ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered into this 12th
day of June, 1998, by and among TKS ACQUISITION, INC., a Delaware corporation
("Buyer"), LOGOATHLETIC, INC., a Virginia corporation ("Logo"),
LOGOATHLETIC/HEADWEAR, INC., a Massachusetts corporation ("LogoAH"), and TULTEX
CORPORATION, a Virginia corporation and sole shareholder of Logo and LogoAH
("Tultex"). Each of Tultex, Logo and LogoAH shall sometimes be referred to
individually as a "Seller" and collectively as the "Sellers."
RECITALS
A. The Sellers are engaged, among other things, in the business of
manufacturing, marketing and distributing licensed sports apparel.
B. The Sellers own the Assets, which constitute substantially all of
the assets of Logo and LogoAH, and all of the assets of Tultex relating to the
Business (as defined herein).
C. The Sellers desire to sell the Assets to Buyer and Buyer desires to
purchase the Assets from the Sellers and assume certain liabilities of the
Sellers relating to the Business.
D. Buyer intends to use the Assets to continue the Business of the
Sellers as a going concern.
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings specified:
1.1 Accounts Payable. "Accounts Payable" shall mean all accounts
payable and expenses payable arising in the ordinary course of the Business of
Logo and LogoAH (excluding payables to Affiliates (as defined in Section 3.20),
other than for payments under the Real Property Lease), which payables are
listed on Schedule 1.1, which listing shall be adjusted to reflect changes in
the ordinary course through the Effective Time of Closing, as permitted pursuant
to Section 5.1.
1.2 Accounts Receivable. "Accounts Receivable" shall mean all accounts
receivable, notes receivable and associated rights owned by the Sellers relating
to the Business and arising in the ordinary course of the Business (except for
the Accounts Receivable described in Section 1.48(f)), including, without
limitation, those listed on Schedule 1.2, which listing shall be adjusted to
reflect changes in the ordinary course through the Effective Time of Closing, as
permitted pursuant to Section 5.1.
1.3 Affiliate. "Affiliate" of a specified Person means any other Person
which, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such specified Person.
1.4 Agreement. "Agreement" shall mean this Asset Purchase Agreement,
together with the Exhibits and Schedules attached hereto, as the same may be
amended from time to time in accordance with the terms hereof.
1.5 Assets. "Assets" shall mean all of the Sellers' properties, assets,
and rights owned, used, useful, acquired for use, or arising or existing
primarily in connection with the Business, whether known or unknown, tangible or
intangible, real, personal or mixed, and wherever located, existing as of the
Closing, excluding the Retained Assets, and including, but not limited to, all
Assets listed on Schedule 1.5 and the following:
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(a) Accounts Receivables. As defined in Section 1.2;
(b) Inventory. As defined in Section 1.22;
(c) Deposits. Prepaid Expenses and deposits other than bank
deposits;
(d) Owned Real Property. The real property, including, but not
limited to, buildings, structures and improvements thereon, located at 0
Xxxxxxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxxx 00000 and all fixtures attached or
contained therein and appurtenances thereof (the "Owned Real Property");
(e) Tangible Personal Property. All machinery, equipment,
leasehold improvements, computers and other items of personal property,
including, but not limited to, all tools, fixtures, dies, molds, jigs, patterns,
parts, supplies, furniture, furnishings and motor vehicles;
(f) Real Property Lease. All rights under the lease (the "Real
Property Lease") dated October 9, 1991 and assigned to Tultex on January 31,
1992, for the real property located at 0000 Xxxxxxxxxxxx Xxxxx, Xxxxxxxxxxxx,
Xxxxxxx 00000 and all leasehold interests of the Sellers therein and all rights
of the Sellers to leasehold improvements located thereon (the "Leased Real
Property");
(g) Contract and License Rights. All rights under all of the
Contracts and Licenses, and rights to refunds and adjustments of any kind
(subject to Section 5.13 hereof), except for Contracts listed on Schedule
1.48(d);
(h) Authorizations. All licenses, approvals, certificates,
permits or other evidence of authority issued by a federal, state, local or
foreign governmental agency or authority relating to or utilized in connection
with the Business or any part thereof or the Assets;
(i) Intangibles. All trade names, trademarks, service marks,
trade dress and mask works and all registrations and applications for any of the
foregoing, works of authorship and all copyrights related thereto and all
registrations and applications therefor, inventions, discoveries, designs,
industrial models and all United States and foreign patent rights covered by,
disclosed in or otherwise related thereto and all registrations (issued or
pending) and applications therefor and all reissues, divisions,
continuations-in-part, re-examinations and extensions thereof (collectively
hereafter referred to as "Intangibles"), together with the goodwill symbolized
or represented by the foregoing and the right to xxx for past infringement and
improper, unlawful or unfair use of any of the foregoing;
(j) Undocumented Intangibles. All know-how, Trade Secrets,
processes, technology, discoveries, unpatented inventions and designs, formulae
and procedures and other intellectual property, including, but not limited to,
documentation relating to any of the foregoing, all shop rights and the right to
xxx for past infringement or improper, unlawful or unfair use or disclosure
thereof and the right to apply for patent, design or similar protection therefor
anywhere in the world;
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(k) Documentation. All technical documentation, including, but
not limited to, all materials which reproduce, patterns, plans, designs,
research data, drawings, models, blueprints, specifications, flow sheets,
equipment and parts lists and descriptions and related instructions, manuals,
data, records and procedures and art work;
(l) Records. All records relating to the business and
operations of each Seller, including, but not limited to, property records,
production records, engineering records, purchasing and sales records, credit
records, personnel and payroll records, accounting records, computer programs,
customer and vendor lists and records and such other plant and accounting
records as Buyer may reasonably require in its conduct of the Business
subsequent to the Closing;
(m) Listings and Materials. All interest in and to telephone
and telex numbers, post office boxes and all listings in all telephone books and
directories, stationery, forms, labels, shipping material, catalogs, brochures,
art work, photographs and advertising and promotional materials;
(n) Warranty Rights. All rights in, to and under third-party
manufacturers' warranties;
(o) Claims. All claims as to which each Seller is a judgment
creditor;
(p) Name. All rights in and to both Logo's and LogoAH's
corporate name and all variants thereof and goodwill associated therewith, and
all rights to use such names as a trademark, trade name or service xxxx; and
(q) Other. All assets reflected on the Final Statement of Net
Assets, whether or not referenced in any paragraph above.
1.6 Business. "Business" shall mean the business of manufacturing,
marketing and distributing licensed apparel, except that the Business shall not
include the motor sports or collegiate licensing business currently conducted by
Tultex (as distinguished from the motor sports and collegiate business currently
conducted by Logo and LogoAH which is included in the definition of Business).
1.7 Buyer. "Buyer" is defined at the beginning of this Agreement.
1.8 Buyer's Closing Certificate. "Buyer's Closing Certificate" shall
mean the certificate of Buyer in the form of Exhibit 1.8.
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1.9 Closing. "Closing" shall mean the conference held at 10:00 a.m.,
local time, on the Closing Date, at the offices of Xxxxxx, Halter & Xxxxxxxx
LLP, Cleveland, Ohio or such other time and place as the parties may mutually
agree in writing; provided, that the Closing shall be held as soon as
practicable after the satisfaction of the conditions precedent to Closing
described in Articles VI and VII, anticipated to be on or before July 2, 1998.
All transactions occurring at the Closing shall be deemed to have occurred
simultaneously, and no one transaction shall be deemed to be complete until all
transactions are completed.
1.10 Closing Date. "Closing Date" shall mean such date as is agreed
upon, to be scheduled as soon as is practicable within the parameters provided
in Section 1.9.
1.11 Closing Pro Forma Statement of Net Assets. "Closing Pro Forma
Statement of Net Assets" shall mean the unaudited pro forma consolidated balance
sheet comprising a statement of net assets of the Business of the Sellers as of
May 9, 1998 comprised solely of the Assets being acquired and the Liabilities
being assumed hereunder, which has been prepared by the Sellers in accordance
with Schedule 2.5 and otherwise in accordance with the Sellers' books and
records on a basis consistent with the accounting practices used to prepare the
Financial Statements of the Business of the Sellers. A true, accurate and
complete copy of the Closing Pro Forma Statement of Net Assets is attached
hereto as Schedule 1.11.
1.12 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended, including all regulations and rules promulgated thereunder.
1.13 Confidential Information. "Confidential Information" is defined in
Section 9.1.
1.14 Contracts. "Contracts" shall mean the contracts, agreements,
commitments, plans, instruments, leases and rental agreements and rights of
renewal thereto, open purchase
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orders, and commitments (other than Licenses) to which any Seller is a party or
by which it is bound, whether oral or written, which relate to the Business and
are listed on Schedule 1.14.
1.15 Effective Time of Closing. "Effective Time of Closing" shall mean
12:01 a.m., local time, on the Closing Date.
1.16 Employee Benefit Plans. "Employee Benefit Plans" shall mean the
employee benefit plans of any of the Sellers relating to the Business or any of
the employees or former employees of the Business. Schedule 1.16 contains a
true, accurate and complete list of the Employee Benefit Plans.
1.17 Final Purchase Price. The "Final Purchase Price" for the Assets
shall be the Purchase Price, to be adjusted dollar for dollar by the amount that
the net assets reflected in the Final Statement of Net Assets are less than, or
greater than, as applicable, $101,543,197, the amount of the net assets
reflected on the Closing Pro Forma Statement of Net Assets.
1.18 Final Statement of Net Assets. "Final Statement of Net Assets"
shall mean the statement of net assets as of the Closing Date to be delivered to
Buyer by Sellers and prepared pursuant to Section 2.5.
1.19 Financial Statements. "Financial Statements" shall mean the
consolidated year end balance sheets for 1995, 1996, and 1997 of the Business,
together with the related statements of income and cash flows for the twelve
month periods then ended, as contained in the final consolidating work papers
prepared and used by Tultex in connection with the audited financial statements
of Tultex for fiscal 1995, 1996, and 1997, and the consolidated balance sheet of
the Business as of April 4, 1998, and the related income statement for the three
month period then ended prepared by the Sellers, all of which are attached on
Schedule 1.19.
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1.20 Hazardous Substances. "Hazardous Substances" means hazardous
substances as defined by the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, or as defined by any applicable similar
Law of any jurisdiction where any Seller conducted the Business or Released
Hazardous Substances and also includes Petroleum Products, asbestos, urea
formaldehyde and poly-chlorinated biphenyls.
1.21 Intangibles. "Intangibles" is defined in Section 1.5(i).
1.22 Inventory. "Inventory" shall mean all work in process,
semi-finished goods and finished goods and raw materials owned by Logo and
LogoAH, including, without limitation, (a) "xxxx and hold" inventory owned by
Logo and LogoAH, (b) inventory located on other persons' premises, or (c) listed
on Schedule 1.22, adjusted to reflect changes in the ordinary course through the
Closing Date, as permitted pursuant to Section 5.1.
1.23 Knowledge of the Sellers and Knowledge of Buyer. "Knowledge of the
Sellers" shall mean the knowledge of Xxxxxxx X. Xxxxxx, Xx., O. Xxxxxxxx
Xxxxxxx, Xxxxxxx X. Xxxx, Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx, Xxxxx Xxxxx, and
Xxxxxxx X. Xxxxxxx, including knowledge such persons would have had after making
reasonable inquiry of the Sellers' personnel and investigation and review of
their books and records; and "Knowledge of Buyer" shall mean knowledge of any
vice president or higher officer and the chief financial officer of Buyer,
including knowledge such persons would have had after making reasonable inquiry
of Buyer's personnel and investigation and review of its books and records.
1.24 Law. "Law" shall mean any federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.
1.25 Leased Real Property. "Leased Real Property" is defined in Section
1.5(f).
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1.26 Liabilities. "Liabilities" shall mean the liabilities assigned a
specific dollar amount and specifically represented on the Final Statement of
Net Assets and liabilities of the Sellers in connection with the Business which
arise or first become due and payable on and after the Effective Time of Closing
under the Contracts (except for those listed on Schedule 1.48(d)), Licenses, the
Real Property Lease, the Omega Agreements (as defined in Section 3.18(g)), the
Trust Agreements (as defined in Section 3.18(h)), and the Existing Disability
Income Arrangements (as defined in Section 3.18(i)) (provided that with respect
to the foregoing obligations, the corresponding benefits therefrom owned by the
Sellers are validly assigned to and received by Buyer), but specifically
excluding, without limitation, any inter-company payables or debt and any
deferred taxes relating to any period prior to the Closing.
1.27 License Agreement. "License Agreement" is defined in Section
6.7(g).
1.28 Licenses. "Licenses" shall mean any agreements pursuant to which
at least one Seller holds the right to use in the Business certain names,
designs, slogans, logos and other copyrighted or trademarked materials,
including but not limited to those Licenses listed on Schedule 1.28.
1.29 Liens. "Liens" means all mortgages, liens, encumbrances, charges,
claims, restrictions, pledges, security interests or impositions.
1.30 Losses. "Losses" is defined in Section 8.1.
1.31 Major League Licenses. "Major Lease Licenses" is defined in
Section 6.10.
1.32 Opinion of the Sellers' Counsel. "Opinion of Sellers' Counsel"
shall mean the opinion of Hunton & Xxxxxxxx, counsel to the Sellers, in the form
of Exhibit 1.32.
1.33 Opinion of Buyer's Counsel. "Opinion of Buyer's Counsel" shall
mean the opinion of Xxxxxx, Halter & Xxxxxxxx LLP, counsel to Buyer, in the form
of Exhibit 1.33.
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1.34 Owned Real Property. "Owned Real Property" is defined in Section
1.5(d).
1.35 Permits. "Permits" shall mean all governmental permits, licenses
and authorizations used by the Sellers in connection with the Business,
including but not limited to those Permits listed on Schedule 1.35.
