Exhibit 10.4
AGREEMENT, dated as of September 24, 1996, by and among Pivot Rules, Inc.
("Pivot Rules"), on the one hand, and Leisure Wear Inc. ("Leisure Wear"), Xxxxx
X. Xxxxxxxxx Inc. Profit Sharing Plan, Xxxxx Xxxxxxxxx, Xxxxx Xxxxxxxxx and
Xxxxxxx Xxxxxxxxx (collectively, the "Sellers"), on the other hand.
WHEREAS, Pivot Rules and the Sellers entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated as of September 30, 1994,
pursuant to which Pivot Rules agreed to purchase from the Sellers the shares of
common stock of Pivot Rules owned by the Sellers (the "Shares") in exchange for
a cash payment of $50,000 and a promissory note, dated September 30, 1994, in
the principal amount of $822,291 (the "Note");
WHEREAS, in connection with the Stock Purchase Agreement, Pivot Rules
entered into a consulting and non-competition agreement with each of Xxxxx
Xxxxxxxxx and Xxxxxxx Xxxxxxxxx (the "Consulting Agreements"), pursuant to
which Pivot Rules is required to pay each of Xxxxx Xxxxxxxxx and Xxxxxxx
Xxxxxxxxx consulting and non-competition fees of $37,500 on December 31, 2000,
subject to the conditions set forth in the Consulting Agreements;
WHEREAS, in connection with the Stock Purchase Agreement, the parties
hereto entered into an escrow agreement (the "Escrow Agreement") with Scoppetta
& Xxxxx (the "Escrow Agent"), which provides for the Escrow Agent to hold the
Shares in escrow as security for the payment of amounts due under the Note;
WHEREAS, the parties hereto entered into a letter agreement (the "Letter
Agreement"), dated as of February 13, 1996, altering certain of the payment
terms set forth in the Note; and
WHEREAS, the parties hereto desire to adjust the purchase price under the
Stock Purchase Agreement by (i) revising certain terms and conditions of the
Consulting Agreements, (ii) causing the Note and the indebtedness evidenced
thereby to be canceled, (iii) terminating the Stock Purchase Agreement (except
as set forth herein) and the Escrow Agreement and (iv) providing for certain
incentive payments set forth herein;
NOW THEREFORE, in consideration of the foregoing, and for other good and
valid consideration, the receipt and adequacy of which is hereby acknowledged,
the parties hereto agree as follows:
1. The parties hereto acknowledge that Pivot Rules has duly made payments of
principal to the Sellers prior to the date hereof amounting to an
aggregate of $343,111, and has duly paid all interest accrued on such
principal amount, in each case in accordance with the Stock Purchase
Agreement, the Note and the Letter Agreement. In lieu of the remaining
payments which would otherwise be due and payable following the date
hereof under the Stock Purchase Agreement and the Note, Pivot Rules shall
be required to make the following payments to the Sellers:
a. Pivot Rules shall pay the Sellers $240,000 in cash by certified
check, within five (5) days following the satisfaction of the
conditions set forth in Section 6 of this Agreement, but in no event
earlier than September 15, 1996 (the "Closing Date").
b. Effective after the Closing Date, Pivot Rules shall be required to
pay to the Sellers the following additional cash incentive payments:
(i) an amount equal to 5% of the dividends or loans, if any, made by
Pivot Rules from time to time to any holders of currently outstanding
common stock of Pivot Rules, (ii) an amount equal to 5% of the cash
dividends, if any, paid by Pivot Rules from time to time to any party
not currently a holder of common stock of Pivot Rules with respect to
equity securities issued by Pivot Rules following the execution of
this Agreement and (iii) an amount equal to 5% of the net cash
proceeds to Pivot Rules resulting from the issuance, if any, of
equity securities by Pivot Rules in any public offering or private
placement consummated prior to the payment of an aggregate of
$279,000 of cash incentive payments to sellers; provided however,
that (x) in no event shall the payments to be made under this
paragraph (b) exceed an aggregate amount of $279,000 and (y) payments
shall not be required to be made with respect to any events described
in clauses (i) through (iii) of this paragraph (b) which occur
following the fifth anniversary of the date of this Agreement. In the
event of a public offering or offerings described in clause (iii)
above, Pivot Rules will use its best efforts to allow the Sellers to
use all or a portion of the cash payments they are entitled to
receive out of the proceeds of any such offering pursuant to clause
(iii) above toward the purchase of shares from the underwriters in
the offering at the public offering price; provided, however, that
Sellers will notify Pivot Rules within 10 business days of their
receipt of notice that the purchase of such shares is available to
them, as to whether they intend to purchase such shares, or else
forfeit such right.
Payments made to the Sellers under this Section 1 shall be made to Leisure
Wear, as agent for the Sellers. Leisure Wear agrees to allocate all payments
made hereunder among the Sellers in proportion to their share ownership.
2. Effective as of the Closing Date, Sections 6, 8 and 10 of the Stock
Purchase Agreement shall be incorporated in their entirety herein as
though set forth in full herein, and the remainder of the Stock Purchase
Agreement shall be terminated and of no further force or effect.
3. On the Closing Date the Sellers shall return the Note to Pivot Rules, and
the Note, and the indebtedness evidenced by the Note, shall be canceled
and of no further force or effect.
4. Effective on the Closing Date, the Escrow Agreement shall be terminated.
By executing this Agreement, Pivot Rules and the Sellers are instructing
the Escrow Agent to return the remaining Shares held by it pursuant to the
Escrow Agreement to Pivot Rules as soon as practicable after the Closing
Date.
