EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
January 28, 1999, by and among (i) Supreme International Corporation, a Florida
corporation ("Purchaser"), and (ii) Xxxxxxxxxxx X. Xxxxxx, Xxxxxxx Xxxxxxxxx and
Xxxxxx Guaranty Trust Company of New York, as Trustees of the PEI Trust created
under Par. E. of Article 3 of the Agreement dated November 19, 1985, as amended
January 27, 1986 (collectively, "Seller"),
W I T N E S S E T H :
WHEREAS, Seller owns all of the issued and outstanding shares
of capital stock of Xxxxx Xxxxx International Inc., a New York corporation (the
"Company"), consisting of fifty (50) shares of common stock, without par value
(the "Stock"); and
WHEREAS, Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser, all of the Stock;
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE STOCK
1.1 PURCHASE AND SALE. On the Closing Date (as defined in Section 1.3
hereof) and upon the terms and subject to the conditions of this Agreement,
Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, the
outstanding shares of Stock.
1.2 PURCHASE PRICE. (a) In consideration for the sale of the Stock by
Seller, Purchaser shall pay to Seller the sum of (i) $75,000,000, PLUS (ii) the
Net Working Capital Amount (as defined in Section 1.2(b) hereof), MINUS (iii)
the Net Severance and Bonus Amount (as defined in Section 1.2(c) hereof) (the
"Purchase Price"). On the date hereof, Purchaser shall pay to Seller, by wire
transfer in immediately available funds to an interest-bearing account
designated by Seller for such purpose, an advance against the Purchase Price in
the amount of $5,000,000 (the "Deposit") which shall be non-refundable
(including all interest accrued thereon) except in the event this Agreement is
terminated by Purchaser for the reasons set forth in Sections 7.1(a) or (b)
hereof, by mutual agreement of Purchaser and Seller pursuant to Section 7.1 (c)
hereof or by Seller pursuant to Section 7.1(e) hereof. In the event that the
sale of the Stock contemplated by this Agreement is consummated, all interest
earned on the Deposit will be credited to the Purchase Price.
(b) As used in this Agreement, the term "Net Working Capital
Amount" means the excess of the aggregate amount of the current assets of the
Company (excluding deferred corporate taxes) over the aggregate amount of the
current liabilities of the Company, in each case determined as of the close of
business on the day immediately prior to the Closing Date in accordance with the
past accounting practices of the Company.
(c) Not later than two (2) business days prior to the Closing
Date Purchaser and Seller shall jointly agree in writing upon (i) an estimate of
the Net
Working Capital Amount as of the Closing Date (the "Estimated Net Working
Capital Amount") and (ii) the net after tax cost to the Company (assuming that
the Company pays taxes at a combined federal, state and local corporate income
tax rate equal to 41.3%) of the Additional Severance Agreements and bonuses and
other payments due to the Company's President and Chief Executive Officer in
connection with the consummation of the transactions contemplated hereby which
are to be paid by the Company as provided for in clause (i) of Section 4.7
hereof (the "Net Severance and Bonus Amount"). The Estimated Net Working Capital
Amount and the Net Severance and Bonus Amount so agreed to shall be used to
determine the amount of the Purchase Price (the "Estimated Purchase Price")
payable to Seller at the Closing (as defined in Section 1.3 hereof) as set forth
in clause (d) of this Section 1.2.
(d) On the Closing Date, Purchaser shall pay to Seller, in the
manner set forth in Section 1.3 hereof, the difference between the Estimated
Purchase Price and the Deposit (including all interest accrued thereon from the
date hereof through and including the Closing Date) (the "Balance"), by wire
transfer of immediately available funds to an account designated by Seller in
writing for such purpose at least two (2) business days prior to the Closing
Date.
1.3 CLOSING. The closing of the sale and purchase of the Stock (the
"Closing") shall take place at the offices of Patterson, Belknap, Xxxx & Xxxxx
LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. on the fifth
business day after the satisfaction or waiver (to the extent legally permitted)
of the last of the conditions to be satisfied set forth in Article V hereof, or
such other time and date as may be agreed in writing by the Seller and Purchaser
(the "Closing Date"). At the Closing,
(a) Purchaser shall:
(i) pay to Seller the Balance in immediately
available funds by wire transfer to a payment account designated by Seller;
(ii) deliver to Seller the certificates of an
executive officer of Purchaser described in Sections 5.1(a) and (b) hereof;
(iii) deliver to Seller the opinion of Broad and
Xxxxxx, counsel to Purchaser, in form and content reasonably satisfactory to
Seller and its counsel addressing such legal matters as are customarily covered
by the opinion of a purchaser's counsel in transactions of the type contemplated
by this Agreement; and
(iv) deliver to Seller such other documents as Seller
or Seller's counsel may reasonably request to demonstrate satisfaction of the
conditions and compliance with the covenants of Purchaser set forth in this
Agreement.
(b) Seller shall deliver, or cause to be delivered, to
Purchaser:
(i) one or more stock certificates for the Stock to
be sold by Seller having all requisite stock transfer stamps attached, duly
endorsed for transfer to Purchaser by Seller, or with stock powers attached duly
endorsed for transfer to Purchaser by Seller, together with such other
instruments and documents as may be necessary to transfer Seller's shares of
Stock to Purchaser;
(ii) the certificates of Seller described in
Sections 5.2(a) and (b) hereof;
(iii) the opinion of Patterson, Belknap, Xxxx & Xxxxx
LLP, counsel to Seller, in form and content reasonably satisfactory to Purchaser
and its counsel addressing such legal matters as are customarily covered by the
opinion of a seller's counsel in transactions of the type contemplated by this
Agreement; and
(iv) such other documents as Purchaser or its
counsel may reasonably request to demonstrate satisfaction of the conditions and
compliance with the covenants of Seller set forth in this Agreement.
1.4 POST-CLOSING ADJUSTMENT. As soon as practicable after the Closing
(but in any event within ten (10) business days thereof), Purchaser shall cause
its accountants to calculate the actual Net Working Capital Amount and to
deliver such calculation to Seller. Seller must within five (5) business days of
receipt of same (the "Receipt Date") confirm whether or not it agrees with the
calculation of such actual Net Working Capital Amount and, if it does not, it
will cause accountants selected by Seller, at Seller's cost, to review the same
and to confirm to Purchaser's accountants within ten (10) business days of the
Receipt Date whether or not they agree with such calculation of the actual Net
Working Capital Amount and if they do not, specifying in reasonable detail the
points of disagreement. Purchaser and its accountants will provide Seller's
accountants with full and complete access to the necessary books, records and
working papers. Purchaser and Seller shall then instruct their respective
accountants to seek to resolve the points of disagreement and agree upon the
actual Net Working Capital Amount. If either (i) Seller agrees with Purchaser's
accountants' calculation of the actual Net Working Capital Amount or (ii)
Purchaser's accountants and Seller's accountants agree upon the same (with such
further adjustments as they may agree upon) within twenty (20) business days of
the Receipt Date, the amount so agreed upon shall be the actual Net Working
Capital Amount. If Purchaser's and Seller's accountants do not agree
upon the actual Net Working Capital Amount pursuant to the procedures set forth
above, Purchaser's and Seller's accountants shall jointly select from the "Big
Five" accounting firms a firm of independent public accountants which has not
performed any services since January 1, 1996 for either Purchaser or Seller or
their respective affiliates, to act as an arbitrator (the "Arbitrator") to
determine the actual Net Working Capital Amount. All determinations made by the
Arbitrator shall be final, conclusive and binding with respect to the actual Net
Working Capital Amount. Fees and expenses of the Arbitrator shall be shared
equally by Purchaser and Seller. To the extent that the actual Net Working
Capital Amount (determined in accordance with the procedure set forth in this
Section 1.4 ), is greater than the Estimated Net Working Capital Amount,
Purchaser shall pay to Seller within one (1) business day of the date of such
determination the amount of such excess, together with interest thereon at the
rate of 8% per annum from the Closing Date to the date of payment, by wire
transfer of immediately available funds to an account designated in writing for
such purpose by Seller within two (2) business days prior to the Closing Date.
