EXHIBIT 10.1
ASSET PURCHASE AGREEMENT dated as of March 11, 1999
by and between COMPONENTS ACQUISITION CORP., a Delaware
corporation (the "Purchaser") and COMPONENTS BY XXXX XxXXX,
INC., a New Jersey corporation ("Seller").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser wishes to
purchase all of the assets of Seller, upon the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Defined Terms
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1.01. Defined Terms. The following terms, not defined elsewhere in this
Agreement, shall have the following meanings:
"Affiliate" shall mean, as to the party specified, any Person which
directly or indirectly through ownership of stock or through any other
arrangement either controls, is controlled by or is under common control
with, such party. The term "control" shall mean the power to direct the
affairs of such Person by reason of ownership of equity interests, by
contract or otherwise.
"Applicable Accounting Principles" shall mean United States Generally
Accepted Accounting Principles, applied on a consistent basis throughout the
periods indicated except as disclosed in footnotes to the financial
statements.
"Business" shall mean the business presently conducted by Seller,
including, without limitation, the merchandising and sourcing of St. Xxxxxxx
tailored clothing, as well as sportswear, dress shirts, neckwear, topcoats
and casual slacks.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks are authorized to be closed in New York City.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contracts" shall mean the leases, rental agreements, insurance
policies, sales orders, collective bargaining agreements, union contracts,
licenses, agreements, permits, purchase orders, commitments and any and all
other contracts or binding arrangements (including, capital commitments),
whether written or oral, express or implied, of Seller or by which any of
its Assets are bound.
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"Dollars" and "$" shall mean, unless otherwise specified, United States
Dollars.
"Encumbrances" shall mean, to the extent applicable, all liens
(including liens for Taxes), mortgages, security interests, leases, options,
claims, charges, restrictions, rights of first refusal or first offer,
easements or other similar encumbrances.
"Historical Financial Statements" shall mean Seller's audited financial
statements (balance sheets, statements of income and statements of cash
flows) for the fiscal years ending December 31, 1996 and 1997, and Seller's
unaudited quarterly financial statements for the first and second quarters
of 1998, copies of which are included in Schedule 3.05.
"Income Taxes" shall mean all Taxes on or measured by net income, gross
profits or net profits, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority,
domestic or foreign.
"Intellectual Property Rights" shall mean the name "Components, Inc."
and all Patents, Trademarks, Trade Names, copyrights, and confidential and
proprietary drawings, designs, inventions, trade secrets, and customer and
supplier lists of Seller.
"IPO" shall mean an initial public offering of the Xxxxxxxxxx Stock.
"XxXxx" shall mean Xxxx XxXxx, an individual.
"Patents" shall mean patents (including all reissues, divisions,
continuations, continuations in part and extensions thereof), patent
applications and patent disclosures docketed.
"Permitted Encumbrances" shall mean, to the extent applicable,
Encumbrances which (a) are liens for Taxes not yet due and payable, or (b)
are mechanics', carriers', materialmen's, landlords', workers' or other
similar liens incurred in the ordinary course of business.
"Person" shall mean any natural person, corporation, limited liability
company, unincorporated association, partnership, joint venture or other
entity.
"Xxxxxxxxxx Stock" shall mean the common stock of The Xxxxxxxxxx
Corporation issued pursuant to the IPO.
"Pre-Tax Income" shall mean the net income, including the gain or loss
on discontinued operations or extraordinary items, of the Purchaser for
financial reporting purposes prepared in accordance with Applicable
Accounting Principles before any provision for Federal and state income
taxes.
"Taxes" shall mean all taxes on, or measured by or referred to as,
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, customs, duties or similar
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assessments or charges, together with any interest and any penalties,
additions to tax or additional similar amounts imposed by any taxing
authority, domestic or foreign, with respect thereto.
"Tax Returns" shall mean all material returns, reports and statements
relating to Taxes that are required to be filed with any appropriate
domestic or foreign taxing authority.
"Trade Names" shall mean trade names embodying goodwill of Seller,
whether or not registration has been obtained or an application for
registration is pending.
"Trademarks" shall mean trademarks, service marks, brand names, brand
marks, trade dress, logos and all other names and slogans associated with
products of Seller, whether or not registered, and all registrations thereof
and pending applications therefor.
1.02. Other Definitions. The following terms are defined in the
sections indicated:
Term Section
"Acceptance Notice" 2.05(b)
"Assets" 2.01
"Benefit Plans" 3.12
"Claims" 8.04
"Closing" 2.08
"Closing Date" 2.08
"Closing Date Payment Amount" 2.04
"COBRA" 3.12
"Employment Agreement" 6.03
"ERISA" 3.12
"Excluded Assets" 2.02
"Liabilities" 2.03
"Improvements" 3.07
"Losses" 8.02
"Notice of Disagreement" 2.05(b) & 2.06(a)
"Parent" 2.06
"Partnership" 6.05
"Purchaser" Preamble
"Purchase Price" 2.04
"Real Property" 3.07
1.03. Accounting Terms. Any accounting terms used in this Agreement
shall, unless otherwise specifically provided, have the meanings given them in
accordance with, and all financial computations hereunder shall, unless
otherwise specifically provided, be computed in accordance with, the Applicable
Accounting Principles.
1.04. Other Rules of Construction. References in this Agreement to
sections, schedules and exhibits are to sections of, and schedules and exhibits
to, this Agreement unless otherwise indicated. Words in the singular include the
plural and in the plural include the singular. The word "or" is not exclusive.
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The words "including", "includes", "included" and "include", when used, are
deemed to be followed by the words "without limitation".
ARTICLE II
The Asset Purchase
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2.01. Purchase and Sale of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, Seller shall sell,
assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase
and accept from Seller, free and clear of all Encumbrances (except Permitted
Encumbrances), all right, title and interest in and to all of the following
assets owned by Seller on the Closing Date (such assets being hereinafter
referred to as the "Assets"):
(i) all quantities of non-obsolete inventory, including without
limitation finished goods (wherever located) and raw materials and
work-in-process used for the Business, except those listed on Schedule 2.02
(the "Inventory");
(ii) all net accounts receivable (trade account receivables) and notes
receivable of Seller arising out of the sale and delivery of goods and
services, either before or after the Closing Date (the "Accounts
Receivable");
(iii) all machinery, tools, equipment, fixtures, furnishings, office
supplies, motor vehicles, spare parts, and other tangible personal property
owned by Seller listed on Schedule 2.01 (the "Equipment");
(iv) all Contracts, agreements, leases, arrangements and/or commitments
to which Seller is a party or by which Seller or any of the Assets are
bound, except those listed on Schedule 2.02 (the "Assigned Contracts");
(v) all of Seller's customer and supplier lists, sales data, brochures,
catalogs, mailing lists, art work, photographs and advertising material,
accounting data, property records, manufacturing records and personnel
records, whether in electronic form or otherwise;
(vi) all right, title and interest in and to any Intellectual Property
Rights of Seller, and all files relating thereto;
(vii) all right, title and interest in and to the goodwill of Seller;
and
(viii) all prepaid expenses of, or for the benefit of, the Seller,
except those listed on Schedule 2.02.
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2.02. Assets Not Purchased. It is understood and agreed by the parties
that Seller is not selling, assigning, transferring or conveying to Purchaser
the following assets, rights and properties, which shall be specifically
excluded from the transactions contemplated by this Agreement and shall be
retained by Seller (the "Excluded Assets"):
(i) all right, title and interest of Seller in, and all rights and
obligations of, Seller under any Contracts, agreements, undertakings, and
commitments not listed on Schedule 2.02;
(ii) all machinery, tools, equipment, fixtures, furnishings, office
supplies, motor vehicles, spare parts, and other tangible personal property
owned by Seller not listed on Schedule 2.02;
(iii) all inventory of Seller listed on Schedule 2.02.
(iv) any insurance policies in respect of the Business or in respect of
the Assets or any employees, other than insurance policies used to fund or
finance any obligation with respect to an employee to the extent such
obligation is assumed by Purchaser; and
(v) all prepaid expenses of, or for the benefit of, the Seller listed
on Schedule 2.02.
2.03. Assumed Liabilities. Effective as of the Closing Date, Purchaser
shall, without any further responsibility or liability of or recourse to Seller,
its Affiliates, or their respective directors, shareholders, officers,
employees, agents, consultants, representatives, successors, transferees or
assignees, absolutely and irrevocably assume and shall be solely liable and
responsible for, any and all claims, liabilities and obligations of Seller: (i)
under any of the Assigned Contracts (provided, however, that Purchaser is not
assuming any liability of Seller under any of the Assigned Contracts to the
extent such liability arises from a breach of contract by Seller prior to the
Closing Date or a breach by Seller of any provision of this Agreement); (ii)
otherwise arising by reason of the conduct of the Business or sales made after
the Closing Date, except such claims, liabilities and obligations with respect
to which the Purchaser is entitled to indemnification pursuant to the terms of
the Agreement; and (iii) those accrued liabilities set forth on Schedule 2.03 as
they exist and are accrued as of the Closing Date (all of the items specified in
clauses (i) through (iii) of this Section 2.03 herein called collectively, the
"Assumed Liabilities").
2.04. Purchase Price. Subject to adjustment in accordance with Sections
2.05 and 2.06 below, in consideration of the sale and transfer to Purchaser of
the Assets on the Closing Date, Purchaser shall pay to Seller the following (the
"Purchase Price"): (i) $4,695,000 (which sum includes the $200,000 deposit (the
"Contract Deposit") paid to XxXxx prior to the date hereof) in cash, payable to
Seller on the Closing Date by wire transfer of immediately available funds (the
"Closing Date Payment Amount"); and (ii) in accordance with the timetable set
forth in Section 2.06 below, the Deferred Purchase Price.
2.05. Purchase Price Adjustment. (a) As of the Closing Date, the books
of Seller shall be deemed "closed," and Seller shall engage its auditor,
Xxxxxxxx X. Xxxxxxx & Co., P.A. (the "Auditor") to conduct a physical inventory
and balance sheet audit of the Assets. When conducting such physical inventory
and balance sheet audit, the Auditor shall record the Excluded Assets at full
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value. Within sixty (60) days after the Closing Date, the Seller shall deliver
to Purchaser a balance sheet setting forth the value of the Assets (after making
appropriate adjustments for the exclusion of the Excluded Assets and for the
value of the Assumed Liabilities), prepared by the Auditor based on such audit
and in accordance with Applicable Accounting Principles (the "Closing Date
Balance Sheet"). Purchaser and Seller shall take such actions as are necessary
to cause the Auditor's audit to be performed, and Closing Date Balance Sheet to
be prepared, expeditiously. Ernst & Young, LLP or other representatives selected
by Purchaser ("Purchaser's Auditor") shall have the opportunity to observe the
taking of the inventory in connection with the preparation of the Closing Date
Balance Sheet, and to examine the work papers, schedules and other documents
prepared by Seller in connection with its preparation of the Closing Date
Balance Sheet. Seller shall use its best efforts to cause the Auditor to permit
Purchaser and Purchaser's Auditor to examine the Auditor's work papers used in
connection with its audit and preparation of the Closing Date Balance Sheet and
shall provide reasonable cooperation, and shall cause the Auditor to provide
reasonable cooperation, with their review thereof.
(b) Within forty-five days following the delivery of the Closing Date
Balance Sheet and the related report of the Auditor, Purchaser shall deliver to
Seller in accordance with the provisions of Section 10.07 hereof a written
notice of disagreement (a "Notice of Disagreement") or notice of acceptance (an
"Acceptance Notice") with respect to the Closing Date Balance Sheet and related
auditors report. If an Acceptance Notice is delivered to Seller of if no Notice
of Disagreement is delivered in a timely manner (as set forth in the preceding
sentence), then the Closing Date Balance Sheet shall be binding on the parties.
If a Notice of Disagreement is received by the Seller in a timely manner, then
the Closing Date Balance Sheet shall be binding on the parties on the date any
disputed matters are resolved in accordance with the provisions of Section 2.07
hereto. Any Notice of Disagreement delivered to the Seller shall specify in
reasonable detail the items on the Closing Date Balance Sheet disputed and shall
describe in reasonable detail the basis for the objection and all information in
the possession of Purchaser which forms the basis thereof, as well as the amount
in dispute.
(c) (i) If Purchaser delivers to Seller an Acceptance Notice or fails
to deliver an Notice of Disagreement within the forty-five (45) day period
required by Section 2.05(b) hereof, then in the event the net book value of the
Assets (after making appropriate adjustments for the Assumed Liabilities and the
Excluded Assets) as determined from the Closing Date Balance Sheet pursuant to
Section 2.05(a) hereof (the "Closing Net Book Value") is less than One Million
One Hundred Thousand Dollars ($1,100,000.00) (the "Target Book Value"), Seller
shall within four (4) business days after the delivery of such Acceptance Notice
or the expiration of forty-five (45) day period, as the case may be, pay
Purchaser the amount by which the Target Book Value exceeds the Closing Net Book
Value (such amount, if any, shall be the "Asset Adjustment Amount").
