SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 15, 1998
TULTEX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 1-8016 54-0367896
- -------- ------ ----------
(State or other jurisdiction Commission File IRS Employer
of incorporation) Number Identification No.
101 Commonwealth Boulevard, P. O. Box 5191, Martinsville, Virginia 24115
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 540-632-2961
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 15, 1998, Tultex Corporation (the "Company") completed the sale of
substantially all the assets and business of LogoAthletic, Inc. and
LogoAthletic/Headwear, Inc., its licensed apparel subsidiaries, to TKS
Acquisition Inc. ("TKS"), a new company headed by Thomas K. Shine, President and
CEO of LogoAthletic. Mr. Shine will continue in his position as CEO of the new
company. The new company's investors include Puma AG, Simon Investors, McDonald
& Company Securities, The Indianapolis Motor Speedway and other private
investors.
Consideration to the Company is approximately $96.0 million in cash and $12.5
million in subordinated notes of TKS due five years after the closing.
Additional cash payments may be received by the Company if TKS reaches certain
sales targets during the next two years. As part of the transaction, the Company
repurchased $6.0 million of its outstanding preferred stock owned by investors
in TKS.
A cash payment of $83.0 million was received by the Company at closing. This
payment, net of the repurchase of the $6.0 million of preferred stock, was
applied against the Company's revolving credit facility as required by the
borrowing agreement. The approximately $13.0 million of estimated cash proceeds,
which represents adjustments for working capital prior to the closing, are
expected to be received within 60 days of closing and will also be applied
against this credit facility.
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As part of the agreement between the Company and TKS, the Company will
manufacture and deliver to TKS, fleece and T-shirt products at predetermined
prices through April 30, 1999. Any products manufactured by the Company and
delivered to TKS after April 30, 1999 will be at mutually agreed upon prices.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Not Applicable
(b) Pro forma financial information.
The accompanying unaudited pro forma consolidated balance sheet as of
April 4, 1998, gives effect to the sale as if the transaction had been
consummated on April 4, 1998. The accompanying unaudited pro forma consolidated
statement of operations for the year ended January 3, 1998, and the three months
ended April 4, 1998, give effect to the sale as if the transaction had been
consummated on December 29, 1996.
The unaudited pro forma consolidated financial statements should be read
in conjunction with the historical financial statements of the Company. The
unaudited pro forma consolidated financial statements do not purport to be
indicative of the financial position of the Company had the sale occurred on
April 4, 1998. Nor do the unaudited pro forma financial statements purport to be
indicative of the results of operations that actually would have occurred had
the sale been consummated on December 29, 1996, or to project the Company's
financial position or results of operations for any future period.
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Tultex Corporation
Unaudited Pro Forma Consolidated Balance Sheet ($000's omitted)
April 4, 1998
Tultex Pro Forma Tultex
Historical Adjustments (1) Pro Forma
---------- ----------- -----------
Assets
- ------
Current Assets:
Cash $949 $ - $949
Accounts Receivable - Net 92,747 (21,141) 71,606
Inventories 241,505 (59,016) 182,489
Prepaid Expenses 9,209 (1,834) 7,375
Income Taxes Refundable 7,847 6,359 14,206
---------- ---------- -----------
Total Current Assets 352,257 (75,632) 276,625
Property, Plant and Equipment,
Net of Depreciation 141,527 (8,239) 133,288
Intangible Assets 46,323 (22,878) 23,445
Other Assets 14,107 10,943 25,050
========== ========== ===========
Total Assets $554,214 $(95,806) $458,408
========== ========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Notes Payable to Banks $5,000 $ - $5,000
Current Maturities of Long-Term
Debt 498 (13) 485
Accounts Payable 26,438 (3,324) 23,114
Accrued Expenses 12,345 (190) 12,155
---------- ---------- -----------
Total Current Liabilities 44,281 (3,527) 40,754
Long-Term Debt, Less Current
Maturities 307,672 (75,659) 232,013
Deferred Income Taxes 11,278 - 11,278
Other Liabilities 3,783 (675) 3,108
Stockholders' Equity:
5% Cumulative Preferred Stock 198 - 198
Series B, $7.50 Cumulative
Convertible Preferred Stock 7,500 (6,000) 1,500
Series C, 4.5% Cumulative
Convertible Preferred Stock 333 - 333
Common Stock 29,885 - 29,885
Capital in Excess of Par Value 6,920 - 6,920
Retained Earnings 142,940 (9,945) 132,995
Unearned Stock Compensation (118) - (118)
---------- ---------- -----------
187,658 (15,945) 171,713
Less Notes Receivable -
Stockholders 458 - 458
---------- ---------- -----------
Total Stockholders' Equity 187,200 (15,945) 171,255
---------- ---------- -----------
Total Liabilities and
Stockholders' Equity $554,214 $(95,806) $458,408
========== ========== ===========
See Notes to Unaudited Pro Forma Financial Statements
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Tultex Corporation
Unaudited Pro Forma Consolidated Statement of Operations ($000's omitted)
Year Ending January 3, 1998
Tultex Pro Forma Tultex
Historical Adjustments Pro Forma
---------- ---------- ----------
Net Sales and Other Income $ 650,628 $(175,828)(2),(3) $474,800
---------- ---------- ----------
Costs and Expenses:
Cost of Products Sold 508,998 (118,039)(2),(3) 390,959
Depreciation 20,614 (1,932) (2) 18,682
Selling, General and
Administrative 101,352 (51,574) (2) 49,778
Interest 27,611 (6,966) (4) 20,645
Interest Income - (1,144) (5) (1,144)
---------- ---------- ----------
Total Costs and Expenses 658,575 (179,655) 478,920
---------- ---------- ----------
Income (Loss) Before Income Taxes (7,947) 3,827 (4,120)
Provision (Benefit) for Income
Taxes (3,099) 1,493 (6) (1,606)
---------- ---------- ----------
Net Income (Loss) (4,848) 2,334 (2,514)
Preferred Dividend Requirement (810) 450 (7) (360)
---------- ---------- ----------
Balance Applicable to Common
Stock $(5,658) $2,784 $(2,874)
========== ========== ==========
Net Income (Loss) Per Common
Share:
Basic $(.19) $.09 $(.10)
Diluted (.19) .09 (.10)
Weighted Average Number of
Common Shares
Outstanding - Basic and Diluted 29,782,946 29,782,946 29,782,946
See Notes to Unaudited Pro Forma Financial Statements
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Tultex Corporation
Unaudited Pro Forma Consolidated Statement of Operations ($000's omitted)
Three Months Ending April 4, 1998
Tultex Pro Forma Tultex
Historical Adjustments Pro Forma
---------- ---------- ----------
Net Sales and Other Income $100,273 $(24,728)(2),(3) $75,545
---------- ---------- ----------
Costs and Expenses:
Cost of Products Sold 75,806 (16,196) (2),(3) 59,610
Depreciation 5,148 (489) (2) 4,659
Selling, General and
Administrative 23,616 (10,500) (2) 13,116
Interest 6,908 (1,545) (4) 5,363
Interest Income - (292) (5) (292)
---------- ---------- ----------
Total Costs and Expenses 111,478 (29,022) 82,456
---------- ---------- ----------
Income (Loss) Before Income Taxes (11,205) 4,294 (6,911)
Provision (Benefit) for Income
Taxes (4,370) 1,675 (6) (2,695)
---------- ---------- ----------
Net Income (Loss) (6,835) 2,619 (4,216)
Preferred Dividend Requirement (147) 113 (7) (34)
---------- ---------- ----------
Balance Applicable to Common
Stock $(6,982) $2,732 $(4,250)
========== ========== ==========
Net Income (Loss) Per Common
Share:
Basic $(.23) $.09 $(.14)
Diluted (.23) .09 (.14)
Weighted Average Number of
Common Shares
Outstanding - Basic and Diluted 29,881,290 29,881,290 29,881,290
See Notes to Unaudited Pro Forma Financial Statements
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Notes to Unaudited Pro Forma Financial Statements