1.36 Person. "Person" means an individual, a corporation, a limited
liability company, an association, a joint-stock company, a business trust or
other similar organization, a partnership, a joint venture, a trust, an
unincorporated organization, a government or any agency, instrumentality or
political subdivision of a government.
1.37 Petroleum Products. "Petroleum Products" means petroleum,
gasoline, oil, fuel oil, diesel fuel and petroleum solvents.
1.38 Post Closing Adjustment. "Post Closing Adjustment" is defined in
Section 2.5.
1.39 Preliminary Post Closing Adjustment. "Preliminary Post Closing
Adjustment" is defined in Section 2.5.1.
1.40 Prepaid Expenses. "Prepaid Expenses" shall mean, as of the
Closing, those expenses of the Sellers in connection with the Business that are
paid in advance, including, without limitation, those listed on Schedule 1.40,
which listing shall be adjusted to reflect changes in the ordinary course
through the Effective Time of the Closing, as permitted pursuant to Section 5.1.
1.41 Purchase Price. The "Purchase Price" for the Assets shall be an
amount equal to Ninety Six Million Five Hundred Forty Three Thousand One Hundred
Ninety Seven Dollars ($96,543,197) (which amount represents the net asset value
on the Closing Pro Forma Statement of Net Assets less $5,000,000), plus, the
Earn-Out, if any, as provided in Section 2.6. The Purchase Price shall be
subject to adjustment pursuant to Section 2.5 hereof.
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1.42 Preferred Stock. "Preferred Stock" shall mean the shares of
Tultex's Cumulative Convertible Preferred stock, $7.50 Series B.
1.43 RCRA. "RCRA" means the Resource Conservation and Recovery Act of
1976, as amended.
1.44 Real Property. "Real Property" means the Owned Real Property, the
Leased Real Property, and the real property where the Retail Outlets are
located.
1.45 Real Property Lease. "Real Property Lease" is defined in Section
1.5(f).
1.46 Release. "Release" means any direct or indirect spilling, pumping,
pouring, emitting, emptying, placing, discharging, injecting, escaping, leaking,
dumping, or disposing on or into any building or facility or the environment
whether intentional or unintentional, known or unknown and includes a threatened
Release.
1.47 Retail Outlets and Retail Outlet Leases. "Retail Outlets" and
"Retail Outlet Leases" are both defined in Section 1.48(e).
1.48 Retained Assets. "Retained Assets" shall mean the following assets
of the Sellers related to the Business:
(a) Cash Equivalents. Cash, bank deposits and marketable
securities (except for cash, if any, relating to services to be performed by
Buyer after the Closing, i.e. prepaid accounts and deposits);
(b) Tax Refunds. Rights to Tax refunds;
(c) Certain Records. The corporate minute book, stock records
and Tax returns of the Sellers and other similar corporate books and records
originals of which the Sellers are required to maintain under applicable laws
(provided that true, accurate and complete copies of the same are included among
the Assets);
(d) Certain Contracts. All of the Sellers' rights and
obligations under the Contracts listed on Schedule 1.48(d) and all other
contracts not listed on Schedule 1.14;
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(e) Retail Outlets. All right, title and interest in and to
the assets located at the retail outlet stores located at 0000 Xxxxxx Xxxx Xxxx,
Xxxxxxxxxxxx, Xxxxxxx, 0000 Xxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxx, and the retail
outlet store in the State of Utah (the "Retail Outlets"), including, without
limitation, the rights and obligations associated with the real property lease
for each of the Retail Outlets (the "Retail Outlet Leases");
(f) Certain Accounts Receivable. All right, title and interest
in the accounts receivable described on Schedule 1.48(f), which schedule shall
be adjusted to reflect changes in the ordinary course through the Effective Time
of Closing, as permitted pursuant to Section 5.1.
(g) Shares. Any shares of capital stock held in treasury of
the Sellers;
(h) Litigation. Rights and obligations of the Sellers in any
pending litigation or claims, including, without limitation, all matters set
forth on Schedule 3.5;
(i) Agreement. Rights of the Sellers arising under this
Agreement; and
(j) Other. Any other assets of the Sellers not owned or used
in connection with the Business.
1.49 Sellers. "Sellers" are defined at the beginning of this Agreement.
1.50 Sellers' Closing Certificate. "Sellers' Closing Certificate" shall
mean the certificate of the Sellers in the form of Exhibit 1.50.
1.51 Sellers' Indebtedness. "Sellers' Indebtedness" is defined in
Section 8.14.
1.52 Services Agreement. "Services Agreement" is defined in Section
6.7(f).
1.53 Storage. "Storage" means storage as defined by RCRA or as defined
by any applicable similar Law of any jurisdiction where any Seller conducted
business or Released Hazardous Substances.
1.54 Supply Agreement. "Supply Agreement" is defined in Section 6.7(e).
1.55 Taxes. "Tax" means any charge or assessment by or liability,
including, but not limited to, any deficiency, interest or penalty to any
foreign, federal, state, regional or local authority, agency, body, court or
instrumentality, regulatory or otherwise, which, in whole or in
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part, was formed by or operates under the auspices of any foreign, federal,
state, regional or local government.
1.56 Trade Secret. "Trade Secret" shall mean, with respect to any
Person, any owned information that is not known to any competitor or other third
party and, if it were to be known by a competitor or other third party, could be
harmful competitively to the owner of the information.
1.57 Transport. "Transport" means transport as defined by RCRA or as
defined by any applicable similar Law of any jurisdiction where any Seller
conducted the Business or Released Hazardous Substances.
1.58 Treatment. "Treatment" means treatment as defined by RCRA or as
defined by any applicable similar Law of any jurisdiction where any Seller
conducted the Business or Released Hazardous Substances.
ARTICLE II
PURCHASE AND SALE
2.1 Commitment to Sell. At the Closing, and upon all of the terms and
subject to all of the conditions of this Agreement, the Sellers hereby agree to
sell, convey, transfer, assign and deliver to Buyer by deed, xxxx of sale,
assignment, or other appropriate instrument, free and clear of all Liens, all of
the Assets. In addition, the Sellers shall assign to Buyer all of Sellers'
rights under the Contracts (except those listed on Schedule 1.48(d)) and
Licenses.
2.2 Commitment to Purchase. At the Closing, and upon all of the terms
and subject to all of the conditions of this Agreement, Buyer hereby agrees to
purchase the Assets and, in full payment therefor, shall pay to the Sellers the
Purchase Price therefore and assume those specified Liabilities as provided in
this Article II.
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2.3 Payment of the Purchase Price. At the Closing, Buyer shall pay the
Purchase Price to the Sellers by delivering (i) a subordinated promissory note
to Tultex in the principal amount of $5,000,000 with a 7 2/10th percent (7.2%)
interest rate, semi-annual interest payments and the principal due on the fifth
anniversary date thereof, that shall be subordinated to the indebtedness to the
Buyer's senior lender(s), and otherwise in the form of Exhibit 2.3(i), which
form remains subject to review and approval by Buyer's senior lender(s) with
such changes, if any, that are mutually acceptable to Buyer and the Sellers (the
"Five Million Dollar Subordinated Promissory Note"); (ii) a convertible,
subordinated promissory note to Tultex in the principal amount of $5,000,000
with a 7 2/10th percent (7.2%) interest rate, semi-annual interest payments and
the principal due no later than the fifth anniversary date thereof, that shall
be subordinated to the indebtedness to the Buyer's senior lender(s), and
otherwise in the form of Exhibit 2.3(ii), which form remains subject to review
and approval by Buyer's senior lender(s) with such changes, if any, that are
mutually acceptable to Buyer and the Sellers (the "Convertible Five Million
Dollar Subordinated Promissory Note"); (iii) a subordinated promissory note to
Tultex in the principal amount of $2,500,000, that shall be subordinated to the
indebtedness to the Buyer's senior lender(s), and otherwise in the form of
Exhibit 2.3(iii), which form remains subject to review and approval by Buyer's
senior lender(s) with such changes, if any, that are mutually acceptable to
Buyer and the Sellers (the "Two Million Five Hundred Thousand Dollar
Subordinated Promissory Note" and collectively with the Five Million Dollar
Subordinated Note and the Convertible Five Million Dollar Subordinated Note, the
"Notes"); and (iv) the remainder of the Purchase Price, in immediately available
funds, except for the Earn-Out, if any, which is payable pursuant to Section
2.6.
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2.4 Assumption of Liabilities. In addition to payment of the Purchase
Price, as provided above, at the Closing, Buyer shall assume the Liabilities.
Buyer does not and will not assume any liability, known or unknown, fixed or
contingent, of any of the Sellers except for the Liabilities. Buyer shall not be
a successor or alter ego of or joint employer or venturer with any of the
Sellers, except to the extent that Buyer has assumed Sellers' liabilities and
obligations arising from and after the Effective Time of Closing under the
Contracts (except those listed on Schedule 1.48(d)) and Licenses.
2.5 Adjustment to Purchase Price. Within sixty (60) days after the
Closing, Sellers will prepare Sellers' Final Statement of Net Assets in
accordance with the Closing Pro Forma Statement of Net Assets and generally
accepted accounting principles on a basis consistent with the Sellers' past
practice, except as modified pursuant to Schedule 2.5. During the preparation of
the Sellers' Final Statement of Net Assets, Buyer shall provide the Sellers and
their representatives full access to the books, records, facilities and
employees of Buyer and shall cooperate fully with Sellers and their
representatives in order to prepare the Sellers' Final Statement of Net Assets.
Based on Sellers' Final Statement of Net Assets, Sellers also will prepare and
deliver a written calculation of any adjustment to the Purchase Price. If the
net assets reflected on the Final Statement of Net Assets exceed the net assets
reflected on the Closing Pro Forma Statement of Net Assets, the Purchase Price
will be increased dollar-for-dollar by an amount equal to such difference, and
if the net assets on the Final Statement of Net Assets are less than the net
assets reflected on the Closing Pro Forma Statement of Net Assets, the Purchase
Price will be decreased dollar-for-dollar by an amount equal to such difference
(the "Post Closing Adjustment").
2.5.1 Buyer's Review. Not later than sixty (60) days after the
Closing Date, Sellers will deliver the Sellers' Final Statement of Net Assets
and the calculation of the Post
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Closing Adjustment (the "Preliminary Post Closing Adjustment") to Buyer. All
work papers, documents and records used or generated by the Sellers in
connection with the preparation and confirmation of the Sellers' Final Statement
of Net Assets and the calculation and confirmation of the Preliminary Post
Closing Adjustment will be made available to Buyer. Unless Buyer delivers to the
Sellers a written objection on or before the 15th day after Buyer's receipt of
the Sellers' Final Statement of Net Assets and the Preliminary Post Closing
Adjustment (the "15 Day Dispute Period"), the Sellers' Final Statement of Net
Assets and the Preliminary Post Closing Adjustment will become final and binding
on the parties and be deemed to be the "Final Statement of Net Assets" and the
"Final Purchase Price," respectively. If Buyer delivers to the Sellers a written
objection within the 15 Day Dispute Period, Buyer agrees to pay to Sellers,
within five (5) business days after sending such written objection, the
undisputed portion of the Post Closing Adjustment.
2.5.2 Dispute Procedures. If Buyer objects (as provided in the
last sentence of Section 2.5.1) to the Sellers' Final Statement of Net Assets
and the Preliminary Post Closing Adjustment and the Sellers and Buyer are able
to resolve their dispute within thirty (30) days after Buyer's objection is
received by the Sellers, the Sellers' Final Statement of Net Assets and the
Preliminary Post Closing Adjustment (each as reflecting the resolution of the
parties) will become final and binding on the parties and be deemed to be the
"Final Statement of Net Assets" and the "Final Purchase Price," respectively. If
Buyer objects (as provided in last sentence of Section 2.5.1) to the Sellers'
Final Statement of Net Assets and the Preliminary Post Closing Adjustment and
the Sellers and Buyer are unable to resolve their dispute within thirty (30)
days after Buyer's objection is received by the Sellers, the dispute will be
resolved by Xxxxxx Xxxxxxxx LLP (the "Independent Accountants"). The Independent
Accountants will be instructed to perform their services as expeditiously as
possible and in any event within sixty (60) days thereafter. The resolution of
the
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Independent Accountants shall be presented as the "Final Statement of Net
Assets" and "Final Purchase Price," prepared by the Independent Accountants,
which shall be final and binding on the parties.
2.5.3 Cost of Independent Accountants. The fees and expenses
of the Independent Accountants for the resolution of the dispute shall be shared
equally by Buyer on the one hand and the Sellers on the other.
2.5.4 Refund or Final Payment. To the extent that the Final
Purchase Price is greater than the Purchase Price, Buyer shall pay such excess,
plus interest as calculated herein, to the Sellers in immediately available
funds within five (5) business days of the determination of the Final Purchase
Price. To the extent that the Final Purchase Price is less than the total of the
Purchase Price and any portion of the Post Closing Adjustment paid by Buyer, the
Sellers shall pay such difference, plus interest as calculated herein, to Buyer
within five (5) business days of the determination of the Final Purchase Price.
The amount of the unpaid Post Closing Adjustment (as finally determined) shall
accrue interest at the rate of 9% calculated from the 15th day after the Sellers
have delivered to Buyer both the Sellers' Final Statement of Net Assets and the
Preliminary Post Closing Adjustment to the date that the Post Closing Adjustment
is paid.