(ii) Alternatively, if Purchaser delivers to Seller a Notice of
Disagreement, then Seller shall pay the Asset Adjustment Amount in accordance
with the terms of Section 2.07 hereof.
2.06. Deferred Purchase Price. (a) Within ninety (90) days after the
end of each of Purchaser's 1999 through 2004 fiscal years (which shall be
calendar years) (or as soon thereafter as reasonably practicable), Purchaser
shall prepare and deliver to the Seller financial statements for the Purchaser
for such year, together with a statement (the "Statement") setting forth the
Pre-Tax Income for such year, prepared in accordance with Applicable Accounting
Principles. Such financial statements may consist of the financial statements of
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the Purchaser's parent corporation, The Xxxxxxxxxx Corporation, a Delaware
corporation (the "Parent"), including consolidating balance sheets and income
statements setting forth the various subsidiaries/divisions of the Parent. On
such financial statements, the Business shall be allocated overhead and other
expenses (including the cost of capital employed by the Business) in accordance
with the terms and procedures set forth in Schedule 2.06 (a) hereto and
otherwise in accordance with Applicable Accounting Principles. If requested,
Seller shall make reasonable efforts to assist Purchaser and its representatives
in the preparation of the Statement. During the forty-five (45) day period
following Seller's receipt of the Statement, Seller, at its sole expense, will
be permitted to review, or have its accountants, auditors or counsel review, all
relevant working papers and books and records of the Purchaser relating to the
Statement. Purchaser shall provide reasonable cooperation with this review. The
Statement shall become final and binding upon the parties on the forty-fifth day
following receipt thereof by Seller unless Seller delivers a written notice (a
"Notice of Disagreement") to the Purchaser on or prior to such date that Seller
disagrees with the Statement. In order to be valid, any Notice of Disagreement
delivered to the Purchaser shall specify in reasonable detail the amount in
dispute and the items on the Statement disputed, shall describe in reasonable
detail the basis for the objection and all information in the possession of
Purchaser which forms the basis thereof, and shall be accompanied by a
certificate of Seller's independent auditors that they concur with each of the
positions taken by Seller in the Notice of Disagreement. If a Notice of
Disagreement is received by the Purchaser in a timely manner, then the Statement
shall become final and binding upon the parties on the date any disputed matters
are resolved in accordance with the provisions set forth in Section 2.07 hereto.
(b) In the event the Statement reveals that the Business has achieved
certain Pre-Tax Income targets (each, a "Pre-Tax Income Target") for the years
1999 through 2004 as set forth below, then Purchaser shall pay to Seller
additional purchase consideration (the "Obligation") in the amounts set forth
below:
Pre-Tax Obligation
Income Target Payable
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1999 $ 1,824,000 $530,000
2000 $ 2,230,000 $600,000
2001 $ 2,375,000 $700,000
2002 $ 2,720,000 $850,000
2003 $ 2,812,000 $850,000
2004 $ 3,220,000 $1,000,000
provided, however, in the event that in year 2004 the Seller is due any (i)
Postponed Obligation, (ii) Delayed Obligation, (iii) an Obligation in respect of
year 2004 or (iv) any other monetary obligation from Purchaser under this
Agreement or any other related agreements (each a "Year 2004 Obligation"),
Purchaser's obligation of payment for the Year 2004 Obligations (individually or
collectively at the option of the Purchaser) shall be reduced by $165,000.
(c) The obligations for each year set forth in Section 2.06(b) above
shall be paid upon the following terms: In each year that the Purchaser has
Pre-Tax Income, as set forth in clause 2.06(b) above, in an amount equal to or
greater than the Pre-Tax Income Target for such year Seller will be paid 100% of
the obligation for such year. In the event that the Purchaser has Pre-Tax Income
in an amount equal to or greater than 80%, but less than 100%, of the Pre-tax
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Income Target for such year, Seller will be paid 50% of the obligation for such
year, with payment of the remaining 50% deferred for five (5) years ("Delayed
Obligation"). In the event that the Purchaser has Pre-Tax Income in an amount
less than 80% of the Pre-Tax Income Target, but not less than the greater of (x)
$1,100,000 or (y) 60% of the Pre-Tax Income Target for such year, then payment
of 100% of the unpaid installment for such year will be deferred for ten (10)
years ("Postponed Obligation") subject to the terms hereof. In any year where
Purchaser has Pre-Tax Income in an amount less than the greater of (x)
$1,100,000 or (y) 60% of the Pre-Tax Income Target for such year, Seller will
forfeit payment of 100% of the obligation for such year ("Forfeited
Obligation"). No portion of the Obligation shall be payable during or with
respect to any period in which XxXxx is in breach of a noncompete obligation
contained in the Employment Agreement.
In any year that the Pre-Tax Income exceeds the relevant target set
forth above, Seller may elect to have all or a portion of such excess credited
to prior years (credited to the earliest year first) for which the Pre-Tax
Income Targets have not been satisfied in full (other than years in which the
Obligation was forfeited) rather than crediting such excess Pre-Tax Income to
the year in which it is actually earned (thereby reducing or eliminating the
bonus payable to XxXxx in respect of such year under the Employment Agreement).
Any Delayed or Postponed Obligations which are no longer deferrable as a result
of the credit shall be paid at the time the credit is recognized. Forfeited
Obligations will not be recognized as earned as a result of any such credit.
(d) The Obligation in respect of any year shall be paid to Seller as
follows:
(i) If no Notice of Disagreement is timely filed (or Seller notifies
the Purchaser in writing that they accept the Statement),
Purchaser shall deliver the Obligation in the amount set forth
above in cash or at the option of the Parent, in the event of an
IPO, in shares of Xxxxxxxxxx Stock that are issued pursuant to an
effective registration statement and which are free from any
restrictions on resale. Such payment shall be delivered to Seller
as soon as practicable, but in no event later than sixty-days
following the delivery to Seller of the Statement;
(ii) If a Notice of Disagreement is timely filed, upon final
resolution of the matter, Purchaser shall deliver the Obligation
in the amount set forth above in cash or at the option of the
Parent, in the event of an IPO, in shares of Xxxxxxxxxx Stock
that are issued pursuant to an effective registration statement
and which are free from any restrictions on resale; and
(iii) Postponed Obligations and Delayed Obligations shall be paid at
their respective maturity (as determined in accordance with the
first paragraph of clause (c) of Section 2.06) in cash, or at the
option of the Parent, in the event of an IPO, in shares of
Xxxxxxxxxx Stock that are issued pursuant to an effective
registration statement and which are free from any restrictions
on resale;
provided, however, any amounts due to Seller from Purchaser pursuant to this
paragraph (d) and remain unpaid shall be subject to set off and deduction for
amounts due from Seller under this Agreement, including Sections 2.05 and
Article VIII hereof. With respect to payments made by Purchaser under this
paragraph (d) by the issuance (each such issuance, a "Stock Payment") of shares
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of Xxxxxxxxxx Stock in respect of all or any portion of an Obligation the
following provisions apply:
(i) the number of shares of Xxxxxxxxxx Stock issued to Seller in
respect of any Obligation shall not exceed the average trading
volume of shares of Xxxxxxxxxx Stock in the preceding five (5)
trading days, it being understood and agreed that if no shares of
Xxxxxxxxxx Stock are traded on any one or more of the preceding
five (5) trading days, the volume of shares traded for such
day(s), which is zero (0), will still be included for such day(s)
in calculating the average trading volume of shares of Xxxxxxxxxx
Stock for such five (5) trading day period;
(ii) all shares issued (except with respect to shares issued in
respect of an Additional Stock Payment, as defined below) shall
be valued at the average of the closing price for such shares for
the twenty (20) trading days preceding such payment;
(iii) in the event that Seller sells all of the shares comprising such
Stock Payment within five (5) business days after its receipt of
such shares and such sale of shares results in gross cash
proceeds to Seller that are less than the portion of the
Obligation paid by such Stock Payment (such difference, the
"Obligation Shortfall"), the Purchaser shall issue to Seller an
additional number of shares of Xxxxxxxxxx Stock (the "Additional
Stock Payment") equal to the quotient of the Obligation Shortfall
divided by the closing price of Xxxxxxxxxx Stock on the trading
day immediately preceding such sale of shares; and
(iv) if the sale by Seller of any shares of Xxxxxxxxxx Stock included
in a Stock Payment results in per share gross cash proceeds to
Seller in excess of the per share value of such shares used to
determine the number of shares of Xxxxxxxxxx Stock issued in such
Stock Payment (such excess the "Per Share Windfall Amount"), the
Seller shall pay to Purchaser, within five (5) business days of
such sale of shares, an amount equal to the Per Share Windfall
Amount multiplied by the number of shares of Xxxxxxxxxx Stock
included in such sale.
Notwithstanding the foregoing, in the event (i) the Parent is acquired
in a transaction in which the current holders of the Parent's equity securities,
as listed on Schedule 2.06(c) hereto, own less than 50% of the combined equity
interests of the post-acquisition entity, (ii) the Parent sells or otherwise
transfers all or substantially all of its assets to an unrelated third party,
(iii) Xxxxxxx Xxxxxxxxxx ceases to hold an executive position with the Parent
(other than by reason of his death or disability) or (iv) the Purchaser shall
sell the Business to an unrelated third party, then all unpaid installments of
the purchase price (including all Delayed and Postponed Obligations but
excluding any Forfeited Obligations) will become immediately due and payable in
cash.
2.07. Arbitration of Accounting Disagreements. During the 20-day period
following the delivery of a Notice of Disagreement pursuant to Sections 2.05 and
2.06 above, Seller and Purchaser shall seek in good faith to resolve in writing
any differences which they may have with respect to any matter specified in a
Notice of Disagreement. At the end of such 20-day period, if Seller and the
Purchaser have not reached agreement on such matters, any portion of the Asset
Adjustment Amount or the Obligation, as the case may be, not in dispute shall be
payable to Seller or Purchaser not later than four (4) days after such date and
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otherwise in accordance with this Agreement, and the matters which remain in
dispute shall be submitted to an arbitrator (the "Arbitrator") for review and
resolution. The Arbitrator shall be one of the "big 5" independent public
accounting firms (other than the Purchaser's Auditor) as shall be agreed upon at
the appropriate time by the parties hereto in writing. The Arbitrator shall
render a decision resolving the matters in dispute within 20 days following
their submission to the Arbitrator unless, in the view of the Arbitrator the
dispute cannot be equitably resolved within such period, and then, upon written
notice to the parties, it shall be resolved as soon as practicable in the
discretion of the Arbitrator. All of the usual and customary fees and costs of
the Arbitrator, if disagreements are submitted to the Arbitrator pursuant to
this Section 2.07, shall be borne 50% by Purchaser and 50% by the Seller.
2.08. The Closing. Upon the terms and subject to the conditions set
forth in this Agreement, the acquisition by Purchaser of the Assets (herein
called the "Closing") shall take place at 10:00 a.m. at the offices of Xxxxxxx,
Xxxxxxxx & Kotel, P.C. on or prior to June 30, 1999, or such other time, date
and place as the parties shall agree upon, but in no event before the conditions
set forth in Articles VI and VII shall have been satisfied or waived (the date
of the Closing being herein referred to as the "Closing Date").
2.09. Allocation of Consideration. The consideration paid by Purchaser
shall be allocated among the Assets as set forth on Schedule 2.09. Any
adjustments to such consideration pursuant to Section 2.05 shall be allocated in
the manner provided by the independent public accountants appointed by the
Parent.
2.10. Further Assurances. From and after the Closing, upon written
request from the Purchaser, Seller shall execute, acknowledge and deliver all
such further acts, assurances, deeds, assignments, transfers, conveyances and
other instruments and papers as may be reasonably required to sell, assign,
transfer, convey and deliver the Assets to Purchaser.
ARTICLE III
Representations and Warranties of Seller
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Seller represents and warrants to Purchaser that the statements made in
this Article III are true, correct and complete as of the date hereof, and will
continue to be true, correct and complete on the Closing Date:
3.01. Authority. The Seller has the requisite power and authority to
execute and deliver this Agreement and the other agreements and instruments to
be executed and delivered by Seller pursuant hereto and to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by Seller and constitutes, and such other agreements and
instruments when duly executed and delivered by Seller will constitute, legal,
valid and binding obligations of Seller enforceable against Seller in accordance
with their respective terms. The execution and delivery by Seller of this
Agreement and such other agreements and instruments and the consummation by
Seller of the transactions contemplated hereby and thereby will not violate the
Corporation Law of the State of New Jersey, or conflict with, or result in any
breach of, the Certificate of Incorporation, Bylaws or other organizational
documents of Seller or any material indenture, mortgage, lease, agreement or
other instrument to which Seller is a party or by which Seller, or its
properties or assets, is bound. No material approval, authorization, consent or
other order or action of or filing with any court, administrative agency, other
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governmental body or any other Person is required for the execution and delivery
by Seller of this Agreement or such other agreements and instruments or the
consummation by Seller of the transactions contemplated hereby or thereby.