1. Reflects the elimination of substantially all the assets of LogoAthletic Inc.
and LogoAthletic/Headwear Inc., the redemption of $6,000,000 of preferred
stock, the loss on sale net of the resulting tax benefit, the recording of a
$12,500,000 note receivable from TKS Acquisition at a stated interest rate of
7.2%, discounted to $11,000,000 to reflect an estimated market interest rate
of 10.3% for similar debt instruments, and the application of net proceeds
towards the reduction in revolving debt.
2. Reflects the elimination of the operations of LogoAthletic Inc. and
LogoAthletic/Headwear Inc. from the consolidated statement of operations of
the Company for the year ending January 3, 1998 and the three months ending
April 4, 1998, assuming the sale occurred at the beginning of fiscal 1997.
3. Includes sales to LogoAthletic Inc. and LogoAthletic/Headwear Inc. of
$25,569,000 for fiscal 1997 and $3,555,000 for the three months ended April
4, 1998 and cost of sales of $20,455,000 for fiscal 1997 and $2,844,000 for
the three months ended April 4, 1998. The Company and TKS have entered into a
supply agreement whereby TKS will buy fleece and T-shirt products from the
Company at predetermined prices through April 30, 1999. Any products
purchased by TKS from the Company after April 30, 1999 will be at mutually
agreed upon prices.
4. Represents the reduction in interest expense based on application of the net
proceeds against the revolving debt as required by the Company's revolving
credit facility.
5. Includes interest income of $1,144,000 for fiscal 1997and interest income of
$292,000 for the three months ended April 4, 1998, on the $12,500,000 of
notes received from the sale.
6. Represents taxes at the Company's 39% tax rate.
7. Represents the reduction in dividend payments for fiscal 1997 and the three
months ended April 4, 1998 as a result of the repurchase of $6,000,000 of
Preferred Stock with the proceeds from the sale.
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(c) Exhibits
Exhibit Number Description
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2.1 Asset Purchase Agreement dated June 12,1998 between
Tultex Corporation and TKS Acquisition, Inc. (Certain
exhibits and schedules have been omitted in accordance
with Item 601 (b) (2) of Regulation S-K. A copy of such
exhibits and schedules shall be furnished supplementally
to the Securities and Exchange Commission upon request.)
2. 2 Exhibit 2.3 (i) of the Asset Purchase Agreement,
$5,000,000 Subordinated Promissory Note
2. 3 Exhibit 2.3 (ii) of the Asset Purchase Agreement,
$5,000,000 Convertible Subordinated Promissory Note
2. 4 Exhibit 2.3 (iii) of the Asset Purchase Agreement,
$2,500,000 Subordinated Promissory Note
2. 5 Exhibit 6.7 (e) of the Asset Purchase Agreement
"Supply Agreement"
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Tultex Corporation
Date: July 29, 1998 (Registrant)
By: /s/ S. H. Wood
----------------
Suzanne H. Wood
Vice President and Chief Financial Officer
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered into this 12th
day of June, 1998, by and among TKS ACQUISITION, INC., a Delaware corporation
("Buyer"), LOGOATHLETIC, INC., a Virginia corporation ("Logo"),
LOGOATHLETIC/HEADWEAR, INC., a Massachusetts corporation ("LogoAH"), and TULTEX
CORPORATION, a Virginia corporation and sole shareholder of Logo and LogoAH
("Tultex"). Each of Tultex, Logo and LogoAH shall sometimes be referred to
individually as a "Seller" and collectively as the "Sellers."
RECITALS
A. The Sellers are engaged, among other things, in the business of
manufacturing, marketing and distributing licensed sports apparel.
B. The Sellers own the Assets, which constitute substantially all of
the assets of Logo and LogoAH, and all of the assets of Tultex relating to the
Business (as defined herein).
C. The Sellers desire to sell the Assets to Buyer and Buyer desires to
purchase the Assets from the Sellers and assume certain liabilities of the
Sellers relating to the Business.
D. Buyer intends to use the Assets to continue the Business of the
Sellers as a going concern.
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings specified:
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1.1 Accounts Payable. "Accounts Payable" shall mean all accounts
payable and expenses payable arising in the ordinary course of the Business of
Logo and LogoAH (excluding payables to Affiliates (as defined in Section 3.20),
other than for payments under the Real Property Lease), which payables are
listed on Schedule 1.1, which listing shall be adjusted to reflect changes in
the ordinary course through the Effective Time of Closing, as permitted pursuant
to Section 5.1.
1.2 Accounts Receivable. "Accounts Receivable" shall mean all accounts
receivable, notes receivable and associated rights owned by the Sellers relating
to the Business and arising in the ordinary course of the Business (except for
the Accounts Receivable described in Section 1.48(f)), including, without
limitation, those listed on Schedule 1.2, which listing shall be adjusted to
reflect changes in the ordinary course through the Effective Time of Closing, as
permitted pursuant to Section 5.1.
1.3 Affiliate. "Affiliate" of a specified Person means any other Person
which, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such specified Person.
1.4 Agreement. "Agreement" shall mean this Asset Purchase Agreement,
together with the Exhibits and Schedules attached hereto, as the same may be
amended from time to time in accordance with the terms hereof.