2.6 Earn-Out. (a) If net sales from the period beginning January 4,
1998 through January 2, 1999 of the Business operated by Logo and LogoAH prior
to the Closing and Buyer after the Closing ("1998 Sales") are equal to or
greater than $218,439,000 (with the portion of 1998 Sales attributable to the
Business of Logo and LogoAH prior to the Closing being agreed to by the parties
and set forth on Schedule 2.6), Buyer will pay Tultex an amount equal to
$1,500,000; if 1998 Sales are equal to $207,517,050, Buyer will pay Tultex an
amount equal to
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$1,000,000 (with such amount increased on a prorated linear basis for 1998 Sales
between $207,517,050 and $218,439,000); if 1998 Sales are equal to $196,595,100,
Buyer will pay Tultex an amount equal to $500,000 (with such amount increased on
a prorated linear basis for 1998 Sales between $196,595,100 and $207,517,050);
or, if 1998 Sales are less than $196,595,100, Buyer will not be obligated to pay
any amount to Tultex (the "1998 Earn-Out"). (b) If net sales from the period
beginning January 3, 1999 through January 1, 2000 of the Business operated by
Buyer ("1999 Sales") are equal to or greater than $230,475,000, Buyer will pay
Tultex an amount equal to $1,000,000; if 1999 Sales are equal to $218,951,250,
Buyer will pay Tultex an amount equal to $667,000 (with such amount increased on
a prorated linear basis for 1999 Sales between $218,951,250 and $230,475,000);
if 1999 Sales are equal to $207,427,500, Buyer will pay Tultex an amount equal
to $333,000 (with such amount increased on a prorated linear basis for 1999
Sales between $207,427,500 and $218,951,250); or, if 1999 Sales are less than
$207,427,500, Buyer will not be obligated to pay any amount to Tultex (the "1999
Earn-Out"). Buyer will calculate 1998 Sales and 1999 Sales following Buyer's
preparation of its audited financial statements for the periods ending on
December 31, 1998 and December 31, 1999. Sales shall mean net sales (gross sales
less returns and allowances) generated in the ordinary course of business of the
Business as currently conducted or as conducted by Buyer, but shall be exclusive
of sales generated from acquisitions made by Buyer or from sales of different
product lines (both of which shall be separately accounted for by Buyer). Buyer
covenants to continue to offer the current product lines of Logo and LogoAH,
comprised of T-shirts, shirts, sweats, jerseys, jackets and headwear in the
licensed sports category, in the ordinary course of its business unless Buyer
determines to discontinue any one or more of the aforementioned product lines in
the exercise of its reasonable business judgment. On
17
or before the date that is thirty (30) days after the final preparation of
Buyer's audited 1998 financial statements, Buyer shall provide Tultex such
financial statements and its computation of the 1998 Earn-Out, if any, and pay
to Tultex the 1998 Earn-Out, if any; and on or before the date that is thirty
(30) days after the final preparation of Buyer's audited 1999 financial
statements, Buyer shall provide Tultex such financial statements and its
computation of the 1999 Earn-Out, if any, and shall pay to Tultex the 1999
Earn-Out, if any. In no event shall (i) the 1998 Earn-Out exceed $1,500,000, or
(ii) the 1999 Earn-Out exceed $1,000,000. Notwithstanding anything contained in
this Section 2.6 to the contrary, Buyer may defer payment of any Earn-Out due
hereunder to the extent provided for in the Subordination Agreement; provided,
that deferment of any such payment shall not affect Buyer's legal obligation to
pay, and Buyer shall pay Tultex such deferred Earn-Out promptly after the Buyer
is capable of paying such amount and is permitted to pay such amount pursuant to
the Subordination Agreement; and, provided further, that any such deferred
Earn-Out shall accrue interest from the date of deferment to the date of payment
(at which time it and such interest shall be paid) at the annual rate of nine
percent (9%).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers jointly and severally hereby represent and warrant to Buyer that:
3.1 Organization of the Sellers. Logo is a corporation duly organized
and validly existing and in good standing under the laws of the Commonwealth of
Virginia and has full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder. Logo has full corporate power and
authority to carry on its business as it is now being conducted and to own,
operate and hold under lease its assets and properties as, and in the
18
places where, such properties and assets now are owned, operated or held. LogoAH
is a corporation duly organized and validly existing and in good standing under
the laws of the Commonwealth of Massachusetts and has full corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
LogoAH has full corporate power and authority to carry on its business as it is
now being conducted and to own, operate and hold under lease its assets and
properties as, and in the places where, such properties and assets now are
owned, operated or held. Tultex is a corporation duly organized and validly
existing and in good standing under the laws of the Commonwealth of Virginia and
has full corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. With respect to the Business, Tultex has full
corporate power and authority to carry on its business as it is now being
conducted and to own, operate and hold under lease its assets and properties as,
and in the places where, such properties and assets now are owned, operated or
held. Schedule 3.1 lists the states and countries in which each Seller (a) owns
or leases real property used primarily in the Business; (b) maintains sales
offices or sales agents used primarily in the Business; or (c) maintains
inventory used primarily in the Business. The Sellers are not, and are not
required to be, qualified to do business as a foreign corporation in connection
with the Business in any states or countries other than those listed in Schedule
3.1, and the Sellers are duly qualified to do business and are in good standing
as a foreign corporation in each of those states and countries, except for where
the failure to so qualify would not have an adverse effect on the Business or
the Assets. All of the outstanding equity securities of Logo and LogoAH are
owned of record and beneficially by Tultex.
3.2 Authorization; Enforceability. The execution, delivery and
performance by each Seller of this Agreement and of all of the documents and
instruments contemplated hereby are
19
within the corporate power and authority of each Seller and have been duly
authorized by all necessary corporate action of each Seller. This Agreement is,
and the other documents and instruments required hereby will be, when executed
and delivered by the parties hereto, the valid and binding obligations of each
Seller, enforceable against each Seller in accordance with their respective
terms. Tultex represents that the approval of its shareholders is not required
for the consummation of the transactions contemplated by this Agreement. In
addition, without limiting the generality of the representations in this Section
3.2, the Sellers represent that each of their respective Board of Directors has
provided the required resolutions to be filed with the appropriate
representatives of the Sellers' Indebtedness.
3.3 No Violation or Conflict by the Sellers. Except as set forth on
Schedule 3.3, the execution, delivery and performance of this Agreement by each
Seller does not and will not conflict with or violate any Law, judgment, order
or decree binding on any Seller, or the Articles of Incorporation (or its
equivalent) or Bylaws (or its equivalent) of any Seller or any contract or
agreement to which any Seller is a party or by which any Seller or any of the
Assets is bound, except that the Sellers make no representation or warranty with
respect to compliance with the bulk sales laws of any state.
3.4 Assets; Title to Assets. The Assets constitute all of the business,
assets, properties and rights of the Sellers in connection with the Business. At
least one of the Sellers owns good, valid and marketable title to each of the
Assets, free and clear of any and all Liens (except for the Liens set forth on
Schedule 3.4 which will be released and removed by Sellers prior to the
Closing), and, upon delivery of the Assets at Closing, good, valid and
marketable title to the Assets, free and clear of all Liens, will pass to Buyer.
The Assets to be conveyed at Closing
20
constitute all of the Assets of the Sellers owned, used, useful, acquired for
use, or arising or existing primarily in connection with the Business.
3.5 No Litigation. Except as listed in Schedule 3.5, there is no
litigation, arbitration proceeding, governmental investigation, citation or
action of any kind pending or, to the Knowledge of the Sellers, proposed or
threatened against the Sellers in connection with the Business or relating to
the Assets, Contracts, or Licenses. The matters described in Schedule 3.5, if
adversely determined, would not have a material adverse effect on the Business
of the Sellers, the Assets, the Contracts, or the Licenses, except as shown upon
Schedule 3.5.
3.6 Accounts Receivable and Accounts Payable. The Accounts Receivable
reflected on the Financial Statements, the Closing Pro Forma Statement of Net
Assets and the Final Statement of Net Assets represent transactions in the
ordinary course of business, and, based on facts existing on the Closing Date
and known to the Sellers, are collectible net of any reserves shown on the
Financial Statements, the Closing Pro Forma Statement of Net Assets and the
Final Statement of Net Assets, as the case may be (which reserves are adequate
and were calculated consistent with past practice). Schedule 1.2 specifically
identifies (i) the aging of receivables, and (ii) each receivable in an amount
in excess of $10,000 that is more than 90 days past due.
The Accounts Payable reflected on the Financial Statements, the Closing
Pro Forma Statement of Net Assets and Final Statement of Net Assets reflect or
will reflect all amounts owed by the Sellers in connection with the Business in
respect of trade accounts due and other payables, and the actual liability of
the Sellers in respect of such obligations were not, and will not be, on such
dates in excess of the amounts so reflected on the Financial Statements, the
Closing Pro Forma Statement of Net Assets or the Final Statement of Net Assets,
as the case may be.
21
3.7 Condition of Equipment. Except as shown on Schedule 3.7, each of
the tangible Assets used by the Sellers in the conduct of the Business is (i) in
good operating condition and repair, subject to ordinary wear and tear and
taking into account the age and prior use of such tangible assets, and (ii)
substantially fit for the purposes for which it is being utilized. None of such
tangible assets is in need of maintenance or repairs, except for ordinary,
routine maintenance and repairs which are not material in nature or cost.
3.8 Liabilities. The Sellers have no liabilities with respect to the
Business except (a) to the extent provided for or reserved against on the
Closing Pro Forma Statement of Net Assets (as updated on the Final Closing Pro
Forma Statement of Net Assets), which include current liabilities that have
arisen in the ordinary course of business consistent with past practice since
the date of the Closing Pro Forma Statement of Net Assets (all of which have
been recorded on the Sellers' books), (b) obligations under the Contracts and
Licenses, or (c) as listed on Schedule 3.8. Since January 3, 1998, there has not
been any incurrence (whether discharged or not) of any liability by the Sellers
in connection with the Business other than current liabilities incurred, and
obligations entered into, in the ordinary course of business consistent with
past practice, except as set forth on the Financial Statements and Schedule 3.8.
3.9 Inventory. The Inventory is of a quality and quantity useable and
saleable in the ordinary course of the Business as heretofore conducted, except
for obsolete items and items of below standard quality which are identified on
Schedule 3.9; and, the raw materials forming part of the Inventory are suitable
for use in the ordinary course of the Sellers' Business as heretofore conducted.
All apparel items included in the Inventory are in compliance with federal
labeling and flammability regulations. Items included in the Inventory are
carried on the books of the Sellers, and are valued on the Closing Pro Forma
Statement of Net Assets and the Final
22
Statement of Net Assets, at the lower of cost or market and, in any event, at
not greater than their net realizable value, except for obsolete items and items
of below standard quality which are identified on Schedule 3.9 and valued as set
forth on Schedule 3.9.
3.10 Intangibles. Schedule 3.10 lists all Intangibles owned by any
Seller with respect to the Business. To the Knowledge of the Sellers, there has
not been any infringement or alleged infringement by others of any such
Intangibles. Except as set forth in Schedule 1.14 or Schedule 1.28, no Seller is
a party to any Contract or License, whether as licensor, licensee, franchisor,
franchisee, dealer, distributor, or otherwise, with respect to any Intangible or
Trade Secret (as defined below) with respect to the Business. To the Knowledge
of the Sellers, the Sellers have the right to use all Intangibles as are
necessary to enable the Sellers to conduct, and Buyer to continue to conduct
after the Closing, all phases of the Sellers' Business in the manner presently
conducted by the Sellers, and that use has not conflicted with, infringed, or
otherwise violated any rights of any person or entity. Except for required
consents to assignment set forth on Schedule 3.3, the Sellers have the
unrestricted right to sell or assign to Buyer all such owned Intangibles and all
such licenses or other rights with respect to the Business. The Intangibles
listed in Schedule 3.10 are valid and in full force and effect and are not
subject to any Taxes, maintenance fees, or actions falling due within the next
six months. Except as set forth in Schedule 3.10, there have been no
interference actions or other judicial, arbitration, or other adversary
proceedings concerning the Intangibles listed in Schedule 3.10. Each application
for an Intangible listed in Schedule 3.10 is awaiting action by its respective
appropriate recording office except as otherwise indicated in Schedule 3.10. To
the Knowledge of the Sellers, the manufacture, use, performance or sale of
products or services incorporating or in connection with the Intangibles listed
in Schedule 3.10 does not violate or infringe on any Intangible or other right
of any person or entity, and the Sellers
23
have not otherwise infringed any Intangible, Trade Secret or other right of any
person or entity. The Sellers have the exclusive right to use and the
unrestricted right to transfer to Buyer all of Sellers' Trade Secrets with
respect to the Business, and to the Knowledge of the Sellers, none of the
Sellers' Trade Secrets with respect to the Business have been used, divulged, or
appropriated for the benefit of any past or present employees of the Sellers or
other person or entity, or to the detriment of the Sellers. The Sellers have not
disposed of or permitted to lapse, or otherwise failed to preserve the Sellers'
right to use any rights referenced in this Section 3.10.
3.11 Books and Records. The books of account, records and minute books
of the Sellers in connection with the Business are complete and correct in all
material respects.
3.12 Contracts. Schedule 1.14 is a true and complete list of all
Contracts, including those Contracts that constitute: (a) a lease of any real or
personal property with (i) aggregate annual rentals in excess of $25,000, or
(ii) with a remaining term in excess of one year and which is non-cancelable
without penalty on notice of ninety (90) days or less; (b) an agreement to
purchase or sell a capital asset for a price in excess of $25,000; (c)
obligations for money borrowed; (d) any other agreement involving an amount in
excess of $25,000; (e) written agreements with sales representatives, or (f)
agreements for the disposal of waste. The Seller that is party to each Contract
has performed each term, covenant and condition of each of the Contracts which
is to be performed by such Seller, in all material respects, at or before the
date hereof and will perform each term, covenant and condition of each of the
Contracts to be performed by it prior to the Closing, unless the other party to
such Contract is in material default thereunder. No event has occurred that
would, with the passage of time or
24
compliance with any applicable notice requirements, constitute a default by a
Seller under any of the Contracts. To the Knowledge of the Sellers, no event has
occurred that would, with the passage of time or compliance with any applicable
notice requirements, constitute a default by the other party under any of the
Contracts. To the Knowledge of the Sellers, no party to any of the Contracts
intends to cancel, terminate, or exercise any option under any of the Contracts.