To the extent that the Estimated Net Working Capital Amount is greater than the
actual Net Working Capital Amount (determined in accordance with the procedure
set forth in this Section 1.4), Seller shall pay to Purchaser within one (1)
business day of the date of such determination the amount of such excess,
together with interest thereon at the rate of 8% per annum from the Closing Date
to the date of payment, by wire transfer of immediately available funds to an
account designated in writing for such purpose by Purchaser within two (2)
business days prior to the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.1 CORPORATE EXISTENCE AND QUALIFICATION OF THE COMPANY; BUSINESS OF
THE COMPANY. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York , and has full
corporate power and authority to own its properties and to conduct its business
as presently conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
will not, individually or in the aggregate, have a material adverse effect on
the financial condition, the results of operations, the business, properties,
assets or liabilities of the Company (a "Material Adverse Effect"). Seller has
delivered to Purchaser true, correct and complete copies of the Certificate of
Incorporation and the Bylaws of the Company.
2.2 NO CONFLICTS. The execution, delivery and performance by Seller of
this Agreement, the consummation of the transactions contemplated hereby and
compliance by Seller with the terms hereof will not (a) violate, conflict with,
cause an event of default under, give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company under, or
result in the creation or imposition of any lien, mortgage, security interest,
charge, encumbrance or restriction (a "Lien") on any asset of the Company or on
the Stock under any agreement, instrument, license, franchise, judgment, order,
law, rule or regulation by which Seller or the Company is bound or to which the
Company's property is subject, except as will not have a Material Adverse Effect
on the Company, or (b) violate or conflict with the Certificate of Incorporation
or Bylaws of the Company.
2.3 GOVERNMENTAL AUTHORIZATIONS. Except as set forth on SCHEDULE 2.3,
the execution, delivery and performance by Seller of this Agreement and the
consummation of the transactions contemplated hereby by Seller do not require
any action by or in respect of, or filing with, any court, arbitrator,
administrative agency or commission or governmental body, agency, official or
authority, domestic or foreign (a "Governmental Entity") except for (a) such as
have been or will be taken or made prior to the Closing and (b) those, the
absence of which would not materially impair or delay the ability of Seller to
consummate the transactions contemplated hereby.
2.4 CAPITALIZATION. The authorized capital stock of the Company
consists solely of two hundred (200) shares of common stock, without par value
(the "Common Stock"), of which fifty (50) shares are issued and outstanding (the
"Issued Stock"). All outstanding shares of Issued Stock have been duly
authorized and validly issued and are fully paid and nonassessable. The Issued
Stock was not issued in violation of any federal or state securities law or any
other legal requirement. Other than this Agreement, there are no outstanding
subscriptions, rights, options, warrants, conversion rights, agreements or other
claims for the purchase or acquisition from the Company or any stockholder of
the Company of any shares of Common Stock or any other securities of the Company
or obligating the Company to issue, repurchase or otherwise acquire any shares
of Common Stock or any other securities of the Company or any securities
convertible into, exercisable or exchangeable for, or otherwise entitling the
holder to acquire any shares of Common Stock or any other securities of the
Company.
2.5 RIGHT TO TRANSFER. Seller now has, and will have at Closing, good
and valid legal title to the Stock and full legal right and power to transfer
and deliver to
Purchaser the Stock in the manner provided in this Agreement, and upon delivery
of the Stock against payment therefor pursuant to the terms of this Agreement,
Purchaser will receive good and valid legal title thereto and full beneficial
ownership thereof, free and clear of all Liens, restrictions, encumbrances and
rights of others of any kind other than those created or permitted by Purchaser.
2.6 BINDING EFFECT. Seller has full power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Seller. The execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby by Seller do not and will
not require the approval of any other party. Assuming the due execution and
delivery of this Agreement by Purchaser, this Agreement constitutes a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium and other
similar laws relating to the enforcement of creditor's rights generally, the
availability of equitable remedies and to general equity principles.
2.7 OTHER EQUITY INTERESTS. Except as set forth on SCHEDULE 2.7
hereto, the Company does not have any direct or indirect equity interest in any
other corporation, partnership, joint venture, limited liability company or
other entity or any commitment to acquire any such equity interest.
2.8 FINANCIAL STATEMENTS, BOOKS AND RECORDS AND ACCOUNTS RECEIVABLE.
(a) Except as set forth on SCHEDULE 2.8(a), the audited
balance sheets of the Company as of December 31, 1997 and 1996 (the "December
Balance Sheets")
and the unaudited balance sheet of the Company as of November 30, 1998 annexed
hereto as SCHEDULE 2.8(a) (collectively the "Balance Sheets") have been prepared
from the books and records of the Company and present fairly in all material
respects the financial position of the Company as of the respective dates
thereof in conformity with generally accepted accounting principles ("GAAP"),
and include all adjustments required for a fair presentation.
(b) Except as set forth on SCHEDULE 2.8(b), the audited
statements of income, stockholders' equity and cash flows of the Company for
each of the three years in the period ended December 31, 1997 (collectively, the
"December Income Statements"), and the unaudited statements of income,
stockholders' equity and cash flows for the Company for the eleven months ended
November 30, 1998 annexed hereto as SCHEDULE 2.8(B) (except for the unaudited
statement of cash flows for the Company for the eleven months ended November 30,
1998 which is not annexed hereto but which will be delivered to Purchaser within
ten (10) days of the date hereof) (collectively, with the December Income
Statements, the "Income Statements" and, together with the Balance Sheets, the
"Financial Statements") have been prepared from the books and records of the
Company and present fairly in all material respects the results of operations of
the Company for the periods covered thereby in conformity with GAAP, and include
all adjustments required for a fair presentation.
(c) The books of account, minute books, stock record books,
and other records of the Company, all of which have been made available to
Purchaser by Seller, are true, correct and complete in all material respects and
have been maintained in accordance with sound business practices. Except as set
forth on SCHEDULE 2.8(c), the minute books of the Company contain true, correct
and complete records of all meetings of, and corporate actions taken by, the
stockholders, the Board of Directors,
and committees of the Board of Directors of the Company, and no meeting of the
stockholders, the Board of Directors or any committee of the Board of Directors
has been held for which minutes have not been prepared and are not contained in
such minute books.
2.9 TAX MATTERS. Except as set forth on SCHEDULE 2.9, the Company has
duly and timely filed or caused to be filed (and prior to the Closing Date, will
duly and timely file or cause to be filed) all federal income tax returns and
all returns and reports and declarations of other material Taxes (as defined
below) ("Returns") required by applicable law to be filed on or before the
Closing Date and, to the knowledge of Seller, such Returns filed prior to the
date hereof were (and such Returns filed hereafter will be) true, correct and
complete in all material respects when filed. The Company has timely paid or,
where payment is not required to be made, has made adequate provision for (or,
with respect to liabilities for Taxes arising after the date hereof, will pay or
make adequate provision for) all Taxes shown to be due on such Returns. The
Company has furnished or made available (and will, prior to the Closing Date,
furnish or make available) to Purchaser (or its representatives) complete and
correct copies of all Returns of Taxes requested by Purchaser to be furnished or
made available. The reserves and provisions for Taxes reflected in the Financial
Statements of the Company are (or will be) adequate for all periods throughout
the Closing Date (treating for this purpose the Closing Date as if it were the
last day of a taxable period) as determined in accordance with generally
accepted accounting principles. Except as set forth on SCHEDULE 2.9: (i) all
Returns (including any amendments to date) have been prepared and filed in good
faith, (ii) all deficiencies asserted or assessments made or actions, suits,
proceedings, or legal claims instituted by any governmental authority concerning
federal income Taxes or other material Taxes of the Company have been fully paid
or
finally settled, (iii) there is no audit or other investigation by any
governmental authority pending as of the date hereof concerning federal income
Taxes or other material Taxes of the Company, (iv) the Company does not have any
outstanding agreement or waiver extending the applicable statutory periods of
limitation on the assessment of federal, state or foreign income Taxes, and the
Returns of such Taxes have been audited (and any adjustments proposed as a
result of any audit have been paid, settled or determined) or the generally
applicable statute of limitations (including any extensions thereof) has
expired, for all periods through December 31, 1994, (v) no election under
Section 341(f) of the Internal Revenue Code of 1986, as amended from time to
time (the "Code") has been or, prior to the Closing Date, shall be made to treat
the Company as a consenting corporation, as defined therein, (vi) there are no
Liens for federal income Taxes or other material taxes upon the assets of the
Company except for Liens for current Taxes not yet due or delinquent, (vii) the
Company has no material unsatisfied obligation to withhold under Section 1445 of
the Code, and (viii) the Company is not a party to any agreement, contract or
arrangement that would result separately, or in the aggregate, in payment of any
"excess parachute payments" within the meaning of Section 280G of the Code.