1.5 Assets. "Assets" shall mean all of the Sellers' properties, assets,
and rights owned, used, useful, acquired for use, or arising or existing
primarily in connection with the Business, whether known or unknown, tangible or
intangible, real, personal or mixed, and wherever located, existing as of the
Closing, excluding the Retained Assets, and including, but not limited to, all
Assets listed on Schedule 1.5 and the following:
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(a) Accounts Receivables. As defined in Section 1.2;
(b) Inventory. As defined in Section 1.22;
(c) Deposits. Prepaid Expenses and deposits other than bank
deposits;
(d) Owned Real Property. The real property, including, but not
limited to, buildings, structures and improvements thereon, located at 5
Industrial Drive, Mattapoisett, Massachusetts 02739 and all fixtures attached or
contained therein and appurtenances thereof (the "Owned Real Property");
(e) Tangible Personal Property. All machinery, equipment,
leasehold improvements, computers and other items of personal property,
including, but not limited to, all tools, fixtures, dies, molds, jigs, patterns,
parts, supplies, furniture, furnishings and motor vehicles;
(f) Real Property Lease. All rights under the lease (the "Real
Property Lease") dated October 9, 1991 and assigned to Tultex on January 31,
1992, for the real property located at 8677 Logoathletic Court, Indianapolis,
Indiana 46219 and all leasehold interests of the Sellers therein and all rights
of the Sellers to leasehold improvements located thereon (the "Leased Real
Property");
(g) Contract and License Rights. All rights under all of the
Contracts and Licenses, and rights to refunds and adjustments of any kind
(subject to Section 5.13 hereof), except for Contracts listed on Schedule
1.48(d);
(h) Authorizations. All licenses, approvals, certificates,
permits or other evidence of authority issued by a federal, state, local or
foreign governmental agency or authority relating to or utilized in connection
with the Business or any part thereof or the Assets;
(i) Intangibles. All trade names, trademarks, service marks,
trade dress and mask works and all registrations and applications for any of the
foregoing, works of authorship and all copyrights related thereto and all
registrations and applications therefor, inventions, discoveries, designs,
industrial models and all United States and foreign patent rights covered by,
disclosed in or otherwise related thereto and all registrations (issued or
pending) and applications therefor and all reissues, divisions,
continuations-in-part, re-examinations and extensions thereof (collectively
hereafter referred to as "Intangibles"), together with the goodwill symbolized
or represented by the foregoing and the right to sue for past infringement and
improper, unlawful or unfair use of any of the foregoing;
(j) Undocumented Intangibles. All know-how, Trade Secrets,
processes, technology, discoveries, unpatented inventions and designs, formulae
and procedures and other intellectual property, including, but not limited to,
documentation relating to any of the foregoing, all shop rights and the right to
sue for past infringement or improper, unlawful or unfair use or disclosure
thereof and the right to apply for patent, design or similar protection therefor
anywhere in the world;
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(k) Documentation. All technical documentation, including, but
not limited to, all materials which reproduce, patterns, plans, designs,
research data, drawings, models, blueprints, specifications, flow sheets,
equipment and parts lists and descriptions and related instructions, manuals,
data, records and procedures and art work;
(l) Records. All records relating to the business and
operations of each Seller, including, but not limited to, property records,
production records, engineering records, purchasing and sales records, credit
records, personnel and payroll records, accounting records, computer programs,
customer and vendor lists and records and such other plant and accounting
records as Buyer may reasonably require in its conduct of the Business
subsequent to the Closing;
(m) Listings and Materials. All interest in and to telephone
and telex numbers, post office boxes and all listings in all telephone books and
directories, stationery, forms, labels, shipping material, catalogs, brochures,
art work, photographs and advertising and promotional materials;
(n) Warranty Rights. All rights in, to and under third-party
manufacturers' warranties;
(o) Claims. All claims as to which each Seller is a judgment
creditor;
(p) Name. All rights in and to both Logo's and LogoAH's
corporate name and all variants thereof and goodwill associated therewith, and
all rights to use such names as a trademark, trade name or service mark; and
(q) Other. All assets reflected on the Final Statement of Net
Assets, whether or not referenced in any paragraph above.
1.6 Business. "Business" shall mean the business of manufacturing,
marketing and distributing licensed apparel, except that the Business shall not
include the motor sports or collegiate licensing business currently conducted by
Tultex (as distinguished from the motor sports and collegiate business currently
conducted by Logo and LogoAH which is included in the definition of Business).
1.7 Buyer. "Buyer" is defined at the beginning of this Agreement.
1.8 Buyer's Closing Certificate. "Buyer's Closing Certificate" shall
mean the certificate of Buyer in the form of Exhibit 1.8.
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1.9 Closing. "Closing" shall mean the conference held at 10:00 a.m.,
local time, on the Closing Date, at the offices of Calfee, Halter & Griswold
LLP, Cleveland, Ohio or such other time and place as the parties may mutually
agree in writing; provided, that the Closing shall be held as soon as
practicable after the satisfaction of the conditions precedent to Closing
described in Articles VI and VII, anticipated to be on or before July 2, 1998.
All transactions occurring at the Closing shall be deemed to have occurred
simultaneously, and no one transaction shall be deemed to be complete until all
transactions are completed.
1.10 Closing Date. "Closing Date" shall mean such date as is agreed
upon, to be scheduled as soon as is practicable within the parameters provided
in Section 1.9.
1.11 Closing Pro Forma Statement of Net Assets. "Closing Pro Forma
Statement of Net Assets" shall mean the unaudited pro forma consolidated balance
sheet comprising a statement of net assets of the Business of the Sellers as of
May 9, 1998 comprised solely of the Assets being acquired and the Liabilities
being assumed hereunder, which has been prepared by the Sellers in accordance
with Schedule 2.5 and otherwise in accordance with the Sellers' books and
records on a basis consistent with the accounting practices used to prepare the
Financial Statements of the Business of the Sellers. A true, accurate and
complete copy of the Closing Pro Forma Statement of Net Assets is attached
hereto as Schedule 1.11.
1.12 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended, including all regulations and rules promulgated thereunder.
1.13 Confidential Information. "Confidential Information" is defined in
Section 9.1.
1.14 Contracts. "Contracts" shall mean the contracts, agreements,
commitments, plans, instruments, leases and rental agreements and rights of
renewal thereto, open purchase
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orders, and commitments (other than Licenses) to which any Seller is a party or
by which it is bound, whether oral or written, which relate to the Business and
are listed on Schedule 1.14.
1.15 Effective Time of Closing. "Effective Time of Closing" shall mean
12:01 a.m., local time, on the Closing Date.
1.16 Employee Benefit Plans. "Employee Benefit Plans" shall mean the
employee benefit plans of any of the Sellers relating to the Business or any of
the employees or former employees of the Business. Schedule 1.16 contains a
true, accurate and complete list of the Employee Benefit Plans.
1.17 Final Purchase Price. The "Final Purchase Price" for the Assets
shall be the Purchase Price, to be adjusted dollar for dollar by the amount that
the net assets reflected in the Final Statement of Net Assets are less than, or
greater than, as applicable, $101,543,197, the amount of the net assets
reflected on the Closing Pro Forma Statement of Net Assets.
1.18 Final Statement of Net Assets. "Final Statement of Net Assets"
shall mean the statement of net assets as of the Closing Date to be delivered to
Buyer by Sellers and prepared pursuant to Section 2.5.
