1
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 11th day of March, 1999,
between Big Play, Inc., an Ohio corporation ("Purchaser"), and Roxxi, Inc., a
Nevada corporation ("Seller").
R E C I T A L:
Purchaser desires to purchase, and Seller desires to sell to Purchaser, the
assets of Seller related to the cap and hat business of Seller ("Business") in
exchange for cash and future payments.
NOW, THEREFORE, Purchaser, and Seller agree as follows:
ARTICLE I
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1 Transfer of Assets. Seller hereby sells to Purchaser on the date hereof
(the "Closing Date") all of the assets listed on Exhibit A-1 to this Agreement
(collectively, the "Subject Assets") which will not include any college
licensing agreements, digitized designs or the "Roxxi" tradename.
1.2 Assumption of Liabilities. Purchaser will not assume any obligations or
liabilities of Seller. Seller will continue to be responsible for all
obligations and liabilities of Seller, whether they are known or unknown and
whether they arise prior to, in connection with, or subsequent to the Closing
Date, and Seller will satisfy each such obligation and liability as it becomes
due. Purchaser will enter into an assignment and assumption agreement with Royal
Grip, Inc., a Nevada corporation, and HM Real Estate LLC ("Landlord") for the
plant (the "Leased Property") located at 0000 X.X. 00xx Xxxxxx, Xxxxxxxx Xxxx,
Xxxxxxxx 00000.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Payment by Purchaser. The purchase price ("Purchase Price") for the
Subject Assets is the sum of: (a) Three Hundred Thousand Dollars ($300,000.00)
("Cash Amount"), plus (b) the "Earn Out Amount" (as hereinafter defined). The
Purchase Price will be paid as provided in Section 2.2.
2.2 Payment of Purchase Price.
(a) Purchaser will pay the Cash Amount by way of a bank check or wire
transfer at Closing.
(b) the Earn Out Amount will be paid as follows:
2
Purchaser shall pay to Seller an amount equal to two percent (2%) of
its "net revenues" from the manufacturing and sale of hats and caps
up to a maximum of Two Hundred Thousand Dollars ($200,000) ("Earn
Out Amount"). The Earn Out Amount shall be paid in quarterly
installments based on revenues for the prior three calendar months
beginning with the period ending August 31, 1999 (which shall cover
the period from Closing to that date) and continuing for each
three-month period ending November 30, February 28, May 31 and
August 31 thereafter until the maximum amount has been paid.
Installments shall be paid within 60 days of the end of the period
and will be accompanied by a certificate of an officer of Purchaser
("Earn-Out Certificate") verifying Purchaser's net revenues from the
sale of hats and caps and the calculation of the prior year's annual
payment. For purposes of this Agreement, "net revenues" shall mean
gross revenues less the sum of returns and allowances.
2.3 Audit. Seller shall have fifteen (15) days from the date the Earn-Out
Certificate is delivered to it to furnish Purchaser with a letter requesting
access to the books and records of Purchaser necessary to compute the Earn-Out
Amount and upon receipt of such request, Purchaser shall promptly make available
such books and records to Seller. Seller shall have ten (10) days after such
access is granted to furnish Purchaser with a letter setting forth those items
with which it disagrees and the reasons for each such disagreement. The parties
shall promptly seek to reconcile any such disagreement; if they fail to reach an
agreement within thirty (30) days of receipt by Purchaser of such letter, then
Xxxxxx Xxxxxxxx shall be retained by the parties to settle any remaining
disagreement, and the decision of that firm shall be final and binding on the
parties. The fees of all accounting firms involved shall be paid by the party
which fails to prevail with respect to the dispute. The payment of the portion
of the Earn-Out Amount in dispute, as it may be ultimately determined (pursuant
to the procedures set forth in this paragraph) shall be made within fifteen (15)
days of such determination. In the event any audit discloses that Purchaser's
calculation of the Earn-out Amount was inaccurate by at least 10%, Seller shall
be entitled to audit any prior period not previously audited.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER
Seller represents and warrants to, and agrees with, Purchaser as follows:
3.1 Organization. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada.
3.2 Authority of Seller; Consents. The execution, delivery and consummation
of this Agreement by Seller has been duly authorized by the Board of Directors
and the shareholder of Seller, and no further corporate action is necessary
3
on the part of Seller or its shareholder to make this Agreement valid and
binding on Seller and enforceable against Seller in accordance with its terms.
The execution, delivery and consummation of this Agreement by Seller is not
prohibited or restricted by any law, court order, charter document or contract.
3.3 Title to and Condition of Assets. Seller owns and possesses all right,
title and interest in and to Subject Assets, in each case free and clear of all
liens ("Liens"). Seller has the right, power and capacity to convey, transfer,
assign and deliver the Subject Assets free and clear of any Liens. All tangible
Subject Assets of Seller are sold "as-is". Except for the assets set forth on
Schedule 3,3, the Subject Assets comprise all assets of any kind or character
used in the operation of the Business as it is presently conducted.
3.4 Employment Matters.
(a) Except as set forth on Schedule 3.4, Seller is not bound by any
union contract or employment, bonus, deferred compensation, insurance,
pension, profit sharing or similar personnel arrangement or any employee
termination or severance arrangement relating to the Business. Seller
represents that no labor organization or union has been certified by the
National Labor Relations Board or any other governmental agency or
recognized by Seller, as a collective bargaining representative of any
employees of the Business and that no collective bargaining relationship
otherwise exists, with any labor organization or union. Seller further
represents that no labor organization or union has within the past 18
months, invoked the processes of the National Labor Relations Board or any
other governmental agency seeking to represent for purposes of collective
bargaining any of the employees of the Business, that no labor organization
or union has, within the last 18 months, requested or demanded recognition
as a collective bargaining representative of any of the employees of the
Business, and that, to the best of Seller's knowledge, no labor organization
or union is in any way actively seeking to represent any of the employees of
the business for purposes of collective bargaining. Seller shall continue to
be responsible for all obligations and liabilities of Seller for wages,
benefits, accrued vacation pay, sick pay and other similar payment
obligations arising prior to and including the date of the Closing, and
Seller will satisfy each such obligation as it becomes due. There are no
pending or threatened strikes or other labor disputes and the relations
between the Seller and the employees of the Business is good.
(b) Except as set forth on Schedule 3.4, there are no active, pending
or threatened administrative or judicial proceedings under Title VII of the
Civil Rights Act of 1964, the Americans with Disabilities Act, the Age
Discrimination in Employment Act, the Fair Labor Standards Act, Family and
Medical Leave Act, the Occupational
4
Safety and Health Act, the National Labor Relations Act or any other
foreign, federal, state or local law (including common law), ordinance or
regulation relating to applicants, past employees and employees of the
Seller working in the Business.
3.5 [INTENTIONALLY LEFT BLANK]
3.6 Purchase Orders and Open Invoices. Schedule 3.6 is a true and complete
list of all purchase orders and open invoices outstanding as of the date hereof.
3.7 Litigation. There are no administrative or judicial proceedings to which
Seller, or any shareholder, director, officer, employee or agent of Seller, is a
party or to which it or he or she is overtly threatened to be made a party with
respect to the Business, including, without limitation, proceedings that could
affect title to or interests in the Subject Assets.
3.8 Employees. Schedule 3.8 is a true and correct list of all of the
Business' full- and part-time employees, their wage or salary rates, the fringe
benefits which they currently receive and their dates of hire. Except as set
forth in Schedule 3.8, all employees of the Business are employed at-will and no
such employee is party to any written employment agreement.
3.9 Patents. Seller does not own nor does it use any patents in connection
with the Business.
3.10 Compliance with Laws. Seller has complied with all laws, regulations,
rules and orders affecting the Business and its operations and is not in default
under or in violation of any provision of any federal, state or local law,
regulation, rule or order as it relates to the Business except where any failure
to comply or series of failures to comply would have an economic impact of less
that $1,000.
3.11 Licenses and Rights. Seller possesses all franchises, licenses, permits
and other authorizations from governmental or regulatory authorities and from
all other persons or entities that are necessary to permit it to engage in the
Business as presently conducted in and at the location where it is presently
operating.
3.12 Schedule of Government Reports. Schedule 3.12 lists and Seller has
furnished to the Purchaser complete copies of all reports, if any, filed since
January 1, 1995 with the Department of Labor, Equal Employment Opportunity
Commission, Occupational Safety and Health Administration, Environmental
Protection Agency or any similar state, county or local agency with respect to
the Business or the Subject Assets. Schedule 3.12 also contains a list of any
inquiries from any of the foregoing agencies received during that time period.
In addition, Purchaser has received from Seller true and complete copies of all
workers compensation claims, accident reports and all other insurance claims or
5
similar evidence that would indicate the safety record of the machinery and
operations of the Business since January 1, 1995 that Seller has or has
received.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser warrants and represents to, and agrees with, Seller as follows:
4.1 Organization and Good Standing of Purchaser. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio, has full power and authority to carry on its business as and
where now conducted and to own or lease and operate its properties at and where
now owned or leased and operated by it, and is duly qualified to do business and
is in good standing in every jurisdiction in which the property owned, leased or
operated by it, or the nature of the business conducted by it, makes such
qualification necessary.
4.2 Authority of Purchaser. The execution, delivery and consummation of this
Agreement by Purchaser has been authorized by the board of directors of
Purchaser in accordance with all applicable laws and the Articles of
Incorporation and Code of Regulations of Purchaser, and no further corporate
action is necessary on the part of Purchaser to make this Agreement valid and
binding on Purchaser and enforceable against Purchaser in accordance with its
terms.
ARTICLE V
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
5.1 Survival of Representations and Warranties. Notwithstanding the closing
of the transactions contemplated under this Agreement (the "Closing"), or any
investigation made by or on behalf of Seller or Purchaser, the representations
and warranties of Seller and Purchaser contained in this Agreement will survive
until March 1, 2001.
5.2 Indemnification by Seller. Seller will indemnify and save harmless
Purchaser and its subsidiaries, shareholders, directors, officers, employees and
agents from any and all costs, expenses, losses, damages and liabilities
incurred or suffered, directly or indirectly, by any of them (including, without
limitation, reasonable legal fees and expenses) resulting from or attributable
to (a) the breach of, or misstatement in, any one or more of the
representations, warranties or covenants of Seller made in or pursuant to this
Agreement, (b) any and all obligations, debts or other liabilities of Seller
(other than the Lease), or (c) Seller's conduct of the Business prior to the
Closing Date. Anything
6
to the contrary notwithstanding, Seller shall not be obligated to indemnify
Purchaser with respect to any breach of or misstatement in Section 3.10 in an
amount in excess of $300,000.
5.3 Purchaser's Indemnification. Purchaser covenants and agrees to indemnify
and save harmless Seller from any and all costs, expenses, losses, damages and
liabilities incurred or suffered by Seller (including reasonable legal fees and
costs) resulting from or attributable to (a) the breach of, or misstatement in,
any one or more of the representations, warranties or covenants of Purchaser
made in or pursuant to this Agreement or (b) Purchaser's conduct of its business
after the Closing.
ARTICLE VI
NONCOMPETITION
6.1 Covenants and Confidential Information.
(a) For a period of three (3) years from the Closing, Seller will not
and will cause its affiliates to not, directly or indirectly (except in
connection with its current royalty arrangement with Paramount Headware
Inc.), do or suffer any of the following:
(i) Own, manage, control or participate in the ownership, management
or control of, or be employed or engaged by or otherwise affiliated or
associated as a consultant, independent contractor or otherwise with,
any other corporation, partnership, proprietorship, firm, association,
or other business entity, or otherwise engage in any business, which is
engaged in any manner in the manufacturing of hats or caps; provided,
however, that the ownership of not more than one percent (1%) of the
stock of any publicly traded corporation will not be deemed a violation
of this requirement;
(ii) Employ, assist in employing, or otherwise associate in business
with any employee, officer or agent of Purchaser;
(iii) Induce any person who is an employee, officer, agent or customer
of Purchaser to terminate said relationship; and
(iv) Disclose, divulge, discuss, copy or otherwise use or suffer to
be used in any manner, in competition with, or contrary to the
interests of, Purchaser, the business methods, or other trade secrets
of Purchaser, it being acknowledged by Seller that all information
regarding the manufacturing of hats and caps is confidential
information and Purchaser's exclusive property.
(b) Seller expressly agrees and understands that the remedy at law for
any breach by it or its affiliates of Section 6.1 will be inadequate and
that the damages flowing from such breach are not readily susceptible to
being measured in monetary terms. Accordingly, it is acknowledged that upon
adequate proof of a violation by Seller or its affiliates of any legally
enforceable provision of Section 6.1, Purchaser will be entitled to
immediate injunctive relief and may obtain a temporary order restraining any
threatened or further breach. Nothing in Section 6.1 will
7
be deemed to limit Purchaser's remedies at law or in equity for any breach
by Seller or its affiliates of any of the provisions of this Section 6.1
which may be pursued or availed of by Purchaser.
(c) Section 6.1 shall not be deemed to limit Seller from engaging in
the business of selling hats or caps.
(d) Seller has carefully considered the nature and extent of the
restrictions upon it and the rights and remedies conferred upon Purchaser
under Section 6.1, and hereby acknowledges and agrees that the same are
reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to Purchaser, are fully required to protect
the legitimate interests of Purchaser and do not confer a benefit upon
Purchaser disproportionate to the detriment to Seller.
ARTICLE VII
LEASED PROPERTY IMPROVEMENTS; CLOSING DELIVERIES
7.1 Sublease. Purchaser will execute an Assignment and Assumption of Lease
(the "Assignment"), a copy of which is attached to the Agreement as Exhibit "C."
7.2 Deliveries by Seller. On the Closing Date, Seller is delivering to the
Purchaser the following:
(a) a general xxxx of sale transferring to Purchaser all of Seller's
right, title and interest in the Subject Assets, together with delivery of
the Subject Assets;
(b) corporate resolutions of Seller authorizing the execution and
delivery of this Agreement and the performance by Seller of its obligations
hereunder;
(c) the Assignment executed by Royal Grip, Inc. and Landlord;
(d) certified resolutions of the Board of Directors of Coyote Sports,
Inc. approving the transaction contemplated by this Agreement and agreeing
to be bound by the terms of Article VI of this Agreement; and
(e) an unconditional guarantee of Seller's obligations hereunder from
Royal Precision, Inc. in form and substance satisfactory to Purchaser.
7.3 Deliveries by Purchaser. On the Closing Date, Purchaser is delivering:
(a) That portion of the Purchase Price which is equal to the Cash
Amount; and
(b) the Assignment executed by Purchaser. In addition to Purchaser's
Closing Date deliveries, Purchaser will offer employment to at least 45
employees it determines in its sole discretion to offer employment to,
effective as of the Closing Date. The offer of employment will
8
be on an "at-will" basis on terms and conditions as Purchaser shall
determine in its sole discretion. Nothing in this Agreement will be
construed as, or deemed to be, a guarantee of employment.
ARTICLE VIII
THIRD PARTIES; BINDING EFFECT
Nothing contained in this Agreement is intended to convey upon any person or
entity, other than the parties and their successors in interest and permitted
assigns, any rights or remedies under or by reason of this Agreement unless
expressly stated. All covenants, agreements, representations and warranties of
the parties contained in this Agreement are binding on and will inure to the
benefit of Purchaser and Seller, and their respective successors and permitted
assigns.
ARTICLE IX
NOTICES
All notices, requests, demands and other communications under this Agreement
must be in writing and will be deemed duly given, unless otherwise expressly
indicated to the contrary in this Agreement, (i) when personally delivered, (ii)
upon receipt of a telephonic facsimile transmission with a confirmed telephonic
transmission answer back, (iii) three (3) days after having been deposited in
the United States mail, certified or registered, return receipt requested,
postage prepaid, or (iv) one (1) business day after having been dispatched by a
nationally recognized overnight courier service, addressed to the parties or
their permitted assigns at the following addresses (or at such other address or
number as is given in writing by either party to the other) as follows:
To Purchaser: Big Play, Inc.
00000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. XxXxxxxxxx
With a copy to: Benesch, Friedlander, Xxxxxx & Xxxxxxx LLP
0000 XX Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxx Xxxxxxxx
9
To Seller: c/o Royal Precision, Inc.
Suite 1
00000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: President
With a copy to: Xxxxxxx Xxxxxx
Xxxxx 0
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
ARTICLE X
REMEDIES NOT EXCLUSIVE
No remedy conferred by any of the specific provisions of this Agreement is
intended to be exclusive of any other remedy, and each and every remedy will be
cumulative and will be in addition to every remedy given under this Agreement or
now or subsequently existing, at law or in equity, by statute or otherwise. The
election of any one or more remedies by Purchaser or Seller will not constitute
a waiver of the right to pursue other available remedies.
ARTICLE XI
MISCELLANEOUS
11.1 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same document.
11.2 Captions and Section Headings. Captions and section headings are for
convenience only, are not a part of this Agreement and may not be used in
construing it.
11.3 Amendments, Supplements or Modifications. Each of the parties agrees to
cooperate in the effectuation of the transactions contemplated under this
Agreement and to execute any and all additional documents to take such
additional action as is reasonably necessary or appropriate for such purposes.
11.4 Time of Essence. The time of making payments and keeping the agreements
made herein is specifically made of the essence of this Agreement.
11.5 Right of Set-Off. Purchaser shall have the right to set off, against
any payments owed with respect to the Earn Out Amount, any amounts owed
Purchaser by Seller either as a result of a breach of representation, warranty
or covenant or other right of indemnification that Seller has pursuant to this
Agreement or as a result of the breach by
10
Seller or its affiliates of Article VI. Any amount to be set off will be
indicated in the certificate provided for in Article II and certified to by an
officer of Purchaser.
11.6 Entire Agreement. This Agreement, including any certificate, schedule,
exhibit or other document delivered pursuant to its terms, constitutes the
entire agreement between the parties, and supersedes all prior agreements and
understandings between the parties. There are no verbal agreements,
representations, warranties, undertakings or agreements between the parties, and
this Agreement may not be amended or modified in any respect, except by a
written instrument signed by the parties to this Agreement.
11.7 Governing Laws. This Agreement is to governed by and construed in
accordance with the internal laws of the State of Ohio.
11.8 Transfer Taxes. Any sales or transfer taxes resulting from the
transactions contemplated under this Agreement shall be borne by Seller.
11.9 Cap Order. Seller agrees to purchase at least 40,000 caps from Seller
during the first four months after Closing at a price of $5.50 per cap.
11.10 Additional Training. Seller will provide, at its expense, three days
of training by Xxxx Xxxxxxx and two days of training by Xxxxxx Xxxxxxx at the
Leased Property by April 30, 1999.
11.11 Delivery of Certain Assets. Seller will deliver to Purchaser in
working order, at the Leased Property, (i) a 2 head embroidery unit currently in
Arizona by May 31, 1999 and (ii) two personal computers used in the Business
currently in Arizona by April 30, 1999. Purchaser shall pay the shipping costs.
11.12 Assets of Seller. Purchaser will not employ, assist in employing, or
otherwise associate in business with any of the people set on Schedule 11.12
until the earlier of (i) two (2) years from the date hereof or (ii) six (6)
months after they no longer work for or on behalf of Paramount Headware, Inc.
11.13 Transfer of Machinery. Purchaser shall not transfer any hat or cap
making equipment to any affiliate unless that affiliate agrees to be bound by
the provisions of Article II.
11.14 Vacation Pay. Seller shall pay all accrued vacation pay to employees
of the Business within five (5) days of the Closing.
11
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
BIG PLAY, INC.
By: /s/ Xxxxx XxXxxxxxxx
-------------------------------
ROXXI, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxxx, President