3.02. Ownership of the Assets. The Seller has good and valid title to
the Assets, free and clear of any Encumbrances, except Permitted Encumbrances,
which Assets represent all assets currently used by Seller in the conduct of the
Business. The Assets are not subject to any contract, agreement, arrangement,
commitment or understanding other than this Agreement.
3.03. Organization and Qualification of Seller. Seller is a corporation
duly organized and validly existing under the laws of the State of New Jersey.
The Seller has full power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals necessary to enable
it to use its corporate name and to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted. The Seller is in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership, leasing or holding of its properties makes such
qualification necessary. The Seller has made available to Parent and Purchaser
true and complete copies of the Certificate of Incorporation, as amended to
date, and the By-laws, as in effect on the date hereof, of Seller.
3.04. Other Equity Interests. Except as set forth on Schedule 3.04,
Seller does not directly or indirectly own any capital stock of or other equity
interest in any Person.
3.05. Historical Financial Statements; No Undisclosed Liabilities. The
Historical Financial Statements, true and complete copies of which are included
in Schedule 3.05, were prepared in accordance with Applicable Accounting
Principles and constitute fair and reasonable presentations of the financial
position and results of operations of Seller, in all material respects, as of
the dates and for the periods set forth therein. The Seller does not have any
known contingent or undisclosed obligations or liabilities which would be
required in accordance with the Applicable Accounting Principles to be reflected
in a currently prepared balance sheet or notes thereto, other than obligations
or liabilities (i) that are reflected or disclosed in the Historical Financial
Statements, (ii) that are disclosed in this Agreement or the Schedules hereto or
(iii) that were incurred after June 30, 1998, in the ordinary course of
business.
3.06. Absence of Material Adverse Changes. Except as disclosed in
Schedule 3.04, and excluding any macroeconomic changes or conditions in national
or local economies affecting the Business or its customers or suppliers
generally, there have been no changes since December 31, 1997, which
individually or in the aggregate have had a material adverse effect on the
business, assets, financial condition or results of operations of Seller.
Without limiting the foregoing, except as disclosed in Schedule 3.06, since
December 31, 1997, Seller has not:
(i) redeemed or otherwise acquired any of its capital stock or
issued any capital stock or any option, warrant or right
relating thereto;
(ii) granted to any employee any increase in compensation except as
required under existing agreements or in the ordinary course of
business consistent with past practice;
11
(iii) incurred any liabilities, obligations or indebtedness for
borrowed money or guaranteed any such liabilities, obligations
or indebtedness, other than in the ordinary course of business
consistent with past practice;
(iv) cancelled any material indebtedness owed to Seller, other than
in the ordinary course of business consistent with past
practice;
(v) made any material change in any method of accounting or
accounting practice or policy;
(vi) acquired by merging or consolidating with, or by purchasing
stock or a substantial portion of the assets of, or by any other
manner, any material operating business, corporation,
partnership, association or other business organization (or
division thereof);
(vii) sold, leased or otherwise disposed of any of its assets except
in the ordinary course of business consistent with past
practice;
(viii) entered into any material lease of real property;
(ix) modified, amended or terminated any lease of, or other material
agreement pertaining to, real property (except modifications or
amendments associated with renewals of leases in the ordinary
course of business);
(x) engaged in any transaction outside Seller's ordinary course of
business consistent with past practices;
(xi) suffered any event or occurrence which has had or could have a
material adverse effect on Seller; or
(xii) suffered any damage to any of its significant assets that has or
could have a material adverse effect.
Notwithstanding anything to the contrary contained in this Section 3.06,
Purchaser acknowledges that withdrawals from the Seller made by XxXxx of
approximately $105,434 for (i) profits on which Federal income Taxes were
already paid and (ii) net income earned during fiscal year 1998, do not
constitute a material adverse change.
3.07. Real Property and Improvements. Schedule 3.07 contains a list of
all interests in real property leased by Seller (the "Real Property"). Seller
does not own any real property. The uses for which the buildings, facilities,
and other improvements located on the Real Property (the "Improvements") are
zoned do not materially restrict, or in any manner materially impair, the use of
the Improvements for purposes of the businesses of Seller as conducted on the
date of this Agreement. The Seller is the lessee of each of the leasehold
estates set forth in Schedule 3.07 as being leased by it, and except as set
12
forth in Schedule 3.07, is in possession of each of the premises purported to be
so leased. Each such lease pursuant to which such leasehold estate is granted is
valid and without any material default thereunder by Seller, or, to the
knowledge of Seller, the landlord. Except as set forth in Schedule 3.07, there
are no pending or, to the knowledge of Seller, threatened, condemnation, eminent
domain or similar proceeding with respect to the Real Property or the
Improvements and no special taxes or assessments relating to any part of the
Real Property, and no public improvements that may result in a special tax or
assessment against any part of the Real Property, are proposed, in progress or
completed. To the knowledge of Seller, there are no structural defects in the
buildings and other improvements situated on the real property owned or leased
by Seller, and all such facilities are in all material respects in good
condition and working order (reasonable wear and tear excepted) and adequate for
the operation of Seller's business as currently conducted.
3.08. Personal Property. Except as disclosed in Schedule 3.08 and
except for obsolete assets and assets disposed of in the ordinary course of
business since December 31, 1997, Seller has good and valid title to the
machinery, equipment and other tangible personal property reflected in the
Historical Financial Statements as being owned by it or acquired by it after
December 31, 1997, free and clear of all Encumbrances, other than Permitted
Encumbrances; and Seller is the lessee of all the leasehold estates pertaining
to the machinery, equipment and other tangible personal property purported to be
granted by the capitalized leases reflected in the Historical Financial
Statements (if any). Each lease or licensing arrangement for personal property
used by Seller is valid and without any material default thereunder by Seller,
or, to the knowledge of Seller, the lessor.
3.09. Intellectual Property Rights. Schedule 3.09 lists all the
Patents, Trademarks and Trade Names owned or licensed by Seller which are used
in Seller's businesses. Except as otherwise disclosed in Schedule 3.09, Seller
validly owns, beneficially and of record, all the Patents, Trademarks and Trade
Names listed in Schedule 3.09, free and clear of all Encumbrances other than
Permitted Encumbrances. Except as disclosed in Schedule 3.09, no action, claim,
suit or proceeding has been brought against Seller or, to the knowledge of
Seller, has been threatened against Seller with respect to any Intellectual
Property Rights used in Seller's businesses that challenge Seller's right to use
any Intellectual Property Rights or that alleges that Seller infringes any
Intellectual Property Rights of any other Person. To the knowledge of Seller, no
other Person is infringing any of the Intellectual Property Rights.
3.10. Litigation. Except as disclosed in Schedule 3.10, there is no
action, suit arbitration, investigation, audit or proceeding pending or
threatened against Seller or any shareholder of Seller in any court, or before
any Federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or before any arbitrator
of any kind. Neither Seller nor any shareholder of Seller is subject to any
judgment, order, writ, injunction or decree of any court or any Federal, state,
local or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator.
3.11. Contracts. Schedule 3.11 lists all Contracts by which any Assets
are bound and/or which are to be assigned to Purchaser pursuant hereto. Except
for the Contracts listed in Schedule 3.11, Seller is not a party to, nor are any
of its Assets subject to, any (i) material license or royalty agreement, (ii)
material distributor, dealer, sales agency or advertising contract, (iii)
contract or agreement granting to any Person a preferential right to purchase
any of its material assets, properties or rights or containing a covenant or
13
other agreement not to compete and (iv) contract or agreement with respect to
the transportation, removal or storage of any material amount of effluent,
wastes, pollutants or other hazardous substances or materials. Except as
disclosed in Schedule 3.11, each of the Contracts listed in Schedule 3.11 is
valid and in full force and effect and, to the knowledge of Seller, Seller and
each other party to any such Contract has performed all material obligations
required to be performed by it thereunder.
3.12. Benefit Plans. The Seller has no "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA), or any other employee fringe benefit plans maintained,
or contributed to, by Seller (all the foregoing being herein called "Benefit
Plans") except as set forth on Schedule 3.12.
3.13. Taxes. (a) With respect to the ownership of the Assets and the
conduct of the Business on and prior to the Closing Date, Seller has properly
completed and filed on a timely basis all returns, reports and declarations in
connection with any Taxes required to be filed. No request for an extension to
file any Tax return has been requested or granted. Seller has paid, or will pay,
as the case may be, all Taxes required to be paid by it, and with respect to the
Assets, through the Closing Date.
(b) None of the Assets is subject to any lien in favor of the United
States pursuant to Code Section 6321 or to any foreign national tax authority
for nonpayment of federal or foreign income taxes, or any lien in favor of any
state or locality pursuant to any comparable provision of state or local law,
under which transferee liability might be imposed upon the Purchaser as a
purchaser of such Assets pursuant to Code Section 6323 or any comparable
provision of foreign, state or local law.
3.14. Compliance With Laws. To the best of Seller's knowledge, Seller
has complied in all material respects with and is in material compliance with
all federal, state, local or foreign statutes, ordinances, codes, rules and
regulations, decrees, stipulations and awards entered by any governmental
authority, and all licenses, franchises, consents, approvals, permits or similar
rights granted under any of the foregoing, except for such violations that would
not individually or in the aggregate have a material adverse effect on the
Business. The Seller has been granted, has complied in all material respects
with and is in material compliance with, all licenses, permits, consents,
approvals, franchises and other authorizations necessary for the conduct of the
Business or the ownership or operations of the Assets, and has not received any
written notice that any of the foregoing will be revoked, canceled, rescinded or
not renewed in the ordinary course such that there may be an adverse effect on
the Business on the date hereof through the date of Closing.
3.15. Transactions with Affiliates. Since December 31, 1998, except as
disclosed in Schedule 3.15, Seller has not purchased, acquired, leased or
licensed any property or services from, or sold, transferred, leased or licensed
any property or services to, any Affiliate, or any officer or director of
Seller, other than on an arm's length basis in the ordinary course of business.
3.16. Insurance. All of the real and tangible personal property
included in the Assets are insured for the benefit of Seller in amounts and
against such risks as are customary for companies similarly situated under valid
and enforceable policies issued by financially sound and reputable insurers.
Schedule 3.16 contains a list and description of all material policies of
property, fire, liability, workers' compensation and all other types of
insurance maintained by Seller. As of the date hereof, all such policies are in
full force and effect and all premiums due thereon have been paid.
14
3.17. Inventory. All inventory of the Seller was acquired by the Seller
in the ordinary course of business and is in good condition and is usable and
saleable in the ordinary course of such business. The Seller has good and valid
title to the inventory, free and clear of all Encumbrances, except Permitted
Encumbrances. The allowance for obsolete and slow moving inventory reflected in
the Historical Financial Statements and in the Closing Date Balance Sheet is and
will be properly determined in accordance with Applicable Accounting Principles.
3.18. Accounts Receivable. All accounts receivable of the Seller
included in the Assets, whether reflected in the Historical Financial Statements
or subsequently created ("Receivables"), have arisen from bona fide transactions
in the ordinary course of business. The allowance for doubtful accounts in
respect of Receivables reflected in the Historical Financial Statements and in
the Closing Date Balance Sheet is and will be properly determined in accordance
with the Applicable Accounting Principles.
3.19. Customers and Suppliers. Schedule 3.19 hereto lists the ten
largest suppliers and the twenty largest customers of Seller (calculated by
dollar amount) for each of 1996 and 1997, stating for each the dollar volume of
the purchases. Seller does not have any knowledge that any of the customers or
suppliers listed on Schedule 3.19 intends to cease purchasing from, selling to
or dealing with Seller, nor has any information been brought to the attention of
Seller that might reasonably lead it to believe any such customer or supplier
intends to materially alter the amount of such sales or purchases or the extent
of dealings with Seller.
3.20. Employees. Schedule 3.20 sets forth a complete and correct list
as of the date of this Agreement of the names, annual salaries and credited
years of service of all officers and employees of Seller. In the case of
officers or employees receiving bonus or similar payments at any time during the
past two years exceeding $25,000 during any 12 month period, such Schedule 3.20
also sets forth the amount of the bonus and other payments in excess of ordinary
wages received by such officers and employees during each of the past two years.
As of the date of this Agreement, there are no current or, to the knowledge of
Seller, threatened work stoppages by any of the employees.
3.21. Accuracy. To Seller's knowledge, the required disclosures made in
this Agreement and the schedules attached hereto are complete and accurate in
all material respects, and the scheduled disclosures do not contain any untrue
statement of a fact or omit to state any fact necessary to make the statements
or facts contained therein not misleading.
15
ARTICLE IV
Representations and Warranties of the Purchaser and Parent
----------------------------------------------------------
Purchaser and Parent represent and warrant to Seller that the
statements made in this Article IV are true, correct and complete as of the date
hereof, and will continue to be true, correct and complete on the Closing Date:
4.01. Organization. Purchaser has been duly organized, is validly
existing and is in good standing under the laws of the State of Delaware.
