EXHIBIT 4.3
** Represents material which has been redacted and will be separately filed with
the Commission pursuant to a Request for Confidential Treatment pursuant to Rule
406 under the Securities Act of 1933, as amended.
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This AMENDMENT NO. 1 to the Stock Purchase Agreement, dated as of
December 8, 2004 (the "AGREEMENT"), by and among DELTA GALIL INDUSTRIES LTD., a
company organized under the laws of the State of Israel ("DELTA"), DELTA GALIL
USA , INC., a Delaware corporation and a wholly owned subsidiary of Delta
("PURCHASER"), and XXXXXX XXXXX, XXXXXXXX XXXXXXXXXX and XXXX XXXXX (the
"SELLING Shareholders"), relating to the purchase by the Purchaser of the shares
of Burlen Corp., a Georgia corporation ("BURLEN" or the "COMPANY").
W I T N E S S E T H
WHEREAS, the Agreement provided for certain post-closing payments from
Purchaser to the Selling Shareholders; and
WHEREAS, the parties desire to amend the Agreement to take into account
the integration of the certain "back-end" operations of the Company and the
Purchaser in areas such as finance, human resources, logistics, information
technology and, potentially, distribution, thus achieving overall efficiencies;
and
WHEREAS, it had been the parties' intention to transfer the Purchaser's
**** business to Burlen, but the parties have subsequently decided not to do so,
and the parties wish to amend the Agreement to compensate the Selling
Shareholders for this decision.
NOW, THEREFORE, the parties hereby agree as follows:
1. Any capitalized terms used but not defined herein shall have the meaning
ascribed to such terms in the Agreement.
2. Section 1.4 shall be deleted in is entirety and replaced with the following:
1.4 PERFORMANCE PAYMENT.
(a) As used herein:
(i) "NET SALES" shall mean net sales, as determined
under U.S. GAAP, for all sales by the Company ***** in all
cases determined consistent with revenue recognition
methodologies employed for the fiscal year ending on December
31, 2004;
(ii) "EBIT" shall mean earnings before interest and
taxes calculated as set forth in ANNEX 1 to the Agreement.
(iii) "MARGIN MINIMUM" shall mean EBIT as a
percentage of Net Sales of at least ***% for the relevant
period.
(iv) "COMBINED SALES" shall mean Net Sales plus net
sales by the Purchaser ***********.
(v) "BASE NET SALES" shall mean $*******
(vi) "BASE COMBINED SALES" shall mean $******
(b) In addition to the Closing Payment, the Selling Shareholders may be
entitled to aggregate consideration in an amount not to exceed $18,000,000 (the
"PERFORMANCE PAYMENT"). A portion of the total Performance Payment shall be
payable based on the attainment of performance targets for each of 2006, 2007,
2008, 2009, 2010 and 2011 as more fully described below. Any Performance Payment
shall be made to the Selling Shareholders pro rata in proportion to their
shareholdings in the Company as set forth on SCHEDULE 2.2(C) to the Agreement.
(c) Any payment of the Performance Payments shall be payable as follows:
75% in cash and 25% in either cash or Ordinary Shares of Delta at Delta's
discretion, subject to applicable restrictions on transfer, if any, to which the
Ordinary Shares issuable at Closing are subject. In addition thereto and in
connection with any such issuance, Delta shall make all such disclosures to the
Selling Shareholders as may be required to be made in order to make the previous
public statements not materially misleading. The number of Ordinary Shares
issuable shall be calculated according to the Fair Market Value. Performance
Payments shall be made by Purchaser to the Selling Shareholders within five (5)
business days after Net Sales and EBIT for the applicable year are finally
determined in accordance with Section 1.5. Notwithstanding anything in the
Agreement to the contrary, Delta shall have no right to pay any portion of any
amount owed to the Selling Shareholders (whether as part of the Closing Payment
or Performance Payments) in Ordinary Shares unless at the time payment in
Ordinary Shares is to be made the Ordinary Shares trade on the Tel Aviv Stock
Exchange.
(d) For each year from 2006 through 2011, each of the Net Sales, EBIT
and Combined Sales for each such year will be compared to the Target Net Sales,
Target EBIT and Target Combined Sales set forth in Table I below. Those amounts
will be analyzed using each of the three methods listed under columns A, B and C
in Table II. In each column, the Performance Payment due will be the aggregate
of the Performance Payment payable in respect of Net Sales, EBIT and Combined
Sales for each relevant year. The method that yields the highest aggregate
payment for such year will be used to calculate the Performance Payment, if any,
to be paid in the aggregate to the Selling Shareholders with respect to such
year.
