STOCK PURCHASE AGREEMENT EXHIBIT 10.1
THIS STOCK PURCHASE AGREEMENT is entered into as of February 26, 1998 by
and among Xxxxxxx Xxxxxxx (the "Purchaser"), Stage II Apparel Corp., a New York
corporation (the "Company") and Xxxx Xxxxx ("JC"), Xxxxxx Xxxxxxx ("RP") and
Xxxxxx X. Xxxxx ("SC" and, collectively with JC and RP, the "Sellers").
Recitals
A. The Sellers own an aggregate of 1,900,000 shares (the "Control Shares")
of the Company's common stock, no par value ("SA Common"), representing 48.7% of
the outstanding SA Common.
B. The Purchaser owns a majority of the outstanding capital stock of
Shorebreak Group, Inc. ("Shorebreak") and is a party to a Purchase Agreement
dated as of December 8, 1997 among the Company, Shorebreak and its shareholders
(the "Purchase Agreement"), providing for (a) the Company's acquisition of the
outstanding capital stock of Shorebreak in exchange for 4,008,654 shares of SA
Common, (b) the Company's repurchase of the Control Shares from the Sellers in
consideration for their release from guarantees of the Company's indebtedness to
its factor and their receipt of options to purchase a total of 1,500,000 shares
of SA Common on the terms set forth in the form of Repurchase Agreement annexed
as an exhibit to the Purchase Agreement, (c) the reconstitution of the Company's
board of directors (the "Board") with designees of the Seller (the "Board
Reconstitution"), (d) the addition of a new management team to the Company
headed by the Purchaser (the "Management Realignment") and (e) the arrangement
of a new credit facility for the Company by the Purchaser (the "New Credit
Facility").
C. As a result of delays in obtaining regulatory clearance for the
Company's proxy statement soliciting shareholder approval of the transactions
contemplated by the Purchase Agreement, (a) the parties to the Purchase
Agreement have elected to terminate the Purchase Agreement, (b) the Purchaser
and the Company have entered into a Management Agreement of even date herewith
(the "Management Agreement") to provide for the Board Reconstitution, the
Management Realignment, the New Credit Facility and the grant to the Purchaser
of the Mirror Options described therein, and (c) the parties hereto are entering
into this Agreement to provide for the sale of the Control Shares to the
Purchaser on the terms and conditions set forth herein.
Accordingly, the parties hereto agree as follows:
1. Sale of Control Shares
1.1 Purchase and Sale. On the terms and subject to the conditions of
this Agreement, at the closing of the transactions contemplated by this
Agreement, to be held at the time and place of the closing under the Management
Agreement (the "Closing"), the Sellers shall sell and deliver to the Purchaser,
and the Purchaser shall purchase from the Sellers, the Control Shares in the
following amounts:
Number of
Name of Seller Control Shares
-------------- --------------
Xxxx Xxxxx.......................................1,225,000
Xxxxxx Xxxxxxx................................... 500,000
Xxxxxx X. Xxxxx.................................. 175,000
1.2 Closing. Subject to the satisfaction or waiver of the conditions
set forth in Articles 11 and 12, the Closing shall take place at the offices of
counsel to the Purchaser on March 9, 1998 or such other date not later than
March 12, 1998 to which the parties may mutually agree (the "Outside Closing
Date").
2. Consideration for Control Shares
In consideration of the sale, conveyance, transfer and delivery of the
Control Shares to the Purchaser and the consummation of the other undertakings
and transactions referred to in this Agreement, at the Closing, the Purchaser
shall (a) arrange for the release of JC and RP from all obligations under their
guarantees of the Company's indebtedness to Xxxxxxx Factors, Inc. ("Xxxxxxx"),
to be evidenced by mutually satisfactory release and discharge instruments
executed and delivered by Xxxxxxx (the "Xxxxxxx Releases"), (b) arrange for the
delivery from Xxxxxxx to JC of (i) any collateral security for his Guarantee
held by Xxxxxxx and (ii) termination statements on Form UCC-3 executed by
Xxxxxxx, terminating its security interest in any collateral security for JC's
Guarantee against which any financing statements on Form UCC-1 have been filed
by Xxxxxxx, and (c) issue to the Sellers options (the "Options") to reacquire a
total of 1,500,000 Control Shares (the "Option Shares") on the terms and subject
to the conditions set forth in Section 3, to be evidenced by option agreements
in substantially the form annexed hereto as Exhibit A (the "Option Agreements").
3. Option Terms
3.1 Option Series. The Options shall be allocated among three series
(each, an "Option Series"), entitling the Sellers to purchase Options Shares
from the Purchaser as follows:
Shares Subject Vesting Date--Years Exercise Expiration Date--
Series To Option After Closing Price Years After Closing
------ --------- ------------- ----- -------------------
A 500,000 One $ .50 Five
B 500,000 Two 1.00 Six
C 500,000 Three 1.50 Seven
3.2 Option Allocation. The Options of each Option Series shall be
allocated among the Sellers as follows:
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Option Shares
Subject to Each
Name of Seller Option Series
-------------- -------------
Xxxx Xxxxx....................................... 365,000
Xxxxxx Xxxxxxx................................... 105,000
Xxxxxx X. Xxxxx.................................. 30,000
The number of Option Shares subject to the Option Series A of the Option
issuable to JC hereunder shall be subject to reduction in the manner and to the
extent set forth in the Option Agreement between the Purchaser and JC.
3.3 Adjustment in Shares. In the event the shares of SA Common, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares of capital stock or other securities of the Company or of
another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each Option Share
theretofore or thereafter subject to an Option the number and kind of shares of
capital stock or other securities into which each outstanding share of SA Common
shall be so changed, or for which each such share shall be exchanged, or to
which each such share shall be entitled, as the case may be. The price and other
terms of outstanding Options shall also be appropriately amended to reflect the
foregoing events.
4. Restrictions on Resale of Control Shares by the Purchaser
4.1 Control Shares Subject to Options. Until the exercise or expiration
of the Options, the Purchaser shall not sell or offer to sell any of the
1,500,000 Control Shares subject to the Options, and he shall hold those Control
Shares in reserve for transfer to the Sellers upon exercise of the Options. free
and clear of any liens, claims, encumbrances, security interests, options,
charges and restrictions of any kind, other than those arising or imposed under
this Agreement and the Securities Act of 1933, as amended (the "Securities
Act").
4.2 Other Control Shares. Until the third anniversary of the Closing,
the Purchaser shall not offer to sell or sell or transfer any interest in the
400,000 Control Shares not subject to the Options.
5. Resale of Option Shares and Other Securities by the Sellers
5.1 Registration of Option Shares. Prior to the first anniversary of
the Closing, the Company shall file with the Securities and Exchange Commission
a registration statement on Form S-8 (the "Registration Statement") under the
Securities Act covering the resale of the Option Shares by the Sellers in
accordance with Rule 415 under the Securities Act. The Company will (i) use its
best efforts to maintain the effectiveness of the Registration Statement in
accordance with the applicable provisions of the Securities Act until the
Sellers are entitled to freely transfer all of their Option Shares pursuant to
paragraph (k) of Rule 144 under the Securities Act ("Rule 144"), (ii) file any
documents required for state securities or "blue sky" clearance in jurisdictions
specified in writing by the Sellers and use its best efforts to cause the Option
Shares so registered to be and remain qualified thereunder where qualifications
are required to permit the public sale thereof and (iii) bear all expenses in
connection with the procedures described in this
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Section 5.1, other than selling commissions and fees and expenses of counsel or
other advisers, if any, to the Principal Shareholders.