4.02. Authority. Purchaser has the full power and authority to execute
and deliver this Agreement and the other agreements and instruments to be
executed and delivered by it pursuant hereto and to consummate the transactions
contemplated hereby and thereby. All corporate acts and other proceedings
required to be taken by or on the part of Purchaser to authorize such execution,
delivery and consummation have been duly and properly taken. This Agreement has
been duly executed and delivered by Purchaser and constitutes, and such other
agreements and instruments contemplated by this Agreement when duly executed and
delivered by Purchaser will constitute, legal, valid and binding obligations of
the Purchaser enforceable against it in accordance with their respective terms.
The execution and delivery by Purchaser of this Agreement and the execution and
delivery by Purchaser of such other agreements and instruments and the
consummation by Purchaser of the transactions contemplated hereby and thereby
will not violate any law, or (after obtaining necessary consents) conflict with,
result in any breach of, constitute a default under, or result in the creation
of a lien or encumbrance on any of the properties or assets of Purchaser
pursuant to, the certificate of incorporation of Purchaser or (after obtaining
necessary consents) any indenture, mortgage, lease, agreement or other
instrument to which Purchaser is a party or by which its properties or assets
are bound. No approval, authorization, consent or other order or action of or
filing with any court, administrative agency or other governmental body in the
United States of America is required for the execution and delivery by Purchaser
of this Agreement and the execution and delivery by Purchaser of such other
agreements and instruments or the consummation by Purchaser of the transactions
contemplated hereby or thereby.
4.03. No Legal Proceedings. There is no action, suit, order, judgment
or proceeding pending or, to the knowledge of Purchaser, threatened against or
affecting Purchaser that, individually or when aggregated with one or more other
actions, suits, orders, judgments or proceedings, has or might reasonably be
expected to have a material adverse effect on Purchaser's ability to perform any
of its obligations hereunder or under any of the other agreements and
instruments to be executed and delivered by Purchaser in connection herewith.
4.04 Financing. As of the Closing Date, Purchaser shall have all funds
necessary to pay the Closing Date Payment Amount and related fees and expenses,
and as of the Closing Date, will have the financial capacity to perform all of
its other obligation under this Agreement, and any additional agreements
executed and delivered in connection herewith.
4.05 The Business. Purchaser and Parent agree that the Purchaser shall,
for as long as Xxxx XxXxx shall be an employee of Purchaser, not conduct any
business other than the Business without the prior written consent of Xxxx
XxXxx.
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ARTICLE V
Further Covenants and Agreements
--------------------------------
5.01. Conduct of Business. (a) Except as otherwise expressly provided
herein, from and after the date of this Agreement and until the Closing, Seller
shall:
(i) operate its business only in the ordinary course consistent with
past practice in all material respects;
(ii) use its best efforts to preserve intact its business and to
maintain satisfactory relationships with its customers, suppliers,
distributors and any other person having business relations with it;
(iii) maintain its tangible assets in good order and repair, ordinary
wear and tear excepted;
(iv) perform punctually all obligations under each Contract, and keep
each Contract in full force and effect, free from any right of cancellation,
forfeiture or termination;
(v) retain the services of its key officers and employees; and
(vi) promptly notify the Purchaser of any material adverse change in
the business, assets, financial condition or results of operations of
Seller.
(b) From the date hereof to the Closing, Seller will not take any
action or engage in any transaction which would render the representations and
warranties of Seller inaccurate in any material respect as of the Closing Date.
In addition, except as expressly permitted by the terms of this Agreement,
Seller will not do any of the following without the prior written consent of the
Purchaser (such consent not to be unreasonably withheld):
(i) amend Seller's Certificate of Incorporation (except to change
Seller's corporate name);
(ii) redeem or otherwise acquire any of its capital stock or issue any
capital stock or any option, warrant or right relating thereto;
(iii) grant to any employee any increase in compensation, except as has
been previously disclosed to the Purchaser;
(iv) incur any liabilities, obligations or indebtedness for borrowed
money or guarantee any such liabilities, obligations or indebtedness in
excess of $10,000 or which requires performance over more than one year,
other than to an independent third party in the ordinary course of business
consistent with past practice;
17
(v) cancel any material indebtedness owed to Seller, other than in the
ordinary course of business consistent with past practice;
(vi) make any material change in any method of accounting or accounting
practice or policy;
(vii) acquire or agree to acquire by merging or consolidating with, or
by purchasing stock or a substantial portion of the assets of, or by any
other manner, any material operating business, corporation, partnership,
association or other business organization (or division thereof);
(viii) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets with a value in excess of $10,000,
except in the ordinary course of business consistent with past practice;
(ix) enter into any lease of real property;
(x) modify, amend or terminate any lease of, or other material
agreement pertaining to, real property (except modifications or amendments
associated with renewals of leases in the ordinary course of business);
(xi) make capital expenditures or purchases in excess of $10,000 in the
aggregate; or
(xii) agree, whether in writing or otherwise, to do any of the
foregoing or to take any other action which would in any manner interfere
with, impedes, delays or make more costly the consummation of the
transaction completed hereby.
(c) Notwithstanding anything to the contrary contained in this Section
5.01, Purchaser acknowledges that withdrawals from the Seller made by XxXxx of
approximately $105,434 for (i) profits on which Federal income Taxes were
already paid and (ii) net income earned during fiscal year 1998, will not
constitute extraordinary transactions, and do not require any the consent of
Purchaser.
5.02. Access; Information. From the date hereof to and including the
Closing Date, XxXxx and Seller shall afford to the officers, employees,
attorneys, accountants and other authorized representatives of Purchaser
reasonable access to the offices, management, employees, plants, properties,
assets, contracts, books and records of Seller in order that the Purchaser may
have the full opportunity to make such legal, financial, accounting and other
reviews or investigations of Seller as they shall desire to make. XxXxx and
Seller shall furnish promptly to the Purchaser such financial and operating
information as Purchaser may reasonably request, including copies of any
documents requested before or after the date hereof.
5.03. Consents. From the date hereof to and including the Closing Date,
Seller agrees (i) to obtain all consents, authorizations, orders, exemptions and
approvals of any third parties, including governmental bodies and landlord under
leases, required to be obtained by it in connection with any of the transactions
contemplated hereby, (ii) to take all reasonable actions necessary to comply
18
promptly with all legal requirements which may be imposed on or applicable to it
with respect to the Closing and (iii) to promptly cooperate with and furnish
information to Purchaser in connection with any such legal requirements.
5.04. Notification of Certain Matters. Seller shall give prompt written
notice to the Purchaser, and the Purchaser shall give prompt written notice to
Seller, as the case may be, of the occurrence, or failure to occur, of any event
that would be likely to cause any representation or warranty by such notifying
party contained in this Agreement to be untrue or inaccurate in any material
respect at any time between or including the date of this Agreement and the
Closing Date.
5.05. Insurance. The Seller agrees to keep all insurance policies set
forth in Schedule 3.16, or replacements thereof, in full force and effect
through the close of business on the Closing Date.
5.06. Prohibition of Solicitation. From the date hereof through the
Closing or the earlier termination of this Agreement, Seller shall not, and
shall cause its respective directors, officers, shareholders, affiliates,
agents, advisers and other representatives (including investment bankers) not
to, directly or indirectly, enter into, solicit or initiate any discussions or
negotiations with, or encourage or respond to any inquiries or proposals by, or
participate in any negotiations with, or provide any information to, or
otherwise cooperate in any other way with, any Person, other than Purchaser and
its directors, officers, members, affiliates, agents, advisers and other
representatives, concerning any sale of all or a portion of Seller's assets, or
any merger, consolidation, liquidation, dissolution or similar transaction
involving Seller (each such transaction being referred to herein as a "Proposed
Acquisition Transaction"). Seller will immediately notify the Purchaser if any
discussions or negotiations are sought to be initiated, any inquiry or proposal
is made, or any information is requested with respect to any Proposed
Acquisition Transaction and notify the Purchaser of the terms of any proposal
which it may receive after the date hereof in respect of any such Proposed
Acquisition Transaction, including without limitation the identity of the
prospective purchaser or soliciting party.
5.07 Publicity. Prior to the Closing, or if this Agreement shall be
terminated, Purchaser and Seller shall consult with each other before issuing
any press release concerning the transactions contemplated by this Agreement
and, except as may be required by applicable law, will not issue a press release
prior to such consultation. If Purchaser or Seller or any of their respective
Affiliates is so required to issue a press release, it shall use its best
efforts to inform the other party hereto prior to issuing it.
5.08 Preservation of Records; Assistance. (a) Records. Purchaser
agrees, at its own expense, (x) to preserve and keep the records of the Business
for a period of five (5) years from the Closing Date, or for any longer periods
as may be required by any government agency or ongoing litigation, and (y) to
make such records available to Seller as may be reasonably required by Seller.
Seller agrees, at its own expense, (x) to preserve and keep the Tax Returns
relating to the Business for a period of five (5) years from the Closing Date,
or for any longer periods as may be required by any government agency or ongoing
litigation, and (y) to make such Tax Returns available to Purchaser as may be
reasonably required by Purchaser.
(b) Assistance. After the Closing, Purchaser shall make available to
Seller such of its employees and professional representatives, at such time or
times as Seller shall reasonably request without unduly interfering with the
19
conduct of Purchaser's business, in order to assist Seller in the investigation
or evaluation of, or litigation with respect to, any claims, liabilities or
obligations of the Business prior to the Closing that are not assumed by
Purchaser pursuant to Section 2.03; provided, however, that Seller shall
reimburse Purchaser in respect of Purchaser's documented out-of-pocket expenses
incurred in compliance with this Section 5.08(ii).
5.09 Offers of Employment. Purchaser shall at Closing extend offers of
employment at will to each employee of Seller other than _________, and shall
for purposes of calculation of service credit in connection with the application
of Purchaser's employee welfare and benefit plans and employment policies and
practices treat each such employee of Seller as if he or she had been hired by
Purchaser on the date he or she was hired by Seller, except as restricted by the
Purchaser's various employee benefit plans.
ARTICLE VI
Conditions Precedent to Obligations of Purchaser
------------------------------------------------
All obligations of Purchaser to effect the Closing hereunder are, at
the option of the Purchaser, subject to the conditions precedent that, at the
Closing:
6.01. Xxxx of Sale. The Seller shall have executed and delivered to
Purchaser such bills of sale and other instruments as Purchaser may reasonably
request in order to give effect to, and appropriately evidence, the transfer to
Purchaser of all Seller's right, title and interest in and to the Assets.
6.02. Opinion of Counsel. The Purchaser shall have received the
favorable opinion of Pavia & Harcourt, counsel to Seller, addressed to the
Purchaser and dated the Closing Date, substantially in the form of Exhibit 6.02
(or otherwise in a form reasonably satisfactory to the Purchaser).
6.03. Employment Agreement. XxXxx shall have executed and delivered to
Purchaser an employment agreement in the form of Exhibit 6.03 attached hereto
(the "Employment Agreement").
6.04. Consummation of the IPO. The Parent shall have consummated the
IPO or any Affiliate of Purchaser shall have closed an offering of not less than
$10,000,000 of such Affiliate's senior subordinated debt.
6.05. Consent of National Bank of Canada. The Purchaser shall have
obtained written consent to the transactions contemplated hereby from the
National Bank of Canada to the extent required by the Credit Agreement dated
June 19, 1998 between the National Bank of Canada and XX Xxxxxxxxxx, L.P., a
Delaware limited partnership, and an Affiliate of Purchaser (the "Partnership").
6.06. Due Diligence Review. Purchaser shall have received a copy of
Seller's audited financial statements for the year ended December 31, 1998, and
shall be reasonably satisfied with the financial condition and results of
operations of Seller and the Business set forth therein.
6.07. Liabilities. Seller shall not be in default under any
Liabilities, nor shall have caused an acceleration of any such Liabilities.
20
6.08. Performance by Seller. All the terms, covenants, agreements and
conditions of this Agreement to be complied with and performed by Seller on or
before the Closing shall have been complied with and performed and, in addition,
Seller shall not have done any of the actions listed in Section 5.01(b) between
August 31, 1998 and the date of the Closing.
6.09. Representations and Warranties. The representations and
warranties made by Seller in this Agreement shall be true and correct with the
same force and effect as though all such representations and warranties had been
made as of the Closing.
6.10. No Law Suits. There shall not be pending or threatened any
lawsuit, claim or proceeding, in law or equity, which challenges or adversely
affects Seller or the Business.
6.11. Seller's Certificate. The Purchaser shall have received from
Seller, in form and substance reasonably satisfactory to the Purchaser and its
counsel, a certificate of Seller, dated the Closing Date, confirming the
satisfaction of the conditions set forth in Sections 6.08 and 6.09.
6.12. Secretary's Certificate. Purchaser shall have received from
Seller, in form and substance reasonably satisfactory to the Purchaser and its
counsel, a certificate, dated the Closing Date, of the Secretary or an Assistant
Secretary of Seller, (i) certifying the resolutions of the Board of Directors of
Seller and all other documents of Seller which authorize the transactions
contemplated hereby and the execution, delivery and performance by Seller of
this Agreement and the documents contemplated hereby, (ii) certifying the
Certificate of Incorporation and Bylaws of Seller, (iii) containing a
certificate of good standing from the Secretary of State of the state of
Seller's organization, and (iv) containing an incumbency certificate regarding
the officers of Seller authorized to sign this Agreement and the other documents
contemplated hereby.