The Sellers' execution, delivery and performance of this Agreement will not
constitute a breach of or a default under any Contract except as identified on
Schedule 1.14. All consents required for Buyer's assumption of the Contracts, as
designated on Schedule 3.3, will have been received by the Closing Date. True
copies of the Contracts have been delivered to Buyer.
3.13 Licenses. Schedule 1.28 is a true and complete list of all
Licenses held by the Sellers in connection with the Business. The applicable
Seller has performed each term, covenant and condition of each of the Licenses
which is required to be performed by such Seller, in all material respects, at
or before the date hereof and will perform each term, covenant and condition of
each of the Licenses required to be performed by it prior to Closing, unless the
other party to the Licenses is in material default thereunder. No event has
occurred that would, with the passage of time or compliance with any applicable
notice requirements, constitute a default by a Seller under any of the Licenses.
To the Knowledge of the Sellers, no event has occurred that would, with the
passage of time or compliance with any applicable notice requirements,
constitute a default by the other party under any of the Licenses. To the
Knowledge of the Sellers, except as shown on Schedule 1.28 no party to any of
the Licenses intends to cancel, terminate, or exercise any option under any of
the Licenses. The Sellers' execution, delivery and performance of this Agreement
will not constitute a breach of or a default under any License, except as
identified on Schedule 1.28. The Sellers will use reasonable best efforts to
obtain all consents required to permit assignment to and assumption by Buyer of
the Licenses as soon as reasonably possible after the date hereof. True copies
of the Licenses have been delivered to
25
Buyer. Schedule 1.28 sets forth, for each License, the revenue generated by the
Sellers in calendar year 1997.
3.14 Financial Statements. The Financial Statements fairly present the
financial position and results of operations of the Business of the Sellers as
of the date thereof and the periods then ended and were prepared in accordance
with generally accepted accounting principles, consistently applied. The Closing
Pro Forma Statement of Net Assets and the Final Statement of Net Assets will be
true and correct in all material respects, and will be prepared, unless
otherwise provided herein in a manner consistent with the Financial Statements
of the Sellers. As of the dates of the Financial Statements, the Closing Pro
Forma Statement of Net Assets and the Final Statement of Net Assets, the Sellers
had or will have, as the case may be, no material liabilities or obligations
relating to the Business, fixed or contingent, not adequately reflected in such
statements or balance sheets, the notes thereto or the exhibits hereto.
3.15 No Adverse Change. Except as set forth in Schedule 3.15, since
January 3, 1998, there has not been: (a) any material adverse change in the
Business of the Sellers; (b) any loss, damage, condemnation or destruction to
the properties of the Sellers materially adversely affecting the Business of the
Sellers or the Assets; (c) any labor dispute or disturbance, litigation or, to
the Knowledge of the Sellers, any event or condition that could materially
adversely affect the Business of the Sellers but not including events or
conditions that affect all or part of the general economy; (d) any Lien made on
any of the properties or assets of the Sellers in connection with the Business;
or (e) any sale, transfer or other disposition of assets of the Sellers in
connection with the Business other than in the ordinary course of business.
3.16 Taxes. Except as set forth in Schedule 3.16, the Sellers have
filed all required Tax returns and reports relating to the Business and the
Assets, Contracts, and Licenses. The Sellers'
26
records to be transferred to Buyer contain all information and documents
(including, without limitation, properly completed Forms W-9) necessary to
comply with all information reporting and tax withholding requirements under
federal and state laws, rules and regulations, and such records identify with
specificity all accounts subject to backup withholding under Section 3406 of the
Code. The Sellers have paid (or has made adequate provision for and will timely
pay) in connection with the Business all Taxes (including additions to Tax,
penalties and interest), withholdings and other governmental charges the
nonpayment of which could adversely affect any of the Assets, Contracts, or
Licenses or the use thereof or could cause Buyer to incur any liability. Except
as set forth on Schedule 3.16, no taxing authority has asserted any claim for
the assessment of any such tax liability (including additions to Tax, penalties
and interest), withholding or other governmental charges. None of the Assets is
subject to, and none of the Contracts is, a "safe harbor lease" under former
Section 168(f)(8) of the Code. None of the Sellers is a foreign person within
the meaning of Section 1445 of the Code.
3.17 Employment Agreements and Benefits. Schedule 1.16 is a true and
complete list of all Employee Benefit Plans which are in effect with obligations
to be performed relating to the compensation and other benefits of present and
former employees, salesmen, consultants and other agents of the Sellers in
connection with the Business, including collective bargaining agreements and
pension, retirement, bonus, stock option, profit sharing, health, disability,
life insurance, hospitalization, education or other similar plans or
arrangements (whether or not subject to the Employee Retirement Income Security
Act of 1974, as amended, and all regulations and rules promulgated thereunder
("ERISA")), true copies of which have been delivered to Buyer. None of the
Employee Benefit Plans listed on Schedule 1.16, will be breached by the Sellers'
execution, delivery and performance of this Agreement. Except as
27
provided in Section 8.3(c) hereof, no Employee Benefit Plan requires Buyer to
assume any employment, compensation, fringe benefit, pension, profit sharing or
deferred compensation plan in respect of any employee of the Sellers. To the
Knowledge of the Sellers, there are no union organizing campaigns pending or
threatened at any of the facilities being transferred to Buyer hereunder.
Schedule 1.16 lists the name and current compensation for all present employees
of the Sellers in connection with the Business with annual compensation in
excess of $60,000. To the Knowledge of the Sellers, no present employee of the
Sellers in connection with the Business is a party to any contract or agreement
that contains (a) a covenant limiting the freedom of any such employee to
compete in any line of business or with any Person or in any geographic area or
market, or (b) an obligation of confidentiality with respect to information of
the Sellers in connection with the Business.
3.18 Employee Benefit Plans. (a) Schedule 1.16 identifies each "pension
plan" (as defined in Section 3(2) of ERISA) (the "Pension Plans") and each
"welfare plan" (as defined in ERISA Section 3(l)) (the "Welfare Plans")
maintained by the Sellers or to which any Seller contributes on behalf of the
employees of either Logo or LogoAH (the Pension Plans and Welfare Plans are
hereafter referred to as the "Employee Plans"). A true and complete copy of each
Employee Plan has been furnished to Buyer.
(b) Schedule 1.16 identifies each Pension Plan that is intended to be
qualified under Section 401(a) of the Code. To the Knowledge of the Sellers,
each such Pension Plan complies with applicable Law as of the date hereof. To
the Knowledge of the Sellers, there are no facts or circumstances that would
jeopardize or adversely affect the qualification under Code Section 401(a) of
any Pension Plan that is intended to be so qualified.
28
(c) As of the Closing Date, full payment has been made, or will be made
pursuant to the terms of the applicable plan, to each Employee Plan of all
contributions that are required under the terms thereof and under ERISA. No
"accumulated funding deficiency" (as defined in ERISA Section 302 or Code
Section 412), whether or not waived, exists with respect to any Pension Plan.
With the exception of the Pension Plan for employees of Tultex (the "Sellers'
Pension Plan"), no Pension Plan is a "defined benefit plan" (as defined in Code
Section 414) and the Sellers have not maintained or contributed to any other
defined benefit plan or any other plan that is subject to the provisions of
Title IV of ERISA.
(d) No employees of the Business are currently accruing benefits under
the Sellers' Pension Plan.
(e) Each Employee Plan has been administered in accordance with its
terms and the terms of any applicable collective bargaining agreement. In
addition, to the Knowledge of the Sellers, each Employee Plan complies with, and
has been administered in accordance with the provisions of ERISA (including the
rulings and regulations promulgated thereunder) or in a manner that would result
in no adverse impact on Buyer or the Assets or any plan of Buyer into which
assets may be transferred pursuant to this Agreement. To the Knowledge of
Sellers, all reports, returns and other documentation that are required to have
been filed with the Internal Revenue Service, the Department of Labor, the
Pension Benefit Guaranty Corporation or any other governmental agency (federal,
state or local) have been filed on a timely basis. Except as set forth in
Schedule 3.5, no lawsuits or complaints to, or by, any person or governmental
entity have been filed, or are to the Knowledge of the Sellers contemplated or
threatened, with respect to any Employee Plan.
29
(f) The Sellers do not and have not contributed to or maintained a
"multiemployer plan" (as defined in ERISA Section 3(37)).
(g) The insurance policies issued on the lives of Xxxxxx X. Xxxxx
(General American Life Insurance Company Policy No. 3,231,214) and Xxxxxxx X.
Xxxxxxx (General American Life Insurance Company Policy No. 3,231,213),
respectively, pursuant to the LOGO 7, Inc. Omega Plan comprised of the Executive
Compensation Agreements entered into thereunder by and between LOGO 7, Inc., and
Xxxxxx X. Xxxxx and Xxxxxxx X. Xxxxxxx, respectively (collectively, the "Omega
Agreements"), are in force, all premiums due on such life insurance policies
have been paid, and there are no outstanding loans in respect of, nor have there
been any withdrawals of the cash surrender values on, any such life insurance
policy.
(h) The applicable Seller has discharged all obligations of the
"Corporation" under terms of that certain (a) Agreement dated March 15, 1990 by
and between LOGO 7, Inc., an Indiana corporation, Xxxxxx Xxxxx, and Xxxxx
Xxxxxxxx, as trustee, and (b) Agreement dated March 15, 1990 by and between LOGO
7, Inc., an Indiana corporation, Xxxxxxx Xxxxxxx, and Xxxxx Xxxxxxxx, as trustee
(collectively, the "Trust Agreements").
(i) The disability income insurance policies issued in respect of
Xxxxxx X. Xxxxx (Xxxx Xxxxxx Insurance Group Disability Income Policy No.
010238990503) and Xxxxxxx X. Xxxxxxx (Xxxx Xxxxxx Insurance Group Disability
Income Policy No. 010238990603), respectively (collectively, the "Existing
Disability Income Arrangements"), are in force and all premiums due on such
insurance policies have been paid.
3.19 Compliance with Law. Except as set forth in Schedule 3.19, the
Sellers' conduct of the Business and their use of the Assets does not violate or
conflict with any Law, including, without limitation, Laws relating to
environmental quality and the discharge, storage, handling or
30
use of hazardous materials, waste or pollutants. The Permits constitute all
governmental approvals, authorizations, permits and licenses, including those
related to environmental quality, required to conduct the Business of the
Sellers, and are in full force and effect, are being complied with in all
material respects and will remain in effect immediately following the Closing.
The Sellers and Buyer will cooperate in obtaining necessary consents and
approvals to the transfer of the Permits to Buyer.
3.20 Transactions With Affiliates. Except as set forth in Schedule
3.20, since January 3, 1998, each Seller has not with respect to the Business,
in the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any property or assets or obtained any services from, or sold, leased
or otherwise disposed of any property or assets or provided any services to
(except with respect to remuneration for services rendered as a director,
officer or employee of a Seller), any shareholder of a Seller or any Affiliate
of a Seller. Except as set forth in Schedule 3.20, the Sellers in connection
with the Business do not owe any amount or have any contractual obligation or
commitment to any Affiliate (other than compensation for current services not
yet due and payable and reimbursement of expenses arising in the ordinary course
of business), and no Affiliate owes any amount or has any contractual obligation
to any Seller in connection with the Business (other than for advances arising
in the ordinary course of business),. Since January 3, 1998, Logo and LogoAH
have not declared, paid or set aside any dividend or other distribution on or
with respect to their capital stock other than as described on Schedule 3.20.
3.21 Real Property.
(a) Legal Descriptions. Complete and accurate legal descriptions of the
Real Property are set forth on Schedule 3.21(a).
31
(b) No Condemnation or Improvement. There is no state of facts or event
which could reasonably be expected to form the basis for any condemnation
proceedings that could affect the Real Property or any possible future
improvements by any public authority, any part of the cost of which could be
assessed against the Real Property, or any contemplated future assessments of
any kind.
(c) Utilities. In the past three years no Seller has experienced any
material interruption in the delivery of adequate service of any utilities or
other public authorities required in the operation of the Business. The Real
Property has adequate water supply, storm and sanitary sewage facilities,
telephone, gas, electricity, fire protection, and, without limitation, other
public utilities.
(d) Condition of Real Property. To the Knowledge of the Sellers, the
roof and the foundation of the Real Property are watertight and free from leaks,
seepages and moisture.
(e) Environmental Matters. Except as described on Schedule 3.21(e):
(i)The Sellers' assets with respect to the Business do not contain
any Hazardous Substances and there are no underground storage tanks located on
(nor, to the Knowledge of the Sellers, have any underground storage tanks been
removed from) the Real Property or any former owned or leased facility of any of
the Sellers used in connection with the Business;
(ii) There has been no Release of any Hazardous Substances at any
or from any of the Sellers' current or former facilities used in connection with
the Business;
(iii) To the Knowledge of the Sellers, there has been no Release of
any Hazardous Substances at any or from any properties adjacent to any of the
Sellers' current or former facilities used in connection with the Business;
32
(iv) To the Knowledge of the Sellers, there are no
asbestos-containing materials or urea formaldehyde-containing materials
incorporated into the buildings or interior improvements that are a part of the
Real Property, or into other assets or products of the Sellers, nor is there any
electrical transformer, fluorescent light fixture with ballasts, or other
equipment containing polychlorinated biphenyls on the Real Property; (v) There
has been no generation, Treatment or Storage of any Hazardous Substances by any
of the Sellers with respect to the Business;
(vi) There has been no Disposal or arrangement for Disposal of
Hazardous Substances by any Seller in connection with the Business on any
property not owned or leased by any Seller; and
(vii) No Seller uses any Hazardous Substances in the conduct of its
Business.