1.19 Financial Statements. "Financial Statements" shall mean the
consolidated year end balance sheets for 1995, 1996, and 1997 of the Business,
together with the related statements of income and cash flows for the twelve
month periods then ended, as contained in the final consolidating work papers
prepared and used by Tultex in connection with the audited financial statements
of Tultex for fiscal 1995, 1996, and 1997, and the consolidated balance sheet of
the Business as of April 4, 1998, and the related income statement for the three
month period then ended prepared by the Sellers, all of which are attached on
Schedule 1.19.
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1.20 Hazardous Substances. "Hazardous Substances" means hazardous
substances as defined by the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, or as defined by any applicable similar
Law of any jurisdiction where any Seller conducted the Business or Released
Hazardous Substances and also includes Petroleum Products, asbestos, urea
formaldehyde and poly-chlorinated biphenyls.
1.21 Intangibles. "Intangibles" is defined in Section 1.5(i).
1.22 Inventory. "Inventory" shall mean all work in process,
semi-finished goods and finished goods and raw materials owned by Logo and
LogoAH, including, without limitation, (a) "bill and hold" inventory owned by
Logo and LogoAH, (b) inventory located on other persons' premises, or (c) listed
on Schedule 1.22, adjusted to reflect changes in the ordinary course through the
Closing Date, as permitted pursuant to Section 5.1.
1.23 Knowledge of the Sellers and Knowledge of Buyer. "Knowledge of the
Sellers" shall mean the knowledge of Charles W. Davies, Jr., O. Randolph
Rollins, Suzanne H. Wood, Thomas K. Shine, Michael R. Kistler, Janie Lewis, and
Richard W. Bednarz, including knowledge such persons would have had after making
reasonable inquiry of the Sellers' personnel and investigation and review of
their books and records; and "Knowledge of Buyer" shall mean knowledge of any
vice president or higher officer and the chief financial officer of Buyer,
including knowledge such persons would have had after making reasonable inquiry
of Buyer's personnel and investigation and review of its books and records.
1.24 Law. "Law" shall mean any federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.
1.25 Leased Real Property. "Leased Real Property" is defined in Section
1.5(f).
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1.26 Liabilities. "Liabilities" shall mean the liabilities assigned a
specific dollar amount and specifically represented on the Final Statement of
Net Assets and liabilities of the Sellers in connection with the Business which
arise or first become due and payable on and after the Effective Time of Closing
under the Contracts (except for those listed on Schedule 1.48(d)), Licenses, the
Real Property Lease, the Omega Agreements (as defined in Section 3.18(g)), the
Trust Agreements (as defined in Section 3.18(h)), and the Existing Disability
Income Arrangements (as defined in Section 3.18(i)) (provided that with respect
to the foregoing obligations, the corresponding benefits therefrom owned by the
Sellers are validly assigned to and received by Buyer), but specifically
excluding, without limitation, any inter-company payables or debt and any
deferred taxes relating to any period prior to the Closing.
1.27 License Agreement. "License Agreement" is defined in Section
6.7(g).
1.28 Licenses. "Licenses" shall mean any agreements pursuant to which
at least one Seller holds the right to use in the Business certain names,
designs, slogans, logos and other copyrighted or trademarked materials,
including but not limited to those Licenses listed on Schedule 1.28.
1.29 Liens. "Liens" means all mortgages, liens, encumbrances, charges,
claims, restrictions, pledges, security interests or impositions.
1.30 Losses. "Losses" is defined in Section 8.1.
1.31 Major League Licenses. "Major Lease Licenses" is defined in
Section 6.10.
1.32 Opinion of the Sellers' Counsel. "Opinion of Sellers' Counsel"
shall mean the opinion of Hunton & Williams, counsel to the Sellers, in the form
of Exhibit 1.32.
1.33 Opinion of Buyer's Counsel. "Opinion of Buyer's Counsel" shall
mean the opinion of Calfee, Halter & Griswold LLP, counsel to Buyer, in the form
of Exhibit 1.33.
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1.34 Owned Real Property. "Owned Real Property" is defined in Section
1.5(d).
1.35 Permits. "Permits" shall mean all governmental permits, licenses
and authorizations used by the Sellers in connection with the Business,
including but not limited to those Permits listed on Schedule 1.35.
1.36 Person. "Person" means an individual, a corporation, a limited
liability company, an association, a joint-stock company, a business trust or
other similar organization, a partnership, a joint venture, a trust, an
unincorporated organization, a government or any agency, instrumentality or
political subdivision of a government.
1.37 Petroleum Products. "Petroleum Products" means petroleum,
gasoline, oil, fuel oil, diesel fuel and petroleum solvents.
1.38 Post Closing Adjustment. "Post Closing Adjustment" is defined in
Section 2.5.
1.39 Preliminary Post Closing Adjustment. "Preliminary Post Closing
Adjustment" is defined in Section 2.5.1.
1.40 Prepaid Expenses. "Prepaid Expenses" shall mean, as of the
Closing, those expenses of the Sellers in connection with the Business that are
paid in advance, including, without limitation, those listed on Schedule 1.40,
which listing shall be adjusted to reflect changes in the ordinary course
through the Effective Time of the Closing, as permitted pursuant to Section 5.1.
1.41 Purchase Price. The "Purchase Price" for the Assets shall be an
amount equal to Ninety Six Million Five Hundred Forty Three Thousand One Hundred
Ninety Seven Dollars ($96,543,197) (which amount represents the net asset value
on the Closing Pro Forma Statement of Net Assets less $5,000,000), plus, the
Earn-Out, if any, as provided in Section 2.6. The Purchase Price shall be
subject to adjustment pursuant to Section 2.5 hereof.
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1.42 Preferred Stock. "Preferred Stock" shall mean the shares of
Tultex's Cumulative Convertible Preferred stock, $7.50 Series B.
1.43 RCRA. "RCRA" means the Resource Conservation and Recovery Act of
1976, as amended.
1.44 Real Property. "Real Property" means the Owned Real Property, the
Leased Real Property, and the real property where the Retail Outlets are
located.
1.45 Real Property Lease. "Real Property Lease" is defined in Section
1.5(f).
1.46 Release. "Release" means any direct or indirect spilling, pumping,
pouring, emitting, emptying, placing, discharging, injecting, escaping, leaking,
dumping, or disposing on or into any building or facility or the environment
whether intentional or unintentional, known or unknown and includes a threatened
Release.
1.47 Retail Outlets and Retail Outlet Leases. "Retail Outlets" and
"Retail Outlet Leases" are both defined in Section 1.48(e).