The Company has been a validly electing S corporation within the
meaning of Code Sections 1361 and 1362 for more than ten years. Seller is, and
has always been, for all periods prior to the Closing Date, a validly electing
"qualified subchapter S trust," within the meaning of Code Section 1361(d)(3).
The Company has never been a member of an "affiliated group," within the meaning
of Code Section 1504(a), or other unitary or combined group of corporations. The
Company has never indemnified any person for Taxes or entered into any tax
sharing agreement. The Company has paid all sales, employment or other
withholding taxes owed, except for amounts not yet due,
but which are reflected on the books and records of the Company.
For purposes of the preceding paragraph the term "Taxes" means
all net income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, licenses, withholding, payroll, employment, excise, severance, stamp,
occupation, property or windfall profits taxes, or other taxes of any kind
whatsoever, together with any interest, fines and any penalties, additions to
tax or additional amounts imposed by any governmental authority, whether
domestic or foreign.
2.10 LEGAL PROCEEDINGS. SCHEDULE 2.10 sets forth a true, correct and
complete list of all pending claims, suits, actions, arbitrations, legal,
administrative or other proceedings, or, to the knowledge of Seller,
governmental investigations, to which the Company is a party or which, to
Seller's knowledge, are specifically applicable to the Company or any of its
properties, assets, operations or business or any of the transactions
contemplated by this Agreement. To Seller's knowledge, (i) no claim, suit,
action, arbitration, proceeding or investigation of the nature or relating to
the matters described in the preceding sentence has been threatened and (ii)
there is no basis for any suit, action, arbitration, proceeding or investigation
of such nature or relating to such matters which could have a Material Adverse
Effect. Except as described on SCHEDULE 2.10 hereto, the Company is not in
default under any judgment, order, writ, injunction or decree of any
Governmental Entity specifically applicable to the Company or any of its
properties, assets, operations or business, and there is no such judgment,
order, writ, injunction or decree of any kind in effect enjoining or restraining
the Company or any director or officer (in such capacity) of the Company from
taking any action of any kind.
2.11 LICENSES, APPROVALS, OTHER AUTHORIZATIONS. The Company possesses
or has been granted all material governmental licenses, permits, approvals,
franchises, registrations and other authorizations of any Governmental Entity
which are required to conduct its business substantially as such business is
presently being conducted (the "Licenses"). All of the Licenses are in full
force and effect, and no proceeding is pending, or to the knowledge of Seller
threatened, seeking the revocation or limitation of any such License.
2.12 LABOR AND EMPLOYEE BENEFIT MATTERS.
(a) SCHEDULE 2.12 contains a true and complete list of each
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and each other employee
benefit plan, welfare plan, program, agreement, policy or arrangement,
sponsored, maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that, together with the Company would be deemed a "single employer"
within the meaning of Section 4001(a)(14) of ERISA, within six years prior to
the Closing Date (the "Plans").
(b) With respect to each Plan, Seller has caused to be
delivered to Purchaser, or will deliver to Purchaser within ten (10) days of the
date hereof, true and complete copies of (i) the Plan documents, if any
(including all amendments thereto), as currently constituted on the date hereof,
(ii) the annual reports and actuarial reports for the last three years, (iii)
the most recent Summary Plan Description and Summary of Material modifications,
if applicable, and all material employee communications for each plan, (iv) any
trust or other funding agreement (including all amendments thereto)
relating thereto as in effect on the date hereof and the latest financial
statements thereof and (v) with respect to each Plan that is intended to be
qualified under Section 401 of the Code, the most recent determination letter
received from the Internal Revenue Service.
(c) Except as disclosed on SCHEDULE 2.12, neither the Company
nor any ERISA Affiliate has any formal plan or commitment, whether legally
binding or not, to create any additional Plan or modify or change any existing
Plan, other than as required by the Code, ERISA or regulations or other
requirements of the Internal Revenue Service or the Department of Labor issued
thereunder.
(d) Except as disclosed on SCHEDULE 2.12, neither the Company
nor any ERISA Affiliate maintains or contributes to or has ever maintained or
contributed to or has any liability to or under any Plan which is subject to
Title IV of ERISA or Section 412 of the Code.
(e) Neither the Company nor any ERISA Affiliate is, or has
ever been, obligated to make contributions to or is, or has ever been, otherwise
subject to a "multiemployer plan" as defined in Section 3(37) of ERISA.
(f) To Seller's knowledge, no prohibited transaction, as
described in Section 406 of ERISA, has occurred with respect to any Plan and no
tax has been imposed pursuant to Sections 4975 or 4976 of the Code. Nor has
there been any breach of duty under ERISA or other applicable law which could
result, directly or indirectly, in any taxes, penalties or other liability to
the Company or any ERISA Affiliate.
(g) Full payment has been made of all amounts which the
Company or any ERISA Affiliate is required to pay to each Plan through the date
hereof and all amounts properly accrued through the Closing Date with respect to
any Plan will be properly recorded in the financial statements of the Company.
(h) To Seller's knowledge, each Plan has been operated and
administered in all material respects in accordance with applicable laws. The
Company knows of no pending, threatened or anticipated claims, litigation,
arbitration or governmental investigation with respect to any Plan. To Seller's
knowledge, each Plan which is intended to be qualified within the meaning of
Section 401(a) of the Code is so qualified and has been qualified from the
effective date of such Plan through the Closing Date..
(i) Except for payments made pursuant to any arrangement,
plan, contract or trust which is disclosed on SCHEDULE 2.12, no Plan provides
benefits with respect to current or former employees of the Company or any ERISA
Affiliate beyond their retirement or other termination of service, except as
otherwise required by law.
(j) With respect to each Plan that is funded wholly or
partially through an insurance policy, there will be no material liability of
the Company or any ERISA Affiliate, as of the Closing Date, under any such
insurance policy or ancillary agreement with respect to such insurance policy in
the nature of a retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
occurring prior to the Closing Date.
2.13 COMPLIANCE WITH LAWS. The conduct of the Business complies in all
material respects with (a) all statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto and all Licenses and (b) the
Certificate of Incorporation and Bylaws of the Company. Except as set forth on
SCHEDULE 2.13, the Company has not received notice of any alleged violation of
any statute, law, regulation, ordinance, rule, judgment, order, decree or
License applicable thereto or to its properties from any Governmental Entity or
other person and Seller has no knowledge of any such material violation.
2.14 INSURANCE. The Company maintains insurance policies with
insurers, in such amounts and against such risks of the Company as are
customary, reasonable and appropriate for its business and its assets and which
are consistent with prudent industry practice. The Company is included as an
insured party under such policies, with full rights as loss payee (provided that
certain policies designate certain persons or entities as additional insureds).
SCHEDULE 2.14 lists and describes briefly all policies of liability, theft,
fire, title, workers' compensation and other forms of insurance and surety bonds
insuring the Company or the employees, properties, assets and business of the
Company. All policies listed in SCHEDULE 2.14 are in full force and effect; no
such policy or the future proceeds thereof has been assigned to any other person
(provided that certain policies designate certain persons or entities as
additional insureds); and all premiums and other payments due under or on
account of any such policy have been paid except where the failure to make such
payment would not result in the termination of any such policy.
2.15 CONTRACTS. Except as set forth on SCHEDULE 2.15, the Company is
not a party to any: (i) agreement which restricts the ability of any officer,
director or employee
of the Company to compete with the Company; (ii) contract, plan or arrangement,
including but not limited to plans relating to pension, retirement, deferred
compensation or incentive compensation, to which any of the directors or
officers of the Company is a party or in which any of such directors or officers
participates, except for such contracts, plans or arrangements as are available
to salaried employees generally at one or more locations of the Company; (iii)
indenture, mortgage, note, installment obligation, agreement or other instrument
relating to the borrowing of money in excess of $50,000 by the Company; or (iv)
other agreement (other than contracts for the purchase or sale of goods or
services) which (A) is not terminable by the Company on ninety or fewer days'
notice at any time without penalty, (B) has a remaining term, as of the date of
this Agreement, of over one year in length of obligation on the part of the
Company and (C) involves the receipt or payment by the Company, subsequent to
the date of this Agreement, of more than $100,000. The Company has delivered or
otherwise made available to Purchaser true and correct copies of all of the
agreements set forth on SCHEDULE 2.15. SCHEDULE 2.15 sets forth a true and
correct summary of all amounts that would be payable upon the termination of
employment by the Company to the non-officer employees of the Company pursuant
to the Company's existing severance policy (the "Severance Policy"). There is
not, under any of the agreements or other obligations specified on SCHEDULE
2.15, any event of default or event which, with or without notice or lapse of
time or both, would constitute an event of default on the part of the Company
except where such event of default would not have a Material Adverse Effect.