5.2 Right of First Refusal. Each of the Sellers shall give the Company
written notice of his intention to sell any of his Options Shares (a "Resale
Notice") at least two business days prior to effecting any sale thereof (the
"Resale Notice Period"). Each Resale Notice shall (a) set forth the number of
Option Shares to be offered for sale (the "Offered Shares"), (b) indicate the
proposed manner of sale and (c) offer to sell the Offered Shares to the Company
at the closing price of the SA Common on the trading day immediately preceding
the date of the Resale Notice (the "Offered Share Price"). Upon receipt of each
Resale Notice, the Company (i) shall have the right, but not the obligation, to
purchase all or any part of the Offered Shares for cash against delivery at the
Offered Share Price at any time prior to the expiration of the Resale Notice
Period, and (ii) shall provide a copy of the Resale Notice to the Purchaser, who
shall have the right, but not the obligation, to purchase all or any part of the
Offered Shares, to the extent not repurchased by the Company hereunder, for cash
against delivery at the Offered Share Price at any time prior to the expiration
of the Resale Notice Period.
5.3 Restrictions on Resale of Option Shares by the Sellers.
Notwithstanding the registered status of the Option Shares under the
Registration Statement, during the periods (each, a "Restriction Period") ending
on the second anniversary ("Year 2"), the third anniversary ("Year 3") and the
fourth anniversary ("Year 4") of the Closing, the Sellers shall not offer to
sell or sell any Option Shares in any three-month period (each, a "Quarter") in
excess of the following amounts ("Quarterly Sale Caps"):
Quarterly Sale Caps
-----------------------------------
Name of Principal Shareholder Year 2 Year 3 Year 4
----------------------------- ------ ------ ------
Xxxx Xxxxx 50,000 75,000 100,000
Xxxxxx Xxxxxxx 18,000 20,000 25,000
Xxxxxx X. Xxxxx 6,000 6,000 8,000
If a Seller sells fewer Options Shares than permitted under the applicable
Quarterly Sales Caps in one or more Quarters during a particular Restriction
Period, he may add 50% of the unsold amount to the Quarterly Sales Caps in
subsequent Quarters during that Restriction Period but not in subsequent
Restriction Periods.
5.4 Other Resale Restrictions. In each Quarter during the 18 months
after the Closing, JC and his affiliates shall not offer to sell or sell more
than 10,000 shares of SA Common that JC shall continue to own beneficially after
giving effect to his sale of Control Shares to the Seller hereunder.
6. Representations and Warranties of the Purchaser
The Purchaser hereby represent and warrant to the Sellers as follows:
6.1 Authority. This Agreement has been duly executed and delivered by
the Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms.
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6.2 Investment Representations. The Purchaser (a) is an "accredited
investor," as defined in Rule 501 under the Securities Act, (b) has received,
reviewed and considered all information deemed relevant in making an informed
decision about the purchase of the Control Shares, (c) will acquire the Control
Shares for investment and with no present intention of distributing or reselling
them except in accordance with this Agreement and (d) is aware that the Control
Shares (i) will be deemed to be "restricted securities" for purposes of the
Securities Act and (ii) may not be sold or otherwise transferred in the absence
of an exemption from the registration requirements of the Securities Act and
applicable state securities laws or as otherwise contemplated hereby.
7. Representations and Warranties of the Sellers
The Sellers hereby represent and warrant to the Purchaser as follows:
7.1 Authority. This Agreement has been duly executed and delivered by
the Sellers and constitutes the legal, valid and binding obligation of the
Sellers, enforceable against the Sellers in accordance with its terms.
7.2 Beneficial Ownership of Control Shares. Each Seller is the lawful
beneficial owner of the Control Shares listed opposite his name in Section 1,
all of which are registered in his name on the stock records of the Company. As
of the date hereof, the Sellers beneficially own no shares of SA Common other
than the Control Shares and, with respect to RP, 1,500 shares held by his XXX
and 1,000 shares held by his wife, and with respect to JC, 65,755 shares held
directly, 400 shares held by his wife, 13,700 shares held by his XXX and 36,619
shares held by the JC Foundation, Inc.
7.3 Title to Control Shares. Each Seller has good and marketable title
to the Control Shares listed opposite his name in Section 1 and has the full
right to transfer title to those Control Shares to the Purchaser, free and clear
of any liens, claims, encumbrances, security interests, options, charges and
restrictions of any kind. Upon delivery to the Purchaser of certificates
representing the Control Shares, the Purchaser will acquire good and valid title
to the Control Shares, free and clear of any liens, claims, encumbrances,
security interests, options, charges and restrictions of any kind, other than
restrictions on the resale thereof under Section 4 and the Securities Act. Other
than this Agreement, the Control Shares are not subject to any agreement,
arrangement, commitment or understanding that could impair the Purchaser's
rights thereto, including any restriction relating to the voting, dividend
rights or disposition of the Control Shares.
7.4 Investment Representations. Each Seller (i) is an "accredited
investor," as defined in Rule 501 under the Securities Act, (ii) has received,
reviewed and considered all information deemed relevant in making an informed
decision about the Options, (iii) will acquire Option Shares, if any, for
investment and with no present intention of distributing or reselling them
except as provided in the Registration Statement and (iv) is aware that the
Option Shares (A) will be deemed to be "restricted securities" for purposes of
the Securities Act and (B) may not be sold or otherwise transferred in the
absence of an exemption from the registration requirements of the Securities Act
and applicable state securities laws or as otherwise contemplated by the
Registration Statement.
8. Representations and Warranties of the Company
The Company hereby represents and warrants to the Purchaser as follows:
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8.1 Subsidiaries: Encumbrance on Subsidiaries Shares. The Company has
good and marketable title to all of the outstanding capital stock of each of its
subsidiaries, a list of which, with their names, jurisdictions of incorporation
and principal places of business is set forth is Schedule 8.1a (the
"Subsidiaries"). All of the outstanding capital stock of the Subsidiaries
("Subsidiary Shares") are duly authorized, validly issued, fully paid and
non-assessable, have not been pledged, mortgaged or otherwise encumbered in any
way and are not subject to any lien, charge, claim, liability, or encumbrance of
any nature, except as set forth in Schedule 8.1b. Except as set forth in
Schedule 8.1b, there are no options, warrants, rights of subscription or
conversion, calls, commitments, agreements, arrangements, understandings, plans,
contracts, proxies, voting trusts, voting agreements or instruments of any kind
or character, oral or written, to which the Company or the Subsidiaries is a
party, or by which the Company or the Subsidiaries is bound, relating to the
issuance, voting or sale of the Subsidiary Shares or any authorized but unissued
shares of capital stock of the Subsidiaries or of any securities representing
the right to purchase or otherwise receive any such shares of capital stock. The
Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of the jurisdictions noted on Schedule 8.1a. The
Subsidiaries have the corporate power and authority to carry their businesses as
now conducted and to own, lease or operate the properties and assets now used by
them in connection therewith. The Subsidiaries are not qualified to transact
business in any other jurisdiction other than the jurisdictions listed on
Schedule 8.1a, nor is any Subsidiary required to be so qualified.