1.48 Retained Assets. "Retained Assets" shall mean the following assets
of the Sellers related to the Business:
(a) Cash Equivalents. Cash, bank deposits and marketable
securities (except for cash, if any, relating to services to be performed by
Buyer after the Closing, i.e. prepaid accounts and deposits);
(b) Tax Refunds. Rights to Tax refunds;
(c) Certain Records. The corporate minute book, stock records
and Tax returns of the Sellers and other similar corporate books and records
originals of which the Sellers are required to maintain under applicable laws
(provided that true, accurate and complete copies of the same are included among
the Assets);
(d) Certain Contracts. All of the Sellers' rights and
obligations under the Contracts listed on Schedule 1.48(d) and all other
contracts not listed on Schedule 1.14;
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(e) Retail Outlets. All right, title and interest in and to
the assets located at the retail outlet stores located at 5668 George Town Road,
Indianapolis, Indiana, 2333 Post Drive, Indianapolis, Indiana, and the retail
outlet store in the State of Utah (the "Retail Outlets"), including, without
limitation, the rights and obligations associated with the real property lease
for each of the Retail Outlets (the "Retail Outlet Leases");
(f) Certain Accounts Receivable. All right, title and interest
in the accounts receivable described on Schedule 1.48(f), which schedule shall
be adjusted to reflect changes in the ordinary course through the Effective Time
of Closing, as permitted pursuant to Section 5.1.
(g) Shares. Any shares of capital stock held in treasury of
the Sellers;
(h) Litigation. Rights and obligations of the Sellers in any
pending litigation or claims, including, without limitation, all matters set
forth on Schedule 3.5;
(i) Agreement. Rights of the Sellers arising under this
Agreement; and
(j) Other. Any other assets of the Sellers not owned or used
in connection with the Business.
1.49 Sellers. "Sellers" are defined at the beginning of this Agreement.
1.50 Sellers' Closing Certificate. "Sellers' Closing Certificate" shall
mean the certificate of the Sellers in the form of Exhibit 1.50.
1.51 Sellers' Indebtedness. "Sellers' Indebtedness" is defined in
Section 8.14.
1.52 Services Agreement. "Services Agreement" is defined in Section
6.7(f).
1.53 Storage. "Storage" means storage as defined by RCRA or as defined
by any applicable similar Law of any jurisdiction where any Seller conducted
business or Released Hazardous Substances.
1.54 Supply Agreement. "Supply Agreement" is defined in Section 6.7(e).
1.55 Taxes. "Tax" means any charge or assessment by or liability,
including, but not limited to, any deficiency, interest or penalty to any
foreign, federal, state, regional or local authority, agency, body, court or
instrumentality, regulatory or otherwise, which, in whole or in
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part, was formed by or operates under the auspices of any foreign, federal,
state, regional or local government.
1.56 Trade Secret. "Trade Secret" shall mean, with respect to any
Person, any owned information that is not known to any competitor or other third
party and, if it were to be known by a competitor or other third party, could be
harmful competitively to the owner of the information.
1.57 Transport. "Transport" means transport as defined by RCRA or as
defined by any applicable similar Law of any jurisdiction where any Seller
conducted the Business or Released Hazardous Substances.
1.58 Treatment. "Treatment" means treatment as defined by RCRA or as
defined by any applicable similar Law of any jurisdiction where any Seller
conducted the Business or Released Hazardous Substances.
ARTICLE II
PURCHASE AND SALE
2.1 Commitment to Sell. At the Closing, and upon all of the terms and
subject to all of the conditions of this Agreement, the Sellers hereby agree to
sell, convey, transfer, assign and deliver to Buyer by deed, bill of sale,
assignment, or other appropriate instrument, free and clear of all Liens, all of
the Assets. In addition, the Sellers shall assign to Buyer all of Sellers'
rights under the Contracts (except those listed on Schedule 1.48(d)) and
Licenses.
2.2 Commitment to Purchase. At the Closing, and upon all of the terms
and subject to all of the conditions of this Agreement, Buyer hereby agrees to
purchase the Assets and, in full payment therefor, shall pay to the Sellers the
Purchase Price therefore and assume those specified Liabilities as provided in
this Article II.
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2.3 Payment of the Purchase Price. At the Closing, Buyer shall pay the
Purchase Price to the Sellers by delivering (i) a subordinated promissory note
to Tultex in the principal amount of $5,000,000 with a 7 2/10th percent (7.2%)
interest rate, semi-annual interest payments and the principal due on the fifth
anniversary date thereof, that shall be subordinated to the indebtedness to the
Buyer's senior lender(s), and otherwise in the form of Exhibit 2.3(i), which
form remains subject to review and approval by Buyer's senior lender(s) with
such changes, if any, that are mutually acceptable to Buyer and the Sellers (the
"Five Million Dollar Subordinated Promissory Note"); (ii) a convertible,
subordinated promissory note to Tultex in the principal amount of $5,000,000
with a 7 2/10th percent (7.2%) interest rate, semi-annual interest payments and
the principal due no later than the fifth anniversary date thereof, that shall
be subordinated to the indebtedness to the Buyer's senior lender(s), and
otherwise in the form of Exhibit 2.3(ii), which form remains subject to review
and approval by Buyer's senior lender(s) with such changes, if any, that are
mutually acceptable to Buyer and the Sellers (the "Convertible Five Million
Dollar Subordinated Promissory Note"); (iii) a subordinated promissory note to
Tultex in the principal amount of $2,500,000, that shall be subordinated to the
indebtedness to the Buyer's senior lender(s), and otherwise in the form of
Exhibit 2.3(iii), which form remains subject to review and approval by Buyer's
senior lender(s) with such changes, if any, that are mutually acceptable to
Buyer and the Sellers (the "Two Million Five Hundred Thousand Dollar
Subordinated Promissory Note" and collectively with the Five Million Dollar
Subordinated Note and the Convertible Five Million Dollar Subordinated Note, the
"Notes"); and (iv) the remainder of the Purchase Price, in immediately available
funds, except for the Earn-Out, if any, which is payable pursuant to Section
2.6.
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2.4 Assumption of Liabilities. In addition to payment of the Purchase
Price, as provided above, at the Closing, Buyer shall assume the Liabilities.
Buyer does not and will not assume any liability, known or unknown, fixed or
contingent, of any of the Sellers except for the Liabilities. Buyer shall not be
a successor or alter ego of or joint employer or venturer with any of the
Sellers, except to the extent that Buyer has assumed Sellers' liabilities and
obligations arising from and after the Effective Time of Closing under the
Contracts (except those listed on Schedule 1.48(d)) and Licenses.
2.5 Adjustment to Purchase Price. Within sixty (60) days after the
Closing, Sellers will prepare Sellers' Final Statement of Net Assets in
accordance with the Closing Pro Forma Statement of Net Assets and generally
accepted accounting principles on a basis consistent with the Sellers' past
practice, except as modified pursuant to Schedule 2.5. During the preparation of
the Sellers' Final Statement of Net Assets, Buyer shall provide the Sellers and
their representatives full access to the books, records, facilities and
employees of Buyer and shall cooperate fully with Sellers and their
representatives in order to prepare the Sellers' Final Statement of Net Assets.