(e) The Performance Payment may only be paid with respect to any year if
the Net Sales generate a gross margin that meets the Margin Minimum. A grace
amount of an aggregate shortfall of **% of margin may be used over the course of
all of the years (2006 to 2011) for which a Performance Payment is calculable,
as follows: If, in any year, the Selling Shareholders would be entitled to a
Performance Payment but for the fact that the Margin Minimum requirement has not
been met, the Performance Payment will still be payable if the actual EBIT
margin can be increased to the Margin Minimum using the grace amount, until the
aggregate amount of all such utilizations of the grace amount equals **%. For
example, if the actual EBIT margin in one year is ***%, then **% of the grace
amount could be used to reach the Margin Minimum of ***%, leaving ***% of the
grace amount for future use.
TABLE I
----------------- ------------ -------------- -------------- -------------- -------------- -------------- -------------
2006 2007 2008 2009 2010 2011
----------------- ------------ -------------- -------------- -------------- -------------- -------------- -------------
NET SALES TARGET NET ***% of ***% of ***% of ***% of ***% of ***% of
SALES Base Net Base Net Base Net Base Net Base Net Base Net
Sales Sales Sales Sales Sales Sales
------------ -------------- -------------- -------------- -------------- -------------- -------------
MINIMUM $******** $******** $****** $****** $******* $*******
NET SALES
----------------- ------------ -------------- -------------- -------------- -------------- -------------- -------------
----------------- ------------ -------------- -------------- -------------- -------------- -------------- -------------
EBIT TARGET $***** $****** $******* $******* $******** $******
EBIT
------------ -------------- -------------- -------------- -------------- -------------- -------------
MINIMUM $******* $****** $******* $******* $******* $********
EBIT
----------------- ------------ -------------- -------------- -------------- -------------- -------------- -------------
---------------- ------------ -------------- -------------- -------------- -------------- -------------- -------------
COMBINED TARGET ***% of ***% of ***% of ***% of ***% of ***% of
SALES COMBINED Base Base Base Base Base Base
SALES Combined Combined Combined Combined Combined Combined
Sales Sales Sales Sales Sales Sales
------------ -------------- -------------- -------------- -------------- -------------- -------------
MINIMUM $****** $****** $***** $****** $******** $********
COMBINED
SALES
----------------- ------------ -------------- -------------- -------------- -------------- -------------- -------------
TABLE II
--------------------------------------------------------------------------------------------------------------------
A B C
--------------------------------------------------------------------------------------------------------------------
MAXIMUM
PAYMENT FOR
NET SALES $450,000 $600,000 $750,000
Maximum Payment for
Maximum Payment for Net Net Sales * [(Actual Net Maximum Payment for Net
Sales * [(Actual Net Sales Sales minus Minimum Sales* [(Actual Net Sales
minus Minimum Net Net Sales)/ Target Net minus Minimum Net
Sales)/(Target Net Sales Sales minus Minimum Sales)/(Target Net Sales
minus Minimum Net Sales)] Net Sales)] minus Minimum Net Sales)]
PAYMENT
FOR
MINIMUM
NET SALES $187,500 $250,000 $312,500
NO PAYMENT FOR NET SALES BELOW MINIMUM
--------------------------------------------------------------------------------------------------------------------
MAXIMUM
PAYMENT FOR
EBIT $2,400,000 $2,250,000 $2,100,000
Maximum Payment for Maximum Payment for Maximum Payment for EBIT
EBIT * [(Actual EBIT EBIT * [(Actual EBIT *[(Actual EBIT minus
minus Minimum minus Minimum Minimum EBIT)/(Target
EBIT)/(Target EBIT minus EBIT)/(Target EBIT EBIT minus Minimum
Minimum EBIT)] minus Minimum EBIT)] EBIT)]
PAYMENT FOR
MINIMUM
EBIT $1,000,000 $937,500 $875,000
NO PAYMENT FOR EBIT BELOW MINIMUM
--------------------------------------------------------------------------------------------------------------------
MAXIMUM
PAYMENT FOR
COMBINED
SALES $150,000 $150,000 $150,000
Maximum Payment for
Combined Sales*
Maximum Payment for [(Actual Combined Maximum Payment for
Combined Sales* [(Actual Sales minus Minimum Combined Sales * [(Actual
Combined Sales minus Combined Combined Sales minus
Minimum Combined Sales)/Target Minimum Combined
Sales)/(Target Combined Combined Sales minus Sales)/(Target Combined
Sales minus Minimum Minimum Combined Sales minus Minimum