8.2 Status of SA Common. The outstanding shares of SA Common have been
duly authorized by all requisite corporate action of the Company and are validly
issued, fully paid and nonassessable. The outstanding shares of SA Common and
1,089,298 treasury shares of SA Common are listed on the American Stock Exchange
(the "AMEX"). All written communications which the Company has received from the
AMEX or sent to the AMEX since January 1, 1997 are listed on Schedule 8.2, and
copies of all such communications have been made available to the Purchaser. The
Company has not received any written communications from the AMEX, other than
may be contained in the communications listed in Schedule 8.2, that would
indicate that the listing of the SA Common for trading on the AMEX was in
jeopardy in any way. No anti-takeover or similar statute or regulation applies
or purports to apply to the transactions contemplated by this Agreement.
8.3 Legal Proceedings. Except as set forth in Schedule 8.3, neither the
Company nor any Subsidiary is a party to any pending litigation, arbitration or
administrative proceeding or investigation, and, to the best knowledge of the
Company, no such litigation, arbitration or administrative proceeding or
investigation that might result in any material and adverse change in the
financial condition, business or properties of the Company or the Subsidiaries
has been threatened.
8.4 Liens. There are no liens, mortgages, deeds of trust, claims,
charges, security interests or other encumbrances or liabilities of any type
whatsoever to which any of the assets of the Company or the Subsidiaries are
subject, except as described in Schedule 8.4 or in the financial statements
referred to in Section 8.9.
8.5 Legal Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
The Company has corporate power and authority to carry on its business as now
conducted and to own, lease or operate the properties and assets now used by it
in connection therewith. The Company is not qualified to transact business in
any other jurisdiction, nor is the Company required to be so qualified.
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8.6 Title to Assets. The Company and the Subsidiaries each has good and
marketable title to their respective real and personal property reflected in the
financial statements referred to in Section 8.9, free and clear of all liens,
mortgages, deeds of trust, claims, security interests, liabilities, encumbrances
and charges, except (a) as reflected in such financial statements, (b) for
liens, encumbrances and charges, if any, that do not materially detract from the
value of or interfere with the use of any property subject thereto or affected
thereby and (c) as disclosed in Schedule 8.4. Schedule 8.6 contains an accurate
list of all leases and other agreements under which the Company or any
Subsidiary is lessee of any real or personal property. Each of such leases and
agreements is in full force and effect and constitutes the legal, valid and
binding obligation of the parties thereto.
8.7 Trademarks, Trade names; Licenses. The Company and the Subsidiaries
own the trademarks, trade names and registrations therefor specified in Schedule
8.7a, and the Company is the licensee of the licenses of the trademarks, trade
names and registrations therefor listed on Schedule 8.7b. The Company and the
Subsidiaries have not granted, and will not grant prior to the Closing, licenses
or other rights to use such trademarks, trade names or registrations. No other
trademarks, trade names or registrations are either owned or used by the Company
or any Subsidiary. To the best knowledge of the Company, the operations of the
Company's and the Subsidiaries' respective businesses do not infringe on the
trademarks and trade names of any third party, and no pending or threatened
claim has been made that there is any such infringement.
8.8 Patents, Inventions. The Company and the Subsidiaries own the
inventions, letters patent, applications for letters patent and patent license
rights specified as belonging to them in Schedule 8.8 and have not granted, and
will not grant prior to the Closing, licenses or other rights to use such
inventions, letters patent, application for letters patent or patent license
rights, except as specified in Schedule 8.8. No other inventions, letters
patent, applications for letters patent or patent license rights are owned or
used by the Company or any Subsidiary. To the best knowledge of the Company, the
operations of the Company's and the Subsidiaries' respective businesses do not
infringe on the inventions, letters patent, applications for letters patent or
patent license rights of any third party and no pending or threatened claim has
been made that there is any such infringement.
8.9 Financial Statements. The consolidated balance sheet of the Company
and the Subsidiaries as at December 31, 1996 and the consolidated statements of
income and cash flows for the fiscal year then ended, true, correct and complete
copies of which have been furnished to the Purchaser, have been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"). The consolidated balance sheet of the Company (the "Company Balance
Sheet") and related consolidated statements of income and cash flows of the
Company and the Subsidiaries as at and for the nine month period ended September
30, 1997 (collectively, the "Company Financial Statements"), true and correct
copies of which have been delivered to the Purchaser, have been prepared in
accordance with GAAP. All items included in the inventories reflected in the
Company Balance Sheet are owned by the Company or the Subsidiaries, except for
items sold in the ordinary course of business since September 30, 1997, and are
not subject to any security interest except as described in Schedule 8.4.
Schedule 8.9 contains a list of all prepaid expenses (including pre-paid tickets
to sports and entertainment events) showing to whom money was paid and the
contract or other obligation pursuant to which it was paid.
8.10 No Material Adverse Changes. There has been no material adverse
change in the consolidated financial position of the Company and the
Subsidiaries since September 30, 1997, other than the changes referred to in
Schedule 8.10a. The Company Balance Sheet reflects the liabilities and
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obligations of the Company and the Subsidiaries, direct and contingent, as at
September 30, 1997, and neither the Company nor the Subsidiaries has, as of the
date hereof, any material liabilities of any nature whatsoever, direct or
contingent, that have not been reflected in the Company Balance Sheet, except
such current liabilities as have been incurred since September 30, 1997 in the
ordinary course of business and except for possible rejections by customers of
manufactured goods (which rejections in the aggregate will not exceed $50,000).
A "material adverse change in financial condition" shall mean a decrease in
total assets or an increase in total liabilities of greater than 5% of the total
assets or total liabilities reflected on the Company Balance Sheet. As of the
date of the Company Balance Sheet, there was no asset used by the Company or the
Subsidiaries in its operations that has not been reflected thereon, and except
as set forth on Schedules 8.10b, no assets have been acquired by the Company or
the Subsidiaries since September 30, 1997 except in the ordinary course of
business.
8.11 No Other Business. The Company does not own all or any part of or
control, directly or indirectly, any other business, corporation, joint venture,
partnership or proprietorship, other than the Subsidiaries.
8.12 Filing of Governmental Reports. To the best knowledge of the
Company, each of the Company and the Subsidiaries has filed all reports and
returns required by all governments or governmental agencies and has complied
with all applicable material federal, state and local laws, and the Company
knows of no claim that the Company or the Subsidiaries has failed to do so.
8.13 Timely Filing Of All Tax Returns. To the best knowledge of the
Company, each of the Company and the Subsidiaries has timely filed all federal
and state income tax returns and has filed with all other appropriate
governmental agencies all tax, franchise, license, gross receipts and other
similar returns and reports required to be filed by the Company or the
Subsidiaries, as the case may be. The filing of the federal and New York State
tax returns for the taxable year of the Company ended December 31, 1996 are not
on extension. The Company has delivered to the Purchaser true and complete
copies of the consolidated federal income tax returns filed by the Company (on
behalf of itself and the Subsidiaries) for its taxable years ended December 31,
1995 and 1996. All tax liabilities of the Company and the Subsidiaries arising
through the end of the taxable period ended September 30, 1997 have been paid or
adequately disclosed and reserved for on the Company Balance Sheet except as set
forth on Schedule 8.13. Except as set forth on Schedule 8.13, no federal or New
York State income tax return of the Company or the Subsidiaries for any year has
been or is currently under audit by the Internal Revenue Service or the New York
State tax authorities. For purposes of this Section 8.13, the word "timely"
shall mean that such returns were filed within the time prescribed by law for
the filing thereof, including the time permitted under any applicable
extensions.