2.16 ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth in SCHEDULE 2.16, to the knowledge of
Seller,
the Company is in material compliance with all applicable Environmental Laws
except for Environmental Laws which, if not complied with, would not have a
Material Adverse Effect. Except as set forth in SCHEDULE 2.16, the Company has
not received any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the Company
is not in such full compliance.
(b) Except as disclosed on SCHEDULE 2.16, there is no material
Environmental Claim pending or, to Seller's knowledge, threatened against the
Company.
(c) "Environmental Claim" means any notice (written or oral)
by any person or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, clean-up costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (i)
the presence, or release into the environment of, any Materials of Environmental
Concern at any location, whether or not owned by the Company or (ii)
circumstances forming the basis of any violations, or alleged violation, of any
Environmental Laws.
(d) "Environmental laws" means all federal, state, local and
foreign laws and regulations relating to pollution or the protection of human
health or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), including, without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of
Environmental Concern.
(e) "Materials of Environmental Concern" means chemicals,
biologicals, pollutants, contaminants, wastes (including without limitation
medical waste products), toxic substances, radioactive substances, petroleum and
petroleum products.
2.17 PROPERTIES. Except as disclosed on SCHEDULE 2.17 and except for
property and assets sold since December 31, 1997 in the ordinary course of
business consistent with past practice, the Company has good title to, or in the
case of leased property valid leasehold interests in, all personal property and
assets (whether tangible or intangible) reflected on the December Balance Sheets
or acquired after December 31, 1997. The Company has good and marketable fee
title to, or in the case of leased real property has valid leasehold interests
in, all real property reflected on the December Balance Sheets or acquired after
December 31, 1997 and none of such property or assets (whether real or personal)
is subject to any Liens, except Liens for Taxes not yet due. The buildings,
plants, structures, fixtures and equipment of the Company are structurally
sound, are in good operating condition and repair, and are adequate for the uses
to which they are being put, and none of such buildings, plants, structures,
fixtures or equipment is in need of maintenance or repairs except for ordinary,
routine maintenance or repairs that are not material in cost or nature. SCHEDULE
2.17 sets forth a true, correct and complete list of all of the real property
interests owned or leased by the Company. The Company has the legal right to
possess and quietly enjoy such real property and has received no notice from any
person asserting any claim or right inconsistent therewith. All of such real
property is zoned for the purposes for which it is currently being used, and,
the Company has legal and valid occupancy permits and other required licenses or
governmental approvals for all of such real property and the
uses being made thereof. None of the foregoing real property is located in a
flood zone as designated by the U.S. Department of Housing and Urban Development
or is the subject of any pending, or to the knowledge of Seller threatened,
condemnation or eminent domain proceeding.
2.18 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.18 sets forth a true, correct and complete list
of all trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, company names, patents, design patents, copyright
registrations and copyrights and pending applications therefor, in each case
which are owned by the Company or used in or required for the business of the
Company as currently being conducted (collectively, the "Intellectual Property
Rights"). Except as disclosed on SCHEDULE 2.18, the Company is the sole and
exclusive owner of, with all right, title and interest in and to (free and clear
of any Lien) the Intellectual Property Rights described on SCHEDULE 2.18 and has
sole and exclusive rights, without being contractually obligated to pay any
compensation to any third party in respect thereof, to the use thereof or the
material covered thereby in connection with its business. Except as set forth on
SCHEDULE 2.18, the Company has not granted any licenses or other rights to the
Intellectual Property Rights to any other person and no other person has granted
to the Company any licenses or other rights to the Intellectual Property Rights.
The Company has delivered or otherwise made available to Purchaser true and
correct copies of each such license or other agreement. Each such license
granted to the Company is valid and binding and the intellectual property used
by the Company pursuant to such license will be available to the Company on
terms and conditions after the Closing which are identical to the terms and
conditions in force prior to the Closing. Except as set forth on
SCHEDULE 2.18, the Company is not aware of any breach under any such license
agreement which could have a Material Adverse Effect. Except as set forth on
SCHEDULE 2.18, there are no interferences, oppositions, cancellations or other
contested proceedings pending, or to the knowledge of Seller threatened, in the
United States Copyright Office, the United States Patent and Trademark Office or
any Federal, state or local court or before any Governmental Entity, relating to
any registration, grant, license or pending application with respect to any
Intellectual Property Rights.
(b) Except as set forth on SCHEDULE 2.18, (i) the Company has
not been sued or charged or been a defendant in any claim, suit, action or
proceeding which involves a claim of infringement of any Intellectual Property
Rights, (ii) there are no other claims that the Company is infringing any
existing patent, trademark or copyright or any basis for any such claim, without
regard to whether any such patent, trademark or copyright is ultimately found to
be valid, (iii) to the knowledge of Seller, there are no continuing
infringements by any other person or persons of the Intellectual Property Rights
and (iv) to the knowledge of Seller, the use of the Intellectual Property Rights
in connection with the business of the Company, as currently being conducted,
does not infringe the patent, trademark, copyright or any other right of any
third party.
2.19 BANK ACCOUNTS. SCHEDULE 2.19 sets forth a true, correct and
complete list of each bank at which the Company has an account or safe deposit
box and the address of each such bank, the number of such account or box and the
name of each individual authorized to draw on or have access thereto.
2.20 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, except as
set forth on SCHEDULE 2.20, the Company has conducted its business in the
ordinary course
and maintained its records and books of account in reasonable detail which
accurately and fairly reflect the transactions of the Company in all material
respects. Since December 31, 1997 there has not been, except as disclosed on
SCHEDULE 2.20:
(a) Any adverse change in the nature of the Company's
business, the results of the Company's operations, the Company's assets, the
Company's financial condition, or the manner of conducting the Company's
business, other than immaterial changes in the ordinary course of business;
(b) Any damage, destruction or casualty loss (whether or not
covered by insurance) adversely affecting the Company's business, the results of
operations, the assets or the financial condition of the Company or its ability
to carry on its operations substantially as presently conducted;
(c) Any declaration, setting aside or payment of dividends or
other distributions in respect of the Stock;
(d) Any entering into of any employment agreement, or any
increase in the compensation payable, or to become payable, by the Company to
any of its officers, employees, agents or consultants over the rates payable at
December 31, 1997, except for increases in the ordinary course of business;
(e) Any issuance of securities of the Company, including
options, warrants or other agreements evidencing or requiring such issuance;
(f) Any amendment or termination of, default by the Company
or, to
the knowledge of Seller, default by any other party under, any material
contract, agreement or license to which the Company is a party;
(g) Any material labor dispute or collective labor negotiation
involving the Company;
(h) Any discharge or satisfaction of any Lien, encumbrance,
obligation or liability (accrued, absolute, fixed or contingent) of the Company
except in the ordinary course of business;
(i) Incurrence by the Company of any obligation or liability
(accrued, absolute, fixed or contingent) except current liabilities incurred,
and obligations entered into, in the ordinary course of business and consistent
with prior practice;
(j) Institution of any severance, retirement, bonus, stock
option, profit sharing pension plan or similar agreement or arrangement or
material changes made in any such existing plans or agreement or arrangement of
the Company, other than severance or bonus arrangements with employees of the
Company entered into in the ordinary course of business consistent with past
practices or as otherwise specifically contemplated hereby;
(k) Announcement or initiation of any general increase in
compensation, bonus, insurance or employee benefits involving employees or
consultants of the Company;
(l) Sale or disposition (other than inventory in the ordinary
course of
business), or lease of any property of the Company or mortgage, pledge, or grant
an imposition of any Lien on any asset or property of the Company; or
(m) Any amendment to the Certificate of Incorporation or
bylaws of the Company.