Based on Sellers' Final Statement of Net Assets, Sellers also will prepare and
deliver a written calculation of any adjustment to the Purchase Price. If the
net assets reflected on the Final Statement of Net Assets exceed the net assets
reflected on the Closing Pro Forma Statement of Net Assets, the Purchase Price
will be increased dollar-for-dollar by an amount equal to such difference, and
if the net assets on the Final Statement of Net Assets are less than the net
assets reflected on the Closing Pro Forma Statement of Net Assets, the Purchase
Price will be decreased dollar-for-dollar by an amount equal to such difference
(the "Post Closing Adjustment").
2.5.1 Buyer's Review. Not later than sixty (60) days after the
Closing Date, Sellers will deliver the Sellers' Final Statement of Net Assets
and the calculation of the Post
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Closing Adjustment (the "Preliminary Post Closing Adjustment") to Buyer. All
work papers, documents and records used or generated by the Sellers in
connection with the preparation and confirmation of the Sellers' Final Statement
of Net Assets and the calculation and confirmation of the Preliminary Post
Closing Adjustment will be made available to Buyer. Unless Buyer delivers to the
Sellers a written objection on or before the 15th day after Buyer's receipt of
the Sellers' Final Statement of Net Assets and the Preliminary Post Closing
Adjustment (the "15 Day Dispute Period"), the Sellers' Final Statement of Net
Assets and the Preliminary Post Closing Adjustment will become final and binding
on the parties and be deemed to be the "Final Statement of Net Assets" and the
"Final Purchase Price," respectively. If Buyer delivers to the Sellers a written
objection within the 15 Day Dispute Period, Buyer agrees to pay to Sellers,
within five (5) business days after sending such written objection, the
undisputed portion of the Post Closing Adjustment.
2.5.2 Dispute Procedures. If Buyer objects (as provided in the
last sentence of Section 2.5.1) to the Sellers' Final Statement of Net Assets
and the Preliminary Post Closing Adjustment and the Sellers and Buyer are able
to resolve their dispute within thirty (30) days after Buyer's objection is
received by the Sellers, the Sellers' Final Statement of Net Assets and the
Preliminary Post Closing Adjustment (each as reflecting the resolution of the
parties) will become final and binding on the parties and be deemed to be the
"Final Statement of Net Assets" and the "Final Purchase Price," respectively. If
Buyer objects (as provided in last sentence of Section 2.5.1) to the Sellers'
Final Statement of Net Assets and the Preliminary Post Closing Adjustment and
the Sellers and Buyer are unable to resolve their dispute within thirty (30)
days after Buyer's objection is received by the Sellers, the dispute will be
resolved by Arthur Andersen LLP (the "Independent Accountants"). The Independent
Accountants will be instructed to perform their services as expeditiously as
possible and in any event within sixty (60) days thereafter. The resolution of
the
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Independent Accountants shall be presented as the "Final Statement of Net
Assets" and "Final Purchase Price," prepared by the Independent Accountants,
which shall be final and binding on the parties.
2.5.3 Cost of Independent Accountants. The fees and expenses
of the Independent Accountants for the resolution of the dispute shall be shared
equally by Buyer on the one hand and the Sellers on the other.
2.5.4 Refund or Final Payment. To the extent that the Final
Purchase Price is greater than the Purchase Price, Buyer shall pay such excess,
plus interest as calculated herein, to the Sellers in immediately available
funds within five (5) business days of the determination of the Final Purchase
Price. To the extent that the Final Purchase Price is less than the total of the
Purchase Price and any portion of the Post Closing Adjustment paid by Buyer, the
Sellers shall pay such difference, plus interest as calculated herein, to Buyer
within five (5) business days of the determination of the Final Purchase Price.
The amount of the unpaid Post Closing Adjustment (as finally determined) shall
accrue interest at the rate of 9% calculated from the 15th day after the Sellers
have delivered to Buyer both the Sellers' Final Statement of Net Assets and the
Preliminary Post Closing Adjustment to the date that the Post Closing Adjustment
is paid.
2.6 Earn-Out. (a) If net sales from the period beginning January 4,
1998 through January 2, 1999 of the Business operated by Logo and LogoAH prior
to the Closing and Buyer after the Closing ("1998 Sales") are equal to or
greater than $218,439,000 (with the portion of 1998 Sales attributable to the
Business of Logo and LogoAH prior to the Closing being agreed to by the parties
and set forth on Schedule 2.6), Buyer will pay Tultex an amount equal to
$1,500,000; if 1998 Sales are equal to $207,517,050, Buyer will pay Tultex an
amount equal to
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$1,000,000 (with such amount increased on a prorated linear basis for 1998 Sales
between $207,517,050 and $218,439,000); if 1998 Sales are equal to $196,595,100,
Buyer will pay Tultex an amount equal to $500,000 (with such amount increased on
a prorated linear basis for 1998 Sales between $196,595,100 and $207,517,050);
or, if 1998 Sales are less than $196,595,100, Buyer will not be obligated to pay
any amount to Tultex (the "1998 Earn-Out"). (b) If net sales from the period
beginning January 3, 1999 through January 1, 2000 of the Business operated by
Buyer ("1999 Sales") are equal to or greater than $230,475,000, Buyer will pay
Tultex an amount equal to $1,000,000; if 1999 Sales are equal to $218,951,250,
Buyer will pay Tultex an amount equal to $667,000 (with such amount increased on
a prorated linear basis for 1999 Sales between $218,951,250 and $230,475,000);
if 1999 Sales are equal to $207,427,500, Buyer will pay Tultex an amount equal
to $333,000 (with such amount increased on a prorated linear basis for 1999
Sales between $207,427,500 and $218,951,250); or, if 1999 Sales are less than
$207,427,500, Buyer will not be obligated to pay any amount to Tultex (the "1999
Earn-Out"). Buyer will calculate 1998 Sales and 1999 Sales following Buyer's
preparation of its audited financial statements for the periods ending on
December 31, 1998 and December 31, 1999. Sales shall mean net sales (gross sales
less returns and allowances) generated in the ordinary course of business of the
Business as currently conducted or as conducted by Buyer, but shall be exclusive
of sales generated from acquisitions made by Buyer or from sales of different
product lines (both of which shall be separately accounted for by Buyer). Buyer
covenants to continue to offer the current product lines of Logo and LogoAH,
comprised of T-shirts, shirts, sweats, jerseys, jackets and headwear in the
licensed sports category, in the ordinary course of its business unless Buyer
determines to discontinue any one or more of the aforementioned product lines in
the exercise of its reasonable business judgment. On
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or before the date that is thirty (30) days after the final preparation of
Buyer's audited 1998 financial statements, Buyer shall provide Tultex such
financial statements and its computation of the 1998 Earn-Out, if any, and pay
to Tultex the 1998 Earn-Out, if any; and on or before the date that is thirty
(30) days after the final preparation of Buyer's audited 1999 financial
statements, Buyer shall provide Tultex such financial statements and its
computation of the 1999 Earn-Out, if any, and shall pay to Tultex the 1999
Earn-Out, if any. In no event shall (i) the 1998 Earn-Out exceed $1,500,000, or
(ii) the 1999 Earn-Out exceed $1,000,000. Notwithstanding anything contained in