8.14 No Breach. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated by this Agreement will
not, result in the breach of any term or provision of the certificate of
incorporation or bylaws of the Company or any Subsidiary or constitute a
material breach of any term or provision of or constitute a default under any
law, rule, regulation, indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any Subsidiary is a party or by which any of
them is bound, and no consent or other approval of any other party is required
to be obtained by either the Company or any Subsidiary in connection with the
transactions contemplated hereby.
8.15 Authority. The Company has the full legal right and capacity to
execute, deliver and
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perform this Agreement. No governmental license, permit or authorization, and no
registration or filing with any court, governmental authority or regulatory
agency, is required in connection with the Company's execution, delivery or
performance of this Agreement. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against it in accordance with its terms, except to
the extent that such enforceability may be limited by general principles of
equity or bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally.
8.16 Minute Books. True and complete copies of the certificate of
incorporation and bylaws of the Company and each of the Subsidiaries and all
amendments thereto and copies of all minutes of the Company and the Subsidiaries
are contained in the minute books that have been made available to the Purchaser
for inspection.
8.17 Contracts. Except as disclosed in Schedule 8.17 or in the other
Schedules under this Article 8, neither the Company nor any the Subsidiary is a
party to any written:
(a) employment contract, or contract with any officer, director or
consultant;
(b) contract with any labor union or other labor organization;
(c) bonus, pension, profit-sharing, retirement, stock purchase,
severance, vacation, sick day, hospitalization, insurance or other plan or
arrangement providing employee benefits;
(d) lease with respect to any property, whether as lessor or
lessee;
(e) contract other than purchase orders it issued for apparel or
purchase orders it received for the sale of goods, either continuing over a
period of more than ninety (90) days from the date hereof or involving at least
$10,000;
(f) contract for borrowed money or guaranties for borrowed money;
(g) license, sublicense, franchise or royalty agreement;
(h) distribution, advertising or similar contract;
(i) contract for the warehousing, storage, handling, shipping,
importing, entry or customs clearance of products or supplies; or
(j) contract or license agreement that cannot be terminated on not
more than sixty (60) days' notice and without liability or penalty in excess of
$10,000 in the aggregate in connection with all such contracts, except contracts
and commitments for the purchase or sale of goods, materials, supplies or
services entered into in the ordinary course of business.
8.18 Enforceability of Contracts. Except as set forth in Schedule 8.18,
all agreements, contracts or other instruments of the Company listed or required
to be listed in the Schedules under this Article 8 (collectively, the "Company
Contracts") are valid, binding and in full force and effect and are enforceable
by the Company in accordance with their respective terms. Except as set forth in
Schedule
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8.18, the Company has performed all material obligations required to be
performed by it to date under the Company Contracts and it is not in breach or
default in any material respect thereunder (with or without the lapse of time or
the giving of notice, or both) nor has any other party to any of the Company
Contracts notified the Company of that party's belief that the Company is or is
likely to become in breach or default in any material respect thereunder or of
the party's intention to accelerate or modify in a manner adverse to the Company
any of its obligations or rights thereunder and, to the knowledge of the
Company, no other party to any of the Company Contracts is in breach or default
in any material respect thereunder (with or without the lapse of time or the
giving of notice, or both). The Company has delivered to the Purchaser true and
correct copies of all Company Contracts.
8.19 Oral Agreements. Neither the Company nor any Subsidiary is a party
to any oral instruments of the types described in Section 8.17.
8.20 Certain Actions Not Taken. Except as disclosed in the Company
Financial Statements or in the Schedules under this Article 8, since September
30, 1997, neither the Company nor any Subsidiary has:
(a) issued, purchased or redeemed any stock, bonds or other
corporate securities of the Company or any Subsidiary, consummated any merger,
business combination , reclassification of its capital stock or other
substantial business reorganization, or declared, set aside or paid any dividend
or distribution in respect of any shares of capital stock;
(b) incurred any obligation (absolute or contingent) except
current liabilities incurred in the ordinary course of business and obligations
under the Company Contracts;
(c) mortgaged, pledged or knowingly subjected to lien, charge or
any other encumbrance, any of its assets, tangible or intangible;
(d) sold or transferred any of its tangible or intangible assets,
except in the ordinary course of business;
(e) canceled any material debts or claims or waived any material
right;
(f) paid or discharged any liabilities of others;
(g) sold, assigned or transferred any trademarks, trade names,
copyrights, licenses, royalty agreements, patents, patent applications,
proprietary registrations, know-how, trade secrets or other intangible assets,
or granted any licenses with respect to any of the foregoing, except as
disclosed in the Schedules under this Article 3;
(h) suffered or incurred any extraordinary expenses or losses;
(i) discharged or satisfied any material lien or encumbrance;
(j) paid or discharged any material obligation or liability,
absolute or contingent, other than (i) obligations and liabilities the payment
or discharge of which is reflected in the Company Financial Statements and (ii)
current liabilities incurred since September 31, 1997 in the ordinary course
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of business;
(k) made any material change in the individual or aggregate
compensation in any form payable to any Subsidiary's or the Company's employees,
directors, officers and/or consultants, except as set forth on Schedule 8.20;
(l) entered into any material transaction of any kind except in
the ordinary course of business, or entered into any transaction or agreement
whatsoever with a party that controls or is under common control with the
Company and any Subsidiary, including the Sellers;
(m) made any material changes in its accounting principles or
methods; or
(n) agreed in writing or, to the best knowledge of the Company,
orally to take any of the actions specified in this Section.
8.21 No Misleading Statements. No representation, warranty, covenant or
statement by the Company in this Agreement (including the Schedules) contains or
will contain any untrue statement of a material fact, or omits or will omit a
material fact, the omission of which will make the statements contained therein
materially misleading.
8.22 Pension Plans and Payments. The Company and the Subsidiaries each
has made all payments and performed all material acts, if any, required to be
complied with and has complied in all material respects with the applicable
provisions, if any, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and the related provisions of the Internal Revenue Code of
1966, as amended (the "Code"). Neither the Company nor any Subsidiary has any
unfunded liability nor accumulated funding deficiency (within the meaning of
ERISA and the Code), whether or not waived, with respect to any employee plan
previously maintained by either the Company or any Subsidiary or to which either
has previously contributed. All benefits payable under any terminated employee
pension benefit plan (as such term is defined in Section 3(2)(A) of ERISA)
previously maintained by either the Company or the Subsidiary or to which either
has previously contributed have been paid in full, and neither the Company nor
any Subsidiary has any unfunded liability in respect of any such plan to the
Pension Benefit Guaranty Corporation or to the participants in such plan or to
the beneficiaries of such participants. Each such terminated plan was terminated
in accordance with the applicable provisions of law and all agreements and
contracts relating to any such plan have been terminated without liability to
either the Company or the Subsidiary. The Company and the Subsidiaries currently
maintain a profit sharing plan for their employees, which plan is qualified
under Section 401(k) of the Code. The Company and the Subsidiaries have made all
contributions required to be made under their profit-sharing plan and has
invested all funds in the profit-sharing plan in accordance with the terms of
said plan. During 1997, no contributions were made, or required to be made by
the Company or its Subsidiaries to any such plan. Such plan has been
administered and operated in accordance with the applicable provisions of ERISA
and the Code. The copies of the following delivered to the Purchaser are true
and correct copies of (a) the plan document setting forth the terms and
conditions of such plan, (b) the trust agreement established under such plan,
(c) any investment or insurance contracts, if any, under such trust, (d) the
latest determination letter or an opinion from the Internal Revenue Service as
to the qualified status of such plan under the Code and (e) the annual reports
on Form 5500 series for the last three completed plan years. All contributions
to health plans required to be made by employees of the Company or the
Subsidiaries have been paid to the Company or the Subsidiaries or the health
plan as required by the policies of the Company or the Subsidiaries.