Schedule 3.21(e) also contains an accurate and complete list of all Hazardous
Substance and other environmental reports prepared for any Seller or in any of
the Sellers' possession with respect to the Assets or the Business in the past
ten years.
3.22 No Broker. No Seller is committed to any liability for any
brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement.
3.23 No Capital Stock. No capital stock of any corporation is included
in the Assets.
3.24 Worker Adjustment and Retraining Notification Act ("WARN").
Schedule 3.24 lists each and every employee of Logo and LogoAH, respectively,
that, since February 1, 1998, (i) incurred an employment termination, other than
a discharge for cause, voluntary departure or retirement; (ii) was laid off for
any reason; or (iii) experienced a reduction in hours of work of more
33
than fifty percent (50%) from February 1, 1998 to the date of this Agreement,
and Schedule 3.24 shall be updated to provide the same information through the
Closing Date.
3.25 Disclosure. Except to the extent of any subsequent correction or
supplement with respect thereto furnished prior to the date hereof, no written
statement, certificate, exhibit, list or other written information listed on
Schedule 3.25 and furnished by or on behalf of any Seller at any time to Buyer,
in connection with this Agreement when considered as a whole, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. Each
document delivered or to be delivered by any Seller to Buyer is or will be a
true and complete copy of such document, unmodified except by another document
delivered by a Seller to Buyer prior to the date hereof.
3.26 Investment Intent. (a) Tultex understands that the investment in
the Notes (as defined in Section 2.3) (i) is suitable only for an investor who
is able to bear the economic consequences of losing its entire investment, (ii)
is an investment which involves a high degree of risk, and (iii) there are
substantial restrictions on the transferability of, and there will be no
immediate public market for, the Notes, and accordingly, it may not be possible
for Tultex to liquidate the investment in case of emergency. (b) Tultex has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of this speculative investment and of making an
informed investment decision. Tultex is an "ACCREDITED INVESTOR" as defined in
Rule 501 of Regulation D of the Securities Act. (c) The Notes are being acquired
by Tultex solely for its own personal account, for investment purposes only, and
not with a view to, or in connection with, any resale or distribution thereof.
Tultex has no contract, undertaking, understanding, agreement or arrangement,
formal or informal, with any person to
34
sell, transfer or pledge to any person the Notes, or any part thereof, or any
interest therein or any rights thereto. Tultex has no present plans to enter
into any such contract, undertaking, agreement or arrangement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers that:
4.1 Organization. Buyer is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware, and has
full corporate power and authority to enter into and perform its obligations
under this Agreement.
4.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement are within the corporate power and authority of
Buyer and have been duly authorized by all necessary corporate action by Buyer.
This Agreement is, and the other documents and instruments required hereby will
be, when executed and delivered by Buyer, enforceable against Buyer in
accordance with their respective terms.
4.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement by Buyer do not and will not conflict with or violate any Law,
judgment, order or decree binding on Buyer, or the Certificate of Incorporation
or By-laws of Buyer or any contract or agreement to which Buyer is a party or by
which it is bound.
4.4 No Broker. Buyer has not had any dealings, negotiations or
communications with any broker or other intermediary in connection with the
transactions contemplated by this Agreement other than XxXxxxxx & Company
Securities, Inc., whose fees and expenses Buyer is solely responsible.
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4.5 Financing. Buyer has available to it all equity funds, a
substantial majority of which are on deposit in an escrow account, pursuant to
terms and conditions contained in those certain subscription agreements and
related side letter agreements (which have been accepted by Buyer simultaneously
with the execution of this Agreement), a copy of each of which was reviewed by
the Sellers on or prior to the date hereof (the "Subscription Agreements"), and
a customary bank letter agreement for its debt financing, evidencing the
proposed financing to complete the transaction contemplated herein. Buyer has
provided to Sellers true, accurate and complete evidence of its available equity
funds pursuant to the Subscription Agreements and proposed debt funding pursuant
to that certain bank letter agreement from Buyer's senior lender to enable Buyer
to pay the Purchase Price and the Final Purchase Price, if greater, and to
effect the consummation of the transactions described herein.
4.6 Disclosure. Except to the extent of any subsequent correction or
supplement with respect thereto furnished prior to the date hereof, no written
statement, certificate, exhibit, list or other written information furnished by
or on behalf of Buyer at any time to any Seller, in connection with this
Agreement when considered as a whole, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Each document
delivered or to be delivered by Buyer to the Sellers is or will be a true and
complete copy of such document, unmodified except by another document delivered
by Buyer to the Sellers prior to the date hereof.
4.7 Employment Agreement. Xxxxxx X. Xxxxx has entered into an
Employment Agreement with Buyer, effective as of the Closing, in form acceptable
to Buyer.
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4.8 License Agreement. Buyer has entered into a license agreement with
its strategic partner in form acceptable to Buyer.
ARTICLE V
CERTAIN MATTERS PENDING THE CLOSING
The Sellers covenant to Buyer that from and after the date of this
Agreement and until the Closing Date:
5.1 Carry on in Ordinary Course. Tultex, in connection with the
Business, Logo and LogoAH each shall (i) carry on the Business, including
transactions with any of their Affiliates, in the ordinary course and
substantially in the same manner as heretofore carried on, including, without
limitation, (a) collection of the Accounts Receivable only in accordance with
usual procedures, (b) payment of the Accounts Payable as they become due, and
(c) funding of the working capital requirements of the Business, (ii) use their
reasonable best efforts to preserve their properties, business and relationships
with suppliers and customers, it being agreed that "reasonable best efforts",
whenever required in this Agreement, shall not require the payment of any sum of
money or providing any consideration to or for the benefit of any person to
obtain or in connection with obtaining any consents to the assignment of any
Licenses or Contracts or the extension or modification of any Licenses, (iii)
without Buyer's consent, not issue additional equity securities or any rights,
options or warrants with respect thereto, except for the granting of options or
sale of securities of Tultex under the Employee Benefit Plans in the ordinary
course, (iv) without Buyer's consent, not agree to any contract involving the
expenditure of $10,000 or more during its term (other than those contemplated by
Sections 6.10 and 6.11) or to make any single expenditure in excess of $10,000
which it is not obligated to make under obligations of the Sellers in connection
with the Business existing prior to the execution of this Agreement, as
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shown on the Closing Pro Forma Statement of Net Assets, and (v) without Buyer's
consent, not sell any of the Assets, other than Inventory in the ordinary course
of business, consistent with past practice. The Sellers will advise Buyer in
writing of any material adverse change in the financial condition, business or
affairs of the Sellers' Business, or any declaration or payment of any dividend
with respect to their capital stock or any repurchase of their capital stock.
5.2 Indebtedness. Except for Accounts Payable incurred in the ordinary course of
business, Tultex, in connection with the Business, and each of Logo and LogoAH,
shall not (i) create, incur or assume any indebtedness for borrowed money except
under existing credit lines, (ii) create a Lien on any of their properties or
assets, or (iii) create or assume any other indebtedness or issue any debt
securities.
5.3 Compensation. The Sellers shall not grant any bonuses or
increases in the rate of pay of any of the employees of the Business, except for
bonuses or increases in the ordinary course of business. This provision shall
not prohibit the Sellers from fulfilling pre-existing contractual obligations to
the employees of the Business. The Sellers shall not institute any new employee
benefit plan or grant any increases in employee fringe benefits to any employee
of the Business other than as described in Schedule 1.16.
5.4 Compliance with Law. The Sellers shall comply with all applicable Laws and
with all orders of any court or of any federal, state, municipal or other
governmental department, non-compliance with which could cause a material
adverse change in the Assets or the Business of the Sellers.
5.5 Access. Buyer and its authorized agents, officers and representatives shall
have reasonable access to the properties, books, records, contracts, information
and documents of the Business to conduct such examinations and investigations of
the Sellers' Business as it deems
38
necessary, provided that such examinations and investigations: (i) shall be
offered to be conducted only in the presence of a designated representative of a
Seller; and (ii) shall not unreasonably interfere with such Seller's operations
and activities. The Sellers shall cooperate in all reasonable respects with
Buyer's examinations and investigations.
5.6 Cooperation. Buyer and the Sellers will cooperate in all respects
in connection with the giving of any notices to any governmental authority or
securing the permission, approval, determination, consent or waiver of any
governmental authority required by Law in connection with the consummation of
the transactions contemplated under this Agreement. Subject to the terms and
conditions of this Agreement, Buyer and the Sellers agree to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper and advisable to consummate, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement.
5.7 Publicity. All general notices, releases, statements and
communications to employees, suppliers, distributors and customers of the
Sellers' Business and to the general public and the press relating to the
transactions covered by this Agreement shall be made only at such times and in
such manner as may be mutually agreed upon by Buyer and the Sellers; provided,
however, that either party shall be entitled to make a public announcement in a
manner approved by the other party, such approval not to be unreasonably
withheld, of the proposed transaction if, in the opinion of its legal counsel,
such announcement is required to comply with Law.
5.8 Confidentiality. If the transactions provided for herein are not
consummated, the Buyer and the Sellers and each of their respective directors,
officers, agents and representatives will hold in strict confidence, and not
utilize in any manner, all information obtained from each
39
other and their
directors, officers, agents or representatives (hereinafter in this Section 5.8
referred to as the "Disclosing Persons"), except, however, any such information
that: (i) is now or hereafter becomes available to the public; (ii) was in fact
known by Buyer or the Sellers, as the case may be, prior to disclosure to Buyer
or the Sellers, as the case may be, by the Disclosing Persons; or (iii) is
required to be disclosed by Buyer or the Sellers by subpoena or order of a court
of competent jurisdiction, or by order of a regulatory authority of competent
jurisdiction. In addition, if the transactions provided for herein are not
consummated, Buyer and the Sellers will forthwith cause to be returned to the
other the originals and all copies of materials supplied by the Disclosing
Persons to Buyer or the Sellers, as the case may be, and their directors,
agents, officers and representatives relating to the transactions contemplated
hereby. The obligations under this Section 5.8 shall survive termination of this
Agreement.
5.9 Articles of Incorporation and By-Laws. Prior to Closing, the
Sellers will not amend their Articles of Incorporation (or its equivalent) or
By-laws (or its equivalent) in any manner adverse to Buyer or the consummation
of the transactions contemplated herein, or merge or consolidate with or into
any other corporation.
5.10 No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to its terms, no Seller nor any of their executive officers,
directors, representatives, agents or affiliates shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations (with any
person other than Buyer) concerning any merger, sale of substantial assets,
tender offer, sale of shares of stock or similar transaction involving the
Business or the Assets or disclose, directly or indirectly, any information not
customarily disclosed to the public concerning the Business of the Sellers,
afford to any other person access to the properties, books or records of the
Business of the Sellers or otherwise assist any person
40
preparing to make or who has made such an offer, or enter into any agreement
with any third party providing for a business combination transaction, equity
investment or sale of significant amount of assets, involving the Business. The
Sellers will immediately upon receipt notify Buyer in writing the terms of any
proposal which they may receive in respect to any of the foregoing transactions,
any documentation it intends to provide in connection therewith, and keep Buyer
informed of the status of any developments in this regard.
5.11 Updating of Schedules. Each of the parties hereto shall notify the
other of any changes, additions or events which shall cause any change in or
addition to any Schedules delivered by it under this Agreement, promptly after
the occurrence of same and at the Closing by delivery of updates of all
Schedules. No notification made pursuant to this Section 5.11 shall be deemed to
cure any breach of any representation or warranty made in this Agreement unless
the Person receiving such notification specifically agrees thereto in writing
nor shall any such notification be considered to constitute or give rise to a
waiver by Buyer of any condition set forth in this Agreement. If any warranty or
representation made in this Agreement is determined to be incorrect prior to the
Closing Date or if any condition or event occurs which causes any warranty or
representation to be incorrect as of the Closing Date or if any provision in
this Agreement is breached before the Closing Date, the party making such
incorrect warranty or representation or committing such breach shall be
entitled, up to the Closing Date, to cure such warranty or representation by
doing such things as are necessary to cause such warranty or representation as
made on the date of this Agreement to be correct or by causing the breach in any
provision to be cured prior to the Closing Date, and in the event of such cure,
if the failure to cure would have been a reason to prevent the Closing such
incorrections or breach shall not be deemed the failure of a condition precedent
to closing or a reason for the closing not to occur.
41
Each party shall notify the other as soon as reasonably possible after it
discovers such an incorrectness or breach. The right to cure granted herein
shall not include any material revision, addition to, or deletion from, any
Schedule without the consent of the party for whose benefit the Schedule was
provided.
5.12 Subordination Agreement and Establishment of a System for
Collection of Accounts Receivable following the Closing. The Sellers will
negotiate in good faith a subordination/intercreditor agreement with respect to
the Notes with Buyer's senior lender(s) (the "Subordination Agreement"). In
addition, the Sellers, together with Buyer and its senior lender(s), shall
establish a system, satisfactory to Buyer and its senior lender(s), to ensure
the immediate transfer to Buyer following the Closing of the Accounts Receivable
collected by the Sellers pursuant to the terms and conditions contained in the
Services Agreement.
5.13 Proration of Obligations to the Contracts and Licenses. The
parties hereto shall use their best efforts to mutually agree upon the amount of
expense to be allocated between the Sellers, on the one hand, and the Buyer on
the other with respect to obligations (and refunds and adjustments, if any)
under the Contracts and Licenses being assumed by Buyer hereunder, with the
understanding and approach that Buyer is to be responsible only for that portion
of the obligation that relates to the benefits of such agreements to be received
by Buyer after the Closing. Specifically, the parties shall agree to a daily
proration of all consistent, periodic payments under such agreements and an
equitable adjustment for any non-consistent, periodic payments due thereunder.