2.21 FINDER'S FEES. Except as set forth on SCHEDULE 2.21, there is no
investment banker, broker, finder or other intermediary which has been retained
by Seller or the Company or is authorized to act on behalf of Seller or the
Company who would have a claim to any fee or commission from the Company, Seller
or Purchaser or any of their respective affiliates in connection with the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
3.1 ORGANIZATION, GOOD STANDING AND AUTHORITY. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, with all requisite corporate power and authority to
perform its obligations under this Agreement.
3.2 DUE AUTHORIZATION, ENFORCEABILITY AND NO CONFLICTS. The
execution, delivery and performance of this Agreement has been duly authorized
by all necessary
corporate action on behalf of Purchaser. Assuming the due execution and delivery
of this Agreement by Seller, this Agreement constitutes a valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to the enforcement of creditors' rights
generally, the availability of equitable remedies and to general equity
principles. The execution, delivery and performance by Purchaser of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by Purchaser with the terms hereof will not violate, conflict with,
cause an event of default under, give rise to a right of termination,
cancellation or acceleration of any right or obligation of Purchaser under, or
result in the creation or imposition of any Lien on any asset of Purchaser
under, any agreement, license, franchise, instrument, judgment, order, law, rule
or regulation by which Purchaser is bound or to which any of Purchaser's
properties is subject, except where such violation, conflict, event of default
or right of termination, cancellation or acceleration would not affect or delay
the ability of Purchaser to consummate the transactions contemplated hereby.
3.3 GOVERNMENTAL AUTHORIZATIONS. Except as set forth on SCHEDULE 3.3,
the execution, delivery and performance by Purchaser of this Agreement and the
consummation of the transactions contemplated hereby by Purchaser do not require
any action by or in respect of, or filing with, any Governmental Entity, except
(a) such as have been or will be taken or made prior to the Closing and (b)
those, the absence of which would not materially impair or delay the ability of
Purchaser to consummate the transactions contemplated hereby.
3.4 FINDER'S FEES. Except as set forth on SCHEDULE 3.4, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is
authorized to act on behalf of Purchaser who would have a claim to any fee or
commission from the Company, Seller, or Purchaser or any of their respective
Affiliates in connection with the transactions contemplated by this Agreement.
3.5 LITIGATION. There are no actions, suits, proceedings,
arbitrations or investigations, either at law or in equity, or before any
Governmental Entity, of any kind now pending or, to the knowledge of Purchaser,
threatened against Purchaser which could impair or delay the ability of
Purchaser to consummate the transactions contemplated hereby.
3.6 INVESTMENT REPRESENTATION. Purchaser is acquiring the Stock for
its own account for the purpose of investment and not with a view to the
distribution thereof. Purchaser acknowledges that the sale of the Stock has not
been registered under the Securities Act of 1933, as amended, or under any state
or foreign securities laws (together, "Securities Laws") and that the Stock may
not be sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of without registration under applicable Securities Laws, pursuant to
an exemption therefrom or in a transaction not subject thereto.
ARTICLE IV
COVENANTS
4.1 COVENANTS OF SELLER RELATING TO CONDUCT OF BUSINESS. During the
period from the date of this Agreement and continuing until the Closing or the
earlier termination of this Agreement, Seller agrees that, unless otherwise
consented to in writing by Purchaser;
(a) ORDINARY COURSE. Seller shall cause the Company to conduct
its business in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing:
(i) Seller shall cause the Company to maintain the
business records of the Company in substantially the same
manner as presently maintained and use all reasonable efforts
to preserve intact the present business organizations of the
Company;
(ii) Seller shall, and shall cause the Company to, use
reasonable commercial efforts to keep available the services
of employees, consultants and independent contractors to the
extent necessary to carry on the operations of the Company as
currently conducted, and shall not change the compensation of
any such employee, consultant or independent contractor,
except changes (a) in the ordinary course of business and
consistent with past practice, or (b) pursuant to the
extension of the duration of the agreements listed on SCHEDULE
4.1(a)(ii) (the "Additional Severance Agreements"); and
(iii) Seller shall, and shall cause the Company to, use
reasonable commercial efforts to preserve the relationships of
the Company with customers, suppliers and others having
business dealings with the Company as of the date hereof;
(iv) Seller shall cause the Company not to issue any
shares of
its capital stock, effect any stock split or otherwise change
its capitalization as it existed on the date hereof, grant,
confer or award any option, warrant, conversion right or other
right to acquire any shares of its capital stock, or adopt any
new employee benefit plan (including any stock option, stock
benefit or stock purchase plan) or amend any existing employee
benefit plan in any material respect, except for changes which
are less favorable to participants in such plans or to the
extent required by law;
(v) Seller shall cause the Company not to enter into
any contract, equipment lease, licence, or sublicense (or
series of related contracts, equipment leases, licenses or
sublicenses) or any renewal thereof except, in each case, in
the ordinary course of business consistent with past practice;
(vi) Seller shall cause the Company not to enter into
any real estate contract, real estate lease or real estate
sublease;
(vii) except for borrowings in the ordinary course of
business under lines of credit existing as of the date hereof,
Seller shall cause the Company not to issue, incur or amend
the terms of any indebtedness for borrowed money or guarantee
any such indebtedness;
(viii) Seller shall cause the Company not to make any
capital expenditures or acquisitions;
(ix) Seller shall cause the Company not to make any
capital investment in, any loan to, or any acquisition of the
securities or assets of any other person (or series of related
capital investments, loans and acquisitions) except, in each
case, in the ordinary course of business;
(x) other than in the ordinary course of business
consistent with past practice, Seller shall cause the Company
not to transfer, lease, license, sell, mortgage, pledge,
encumber or otherwise dispose of any of its property or
assets;
(xi) Except as set forth on SCHEDULE 4.1(a)(xii),
Seller shall cause the Company not to grant any license or
sublicense of any rights under or with respect to any of its
existing or pending patents, trademarks, trade names, service
marks, copyrights, software or trade secrets or modify the
terms of any existing such license or sublicense;
(xii) Seller shall cause the Company not to enter into
any employment contract or collective bargaining agreement,
written or oral, or modify the terms of any existing such
contract or agreement;
(xiii) Seller shall cause the Company not to pay,
discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or
otherwise), except the payment, discharge or satisfaction of
liabilities or obligations, in each case, arising in the
ordinary course of business consistent with past practice or
in accordance with the terms thereof as in effect as of the
date hereof;
(xiv) Seller shall cause the Company not to voluntarily
grant its consent to any assignment of the Agreements (or
sublicenses granted thereunder) between the Company and each
of Xxxxxx Corporation ("Xxxxxx"), Davco Industries, Inc.
("Davco") or Europe Craft Imports, Inc. ("ECI") or to any
change in control involving any of Xxxxxx, Davco or ECI, in
each case without the prior consent of Purchaser; and
(xv) Seller shall not cause the Company to commit to
do any of the foregoing.
(b) EXCLUSIVITY. Seller shall not, nor shall Seller authorize
or permit the Company or any of the Company's officers, directors or employees
or any investment banker, attorney, accountant or other representative retained
by Seller or the Company to, solicit or encourage (including by way of
furnishing information), or maintain discussions or negotiations, or take any
other action to facilitate, any inquiries or the making of any proposal,
relating to the sale, transfer or disposal of the Stock or the assets of the
Company (other than inventory sold to customers in the ordinary course of
business consistent with past practice), other than in connection with the
transactions contemplated by this Agreement ; PROVIDED, HOWEVER, that nothing
contained in this Agreement shall prevent Seller or the Company from engaging in
any discussions or negotiations or providing any information, in response to a
BONA FIDE written acquisition proposal received after the date hereof that was
not solicited by Seller or the Company after the date hereof if and only to the
extent that Seller concludes in good faith (after consultation with its
financial advisor) that such acquisition proposal is reasonably capable of being
completed, taking into account all legal, financial, regulatory and other
aspects of the proposal, and would, if consummated, result in a transaction in
which the aggregate value of the consideration is not less than $2,000,000
greater than the Purchase Price (any such more favorable acquisition proposal
being referred to in this Agreement as a "Superior Proposal"). Seller shall
promptly advise Purchaser orally and in writing of any such discussions,
inquiries or proposals.