5. Effective as of the Closing Date, Section 4, clause (i) of each of the
Consulting Agreements shall be amended by deleting such clauses in their
entireties and replacing each of them with the foregoing:
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c. "(i) a fee equal to thirty thousand U.S. Dollars (U.S. $30,000),
payable on December 31, 1998; provided, you are and have been in
compliance with all the terms and conditions of this letter agreement
and the Stock Purchase Agreement;"
In all other respects the Consulting Agreements, including paragraph 5
thereof (relating to clothing), shall remain in full force and effect.
6. Pivot Rules agrees to reimburse the Sellers for actual legal fees incurred
in connection with the negotiation and execution of this Agreement up to a
maximum of $1,000.
7. The transactions contemplated by this Agreement are conditioned upon (i)
Pivot Rules obtaining the consent of Xxxxxx Financial, Inc. to the
transactions contemplated hereby, (ii) the consummation of a financing by
Pivot Rules for an amount which would enable Pivot Rules to make the cash
payment on the Closing Date pursuant to Section 1(a) above; and (iii)
requisite shareholder approval by Pivot Rules' shareholders. In the event
the conditions set forth in this Section 6 are not satisfied by September
30, 1996, this Agreement shall become null and void and of no further
force or effect.
8. Pivot Rules hereby represents and warrants that, as of the Closing Date,
(i) the unaudited financial statements of Pivot Rules as of and for the
year ended December 31, 1995 and the six months ended June 30, 1996 (the
"Financial Statements") which have been delivered to Xxxxxx Financial,
Inc. fairly present the results of operation and financial condition of
Pivot Rules as of and for the dates covered thereby (subject, in the case
of interim financial statements, to normal year-end adjustments consistent
with prior periods, and except that the Financial Statements do not
contain the footnotes required in audited financial statements), (ii)
Pivot Rules shall have received all requisite approvals necessary to be
obtained in order to consummate the transactions contemplated by this
Agreement, including the approval of the Board of Directors and
shareholders of Pivot Rules and (iii) the consummation by Pivot Rules of
the transactions contemplated by this Agreement will not breach any
agreement, judgment, order, law, rule or obligation to which Pivot Rules
is a party or to which Pivot Rules' property is subject.
9. The Sellers, jointly and severally, hereby represent and warrant that, as
of the Closing Date; (i) the Sellers shall own the Note free and clear of
all liens, claims and encumbrances and no other person shall have any
option or similar right to acquire any interest in the Note; (ii) none of
the Sellers shall have assigned, sold, transferred or hypothecated any
interest in the Note; (iii) the Sellers shall have received all requisite
approvals necessary to be obtained in order to consummate the transactions
contemplated by this Agreement, including the approval of the Board of
Directors and shareholders of Leisure Wear; (iv) the consummation by the
Sellers of the transactions contemplated by this Agreement will not breach
any agreement, judgment, order, law, rule or obligation to which any of
the Sellers is a party or to which any of the Seller's property is
subject; (v) the Sellers have been advised by Pivot Rules that Pivot Rules
has had preliminary discussions regarding various financing and other
transactions, which may include a private placement or public offering of
securities of Pivot Rules; and that Pivot has received a preliminary draft
of a letter of intent from an underwriter
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with respect to a proposed public offering; (vi) the Sellers have been
advised by Pivot Rules that Pivot Rules experienced losses for the fiscal
year ended December 31, 1995 of $208,000 and for the seven months ended
July 31, 1996 of an estimated $237,00 and incurred cumulative losses for
the twenty months ended August 31, 1996; (vii) the Sellers, either
themselves or through their respective duly authorized officers, employees
or agents, have had an opportunity to ask questions of and receive answers
and information from Pivot Rules concerning the financial condition,
business and operations of Pivot Rules, and all such questions have been
answered to the satisfaction of the Sellers. Pivot Rules represents that
(i) a third party will be extending a loan to the Company, the proceeds of
which will be used to purchase the Note, (ii) Xxxxxx Financial is
pressuring Pivot Rules to improve its balance sheet and to reduce the
amount of the indebtedness to Xxxxxx Financial within the next few months;
and (iii) the number of customers of Pivot Rules has been substantially
reduced during the 20 month period preceding the date of this Agreement.
10. Except as specifically set forth herein (including provisions incorporated
herein by reference), the parties hereto make no representations or
warranties to each other with respect to the transactions contemplated by
this Agreement.
11. The foregoing represents the basic agreement of the parties hereto. The
parties hereto further agree to execute such other instruments and
documents as are necessary to consummate the transactions contemplated
hereby.
12. This agreement shall be governed by the laws of the State of New York,
without regard to its conflict of law provisions.
13. Any notices required to be delivered hereunder shall be sent by registered
or certified mail or by hand delivery with receipt acknowledged or
overnight courier and addressed to the addressee at his address below:
If to Sellers: c/o Xxxxxxx Xxxxxxxxx
Leisure Wear Inc.
0000 Xxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
with a copy to:
Xxxxxx X. Xxxxx, Esq.
000 Xxxxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
If to Pivot Rules: 00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
with a copy to:
Xxxxxxx Xxxxxxxx, Esq.
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Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Such notice shall be deemed to have been received on the date of hand delivery,
next day if by overnight courier or five (5) days after the date of deposit in
the United States mail. Any action, consent or waiver required to be taken by
Sellers hereunder shall be duly evidenced by the signature of Leisure Wear.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
date first above written.
PIVOT RULES INC.
By: /s/ E. Xxxxxxx Xxxxx
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Title: Chief Executive Officer
LEISURE WEAR INC.
By: /s/ Xxxxxxx Xxxxxxxxx
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Title: President
/s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx
/s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx
/s/ Xxxxxxx Xxxxxxxxx
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Xxxxxxx Xxxxxxxxx
Xxxxx X. Xxxxxxxxx Inc. Profit Sharing Plan
By: /s/ Xxxxx Xxxxxxxxx
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