11
8.23 Adequate Insurance Coverage. The Company and the Subsidiaries
maintain adequate insurance coverage with respect to their respective
properties, including product liability, property damage, workers' compensation
and general liability insurance, in respect of liabilities and risks prudently
insured against by comparable manufacturing businesses and as may be required
pursuant to any franchise, license, agreement or permit to which the Company or
any Subsidiary is a party. Schedule 8.23 contains a correct and complete
description of all such policies of insurance held by or on behalf of the
Company or the Subsidiaries, true and correct copies of which have been
delivered to the Purchaser. The policies described in Schedule 8.23 are
outstanding and in force as of the date hereof, and there is no default, notice
of cancellation or non-renewal with respect to any such policy.
8.24 Powers Of Attorney. There are no persons, firms, associations,
corporations or business organizations holding general or special powers of
attorney from either the Company or any Subsidiary.
8.25 No Finders' Fees Earned. No agent, broker, investment banker,
person or firm acting on behalf of the Sellers, the Company, any Subsidiary or
any firm or corporation affiliated with them or under their authority is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee directly or indirectly from the Sellers, the Company, any Subsidiary or any
entity affiliated with them in connection with any of the transactions
contemplated hereby.
8.26 Environmental Law Compliance. Except as set forth in as Schedule
8.26, neither the Company nor any Subsidiary is in violation of any statute,
code, ordinance, rule, regulation, permit, judgment, order, writ, decree or
injunction, as in effect on the date of this Agreement and applicable to their
respective businesses and assets and relating to environmental or waste disposal
standards or controls, other than violations, if any, which individually or in
the aggregate have not had, or, insofar as reasonably can be foreseen, in the
future will not have, a material adverse effect on their respective business and
assets taken as a whole. To the best knowledge of the Company, and except as set
forth in the as Schedule 3.26, no underground storage tanks and no electrical
transformers containing PCB have been or are located on any real property owned
or leased by the Company or any Subsidiary and, to the best knowledge of the
Company, no asbestos construction or insulation materials have been incorporated
in or installed at any structure, improvement, fixture, boiler, furnace or
distribution system or equipment at any real property owned or leased by the
Company or any Subsidiary, nor have any such materials been disposed of on such
sites. Except as set forth in as Schedule 8.26, no portion of any real property
owned or leased by the Company or any Subsidiary is being used or has been used
for the generation, storage, treatment, processing, disposal or other handling
of toxic or hazardous substances, materials or wastes (including materials to be
recycled, reconditioned or reclaimed) that constitute a "hazardous substance" as
defined in Section 101 of the Comprehensive Environmental Response Compensation
and Liability Act of 1960, as amended, or that are designated as a "hazardous
substance" thereunder, nor are there on the date of this Agreement any toxic or
hazardous substances, materials or wastes, buried or located on any real
property owned or leased by the Company or any Subsidiary.
8.27 Governmental Permits. All material governmental licenses, permits,
certificates of inspection, other authorizations, filings and registrations
which are necessary for the Company or the Subsidiaries to own their respective
assets and operate their respective businesses as presently conducted have been
obtained by the Company or the Subsidiary, as appropriate, and are in full force
and effect in accordance with their respective terms. There is not any
proceeding pending to revoke any such license, permit, certificate,
authorization, filing or registration.
12
8.28 Periodic Reports. The Company is subject to the periodic reporting
requirements of section 12(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and except as disclosed in Schedule 8.28 has filed all
reports it was required to file with covering the period January 1, 1995 to the
present. Except as set forth in Schedule 8.28, such reports were filed by the
date each such report was required to be filed, unless an extension in time to
file such report was obtained by the timely filing of form 12(b)25 or its
equivalent, and in such event, such report was filed within the time permitted
by the extension afforded by the filing of that form.
8.29 Vendor and Customer Contracts. All contracts between the Company
or its Subsidiaries, on the one hand, and vendors and customers, on the other
hand, for the manufacture and sale of goods scheduled for delivered 1998 are in
full force and effect.
9. Indemnities
9.1 Survival of Representations. All representations and warranties
made by the parties hereto in this Agreement shall survive the Closing until and
through the first anniversary of the Closing (the "Survival Date"). The Company
shall have the continuing obligation until the Closing promptly to supplement or
amend the Schedules hereto delivered by the Company in accordance with Article 8
with respect to any matter hereafter arising or discovered that, if existing or
known at he date of this Agreement, would have been required to be set forth or
described in such Schedules; provided, however, that no supplement or amendment
to those Schedules following the fifth business day after the date of this
Agreement shall have any effect for the purpose of determining the satisfaction
of the conditions set forth in Section 11.1.
9.2 Company Indemnity. The Company agrees to indemnify and hold
harmless the Purchaser from and against the amount of all losses (exclusive of
any losses from declines in the market price of the SA Common), liabilities,
claims, damages, costs and expenses, including reasonable attorneys' fees
(collectively, "Losses" and individually, a "Loss") that the Purchaser may
sustain arising out of any breach by the Company of any of its representations,
warranties or covenants in this Agreement or in the Management Agreement, to the
extent that such Losses are not covered by insurance; provided however, that the
liability of the Company for all breaches of the warranties, representations and
covenants hereunder in the aggregate shall be limited to $500,000 and, provided,
further, that the Purchaser shall be entitled to assert a claim hereunder only
if and to the extent that all Losses incurred by the Purchaser shall in the
aggregate exceed $50,000.
9.3 Notification. The Purchaser shall promptly notify the Company of
the existence of any third party claim, demand or other matter to which the
indemnification obligations of the Company would apply. The Company shall be
entitled, at its expense and with counsel reasonably acceptable to the
Purchaser, to assume and conduct the defense of the claim. If the Company does
not undertake the defense of the claim, or if it has a conflict of interest with
respect to the claim, the Purchaser shall be entitled to retain separate counsel
as may be reasonably acceptable to the Company, at the Company's expense, to
conduct in such defense. In the event that the Company chooses to assume the
defense of such third party claim, the Purchaser and the Company shall mutually
and reasonably cooperate in such defense, including any compromise or settlement
thereof. In connection therewith, (a) the Purchaser agrees to consent to any
compromise or settlement proposed by the Company where (i) the compromise or
settlement involves only monetary damages and (ii) the Company agrees to pay the
full amount of such monetary damages; and (b) the Company agrees to consent to
any compromise or settlement proposed by the Purchaser where either
13
(i) the compromise or settlement results in no Losses to the Purchaser that are
required to be indemnified by the Company or (ii) the Purchaser agrees to bear
any and all such Losses.
9.4 Indemnification Survival Date. Notwithstanding anything contained
in this Article 9 to the contrary, except in the case of fraud, the
indemnification obligations of the Company with respect to the breach of any
representation or warranty contained herein shall terminate on the Survival
Date, unless the party seeking indemnification gives written notice to the party
obligated to provide indemnification of a claim for indemnification, and the
specific nature of such claim, prior to the Survival Date.