The agreed upon amount for such obligation shall be set forth on and become a
part of the Final Statement of Net Assets.
5.14 Third Party Consents. Promptly upon execution of this Agreement,
Sellers agree to use best efforts (which shall not include the payment of any
fees by Sellers to the other partie
42
to the Contracts and Licenses) to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper and advisable to obtain
the necessary consents for the assignment of the Contracts and Licenses to
Buyer. Buyer agrees to cooperate with Sellers in connection with the foregoing
covenant.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 Compliance with Agreement. The Sellers shall have performed and
complied in all respects with all of their obligations under this Agreement that
are to be performed or complied with by them prior to or on the Closing Date.
6.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken by the Sellers in connection with the
transactions contemplated by this Agreement, and all documents incident thereto
and hereto, shall be reasonably satisfactory in form and substance to Buyer and
Buyer's counsel, and the Sellers shall have made available to Buyer for
examination the originals or true and correct copies of all documents which
Buyer may reasonably request in connection with the transactions contemplated by
this Agreement.
6.3 No Litigation. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks restraint, prohibition, damages or other relief in connection with this
Agreement, or with the consummation of the transactions contemplated hereby, or
with the Contracts or the Licenses if in the reasonable judgment of Buyer such
restraint, prohibition, damages or other relief would have a material adverse
effect on the Business or the Assets.
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6.4 Representations and Warranties. The representations and warranties
made by the Sellers in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on the Closing Date. An immaterial inaccuracy in a representation or
warranty shall not provide an excuse not to close.
6.5 Authorization of Transaction. All action necessary to authorize the
performance of this Agreement by the Sellers shall have been duly and validly
taken by the Sellers.
6.6 Material Adverse Effect. Between the date of this Agreement and the
Closing Date, there shall have been no material adverse effect on the financial
condition, results of operations, Assets or Business of the Sellers.
6.7 Deliveries at Closing. The Sellers shall have delivered to Buyer,
each properly executed and dated as of the Closing Date:
(a) the Opinion of Sellers' Counsel;
(b) the Sellers' Closing Certificate;
(c) all documentation necessary to effectuate a change of the
applicable Sellers' corporate name to one not using the word "Logo" or any name
confusingly similar thereto, and to permit Buyer to use such names in all states
where Logo and LogoAH are qualified to do business as a foreign corporation;
(d) good standing certificates dated no more than ten (10)
days prior to the Closing Date from each Sellers' state of incorporation and
each state in which each Seller is qualified to do business as a foreign
corporation with respect to the Business;
(e) a supply agreement in substantially the form of Exhibit
6.7(e) (the "Supply Agreement"), signed by Tultex;
(f) a transition services agreement providing for the
rendering of services by Tultex to Buyer following the Closing in form and
substance mutually acceptable to Tultex, Buyer and Buyer's senior lender(s) (the
"Services Agreement"), signed by Tultex;
44
(g) a License Agreement in substantially the form of Exhibit
6.7(g) (the "License Agreement"), signed by Tultex;
(h) the Subordination Agreement in form and substance
satisfactory to Sellers, Buyer and Buyer's senior lender(s); and
(i) evidence, reasonably satisfactory to Buyer, of Sellers'
compliance with their covenants and obligations contained in the Sellers'
Indebtedness.
6.8 Regulatory Approvals. All regulatory approvals necessary for the
consummation of the transactions contemplated by this Agreement shall have been
received, and all applicable waiting periods, if any, shall have expired
6.9 Title to Assets. Buyer shall have received all documentation and
evidence satisfactory to it as to the accuracy of the representations contained
in Section 3.4, including, without limitation, bills of sale, certificates of
title, endorsements, assignments, affidavits, UCC-3 termination statements, and
such other instruments of transfer.
6.10 Consents and Amendments to the Licenses. Buyer shall have received
consents to the assignment of, and certain amendments to (including, but not
limited to, extensions for terms not to expire before December 31, 2001, except
for the National Football League which extension shall not expire before March,
2001), the Licenses from Major League Baseball, the National Hockey League, the
National Basketball Association and the National Football League (collectively
the "Major League Licenses") and the License with the Collegiate Licensing
Company, in a form acceptable to Buyer.
6.11 Consents to Contracts. All consents required for Buyer's
assumption of the Contracts, Licenses and Sellers' transfer of the Assets to
Buyer shall have been received, including, but not limited to, the Real Property
Lease, provided, however, the foregoing condition shall be deemed satisfied if
all Contracts and Licenses are validly assigned to Buyer
45
except for those which, individually or in the aggregate, that both Buyer and
its senior lender(s), in the exercise of their reasonable business judgment,
believe would not have a material adverse effect on Buyer's ownership or conduct
of the Business after the Closing, results of operations, financial condition,
prospects or ability to pay its indebtedness when it becomes due
6.12 Real Property. (a) The applicable Seller shall have delivered to a
title company of Buyer's choice (the "Title Company") a general warranty deed
(the "Deed") executed in recordable form warranting fee simple title to the
Owned Real Property in Buyer free of all Liens, (b) Buyer shall have received
unconditional title insurance commitments dated as of the Closing Date and
signed at the Closing by an authorized agent of the Title Company to serve as an
owner's policy of title insurance for the Owned Real Property and a leasehold
policy of title insurance for the Real Property Lease. The title policies shall
be on ALTA Form B (Revised 10-17-70) and otherwise in form acceptable to Buyer
insuring in Buyer good title to the Owned Real Property and to the Real Property
Lease, without any exception for facts that would be disclosed by a survey and
without any exceptions for non-filed mechanics', laborers', materialmen's, other
general exceptions, or Liens; (c) Buyer shall have received an estoppel
certificate from the lessor of the Leased Real Property and from all other
holders of interests in the Leased Real Property superior to the Real Property
Lease to the effect that Tultex has not breached any of its obligations to them
and that so long as Buyer fulfills Tultex's post-Closing obligations under the
Real Property Lease, Buyer will be entitled to occupy the premises for the
remainder of the term and to all other rights of Tultex under the Real Property
Lease; (d) Buyer shall have received a survey of the Owned Real Property; and
(e) Buyer shall have received from the applicable Seller(s) a FIRPTA affidavit
of such Seller as to such Seller's status as a domestic corporation.
6.13 Environmental Review. Buyer shall have received an environmental
review of the
46
Assets, the results of which are satisfactory to Buyer.
6.14 Purchase of Preferred Stock. Tultex shall have purchased at par
simultaneously with the Closing a minimum of $6,000,000 of par value of the
$7,500,000 of Preferred Stock (and shall have paid all accrued and unpaid
dividends with respect thereto), owned by the three owners thereof
(collectively, the "Owners") in the amounts mutually agreed to by the Owners. In
addition, Tultex will covenant, in a separate written instrument with the
Owners, to purchase at par the remaining $1,500,000 of Preferred Stock (and pay
all accrued and unpaid dividends with respect thereto) as soon as permitted by
the covenants of the Sellers' Indebtedness, upon the written request of the
Owners.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following express conditions precedent:
7.1 Compliance with Agreement. Buyer shall have performed and complied
in all material respects with all of its obligations under this Agreement that
are to be performed or complied with by it prior to or on the Closing Date.
7.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken by Buyer in connection with the transactions
contemplated by this Agreement, and all documents incident thereto and hereto,
shall be reasonably satisfactory in form and substance to the Sellers and the
Sellers' counsel, and Buyer shall have made available to the Sellers for
examination the originals or true and correct copies of all documents which the
Sellers may reasonably request in connection with the transactions contemplated
by this Agreement.
47
7.3 No Litigation. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
7.4 Representations and Warranties. The representations and warranties
made by Buyer in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on the Closing Date. An immaterial inaccuracy in a representation or
warranty shall not provide an excuse not to close.
7.5 Deliveries at Closing. Buyer shall have delivered to the Sellers,
each properly executed and dated as of the Closing Date:
(a) the Opinion of Buyer's Counsel;
(b) the Buyer's Closing Certificate;
(c) a good standing certificate dated no more than 10
days prior to the Closing Date from Buyer's state of incorporation;
(d) the Supply Agreement, signed by Buyer;
(e) the Services Agreement, signed by Buyer; and
(f) the License Agreement, signed by Buyer.
7.6 Regulatory Approvals. All regulatory approvals necessary for the
consummation of the transactions contemplated by this Agreement shall have been
received and all applicable waiting periods, if any, shall have expired.
7.7 Payment of the Purchase Price. The Sellers shall have received the
Five Million Dollar Subordinated
48
Promissory Note, the Convertible Five Million Dollar Subordinated Promissory
Note, the Two Million Five Hundred Thousand Dollar Subordinated Promissory Note,
and the portion of the Purchase Price payable at the Closing in immediately
available funds by wire transfer as calculated pursuant to Article II hereof.
ARTICLE VIII
INDEMNITIES AND ADDITIONAL COVENANTS
8.1 Sellers' Indemnity. (a) In the event that the purchase and sale
transaction set forth herein is consummated, from and after the Closing Date,
and with such indemnity limited to $30,000,000, the Sellers, jointly and
severally, hereby indemnify and hold Buyer, its successors and assigns harmless
from and against, and agree to defend promptly Buyer, its successors and assigns
from and reimburse Buyer, its successors and assigns for, any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind,
including, without limitation, reasonable attorneys' fees and other legal costs
and expenses (hereinafter referred to collectively as "Losses"), that Buyer may
at any time suffer or incur, or become subject to, as a result of or in
connection with (i) any breach or inaccuracy of any of the representations and
warranties made by the Sellers in or pursuant to this Agreement; (ii) any breach
or nonperformance of any covenant or obligation made or incurred by the Sellers
in or pursuant to this Agreement; (iii) the operation and ownership of the
Assets by the Sellers prior to the Closing Date; and (iv) any liability of the
Sellers not specifically assumed by Buyer pursuant to Section 2.4, specifically
including, without limitation, any liability for the matters set forth on
Schedule 3.8, provided, that the Sellers shall not be required to indemnify
Buyer pursuant to this Section unless and until the amount of all Losses for
which indemnification is sought first exceeds $150,000, in which event Buyer may
seek indemnification for all such Losses, including such initial $150,000. The
49
Sellers shall further indemnify Buyer to the extent that any Liability assumed
by Buyer exceeds the amount of such Liability specified on the Final Statement
of Net Assets.
(b) The amounts for which the Sellers shall be liable under
Section 8.1(a) of this Agreement shall be: (i) net of the amount of any income
tax benefit or the present value (based on a discount rate of 9% per annum) of
any income tax benefit realized or to be realized by Buyer by reason of the
facts and circumstances giving rise to the Sellers' indemnification liability;
(ii) calculated by taking into account any income tax required to be paid by
Buyer as a result of the accrual or receipt of any payment made to Buyer
pursuant to Section 8.1(a) of this Agreement; and (iii) net of any insurance
proceeds received by Buyer in connection with the facts giving rise to the right
of indemnification. For purposes of the preceding sentence, the amount of any
state or local income tax benefit or cost shall reflect the federal income tax
effect of such benefit or cost. The amounts for which the Sellers shall be
liable under Section 8.1(a) shall bear interest at the rate of 9% per annum from
the later of (i) the date that the underlying Loss is incurred by Buyer, or (ii)
the date that notice thereof is given to a Seller.
(c) In the event a claim against Buyer arises that is covered
by the indemnity provisions of Section 8.1(a) of this Agreement, notice shall be
promptly given by Buyer to the Sellers, and the Sellers shall have the right to
control all settlements (unless Buyer agrees to assume the cost of settlement
and to forego such indemnity) and to select lead counsel to defend any and all
such claims at the sole cost and expense of the Sellers; provided, however, that
the Sellers may not effect any settlement that could result in any cost, expense
or liability to Buyer unless Buyer consents in writing to such settlement or the
Sellers agree to indemnify Buyer therefor. Buyer may select counsel to
participate in any defense, in which event Buyer's counsel shall be at the sole
cost and expense of Buyer. In connection with any such claim, action or
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proceeding, the parties shall cooperate with each other and provide each other
with access to relevant books and records in their possession.
It is intended that the Five Million Dollar Subordinated Note
will serve as a source of payment for amounts to which Buyer is entitled from
the Sellers under this Agreement and shall be available to satisfy obligations
of the Sellers to Buyer arising as a result of this Agreement. Accordingly, the
Sellers agree that any amounts otherwise payable to or held for the benefit of
the Sellers under the Five Million Dollar Subordinated Note shall be available
to satisfy claims of Buyer under this Agreement (although the right and ability
of Buyer to recover amounts due it shall not be limited to amounts owed to
Sellers under the Five Million Dollar Subordinated Note). Buyer will notify the
Sellers in writing if Buyer decides to satisfy obligations to which Buyer is
entitled from the Sellers under, or as result of, this Agreement by offsetting
such obligations (or portions thereof) against obligations (or portions thereof)
owing under the Five Million Dollar Subordinated Note.