Combined Sales)] Sales)] Combined Sales)]
PAYMENT FOR
MINIMUM
COMBINED
SALES $62,500 $62,500 $62,500
NO PAYMENT FOR COMBINED SALES BELOW MINIMUM
--------------------------------------------------------------------------------------------------------------------
(f) If (I) for any given year the Selling Shareholders were not paid
$3,000,000 in the aggregate pursuant to application of the provisions of Section
1.4(d) of this Agreement and (II) if Net Sales, EBIT or Combined Sales for any
year exceed the
relevant Target for such year (and the Margin Minimum was met or exceeded on
such Net Sales for such year), such excess of Net Sales, EBIT or Combined Sales
may be added to Net Sales, EBIT or Combined Sales for any previous or subsequent
year and the portion of the Performance Payment payable pursuant to application
of the provisions of Section 1.4(d) of this Agreement shall be recalculated. The
Selling Shareholders shall be entitled to payment of an amount equal to the
difference between the recalculated aggregate amount of the Performance Payment
payable to the Selling Shareholders as a result of such recalculation and the
amounts previously paid in respect of application of the provisions of Section
1.4(d) of this Agreement. In no event shall the aggregate amount of the payments
to be made to the Selling Shareholders in respect of any year pursuant to
application of the provisions of Section 1.4(d), whether initially or upon any
recalculation permitted pursuant to this Section 1.4(f), exceed three million
dollars ($3,000,000).For the avoidance of doubt, any recalculation of the
Performance Payment authorized to be made pursuant to this Section 1.4(f) shall
not include Net Sales for any year in the recalculation if the Margin Minimum
for Net Sales for such year has not been met, PROVIDED that Net Sales or
Combined Sales which utilize the grace amount described in Section 1.4(e) shall
be considered as if such Net Sales had met the Margin Minimum.
(g) Notwithstanding anything in this Section 1.4 to the contrary or
otherwise in this Agreement, if the employment of any Selling Shareholder with
Burlen is terminated by Burlen without "Cause" (as such term is defined in such
Selling Shareholder's Employment Agreement to be entered into in connection with
the transactions contemplated hereby (the "EMPLOYMENT AGREEMENT")) or if any
Selling Shareholder terminates his or her employment "For Good Reason" (as such
term is defined in the relevant Employment Agreement), and provided that EBIT
for the full 12-month period ending on the calendar month prior to the effective
date of any such termination are not lower than $12,000,000, Delta shall pay the
Selling Shareholders an amount equal to (A) $18,000,000 minus (B) (i) the
aggregate amount of any Performance Payments previously made by Delta to the
Selling Shareholders, and (ii) any Performance Payments not earned for prior
years due to failure to meet the targets set forth above, such payment upon such
termination being in full satisfaction of the Performance Payment.
(h) On March 15, 2006, the Purchaser shall advance to the Selling
Shareholders an aggregate amount of $1,250,000, pro rata to each Selling
Shareholder in accordance with his or her relative shareholdings in the company
as set forth on Schedule 2.2(c) to the Agreement. The advance will be
non-recourse and will bear interest at 5.0% The advance will be secured by the
Performance Payments due to be paid to the Selling Shareholders with respect to
2007 and 2008. The advance will be repaid by deducting an aggregate of $625,000
from the Performance Payment payable with respect to each of 2007 and 2008, and
if not paid then, to the extent that the Selling Shareholders are entitled to
Performance Payments in respect of any subsequent year, the advance shall be
repaid out of such subsequent Performance Payments.
6. The parties hereby acknowledge that, other than the payments described
herein, neither Delta nor Purchaser shall have any other payment obligations to
the Selling Shareholders under the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
the Stock Purchase Agreement to be duly executed as of this 16 day of February,
2006.
DELTA GALIL INDUSTRIES LTD.
By: /s/ XXXXX XXXXX
---------------
Name: Xxxxx Xxxxx:
Title: Chief Financial Officer
DELTA GALIL USA, INC.
By: /s/ XXXXX XXXXXXX
-----------------
Name: Xxxxx Xxxxxxx
Title: CEO
INDIVIDUAL STOCKHOLDERS:
By: /s/ XXXXXX XXXXX
-------------------
Name: Xxxxxx Xxxxx
By: /s/ XXXXXXXX XXXXXXXXXX
-----------------------
Name: Xxxxxxxx Xxxxxxxxxx
By: /s/ XXXX XXXXX
-----------------------
Name: Xxxx Xxxxx