9.5 Seller Indemnity. To the extent that the Company sustains Losses
covered by its indemnification under Section 9.2 ("Company Losses"), the Company
Losses shall be subject to recoupment, to the extent herein set forth, by the
cancellation of a portion of the Options (the "Cancellable Options"). The
Cancellable Options shall be limited to Options of each Option Series issued to
JC, RP and SC to purchase 36,500 Option Shares, 10,500 Option Shares and 3,000
Option Shares, respectively. For purposes of determining the number of
Cancellable Options subject to cancellation hereunder, the value of each
Cancellable Option to be applied against the Company Losses shall be the
difference between the exercise price thereof and the closing price of the SA
Common on the date the Company Losses are sustained.
9.6 Litigation Indemnity. In the event that the Company sustains
litigation judgments or settlement costs (collectively, "Litigation Losses")
arising from its pending disputes with Xxxxx Xxxxxx and Unique Sports
Generation, Inc. (the "Disputes"), the Sellers shall reimburse the Company on
demand for any Litigation Losses in the range between $100,000 and $300,000,
provided that the Sellers shall not be responsible for reimbursing the Company
for any Litigation Losses resulting from any settlement of Disputes to which
they have not consented. The Sellers shall be entitled to participate in any
settlement negotiations in connection with the Disputes and shall not
unreasonably without or delay their consent to any settlement to a Dispute
recommended by the Board.
10. Conduct of Business Pending Closing
The Company agrees, from the date of this Agreement to the Closing, and
unless otherwise approved in advance in writing by the Purchaser and JC, it will
conduct its business in accordance with the provisions of this Article 10.
10.1 Conduct of Operations. The Company and the Subsidiaries shall
conduct their respective operations according to their respective ordinary and
usual courses of business and shall maintain their respective records and books
of account in a manner that fairly and correctly reflects their respective
income, expenses, assets and liabilities in accordance with GAAP.
10.2 Internal Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with management's general or specific
authorizations, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP to maintain accountability for
assets, (c) access to assets is permitted only in accordance with management's
general or specific authorization and (d) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any difference.
14
10.3 Stand Still on Obligations. Since September 30, 1997, the Company
and the Subsidiaries have not, and prior to the Closing shall not, (a) pay or
incur any material obligation or liability, absolute or contingent, other than
current liabilities incurred in the ordinary and usual course of business, (b)
incur any indebtedness for borrowed money (except for endorsement, for
collection or for deposit, of negotiable instruments received in the ordinary
and usual course of business and except for borrowing in the ordinary course of
business against the Company's credit line with Xxxxxxx (the "Credit Line"), or
assume, guarantee, endorse or otherwise as accommodation become responsible for
material obligations of any other individual or firm, (c) declare or pay any
dividends, make any payment or distribution to shareholders, issue any capital
stock or grant options, warrants or rights to purchase any shares of their
respective capital stock except on provided in this Agreement, (d) mortgage,
pledge or subject to lien or other encumbrances any of their respective
properties or assets, (e) pay any loans to or from the Company shareholders, (f)
sell or transfer any of their respective properties or assets except in the
ordinary and usual course of business or cancel, release or assign any material
indebtedness owed to either the Company or the Subsidiaries or any material
claims held by either the Company or the Subsidiaries, (g) make any investment
of a capital nature either by the purchase of stock or securities (other than
securities of the United States federal government), contributions to capital,
property transfers or otherwise, or by the purchase of any property or assets of
any other individual or firm, (h) make any material change in their respective
insurance, advertising or franchise commitments or arrangements, or enter into
any contract for the purchase or sale of any materials, products or supplies
other than such contracts incurred in the ordinary and usual course of business,
(i) increase in any manner the compensation of any of their respective officers,
directors, consultants, shareholders or employees, except or listed on Schedule
8.20, or pay or agree to pay any pension or retirement allowance not required by
any existing plan to any of their respective officers or employees, or commit
itself to any additional pension, retirement or profit-sharing plan or
agreement, other benefit or perquisite or employment agreement with or for the
benefit of any officer, director, shareholder, employee or other person or (j)
enter into any agreement or transaction whatsoever with a party that controls or
is under common control with the Company and the Subsidiaries except or provided
in this Agreement.
10.4 Preservation of Representations. The Company shall not, nor shall
it allow the Subsidiaries to, take any action that (a) if taken on or before the
date hereof, would make untrue any of the representations and warranties
contained in Article 8 or (b) would interfere with the ability of the Purchaser
to perform this Agreement.
10.5 Procuring Approvals. The Company shall use its best efforts to
obtain all licenses, consents or other approvals required to be obtained by the
Company or the Subsidiaries from any governmental agency or authority or
financial institution or other person in connection with the consummation of the
transactions contemplated by this Agreement.
10.6 Preservation of Business and Customer Relations. Except as
otherwise requested by the Purchaser, the Company shall use its best efforts to
preserve the business of the Company and the Subsidiaries intact and to preserve
for the Company the good will of the Company's and the Subsidiaries' customers
and suppliers and of others having business relations with the Company and the
Subsidiaries. The Company recognizes that the Purchaser has requested that the
following actions be taken prior to the Closing: (a) The Company obtain an
amendment to its license from Dunlop to provide that (i) its license from Dunlop
will be renewed automatically from year to year unless notice is given by the
Company that it does not wish to renew, and (ii) the license will be deemed to
cover the use of the licensed intellectual property upon tee shirts and upon
fleece materials; (b) the Company will renegotiate the employment
15
contracts listed on Schedule 10.7 in a manner satisfactory to the Purchaser; and
(c) the Xxxxx Xxxxxx litigation will have been settled on terms reasonably
satisfactory to the Purchaser. The Company shall use its best efforts to
accomplish the foregoing requests but shall have no obligation to do so, nor
shall any failure to do so give rise to rights of the Purchaser hereunder.
10.7 Corporate Access. The Company will make its Chief Executive
Officer and the Chief Financial Officer reasonably available by telephone or in
person, to the Purchaser during normal business hours.
10.8 Delivery of Periodic Reports. The Company will promptly deliver to
the Purchaser upon release or filing, copies of all its press releases, copies
of its reports of any nature sent to its shareholders, filings made by it
pursuant to section 12 of the Exchange Act and any other filings made by it with
the Securities and Exchange Commission (the "SEC") or the AMEX. As soon as
practicable after the date hereof, the Company will file with the SEC and mail
to its shareholders an Information Statement on Schedule 14F under Section 14(f)
of the Exchange Act with respect to the Board Reconstitution (the "Schedule
14F").
10.9 Maintenance of Exchange Listing. The Company will use its best
efforts to maintain the listing of the SA Common on the AMEX and will file, on
time, all reports required to be filed with the AMEX, pursuant to section 12 of
the Exchange Act.
10.10 Press Releases. No press release will be released by the Company
or its officers, directors or affiliates regarding this Agreement or any related
matter without JC and the Purchaser conferring together and obtaining their
mutual express consents to the wording of the release.
11. Conditions to the Purchaser's Obligations
The obligations of the Purchaser under this Agreement are subject to the
conditions set forth in this Article 11, any of which may be waived in writing
in whole or in part by the Purchaser.