8.2 Buyer's Indemnity. (a) In the event that the purchase and sale
transaction set forth herein is consummated, from and after the Closing Date,
and with such indemnity limited to a maximum amount of $30,000,000, Buyer hereby
indemnifies and holds the Sellers harmless from and against, and agrees to
defend promptly the Sellers from and reimburse the Sellers for, any and all
Losses, that the Sellers may at any time suffer or incur, or become subject to,
as a result of or in connection with: (i) any breach or inaccuracy of any of the
representations and warranties made by Buyer in or pursuant to this Agreement;
(ii) any breach or nonperformance of any covenant or obligation made or incurred
by Buyer in or pursuant to this Agreement; (iii) the operation and ownership of
the Assets by Buyer from and after the Closing Date; and (iv) any Liability of
the Sellers assumed pursuant to Section 2.4 hereof, provided, that Buyer shall
not be
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required to indemnify the Sellers pursuant to this Section unless and
until the amount of all Losses for which indemnification is sought first exceeds
$150,000 in which event the Sellers may seek indemnification for all such
Losses, including the initial $150,000
(b) The amounts for which Buyer shall be liable under Section
8.2(a) of this Agreement shall be: (i) net of the amount of any income tax
benefit or the present value (based on a discount rate of 9% per annum) of any
income tax benefit realized or to be realized by the Sellers by reason of the
facts and circumstances giving rise to Buyer's liability; (ii) calculated by
taking into account any income tax required to be paid by the Sellers as a
result of the accrual or receipt of any payment made to the Sellers pursuant to
Section 8.2 (a) of this Agreement; and (iii) net of any insurance proceeds
received by the Sellers in connection with the facts giving rise to the right of
indemnification. For purposes of the preceding sentence, the amount of any state
or local income tax benefit or cost shall reflect the federal income tax effect
of such benefit or cost. The amounts for which Buyer shall be liable under
Section 8.2(a) shall bear interest at the rate of 9% per annum from the later of
(i) the date that the underlying Loss is incurred by a Seller, or (ii) the date
that notice thereof is given to Buyer.
(c) In the event a claim against the Sellers arises that is
covered by the indemnity provisions of Section 8.2 (a) of this Agreement, notice
shall be promptly given by the Sellers to Buyer, and Buyer shall have the right
to control all settlements (unless the Sellers agree to assume the cost of
settlement and to forego such indemnity) and to select lead counsel to defend
any and all such claims at the sole cost and expense of Buyer; provided,
however, that Buyer may not effect any settlement that could result in any cost,
expense or liability to the Sellers unless the applicable Seller or Sellers
consent in writing to such settlement and Buyer agrees to indemnify the
applicable Seller or Sellers therefor. The Sellers may select counsel to
52
participate in any defense, in which event the Sellers' counsel shall be at the
sole cost and expense of the Sellers. In connection with any such claim, action
or proceeding, the parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession.
8.3 Employee Benefit Plans. (a) Except as provided in Section 8.3(c)
hereof, Buyer and the Sellers acknowledge and agree that, on and after the
Closing Date, Buyer will not assume or accept any of the Employee Benefit Plans
or the obligations of the Sellers under any such Employee Benefit Plan or Plans.
As soon as practicable after the Closing Date, Buyer will establish new employee
benefit plans or otherwise provide benefits for those employees hired by Buyer
as it determines to be appropriate.
(b) Sellers agree that each of the Hired Employees (as defined
in Section 8.4 below) shall become fully vested in his account balance under the
Tultex Corporation Employee Savings Plan (the "Sellers' Savings Plan") as of the
Closing Date. The Sellers agree that it will make any necessary amendments to
the Sellers' Savings Plan in order to fully vest the Hired Employees. Buyer
shall, as soon as practicable following the Closing Date, establish and identify
a tax-qualified plan ("Buyer's Savings Plan") that will accept a transfer from
the Sellers' Savings Plan of the full account balances of the Hired Employees.
The Sellers agree to make such transfer upon reasonable notice from Buyer, but
in any event, not later than ninety (90) days following the earlier of receipt
by Buyer of a favorable determination letter issued by the Internal Revenue
Service with respect to Buyer's Savings Plan or adoption by Buyer of a Master or
Prototype plan which is the subject of a favorable Opinion Letter issued by the
Internal Revenue Service and for which an individual determination letter is not
required. Buyer's Savings Plan shall provide for vesting and eligibility
provisions which are no less favorable to Hired
53
Employees than those of Seller's Savings Plan. Each Hired Employee shall receive
credit under the Buyer's Savings Plan for service with Sellers prior to the
Closing Date for purposes of determining such employee's vesting and eligibility
service.
(c) Regardless of Sections 8.3(a) and 3.17 hereof, Buyer and
the Sellers acknowledge and agree that, on the Closing Date, Buyer will become
the sponsor of the Omega Agreements, the Trust Agreements and the Existing
Disability Income Arrangements. On the Closing Date, the Sellers shall transfer
to Buyer any amounts deferred by the persons covered by the Omega Agreements
(including any reserves relating thereto) that have not been used to purchase
insurance policies thereunder or to pay premiums on such policies thereunder,
and shall also transfer to Buyer the insurance policies purchased pursuant to
the Omega Agreements subject to the representations contained in Section 3.18.
In addition, regardless of Section 8.4 hereof, for purposes of the Omega
Agreements, pursuant to the employment agreement entered into by and between
Buyer and Xxxxxx X. Xxxxx and pursuant to an acknowledgment to be entered into
among Buyer, the Sellers and Xxxxxxx X. Xxxxxxx prior to the Closing Date,
Xxxxxx X. Xxxxx and Xxxxxxx X. Xxxxxxx shall not be deemed to have terminated
employment with Logo 7, Inc. on the Closing Date and shall not be entitled to a
distribution pursuant to section 2.01 of the Omega Agreements as a result of
such individual's being employed with Buyer on and after the Closing Date.
8.4 Obligations to Employees. Except as provided in Section 8.3(c)
hereof, on the Closing Date, the Sellers shall terminate all employees of the
Business of the Sellers (the "Terminated Employees"). Buyer will offer
employment to substantially all of the Terminated Employees (which shall mean
all such employees except for 15 or less of the Terminated Employees, in Buyer's
sole discretion). Conditioned upon Buyer's compliance with the
54
preceding sentence, Sellers shall be liable for and hold Buyer harmless against
all costs and obligations, if any, arising out of WARN, or any other plant
closing law, in connection with the transaction contemplated herein. The
employment by Buyer of Terminated Employees who accept the terms of employment
offered by Buyer will commence at the Closing (the "Hired Employees"). Each
Seller agrees in this regard to cooperate with Buyer by permitting Buyer
throughout the period prior to the Closing to meet with the employees of the
Business at such reasonable times as shall be approved by a representative of
the Sellers and to distribute to such employees of the Business such forms and
other documents relating to employment by Buyer after the Closing as Buyer shall
reasonably request. The Sellers shall be responsible for all obligations to its
employees arising on or before the Closing Date which are not Liabilities
assumed by Buyer, except that any severance pay obligations that are identified
on Schedule 8.4 that arise because Buyer does not hire a Terminated Employee
shall be Buyer's responsibility, unless such employee is offered employment with
Buyer and declines such offer by Buyer. Nothing in this Section 8.4 shall be
deemed to require Buyer to retain any of the Hired Employees for any period of
time or at any particular compensation rate or in any particular position. Buyer
agrees to provide the Hired Employees with first day medical benefits coverage
and agrees to apply, in connection therewith, preexisting condition requirements
that applies to such medical benefits coverage in a manner that insures that no
such employees (or dependents of such employees) will be subject to a
preexisting condition limitation that is greater than that which would have
applied to such employees and dependents had a change in coverage not occurred
all in accordance with applicable Law. With respect to any Terminated Employee,
the appropriate Seller shall make all required deposits for all withholding,
social security and unemployment insurance Taxes through the Closing and shall
file timely quarterly and annual reports with respect to such Taxes in
accordance
55
with applicable Law whether such reports are due prior to or after the Closing.
The Sellers will timely provide all notices and any continuation of health
benefit coverage required to be provided to any of the Sellers' employees,
former employees, or the beneficiaries or dependents of such employees or former
employees, under Part 6 of Subtitle B of Title I of ERISA or Section 4980B(f) of
the Code (herein collectively referred to as "COBRA"), to the extent such
notices and continuation of health benefit coverage are required to be provided
by the Sellers by reason of events occurring prior to or on the Closing Date or
by reason of the transactions contemplated by this Agreement. For the purposes
of the foregoing, the Sellers will treat all Terminated Employees (and such
employees' beneficiaries and dependents) as of the Closing Date as having
incurred a "qualifying event" (within the meaning of ERISA Section 603 and Code
Section 4980B(f)(3)) on the Closing Date. The Sellers will continue the health
benefit coverage required by COBRA and the provisions of this Agreement
irrespective of the elimination of any health benefit plan of the Sellers.
8.5 Transfer Taxes and Fees. The Sellers shall pay all transfer, sales,
recording and filing taxes and fees resulting from the transfer of the Assets to
Buyer.
8.6 Allocation of Purchase Price. The sum of the Purchase Price and the
amount of Liabilities assumed by Buyer pursuant to Section 2.4 hereof shall be
allocated among the Assets, Contracts and Licenses in the manner to be set forth
on Schedule 8.6. This allocation is intended to comply with the allocation
method required by Section 1060 of the Code. The parties shall cooperate to
comply with all substantive and procedural requirements of Section 1060 and the
regulations thereunder, and the allocation shall be adjusted only if and to the
extent necessary to comply with the requirements of Section 1060. Neither Buyer
nor the Sellers will take or permit
56
any affiliated person to take, for income tax purposes, any position
inconsistent with the allocation set forth on Schedule 8.6 or, if applicable,
such adjusted allocation
8.7 Records. Buyer shall preserve and keep, free of charge, all books,
papers and records included in the Assets relating to Sellers' Business for
periods prior to the Closing Date for a period of no less than six years
following the Closing Date. Buyer agrees to permit the Sellers and its
attorneys, accountants, agents and designees access, during normal business
hours, to such books, papers and records from and after the Closing Date for all
reasonable purposes and to copy same, at the Sellers' expense. Any such
examination shall be at the expense of the Sellers, shall be performed at the
place where such books, papers and records are regularly maintained and shall
not unreasonably interfere with Buyer's normal business activities. Buyer shall
notify the Sellers at any time that it intends to destroy any or all of such
books, papers and records, and the Sellers shall have the right to review and
remove any of such books, papers and records at the Sellers' expense. Buyer
shall, upon the reasonable request from Sellers, periodically (but no more
frequently than semi-annually) provide Sellers the names and addresses of its
employees with frozen accrued benefits under Sellers' Pension Plan who are
listed by the Sellers on Schedule 8.7.
8.8 Further Assurances. At the Closing, the Sellers appoint Buyer the
attorney of the Sellers with full power of substitution, in the name of Buyer,
or the name of any Seller, on behalf of and for the benefit of Buyer, to collect
all Accounts Receivables and other items hereby transferred and assigned to
Buyer, to endorse, without recourse, all checks in the name of any Seller the
proceeds of which Buyer is entitled to hereunder, to prosecute, in the name of
any Seller or otherwise, all proceedings that Buyer may deem proper to enforce
any claim of any kind in or to the Assets, to defend and compromise all actions,
in respect of any of the Assets, and to do everything
57
in relation thereto as Buyer may deem advisable. The Sellers agree that the
foregoing powers are coupled with an interest, shall be irrevocable, and shall
not be affected by the dissolution of any Seller or for any other reason. Each
Seller further agrees that Buyer shall retain for its own account any amounts
collected pursuant to the foregoing powers, and the Sellers shall pay or
transfer to Buyer, if and when received, any amounts which shall be received by
any Seller after the Closing in respect of any Accounts Receivables or other
Assets or rights hereby transferred to Buyer hereunder. Each Seller further
agrees that, at any time and from time to time after the Closing, it will, upon
the request of Buyer and at the Sellers' expense, do all such further acts as
may be required to further transfer, assign and confirm to Buyer, or to aid and
assist in the collection, gaining of possession by Buyer of or maintaining, any
of the Assets, or to vest in Buyer good and marketable title to the personal
property included in the Assets and fee simple title to the Owned Real Property.
8.9 Bulk Sales Compliance. Buyer waives compliance by the Sellers with
the provisions of the bulk sales laws of any state, and the Sellers covenant and
agree to pay and discharge when due all claims of creditors that could be
asserted against Buyer by reason of such non-compliance to the extent that such
claims are not specifically assumed by Buyer. Without regard to the limitation
set forth in Section 8.1, the Sellers agree to indemnify and hold Buyer harmless
from and against and shall on demand reimburse Buyer for any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind,
including, without limitation, reasonable attorneys' fees and other legal costs
and expenses, suffered by Buyer by reason of the Sellers' failure to pay and
discharge any such claims to the extent that such claims or liabilities are not
specifically assumed by Buyer. Notwithstanding the foregoing, the Sellers shall
file with
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state or local governmental agencies all notices and statements necessary to
limit Buyer's liability for any unpaid tax of the Sellers.
8.10 Change of Name. Logo and LogoAH covenant that, immediately after
Closing, each shall either dissolve or shall amend its Articles of Incorporation
to change its name, and that in the latter case its new name will not contain
any variation of any Intangible, specifically including "Logo" or any name
confusingly similar thereto. The Sellers agree that from and after Closing each
shall not make use of any Intangible or any variation thereof in its business,
except (i) pursuant to the License Agreement, and (ii) Tultex shall have the
right to use the "LogoAthletic" name in connection with its operation of the
Retail Outlets for a period of two (2) years after the Closing Date.
8.11 Survival of Representations, Warranties and Certain Indemnities.
The representations, warranties and indemnities for Losses pursuant to Section
8.1(a)(i) and Section 8.2(a)(i) shall survive the Closing for a period up to the
first anniversary date of the Closing notwithstanding any investigation by the
parties hereto, except that there shall be no limit on the survival period for
the representations and warranties contained in Sections 3.2 and 3.4 hereof, and
the survival for the representations and warranties contained in Sections 3.16
and 3.18 will be the expiration of the applicable statute of limitations
(including extensions) for either the assessment or collection of Taxes or for
the initiation of any action by a current or former Employee Benefit Plan
participant. Notwithstanding the limitations set forth in Section 8.1, there
shall be no limit on the amount of indemnities for Losses for a breach of the
representations and warranties contained in Sections 3.2 and 3.4 hereof.
8.12 Restricted Stock. At the Closing, Tultex agrees to fully vest, and
cause the lapse or termination of any restriction on, all of the 6,400 shares of
restricted stock of Tultex that
59
Xxxxxxx X. Xxxxxxx acquired rights to pursuant to a resolution adopted by the
Tultex Board of Directors. Tultex will not otherwise pursuant hereto be
obligated to vest the restricted stock owned by any other employees of the
Business.