6.13. No Material Adverse Changes. There shall have been no material
adverse change in the business, assets, operations, prospects or financial
condition of the Seller or the Business since the date of this Agreement.
6.14. XxXxx Guaranty. The Purchaser shall have received from XxXxx a
guaranty in the form of Exhibit 6.14 attached hereto (the "XxXxx Guaranty").
ARTICLE VII
Conditions Precedent to Obligations of Seller
---------------------------------------------
All obligations of Seller to effect the Closing hereunder are, at the
option of Seller, subject to the conditions precedent that, at the Closing:
7.01. Performance by the Purchaser. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and performed by
the Purchaser on or before the Closing shall have been complied with and
performed in all material respects.
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7.02. Representations and Warranties. The representations and
warranties made by the Purchaser in this Agreement shall have been true and
correct in all material respects at the date hereof and as of the Closing with
the same force and effect as though all such representations and warranties had
been made as of the Closing.
7.03. Gross Sales. Purchaser shall have delivered to Seller a statement
detailing the gross sales of the Partnership and the Parent for the period from
August 1 through the end of the month preceding the month of the Closing and the
gross sales indicated on such statement shall have been greater than or equal to
70% of the gross sales for such period indicated in the projections previously
delivered to Seller; provided, however, that this condition shall be deemed
waived unless Seller shall have delivered to Purchaser written notice of the
failure of this condition within five days of Seller receiving the gross sales
statement referred to above.
7.04. Parent Guarantee. The Seller shall have received from the Parent
a guaranty in the form of Exhibit 7.04 attached hereto.
7.05. No Injunctions. There shall not be in effect any injunction or
restraining order issued by a court of competent jurisdiction against the
consummation of the sale and purchase of the Assets pursuant to this Agreement.
7.06. Officer's Certificate. The Seller shall have received from
Purchaser, in form and substance reasonably satisfactory to Seller and its
counsel, a certificate, dated the Closing Date, of an officer of Purchaser,
certifying as to the satisfaction of the conditions set forth in Sections 7.01
and 7.02.
7.07 Secretary's Certificate. The Seller shall have received from
Purchaser, in form and substance reasonably satisfactory to Seller and its
counsel, a certificate, dated the Closing Date, of the Secretary or an Assistant
Secretary of Purchaser, (i) certifying all documents evidencing the actions of
Purchaser authorizing the transactions contemplated hereby and the execution,
delivery and performance by Purchaser of this Agreement and the documents
contemplated hereby, (ii) certifying the Certificate of Incorporation of
Purchaser and (iii) containing an incumbency certificate regarding the officers
of Purchaser authorized to sign this Agreement and the other documents
contemplated hereby.
ARTICLE VIII
Survival, Termination of Agreement Prior To Closing, and Indemnification
------------------------------------------------------------------------
8.01. Survival of Representations. Notwithstanding any investigation or
knowledge of Purchaser, the representations, warranties, covenants and
agreements contained in this Agreement, and in any agreements, certificates or
other instruments delivered pursuant to this Agreement, shall survive the
Closing and shall remain in full force and effect for three years after the
Closing Date (or, in the case of representations and warranties set forth in
Sections 3.12 (Taxes), until the expiration of the applicable statute of
limitations (with extensions)), but subject to all limitations and provisions
contained in this Agreement. Notwithstanding the preceding sentence, any
22
representation, warranty, covenant or agreement in respect of which indemnity
may be sought under this Agreement shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence if notice of the
inaccuracy or breach thereof giving rise to such right to indemnity shall have
been given prior to such time to the party against whom such indemnity may be
sought.
8.02. Indemnification by Seller. The Seller hereby agrees to indemnify
and hold Purchaser and its Affiliates, officers, directors, employees, agents
and representatives harmless from and against any and all claims, damages,
liabilities, liens, losses or other obligations whatsoever, together with costs
and expenses, including fees and disbursements of counsel and expenses of
investigation (collectively, "Losses"), arising out of, based upon or caused by
(i) the material inaccuracy of any representation or the breach of any warranty
of Seller contained in this Agreement or (ii) any material breach or
nonperformance by Seller of any of its covenants or agreements contained in this
Agreement or in any agreement, certificate or other instrument delivered by
Seller pursuant to this Agreement. Notwithstanding the foregoing or any other
provision of this Agreement, however, Seller shall have no liability to the
Purchaser and its Affiliates from Losses unless and until the amount of all
Losses covered by this Section 8.02 exceeds, in the aggregate, $25,000 (the
"Threshold Amount"), and upon the Threshold Amount being exceeded, Seller shall
be liable for the total amount of Losses. The Seller's obligation to indemnify
Purchaser pursuant to this Section 8.02 shall be limited to the total amount of
the Purchase Price actually paid to and retained by Seller from Purchaser;
provided, however, that any amounts due to Seller, from Purchaser pursuant to
this Agreement shall be subject to setoff and deduction to the full extent that
any Loss, in respect of which Purchaser is entitled to indemnification, exceeds
the Purchase Price previously paid to Seller.
8.03. Indemnification by Purchaser. The Purchaser hereby agrees to
indemnify and hold Seller and its Affiliates and their respective officers,
directors, employees, agents and representatives harmless, from and against any
and all Losses arising out of, based upon or caused by (i) the inaccuracy of any
representation or the breach of any warranty of Purchaser contained in this
Agreement or in any agreement, certificate or other instrument delivered by
Purchaser pursuant to this Agreement, or (ii) any breach or nonperformance by
Purchaser of any of its covenants or agreements contained in this Agreement or
in any agreement, certificate or other instrument delivered by Purchaser
pursuant to this Agreement.
8.04. Notice; Cooperation; Defense; Etc. The indemnified party agrees
to give the indemnifying party prompt written notice of any third-party action,
claim, demand, discovery of fact, proceeding or suit (collectively, "Claims")
for which such indemnified party intends to assert a right to indemnification
under this Agreement; provided, however, that failure to give such notification
after such notice is required shall not adversely affect the indemnified party's
entitlement to indemnification hereunder except to the extent that the
indemnifying party shall have been actually prejudiced as a result of such
failure. The indemnified party shall take all reasonable or necessary steps to
resolve, defend or cooperate in the defense of such Claims, including retaining
and providing to the indemnifying party all documents, records and other
information that may be relevant to such Claims and making employees available
to the extent reasonably requested to fully cooperate in the resolution or
defense of such Claims and provide any additional information (including
explanations and interpretations of any other materials or information provided)
that they are able to provide with respect thereto. The indemnifying party shall
23
have the right to participate jointly with the indemnified party in the
indemnified party's defense, settlement or other disposition of any Claim and,
with respect to any Claim that is not likely to result in the indemnified
party's becoming subject solely to injunctive or other similar relief, the
indemnifying party shall have the sole right (but not the obligation) to defend,
settle or otherwise dispose of such Claim on such terms as the indemnifying
party, in its sole discretion, shall deem appropriate. The indemnifying party
shall obtain the written consent of the indemnified party, which shall not be
unreasonably withheld or delayed, prior to ceasing to defend any Claim if it has
theretofore elected to exercise its sole right to defend, settle or otherwise
dispose of such Claim. In calculating amounts payable to the indemnified party
under this Article VIII, (i) the indemnified party shall receive credit for any
insurance recoveries, and (ii) no amount shall be paid for the indemnified
party's special or consequential damages, but the same shall be indemnified if
the same shall be required to pay the amounts to any third party for special or
consequential damages of such third party in regard to a matter which is
otherwise indemnifiable hereunder.
8.05. Adjustment to Purchase Price. Amounts paid by Seller or Purchaser
under this Article VIII shall be treated for all tax purposes as adjustments to
Purchase Price.
ARTICLE IX
Taxes and Benefit Plans
-----------------------
9.01. Taxes. (a) Allocation of Responsibility. Seller shall pay (or
indemnify and hold Purchaser harmless with respect to) (without duplication) any
Taxes (excluding any penalties arising from any act by Purchaser) payable by
Seller with respect to Seller's income for all tax periods up to the Closing
Date. Any Taxes payable by Seller pursuant to this Section 9.01(a) shall be paid
by Seller when due, but in no event more than thirty days following the request
therefor from any Purchaser.
(b) Returns. The Seller shall prepare and file all required Federal,
state, local and foreign Tax Returns for Seller for all taxable periods ending
on or prior to the Closing Date and pay all Taxes due for such periods on such
Tax Returns. Any such Tax Returns shall, insofar as they relate to Seller, be on
a basis consistent with the last such Tax Returns that have been filed in
respect to Seller.
(c) Cooperation. The Purchaser and Seller mutually agree to cooperate
fully with each other with respect to the preparation of all Tax Returns, the
filing and prosecution of any Tax claims, the furnishing of any document, record
or other relevant information relating to any Tax liability or refund and all
other Tax matters, and to keep each other advised as to any issue relating to
Taxes which would have any bearing on the other party's responsibilities
pursuant to this Section 9.01.
9.02. Transfer Taxes. The Seller and Purchaser shall be responsible on
an equal basis for all transfer and similar Taxes assessed or payable in
connection with the Transfer of the Assets pursuant to this Agreement.
9.03. Expenses of Benefit Plans. The Seller shall pay (or indemnify the
Purchaser with respect to) that portion of the costs of the Benefit Plans
payable by Seller for the period up to but not including the Closing Date. Any
costs relating to the Benefit Plans by Seller pursuant to this Section 9.03
shall be paid by Seller when due, but in no event more than thirty days
following the request therefor from Purchaser.
24
ARTICLE X
Miscellaneous
-------------
10.01. Brokers. Seller represents and warrants to the Purchaser and
Purchaser represents and warrants to XxXxx and Seller, that no party hereto or
any party acting on behalf of any of the parties hereto have incurred any
liability, either express or implied, to any "broker", "finder", financial
adviser or similar Person in respect of any of the transactions contemplated
hereby. The Purchaser agrees to indemnify Seller against, and hold it harmless
from, Seller agrees to indemnify the Purchaser against, and hold it harmless
from, any liability, cost or expense (including, but not limited to, fees and
disbursements of counsel) resulting from any agreement, arrangement or
understanding made by such party with any third party for brokerage, finders' or
financial advisory fees or other commissions in connection with this Agreement
or the transactions contemplated hereby. The provisions of this Section shall
survive any termination of this Agreement.
10.02. Expenses. Except as otherwise specifically provided in this
Agreement, each party will pay its own expenses incident to this Agreement and
the transactions contemplated hereby, including legal, due diligence and
accounting fees and disbursements. The provisions of this Section shall survive
any termination of this Agreement.
10.03. Amendments and Waivers. The parties hereto may, by written
agreement signed by the parties, modify any of the covenants or agreements or
extend the time for the performance of any of the obligations contained in this
Agreement or in any document delivered pursuant to this Agreement. Any party
hereto may waive, by written instrument signed by such party, any inaccuracies
in the representations and warranties of another party or compliance by another
party with any of its obligations contained in this Agreement or in any document
delivered pursuant to this Agreement. This Agreement may be amended only by
written instrument signed by the parties hereto.
10.04 Transferability. The respective rights and obligations of each
party hereto shall not be assignable by any party without the written consent of
the other parties (and any purported assignment without such written consent
shall be void and of no effect). This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assignees.
10.05 Termination. Unless otherwise agreed between the parties, the
Purchaser and Seller may each terminate this Agreement if the Closing has not
occurred on or prior to June 30, 1999; provided, however, that any party that
has failed to perform any covenant hereunder, which failure has resulted in
delay of the closing because the conditions set forth in Articles VI and VII
have not been met, shall not be entitled to terminate this Agreement except with
the prior written consent of the other party hereto. In the event of the
termination of this Agreement pursuant to this Section 10.05, Seller shall
return to the Purchaser all deposits or other amounts paid to Seller prior to
the date of such termination, and thereafter, none of the parties shall have any
obligation or liability of any nature whatsoever to the other party hereto, and
all expenses incurred by any party hereto shall be for its own account;
provided, however, that (i) in the event that the Closing has not occurred prior
to June 30, 1999 due to the fault of Purchaser, the Seller may deduct from the
Contract Deposit reasonable attorney's and accountant's fees (including the cost
of a customary annual independent accountant's audit for the most recent fiscal
year) incurred in connection with the negotiation of this Asset Purchase
Agreement and related agreements not to exceed $110,000 and (ii) notwithstanding
any termination of this Agreement, no party hereto shall be deemed to have
25
waived any rights it may have arising from the breach of this Agreement or any
provision contained herein by the other party hereto and such rights shall
specifically survive any such termination of this Agreement.
10.06 Bulk Transfer Laws. The Seller and Purchaser hereby waive
compliance with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Assets. Seller shall indemnify
and hold harmless Purchaser against any and all claims which may be asserted by
third parties against the Assets as a result of non-compliance with any such
bulk transfer law or any similar law in any foreign jurisdiction, other than
claims arising out of or relating to Purchaser's failure to perform or satisfy
its duties or obligations with respect to this Agreement, including the
liabilities and obligations assumed by Purchaser hereunder.