this Section 2.6 to the contrary, Buyer may defer payment of any Earn-Out due
hereunder to the extent provided for in the Subordination Agreement; provided,
that deferment of any such payment shall not affect Buyer's legal obligation to
pay, and Buyer shall pay Tultex such deferred Earn-Out promptly after the Buyer
is capable of paying such amount and is permitted to pay such amount pursuant to
the Subordination Agreement; and, provided further, that any such deferred
Earn-Out shall accrue interest from the date of deferment to the date of payment
(at which time it and such interest shall be paid) at the annual rate of nine
percent (9%).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers jointly and severally hereby represent and warrant to Buyer that:
3.1 Organization of the Sellers. Logo is a corporation duly organized
and validly existing and in good standing under the laws of the Commonwealth of
Virginia and has full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder. Logo has full corporate power and
authority to carry on its business as it is now being conducted and to own,
operate and hold under lease its assets and properties as, and in the
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places where, such properties and assets now are owned, operated or held. LogoAH
is a corporation duly organized and validly existing and in good standing under
the laws of the Commonwealth of Massachusetts and has full corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
LogoAH has full corporate power and authority to carry on its business as it is
now being conducted and to own, operate and hold under lease its assets and
properties as, and in the places where, such properties and assets now are
owned, operated or held. Tultex is a corporation duly organized and validly
existing and in good standing under the laws of the Commonwealth of Virginia and
has full corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. With respect to the Business, Tultex has full
corporate power and authority to carry on its business as it is now being
conducted and to own, operate and hold under lease its assets and properties as,
and in the places where, such properties and assets now are owned, operated or
held. Schedule 3.1 lists the states and countries in which each Seller (a) owns
or leases real property used primarily in the Business; (b) maintains sales
offices or sales agents used primarily in the Business; or (c) maintains
inventory used primarily in the Business. The Sellers are not, and are not
required to be, qualified to do business as a foreign corporation in connection
with the Business in any states or countries other than those listed in Schedule
3.1, and the Sellers are duly qualified to do business and are in good standing
as a foreign corporation in each of those states and countries, except for where
the failure to so qualify would not have an adverse effect on the Business or
the Assets. All of the outstanding equity securities of Logo and LogoAH are
owned of record and beneficially by Tultex.
3.2 Authorization; Enforceability. The execution, delivery and
performance by each Seller of this Agreement and of all of the documents and
instruments contemplated hereby are
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within the corporate power and authority of each Seller and have been duly
authorized by all necessary corporate action of each Seller. This Agreement is,
and the other documents and instruments required hereby will be, when executed
and delivered by the parties hereto, the valid and binding obligations of each
Seller, enforceable against each Seller in accordance with their respective
terms. Tultex represents that the approval of its shareholders is not required
for the consummation of the transactions contemplated by this Agreement. In
addition, without limiting the generality of the representations in this Section
3.2, the Sellers represent that each of their respective Board of Directors has
provided the required resolutions to be filed with the appropriate
representatives of the Sellers' Indebtedness.
3.3 No Violation or Conflict by the Sellers. Except as set forth on
Schedule 3.3, the execution, delivery and performance of this Agreement by each
Seller does not and will not conflict with or violate any Law, judgment, order
or decree binding on any Seller, or the Articles of Incorporation (or its
equivalent) or Bylaws (or its equivalent) of any Seller or any contract or
agreement to which any Seller is a party or by which any Seller or any of the
Assets is bound, except that the Sellers make no representation or warranty with
respect to compliance with the bulk sales laws of any state.
3.4 Assets; Title to Assets. The Assets constitute all of the business,
assets, properties and rights of the Sellers in connection with the Business. At
least one of the Sellers owns good, valid and marketable title to each of the
Assets, free and clear of any and all Liens (except for the Liens set forth on
Schedule 3.4 which will be released and removed by Sellers prior to the
Closing), and, upon delivery of the Assets at Closing, good, valid and
marketable title to the Assets, free and clear of all Liens, will pass to Buyer.
The Assets to be conveyed at Closing
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constitute all of the Assets of the Sellers owned, used, useful, acquired for
use, or arising or existing primarily in connection with the Business.
3.5 No Litigation. Except as listed in Schedule 3.5, there is no
litigation, arbitration proceeding, governmental investigation, citation or
action of any kind pending or, to the Knowledge of the Sellers, proposed or
threatened against the Sellers in connection with the Business or relating to
the Assets, Contracts, or Licenses. The matters described in Schedule 3.5, if
adversely determined, would not have a material adverse effect on the Business
of the Sellers, the Assets, the Contracts, or the Licenses, except as shown upon
Schedule 3.5.
3.6 Accounts Receivable and Accounts Payable. The Accounts Receivable
reflected on the Financial Statements, the Closing Pro Forma Statement of Net
Assets and the Final Statement of Net Assets represent transactions in the
ordinary course of business, and, based on facts existing on the Closing Date
and known to the Sellers, are collectible net of any reserves shown on the
Financial Statements, the Closing Pro Forma Statement of Net Assets and the
Final Statement of Net Assets, as the case may be (which reserves are adequate
and were calculated consistent with past practice). Schedule 1.2 specifically
identifies (i) the aging of receivables, and (ii) each receivable in an amount
in excess of $10,000 that is more than 90 days past due.
The Accounts Payable reflected on the Financial Statements, the Closing
Pro Forma Statement of Net Assets and Final Statement of Net Assets reflect or
will reflect all amounts owed by the Sellers in connection with the Business in
respect of trade accounts due and other payables, and the actual liability of
the Sellers in respect of such obligations were not, and will not be, on such
dates in excess of the amounts so reflected on the Financial Statements, the
Closing Pro Forma Statement of Net Assets or the Final Statement of Net Assets,
as the case may be.
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3.7 Condition of Equipment. Except as shown on Schedule 3.7, each of
the tangible Assets used by the Sellers in the conduct of the Business is (i) in
good operating condition and repair, subject to ordinary wear and tear and
taking into account the age and prior use of such tangible assets, and (ii)
substantially fit for the purposes for which it is being utilized. None of such
tangible assets is in need of maintenance or repairs, except for ordinary,
routine maintenance and repairs which are not material in nature or cost.