11.1 No Material Breaches. There shall not have been any material
breach of the representations, warranties, covenants and agreements of the
Sellers and the Company contained in this Agreement, the Schedules or the
Management Agreement, and all such representations and warranties shall be true
at all times on or before the Closing, except to the extent that they are
expressly stated to be true as of some other time.
11.2 Compliance with Entire Agreement. The Sellers and the Company
shall have performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by them, and the Company shall
have entered into the Management Agreement and complied with all agreements and
conditions required thereunder to be performed or complied with by it.
11.3 Certification of Compliance. The Purchaser shall have received a
certificate dated the date of the Closing and signed by the Chairman of the
Company, certifying that the conditions specified in Sections 11.1 and 11.2 have
been fulfilled.
11.4 Certain Consents Obtained. The Company shall have obtained any
required written consents of Xxxxxxx and any other third parties whose consent
is required to the transactions contemplated
16
by this Agreement or the Management Agreement.
11.5 Delivery of Control Shares. The Sellers shall have delivered to
the Purchaser certificates representing the Control Shares, accompanying by
stock powers therefor duly executed by the Sellers.
11.6 JC Employment Agreement. The Company and JC shall have entered
into the employment agreement in the form of Exhibit B.
11.7 Certification of Corporate Existence. The Purchaser shall have
received certified copies of the following documents:
(a) the certificate of incorporation of the Company and each of
the Subsidiaries and all amendments thereto and restatements thereof, certified
(with respect to the Company's charter documents) as of a recent date by the
Secretary of State of the State of New York;
(b) copies of the bylaws of the Company and of the Subsidiaries
and all amendments thereto and restatements thereof certified as of the date of
the Closing by an officer of the Company and the Subsidiaries, respectively; and
(c) short-form good standing certificates of the Secretary of
State of New York certifying as of a recent date that the Company is in good
standing under the laws of the State of New York.
11.8 Board Approval. Prior to the execution hereof, the Board shall
have resolved, in full compliance with New York BCL sections 713, 912 and 913
(including the unanimous vote of the disinterested directors) and the provisions
of the certificate of incorporation of the Company, that (a) the Company may
enter into this Agreement and perform its obligations hereunder, (b) the
Purchaser shall not be deemed to be "Interested Shareholders" as defined in
Article 8 of the of the Company's amended and restated certificate of
incorporation or New York BCL section 912 and (c) the Board shall not take any
action to interfere with or dilute the rights of the Purchaser under the
Management Agreement.
11.9 Opinion of Counsel. The Purchaser shall have received a written
opinion of counsel for the Sellers and the Company dated as of the date of
Closing and addressed to the Purchaser in the form of Exhibit C.
11.10 AMEX Consent. Prior to the Closing, the AMEX shall have
determined that AMEX Rule 913 shall not be applied to the transactions
contemplated hereby or by the Management Agreement.
11.11 Purchase Orders. Purchase orders granted by or received by the
Company shall have been made available to the Purchaser.
11.12 Foreign Subsidiary Matters. Stage II Apparel Corp. of Hong Kong,
Ltd. (a) will have become dormant, (b) will have its assets, including those
funds pledged to secure the Credit Line, paid to or returned to the Company and
(c) its debts, including any obligations it has for payments due to or for the
direct or indirect benefit of present or former employees of Xxxxxxxx Apparel
Ltd. or Linmark Development settled, paid or set aside for payment.
17
11.13 Schedule 14F. The Company shall have arranged for filing the
Schedule 14F with the SEC and mailing the Schedule 14F to its shareholders.
11.14 Further Assurances. The Sellers shall have delivered to the
Purchaser such documents and further assurances as he shall reasonably request
to memorialize the transactions contemplated hereby.
12. Conditions to the Sellers' Obligations
The obligations of the Sellers under this Agreement are subject to the
conditions set forth in this Article 12, any of which may be waived in writing
in whole or in part by the Sellers.
12.1 No Material Breaches. There shall not have been any material
breach of the representations, warranties, covenants and agreements of the
Purchaser contained in this Agreement or the Management Agreement all such
representations and warranties shall be true at all times on or before the
Closing, except to the extent that any such representation or warranty is
expressly stated to be true as of some other time.
12.2 Compliance with Entire Agreement. The Purchaser shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by him, including delivery of option
agreements pursuant to Section 2, and the Purchaser shall have entered into the
Management Agreement and complied with all agreements and conditions required
thereunder to be performed or complied with by him.
12.3 Certification of Compliance. The Sellers shall have received a
certificate dated the date of the Closing and signed by the Purchaser,
certifying that the conditions specified in Sections 12.1 and 12.2 have been
fulfilled.
12.4 Certain Consents Obtained. The Purchaser shall have obtained any
required written consent of any third parties whose consent is required to the
transactions contemplated by this Agreement or the Management Agreement.
11.5 Delivery of Xxxxxxx Releases and Option Agreements. Xxxxxxx shall
have delivered to Xxxxxxx Releases to JC and RP, and the Purchaser shall have
delivered the Options Agreements to the Sellers, duly executed by the Purchaser,
in accordance with Section 2.
12.6 Further Assurances. The Purchaser shall have delivered to the
Company and the Sellers such documents and further assurances as they shall
reasonably request to memorialize the transactions contemplated hereby.
13. Termination
13.1 Purchaser Termination Event. This Agreement may be terminated by
the Purchaser and the transactions contemplated hereby abandoned at any time
prior to the Closing if any of the following events (each a "Purchaser
Termination Event") shall have occurred:
(a) The Company or the Sellers shall have failed to satisfy any of
the conditions set forth in Sections 11.3 through 11.14 or any of those
conditions shall have become incapable of fulfillment
18
and shall not have been waived by the Purchaser; or
(b) The Company or the Sellers shall have failed to satisfy any of
the conditions set forth in Sections 11.1 or 11.2 or any of those conditions
shall have become incapable of fulfillment and the failure or nonfulfillment
materially reduces the benefits of the transactions contemplated hereby to the
Purchaser.
13.2 Seller Termination Event. This Agreement may be terminated by the
Sellers and the transactions contemplated hereby abandoned at any time prior to
the Closing if any of the following events (each a "Seller Termination Event")
shall have occurred:
(a) The Purchaser shall have failed to satisfy any of the
conditions set forth in Sections 12.3 through 12.6 or any of those conditions
shall have become incapable of fulfillment and shall not have been waived by the
Sellers; or
(b) The Purchaser shall have failed to satisfy any of the
conditions set forth in Sections 12.1 or 12.2 or any of those conditions shall
have become incapable of fulfillment and the failure or nonfulfillment
materially reduces the benefits of the transactions contemplated hereby to the
Sellers.
13.3 Other Termination Events. This Agreement may be terminated and the
transactions contemplated hereby abandoned by the Purchaser or the Sellers if
the Closing does not occur on or prior to the Outside Closing Date, provided
that the party seeking termination pursuant to this Section 13.3 is not in
breach in any of its material representations, warranties, covenants or
agreements contained in this Agreement.
13.4 Notice of Termination. In the event a party seeks to terminate
this Agreement pursuant to this Article 13, written notice thereof shall
forthwith be given to the other parties, setting forth in reasonable detail the
grounds for termination, whereupon the transactions contemplated by this
Agreement shall be terminated, without further action by any party, subject to
the provisions of Section 13.5.