10.07 Notices. Any notice, request or other document to be given
hereunder to a party hereto shall be effective when received and shall be given
in writing and delivered in person, by facsimile or sent by hand delivery or
overnight courier, as follows:
If to Purchaser:
XX Xxxxxxxxxx, L.P.
0000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Xx.
Telefax: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxxx & Kotel,
a Professional Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: L. Xxxxx Xxxxxxxx, Esq.
Telefax: (000) 000-0000
If to Seller:
Xxxx XxXxx
Components, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telefax: (000) 000-0000
26
with a copy to:
Xxxxxx Xxxxx, Esq.
Pavia & Harcourt
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telefax: (000) 000-0000
Any party hereto may change its address for receiving notices, requests and
other documents by giving written notice of such change to the other parties
hereto.
10.08 Governing Law; Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York (without
regard to conflict of laws doctrines). The parties agree to submit, and consent
to the binding resolution of any dispute, claims or controversy under this
Agreement, to resolution by arbitration in accordance with the rules of the
American Arbitration Association in the City of New York Any such arbitration
shall be conducted by a panel of at least three arbitrators, an equal number of
whom shall be appointed by each party hereto and the balance of whom shall be
mutually agreed by the arbitrators so appointed. The parties agree to share
equally the costs of such arbitration, except that the prevailing party (as
determined by the arbitrators), to the extent permitted by law, shall also be
entitled to recover from the other party any reasonable legal fees and expenses
of its counsel incurred in connection with such arbitration.
10.09 Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
10.10 Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.12 Entire Agreement. This Agreement, together with the schedules and
exhibits and the agreements, certificates and instruments delivered pursuant
hereto, contain the entire agreement among the parties hereto, and supersede all
prior agreements and undertakings (written and oral) between the parties hereto,
relating to the subject matter hereof.
10.13 Publicity. No party shall issue any press release or make any
other public announcement with respect to this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
parties (which will not be unreasonably withheld or delayed), except as may be
required by law or the regulations of any securities exchange.
10.14 Parties in Interest. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the parties and their
27
respective successors and permitted assigns any rights or remedies under or by
virtue of this Agreement, and no Person shall assert any rights as a third party
beneficiary hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
COMPONENTS ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx, Xx.
Title: CEO
COMPONENTS BY XXXX XXXXX,INC.
By: /s/ Xxxx XxXxx
--------------------------------
Name: Xxxx XxXxx
Title: President
28
EXHIBIT 6.03
to Components Purchase Agreement
Employment Agreement, dated as of _________,
1998 (the "Effective Date"), by and between
COMPONENTS ACQUISITION CORP., a Delaware corporation
(the "Purchaser") and a wholly-owned subsidiary of
The Xxxxxxxxxx Corporation (the "Parent"), and XXXX
XxXXX, an individual (the "Executive").
W I T N E S S E T H:
WHEREAS, pursuant to an Asset Purchase Agreement of even date
herewith (the "Asset Purchase Agreement"), the Purchaser is acquiring all the
assets of Components by Xxxx XxXxx, Inc., a New Jersey corporation
("Components"), and from the date hereof will conduct the business of
Components;
WHEREAS, Executive through the date hereof was the president
and chief executive officer of Components and was responsible for the day-to-day
operating control of Components; and
WHEREAS, the Purchaser wishes to ensure the continuation of
the services of Executive following the effectiveness of the Asset Purchase
Agreement and for the period provided in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
(a) The Purchaser hereby engages and employs the Executive, and the Executive
hereby accepts engagement and employment, as President and Chief Executive
Officer of the Purchaser or of such other entity which shall operate the
business of Components acquired by the Purchaser. The Executive shall be
responsible for the day-to-day operating control and management activities of
the Purchaser and shall be vested by the Board of Directors of the Purchaser
with authority to make such business decisions which, in his judgment, are
necessary and appropriate for the successful day-to-day operation and financial
performance of the business of the Purchaser; provided, however, that (i) all
activities of the Executive with respect to the control and management of the
Business shall be consistent with the then current business plan and budget for
the Purchaser, (ii) the Executive shall not obligate the Parent in any manner
without the prior written approval of the Parent, (iii) the Executive shall
comply with all financial and accounting controls generally applicable to the
Parent and its subsidiaries and (iv) the Executive shall not engage in any
action or enter into any contract or agreement which would, either directly or
indirectly, cause the Parent to breach any of its contractual obligations,
provided, however, that such contracts of Parent have been disclosed to the
Executive. The Executive shall also perform such duties as are required by the
Purchaser's Board of Directors.
29
(b) The Executive shall devote such of his time and efforts as shall be
necessary to the proper discharge of his duties and responsibilities under this
Agreement.
2. TERM
The Executive's employment hereunder shall, unless earlier terminated
in accordance with Section 8, be for a term of six years commencing on the date
hereof (the "Term").
3. COMPENSATION
(a) As compensation for the performance of his duties on behalf of the
Purchaser, the Executive shall be entitled to receive during the Term the
following:
(i) A base salary paid in bi-weekly installments (subject
to modification consistent with the policies of the
Parent) (the "Base Salary") of not less than $220,000
per annum for the years 1999 through 2000 and
$250,000 per annum thereafter, subject to any upward
adjustments annually by the Parent's Board of
Directors; and
(ii) In the event the Pre-Tax Income (as defined in the
Asset Purchase Agreement) of the Purchaser for any
fiscal year exceeds the Pre-Tax Income Target (as
defined in the Asset Purchase Agreement) for such
year, the Parent shall, or shall cause the Purchaser
to, distribute to the Executive a bonus with respect
to such year equal to 20% of the excess. Any bonus
payable pursuant to this Section 3(a)(ii) shall be
paid in cash at the same time as any Obligation (as
defined in the Asset Purchase Agreement) is due
pursuant to the Asset Purchase Agreement, and shall
be charged to the Purchaser as an item of expense.
(b) The Purchaser shall withhold all applicable federal, state and
local taxes, social security and workers' compensation contributions and such
other amounts as may be required by law or agreed upon by the parties with
respect to the compensation payable to the Executive pursuant to Section 3(a) or
otherwise in connection with his employment by the Purchaser.
(c) The Purchaser shall reimburse the Executive for all normal, usual
and necessary expenses incurred by the Executive in furtherance of the business
and affairs of the Purchaser, including reasonable travel and entertainment,
against receipt by the Purchaser of appropriate vouchers or other proof of the
Executive's expenditures and otherwise in accordance with such expense
reimbursement policy as may from time to time be adopted by the Board of
Directors of the Parent.
(d) During the Term, the Executive shall be entitled to participate in
any group insurance plan or program of the Purchaser, now existing or
established hereafter, that are offered by Purchaser to employees of the
Purchaser to the extent that he is eligible under the general provisions
thereof.
30
(e) During the Term, the Executive shall be subject to, and shall act
in accordance with, the Parent's policies, as amended from time to time.
(f) The Executive shall be entitled to twenty (20) work days paid
vacation each calendar year, at such times and for such periods as will not
interfere unduly with the operation of the Purchaser provided, however, that the
Executive provides two (2) weeks notice for vacation periods of five (5) or more
days in duration. Any vacation days not utilized in a given year shall be
forfeited and shall not be carried over to the succeeding year.
(g) During the Term hereof, the Purchaser shall continue to provide to
the Executive the leased automobile which was provided to the Executive by
Components immediately prior to the Executive's employment pursuant to the terms
hereof, through the end of the current term of such lease, and shall thereafter
provide for the Executive's use of a leased car comparable to the one currently
leased. In addition, the Purchaser shall reimburse the Executive for his fuel,
oil and parking expenses incurred in connection with his business use of such
automobile during the Term hereof, provided that the Executive presents to the
Purchaser valid receipts for such expenses.
(h) During the Term hereof, the Purchaser shall reimburse the Executive
for the monthly mortgage and maintenance payments in the amount of $2000 per
month for the premises known and designated as apartment 906, 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, against receipt of proof of payment which is
satisfactory to Purchaser in its reasonable discretion; provided, however, that
in the event that (i) the Executive shall no longer be the owner of record of
such premises or (ii) Xxxxx Xxxxx shall no longer occupy such premises as her
principal residence, this obligation of Purchaser to make such mortgage and
maintenance payments for such premises shall be terminated.
(i) The Executive agrees that he shall be responsible for payment of
any imputed federal or state income taxes in respect of any non-cash
compensation including, without limitation, the leased automobile provided to
the Executive by the Purchaser.
4. REPRESENTATIONS AND WARRANTIES
(a) The Executive hereby represents and warrants to the Purchaser as
follows:
(i) Neither the execution and delivery of this Agreement nor
the performance by the Executive of his duties and other obligations hereunder
violate or will violate any statute, law, determination or award, or conflict
with or constitute a default under (whether immediately, upon the giving of
notice or lapse of time or both) any prior employment agreement, contract, or
other instrument to which the Executive is a party or by which he is bound.
(ii) The Executive has the full right, power and legal
capacity to execute and deliver this Agreement and to perform his duties and
other obligations hereunder. This Agreement constitutes the legal, valid and
binding obligation of the Executive enforceable against him in accordance with
its terms. No approvals or consents of any persons or entities are required for
the Executive to execute and deliver this Agreement or perform his duties and
other obligations hereunder.
31
(iii) The Executive agrees to maintain strict compliance with
all federal, state, local and foreign statutes, ordinances, codes, rules and
regulations.
(b) The Purchaser hereby represents and warrants to the Executive as
follows:
(i) The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws
of the State of Delaware, with all requisite powers
and authority to own its properties and conduct its
business in the manner presently contemplated.
(ii) The Purchaser has full power and authority to enter
into this Agreement and to incur and perform its
obligations hereunder. This Agreement constitutes the
legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with
its terms. No approvals or consents of any persons or
entities are required for the Purchaser to execute
and deliver this Agreement or perform its duties and
other obligations hereunder.
(iii) The execution, delivery and performance by the
Purchaser of this Agreement does not conflict with or
result in a breach or violation of the Certificate of
Incorporation, by-laws or other organizational
documents of the Purchaser or result in a breach or
violation of or constitute a default (whether
immediately, upon the giving of notice or lapse of
time or both) under any agreement or instrument to
which the Purchaser is a party or by which the
Purchaser or any of its properties may be bound or
affected.
5. NON-COMPETITION
(a) The Executive understands and recognizes that his services to the Purchaser
are special and unique and agrees that, for a period of six years from the date
hereof (the "Term"), he shall not in any manner, directly or indirectly, on
behalf of himself or any person, firm, partnership, joint venture, corporation
or other business entity ("Person"), enter into or engage in any business which
is competitive with the Purchaser's business (including, without limitation,
businesses that relate to the manufacturing, merchandising, sourcing, marketing
or distribution of tailored clothing sportswear, shirts, neckwear, topcoats or
casual slacks), as it is currently or hereafter carried on or contemplated to be
carried on by Purchaser, either as an individual for his own account, or as a
partner, joint venturer, executive, agent, consultant, salesperson, officer,
director or shareholder of a Person operating or intending to operate within the
area that the Purchaser is conducting its business (collectively, "Restricted
Businesses"); provided, however, that nothing herein will preclude Executive
from holding one percent (1%) or less of the stock of any publicly traded
company.
32
(b) In the event that Executive breaches any provisions of this Section
5 or there is a threatened breach, then, in addition to any other rights which
the Purchaser may have, the Purchaser shall be entitled, without the posting of
a bond or other security, to injunctive relief to enforce the restrictions
contained herein. In the event that a proceeding is brought in equity to enforce
the provisions of this Section 5, the Executive shall not urge as a defense that
there is an adequate remedy at law, nor shall the Purchaser be prevented from
seeking any other remedies which may be available.
(c) Nothwithstanding anything to the contrary contained in this Section
5, the Executive's obligations under this Section 5 shall terminate if Executive
resigns for Good Reason (as defined in Section 8(a)(iv)).
6. NON-SOLICITATION
(a) For a period of six years from the date hereof, Executive shall
not, directly or indirectly, without the prior written consent of the Purchaser
(i) solicit or induce any employee of the Purchaser or any subsidiary,
affiliate, successor or assign (collectively, the "Affiliates") to leave the
employ of the Purchaser or any Affiliate or (ii) hire for any purpose any person
who is at such time or has been within the preceding six months an employee of
the Parent or any Affiliate.
(b) For a period of six years from the date hereof, Executive shall
not, directly or indirectly, without the prior written consent of the Purchaser:
(i) solicit or accept employment or be retained by any
party who, at any time during the Term, was a
customer or supplier of the Purchaser or any
Affiliate where his position will be related to the
business of the Purchaser; or
(ii) solicit or accept the business of any customer or
supplier of the Purchaser or any Affiliate with
respect to products similar to those supplied by the
Purchaser.