4.2 ACCESS TO INFORMATION. Seller shall cause the Company to provide
Purchaser all financial and tax information and financial statements and tax
returns related to the Company, make available to Purchaser and its agents and
representatives such other contracts, leases, documents, books, records and
other information relating to the legal and business affairs and financial
condition of the Company, and make available to Purchaser such personnel, agents
and representatives of the Company, as shall be reasonably requested from time
to time by Purchaser in order for Purchaser to complete its investigation of the
Company. The confidentiality agreements listed on SCHEDULE 4.2 hereto shall
remain in full force and effect until the Closing and shall survive any
termination of this Agreement.
4.3 LEGAL CONDITIONS TO CLOSING. Each of Purchaser and Seller will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to the Closing.
4.4 THIRD PARTY CONSENTS. Seller shall use commercially reasonable
efforts to obtain all consents from third parties which are required for the
transfer of the Stock or the operation of the Company's business after the
Closing.
4.5 XXXX-XXXXX-XXXXXX. Seller and Purchaser shall, as soon as
practicable after the date hereof, file Notification and Report Forms under the
Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 0000 (xxx "XXX Xxx") with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and shall use reasonable efforts to respond as
promptly as practicable to all inquiries received from the FTC or the Antitrust
Division for additional information or documents.
4.6 MAINTENANCE OF PRESTIGE OF XXXXX XXXXX TRADEMARK. Purchaser
acknowledges that upon establishing the PEI Trust, Xxxxx Xxxxx asked Seller to
consider carefully that the business carried on by the Company was his personal
creation and represented an artistic statement and style about which he cared
deeply. Purchaser covenants that it will maintain the reputation of the "Xxxxx
Xxxxx" trademark and related marks as high-image marks and will use commercially
reasonable efforts to sell high-quality products consistent with a prestigious
xxxx primarily to boutiques, specialty shops and better department stores.
4.7 BONUS AND SEVERANCE PAYMENTS. It is understood and agreed that the
Company shall be solely responsible for (i) the payment of all amounts due under
the Additional Severance Agreements and all bonuses and other payments due to
the Company's President and Chief Executive Officer in connection with the
consummation of the transactions contemplated hereby and (ii) the payment of all
severance and other amounts due to the other employees of the Company pursuant
to arrangements in effect on the date hereof, as set forth on SCHEDULE 2.15,
including, but not limited to the Severance Policy.
4.8 COBRA. On and after the Closing Date, Purchaser shall be
responsible for providing health care continuation coverage, and any notices
related thereto, as
required by Section 4980B of the Code and regulations thereunder, to employees
and former employees (and their spouses and dependents) of the Company who were
covered by the Company's health plan prior to the Closing and who lose or have
lost health care coverage.
4.9 TAX MATTERS.
(a) The Company shall prepare and file any required Return for
any taxable period ending on or before the Closing Date and that is due on or
before the Closing Date. Purchaser shall cause the Company to prepare and file
all required Returns due after the Closing Date; provided, however, any such
Return that relates to a period ending on or prior to the Closing Date shall not
be filed without the review and consent of Seller.
(b) Each of Purchaser and Seller, at no cost to the other,
shall (i) furnish or cause to be furnished to the other, upon request, as
promptly as practicable, such information (including access to books and
records) and assistance (including making available personnel familiar with such
matters) relating to the Company as is reasonably necessary for the preparation
and filing of any Return, report, statement or for the preparation for any audit
and for the prosecution or defense of any claim, suit or proceeding relating to
any proposed adjustments of Taxes and (ii) use their best reasonable efforts,
upon request, to obtain any certificate or other document from any taxing
authority, customer of the Company or any other person as may be necessary to
mitigate, reduce or eliminate any Taxes that would otherwise be imposed with
respect to the Company. Unless required by any taxing authority, Purchaser shall
not file any amended tax return with respect to any returns of the Company which
were filed before
the Closing Date without the consent of Seller.
(c) If a claim shall be made by any taxing authority which, if
successful, would result in an indemnity payment by Seller or an additional
payment of Taxes by Seller (a "Tax Claim"), or if an audit or administrative
proceeding is commenced by any taxing authority with respect to Taxes that could
give rise to a Tax Claim (a "Tax Audit"), Seller shall have the right, at its
option, upon timely notice to Purchaser, to assume and control the conduct of
any such Tax Audit and the defense of any suit, action or proceeding with
respect to any such Tax Claim at its own expense and with its own counsel
(without prejudice to the right of Purchaser to participate at its own expense
through counsel of its own choosing). If Seller has indemnification or payment
responsibility for less than all of the Taxes which are the subject of the Tax
Audit or Tax Claim, Seller and Purchaser shall jointly control the conduct of
such Tax Audit or Tax Claim, each acting in good faith. Purchaser and Seller
shall cooperate in the defense of any Tax Audit or Tax Claim as provided herein,
and each shall keep the other informed of all material developments and events
relating to such Tax Audit or Tax Claim, and shall consider in good faith all
requests made by the other in connection with the contest.
(d) In any case in which Seller is entitled to and elects to
control the contest, as provided above, Seller, at its sole option may pursue or
forego any and all administrative appeals, proceedings, hearings, and
conferences with the taxing authority with respect to any Tax Claim; may, at its
sole option, either pay the Taxes claimed and xxx for a refund where applicable
law permits such refund suits, or may contest the Tax Claim in any permissible
manner, and prosecute such contest to a determination in court of initial
jurisdiction, and to determination in an appellate court,
and may settle the Tax Claim at any stage in the judicial process; provided,
however, that Seller may not do so without the consent of Purchaser, which
consent may not be unreasonably withheld.
ARTICLE V
CONDITIONS TO OBLIGATIONS
5.1 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of Seller to
sell the Stock pursuant to the provisions of this Agreement shall be subject to
the satisfaction at or before the Closing of the following conditions, which may
be waived (to the extent legally permitted) by Seller:
(a) Purchaser shall have performed and complied in all
material respects with its covenants and agreements contained herein and Seller
shall have received a certificate to this effect from an executive officer of
Purchaser;
(b) The representations and warranties of Purchaser contained
in Article III of this Agreement shall be true, correct and complete in all
respects (in the case of any representation or warranty containing a materiality
qualification) or in all material respects (in the case of any representation or
warranty without any materiality qualification) at and as of the Closing Date as
if made at and as of such date, and Seller shall have received a certificate to
this effect from an executive officer of Purchaser;
(c) All necessary approvals, consents and releases shall have
been obtained from any Governmental Entity whose approval, consent or release is
necessary for the consummation of the transactions contemplated hereby;
(d) Seller shall have received the opinion of Broad and
Xxxxxx, counsel to Purchaser, contemplated by Section 1.3(a)(iii) hereof; and
(e) The waiting period applicable to the consummation of the
purchase of the Stock by Purchaser under the HSR Act shall have expired or been
earlier terminated.
5.2 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligation of Purchaser
to purchase the Stock from Seller pursuant to the provisions of this Agreement
shall be subject to the satisfaction at or before the Closing of the following
conditions, which may be waived (to the extent legally permitted) by Purchaser:
(a) Seller shall have performed and complied in all material
respects with its covenants and agreements contained herein; provided, however,
that any change in the business relationship between the Company and Xxxxxx,
Davco or ECI arising as a result of the activities referred to in Section
4.1(a)(xiv) hereof shall not be deemed to be a breach of any of the covenants of
Seller contained herein, and Purchaser shall have received a certificate to this
effect from Seller;
(b) The representations and warranties of Seller contained in
Article ll of this Agreement shall be true, correct and complete in all respects
(in the case of any representation or warranty containing a materiality
qualification) or in all material respects (in the case of any representation or
warranty without any materiality qualification) at and as of the Closing Date as
if made as of such date; provided, however, that any change in the business
relationship between the Company and
Xxxxxx, Davco or ECI arising as a result of the activities referred to in
Section 4.1(a)(xiv) hereof shall not be deemed to be a breach of any of the
representations and warranties of Seller in Article II of this Agreement, and
Purchaser shall have received a certificate to this effect from Seller;
(c) Purchaser shall have received the opinion of Patterson,
Belknap, Xxxx & Tyler LLP, counsel to the Seller, contemplated by Section
1.3(b)(iii) hereof;
(d) All necessary approvals, consents and releases shall have
been obtained from any Governmental Entity whose approval, consent or release is
necessary for the consummation of the transactions contemplated hereby; and
(e) The waiting period applicable to the consummation of the
purchase of the Stock by Purchaser under the HSR Act shall have expired or been
earlier terminated.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify
Purchaser and its affiliates and their respective officers, directors,
employees, stockholders, agents and representatives against, and agrees to
defend and hold them harmless from, any loss, liability, claim, judgment,
settlement, award, penalty, damage, cost or expense (including reasonable
attorneys' fees and expenses) (a "Loss"), as incurred, for or on account of or
arising from or in connection with or otherwise with respect to:
(a) any breach (in the case of any representation or warranty
containing a materiality qualification) or material breach (in the case of any
representation or warranty without any materiality qualification) by Seller of
any of its representations or warranties contained in this Agreement (including
the Schedules hereto) or
(b) any material breach by Seller of any of its covenants or
agreements contained in this Agreement,
PROVIDED, HOWEVER, that Seller shall not have any liability pursuant to clause
(a) of this Section 6.1 unless the aggregate of all Losses for which Seller
would, but for this proviso, be liable, exceeds on a cumulative basis, One
Hundred Thousand Dollars ($100,000), in which case Seller shall be liable for
all Losses in excess thereof; PROVIDED, HOWEVER, that notwithstanding anything
contained herein to the contrary, in the absence of fraud, the Seller's
aggregate liability pursuant to this Section 6.1 shall not exceed $8,000,000.
