSIGNMENT. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties,
provided, however, that following the Closing the Purchaser may
assign its rights hereunder without the consent of the Company or
either Shareholder to a successor-in-interest to the Purchaser
(whether by merger, sale of assets or otherwise). Nothing in this
Agreement, express or implied, is intended to confer upon any
person, other than the parties to this Agreement and their
respective heirs, successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
14.4 SUCCESSORS BOUND. Subject to the provisions of Section
14.3, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, assigns,
heirs and personal representatives.
14.5 SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
14.6 BULK SALES LAWS. The transactions contemplated by this
Agreement shall be consummated without compliance with the bulk
sales laws of any state. If by reason of any applicable bulk sales
law any claims are asserted by creditors of the Company, such claims
shall be the responsibility of the Purchaser in the case of claims
arising under any of the Assumed Liabilities, or the responsibility
of the Company in the case of claims arising under any other
liabilities of the Company.
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14.7 SHAREHOLDER CONSENT. The Shareholders, by their execution
hereof, hereby give their consent to the sale and transfer of the
Assets to the Purchaser, in accordance with Chapter 302A, Section
202 of the New York Business Corporation Law.
14.8 AMENDMENT. This Agreement may be amended only by an
instrument in writing executed by both parties hereto.
14.9 ENTIRE AGREEMENT. This Agreement and the Exhibits,
Schedules, certificates and other documents referred to herein
constitute the entire agreement of the parties hereto, and supersede
all prior understandings with respect to the subject matter hereof
and thereof (including, without limitation, the letter of intent
among the Purchaser, the Shareholders and the Company dated March
21, 1996).
14.10 GOVERNING LAW. This Agreement shall be construed and
enforced under and in accordance with and governed by the law of the
State of New York.
14.11 CONSTRUCTION. As the context requires or permits:
pronouns used herein shall include the masculine, the feminine and
neuter; terms used in plural shall include the singular, and
singular terms shall include the plural; "hereof", "herein",
"hereunder" and "hereto" shall refer to this Agreement; and section
and paragraph references, when not expressly referring to another
agreement or document, shall mean sections or paragraphs in this
Agreement.
14.12 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which shall constitute the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered
as of the date first above written.
THE PURCHASER:
BRAZOS SPORTSWEAR, INC.
By: _______________________________
XXXXXXX X. XXXX, President
THE COMPANY:
PLYMOUTH XXXXX, INC.
By: _______________________________
XXXXX XXXXXXX, President
THE SHAREHOLDERS:
___________________________________
XXXX XXXXXXX
___________________________________
XXXXX XXXXXXX
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EXHIBIT DESCRIPTION
------- -----------
A-1 Form of Purchase Debenture
A-2 Form of Rolling Debenture
A-3 Form of Earnout Debenture
A-4 Guaranty
B Form of Warrant
C Lease Agreement
D Non-Competition Agreement
E-1 Employment Agreement (Xxxx Xxxxxxx)
E-2 Employment Agreement (Xxxxx Xxxxxxx)
F Opinion of Counsel for the Company and the Shareholders
G Opinion of Counsel for the Purchaser
SCHEDULE DESCRIPTION
-------- -----------
1.2(ii) Retained Assets
3.5 Permitted Liens
3.6 Real Property
3.7 Changes
3.9 Doubtful Accounts
3.12 Product Licenses
3.13 Contracts
3.14 Intangible Rights
3.15 Insurance
3.16 Licenses, Permits
3.17 Litigation
3.19 Environmental Matters
3.20 Employees
3.21 Employee Benefit Plans
3.22 Customer and Suppliers
3.23 Affiliated Party Transactions
3.26 Consents
4.4 Parent Capitalization
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