(c) Nothwithstanding anything to the contrary contained in this Section
6, the Executive's obligations under this Section 6 shall terminate if Executive
resigns for Good Reason (as defined in Section 8(a)(iv))
7. CONFIDENTIAL INFORMATION
The Executive agrees that during the course of his employment and for a
period of three years after termination, he will not disclose or make accessible
to any other person any information relating to the Purchaser or any Affiliate
or any of its customers or any other information obtained by Executive during
33
the course of his employment with the Purchaser or any Affiliate (the
"Confidential Information"), except for (i) information that is in the public
domain or subsequently enters the public domain by publication or otherwise
through no action or fault of the Executive, (ii) information that is known to
the Executive prior to the receipt thereof under this Agreement from his own
independent sources as evidenced by his written records, and which was not
acquired, directly or indirectly, from the Purchaser, (iii) information that the
Executive receives from any third party having a legal right to transmit such
information without any obligation to the Purchaser to keep such information
confidential or (iv) information that is independently developed by the
Executive at times other than during the Term without attribution in any manner
to the confidential information of the Purchaser. The Executive agrees (i) not
to use any such Confidential Information for himself or others during such
period and (ii) not to take any such material or reproductions thereof from the
Purchaser or any Affiliate's facilities at any time during his employment by the
Purchaser, except as required in the Executive's duties to the Purchaser. The
Executive agrees immediately to return all such material and reproductions
thereof in his possession to the Purchaser upon request and in any event upon
termination of employment.
8. TERMINATION
(a) The Executive's employment hereunder shall begin on the Effective
Date and shall continue for the period set forth in Section 2 hereof unless
sooner terminated upon the first to occur of the following events:
(i) The death of the Executive;
(ii) The Disability (as defined below) of the Executive,
provided, however, that such termination shall be
effective upon giving the Executive five (5) days
notice upon the expiration of either period
comprising his Disability (as defined in Section 8(b)
hereof);
(iii) Termination by the Board of Directors of the
Purchaser for just cause. Any of the following
actions by the Executive shall constitute "just
cause":
(A) Material breach by the Executive of Sections
5, 6 or 7 of this Agreement;
(B) Material breach by the Executive of any
provision of this Agreement other than
Sections 5, 6 and 7 which is not cured by
the Executive within thirty (30) days of
written notice thereof from the Purchaser;
(C) Any willful misconduct or grossly negligent
and material omission on the part of the
Executive intended to cause harm to the
Purchaser or any Affiliate;
34
(D) Grossly negligent performance by the
Executive of his duties as President of the
Purchaser, as determined by the Board after
notice to the Executive and an opportunity
for the Executive to be heard by the Board;
or
(E) The conviction or plea of nolo contendere of
the Executive with respect to (I) any felony
or (II) any other crime involving moral
turpitude;
(iv) Termination by the Executive as a result of a
resignation for "Good Reason." Resignation by the
Executive for "Good Reason" shall mean a resignation
by the Executive in the event that the Purchaser
shall be in material breach of its obligations under
this Agreement or the Asset Purchase Agreement
(subject to any right of setoff in respect of such
obligations under the Asset Purchase Agreement) and
such material breach continues for thirty (30) or
more days after the Executive gives written notice of
such material breach to the Board of Directors of
Purchaser.
(b) For purposes hereof, a "Disability" of the Executive shall be
deemed to have occurred in the event (i) the Executive is absent from work or
otherwise substantially unable to assume his normal duties for a period of
forty-five (45) successive days or an aggregate of sixty (60) days during any
six-month period because of physical or mental disability, accident, illness or
other cause other than approved vacation or leave of absence or (ii) the
Executive is deemed by a licensed physician designated by the Purchaser and
reasonably acceptable to the Executive to have a permanent disability such that
Executive will be unable to perform his duties under this agreement. The
Purchaser shall have the right to have the Executive examined by a competent
physician for purposes of determining his physical or mental incapacity.
Notwithstanding the foregoing provision, if it is determined by the Purchaser
that the Executive has a "disability" as defined under the Americans with
Disabilities Act, the Executive's employment shall not be terminated on the
basis of such disability unless it is first determined by the Purchaser that
there is no reasonable accommodation which would permit the Executive to perform
the essential functions of his position without imposing an undue hardship on
the operation of the business of the Purchaser.
35
9. NOTICES
Any notice or other communication under this Agreement shall be in
writing and shall be deemed to have been given: when delivered personally
against receipt therefor; one (1) day after being sent by Federal Express or
similar overnight delivery; or three (3) days after being mailed registered or
certified mail, postage prepaid, return receipt requested, to either party at
the address set forth below, or to such other address as such party shall give
by notice hereunder to the other party.
If to Purchaser:
The Xxxxxxxxxx Corporation
0000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxxxx, Xx.
with a copy to:
Xxxxxxx, Xxxxxxxx & Kotel,
a Professional Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: L. Xxxxx Xxxxxxxx, Esq.
If to Executive:
Xxxx XxXxx
00 Xxxx 00xx Xxxxxx
Xxxxxxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxx Xxxxx, Esq.
Pavia & Harcourt
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
10. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, the remaining conditions and provisions or portions thereof
shall nevertheless remain in full force and effect and enforceable to the extent
they are valid, legal and enforceable, and no provision shall be deemed
dependent upon any other covenant or provision unless so expressed herein.
36
11. ENTIRE AGREEMENT; MODIFICATION
This Agreement contains the entire agreement of the parties relating to
the subject matter hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement
which are not set forth herein. No modification of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
12. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall
inure to, and be binding upon, the Purchaser, its successors and assigns, and
upon the Executive and his legal representatives. This Agreement constitutes a
personal service agreement, and the performance of the Executive's obligations
hereunder may not be transferred or assigned by the Executive.
13. NON-WAIVER
The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or condition of this Agreement on the part of either party
shall be effective for any purpose whatsoever unless such waiver is in writing
and signed by such party.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to principles
of conflict of laws.
15. HEADINGS
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
16. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.
37
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
COMPANY:
COMPONENTS ACQUISITION CORP.
By:_______________________________
Name:
Title:
___________________________________
Xxxx XxXxx, in his individual capacity
38
EXHIBIT 6.14
to Components Purchase Agreement
GUARANTY
--------
GUARANTY, dated as of June 30, 1999 made by Xxxx XxXxx, an individual
with offices an address at 00 Xxxx 00xx Xxxxxx, Xxxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Guarantor") in favor of Components Acquisition Corp., a Delaware
corporation, with offices c/o The Xxxxxxxxxx Corporation, 0000 Xxxxxx Xxxx,
Xxxxxxxxx, Xxx Xxxx 00000 ("Purchaser")
WHEREAS, Purchaser and Components by Xxxx XxXxx, Inc., a New Jersey
corporation (the "Company") are parties to a certain Asset Purchase Agreement
dated as of _____________,1999 (the "Asset Purchase Agreement") pursuant to
which the Company agreed to sell and transfer, and Purchaser agreed to purchase
and accept, of the assets of the Company (the "Assets");
WHEREAS, Guarantor is the sole shareholder of the Company;
WHEREAS, as a material inducement to Purchaser to enter into the Asset
Purchase Agreement, Guarantor has agreed to enter into this Guaranty for the
benefit of Purchaser;
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Guarantor agrees with Purchaser as follows:
1 All capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to them in the Asset Purchase Agreement.
2 Guarantor hereby unconditionally and absolutely guarantees to
Purchaser that if any of the following representations made in the Asset
Purchase Agreement are materially incorrect and Guarantor knew they were
incorrect on the date hereof, Guarantor shall be liable to Purchaser for the
actual amount of its damages incurred as a proximate result of such
misrepresentation, up to such portion of the Purchase Price as has actually been
paid to the Company:
(1) The Company has the requisite power and authority to execute and
deliver the Asset Purchase Agreement and to consummate the transactions
contemplated thereby. The execution and delivery by the Company of the Asset
Purchase Agreement will not violate the Corporation Law of the State of New
Jersey, or conflict with or result in a breach of the Certificate of
Incorporation, By-laws or other organizational documents of the Company, or any
material contract to which the Company is a party. No material approval or
consent or filing with any governmental body or other Person is required for the
execution and delivery of the Asset Purchase Agreement by the Company.
(2) The Company has good and valid title to the Assets, free and
clear of any Encumbrances, except Permitted Encumbrances, and the Assets
represent all assets current used by Seller in the conduct of the Business.
39
(3) The Company is a corporation duly organized and validly existing
under the laws of the State of New Jersey. The Company has full power and
authority and possesses all governmental licenses, permits, authorizations and
approvals to enable it to conduct its business as currently conducted.
(4) The Company does not directly or indirectly own any capital stock
of or other equity interest in any Person.
(5) The Historical Financial Statements were prepared in accordance
with Applicable Accounting Principles and constitute fair and reasonable
presentations of the financial position and results of operations of Seller, in
all material respects as of the dates and for the periods set forth therein. The
Company does not have any known material contingent or undisclosed obligations
or liabilities which would be required in accordance with the Applicable
Accounting Principles to be reflected in a currently prepared balance sheet or
notes thereto, other than obligations or liabilities (i) that are reflected or
disclosed in the Historical Financial Statements, (ii) that are disclosed in the
Asset Purchase Agreement or the Schedules thereto, or (iii) that were incurred
after December 31, 1998 in the ordinary course of business.
(6) Except as disclosed on the Schedules to the Asset Purchase
Agreement, and excluding any macroeconomic changes or conditions in national or
local economies affecting the Business, its customers or suppliers generally,
there have been no changes since December 31, 1998 which, individually or in the
aggregate, have had a material adverse effect on the business, assets, financial
condition or results of operations of the Company.
(7) The Company does not own any Real Property. The uses for which
the Improvements are zoned do not materially restrict or materially impair the
use of the improvements for purposes of the Business of the Company as conducted
as of the date of the Asset Purchase Agreement. Each lease of Real Property
pursuant to which a leasehold estate is granted is valid and without any
material default thereunder by the Company.
(8) Except as disclosed on the Schedules to the Asset Purchase
Agreement, and except for obsolete assets and assets disposed of in the ordinary
course of business since December 31, 1997, the Company has good and valid title
to the machinery, equipment and other tangible personal property reflected in
the Historical Financial Statements as being owned by it or acquired by it after
December 31, 1997, free and clear of all Encumbrances, except Permitted
Encumbrances, and the Company is the lessee of all the leasehold estates
pertaining to the machinery, equipment, and other tangible personal property
purported to be granted by the capitalized leases reflected in the Historical
Financial Statements (if any).
(9) The Company owns, beneficially and of record, all the Patents,
Trademarks and Trade Names listed on Schedule 3.09 to the Asset Purchase
Agreement, free and clear of all Encumbrances, other than Permitted
Encumbrances.
(10) Except as disclosed on the Schedules to the Asset Purchase
Agreement, there are no actions, suits, arbitration, investigation, audit or
40
proceeding pending or threatened against Seller in any court, or before any
Federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or before any arbitrator
of any kind.
(11) Except for the Contracts listed on Schedule 3.11 to the Asset
Purchase Agreement, the Company is not a party to nor are any of its Assets
subject to, any other material contract or agreement, and except as disclosed on
such Schedule 3.11, each of the Contracts listed thereon is valid and in full
force and effect, and the Company has performed all material obligations
required to be performed by it thereunder.
(12) Except as disclosed in Schedule 3.12 to the Asset Purchase
Agreement, the Company has no "employee pension benefit plans" (as defined in
Section 3(2) of ERISA), "employee welfare benefit plans" (as defined in Section
3(1) of ERISA), or any other employee fringe benefit plans maintained, or
contributed to, by the Company.
(13) With respect to the ownership of the Assets and the conduct of
the Business on or prior to the Closing Date, the Company has properly completed
and filed on a timely basis all returns, reports, and declarations in connection
with any Taxes required to be filed. Non of the Assets is subject to any lien
with respect to Taxes.
(14) To the best of Guarantor's knowledge, the Company has complied
with and is in compliance with all federal, state, local or foreign statutes,
ordinances, codes, rules and regulations, decrees, stipulations and awards
entered by any governmental authority, and all licenses, franchises, consents,
approvals, permits or similar rights granted under any of the foregoing, and the
Company is in compliance with all licenses, permits, consents, approvals,
franchises and other authorizations necessary for the conduct of the Business or
the ownership or operations of the Assets.
(15) The Company has not purchased, acquired, leased or licensed any
property or services from, or sold, transferred, leased or licensed any property
or services to, any Affiliate, or any officer or director of Seller, other than
on an arm's length basis in the ordinary course of business.
(16) All inventory of the Company was acquired in the ordinary course
of business and is in good condition and is usable and saleable in the ordinary
course of business. The Company has good and valid title to the inventory, fee
and clear of all Encumbrances, except Permitted Encumbrances. The allowance for
obsolete and slow moving inventory reflected in the Historical Financial
Statements and in the Closing Date Balance Sheet is and will be properly
determined in accordance with Applicable Accounting Principles.
(17) All accounts receivable of the Company included in the Assets,
whether reflected in the Historical Financial Statements or subsequently created
have arisen from bona fide transactions in the ordinary course of business. The
allowance for doubtful accounts in respect of Receivables reflected in the
41
Historical Financial Statements and in the Closing Date Balance Sheet is and
will be properly determined in accordance with Applicable Accounting Principles.