13.5 Effects of Termination. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as provided in this Article 13,
this Agreement shall become void and of no further force or effect, except that
each party shall return all documents and other material received from or on
behalf of the other party in connection with the transactions contemplated
hereby, whether so obtained before or after the execution hereof. All
confidential information received by a party with respect to the business of the
other party shall be treated in accordance with the restrictions set forth
herein, which shall remain in full force and effect notwithstanding the
termination of this Agreement.
14. Post Closing Matters
14.1 Standstill Obligations. The Purchaser shall not vote his Control
Shares and any other shares of SA Common acquired by him or take any action as a
director of the Company to approve a merger of consolidation of the Company
with, or a sale of all or substantially all the assets of the Company to any
affiliate of the Purchaser (other than a merger, consolidation or sale that does
not increase the percentage ownership of the Purchaser in the surviving entity)
unless (a) the effective consideration per share of SA Common to be received by
other holders of SA Common in the transaction complies in all material respects
with any applicable requirements of the law of the State of New York regarding
the fairness of transactions between a corporation and any controlling
stockholder, and (b) if the transaction
19
is proposed within three years after the Closing, the consideration to be
received in the transaction on an equivalent per share basis has a value that is
not less than $1.00 per share of SA Common. Notwithstanding the foregoing, this
Section 14.1 shall not apply to any transaction that is approved by holders
(other than the Purchaser and his affiliates) of SA Common representing a
majority of the SA Common (other than shares held by the Purchaser and his
affiliates) voted with respect to the transaction.
14.2 Access. For a period of two years after the Closing, the Company
will make its Chief Executive Officer and its the Chief Financial Officer
reasonably available by telephone and in person to the Sellers during normal
business hours in New York, New York.
14.3 Delivery of Documents.. For a period of three years following the
Closing, or for such shorter period as the Sellers shall own beneficially more
than 1% of the SA Common, the Company will (a) deliver to the Sellers, via
two-day courier at the same time sent to any other recipient, copies of all its
press releases, reports sent to its shareholders, filings made by it pursuant to
section 12 of the Exchange Act with the SEC, the AMEX or any securities exchange
on which its securities are listed, (b) use its best efforts to maintain the
listing of the SA Common on the AMEX, (c) file, on time, all reports required to
be filed with the SEC pursuant to Section 12 of the Exchange Act and (d) give
notice to the Sellers, by two-day courier, of the date of each annual meeting of
shareholders within three business days after that date is established.
14.4 No Derogation. No party shall make any utterance to any third
party at any time before or after the Closing, or if the transactions do not
close, in derogation of any other party to this transaction or regarding any of
their affiliates, except to the extent necessary in pleadings actually filed in
a court of competent jurisdiction in a proceeding to enforce rights hereunder.
14.5 Further Instruments. After the Closing, the parties shall execute
such further instruments and give each other such further assurances as shall be
reasonably requested to carry out the intent of this Agreement.
15. Miscellaneous
15.1 Benefit. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their successors and assigns or personal
representatives.
15.2 Entire Agreement. This Agreement, including the Schedules and the
Exhibits, contains the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof and shall not be modified or
affected by any offer, proposal, statement or representation, oral or written,
made by or for any party in connection with the negotiation of the terms hereof.
There are no representations, promises, warranties, covenants, undertakings or
assurances (express or implied) other than those expressly set forth or provided
for herein and in the other documents referred to herein. This Agreement may not
be modified or amended orally, but only by a writing signed by all the parties
hereto.
15.3 Construction. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine and neuter. Unless
otherwise expressly provided herein, all references to Articles, Sections,
Schedules or Exhibits refer to articles, sections, schedules or exhibits of or
to this Agreement, all of which are hereby incorporated in and made a part of
this Agreement as if set forth in full herein. The headings and captions in this
Agreement and the Schedules are for convenience
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and identification only and are in no way intended to define, limit or expand
the scope and intent of this Agreement or any provision hereof.
15.4 Governing Law; Consent to Jurisdiction. This Agreement and all
rights and obligations hereunder shall be governed by, and construed in
accordance with, the law of the State of New York, applicable to agreements made
and to be performed wholly within that State, without regard to the conflicts of
laws principles of that State. The parties to this Agreement consent to the
jurisdiction of the federal and state courts located in the County of New York,
State of New York over the parties hereto and over any disputes arising in
connection with this Agreement. Service of process may be made by certified or
registered mail, return receipt requested.
15.5 Expenses. Each party hereto shall pay its own expenses incidental
to the preparation of this Agreement, the carrying out of the provisions of this
Agreement and the consummation of the transactions contemplated hereby.
15.6 Assignment. This Agreement may not be assigned by any party
without the prior written consent of the other parties.
15.6 Severability. If any part of this Agreement is held to be
unenforceable or invalid under, or in conflict with, the applicable law of any
jurisdiction, the unenforceable, invalid or conflicting part shall be narrowed
or replaced, to the extent possible, with a judicial construction in such
jurisdiction that effectuates the intent of the parties regarding this Agreement
and such unenforceable, invalid or conflicting part. Notwithstanding the
unenforceability, invalidity or conflict with applicable law of any part of this
Agreement, the remaining parts shall be valid, enforceable and binding on the
parties.
15.7 Notices. All notices, requests, consents and demands by the
parties hereunder shall be delivered by hand, by recognized national overnight
courier or by deposit in the United States mail, postage prepaid, by registered
or certified mail, return receipt requested, addressed to the party to be
notified at the addresses set forth below:
(a) if to the Purchaser before or after the Closing or to the
Company after the Closing, to:
X. Xxxxxxx & Company, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
with a copy to:
Xxxxx, Barandes & Fertel, PC
000 Xxxx 00xx Xx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
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(b) if to the Sellers or the Company before the Closing, to:
Stage II Apparel Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxx
with a copy to:
Xxxxx and Zelmanovitz
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
(b) if to the Sellers after the Closing, to:
Xxxx Xxxxx Xxxxxx Xxxxxxx Xxxxxx X. Xxxxx
0000 Xx. Xxxxxxx Xxxx 0000 X. Xxxxxx Xxxxx Xxxx c/o Stage II Apparel Corp.
Xxxxxx Xxxxx Xx, XX 00000 Xxxxxxxxx, XX 00000 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxx and Xxxxxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
15.8 Non-waivers. Neither any failure nor any delay on the part of any
party to this Agreement in exercising any right, power or privilege hereunder
shall operate as a waiver of any rights of such party, unless such waiver is
made by a writing executed by the party and delivered to the other parties
hereto, nor shall a single or partial exercise of any right preclude any other
or further exercise of any other right, power or privilege accorded to any party
hereto.
15.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original. It shall not be
necessary when making proof of this Agreement to account for more than one
counterpart.
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IN WITNESS WHEREOF, the Purchaser and the Sellers have executed this
Agreement and the Company has caused this Agreement to be executed by a duly
authorized officer as of the day and year first above written.
The Purchaser:
/s/ Xxxxxxx Xxxxxxx
-------------------------------------------
Xxxxxxx Xxxxxxx
The Company:
STAGE II APPAREL CORP.
By:/s/ Xxxx Xxxxx
-------------------------------------------
Xxxx Xxxxx, Chairman of the Board
The Sellers:
/s/ Xxxx Xxxxx
-------------------------------------------
Xxxx Xxxxx
/s/ Xxxxxx Xxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxx X. Xxxxx
-------------------------------------------
Xxxxxx X. Xxxxx
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