8.13 Obligations to Lenders. In connection with (a) the Credit
Agreement, dated May 15, 1997, as amended and modified, for a $187 million
credit facility provided by a syndicate of banks with NationsBank, N.A. as the
administrative agent (the "Credit Facility"), (b) the Indenture for $110 million
of 10 5/8% Senior Notes due in the year 2005 (the "1995 Indenture"), and (c) the
Indenture for $75 million of 9 5/8% Senior Notes due in the year 2007 (the "1997
Indenture" and collectively with the Credit Facility and the 1995 Indenture, the
"Sellers' Indebtedness"), the Sellers covenant and agree to take any and all
necessary action to comply with all of the terms, conditions and covenants
contained in all of the documentation for the Sellers' Indebtedness with respect
to actions necessary both before and after the consummation of the transactions
contemplated herein. Without limiting the generality of the foregoing, (i) with
respect to the Credit Facility, the Sellers covenant and agree to fully comply
with the covenants and obligations contained in Sections 6 and 7 thereof, (ii)
with respect to the 1995 Indenture, the Sellers covenant and agree to fully
comply with the covenants and obligations contained in Articles 8 and 10
thereof, and (iii) with respect to the 1997 Indenture, the Sellers covenant and
agree to fully comply with the covenants and obligations contained in Articles 7
and 9 thereof.
8.14 Lease of Certain Equipment and Use of Software. For the period
commencing on the Closing Date and ending twenty (20) months thereafter, Buyer
will sublease from Tultex and Tultex shall make available and shall lease to
Buyer that certain computer and other related equipment set forth and identified
on Schedule 8.14 (the "Leased Equipment") for the periods
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identified on such schedule. In consideration for the Leased Equipment, Buyer
will pay Tultex Five Thousand Dollars ($5,000) each month during said twenty
month period. Buyer, in its sole discretion and upon written notice to Tultex,
shall have the right to purchase any or all of the Leased Equipment at the
applicable expiration of the lease term, and during the period of ninety (90)
days thereafter, for each piece of the Leased Equipment as set forth on Schedule
8.14 for payment of the residual value of such piece of the Leased Equipment as
determined pursuant to the master lease agreement(s) associated therewith. In
addition, Tultex will make arrangements (by either (i) transferring specific
site licenses to Buyer, or (ii) entering into sublicense agreements with Buyer
and the applicable vendor), in form acceptable to Buyer and without any
additional expense to Buyer, for Buyer's lawful use following the Closing of the
software currently used by Logo and LogoAH with respect to the Leased Equipment,
such software to include, without limitation, the Microsoft Suite software, the
Novell Network software, the software associated with the Macintosh equipment,
and the Attachmate eternal emulation software (collectively, the "Software"),
which arrangements shall permit Buyer to use such Software on all hardware that
such Software is currently used on or loaded into. The licenses associated with
the transfer and use of the Software to Buyer at the Closing shall become part
of Schedule 1.28 and shall be included in the definition of "License" hereunder.
ARTICLE IX
RESTRICTIVE COVENANTS
9.1 Confidentiality. Each Seller agrees not to and will cause their
Affiliates not to disclose or use, directly or indirectly, any Confidential
Information, at any time after the Closing. If the disclosure of Confidential
Information is required by Law, each Seller agrees to use their best efforts to
provide Buyer an opportunity to object to the disclosure and as much prior
written notice
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as is possible under the circumstances. For purposes of this Section 9.1,
"Confidential Information" means (i) all information belonging to, used by, or
that is in the possession of any Seller relating to the Business to the extent
such information is not intended to be disseminated to the public or is
otherwise not generally known to competitors of the Sellers, including, but not
limited to, information relating to products, services, strategies, pricing,
customers, representatives, suppliers, distributors, technology, finances,
employee compensation, computer software and hardware, inventions, developments,
or Trade Secrets, and (ii) all information relating to the acquisition
hereunder, including without limitation all strategies, negotiations,
discussions, terms, conditions and other information relating to this Agreement
and each other document and agreement delivered in connection herewith. Each
Seller acknowledges that following the Closing all of the Confidential
Information referred to in (i) above will be the exclusive proprietary property
of Buyer, whether or not prepared in whole or in part by the Sellers and whether
or not disclosed to or entrusted to the custody of any of the Sellers.
9.2 Sellers' Noncompetition. Until the fifth (5th) anniversary of the
Closing Date, without the prior written consent of Buyer, each Seller agrees
with Buyer that each will not and will cause their Affiliates not to:
(a) develop, manufacture, sell, or distribute
products or perform services in competition
with Buyer in the Business (as defined
below); or
(b) perform any advisory or consulting services
for, invest in or otherwise become
associated with in any capacity, any Person
which develops, manufactures, sells, or
distributes products or performs services in
competition with Buyer in the Business (as
defined below);
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within those geographical areas or markets that the Sellers presently conduct or
have in the three years prior to the Closing Date conducted the Business, which
the parties agree is North America. For purposes of this Section 9.2, "Business"
means manufacturing, marketing, distributing and/or selling licensed apparel
associated with Major League Baseball, the National Hockey League, the National
Basketball Association or the National Football League. Nothing in this Section
9.2 shall prevent any Seller from acquiring an equity interest of less than one
percent in a corporation whose shares are listed on a national securities
exchange or regularly quoted in the over-the-counter market. The noncompetition
covenant set forth in this Section 9.2 shall not prevent or restrict the
acquisition of Tultex by an acquirer whose primary business is something other
than selling licensed apparel.
9.3 Equitable Relief. Each Seller agrees that money damages alone will
not be a sufficient remedy for any breach by any of them of the provisions of
this Article IX, and that in addition to all other remedies, Buyer shall be
entitled to specific performance and injunctive or other equitable relief as a
remedy for any such breach, and each Seller waives the securing or posting of
any bond in connection with such remedy, and each Seller agrees not to assert as
a defense in any proceeding where Buyer seeks such relief that Buyer has an
adequate remedy at law.
9.4 Acknowledgment of Consideration. The Sellers acknowledge that
payment of the Purchase Price and Buyer's other obligations hereunder constitute
adequate consideration for their obligations under this Article IX.
9.5 Reformation. If any of the covenants contained in this Article IX
is found by a court of competent jurisdiction to be invalid or unenforceable as
against public policy or for any other reason, such court is directed to
exercise its discretion to reform such covenant to the end that each Seller
shall be subject to confidentiality, noncompetition and noninterference
covenants that are
63
reasonable under the circumstances and are enforceable by Buyer. In any event,
if any provision of this Article IX is found unenforceable for any reason, such
provision shall remain in force and effect to the maximum extent allowable and
all non-affected provisions shall remain fully valid and enforceable.
9.6 Reasonableness of Terms. Buyer and each Seller stipulate and agree
that the covenants and other terms contained in this Article IX are reasonable
in all respects, including time period, geographical area and scope of
restricted activities (it being acknowledged that the Business is being carried
on within a consolidating industry), that the Buyer would not have purchased the
assets hereunder had each Seller not agreed to these covenants, and that the
restrictions contained herein are designed to protect the assets and business
acquired by Buyer hereunder and ensure that the Sellers do not engage in unfair
competition against Buyer.
9.7 Buyer's Noncompetition Covenant. Until the fifth (5th) anniversary
of the Closing Date, without the prior written consent of Tultex, Buyer agrees
with Tultex that it will not compete and will cause its Affiliates not to
compete with Tultex in North America in the business of manufacturing blank
jersey and fleece products for sale. Nothing in this Section 9.7 shall prevent
Buyer from acquiring an equity interest of less than one percent in a
corporation whose shares are listed on a national securities exchange or
regularly quoted in the over-the-counter market. The noncompetition covenant set
forth in this Section 9.7 shall not prevent or restrict the acquisition of Buyer
by an acquirer whose primary business is something other than selling
activewear.
Buyer agrees that money damages alone will not be a sufficient
remedy for any breach by it of the provisions of this Section 9.7, and that in
addition to all other remedies, Tultex shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach, and
Buyer waives the securing or posting of any bond in connection with such
64
remedy, and Buyer agrees not to assert as a defense in any proceeding where
Tultex seeks such relief that Tultex has an adequate remedy at law. Buyer
acknowledge that Tultex's obligations hereunder constitute adequate
consideration for its obligations under this Section 9.7. If the non-competition
covenant contained in this 9.7 is found by a court of competent jurisdiction to
be invalid or unenforceable as against public policy or for any other reason,
such court is directed to exercise its discretion to reform such covenant to the
end that Buyer shall be subject, are reasonable under the circumstances and are
enforceable by Tultex. In any event, if any provision of this Section 9.7 is
found unenforceable for any reason, such provision shall remain in force and
effect to the maximum extent allowable and all non-affected provisions shall
remain fully valid and enforceable. Buyer agrees that the covenants and other
terms contained in this Section 9.7 are reasonable in all respects, including
time period, geographical area and scope of restricted activities, that Tultex
would not have sold the assets hereunder had Buyer not agreed to these
covenants, and that the restrictions contained herein are designed to ensure
that Buyer does not engage in unfair competition against Tultex.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated (a) by written
agreement of Buyer and the Sellers; or (b) by Buyer or the Sellers at any time
after July 15, 1998 if the Closing shall not have taken place on or before such
date. If this Agreement is terminated pursuant to paragraph (a) of this Section,
all provisions of this Agreement except Section 5.8 (Confidentiality) and
Section 11.2 (Expenses) shall become void without any liability on the part of
any party. If this Agreement is terminated pursuant to paragraph (b) of this
Section, Sections 5.8 and 11.2 shall survive termination and all rights and
remedies of each party hereunder and all other provisions hereof
65
related thereto shall survive termination to the extent required so that any
party responsible for any breach or nonperformance of its obligations hereunder
prior to termination shall remain liable for the damages resulting therefrom.
For purposes of the preceding sentence, the failure of the Sellers to satisfy a
condition to closing set forth in Article VI or of Buyer to satisfy a condition
to closing set forth in Article VII, so long as (i) any such condition is not
also a covenant of such party, and (ii) such party has used all reasonable
efforts to satisfy such condition, in and of itself shall not be deemed a breach
or nonperformance by such party of its obligations hereunder.
10.2 Waiver of Conditions. Subject to applicable Law, (i) if any of the
conditions specified in Article VI hereof has not been satisfied, Buyer may
nevertheless elect to proceed with the transactions contemplated thereby; and
(ii) if any of the conditions specified in Article VII hereof has not been
satisfied, the Sellers may nevertheless elect to proceed with the transactions
contemplated hereby.
ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement, Amendment. This Agreement and the documents
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof, and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions of the parties, whether oral or written, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein or therein. No amendment, supplement, modification, waiver or termination
of this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision of this Agreement,
66
whether or not similar, nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
11.2 Expenses. Each of the parties hereto shall pay the fees and
expenses of their respective counsel, accountants and other experts incident to
the negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby. All expenses of the Sellers for their counsel,
accountants and other experts and outside vendors or contractors incident to the
negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby shall not have an adverse impact on Buyer in
computing the Final Purchase Price.
11.3 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Delaware.
11.4 Assignment. This Agreement and each party's respective rights
hereunder may not be assigned or transferred in any way by any party without the
prior written consent of the other parties. Notwithstanding the foregoing, Buyer
may assign all or any part of its right to receive any amount owed to it
hereunder to any of Buyer's senior lender(s) to the extent provided for in the
Collateral Assignment to PNC Bank, National Association; in which event, the
Sellers will execute and deliver any documents reasonably requested by the
assignee(s) in connection with such assignment, but no such assignment will
relieve Buyer of its obligations hereunder.
11.5 Notices. All notices shall be in writing delivered as follows:
(a) If to Buyer, to: TKS Acquisition, Inc.
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
With a copy to: Xxxxxx, Halter & Xxxxxxxx LLP
1400 XxXxxxxx Investment Center
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000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. XxXxx, Esq.
(b) If to the Sellers, to: Tultex Corporation
000 Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attn: O. Xxxxxxxx Xxxxxxx, Esq.
With a copy to: Hunton & Xxxxxxxx
Riverfront Plaza
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxx, Xx., Esq.
or to such other address as may have been designated in a prior notice. Notices
sent by registered or certified mail, postage prepaid, return receipt requested,
shall be deemed to have been given two business days after being mailed, and
otherwise notices shall be deemed to have been given when received by the person
to whom the notice is addressed or any other person with apparent authority to
accept notices on behalf of the person to whom the notice is addressed.
11.6 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Article and
Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
11.7 Interpretation. Unless the context requires otherwise, all words
used in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the singular
and all words in any gender shall extend to and include all genders.
11.8 No Reliance. Except for permitted successors and assigns pursuant
to Section 11.4, no third party is entitled to rely on any of the
representations, warranties and agreements of
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Buyer and the Sellers contained in this Agreement. The Buyer and the
Sellers assume no liability to any third party (except for permitted successors
and assigns pursuant to Section 11.4) because of any reliance on the
representations, warranties and agreements of Buyer and the Sellers contained in
this Agreement.
11.9 Consent Not To Be Unreasonably Withheld. Whenever any waiver,
approval or consent shall be provided for from any party hereunder, it is agreed
and understood that such waiver, consent or approval shall not be unreasonably
withheld or delayed.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Asset Purchase
Agreement to be duly executed as of the day and year first above written.
TULTEX CORPORATION
By:__________________________
Title:________________________
LOGOATHLETIC, INC.
By:__________________________
Title:________________________
LOGOATHLETIC/HEADWEAR, INC.
By:__________________________
Title:________________________
("Sellers")
TKS ACQUISITION, INC.
By:__________________________
Xxxxxx X. Xxxxx, President
("Buyer")
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