6.2 PROCEDURE FOR THIRD PARTY CLAIMS. (a) In order for Purchaser to be
entitled to any indemnification provided for under this Article VI in respect
of, arising out of or involving a claim made by any person not a party hereto (a
"Third Party Claim"), Purchaser must notify Seller in writing of the Third Party
Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent Seller
actually shall have been prejudiced as a result of such failure (except that
Seller shall not be liable for any expenses incurred during the period in which
Purchaser failed to give such notice). Thereafter, Purchaser shall deliver to
Seller, within five business days' time after Purchaser's receipt thereof,
copies of all
notices and documents (including court papers) received by Purchaser relating to
the Third Party Claim.
(b) If a Third Party Claim is made against Purchaser or the
Company, Seller will be entitled to participate in the defense thereof and, if
it chooses, to assume the defense thereof at its own cost and expense with
counsel selected by Seller and reasonably satisfactory to Purchaser. Should
Seller elect to assume the defense of a Third Party Claim, Seller will not be
liable to Purchaser for any legal expenses subsequently incurred by Purchaser in
connection with the defense thereof unless Purchaser shall have reasonably
determined that there may be one or more defenses which are available to it
which are different from or in addition to those available to Seller. If Seller
assumes such defense, Purchaser shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by Seller, it being understood that Seller shall control such
defense. Seller shall be liable for the fees and expenses of counsel employed by
Purchaser for any period during which Seller has not assumed the defense thereof
(other than during any period in which Purchaser shall have failed to give
notice of the Third Party Claim as provided above). If Seller chooses to defend
or prosecute a Third Party Claim, all of the parties hereto shall cooperate in
the defense or prosecution thereof. Such cooperation shall include the retention
and (upon Seller's request) the provision to Seller of records and information
which are reasonably relevant to such Third Party Claim, and making employees,
consultants and independent contractors available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder and to provide testimony. If Seller chooses to defend or prosecute any
Third Party Claim, Seller shall not agree to any settlement, compromise or
discharge of such Third Party Claim without the prior written consent of
Purchaser,
unless such settlement, compromise or discharge provides solely for monetary
relief and the full and complete release of Purchaser is the result thereof.
Whether or not Seller shall have assumed the defense of a Third Party Claim,
Purchaser shall not admit any liability with respect to, or settle, compromise
or discharge, such Third Party Claim without Seller's prior written consent. If
Seller does not elect to control or defend a Third Party Claim, or after so
electing does not actively contest and defend the same in good faith, Purchaser
shall be entitled to contest, defend and/or settle such Third Party Claim on
such terms and with such counsel as Purchaser deems appropriate, with the
consent of Seller which shall not be unreasonably withheld or delayed, and at
the cost and expense of Seller.
6.3 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to
indemnify Seller and the Company and their respective officers, directors,
employees, stockholders, agents and representatives against, and agrees to
defend and hold them harmless from any and all legal fees and disbursements
incurred in connection with any lawsuit, adversary proceeding, contested matter
or other legal action or proceeding brought against any of them in connection
with the Company's failure to grant its consent to the transactions described in
Section 4.1(a)(xiv) hereof (a "Consent Dispute"). In the event of a Consent
Dispute, Seller must notify Purchaser in writing of the Consent Dispute;
PROVIDED, HOWEVER, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent Purchaser actually shall
have been prejudiced as a result of such failure (except that Purchaser shall
not be liable for any legal fees and disbursements incurred in connection with
such Consent Dispute during the period in which Seller failed to give such
notice). Seller shall be entitled to conduct and control the defense of the
Consent Dispute with counsel selected by Seller and reasonably satisfactory to
Purchaser, it being understood and
agreed that the firm of Wachtell, Lipton, Xxxxx & Xxxx is reasonably acceptable
to Purchaser for this purpose.
6.4 EXCLUSIVITY OF REMEDIES. The remedies of any party hereto for
breaches by another party of any representation, warranty, covenant or agreement
hereunder, or otherwise arising out of any matter pertaining hereto, shall, in
the absence of fraud, be limited to the right of indemnification provided in
this Article VI, and, in the absence of fraud, such right of indemnification
shall be exclusive of any and all other rights or remedies which might be
available to a party upon the occurrence of any such breach or with respect to
such other matter whether such other right or remedy would otherwise be
available at law or in equity.
ARTICLE VII
TERMINATION
7.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Purchaser, on the one hand, or Seller, on the
other hand, if a material breach of any provision of this Agreement has been
committed by the other party and such breach has not been cured or waived by the
party adversely affected by such breach;
(b) (i) by Purchaser if any of the conditions in Section 5.2
has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes
impossible (other than through the failure of Purchaser to comply with its
obligations under this Agreement) and Purchaser has not waived such condition on
or before the Closing Date; or (ii) by Seller if any of the conditions in
Section 5.1 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Seller to comply with its obligations under this Agreement) and Seller has not
waived such condition on or before the Closing Date;
(c) by mutual consent of Purchaser and Seller;
(d) by either Purchaser or Seller, if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before 5:00 P.M. on April 5, 1999; or
(e) By Seller if (i) Seller has not willfully breached any of
the terms of this Agreement in a manner resulting in failure of a condition set
forth in Section 5.2(a) or 5.2(b), (ii) Seller approves entering into a binding
written agreement concerning a transaction that constitutes a Superior Proposal
and Seller notifies Purchaser in writing that Seller wishes to enter into such
agreement, (iii) Purchaser does not make, within five business days of receipt
of Seller's written notification of Seller's desire to enter into a binding
agreement for a Superior Proposal, an offer that Seller believes, in good faith
after consultation with its financial advisors, is at least as favorable, from a
financial point of view, to Seller as the Superior Proposal, and that contains
terms and conditions (other than with respect to type or amount of
consideration) that do not differ materially from the terms and conditions of
the proposed agreement for such Superior Proposal, (iv) Seller refunds to
Purchaser, without interest, the Deposit, and (v) Seller pays to
Purchaser a fee in the amount of $1,000,000 simultaneously with delivery of
notice of termination.
7.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 7.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 7.1, all
further obligations of the parties under this Agreement will terminate;
PROVIDED, HOWEVER, that if this Agreement is terminated by a party because of
the breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement shall survive the
Closing for a period of six (6) months after the Closing Date.
8.2 EXPENSES. Each party will pay all of its own expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated
hereby.
8.3 INTERPRETATION. When a reference is made in this Agreement to a
Section or Schedule, such reference shall be to a Section or Schedule of this
Agreement unless
otherwise indicated. Whenever the words "included," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation." All accounting terms not defined in this Agreement shall
have the meanings determined by GAAP.
8.4 FURTHER ASSURANCES. Each of the parties hereto covenants and
agrees to take any and all such further action and to execute, acknowledge and
deliver such instruments, documents and agreements as any other party may
reasonably request to effectuate, consummate or confirm the transactions
contemplated hereby.
