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Exhibit 10.13
May 28, 1997
VIA TELECOPY - (000) 000-0000
Bourne & Co.
Interstate Tower
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Re: XxXxxxx-Xxxxxxxx Company, Inc.
Attention: Xx. Xxxxxx X. Xxxxxx
Dear Xx. Xxxxxx:
Xxxxxxxx Xxxxxxx LLC (together with its affiliates, "ICM") is pleased to submit
this letter outlining our offer to purchase all of the assets and business of
XxXxxxx-Xxxxxxxx, Inc. (the "Company") on the terms and conditions, and for the
consideration, as generally described herein (the "Proposed Acquisition"). This
letter supersedes our offer of May 15, 1997. This offer is based upon our
conversations with Bourne & Co. representatives, information as set forth in the
Confidential Descriptive Memorandum relating to the Company, information
provided by the Company and various assumptions made by KM in interpreting and
analyzing that information. KM has attempted to structure this proposal in a
manner consistent with the objectives of the Company and its owner.
Purchaser
It is anticipated that a partnership formed by ICM ("Newco") would purchase the
assets of the Company (the "Assets") and assume certain liabilities of the
Company, pursuant to an Asset Purchase Agreement (as defined below). The seller
of the Assets is referred to in this letter as the "Seller". It is our intention
to offer the senior management of the Company the opportunity to purchase equity
in Newco.
Consideration
The purchase price to be paid is based on the financial statements of the
Company as of May 2, 1997 and our review and analysis of the other data and
information that has been made available
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to us regarding the Company. The all cash purchase price that ICM is prepared to
pay for the Assets is to be specifically set forth in, and on the terms and
conditions set forth in, an Asset Purchase Agreement (the "Asset Purchase
Agreement") and would represent a value of $5.7 million. The purchase price will
be subject to the following adjustments:
1. The purchase price will be reduced by the principal amount and accrued
interest of any outstanding indebtedness to be assumed by Buyer as of
the closing date. We anticipate that Newco will assume the Congress
loan facility in order to facilitate an expedited closing.
2. The purchase price will be increased or decreased to the extent that
Net Working Capital (defined as accounts receivable plus inventories
plus assumable prepaid expenses minus accounts payable and other
accrued current liabilities, calculated in accordance with GAAP) on the
closing date exceeds or is less than $4,077,393. Excluded from accounts
receivable will be any receivable which is 90 days past due or will be
in that category within 90 days of the closing.
3. The purchase price will be reduced by the amount over $500,000 of the
aggregate amount of trade payables extended beyond contracted terms
beyond 60 days.
4. The purchase price will be reduced by the amount of any products
returned to the Company that were sold prior to the closing date.
Closing
ICM is prepared to close the Proposed Acquisition expeditiously after ICM has
been able to negotiate and execute a final Asset Purchase Agreement.
Other Terms and Conditions
Consummation of this transaction will be subject to terms and conditions typical
for transactions of this sort, including the following:
1. The Proposed Acquisition is subject to the negotiation of a mutually
acceptable Asset Purchase Agreement, as well as all related agreements
and documents (collectively, the "Transaction Agreements"). The
Transaction Agreements would reflect the terms and conditions set forth
in this letter and contain such other terms, representations,
warranties, covenants, indemnities and conditions usual and customary
in a transaction of this type.
It is anticipated that after we are provided with an opportunity to
perform more extensive due diligence a financing commitment would be
provided to the Seller. We anticipate assuming the Congress loan, but
in the event that it not possible an asset based bank financing will be
provided from another source. The Bank of New York has been our primary
lender in other asset based borrowings. ICM will provide an equity
investment in an amount sufficient to complete this transaction.
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2. Prior to the closing, the business of the Company shall have been
conducted in the ordinary course consistent with past practices, and
there shall have been no material adverse change to the business of the
Company or its prospects, and neither the Company nor its subsidiaries
shall have declared or paid any dividends or other equity
distributions, or shall have sold any material portion of its assets or
incurred any new material indebtedness. In addition, there shall be no
threatened or pending litigation against the Company, and ICM shall
have completed due diligence with respect to the Company and its
business, including without limitation with respect to legal, tax,
financial and environmental matters.
3. Buyer will assume certain of the Company's current liabilities that are
listed on the Company's balance sheet dated as of May 2, 1997, except
that Buyer will not assume any liabilities for any contingent, unknown
or other non-balance sheet liabilities of the Company.
This letter does not constitute a binding obligation of either party, which can
only be conveyed after completion of our due diligence review satisfactory to us
in our sole discretion, and the execution of the Asset Purchase Agreement. This
offer shall remain in effect until 5:00 pm EST on May 30, 1997.
We are pleased to proceed with the transaction as expeditiously as possible. It
is anticipated that an acquisition could be completed, subject to the receipt of
all approvals, within two to three weeks of our selection. We would be happy to
discuss the foregoing in greater detail if you so desire, and look forward to
working with you on this transaction.
Sincerely,
/s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
Chief Executive Officer
cc: Xxxxxxx Xxxxxx, Oak Tree Capital
Xxxx Xxxxxx, Union Tools
Accepted
/s/ Xxxx Xxxxxx
Xxxx Xxxxxx
President and Chief Executive Officer
May 30, 1997