(18) The Company has no knowledge that any of its principal customers
or suppliers intends to cease purchasing from, selling to or dealing with the
Company, nor has any information been brought to the attention of the Company
that might reasonably lease it to believe that any such customer or supplier
intends to alter materially the amount of such sales or purchases or the extent
of dealings with the Company.
(19) As of the date of the Asset Purchase Agreement, there are no
current work stoppages by any of the employees.
3 It is the express intention of the Guarantor that this Guaranty be
absolute and unconditional in all respects and not dischargeable or affected by
any circumstance whatsoever which may constitute a legal or equitable discharge.
All payments made by the Guarantor hereunder shall be free and clear of any tax,
set-off, counterclaim or deduction of any kind whatsoever.
4 This Guaranty is one of payment and not of collection, and Purchaser
shall not be required to proceed in any manner first against (or make any
demands or give any notices to) the Company or any person, entity or collateral.
The Guarantor expressly waives notice of the acceptance of this Guaranty, and,
to the fullest extent permitted by applicable law, any and all other notices.
5 This Guaranty which shall continue and remain in full force and
effect and be binding upon the Guarantor, and his heirs, administrators, legal
representatives, estate, successors and assigns, and shall inure to the benefit
of Purchaser, its successors and assigns, until the full and complete
performance by the Company of its obligation to transfer the Assets to Purchaser
free and clear of any liens and encumbrances, and Guarantor shall not be
released of its obligation hereunder so long as any claim of Purchaser against
the Company arising out of the foregoing representations, and which is made no
later than three (3) years from the Closing Date is not settled or discharged in
full.
6 The Guarantor hereby represents and warrants to Purchaser that this
Guaranty is the Guarantor's legal, valid and binding obligation, enforceable
against the Guarantor in accordance with its terms.
7 No failure on the part of Purchaser to exercise, and no delay in
exercising any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Purchaser of any right,
remedy or power hereunder preclude any other or future exercise of any other
right, remedy or power.
8 In the event that any provision of this Guaranty is declared by a
court of competent jurisdiction, arbitration tribunal, governmental or
administrative body or other entity having jurisdiction to be invalid or
unenforceable, the validity and enforceability of the remaining provisions of
42
this Guaranty shall remain in full force and effect to the extent feasible in
the absence of the void and unenforceable provision. The Guarantor furthermore
agrees to execute and deliver such amendatory provisions to accomplish lawfully
as nearly possible the goals and purposes of the provision so held to be void or
unenforceable.
9 The Guarantor agrees that any legal action or proceeding against the
Guarantor with respect to this Guaranty may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York, as Purchaser may elect, and by execution and delivery of this
Guaranty, the Guarantor hereby accepts for himself and in respect to his
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. The Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts or any other court in any such
action or proceeding my the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Guarantor, at his address set forth in the first
paragraph of this Guaranty, such service to be deemed effective five (5) days
after such mailing. Nothing herein shall affect the right of Purchaser to serve
process in any other manner permitted by law or to commence any legal action or
proceeding against the Guarantor in any other jurisdiction. THE GUARANTOR HEREBY
IRREVOCABLY WAIVES TRIAL BY JURY AND ANY OBJECTION, INCLUDING WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS WHICH HE MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION.
10 This Guaranty and any dispute relating hereto shall be exclusively
governed by, and construed in accordance with, the internal law of the State of
New York without reference to any conflicts of law principles thereof.
______________
Xxxx XxXxx
43
EXHIBIT 7.04
to Components Purchase Agreement
GUARANTY
--------
GUARANTY, dated as of June 30, 1999 made by The Xxxxxxxxxx Corporation,
a Delaware corporation with offices at 0000 Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx
00000 (the "Guarantor"), in favor of Components by Xxxx XxXxx, Inc., a New
Jersey corporation with offices at 00 Xxxx 00xx Xxxxxx, Xxxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (the Company") and Xxxx XxXxx, an individual with an address at 00
Xxxx 00xx Xxxxxx, Xxxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("XxXxx").
WHEREAS, Components Acquisition Corp., a Delaware company (the
"Purchaser") and the Company are parties to a certain Asset Purchase Agreement
dated as of ______________, 1999(the "Asset Purchase Agreement") pursuant to
which the Company agreed to sell and transfer, and Purchaser agreed to purchase
and accept, certain assets of the Company (the "Assets");
WHEREAS, Purchaser and XxXxx are parties to a certain Employment
Agreement dated as of ___________, 1999 (the "Employment Agreement") pursuant to
which Purchaser agrees to employ XxXxx as President and Chief Executive Officer
of Purchaser immediately following the consummation of the transactions
contemplated under the Asset Purchase Agreement and XxXxx agrees to accept such
employment;
WHEREAS, pursuant to the Asset Purchase Agreement and the Employment
Agreement, Purchaser has certain obligations, including, but not limited to, the
payment of certain additional purchase consideration (the "Deferred Purchase
Price"), and the payment of employment compensation, bonuses and perquisites
(the "Employment Compensation"), respectively (the Employment Compensation and
the Deferred Purchase Price, collectively, the "Obligations");
WHEREAS, Guarantor is the sole shareholder of Purchaser;
WHEREAS, as a material inducement to the Company to enter into the
Asset Purchase Agreement and to XxXxx to enter into the Employment Agreement,
Guarantor has agreed to enter into this Guaranty for the benefit of the Company
and XxXxx;
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Guarantor agrees with the Company and XxXxx as follows:
1 All capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to them in the Asset Purchase Agreement.
2 Guarantor hereby unconditionally and absolutely guarantees (as
primary obligor and not as a surety) to the Company and to XxXxx, the prompt
payment and performance, when and as due of each and every Obligation (whether
at stated maturity, by acceleration or otherwise), at the time and place and
otherwise in accordance with the terms of the Asset Purchase Agreement and the
Employment Agreement, respectively, irrespective of the genuineness, validity or
enforceability of any Obligation or of the Asset Purchase Agreement or
44
Employment Agreement, and without regard to any future amendment, modification,
or waiver of any term of the Obligations or of the Asset Purchase Agreement or
the Employment Agreement, notice of which is expressly waived.
3 Guarantor hereby further unconditionally and absolutely guarantees to
the Company and XxXxx that if any of the following representations made in the
Asset Purchase Agreement is materially incorrect as a direct consequence of
fraud on the part of Guarantor, Guarantor shall be liable to the Company and/or
XxXxx for the actual amount of its damages incurred as a proximate result of
such fraud, up to such portion of the Purchase Price as has actually been paid
to the Company:
(1) Purchaser has been duly organized, is validly existing and is in
good standing under the laws of the State of Delaware.
(2) Purchaser has the full corporate power and authority to execute
and deliver the Asset Purchase Agreement and the Employment Agreement and to
consummate the transactions contemplated thereby. All corporate acts and other
proceeding required to be taken by or on the part of Purchaser to authorize such
execution, delivery and consummation have been duly and properly taken. The
Asset Purchase Agreement and the Employment Agreement have been duly executed
and delivered by Purchaser and constitute legal, valid and binding obligations
of Purchaser, enforceable against it in accordance with their respective terms.
The execution and delivery by Purchaser of the Asset Purchase Agreement and the
Employment Agreement will not violate any law or conflict with or result in a
breach of, or default under, or result in the creation of a lien or encumbrance
on any of the properties or assets of Purchaser pursuant to, the Certificate of
Incorporation, By-laws or other organizational documents of the Company, or any
material contract to which the Purchaser is a party or pursuant to which its
properties are bound. No material approval or consent or filing with any
governmental body or other Person is required for the execution and delivery of
the Asset Purchase Agreement or the Employment Agreement by the Purchaser.
(3) There is no action, suit, order, judgment or proceeding pending
or, to the knowledge of Guarantor, threatened against or affecting Purchaser
that, individually or when aggregated with one or more other actions, suits,
orders, judgments or proceedings, has or might reasonably be expected to have a
material adverse effect on Purchaser's ability to perform any of its obligations
under the Asset Purchase Agreement or the Employment Agreement, or any of the
other agreements and instruments to be executed and delivered by Purchaser in
connection therewith.
(4) Purchaser has all funds necessary to pay the Closing Date Payment
Amount and related fees and expenses, and has the financial capacity to perform
all of its other obligations under the Asset Purchase Agreement, the Employment
Agreement and any additional agreements executed and delivered in connection
therewith.
(5) Purchaser and Parent agree that Purchaser shall, for as long as
XxXxx shall be an employee of Purchaser, not conduct any business other than the
Business without the prior written consent of XxXxx.
45
4 It is the express intention of the Guarantor that this Guaranty be
absolute and unconditional in all respects and not dischargeable or affected by
any circumstance whatsoever which may constitute a legal or equitable discharge.
All payments made by the Guarantor hereunder shall be free and clear of any tax,
set-off, counterclaim or deduction of any kind whatsoever.
5 This Guaranty is one of payment and not of collection, and Purchaser
shall not be required to proceed in any manner first against (or make any
demands or give any notices to) the Company or any person, entity or collateral.
The Guarantor expressly waives notice of the acceptance of this Guaranty, and,
to the fullest extent permitted by applicable law, any and all other notices.
6 Guarantor hereby expressly waives, to the fullest extent permitted by
applicable law, diligence, presentment, demand (of payment or otherwise),
protest, notice of acceptance of this Guaranty, and any and all other notices of
any kind whatsoever in connection with this Guaranty, as well as any requirement
that the Company or XxXxx or any other person proceed in any manner first
against, make any demands or give any notices to, exhaust any right, or take any
action, against the Purchaser or any other person.
7 If at any time any payment or property received by the Company and/or
XxXxx on account of any Obligation is rescinded or must otherwise be restored or
returned or is deemed void or voidable, on account of the insolvency or
bankruptcy of the Purchaser, or for any other reason, then the Guarantor's
liability hereunder, with respect to such payment or property received, shall be
immediately reinstated and revived at such time as though such payment or
property had not been made or received. The Guarantor further agrees to
indemnify the Company and/or XxXxx for any damages, losses, costs or expenses
(including, without limitation, reasonable attorneys' fees and disbursements),
incurred by the Company and/or XxXxx in connection with the restoration or
return of any payment as set forth in this Section 7.
8 In addition to the Obligations herein guaranteed, the Guarantor
further agrees to indemnify the Company and XxXxx for any costs or expenses
(including, without limitation, reasonable attorneys' fees and disbursement)
related to the enforcement of the Company's and XxXxx'x rights under the Asset
Purchase Agreement and the Employment Agreement, respectively (including all
costs of collection in connection therewith), or otherwise with respect to the
Obligations, provided, however, that the Company and/or XxXxx has been
successful on the merits or otherwise in its prosecution of any action, suit, or
proceeding brought to enforce their respective rights under the Asset Purchase
Agreement and the Employment Agreement, respectively.
9 This is a continuing Guaranty, which shall continue and remain in
full force and effect and be binding upon the Guarantor, its successors and
assigns, and shall inure to the benefit of the Company and XxXxx, and their
respective heirs, administrators, legal representatives, estate, successors and
assigns, until the full and complete performance by the Purchaser of its
obligations under the Asset Purchase Agreement and the Employment Agreement.
46
10 The Guarantor hereby represents and warrants to the Company and
XxXxx that this Guaranty is the Guarantor's legal, valid and binding obligation,
enforceable against the Guarantor in accordance with its terms.
11 No failure on the part of the Company or XxXxx to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Company or XxXxx
of any right, remedy or power hereunder preclude any other or future exercise of
any other right, remedy or power.
12 In the event that any provision of this Guaranty is declared by a
court of competent jurisdiction, arbitration tribunal, governmental or
administrative body or other entity having jurisdiction to be invalid or
unenforceable, the validity and enforceability of the remaining provisions of
this Guaranty shall remain in full force and effect to the extent feasible in
the absence of the void and unenforceable provision. The Guarantor furthermore
agrees to execute and deliver such amendatory provisions to accomplish lawfully
as nearly possible the goals and purposes of the provision so held to be void or
unenforceable.
13 The Guarantor agrees that any legal action or proceeding against the
Guarantor with respect to this Guaranty may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York, as Purchaser may elect, and by execution and delivery of this
Guaranty, the Guarantor hereby accepts for himself and in respect to his
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. The Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts or any other court in any such
action or proceeding my the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Guarantor, at his address set forth in the first
paragraph of this Guaranty, such service to be deemed effective five (5) days
after such mailing. Nothing herein shall affect the right of the Company or
XxXxx to serve process in any other manner permitted by law or to commence any
legal action or proceeding against the Guarantor in any other jurisdiction. THE
GUARANTOR HEREBY IRREVOCABLY WAIVES TRIAL BY JURY AND ANY OBJECTION, INCLUDING
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS WHICH HE MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY ACTION OR PROCEEDING IN SUCH JURISDICTION.
14 This Guaranty and any dispute relating hereto shall be exclusively
governed by, and construed in accordance with, the internal law of the State of
New York without reference to any conflicts of law principles thereof.
THE XXXXXXXXXX CORP.
-----------------------
47