8.5 AMENDMENT AND WAIVER. This Agreement may be amended only in a
writing signed by Seller and Purchaser. Any provision of this Agreement may be
waived by the party entitled to the benefit thereof only in a writing executed
by the party against whom such waiver is sought to be enforced. No waiver shall
be deemed a waiver of any other provision of this Agreement, and no waiver of a
breach hereunder shall be deemed a waiver of any other or subsequent breach of
this Agreement.
8.6 NOTICE. All notices, demands and other communications to be
given or delivered hereunder shall be in writing and will be deemed to have been
given if personally delivered or sent by overnight courier (in each such case
delivery will be effective upon receipt) to the addresses indicated below or to
such other addresses as the parties may specify on notice as herein provided:
If to Purchaser, to:
Supreme International Corp.
0000 X.X. 000 Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Mr. Xxxxxx Xxxxxxxxxxx
and
Broad and Xxxxxx
Miami Center
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
If to Seller, to:
Xxxxxxxxxxx X. Xxxxxx
Xxxxxxx Xxxxxxxxx
Xxxxxx Guaranty Trust Company
of New York, as Trustees of the PEI Trust
created under Par. E of Article 3 of
the Agreement dated November 19, 1985,
as amended January 27, 1986
c/o Patterson, Belknap, Xxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
8.7 BINDING AGREEMENT; ASSIGNMENT. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors. Neither party may assign its rights or
delegate its duties hereunder without the prior written consent of the other
party, which consent may be granted, withheld or conditioned in the sole and
absolute discretion of such other party.
8.8 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
8.9 CAPTIONS. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
will not be deemed to limit, characterize or in any way affect any provision of
this Agreement and all provisions of this Agreement will be enforced and
construed as if no captions had been used in this Agreement.
8.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which need not contain signatures of more than one party,
but all such counterparts taken together will constitute one and the same
instrument. Signatures may be exchanged by telecopy, with original signatures to
follow. Each party to this Agreement agrees that it will be bound by its own
telecopied signature and
that it accepts the telecopied signatures of the other party to this Agreement.
8.11 GOVERNING LAW. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of New York, without
reference to the choice of law provisions thereof. Any legal action or
proceeding with respect to this Agreement or any transaction related hereto may
be brought in the courts of the State of New York or of the United States
District Court for the Southern District of New York, and, by the execution and
delivery of this Agreement, each of the parties hereto hereby consents for
itself and in respect of its property to the jurisdiction of the aforesaid
courts and agrees that service of process in any legal action or proceeding with
respect to this Agreement or any transaction related hereto may be made on such
party by delivery of such process by certified mail, return receipt requested,
to such party at its address for notice pursuant to Section 8.6 of this
Agreement with the same effect as if such process was personally served on such
party within the State of New York. Each of the parties hereto hereby
irrevocably waives, to the extent permitted by applicable law, any objection,
including, but not limited to, any objection to the laying of venue or based on
the ground of FORUM NON CONVENIENS, which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdictions in respect of this
Agreement or any transaction related hereto. Nothing contained herein shall
affect the right of any party hereto to commence any such proceeding in any
other jurisdiction or to serve process in any other manner permitted by law.
8.12 REMEDIES. All rights, remedies or powers hereby conferred
shall, to the extent not prohibited by law, be deemed cumulative and not
exclusive of any other thereof, or of any other rights, remedies or powers
available. No single or partial exercise of any right, remedy or power by a
party shall preclude further exercise
thereof. No delay or omission to exercise any right, power or remedy accruing to
a party upon the occurrence of any breach of any warranty, covenant or agreement
contained in this Agreement shall impair any such right, power or remedy or be
construed to be a waiver of any such breach or any acquiescence therein or to
any similar breach thereafter occurring.
8.13 PUBLIC ANNOUNCEMENTS. No public announcement concerning the
transactions contemplated hereby may be made by either party without the consent
of the other except as may be required by law or the rules of any applicable
securities exchange.
8.14 ENTIRE AGREEMENT. This Agreement (including the Schedules,
documents and instruments referred to herein) constitutes the entire agreement
and understanding of the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersedes all other prior agreements and
understandings, both written or oral, between such parties with respect to the
subject matter hereof and thereof.
8.15 SECTION 338(h)(10) ELECTION. Notwithstanding any other
provisions of this Agreement to the contrary:
(a) Seller agrees that, if requested by Purchaser in writing,
Seller shall join with Purchaser in timely making a joint election under
Sections 338(g) and 338(h)(10) of the Code (a "Section 338(h)(10) Election") and
any similar election as may be available under applicable state or local law
(and in taking all steps necessary to effectuate the same) with respect to the
sale of the Stock to Purchaser hereunder.
(b) Seller will report the sale of the Stock on its federal,
state and local income tax Returns in a manner consistent with the Section
338(h)(10) Election (and any similar election made under applicable state or
local law).
(c) Nothing in this Agreement shall be construed to impose
upon Seller (or any beneficiary of Seller) any liability for (i) any federal,
state or local Taxes, if any, imposed on the Company by reason of the deemed
sale by the Company of all of its assets resulting from any Section 338(h)(10)
Election or (ii) any "tax expense" (as defined below) resulting from the Section
338(h)(10) Election; all of such Taxes and tax expense shall be borne and paid
solely by the Company or Purchaser. The Company and Purchaser each indemnifies
and holds Seller (and any beneficiary of Seller) harmless from any Taxes or tax
expense referred to in this paragraph (c). For purposes of this paragraph (c),
"tax expense" shall mean the amount of ordinary income items identified by
Seller within thirty (30) days after Seller has been furnished with the proposed
allocation by Purchaser recognized in the deemed sale arising as a result of the
Section 338(h)(10) election, multiplied by 19.6% (that is, the difference
between federal ordinary income rates of 39.6% and capital gains rates of 20%).
Purchaser shall pay Seller the tax expense amount within ten days of the filing
of the S short year return.
(d) The transactions contemplated by this Agreement will cause
the Company to have two short taxable years for the year that includes the
Closing Date, an "S short year" beginning January 1 of such year and ending on
the Closing Date and a "C short year" beginning on the day after the Closing
Date and ending on the next succeeding close of Purchaser's consolidated return
taxable year. Purchaser shall determine, consistent with the provisions of Temp.
Reg. ss. 1.338(b)-2T, the allocation of
the total consideration for the Stock among the assets of the Company and Seller
and Purchaser shall prepare all Returns (including amended returns and claims
for refund) and information reports in a manner consistent with such allocation.
Seller shall determine the Company's income or loss and the amount of Taxes due
for the S short year and provide such information to the Company in a timely
manner in order for the Company and Purchaser to prepare the Company's Returns
for the S short year and the C short year.
(e) The Company has made estimated tax payments or otherwise
pre-paid Taxes attributable to the S short year (the "tax deposit"). Seller
agrees to reimburse the Company, within ten days of payment by the Company, for
any Taxes attributable to the S short year (except Taxes for which the Company
and Purchaser are responsible pursuant to paragraph (c) above) to the extent of
the difference between the actual amount of Taxes due for the S short year and
the tax deposit. Purchaser agrees to pay Seller, within ten days of payment by
the Company, the excess of the tax deposit over the actual amount of Taxes due
for the S short year (not taking into account Taxes for which the Company and
Purchaser are responsible pursuant to paragraph (c) above).
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered on their behalf as of the day and year first above written.
SUPREME INTERNATIONAL CORPORATION
By: /s/ Xxxxxx Xxxxxxxxxxx /s/ Xxxxxxxxxxx X. Xxxxxx
---------------------- -------------------------
Name:Xxxxxx Xxxxxxxxxxx Xxxxxxxxxxx X. Xxxxxx, as Trustee of
Title:Chairman the PEI Trust created under Par. E. of Article 3 of
the Agreement dated November 19, 1985, as amended
January 27, 1986
XXXXXX GUARANTY TRUST COMPANY OF NEW YORK, as Trustee of
the PEI Trust created under Par. E. of Article 3 of the
Agreement dated November 19, 1985, as amended January 27, /s/ Xxxxxxx Xxxxxxxx
1986 --------------------
Xxxxxxx Xxxxxxxxx, as Trustee of
the PEI Trust created under Par. E. of Article 3 of
the Agreement dated November 19, 1985, as amended
By:_________________________ January 27, 1986
Name:
Title:
