EXHIBIT 10.2
ASSET PURCHASE AGREEMENT dated as of March 11 1999,
between DAG ACQUISITION CORP., a Delaware corporation (the
"Purchaser"), THE XXXXXXXXXX CORPORATION, a Delaware
corporation (the "Parent"), XXXXXX XXXXX ("Xxxxx"), and
DIVERSIFIED APPAREL GROUP, LTD., a New York corporation ("DAG"
or the "Seller").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser
wishes to purchase all of the assets of Seller, except as otherwise provided
herein, upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
respective agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
Defined Terms
-------------
1.01. Defined Terms. The following terms, not defined
elsewhere in this Agreement, shall have the following meanings:
"Affiliate" shall mean, as to the party specified, any Person
which directly or indirectly through ownership of stock or through any
other arrangement either controls, is controlled by or is under common
control with, such party. The term "control" shall mean the power to
direct the affairs of such Person by reason of ownership of equity
interests, by contract or otherwise.
"Applicable Accounting Principles" shall mean United States
Generally Accepted Accounting Principles, applied on a consistent basis
throughout the periods indicated except as disclosed in footnotes to
the financial statements.
"Business" shall mean the business presently conducted by
Seller, including, without limitation, the merchandising and sourcing
of tailored clothing and dress shirts to value-priced apparel
retailers.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which banks are authorized to be closed in New
York City.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contracts" shall mean the leases, rental agreements,
insurance policies, sales orders, collective bargaining agreements,
union contracts, licenses, agreements, permits, purchase orders,
commitments and any and all other contracts or binding arrangements
(including, capital commitments), whether written or oral, express or
implied, of Seller or by which any of its Assets are bound.
"Dollars" and "$" shall mean, unless otherwise specified,
United States Dollars.
"Encumbrances" shall mean, to the extent applicable, all liens
(including liens for Taxes), mortgages, security interests, leases,
options, claims, charges, restrictions, rights of first refusal or
first offer, easements or other similar encumbrances.
"Environmental Laws" shall mean all applicable Federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards
and regulations, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or
administrative order, consent decree or judgment, imposing liability or
standards of conduct for the protection, preservation or restoration of
the environment (including ambient air, surface water, groundwater,
drinking water, wetlands, land surface or subsurface strata, animal
life and vegetation) and human health and safety. Environmental Laws
include the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C. xx.xx. 9601 et seq.) ("CERCLA"); the
Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C.
xx.xx. 5101 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. xx.xx. 136 et seq.); the Solid Waste Disposal
Act (42 U.S.C. xx.xx. 6901 et seq.); the Toxic Substance Control Act
(15 U.S.C. xx.xx. 2601 et seq.); the Clean Air Act (42 U.S.C. xx.xx.
7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C.
xx.xx. 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C.
xx.xx. 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. xx.xx.
300(f) et seq.), each as amended and in effect on the date hereof, and
any and all regulations promulgated thereunder, and all analogous
state, local and foreign counterparts or equivalents and any transfer
of ownership notification or approval statutes.
"Environmental Permits" shall mean all material permits,
licenses and authorizations of all governmental authorities required by
Seller for the conduct of its operations as currently conducted under
all applicable Environmental Laws.
"Hazardous Material" shall mean any substance, material or
waste which is regulated by or forms the basis of liability under any
Environmental Laws, including any material or substance which is (a)
defined as a "solid waste," "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," "pollutant," "contaminant," "hazardous constituent,"
"special waste," "toxic substance" or other similar term or phrase
under any Environmental Law, (b) polychlorinated biphenyls (PCB's) or
(c) any radioactive substance.
2
"Historical Financial Statements" shall mean Seller's audited
financial statements (balance sheets, statements of income and
statements of cash flows) for the fiscal year ending December 31, 1997
and December 31, 1998, and Seller's unaudited quarterly financial
statements for the third quarter of 1998, copies of which are included
in Schedule 3.05.
"Income Taxes" shall mean all Taxes on or measured by net
income, gross profits or net profits, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign.
"Intellectual Property Rights" shall mean the names
"Diversified Apparel Group Ltd." and all Patents, Trademarks, Trade
Names, copyrights, and confidential and proprietary drawings, designs,
inventions, trade secrets, and customer and supplier lists of Seller.
"IPO" shall mean an initial public offering of the Xxxxxxxxxx
Stock.
"Patents" shall mean patents (including all reissues,
divisions, continuations, continuations in part and extensions
thereof), patent applications and patent disclosures docketed.
"Permitted Encumbrances" shall mean, to the extent applicable,
Encumbrances which (a) are liens for Taxes not yet due and payable, or
(b) are mechanics', carriers', materialmen's, landlords', workers' or
other similar liens incurred in the ordinary course of business.
"Person" shall mean any natural person, corporation, limited
liability company, unincorporated association, partnership, joint
venture or other entity.
"Xxxxxxxxxx Stock" shall mean the common stock of the Parent
issued pursuant to the IPO.
"Pre-Tax Income" shall mean the net income, including the gain
or loss on discontinued operations or extraordinary items, of the
Business for financial reporting purposes prepared in accordance with
Applicable Accounting Principles before any provision for Federal and
state income taxes, excluding any good will amortization expense
related to this Agreement.
"Purchaser Parties" shall mean the Purchaser and the Parent.
3
"Taxes" shall mean all taxes on, or measured by or referred to
as, income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, customs,
duties or similar assessments or charges, together with any interest
and any penalties, additions to tax or additional similar amounts
imposed by any taxing authority, domestic or foreign, with respect
thereto.
"Tax Returns" shall mean all material returns, reports and
statements relating to Taxes that are required to be filed with any
appropriate domestic or foreign taxing authority.
"Trade Names" shall mean trade names embodying goodwill of
Seller, whether or not registration has been obtained or an application
for registration is pending.
"Trademarks" shall mean trademarks, service marks, brand
names, brand marks, trade dress, logos and all other names and slogans
associated with products of Seller, whether or not registered, and all
registrations thereof and pending applications therefor.
1.02. Other Definitions. The following terms are defined in
the sections indicated:
Term Section
---- -------
"Asset Adjustment Amount" 2.05(b)
"Assets" 2.01
"Benefit Plans" 3.12
"Claims" 8.04
"Closing" 2.08
"Closing Date" 2.08
"Closing Date Balance Sheet" 2.05
"Closing Date Payment Amount" 2.04
"COBRA" 3.12
"Deferred Purchase Price" 2.04
"Delayed Obligations" 2.06
"Employment Agreement" 6.03
"ERISA" 3.12
"Excluded Assets" 2.02
"Liabilities" 2.03
"Improvements" 3.07
"Losses" 8.02
"Notice of Disagreement" 2.06
"Obligation" 2.06
"Postponed Obligations" 2.06
"Pre-Tax Income Target" 2.06
"Purchase Price" 2.04
"Real Property" 3.07
"Statement" 2.06
4
1.03. Accounting Terms. Any accounting terms used in this
Agreement shall, unless otherwise specifically provided, have the meanings given
them in accordance with, and all financial computations hereunder shall, unless
otherwise specifically provided, be computed in accordance with, the Applicable
Accounting Principles.
1.04. Other Rules of Construction. References in this
Agreement to sections, schedules and exhibits are to sections of, and schedules
and exhibits to, this Agreement unless otherwise indicated. Words in the
singular include the plural and in the plural include the singular. The word
"or" is not exclusive. The words "including", "includes", "included" and
"include", when used, are deemed to be followed by the words "without
limitation".
ARTICLE II
The Asset Purchase
------------------
2.01. Purchase and Sale of Assets. Upon the terms and subject
to the conditions set forth in this Agreement, on the Closing Date, Seller shall
sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall
purchase and accept from Seller, free and clear of all Encumbrances (except
Permitted Encumbrances), all right, title and interest in and to all of the
assets of Seller other than the Excluded Assets as hereinafter defined (such
assets being hereinafter referred to as the "Assets"), including, without
limitation, the following:
(i) all inventory, accounts receivable, machinery, equipment,
supplies and other personal property owned by Seller on the date
hereof;
(ii) all of Seller's books, records, reports, documents and
files, including without limitation, customer and supplier lists, sales
data, brochures, catalogs, mailing lists, art work, photographs and
advertising material, accounting data, property records, manufacturing
records and personnel records, whether in electronic form or otherwise.
In addition, upon request, Seller shall provide Purchaser with copies
of all of Seller's tax records and tax returns;
(iii) all right, title and interest in and to any Intellectual
Property Rights of Seller, and all files relating thereto;
(iv) all right, title and interest in and to the goodwill of
Seller;
(v) all prepaid expenses of, or for the benefit of, the
Seller;
(vi) all the real property of Seller, together with all
rights, titles, appurtenant interests, covenants, licenses, remainders,
reversions, privileges and benefits thereunto belonging, including all
right, title and interest in and to any easements, rights-of-way,
rights of ingress or egress or other interests in, on or under any
land, highway, street, road or avenue, open or proposed, in, on,
across, in front of, abutting or adjoining such real property; and
5
(vii) all other assets of the Seller (including without
limitation all causes of action, contract rights and warranty and
product liability claims, whether or not in litigation on the date
hereof).
2.02. Assets Not Purchased. It is understood and agreed by the
parties that the Assets shall not include the assets listed on Schedule 2.02
(the "Excluded Assets").
2.03. Assumed Liabilities. Purchaser shall assume no
liabilities of Seller in connection with the transactions contemplated by this
Agreement, except (i) for liabilities relating to Contracts assumed by Purchaser
or acquired by Purchaser hereunder, and (ii) as otherwise specifically set forth
on Schedule 2.03 (collectively, the "Liabilities"). The Liabilities shall
include all current liabilities incurred in the ordinary course of business on
or prior to the Closing Date, whether or not reflected on the books of the
Seller at the Closing Date.
2.04. Purchase Price. Subject to adjustment in accordance with
Sections 2.05 and 2.06 below, in consideration of the sale and transfer to
Purchaser of the Assets on the Closing Date, Purchaser shall pay to Seller the
following (the "Purchase Price"): (i) $800,000 in cash, payable to Seller on the
Closing Date by wire transfer of immediately available funds (the "Closing Date
Payment Amount"); (ii) $400,000 in the form of a promissory note payable to
Seller (in the form of Exhibit 2.04 hereto, the "Note"), which Note shall bear
interest at a rate of 10% per annum; and (iii) in accordance with the timetable
set forth in Section 2.06 below, the "Deferred Purchase Price." Purchaser and
Seller acknowledge that the Note shall be an unsecured obligation of Purchaser
and that the Note shall be subordinated to all existing and future bank debt of
Purchaser and Parent. Seller agrees to execute all subordination agreements
necessary to effect the foregoing.
2.05. Purchase Price Adjustment. (a) Seller agrees that it
shall refund to Purchaser, pursuant to the terms of this Section 2.05, a portion
of the Closing Date Payment Amount equal to the Asset Adjustment Amount (as
defined below). As of the Closing Date, the books of Seller shall be deemed
"closed," a physical inventory shall be taken of the Assets, and within 60 days
(or such longer period as is required for an audit to be completed) of such date
the independent auditors selected by Purchaser shall have performed a balance
sheet audit of the Assets (at Purchaser's expense). Such auditors shall prepare
a balance sheet based on such physical inventory in accordance with Applicable
Accounting Principles (the "Closing Date Balance Sheet"). If requested, Seller
and Xxxxx shall make reasonable efforts to assist Purchaser and its
representatives in the preparation of the Closing Date Balance Sheet. The
Closing Date Balance Sheet shall be binding on the parties hereto and shall
constitute conclusive evidence of the net book value of the Assets.
(b) Promptly upon the Closing Date Balance Sheet being
delivered to Seller, but in no event more than 10 days following such date, the
Seller shall pay to Purchaser in immediately available funds the amount on a
dollar-for-dollar basis by which the value of the Working Capital as reflected
in the Closing Date Balance sheet is less than $[287,546]. For this purpose,
Working Capital shall equal current assets (exclusive of cash, accounts
receivable which have aged more than 100 days, and any amounts due from Xxxxx)
less current liabilities (the amount of such shortfall, if any, shall be the
"Asset Adjustment Amount").
6
2.06. Deferred Purchase Price. (a) Within ninety (90) days
after the end of each of Purchaser's 1999 through 2003 fiscal years (or as soon
thereafter as reasonably practicable), Purchaser shall prepare and deliver to
the Seller financial statements for the Purchaser for such year, together with a
statement (the "Statement") setting forth the Purchaser's Pre-Tax Income for
such year, prepared in accordance with Applicable Accounting Principles. Such
financial statements may consist of the financial statements of the Parent,
including consolidating balance sheets and income statements setting forth the
various subsidiaries/divisions of the Parent. On such financial statements, the
Business shall be allocated overhead and other expenses (including the cost of
capital employed by the Business) in accordance with the terms and procedure set
forth in Schedule 2.06 (a) hereto and otherwise in accordance with Applicable
Accounting Principles. If requested, Seller and Xxxxx shall make reasonable
efforts to assist Purchaser and its representatives in the preparation of the
Statement. During the forty-five (45) day period following Seller's receipt of
the Statement, Seller, at its sole expense, will be permitted to review, or have
its accountants, auditors or counsel review, all relevant working papers and
books and records of the Purchaser relating to the Statement. Purchaser shall
provide reasonable cooperation with this review. The Statement shall become
final and binding upon the parties on the forty-fifth day following receipt
thereof by Seller unless Seller delivers a written notice (a "Notice of
Disagreement") to the Parent on or prior to such date that Seller disagrees with
the statement. In order to be valid, any Notice of Disagreement shall specify in
reasonable detail the nature of any disagreement so asserted and shall be
accompanied by a certificate of Seller's independent auditors that they concur
with each of the positions taken by Seller in the Notice of Disagreement. If a
Notice of Disagreement is received by the Parent in a timely manner, then the
Statement (as revised in accordance with clause (x) or (y) below) shall become
final and binding upon the parties on the earlier of (x) the date the parties
hereto resolve in writing any differences they have with respect to any matter
specified in the Notice of Disagreement or (y) the date any disputed matters are
finally resolved in writing by the Arbitrator in accordance with the arbitration
provision set forth in Section 2.07 hereto.
7
(b) In the event the Statement reveals that the Purchaser has
achieved certain Pre-Tax Income targets (each, a "Pre-Tax Income Target") for
the years 1999 through 2003, then Purchaser shall pay to Seller additional
purchase consideration (the "Obligation") in the amounts set forth below:
Pre-Tax Obligation
Income Target Payable
------------- -------
1999 $521,000 $115,000
2000 $573,000 $135,000
2001 $630,000 $155,000
2002 $693,000 $175,000
2003 $762,000 $195,000
(c) Any annual portion of the Obligation in the amount of the
annual payment set forth in clause 2.06(b) above will be forfeited in any year
that the Purchaser does not achieve at least sixty percent (60%) of the Pre-Tax
Income Target for that year. Any annual portion of the Obligation will be
postponed by five (5) years (the "Postponed Obligations") in the amount set
forth above in any year that the Purchaser achieves pre-tax income less than
eighty-five percent (85%) of the Pre-Tax Income Target amount set forth above,
but more than sixty percent (60%) for that year. Fifty percent (50%) of the
Obligation will be deferred for five (5) years (the "Delayed Obligations") in
any year that the Purchaser achieves a pre-tax income of less than the Pre-Tax
Income Target but 85% or more of the Pre-Tax Income Target for that year. No
portion of the Obligation shall be payable during or with respect to any period
in which Xxxxx or Seller is in breach of a material contractual obligation to
the Purchaser, the Parent or any of their Affiliates.
In any year that the Purchaser's Pre-Tax Income exceeds the
relevant target set forth above, Seller may elect to have all or a portion of
such excess credited to prior years (in chronological order) for which the
Pre-Tax Income Targets have not been satisfied in full (other than years in
which the Obligation was forfeited) rather than crediting such excess Pre-Tax
Income to the year in which it is actually earned (thereby reducing or
eliminating the bonus payable to Xxxxx in respect of such year under the
Employment Agreement). Any Delayed or Postponed Obligations which are no longer
deferrable as a result of the credit shall be paid at the time the credit is
recognized. Forfeited Obligations will not be recognized as earned as a result
of any such credit.
(d) The Obligation in respect of any year shall be paid to
Seller as follows:
(i) If no Notice of Disagreement is timely filed (or
Seller notifies the Parent in writing that it accepts
the Statement), Purchaser shall deliver the
Obligation in the amount set forth above in cash or
at the option of the Parent, in the event of an IPO,
in shares of Xxxxxxxxxx Stock that are issued
pursuant to an effective registration statement and
which are free from any restrictions on resale. Such
payment shall be delivered to Seller as soon as
practicable, but in no event later than sixty-days
following the delivery to Seller of the Statement;
8
(ii) If a Notice of Disagreement is timely filed, upon
final resolution of the matter, Purchaser shall
deliver the Obligation in the amount set forth above
in cash or at the option of the Parent, in the event
of an IPO, in shares of Xxxxxxxxxx Stock that are
issued pursuant to an effective registration
statement and which are free from any restrictions on
resale; and
(iii) Postponed Obligations and Delayed Obligations shall
be paid at their respective maturity (as determined
in accordance with the first paragraph of this clause
(c)) in cash, or at the option of the Parent, in the
event of an IPO, in shares of Xxxxxxxxxx Stock that
are issued pursuant to an effective registration
statement and which are free from any restrictions on
resale;
provided, however, (x) any amounts due to Seller from Purchaser pursuant to this
paragraph (d) and remain unpaid shall be subject to set off and deduction for
amounts due from Xxxxx or Seller under this Agreement, including Sections 2.05
and Article VIII hereof, or any other agreements between Xxxxx and the Purchaser
Parties, including the Employment Agreement and (y) any amounts due to Purchaser
from Seller pursuant to this paragraph (d) and remain unpaid shall be subject to
set off and deduction for amounts due from Purchaser under this Agreementor any
other agreements between Xxxxx and the Purchaser Parties, including the
Employment Agreement. In the event that a disagreement arises between Xxxxx and
Purchaser, with respect to any such setoff or deduction provided in (x) and (y)
of this proviso, Seller or Purchaser, as applicable in each case, shall be
entitled to deliver a Notice of Disagreement to the other within ten (10)
Business Days following such set off, and the Arbitration provisions of Section
2.07 hereof shall apply to such disagreement. With respect to any payment made
by Purchaser under this paragraph (d) in shares of Xxxxxxxxxx Stock, such shares
shall be valued at the average of the bid and ask price for such shares over the
twenty trading days immediately preceding such issuance for the purpose of
determining the number of shares to be issued to Seller. Any and all payments to
Seller provided for under this Agreement which are the responsibility of
Purchaser, and which are not paid when due, shall be the responsibility of, and
shall timely be paid by, the Parent.
2.07. Arbitration of Accounting Disagreements. During the
30-day period following the delivery of a Notice of Disagreement under Section
2.06 above, Seller and the Parent shall seek in good faith to resolve in writing
any differences which they may have with respect to any matter specified in the
Notice of Disagreement. At the end of such 30-day period, if Seller and the
Parent have not reached agreement on such matters, any portion of the Obligation
not in dispute shall be payable to Seller not later than ten days after such
date and otherwise in accordance with this Agreement, and the matters which
remain in dispute shall be submitted to an arbitrator (the "Arbitrator") for
review and resolution. The Arbitrator shall be an independent public accounting
firm or such other person or persons as shall be agreed upon by the parties
hereto in writing. The Arbitrator shall render a decision resolving the matters
in dispute within 30 days following their submission to the Arbitrator unless,
in the view of the Arbitrator, the dispute cannot be equitably resolved within
such period, and then, upon written notice to the parties, it shall be resolved
as soon as practicable in the discretion of the Arbitrator. All of the usual and
customary fees and costs of the Arbitrator, if disagreements are submitted to
the Arbitrator pursuant to this Section 2.07, shall be borne 50% by Purchaser
and 50% by the Seller.
9
2.08. The Closing. Upon the terms and subject to the
conditions set forth in this Agreement, the acquisition by Purchaser of the
Assets (herein called the "Closing") shall take place at 10:00 a.m. at the
offices of Xxxxxxx, Xxxxxxxx and Kotel, P.C. on or about March 31, 1999, or such
other time, date and place as the parties shall agree upon, but in no event
before the conditions set forth in Articles VI and VII shall have been satisfied
or waived (the date of the Closing being herein referred to as the "Closing
Date").
2.09. Allocation of Consideration. The consideration paid by
Purchaser shall be allocated among the Assets as set forth on Schedule 2.09. Any
adjustments to such consideration pursuant to Section 2.05 shall be allocated in
the manner mutually agreed upon by Purchaser and Seller and set forth in
Schedule 2.09 hereof. Each of the parties must report this transaction for
federal tax purposes in accordance with this allocation of the Purchase Price.
2.10. Further Assurances. From and after the Closing, upon
written request from the Purchaser, Seller and Xxxxx shall execute, acknowledge
and deliver all such further acts, assurances, deeds, assignments, transfers,
conveyances and other instruments and papers as may be reasonably required to
sell, assign, transfer, convey and deliver the Assets to Purchaser.
ARTICLE III
Representations and Warranties of Seller
----------------------------------------
Seller and Xxxxx each represent and warrant to each of the
Purchaser Parties that the statements made in this Article III are true, correct
and complete as of the date hereof, and will continue to be true, correct and
complete on the Closing Date:
3.01. Authority. The Seller has the requisite power and
authority to execute and deliver this Agreement and the other agreements and
instruments to be executed and delivered by Seller pursuant hereto and to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by Seller and constitutes, and such other
agreements and instruments when duly executed and delivered by Seller will
constitute, legal, valid and binding obligations of Seller enforceable against
Seller in accordance with their respective terms. The execution and delivery by
Seller of this Agreement and such other agreements and instruments and the
consummation by Seller of the transactions contemplated hereby and thereby will
not violate the Corporation Law of the State of New York, or conflict with, or
result in any breach of, the Certificate of Incorporation, Bylaws or other
organizational documents of Seller or any material indenture, mortgage, lease,
agreement or other instrument to which Seller are a party or by which Seller, or
its properties or assets, are bound. No material approval, authorization,
consent or other order or action of or filing with any court, administrative
agency, other governmental body or any other Person is required for the
execution and delivery by Seller of this Agreement or such other agreements and
instruments or the consummation by Seller of the transactions contemplated
hereby or thereby.
10
3.02. Ownership of the Assets. The Seller has good and valid
title to the Assets, free and clear of any Encumbrances, which Assets represent
all assets currently used by Seller in the conduct of the Business. The Assets
are not subject to any contract, agreement, arrangement, commitment or
understanding other than this Agreement.
3.03. Organization and Qualification of Seller. The Seller is
a corporation duly organized and validly existing under the laws of the State of
New York. The Seller has full power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals necessary to enable
it to use its corporate name and to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted. The Seller is in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership, leasing or holding of its properties makes such
qualification necessary. The Seller has made available to the Purchaser true and
complete copies of the Certificate of Incorporation, as amended to date, and the
By-laws, as in effect on the date hereof, of Seller.
3.04. Other Equity Interests. Except as set forth on Schedule
3.04, Seller does not directly or indirectly own any capital stock of or other
equity interest in any Person.
3.05. Historical Financial Statements; No Undisclosed
Liabilities. The Historical Financial Statements, true and complete copies of
which are included in Schedule 3.05, were prepared in accordance with Applicable
Accounting Principles and constitute fair and reasonable presentations of the
financial position and results of operations of Seller, in all material
respects, as of the dates and for the periods set forth therein. The Seller does
not have any known, contingent or undisclosed obligations or liabilities which
would be required in accordance with the Applicable Accounting Principles to be
reflected in a currently prepared balance sheet or notes thereto, other than
obligations or liabilities (i) that are reflected or disclosed in the Historical
Financial Statements, (ii) that are disclosed in this Agreement or the Schedules
hereto or (iii) that were incurred after June 30, 1998, in the ordinary course
of business.
3.06. Absence of Material Adverse Changes. Except as disclosed
in Schedule 3.06, and excluding any macroeconomic changes or conditions in
national or local economies affecting the Business or its customers or suppliers
generally, there have been no changes since December 31, 1997, which
individually or in the aggregate have had a material adverse effect on the
business, assets, financial condition or results of operations of Seller.
Without limiting the foregoing, except as disclosed in Schedule 3.06, since
December 31, 1997, Seller has not:
11
(i) redeemed or otherwise acquired any of its capital
stock or issued any capital stock or any option,
warrant or right relating thereto;
(ii) granted to any employee any increase in compensation
except as required under existing agreements or in
the ordinary course of business consistent with past
practice;
(iii) incurred any liabilities, obligations or
indebtedness for borrowed money or guaranteed any
such liabilities, obligations or indebtedness, other
than in the ordinary course of business consistent
with past practice;
(iv) cancelled any material indebtedness owed to Seller,
other than in the ordinary course of business
consistent with past practice;
(v) made any material change in any method of accounting
or accounting practice or policy;
(vi) acquired by merging or consolidating with, or by
purchasing stock or a substantial portion of the
assets of, or by any other manner, any material
operating business, corporation, partnership,
association or other business organization (or
division thereof);
(vii) sold, leased or otherwise disposed of any of its
assets except in the ordinary course of business
consistent with past practice;
(viii) entered into any material lease of real property;
(ix) modified, amended or terminated any lease of, or
other material agreement pertaining to, real
property (except modifications or amendments
associated with renewals of leases in the ordinary
course of business);
(x) engaged in any transaction outside Seller's ordinary
course of business consistent with past practice;
(xi) suffered any event or occurrence which has had or
could have a material adverse effect on Seller; or
(xii) suffered any damage to any of its significant assets
that has or could have a material adverse effect.
3.07. Real Property and Improvements. Schedule 3.07 contains a
list of all real property and interests in real property owned or leased by
Seller (the "Real Property"). Except as set forth in Schedule 3.07, Seller has
good and clear record and marketable title in fee simple to the Real Property
set forth in Schedule 3.07 as being owned by it, in each case free and clear of
all Encumbrances, other than Permitted Encumbrances and any Encumbrances
described in or incorporated by reference into Schedule 3.07. The uses for which
the buildings, facilities, and other improvements located on the Real Property
(the "Improvements") are zoned do not materially restrict, or in any manner
materially impair, the use of the Improvements for purposes of the businesses of
Seller as conducted on the date of this Agreement. The Seller are the lessee of
each of the leasehold estates set forth in Schedule 3.07 as being leased by it,
and except as set forth in Schedule 3.07, is in possession of each of the
premises purported to be so leased. Each such lease pursuant to which such
leasehold estate is granted is valid and without any material default thereunder
by Seller, or, to the knowledge of Seller, the landlord. Except as set forth in
Schedule 3.07, there are no pending or, to the knowledge of Seller, threatened,
condemnation, eminent domain or similar proceeding with respect to the Real
Property or the Improvements and no special taxes or assessments relating to any
part of the Real Property, and no public improvements that may result in a
special tax or assessment against any part of the Real Property, are proposed,
in progress or completed. To the knowledge of Seller, there are no structural
defects in the buildings and other improvements situated on the real property
owned or leased by Seller, and all such facilities are in all material respects
in good condition and working order (reasonable wear and tear excepted) and
adequate for the operation of Seller's business as currently conducted.
12
3.08. Personal Property. Except as disclosed in Schedule 3.08
and except for obsolete assets and assets disposed of in the ordinary course of
business since December 31, 1997, Seller has good and valid title to the
machinery, equipment and other tangible personal property reflected in the
Historical Financial Statements as being owned by it or acquired by it after
December 31, 1997, free and clear of all Encumbrances, other than Permitted
Encumbrances; and Seller is the lessee of all the leasehold estates pertaining
to the machinery, equipment and other tangible personal property purported to be
granted by the capitalized leases reflected in the Historical Financial
Statements (if any). Each lease or licensing arrangement for personal property
used by Seller is valid and without any material default thereunder by Seller,
or, to the knowledge of Seller, the lessor.
3.09. Intellectual Property Rights. Schedule 3.09 lists all
the Patents, Trademarks and Trade Names owned or licensed by Seller which are
used in Seller's businesses. Except as otherwise disclosed in Schedule 3.09,
Seller validly owns, beneficially and of record, all the Patents, Trademarks and
Trade Names listed in Schedule 3.09, free and clear of all Encumbrances other
than Permitted Encumbrances. Except as disclosed in Schedule 3.09, no action,
claim, suit or proceeding has been brought against Seller or, to the knowledge
of Seller, has been threatened against Seller with respect to any Intellectual
Property Rights used in Seller's businesses that challenge Seller's right to use
any Intellectual Property Rights or that alleges that Seller infringes any
Intellectual Property Rights of any other Person. To the knowledge of Seller, no
other Person is infringing any of the Intellectual Property Rights.
3.10. Litigation. Except as disclosed in Schedule 3.10, there
are no actions, suit, arbitration, investigation, audit or proceeding pending or
threatened against Xxxxx or Seller in any court, or before any Federal, state,
local or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind.
Neither Xxxxx nor Seller are subject to any judgment, order, writ, injunction or
decree of any court or any Federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any arbitrator.
13
3.11. Contracts. Schedule 3.11 lists all contracts to which
Seller is party or by which Seller or any Assets are bound. Except for the
Contracts listed in Schedule 3.11, Seller is not a party to, nor are any of its
Assets subject to, any (i) contract or agreement for the employment of any
officer or employee or with any labor union or association; (ii) bonus, pension,
profit-sharing, retirement, deferred compensation, incentive or supplementary
compensation, percentage compensation, termination or severance pay, stock
purchase, stock option, hospitalization, insurance or other plan providing
employee benefits; (iii) contract or agreement in which any Person who is an
officer, director or member of Seller has a significant economic or other
interest; (iv) contract or agreement relating to the borrowing or lending of
money or the guarantee of any obligations for borrowed money, excluding
endorsements made for purposes of collection in the ordinary course of business;
(v) material license or royalty agreement; (vi) material distributor, dealer,
sales agency or advertising contract; (vii) material contract or agreement with
any government or agency or instrumentality thereof; (viii) contract or
agreement granting to any Person a preferential right to purchase any of its
material assets, properties or rights or containing a covenant or other
agreement not to compete; (ix) contract or agreement with respect to the
transportation, removal or storage of any material amount of effluent, wastes,
pollutants or other hazardous substances or materials; (x) any other material
contract or agreement not made in the ordinary course of business. Except as
disclosed in Schedule 3.11, each of the Contracts listed in Schedule 3.11 is
valid and in full force and effect and, to the knowledge of Seller, Seller and
each other party to any such Contract has performed all material obligations
required to be performed by it thereunder.
3.12. Benefit Plans. (a) Schedule 3.12 contains a list and
brief description of all "employee pension benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA), and any other employee fringe benefit plans maintained, or contributed
to, by Seller (all the foregoing being herein called "Benefit Plans"). The
Seller has made available to the Purchaser true, complete and correct copies of
(1) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (2) the most recent annual report on Form 5500 filed with
the Internal Revenue Service with respect to any Benefit Plan (if any such
report was required) and (3) each trust agreement or other funding arrangement
relating to any Benefit Plan (if applicable). All required reports and
descriptions (including Form 5500 Annual Reports, summary annual reports,
PBGC-l's and summary plan descriptions) have been timely filed and distributed
appropriately with respect to each such Benefit Plan. The requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
have been met with respect to each such Employee Benefit Plan which is an
employee welfare benefit plan under Section 3(1) of ERISA.
(b) Each Benefit Plan has been administered in accordance with
its terms. All the Benefit Plans (and each related trust, insurance contract or
fund), and Seller with respect thereto, are in compliance, in form and in
operation, with the applicable provisions of ERISA, the Code and other
applicable laws. To Seller's knowledge, except as disclosed in Schedule 3.12,
there are no investigations by any governmental agency, termination proceedings
or other claims (except claims for benefits payable in the normal operation of
the Benefit Plans), suits or proceedings against or involving any Benefit Plan
that would result in material liability against Seller or any Benefit Plan.
14
(c) Except as disclosed in Schedule 3.12, all the Benefit
Plans, as adopted or as they may have been amended, as, when and to the extent
required, comply with the applicable provisions of all applicable laws. Except
as disclosed in Schedule 3.12, the Benefit Plans that are pension benefit plans
have received determination letters from the Internal Revenue Service to the
effect that such Benefit Plans are qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor, to the knowledge of Seller, has
revocation been threatened nor are there any facts that could result in any such
revocation, nor has any such Benefit Plan been amended since the date of its
most recent determination letter or application therefor in any respect that
would adversely affect its qualification.
(d) No "prohibited transaction" (as defined in Section 4975 of
the Code or Section 406 of ERISA) has occurred which involves the assets of any
Benefit Plan and which could subject any employees of Seller, a trustee,
administrator or other fiduciary of any trusts created under any Benefit Plan to
the tax or penalty on prohibited transactions imposed by Section 4975 of the
Code or the sanctions imposed under Title I of ERISA. No fiduciary has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any Benefit
Plan. Except as disclosed in Schedule 3.12, none of the Benefit Plans has been
terminated nor have there been any "reportable events" (as defined in Section
4043 of ERISA and the regulations thereunder) with respect thereto.
(e) Each Benefit Plan subject to Title IV of ERISA has paid
all premiums when due to the Pension Benefit Guaranty Corporation ("PBGC"). The
Seller has not incurred, and none of the directors and officers (and employees
with responsibility for employee benefits matters) of the Seller has any reason
to expect that Seller will incur, any liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any withdrawal
liability as defined in Section 4201 of ERISA) or under the Code with respect to
any such Benefit Plan which is an employee pension benefit plan under Section
3(2) of ERISA. No Benefit Plan has applied for or received a waiver of the
minimum funding standards imposed by Section 412 of the Code, and no Benefit
Plan has an "accumulated funding deficiency" within the meaning of Section
412(a) of the Code as of the most recent plan year. The Seller has made
available to the Purchaser the most recent actuarial report or valuation with
respect to each Benefit Plan that is a "defined benefit plan" (as defined in
Section 3(35) of ERISA). The information supplied to the actuary for use in
preparing those reports or valuations was complete and accurate in all material
respects and Seller has no reason to believe that the conclusions expressed in
those reports or valuations are incorrect in any material respect.
(f) Except to the extent required under COBRA, Seller does not
maintain, contribute to, or have any liability or obligation to contribute to
any funded or unfunded medical, health or life insurance plan or similar
arrangement for present or future retirees, their spouses or dependents or
present or future terminated employees, their spouses or dependents.
15
(g) Seller is not a member of a controlled group of
corporations, within the meaning of Section 414(b) of the Code, is not a member
of a group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, and is not a member of an affiliated service group,
within the meaning of Section 414(m) and (o) of the Code. The Seller does not
contribute to, never has contributed to, and never has been required to
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA) and
Seller has no liability (including withdrawal liability as defined in Section
4201 of ERISA) under any multiemployer plan.
(h) The execution of this Agreement and the consummation of
the transaction contemplated hereby do not result in the acceleration or early
vesting of any payments or benefits under any Benefit Plan or in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
(i) All contributions or premium payments required to have
been made by Seller under any Benefit Plan under the terms of such Benefit Plan
or applicable law (including without limitation, ERISA and the Code) have been
made within the time prescribed by such Benefit Plan or law.
3.13. Taxes. The Seller has timely filed or caused to be filed
with the appropriate taxing authorities all Tax Returns required to be filed by
Seller through the date hereof and will timely file all Tax Returns required to
be filed on or prior to the Closing Date, in each case, subject to applicable
extensions. All such Tax Returns were correct and complete in all respects.
Seller has paid all Taxes due and payable (whether or not shown on any Tax
Return). The Seller has delivered to the Purchaser correct and complete copies
of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Seller since January 1, 1994.
Seller has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party. No written claim has
ever been delivered to Seller by an authority in a jurisdiction where Seller
does not file Tax Returns that Seller is or may be subject to taxation by that
jurisdiction. There are no liens with respect to Taxes upon any of the
properties or assets of Seller other than customary liens for current Taxes not
yet due and payable. Except as disclosed in Schedule 3.13, there are no disputes
or claims concerning any Tax liability of Seller either claimed or raised by an
authority in writing or as to which Seller has knowledge. Schedule 3.13 lists
all federal, state, local and foreign income Tax Returns that have been audited
and that currently are the subject of audit. Except as disclosed on Schedule
3.13, there are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any material Tax Returns required to be filed
by or with respect to Seller, and Seller has not requested any extension of time
within which to file any Tax Return that has not yet been filed. Except as
disclosed on Schedule 3.13, Seller is not a party to any agreement or
arrangement (written or oral) providing for the allocation or sharing of Taxes
or Tax benefits. The Seller (A) has never been a member of an affiliated group
filing a consolidated federal income Tax Return and (B) has no liability for
Taxes of any Person under Section 1502-6 of the Treasury Regulations promulgated
pursuant to the Code (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.
16
3.14. Environmental Matters. Except as set forth in Schedule
3.14, (i) Seller is in compliance with all Environmental Laws applicable to it
and its properties, (ii) Seller has obtained and is in compliance with all
Environmental Permits, and the sale of the Assets hereunder will not cause a
termination of any such Environmental Permits, (iii) Seller does not generate,
use, store, transport or dispose of any Hazardous Materials in the course of
conducting its business operations, except in each case in compliance with all
applicable Environmental Laws, (iv) Seller has not caused, had or suffered any
material spills, releases or threatened releases of Hazardous Materials at any
of its Real Properties or which affect any adjacent parcels of land, (v) all
garbage, wastes, refuse, byproducts and other potential contaminants produced by
Seller in the course of conducting its business operations are disposed of by
properly licensed waste removal companies, or other third parties or
governmental authorities, in compliance with all requirements applicable to
Seller under Environmental Laws regulating such activities, (vi) none of the
Real Properties (including the soil, subsoil and groundwater at or under such
sites) contains any Hazardous Materials in amounts which could require Seller to
incur any material clean-up or remediation expenses or liabilities not covered
by insurance or other third party indemnities, (vii) there are no unregistered
underground storage tanks located under any of the Real Properties that are
required to be registered under any applicable Environmental Laws, (viii) no
notice has been received by Seller identifying Seller as a "potentially
responsible party", or requesting information under CERCLA or any similar state
statutes, with respect to any current investigation, suit, proceeding or other
regulatory activity of any applicable Federal or state environmental agency
(whether with respect to Seller, the Real Properties or otherwise), (ix) there
are no investigations, suits, administrative actions, demands, claims, hearings
or proceedings against Seller alleging the violation of any Environmental Laws,
(x) there are no consent decrees, orders, judgments or agreements with any
Federal or state environmental agencies in effect that materially restrict
Seller's operations, or the use of the Real Properties in connection with
Seller's operations, as currently conducted and (xi) none of the Real Properties
are listed or proposed for listing on the National Priorities List or are listed
on the Comprehensive Environmental Response, Compensation, Liability Information
System List promulgated pursuant to CERCLA, except in each case for violations
of or exceptions to the foregoing which would not in the aggregate reasonably be
expected to cause a material adverse effect on the business, assets, financial
condition or results of operations of Seller.
3.15. Transactions with Affiliates. Since December 31, 1997,
except as disclosed in Schedule 3.15, Seller has not purchased, acquired, leased
or licensed any property or services from, or sold, transferred, leased or
licensed any property or services to, any Affiliate, or any officer or director
of Seller, other than on an arm's length basis in the ordinary course of
business.
3.16. Insurance. All of the real and tangible personal
property included in the Assets are insured for the benefit of Seller in amounts
and against such risks as are customary for companies similarly situated under
valid and enforceable policies issued by financially sound and reputable
insurers. Schedule 3.16 contains a list and description of all material policies
of property, fire, liability, workers' compensation and all other types of
insurance maintained by Seller. As of the date hereof, all such policies are in
full force and effect and all premiums due thereon have been paid.
17
3.17. Inventory. All inventory of the Seller was acquired by
the Seller in the ordinary course of business and is in good condition and is
usable and saleable in the ordinary course of such business. The Seller has good
and valid title to the inventory, free and clear of all Encumbrances. The
allowance for obsolete and slow moving inventory reflected in the Historical
Financial Statements and in the Closing Date Balance Sheet is and will be
properly determined in accordance with Applicable Accounting Principles.
3.18. Accounts Receivable. All accounts receivable of the
Seller included in the Assets, whether reflected in the Historical Financial
Statements or subsequently created ("Receivables"), have arisen from bona fide
transactions in the ordinary course of business. The allowance for doubtful
accounts in respect of Receivables reflected in the Historical Financial
Statements and in the Closing Date Balance Sheet is and will be properly
determined in accordance with the Applicable Accounting Principles.
3.19. Customers and Suppliers. Schedule 3.19 hereto lists the
ten largest suppliers and the twenty largest customers of Seller (calculated by
dollar amount) for each of 1996 and 1997, stating for each the dollar volume of
the purchases. Seller and Xxxxx have no knowledge that might reasonably indicate
that any of the entities listed on Schedule 3.19 intends to cease purchasing
from, selling to or dealing with Seller, nor has any information been brought to
the attention of Seller or Xxxxx that might reasonably lead it to believe any
such customer or supplier intends to materially alter the amount of such sales
or purchases or the extent of dealings with Seller.
3.20. Employees. Schedule 3.20 sets forth a complete and
correct list as of the date of this Agreement of the names, annual salaries and
credited years of service of all officers and employees of Seller. In the case
of officers or employees receiving bonus or similar payments at any time during
the past two years exceeding $25,000 during any 12 month period, such Schedule
3.20 also sets forth the amount of the bonus and other similar payments received
by such officers and employees during each of the past two years. As of the date
of this Agreement, there are no current or, to the knowledge of Seller,
threatened work stoppages by any of the employees.
3.21. Accuracy. To Seller's knowledge, the required
disclosures made in this Agreement and the schedules attached hereto are
complete and accurate in all material respects, and the scheduled disclosures do
not contain any untrue statement of a fact or omit to state any fact necessary
to make the statements or facts contained therein not misleading.
18
ARTICLE IV
Representations and Warranties of the Purchaser Parties
-------------------------------------------------------
Each Purchaser Party represents and warrants to Seller that
the statements made in this Article IV are true, correct and complete as of the
date hereof, and will continue to be true, correct and complete on the Closing
Date:
4.01. Organization. Each Purchaser Party has been duly
organized, is validly existing and is in good standing under the laws of the
jurisdiction of its organization.
4.02. Authority. Each Purchaser Party has the full power and
authority to execute and deliver this Agreement, the Note and the other
agreements and instruments to be executed and delivered by such Purchaser Party
pursuant hereto and to consummate the transactions contemplated hereby and
thereby. All corporate acts and other proceedings required to be taken by or on
the part of each Purchaser Party to authorize such execution, delivery and
consummation have been duly and properly taken. Each of this Agreement and the
Note has been duly executed and delivered by each Purchaser Party and
constitutes, and such other agreements and instruments contemplated by this
Agreement when duly executed and delivered by a Purchaser Party will constitute,
legal, valid and binding obligations of the relevant Purchaser Party enforceable
against it in accordance with their respective terms. The execution and delivery
by each Purchaser Party of this Agreement, the Note and the execution and
delivery by each Purchaser Party of such other agreements and instruments and
the consummation by each Purchaser Party of the transactions contemplated hereby
and thereby will not violate any law, or (after obtaining the consent of the
National Bank of Canada as provided in Section 6.05 hereof) conflict with,
result in any breach of, constitute a default under, or result in the creation
of a lien or encumbrance on any of the properties or assets of a Purchaser Party
pursuant to, the certificate of incorporation or partnership agreement of any
Purchaser Party or (after obtaining the consent of the National Bank of Canada
as provided in Section 6.05 hereof) any indenture, mortgage, lease, agreement or
other instrument to which any Purchaser Party is a party or by which its
properties or assets are bound. No approval, authorization, consent or other
order or action of or filing with any court, administrative agency or other
governmental body in the United States of America is required for the execution
and delivery by any Purchaser Party of this Agreement and the Note and the
execution and delivery by any Purchaser Party of such other agreements and
instruments or the consummation by any Purchaser Party of the transactions
contemplated hereby or thereby.
4.03. No Legal Proceedings. There is no action, suit, order,
judgment or proceeding pending or, to the knowledge of any Purchaser Party,
threatened against or affecting any Purchaser Party that, individually or when
aggregated with one or more other actions, suits, orders, judgments or
proceedings, has or might reasonably be expected to have a material adverse
effect on any Purchaser Party's ability to perform any of its obligations
hereunder or under any of the other agreements and instruments to be executed
and delivered by any Purchaser Party in connection herewith.
19
ARTICLE V
Further Covenants and Agreements
--------------------------------
5.01. Conduct of Business. (a) Except as otherwise expressly
provided herein, from and after the date of this Agreement and until the
Closing, each Seller shall:
(i) operate the Business only in the ordinary course
consistent with past practice in all material respects;
(ii) use its best efforts to preserve intact the Business and
to maintain satisfactory relationships with its customers, suppliers,
distributors and any other person having business relations with it;
(iii) maintain its tangible assets in good order and repair,
ordinary wear and tear excepted;
(iv) perform punctually all obligations under each Contract,
and keep each Contract in full force and effect, free from any right of
cancellation, forfeiture or termination;
(v) retain the services of its key officers and employees; and
(vi) promptly notify the Parent of any material adverse change
in the business, assets, financial condition or results of operations of Seller.
(b) From the date hereof to the Closing, neither Xxxxx nor
Seller will take any action or engage in any transaction which would render the
representations and warranties of Seller inaccurate in any material respect as
of the Closing Date. In addition, except as expressly permitted by the terms of
this Agreement, neither Xxxxx nor Seller will do any of the following without
the prior written consent of Parent (such consent not to be unreasonably
withheld):
(i) amend DAG's Certificate of Incorporation;
(ii) redeem or otherwise acquire any of its capital stock or
issue any capital stock or any option, warrant or right relating
thereto;
(iii) grant to any employee any increase in compensation,
except as has been previously disclosed to the Parent;
(iv) incur any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or
indebtedness in excess of $10,000, or which requires performance over
more than one year, other than to an independent third party in the
ordinary course of business consistent with past practice;
20
(v) cancel any material indebtedness owed to Seller, other
than in the ordinary course of business consistent with past practice;
(vi) make any material change in any method of accounting or
accounting practice or policy;
(vii) acquire or agree to acquire by merging or consolidating
with, or by purchasing stock or a substantial portion of the assets of,
or by any other manner, any material operating business, corporation,
partnership, association or other business organization (or division
thereof);
(viii) sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets with a value in excess
of $10,000, except in the ordinary course of business consistent with
past practice;
(ix) enter into any lease of real property;
(x) modify, amend or terminate any lease of, or other material
agreement pertaining to, real property (except modifications or
amendments associated with renewals of leases in the ordinary course of
business);
(xi) make capital expenditures or purchases in excess of
$10,000 in the aggregate; or
(xii) agree, whether in writing or otherwise, to do any of the
foregoing or to take any other action which would in any manner
interfere with, impede, delay or make more costly the consummation of
the transaction completed hereby.
(c) Notwithstanding anything in this Agreement to the
contrary, Seller shall have the right to retain as its own all cash assets of
Seller at the Closing; provided, however, that the retention of such cash by
Seller shall not in any way affect or reduce its obligation to make the payment,
if any, required by Section 2.05.
5.02. Access; Information. From the date hereof to and
including the Closing Date, Xxxxx and Seller shall afford to the officers,
employees, attorneys, accountants and other authorized representatives of each
Purchaser Party reasonable access to the offices, management, employees, plants,
properties, assets, contracts, books and records of Seller in order that the
Purchaser Parties may have the full opportunity to make such legal, financial,
accounting and other reviews or investigations of Seller as they shall desire to
make. Xxxxx and Seller shall furnish promptly to the Purchaser Parties such
financial and operating information as any Purchaser Party may reasonably
request, including copies of any documents requested before or after the date
hereof.
5.03. Consents. From the date hereof to and including the
Closing Date, each of Seller and Xxxxx agrees (i) to obtain all consents,
authorizations, orders, exemptions and approvals of any third parties, including
governmental bodies and landlords under leases, required to be obtained by it in
connection with any of the transactions contemplated hereby, (ii) to take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on or applicable to it with respect to the Closing and
(iii) to promptly cooperate with and furnish information to Purchaser in
connection with any such legal requirements.
21
5.04. Notification of Certain Matters. Xxxxx and Seller shall
give prompt written notice to the Parent, and the Parent shall give prompt
written notice to Seller, as the case may be, of the occurrence, or failure to
occur, of any event that would be likely to cause any representation or warranty
by such notifying party contained in this Agreement to be untrue or inaccurate
in any material respect at any time between or including the date of this
Agreement and the Closing Date.
5.05. Insurance. The Seller agreess to keep all insurance
policies set forth in Schedule 3.16, or replacements thereof, in full force and
effect through the close of business on the Closing Date.
5.06. Prohibition of Solicitation. From the date hereof
through the Closing or the earlier termination of this Agreement, Seller and
Xxxxx shall not, and shall cause their respective directors, officers,
shareholders, affiliates, agents, advisers and other representatives (including
investment bankers) not to, directly or indirectly, enter into, solicit or
initiate any discussions or negotiations with, or encourage or respond to any
inquiries or proposals by, or participate in any negotiations with, or provide
any information to, or otherwise cooperate in any other way with, any Person,
other than the Purchaser Parties and their directors, officers, members,
affiliates, agents, advisers and other representatives, concerning any sale of
all or a portion of Seller's assets, or any merger, consolidation, liquidation,
dissolution or similar transaction involving Seller (each such transaction being
referred to herein as a "Proposed Acquisition Transaction"). Xxxxx and Seller
will immediately notify the Parent if any discussions or negotiations are sought
to be initiated, any inquiry or proposal is made, or any information is
requested with respect to any Proposed Acquisition Transaction and notify the
Parent of the terms of any proposal which it may receive after the date hereof
in respect of any such Proposed Acquisition Transaction, including without
limitation the identity of the prospective purchaser or soliciting party.
ARTICLE VI
Conditions Precedent to Obligations of the Purchaser Parties
------------------------------------------------------------
All obligations of the Purchaser Parties to effect the Closing
hereunder are, at the option of the Purchaser Parties, subject to the conditions
precedent that, at the Closing:
6.01. Xxxx of Sale. The Seller shall have executed and
delivered to Purchaser such bills of sale and other instruments as Purchaser may
reasonably request in order to give effect to, and appropriately evidence, the
transfer to Purchaser of all Seller's right, title and interest in and to the
Assets.
22
6.02. Opinion of Counsel. The Purchaser Parties shall have
received the favorable opinion of J. Xxxxx Xxxxxx, A.P.C., counsel to Seller,
addressed to the Purchaser Parties and dated the Closing Date, substantially in
the form of Exhibit 6.02 (or otherwise in a form reasonably satisfactory to the
Purchaser Parties).
6.03. Employment Agreement. Xxxxx shall have executed and
delivered to Purchaser an employment/noncompetition and proprietary information
agreement in the form of Exhibit 6.03 attached hereto (the "Employment
Agreement").
6.04. Consummation of the IPO. The Parent shall have
consummated the IPO or any Purchaser Party shall have closed an offering of not
less than $10,000,000 of such Purchaser Party's senior subordinated debt.
6.05. Consent of National Bank of Canada. The Purchaser
Parties shall have obtained written consent to the transactions contemplated
hereby from the National Bank of Canada to the extent required by the Credit
Agreement dated June 19, 1998 between the National Bank of Canada and the
Parent.
6.06. Due Diligence Review. After having the opportunity to
investigate all aspects of Seller, the Purchaser Parties shall have been
reasonably satisfied with the condition and operation of Seller and the
Business.
6.07. Liabilities. None of the Liabilities shall be in default
or otherwise subject to acceleration.
6.08. Performance by Seller. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and performed by
Xxxxx and Seller on or before the Closing shall have been complied with and
performed and, in addition, neither Xxxxx nor Seller shall have done any of the
actions listed in Section 5.01(b) between March 31, 1998 and the date of the
Closing.
6.09. Representations and Warranties. The representations and
warranties made by Xxxxx and Seller in this Agreement shall be true and correct
with the same force and effect as though all such representations and warranties
had been made as of the Closing.
6.10. No Law Suits. There shall not be pending or threatened
any lawsuit, claim or proceeding, in law or equity, which challenges or
adversely affects Seller, Xxxxx or the Business.
6.11. Seller's Certificate. The Purchaser Parties shall have
received from Seller, in form and substance reasonably satisfactory to Purchaser
and its counsel, a certificate of Seller, dated the Closing Date, confirming the
satisfaction of the conditions set forth in Sections 6.08 and 6.09.
23
6.12. Secretary's Certificate. The Purchaser Parties shall
have received from Seller, in form and substance reasonably satisfactory to the
Purchaser Parties and their counsel, a certificate, dated the Closing Date, of
the Secretary or an Assistant Secretary of Seller, (i) certifying the
resolutions of the Board of Directors of Seller and all other documents of
Seller which authorize the transactions contemplated hereby and the execution,
delivery and performance by Seller of this Agreement and the documents
contemplated hereby, (ii) certifying the Certificate of Incorporation and Bylaws
of Seller, (iii) containing a certificate of good standing from the Secretary of
State of the state of Seller's organization, and (iv) containing an incumbency
certificate regarding the officers of the Seller authorized to sign this
Agreement and the other documents contemplated hereby.
6.13. Release of Debt by Seller and Xxxxx. In consideration of
this Agreement, Seller and Xxxxx shall forgive all amounts that may be owed to
them by the Business.
6.14. No Material Adverse Changes. There shall have been no
material adverse change in the business, assets, operations, prospects or
financial condition of the Seller or the Business since the date of this
Agreement.
ARTICLE VII
Conditions Precedent to Obligations of Seller
---------------------------------------------
All obligations of Seller to effect the Closing hereunder are,
at the option of Seller, subject to the conditions precedent that, at the
Closing:
7.01. Performance by the Purchaser Parties. All the terms,
covenants, agreements and conditions of this Agreement to be complied with and
performed by the Purchaser Parties on or before the Closing shall have been
complied with and performed in all material respects.
7.02. Representations and Warranties. The representations and
warranties made by the Purchaser Parties in this Agreement shall have been true
and correct in all material respects at the date hereof and as of the Closing
with the same force and effect as though all such representations and warranties
had been made as of the Closing.
7.03. No Injunctions. There shall not be in effect any
injunction or restraining order issued by a court of competent jurisdiction
against the consummation of the sale and purchase of the Assets pursuant to this
Agreement.
7.04. Officer's Certificate. The Seller shall have received
from each Purchaser Party, in form and substance reasonably satisfactory to
Seller and its counsel, a certificate, dated the Closing Date, of an officer of
such Purchaser Party, certifying as to the satisfaction of the conditions set
forth in Sections 7.01 and 7.02.
24
7.05 Secretary's Certificate. The Seller shall have received
from each Purchaser Party, in form and substance reasonably satisfactory to
Seller and its counsel, a certificate, dated the Closing Date, of the Secretary
or an Assistant Secretary of such Purchaser Party, (i) certifying all documents
evidencing the actions of such Purchaser Party authorizing the transactions
contemplated hereby and the execution, delivery and performance by such
Purchaser Party of this Agreement and the documents contemplated hereby, (ii)
certifying the Certificate of Incorporation or other organizational document of
such Purchaser Party and (iii) containing an incumbency certificate regarding
the officers of such Purchaser Party authorized to sign this Agreement, the Note
and the other documents contemplated hereby.
7.06 Opinion of Counsel. The Seller shall have received the
favorable opinion of Xxxxxxx, Xxxxxxxx & Kotel, a professional corporation,
counsel to Purchaser Parties, addressed to the Seller and dated the Closing
Date, substantially in the form of Exhibit 7.06 (or otherwise in a form
reasonably satisfactory to the Seller).
ARTICLE VIII
Survival, Termination of Agreement Prior To Closing, and Indemnification
------------------------------------------------------------------------
8.01. Survival of Representations. Notwithstanding any
investigation or knowledge of any Purchaser Party, the representations,
warranties, covenants and agreements contained in this Agreement, and in any
agreements, certificates or other instruments delivered pursuant to this
Agreement, shall survive the Closing and shall remain in full force and effect
for three years after the Closing Date (or, in the case of representations and
warranties set forth in Sections 3.13 (Taxes) and 3.14 (Environmental Matters),
until the expiration of the applicable statute of limitations (with
extensions)), but subject to all limitations and provisions contained in this
Agreement. Notwithstanding the preceding sentence, any representation, warranty,
covenant or agreement in respect of which indemnity may be sought under this
Agreement shall survive the time at which it would otherwise terminate pursuant
to the preceding sentence if notice of the inaccuracy or breach thereof giving
rise to such right to indemnity shall have been given prior to such time to the
party against whom such indemnity may be sought.
8.02. Indemnification by Seller. Xxxxx and Seller each hereby
agree jointly and severally to indemnify and hold each Purchaser Party, and
their Affiliates, officers, directors, employees, agents and representatives
harmless from and against any and all claims, damages, liabilities, liens,
losses or other obligations whatsoever, together with costs and expenses,
including fees and disbursements of counsel and expenses of investigation
(collectively, "Losses"), arising out of, based upon or caused by (i) the
inaccuracy of any representation or the breach of any warranty of Seller or
Xxxxx contained in this Agreement or (ii) any breach or nonperformance by Seller
or Xxxxx of any of its covenants or agreements contained in this Agreement or in
any agreement, certificate or other instrument delivered by Seller or Xxxxx
pursuant to this Agreement.
25
8.03. Indemnification by Purchaser. The Purchaser hereby
agrees to indemnify and hold Seller and its Affiliates and its respective
officers, directors, employees, agents and representatives harmless, from and
against any and all Losses arising out of, based upon or caused by (i) the
inaccuracy of any representation or the breach of any warranty of any Purchaser
Party contained in this Agreement or in any agreement, certificate or other
instrument delivered by any Purchaser Party pursuant to this Agreement, or (ii)
any breach or nonperformance by any Purchaser Party of any of its covenants or
agreements contained in this Agreement or in any agreement, certificate or other
instrument delivered by the Purchaser Parties pursuant to this Agreement.
8.04. Notice; Cooperation; Defense; Etc. The indemnified party
agrees to give the indemnifying party prompt written notice of any third-party
action, claim, demand, discovery of fact, proceeding or suit (collectively,
"Claims") for which such indemnified party intends to assert a right to
indemnification under this Agreement; provided, however, that failure to give
such notification after such notice is required shall not adversely affect the
indemnified party's entitlement to indemnification hereunder except to the
extent that the indemnifying party shall have been actually prejudiced as a
result of such failure. The indemnified party shall take all reasonable or
necessary steps to resolve, defend or cooperate in the defense of such Claims,
including retaining and providing to the indemnifying party all documents,
records and other information that may be relevant to such Claims and making
employees available to the extent reasonably requested to fully cooperate in the
resolution or defense of such Claims and provide any additional information
(including explanations and interpretations of any other materials or
information provided) that it is able to provide with respect thereto. The
indemnifying party shall have the right to participate jointly with the
indemnified party in the indemnified party's defense, settlement or other
disposition of any Claim and, with respect to any Claim that is not likely to
result in the indemnified party becoming subject solely to injunctive or other
similar relief, the indemnifying party shall have the sole right (but not the
obligation) to defend, settle or otherwise dispose of such Claim on such terms
as the indemnifying party, in its sole discretion, shall deem appropriate. The
indemnifying party shall obtain the written consent of the indemnified party,
which shall not be unreasonably withheld or delayed, prior to ceasing to defend
any Claim if it has theretofore elected to exercise its sole right to defend,
settle or otherwise dispose of such Claim.
8.05. Adjustment to Purchase Price. Amounts paid by Seller or
any Purchaser Party under this Article VIII shall be treated for all tax
purposes as adjustments to Purchase Price.
ARTICLE IX
Taxes and Benefit Plans
-----------------------
9.01. Taxes. (a) Allocation of Responsibility. Xxxxx and
Seller shall pay (or indemnify and hold Seller and each Purchaser Party harmless
with respect to) (without duplication) any Taxes (excluding any penalties
arising from any act by any Purchaser Party) payable by Xxxxx or the Seller with
respect to Seller's income for all tax periods before and after the Closing
Date. Any Taxes payable by Xxxxx or Seller pursuant to this Section 9.01(a)
shall be paid by Xxxxx or Seller when due, but in no event more than thirty days
following the request therefor from any Purchaser Party.
26
(b) Returns. The Seller shall prepare and file all required
Federal, state, local and foreign Tax Returns for Seller for all taxable periods
ending on or prior to the Closing Date and pay all Taxes due for such periods on
such Tax Returns. Any such Tax Returns shall, insofar as they relate to Seller,
be on a basis consistent with the last such Tax Returns that have been filed in
respect to Seller.
(c) Cooperation. The Purchaser Parties, Seller and Xxxxx
mutually agree to cooperate fully with each other with respect to the
preparation of all Tax Returns, the filing and prosecution of any Tax claims,
the furnishing of any document, record or other relevant information relating to
any Tax liability or refund and all other Tax matters, and to keep each other
advised as to any issue relating to Taxes which would have any bearing on the
other party's responsibilities pursuant to this Section 9.01.
9.02. Transfer Taxes. The Seller shall be responsible for all
transfer and similar Taxes assessed or payable in connection with the Transfer
of the Assets pursuant to this Agreement.
9.03. Expenses of Benefit Plans. The Seller shall pay (or
indemnify the Purchaser Parties with respect to) the that portion of the costs
of the Benefit Plans payable by Seller for the period up to but not including
the Closing Date. Any costs relating to the Benefit Plans by Seller pursuant to
this Section 9.03 shall be paid by Seller when due, but in no event more than
thirty days following the request therefor from any Purchaser Party.
ARTICLE X
Miscellaneous
-------------
10.01. Brokers. Xxxxx and Seller each represents and warrants
to the Purchaser Parties, and the Purchaser Parties represent and warrant to
Xxxxx and Seller, that no party hereto or any party acting on behalf of any of
the parties hereto have incurred any liability, either express or implied, to
any "broker", "finder", financial adviser or similar Person in respect of any of
the transactions contemplated hereby. The Purchaser Parties agree to indemnify
Seller against, and hold it harmless from, and Xxxxx and Seller agree to
indemnify the Purchaser Parties against, and hold them harmless from, any
liability, cost or expense (including, but not limited to, fees and
disbursements of counsel) resulting from any agreement, arrangement or
understanding made by such party with any third party for brokerage, finders' or
financial advisory fees or other commissions in connection with this Agreement
or the transactions contemplated hereby. The provisions of this Section shall
survive any termination of this Agreement.
27
10.02. Expenses. Except as otherwise specifically provided in
this Agreement, each party will pay its own expenses incident to this Agreement
and the transactions contemplated hereby, including legal, due diligence and
accounting fees and disbursements. Any sales, transfer, stamp or other Taxes or
fees applicable to the conveyance and transfer to Purchaser of the Assets (but
excluding any Income Taxes arising as a result of the transactions contemplated
by this Agreement), shall be borne and paid by Seller. The provisions of this
Section shall survive any termination of this Agreement.
10.03. Amendments and Waivers. The parties hereto may, by
written agreement signed by the parties, modify any of the covenants or
agreements or extend the time for the performance of any of the obligations
contained in this Agreement or in any document delivered pursuant to this
Agreement. Any party hereto may waive, by written instrument signed by such
party, any inaccuracies in the representations and warranties of another party
or compliance by another party with any of its obligations contained in this
Agreement or in any document delivered pursuant to this Agreement. This
Agreement may be amended only by written instrument signed by the parties
hereto.
10.04 Transferability. The respective rights and obligations
of each party hereto shall not be assignable by any party without the written
consent of the other parties (and any purported assignment without such written
consent shall be void and of no effect). This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assignees.
10.05 Termination. The Purchaser Parties or Seller may each
terminate this Agreement if the Closing has not occurred on or prior to April
30, 1999; provided, however, that any party that has failed to perform any
covenant hereunder, which failure has resulted in delay of the closing because
the conditions set forth in Articles VI and VII have not been met, shall not be
entitled to terminate this Agreement except with the prior written consent of
the other party hereto. In the event of the termination of this Agreement
pursuant to this Section 10.05, none of the parties shall have any obligation or
liability of any nature whatsoever to the other party hereto, and all expenses
incurred by any party hereto shall be for its own account; provided, however,
that notwithstanding any termination of this Agreement, no party hereto shall be
deemed to have waived any rights it may have arising from the breach of this
Agreement or any provision contained herein by the other party hereto and such
rights shall specifically survive any such termination of this Agreement.
10.06 Bulk Transfer Laws. The Purchaser hereby waives
compliance by Seller with the provisions of any so-called "bulk transfer law" of
any jurisdiction in connection with the sale of the Assets. The Seller agrees to
indemnify and hold Purchaser harmless, in cash payable upon demand, against any
and all liabilities, including costs and expenses, that may be asserted by third
parties against the Purchaser as a result of any non-compliance by Seller with
any such bulk transfer law.
28
10.07 Notices. Any notice, request or other document to be
given hereunder to a party hereto shall be effective when received and shall be
given in writing and delivered in person, by facsimile or sent by hand delivery
or overnight courier, as follows:
If to any Purchaser Party:
XX Xxxxxxxxxx, L.P.
0000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Xx.
with a copy to:
Xxxxxxx, Xxxxxxxx & Kotel,
a Professional Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: L. Xxxxx Xxxxxxxx, Esq.
If to Seller:
Xxxxxx Xxxxx
Diversified Apparel Group
000 Xxxx 00xx Xxxxxx, Xxxxx 00X
Xxx Xxxx, XX 00000
with a copy to:
J. Xxxxx Xxxxxx, A.P.C.
000 Xxxxxxxx, xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: J. Xxxxx Xxxxxx, Esq.
Any party hereto may change its address for receiving notices, requests and
other documents by giving written notice of such change to the other parties
hereto.
10.08 Governing Law; Choice of Forum. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
(without regard to conflict of laws doctrines). The parties agree that the
exclusive place of jurisdiction for any action, suit or proceeding relating to
this Agreement shall be in the courts of the United States of America sitting in
the Borough of Manhattan in the City of New York or, if such courts shall not
have jurisdiction over the subject matter thereof, in the courts of the State of
New York sitting therein, and each such party hereby irrevocably and
unconditionally agrees to submit to the jurisdiction of such courts for purposes
of any such action, suit or proceeding. Each party irrevocably waives any
objection it may have to the venue of any action, suit or proceeding brought in
such courts or to the convenience of the forum. Final judgment in any such
action, suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which shall
be conclusive evidence of the fact and the amount of any indebtedness or
liability of any party therein described.
29
10.09 Partial Invalidity. In the event that any provision of
this Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
10.10 Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
10.12 Entire Agreement. This Agreement, together with the
schedules and exhibits and the agreements, certificates and instruments
delivered pursuant hereto, contain the entire agreement among the parties
hereto, and supersede all prior agreements and undertakings (written and oral)
between the parties hereto, relating to the subject matter hereof.
10.13 Publicity. No party shall issue any press release or
make any other public announcement with respect to this Agreement or the
transactions contemplated hereby without obtaining the prior written approval of
the other parties (which will not be unreasonably withheld or delayed), except
as may be required by law or the regulations of any securities exchange.
10.14 Parties in Interest. Nothing in this Agreement, express
or implied, is intended to confer on any Person other than the parties and their
respective successors and permitted assigns any rights or remedies under or by
virtue of this Agreement, and no Person shall assert any rights as a third party
beneficiary hereunder.
10.15 Specific Performance. Xxxxx and Seller agrees that the
Purchaser Parties will be irreparably injured if this Agreement is not
specifically enforced. Therefore, notwithstanding anything to the contrary in
this Agreement, the Purchaser Parties shall have the right to enforce
specifically the performance by Xxxxx and Seller under this Agreement, and Xxxxx
and Seller agrees to waive the defense in any such suit that the Purchaser
Parties have an adequate remedy at law and to interpose no opposition, legal or
otherwise, as to the propriety of specific performance as a remedy. The specific
performance remedy described in this Section 10.15 shall be in addition to, and
not in lieu of, any other remedies at law or in equity that Purchaser may elect
to pursue.
30
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
DAG ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx, Xx.
Title: CEO
THE XXXXXXXXXX CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx, Xx.
Title: CEO
DIVERSIFIED APPAREL GROUP, LTD.
By: /s/ Xxxxxx Xxxxx
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
/s/ Xxxxxx Xxxxx
---------------------------------------
Xxxxxx Xxxxx, in his individual capacity
31
EXHIBIT 2.04
to DAG Purchase Agreement
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
DAG ACQUISITON CORP.
Form of
PROMISSORY NOTE
New York, New York
$400,000 Principal Amount March ___, 1999
FOR VALUE RECEIVED, the undersigned, DAG ACQUISITION CORP., a
Delaware corporation (together with its successors and assigns, "DAG"), hereby
promises to pay to DIVERSIFIED APPAREL GROUP (the "Payee") at 000 Xxxx 00xx
Xxxxxx, Xxxxx 00X, Xxx Xxxx, XX 00000, the principal sum of Four Hundred
Thousand Dollars ($400,000) in lawful money of the United States of America in
immediately available funds, plus interest, payable in arrears, at the rate of
ten percent (10%) per annum on the outstanding principal amount until paid.
1. Conversion. In the event that The Xxxxxxxxxx Corporation, a
Delaware corporation, or any successor legal entity to Xxxxxxxxxx Corporation as
a result of a merger or sale of substantially all of the Issuer's assets
(collectively, the "Issuer"), conducts an underwritten initial public offering
("IPO") of its common stock within thirty-six months of the date hereof, then
this Note shall be automatically converted at the time of the IPO into that
number of shares of unrestricted and freely tradable common stock of the Issuer
determined by dividing the outstanding principal amount of this Note plus
accrued interest at the time of conversion by the price of each share of common
stock sold in the IPO.
2. Scheduled Repayment. DAG shall repay the outstanding
principal balance of this Note, plus accrued interest, based on the following
schedule (i) $100,000 shall be paid on the 12 month anniversary of this Note,
(ii) $100,000 shall be paid on the 24 month anniversary of this Note and (iii)
$200,000 shall be paid on the 36 month anniversary of this Note (except in event
of an IPO, in which case, the outstanding principal amount of this Note plus
accrued interest shall be converted into unrestricted and freely tradable common
stock of the Issuer in accordance with Section 1 hereof).
3. Optional Prepayment. DAG shall have the right, at any time
(subject to the terms of the next succeeding paragraph) and without premium or
penalty, to repay all or any part of the principal amount of this Note, together
with any accrued but unpaid interest on the prepaid amount.
4. Allocation. All payments made hereunder (whether in
prepayment or otherwise) shall first be applied against any interest then due
hereunder and shall then be applied against principal.
5. Default. The following shall constitute Events of Default:
(a) Nonpayment. DAG's failure to pay when due any payment of
principal or interest under this Note, if such failure continues for twenty (20)
calendar days after the due date of such payment; or
(b) Insolvency. DAG's written admission of its inability to
pay its debts as they become due, an assignment by DAG for the benefit of
creditors, DAG's institution of proceedings under the Federal Bankruptcy Code or
any state law for debtor relief, the institution of insolvency proceedings
against DAG (unless these proceedings are dismissed within ninety (90) days of
filing), or seizure of substantially all of DAG's assets.
If an Event of Default occurs, Payee may, at its option,
declare the outstanding principal of, and all accrued but unpaid interest on,
this Note to be immediately due and payable without presentment, demand,
protest, or notice of any kind, all of which are expressly waived.
6. Waiver. No delay or omission of Payee in exercising any
right under this note shall impair or waive such right. Partial exercise of its
rights shall not preclude further exercise. No waiver is valid unless made in
writing and signed by Payee.
7. Notices. All communications under this Note shall be in
writing, addressed to the appropriate party as follows:
(i) If to DAG, to:
Xxxxxxx X. Xxxxxxxxxx, Xx.
c/o The Xxxxxxxxxx Corporation
0000 Xxxxxx Xx.
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
2
(ii) If to Payee, to:
Xxxxxx Xxxxx
Diversified Apparel Group
000 Xxxx 00xx Xx., Xxxxx 00X
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
or to such other address as may have been designated in prior notice. Notices
may be sent by (a) overnight courier, (b) facsimile transmission (with immediate
confirmation thereafter), or (c) registered or certified mail, postage prepaid,
return receipt requested; and shall be deemed given (i) in the case of overnight
courier, the next business day after the day sent, (ii) in the case of facsimile
transmissions, on the date sent, and (iii) in the case of mailing, three (3)
business days after being mailed, and otherwise notices shall be deemed to have
been given when received. If sent by registered or certified mail, such notice
shall be effective when mailed, otherwise it shall be effective upon delivery to
said address.
8. Transferability. DAG may transfer or assign not less than
all of its obligations hereunder to any legal entity which acquires (by sale,
merger or otherwise) substantially all the assets of DAG. The terms and
provisions of this Note shall be binding upon DAG and its successors and
assigns, and shall inure to the benefit of Payee and its successors and assigns,
and any subsequent holder of this Note.
9. Subordination. The payment of principal and interest on
this Note shall be subordinate to, and junior in right of payment to, all of
DAG's and/or the Issuer's existing and future bank debt, and the Payee, by
acceptance hereof, acknowledge and specifically agrees to such subordination.
Payee agrees to execute all subordination agreements (and any related documents)
to effect the foregoing with respect to DAG's and/or the Issuer's existing and
future bank debt.
10. Governing Law. This Note is made and delivered in New
York, New York, and shall be governed by and construed in accordance with the
laws of New York State, without regard for its conflicts of laws principles.
11. Headings. Section headings contained in this Note are
intended solely for convenience of reference, and do not themselves constitute a
part of this Note.
12. Severability. If any provision of this Note be invalid or
unenforceable, the remainder of this Note shall be enforced to the greatest
extent permitted by law.
13. Consent to Suit; Waiver of Jury Trial. DAG hereby
irrevocably authorizes and empowers any attorney-at-law to appear for DAG in any
action upon or in connection with this Note at any time after this Note becomes
due, as herein provided, in any court in or of the
3
State of New York, and waives issuance and service of process with respect
thereto. DAG hereby waives the right to a trial by jury with respect to any
action in connection with this Note.
IN WITNESS WHEREOF, DAG Acquistion Corp has executed this Note
as of the date first above written.
DAG ACQUISITION CORP.
By: _________________________
Name:
Title:
4
EXHIBIT 6.03
to DAG Purchase Agreement
EMPLOYMENT AGREEMENT, dated as of , 1999 (the "Effective
Date"), by and between DAG ACQUISITION CORP., a Delaware
corporation (the "Purchaser"), The XXXXXXXXXX CORPORATION, a
Delaware corporation (the "Parent") (and, together with the
Purchaser, collectively, the "Purchaser Parties") and XXXXXX
XXXXX, an individual (the "Executive").
W I T N E S S E T H:
WHEREAS, pursuant to an Asset Purchase Agreement of even date
herewith (the "Asset Purchase Agreement"), the Purchaser is acquiring all the
assets of Diversified Apparel Group, Ltd., a New York corporation (the "Seller")
and from the date hereof will conduct the business of the Seller;
WHEREAS, Executive through the date hereof was the president
of the Seller and was responsible for the day-to-day operating control of the
Seller; and
WHEREAS, the Purchaser wishes to ensure the continuation of
the services of Executive following the effectiveness of the Asset Purchase
Agreement and for the period provided in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
(a) The Purchaser engages and employs the Executive, and the Executive
hereby accepts engagement and employment, as President and Chairman of the Board
of Purchaser. The Executive shall be responsible for the day-to-day operating
control and management activities of the Purchaser and shall be a member of the
Special Operations Committee of the Parent. The Executive shall also perform
such duties as are required by the Purchaser's Board of Directors.
(b) The Executive shall devote such of his time and efforts as shall be
necessary to the proper discharge of his duties and responsibilities under this
Agreement.
2. TERM
The Executive's employment hereunder shall, unless earlier terminated
in accordance with Section 8, be for a term of five (5) years commencing on the
date hereof (the "Term").
3. COMPENSATION
(a) As compensation for the performance of his duties on behalf of the
Purchaser, the Executive shall be entitled to receive during the Term the
following:
(i) A base salary paid in bi-weekly installments (subject to
modification consistent with the policies of the Parent) (the "Base
Salary") of $100,800 per annum for fiscal year 1999 and not less
than $225,000 per annum commencing in the fiscal year 2000, subject
to any upward adjustments annually by the Purchaser's Board of
Directors;
(ii) In the event the Pre-Tax Income (as defined in the Asset Purchase
Agreement) of the Purchaser for any fiscal year exceeds the Pre-Tax
Income Target (as defined in the Asset Purchase Agreement) for such
year, the Parent shall distribute to the Executive a bonus with
respect to such year equal to 20% of the excess. Any bonus payable
pursuant to this Section 3(a)(ii) may be paid in cash or, at the
option of Purchaser, in shares of the Parent's common stock
(provided such shares have been issued pursuant to an effective
registration statement and are free from any restrictions on resale)
and shall be paid at the same time as any Obligation (as defined in
the Asset Purchase Agreement) is due pursuant to the Asset Purchase
Agreement, and, if paid by parent, shall be charged to the
Purchaser; and
(iii) In fiscal year 1999 only, $115,000 (the "Advance"). The Advance
shall be paid to the Executive in equal monthly installments in
arrears. The Advance will be made pursuant to the terms and subject
to the conditions contained in a promissory note in the form of
Exhibit A attached hereto (the "Note") executed by the Executive.
(b) If the Executive's employment is terminated pursuant to Section
8(a)(iv) below the following shall apply: (i) if the Executive's employment is
terminated at any time prior to the second anniversary of the Effective Date,
the Purchaser shall continue to pay the Executive his Base Salary for a period
of three (3) years from the date of such termination at the same intervals and
amounts as paid prior to termination; and (ii) if the Executive's employment is
terminated at any time during the Term, the Purchaser shall continue to pay to
Purchaser any Obligations, Delayed Obligations and Postponed Obligations as
provided in Section 2.06 of the Agreement.
(c) The Purchaser shall withhold all applicable federal, state and local
taxes, social security and workers' compensation contributions and such other
amounts as may be required by law or agreed upon by the parties with respect to
the compensation payable to the Executive pursuant to Section 3(a) or otherwise
in connection with his employment by the Purchaser.
2
(d) The Purchaser shall reimburse the Executive for all normal, usual and
necessary expenses incurred by the Executive in furtherance of the business and
affairs of the Purchaser, including reasonable travel and entertainment, against
receipt by the Purchaser of appropriate vouchers or other proof of the
Executive's expenditures and otherwise in accordance with such expense
reimbursement policy as may from time to time be adopted by the Board of
Directors of the Parent.
(e) During the Term, the Executive shall be entitled to participate in any
group insurance plan or program of the Purchaser now existing or established
hereafter that are offered by Purchaser to employees of Purchaser to the extent
that he is eligible under the general provisions thereof.
(f) During the Term, the Executive shall be entitled to participate in all
fringe benefit programs of the Purchaser or its Parent now existing or
established hereafter on a par with other similarly situated executives of the
Purchaser or its Parent; provided that the cost of such benefits shall be
charged against the Purchaser, regardless of whether such benefits are offered
by Purchaser or Parent.
(g) During the Term hereof, the Purchaser shall continue to provide to the
Executive the leased automobile which was provided to the Executive by
Diversified Apparel Group, Ltd. immediately prior to the Executive's employment
pursuant to the terms hereof, through the end of the current term of such lease,
and shall thereafter provide for the Executive's use of a leased car comparable
to the one currently leased. In addition, the Purchaser shall reimburse the
Executive for his fuel, oil, parking and insurance expenses incurred in
connection with his business use of such automobile during the Term hereof,
provided that the Executive presents to the Purchaser valid receipts for such
expenses.
(h) During the Term, the Executive shall be subject to, and shall act in
accordance with, the Parent's policies, as amended from time to time.
(i) Any and all payments provided for under this Agreement which are the
responsibility of Purchaser, and which are not paid when due, shall be the
responsibility of, and shall timely be paid by, the Parent.
(j) The Executive agrees that he shall be responsible for payment of any
imputed federal or state income taxes in respect of any non-cash compensation.
4. REPRESENTATIONS AND WARRANTIES
(a) The Executive hereby represents and warrants to the Purchaser Parties
as follows:
(i) Neither the execution and delivery of this Agreement nor
the performance by the Executive of his duties and other obligations
hereunder violate or will violate any statute, law, determination or
award, or conflict with or constitute a default under (whether
immediately, upon the giving of notice or lapse of time or both) any
prior employment agreement, contract, or other instrument to which
the Executive is a party or by which he is bound.
3
(ii) The Executive has the full right, power and legal
capacity to execute and deliver this Agreement and to perform his
duties and other obligations hereunder. This Agreement constitutes
the legal, valid and binding obligation of the Executive enforceable
against him in accordance with its terms. No approvals or consents
of any persons or entities are required for the Executive to execute
and deliver this Agreement or perform his duties and other
obligations hereunder.
(iii) The Executive agrees to maintain strict compliance with
all federal, state, local and foreign statutes, ordinances, codes,
rules and regulations.
(b) The Purchaser Parties hereby represent and warrant to the Executive as
follows:
(i) Each of the Purchaser Parties is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, with all requisite powers and authority to own its
properties and conduct its business in the manner presently
contemplated.
(ii) Each of the Purchaser Parties has full power and authority to enter
into this Agreement and to incur and perform its obligations
hereunder. This Agreement constitutes the legal, valid and binding
obligation of the Purchaser Parties enforceable against the
Purchaser Parties in accordance with its terms.
(iii) The execution, delivery and performance by the Purchaser Parties of
this Agreement does not conflict with or result in a breach or
violation of or constitute a default (whether immediately, upon the
giving of notice or lapse of time or both) under any agreement or
instrument to which either of the Purchaser Parties is a party or by
which either of the Purchaser Parties or any of their properties may
be bound or affected.
5. NON-COMPETITION
(a) The Executive understands and recognizes that his services to the
Purchaser are special and unique and agrees that: (i) during the Term, (ii) for
a period of three (3) years following the termination of the Executive's
employment (if the Executive's employment terminates for any reason at any time
prior to or on the second anniversary of the Effective Date), or (iii) for a
period of two (2) years following the termination of the Executive's employment
(if his employment terminates after such anniversary), the Executive shall not
in any manner, directly or indirectly, on behalf of himself or any person, firm,
partnership, joint venture, corporation or other business entity ("Person"):
4
(1) interfere with customer, licensor or supplier
relationships of the Parent or any subsidiary,
affiliate, successor or assign (collectively, the
"Affiliates"); or
(2) enter into or engage in any business that (x) is
competitive with the Parent's or its affiliates'
businesses and/or (y) relates to the merchandising,
sourcing, marketing or distribution of tailored
clothing, sportswear, shirts or casual slacks
("Restricted Businesses"), either as an individual for
his own account, or as a partner, joint venturer,
executive, agent, consultant, salesperson, officer,
director or shareholder of a Person operating or
intending to operate within the area that the Parent is
conducting its business; provided, however, that
nothing herein will preclude Executive from holding one
percent (1%) or less of the stock of any publicly
traded company.
(3) Notwithstanding anything contained herein, in the event
that the Executive is terminated without cause, the
Executive may enter into or engage in the Restricted
Businesses provided that the Restricted Businesses are
not in any way competitive with the business of
Purchaser.
(b) In the event that Executive breaches any provisions of this Section 5
or there is a threatened breach, then, in addition to any other rights which the
Purchaser may have, the Purchaser shall be entitled, without the posting of a
bond or other security, to injunctive relief to enforce the restrictions
contained herein. In the event that a proceeding is brought in equity to enforce
the provisions of this Section 5, the Executive shall not urge as a defense that
there is an adequate remedy at law, nor shall the Purchaser be prevented from
seeking any other remedies which may be available.
6. NON-SOLICITATION
(a) During the Term and (i) for a period of three (3) years following the
termination of the Executive's employment (if the Executive's employment
terminates for any reason at any time prior to or on the second anniversary of
the Effective Date) or (ii) for a period of two (2) year following the
termination of the Executive's employment (if his employment terminates after
such anniversary), the Executive shall not, directly or indirectly, without the
prior written consent of the Parent:
(1) solicit or induce any employee of the Parent or any
Affiliate to leave the employ of the Parent or any
Affiliate;
(2) hire for any purpose any person who is at such time or
has been within the preceding six months an employee of
the Parent or any Affiliate;
5
(3) solicit or accept employment or maintain any business
relationship with any party who, at any time during the
Term, was a customer, supplier, licensor or licensee of
the Parent or any Affiliate; or
(4) solicit or accept the business of any customer,
supplier, licensor or licensee of the Parent or any
Affiliate with respect to products similar to those
supplied by the Parent or any of its Affiliates.
7. CONFIDENTIAL INFORMATION
The Executive agrees that during the course of his employment and for a
period of five years after termination, he will not disclose or make accessible
to any other person any information relating to the Parent or any Affiliate or
any of its customers or any other information obtained by Executive during the
course of his employment with the Parent or any Affiliate (the "Confidential
Information"), except to the extent the same have become generally known to the
public other than through a breach of this Section 7. The Executive agrees (i)
not to use any such Confidential Information for himself or others during such
period and (ii) not to take any such material or reproductions thereof from the
Parent or any Affiliate's facilities at any time during his employment by the
Parent, except as required in the Executive's duties to the Parent. The
Executive agrees immediately to return all such material and reproductions
thereof in his possession to the Parent upon request and in any event upon
termination of employment.
8. TERMINATION
(a) The Executive's employment hereunder shall begin on the Effective Date and
shall continue for the period set forth in Section 2 hereof unless sooner
terminated upon the first to occur of the following events:
(i) The death of the Executive;
(ii) The Disability (as defined below) of the Executive;
(iii) Termination by the Board of Directors of the Parent for
just cause.
Any of the following actions by the Executive shall
constitute "just cause":
(A) Material breach by the Executive of Sections 5, 6 or
7 of this Agreement;
(B) Material breach by the Executive of any provision of
this Agreement other than Sections 5, 6 and 7 which
is not cured by the Executive within 30 days of
written notice thereof from the Parent;
6
(C) Any misconduct or omission on the part of
the Executive intended to cause harm to the
Parent or any Affiliate;
(D) Negligent performance by the Executive of
his duties as President of the Purchaser, as
determined by the Board after notice to the
Executive and an opportunity for the
Executive to be heard by the Board; or
(E) The conviction of the Executive of (I) any
felony or (II) any other crime involving
moral turpitude;
(b) For purposes hereof, a "Disability" of the Executive shall be
deemed to have occurred in the event (i) the Executive is absent from work or
otherwise substantially unable to assume his normal duties for a period of
fifteen (15) successive days or an aggregate of thirty (30) days during any
six-month period because of physical or mental disability, accident, illness or
other cause other than approved vacation or leave of absence or (ii) the
Executive is deemed by a licensed physician designated by the Parent and
reasonably acceptable to the Executive to have a permanent disability such that
Executive will be unable to perform his duties under this agreement. The Parent
shall have the right to have the Executive examined by a competent physician for
purposes of determining his physical or mental incapacity.
(c) The termination of the Executive's employment hereunder shall not
effect the rights and obligations of the Executive, the Seller or the Purchaser
under the Asset Purchase Agreement.
9. NOTICES
Any notice or other communication under this Agreement shall be in
writing and shall be deemed to have been given: when delivered personally
against receipt therefor; one (1) day after being sent by Federal Express or
similar overnight delivery; or three (3) days after being mailed registered or
certified mail, postage prepaid, return receipt requested, to either party at
the address set forth below, or to such other address as such party shall give
by notice hereunder to the other party.
If to Purchaser:
DAG Acquisition Corp.
c/o The Xxxxxxxxxx Corporation
0000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxxxx, Xx.
7
with a copy to:
Xxxxxxx, Xxxxxxxx & Kotel,
a Professional Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: L. Xxxxx Xxxxxxxx, Esq.
If to Executive:
Xxxxxx Xxxxx
Diversified Apparel Group, Ltd.
000 Xxxx 00xx Xxxxxx, Xxxxx 00X
Xxx Xxxx, XX 00000
with a copy to:
J. Xxxxx Xxxxxx, A.P.C.
000 Xxxxxxxx, xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: J. Xxxxx Xxxxxx, Esq.
10. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, the remaining conditions and provisions or portions thereof
shall nevertheless remain in full force and effect and enforceable to the extent
they are valid, legal and enforceable, and no provision shall be deemed
dependent upon any other covenant or provision unless so expressed herein.
11. ENTIRE AGREEMENT; MODIFICATION
(a) This Agreement contains the entire agreement of the parties
relating to the subject matter hereof, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of this
Agreement which are not set forth herein. No modification of this Agreement
shall be valid unless made in writing and signed by the parties hereto.
(b) The Executive acknowledges that any cash and non-cash compensation
received by him prior to the execution of this Agreement shall be applied to the
obligations of the Purchaser hereunder.
12. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall
inure to, and be binding upon, the Purchaser, its successors and assigns, and
upon the Executive and his legal representatives. This Agreement constitutes a
personal service agreement, and the performance of the Executive's obligations
hereunder may not be transferred or assigned by the Executive.
8
13. NON-WAIVER
The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or condition of this Agreement on the part of either party
shall be effective for any purpose whatsoever unless such waiver is in writing
and signed by such party.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to principles
of conflict of laws.
15. HEADINGS
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
16. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DAG ACQUISITION CORP.
By:_____________________________
Name:
Title:
THE XXXXXXXXXX CORPORATION
By:_____________________________
Name:
Title:
________________________________
Xxxxxx Xxxxx, in his individual capacity
10
EXHIBIT A
to Xxxxx Employment Agreement
XXXXXX XXXXX
PROMISSORY NOTE
New York, New York
$115,000 Principal Amount March ___, 1999
FOR VALUE RECEIVED, the adequacy of which is hereby
acknowledged, the undersigned, XXXXXX XXXXX ("Xxxxx"), hereby promises to pay to
DAG ACQUISITION CORP., a Delaware corporation (the "Payee"), at 0000 Xxxxxx
Xxxx, Xxxxxxxxx, XX 00000, the principal sum of One Hundred Fifteen Thousand
Dollars ($115,000) in lawful money of the United States of America and in
immediately available funds.
14. Repayment; Interest. (a) Xxxxx shall repay the full outstanding
principal amount of this Note on the earlier to occur of the following (the "Due
Date"): (i) the date that the "Obligation" in respect of fiscal year 1999
becomes payable under the Asset Purchase Agreement dated the date hereof,
between the Payee, Xxxxx and Diversified Apparel Group, Ltd. and (ii) May 1,
2000; provided, however, (x) in the event that Seller achieves less than the
Pre-Tax Income Target (as defined in the Agreement) but sixty percent (60%) or
more of the Pre-Tax Income Target (as defined in the Agreement) in calendar year
1999, the Due Date shall be deferred until the maturity of the related Delayed
Obligations (as defined in the Agreement) and (y) in the event that Seller does
not achieve at least sixty percent (60%) of the Pre-Tax Income Target (as
defined in the Agreement) for calendar year 1999, the principal of, and accrued
interest on, this Note shall be due and payable in twenty-four (24) monthly
installments with the first date of repayment commencing January 1, 2000;
provided further, however, that if Xxxxx'x employment with Payee is terminated
for "just cause" (as defined in the Employment Agreement) or as a result of
Xxxxx'x resignation, this Note shall become immediately due and payable.
(b) If any amount due under this Note is not paid within 5
days after it is due, or if there shall be any other Event of Default (as
defined below), the unpaid principal of this Note and any overdue interest shall
bear interest at the rate of 10% per annum until such overdue amount is paid in
full or the Event of Default is cured, as applicable.
15. Allocation. All payments made hereunder shall first be applied
against any interest then due hereunder and shall then be applied against
principal.
16. Default. The following shall constitute Events of Default:
(c) Nonpayment. Xxxxx'x failure to pay when due any payment of
principal or interest under this Note, if failure continues for twenty (20)
calendar days after the due date of such payment; or
(d) Insolvency. Xxxxx'x written admission of his inability to
pay his debts as they become due, an assignment by Xxxxx for the benefit of
creditors, Xxxxx'x institution of proceedings under the Federal Bankruptcy Code
or any state law for debtor relief, the institution of insolvency proceedings
against Xxxxx (unless these proceedings are dismissed within ninety (90) days of
filing), or seizure of substantially all of Xxxxx'x assets.
If an Event of Default occurs, Payee may, at its option,
declare the outstanding principal of, and any accrued but unpaid interest on,
this Note to be immediately due and payable without presentment, demand,
protest, or notice of any kind, all of which are expressly waived.
17. Waiver. No delay or omission of Payee in exercising any right under
this Note shall impair or waive such right. Partial exercise of its rights shall
not preclude further exercise. No waiver is valid unless made in writing and
signed by Payee.
18. Notices. All communications under this Note shall be in writing,
addressed to the appropriate party as follows:
(i) If to Xxxxx, to:
Xxxxxx Xxxxx
Diversified Apparel Group
000 Xxxx 00xx Xx., Xxxxx 00X
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
(ii) If to Payee, to:
DAG Acquisition Corp.
c/o The Xxxxxxxxxx Corporation
0000 Xxxxxx Xx.
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
or to such other address as may have been designated in prior notice. Notices
may be sent by (a) overnight courier, (b) facsimile transmission (with immediate
confirmation thereafter), or (c) registered or certified mail, postage prepaid,
return receipt requested; and shall be deemed given (i) in the case of overnight
courier, the next business day after the day sent, (ii) in the case of facsimile
2
transmissions, on the date sent, and (iii) in the case of mailing, three (3)
business days after being mailed, and otherwise notices shall be deemed to have
been given when received. If sent by registered or certified mail, such notice
shall be effective when mailed, otherwise it shall be effective upon delivery to
said address.
19. Transferability. Any attempt by Xxxxx to assign its rights or
delegate its duties under this Note without the prior written consent of Payee
will be void. Payee may assign and/or pledge this Note and any of Payee's rights
hereunder without Nadel's approval.
20. Governing Law. This Note is made and delivered in New York, New
York, and shall be governed by and construed in accordance with the laws of New
York State, without regard for its conflicts of laws principles.
21. Headings. Section headings contained in this Note are intended
solely for convenience of reference, and do not themselves constitute a part of
this Note.
22. Severability. If any provision of this Note be invalid or
unenforceable, the remainder of this Note shall be enforced to the greatest
extent permitted by law.
23. Consent to Suit; Waiver of Jury Trial. Xxxxx hereby irrevocably
authorizes and empowers any attorney-at-law to appear for Xxxxx in any action
upon or in connection with this Note at any time after this Note becomes due, as
herein provided, in any court in or of the State of New York, and waives
issuance and service of process with respect thereto. Xxxxx hereby waives the
right to a trial by jury with respect to any action in connection with this
Note.
IN WITNESS WHEREOF, Xxxxx has executed this Note as of the date first
above written.
----------------------------------------
Xxxxxx Xxxxx, in his individual capacity
3