3.8 Liabilities. The Sellers have no liabilities with respect to the
Business except (a) to the extent provided for or reserved against on the
Closing Pro Forma Statement of Net Assets (as updated on the Final Closing Pro
Forma Statement of Net Assets), which include current liabilities that have
arisen in the ordinary course of business consistent with past practice since
the date of the Closing Pro Forma Statement of Net Assets (all of which have
been recorded on the Sellers' books), (b) obligations under the Contracts and
Licenses, or (c) as listed on Schedule 3.8. Since January 3, 1998, there has not
been any incurrence (whether discharged or not) of any liability by the Sellers
in connection with the Business other than current liabilities incurred, and
obligations entered into, in the ordinary course of business consistent with
past practice, except as set forth on the Financial Statements and Schedule 3.8.
3.9 Inventory. The Inventory is of a quality and quantity useable and
saleable in the ordinary course of the Business as heretofore conducted, except
for obsolete items and items of below standard quality which are identified on
Schedule 3.9; and, the raw materials forming part of the Inventory are suitable
for use in the ordinary course of the Sellers' Business as heretofore conducted.
All apparel items included in the Inventory are in compliance with federal
labeling and flammability regulations. Items included in the Inventory are
carried on the books of the Sellers, and are valued on the Closing Pro Forma
Statement of Net Assets and the Final
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Statement of Net Assets, at the lower of cost or market and, in any event, at
not greater than their net realizable value, except for obsolete items and items
of below standard quality which are identified on Schedule 3.9 and valued as set
forth on Schedule 3.9.
3.10 Intangibles. Schedule 3.10 lists all Intangibles owned by any
Seller with respect to the Business. To the Knowledge of the Sellers, there has
not been any infringement or alleged infringement by others of any such
Intangibles. Except as set forth in Schedule 1.14 or Schedule 1.28, no Seller is
a party to any Contract or License, whether as licensor, licensee, franchisor,
franchisee, dealer, distributor, or otherwise, with respect to any Intangible or
Trade Secret (as defined below) with respect to the Business. To the Knowledge
of the Sellers, the Sellers have the right to use all Intangibles as are
necessary to enable the Sellers to conduct, and Buyer to continue to conduct
after the Closing, all phases of the Sellers' Business in the manner presently
conducted by the Sellers, and that use has not conflicted with, infringed, or
otherwise violated any rights of any person or entity. Except for required
consents to assignment set forth on Schedule 3.3, the Sellers have the
unrestricted right to sell or assign to Buyer all such owned Intangibles and all
such licenses or other rights with respect to the Business. The Intangibles
listed in Schedule 3.10 are valid and in full force and effect and are not
subject to any Taxes, maintenance fees, or actions falling due within the next
six months. Except as set forth in Schedule 3.10, there have been no
interference actions or other judicial, arbitration, or other adversary
proceedings concerning the Intangibles listed in Schedule 3.10. Each application
for an Intangible listed in Schedule 3.10 is awaiting action by its respective
appropriate recording office except as otherwise indicated in Schedule 3.10. To
the Knowledge of the Sellers, the manufacture, use, performance or sale of
products or services incorporating or in connection with the Intangibles listed
in Schedule 3.10 does not violate or infringe on any Intangible or other right
of any person or entity, and the Sellers
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have not otherwise infringed any Intangible, Trade Secret or other right of any
person or entity. The Sellers have the exclusive right to use and the
unrestricted right to transfer to Buyer all of Sellers' Trade Secrets with
respect to the Business, and to the Knowledge of the Sellers, none of the
Sellers' Trade Secrets with respect to the Business have been used, divulged, or
appropriated for the benefit of any past or present employees of the Sellers or
other person or entity, or to the detriment of the Sellers. The Sellers have not
disposed of or permitted to lapse, or otherwise failed to preserve the Sellers'
right to use any rights referenced in this Section 3.10.
3.11 Books and Records. The books of account, records and minute books
of the Sellers in connection with the Business are complete and correct in all
material respects.
3.12 Contracts. Schedule 1.14 is a true and complete list of all
Contracts, including those Contracts that constitute: (a) a lease of any real or
personal property with (i) aggregate annual rentals in excess of $25,000, or
(ii) with a remaining term in excess of one year and which is non-cancelable
without penalty on notice of ninety (90) days or less; (b) an agreement to
purchase or sell a capital asset for a price in excess of $25,000; (c)
obligations for money borrowed; (d) any other agreement involving an amount in
excess of $25,000; (e) written agreements with sales representatives, or (f)
agreements for the disposal of waste. The Seller that is party to each Contract
has performed each term, covenant and condition of each of the Contracts which
is to be performed by such Seller, in all material respects, at or before the
date hereof and will perform each term, covenant and condition of each of the
Contracts to be performed by it prior to the Closing, unless the other party to
such Contract is in material default thereunder. No event has occurred that
would, with the passage of time or
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compliance with any applicable notice requirements, constitute a default by a
Seller under any of the Contracts. To the Knowledge of the Sellers, no event has
occurred that would, with the passage of time or compliance with any applicable
notice requirements, constitute a default by the other party under any of the
Contracts. To the Knowledge of the Sellers, no party to any of the Contracts
intends to cancel, terminate, or exercise any option under any of the Contracts.
The Sellers' execution, delivery and performance of this Agreement will not
constitute a breach of or a default under any Contract except as identified on
Schedule 1.14. All consents required for Buyer's assumption of the Contracts, as
designated on Schedule 3.3, will have been received by the Closing Date. True
copies of the Contracts have been delivered to Buyer.
3.13 Licenses. Schedule 1.28 is a true and complete list of all
Licenses held by the Sellers in connection with the Business. The applicable
Seller has performed each term, covenant and condition of each of the Licenses
which is required to be performed by such Seller, in all material respects, at
or before the date hereof and will perform each term, covenant and condition of
each of the Licenses required to be performed by it prior to Closing, unless the
other party to the Licenses is in material default thereunder. No event has
occurred that would, with the passage of time or compliance with any applicable
notice requirements, constitute a default by a Seller under any of the Licenses.
To the Knowledge of the Sellers, no event has occurred that would, with the
passage of time or compliance with any applicable notice requirements,
constitute a default by the other party under any of the Licenses. To the
Knowledge of the Sellers, except as shown on Schedule 1.28 no party to any of
the Licenses intends to cancel, terminate, or exercise any option under any of
the Licenses. The Sellers' execution, delivery and performance of this Agreement
will not constitute a breach of or a default under any License, except as
identified on Schedule 1.28. The Sellers will use reasonable best efforts to
obtain all consents required to permit assignment to and assumption by Buyer of
the Licenses as soon as reasonably possible after the date hereof. True copies
of the Licenses have been delivered to
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Buyer. Schedule 1.28 sets forth, for each License, the revenue generated by the
Sellers in calendar year 1997.
3.14 Financial Statements. The Financial Statements fairly present the
financial position and results of operations of the Business of the Sellers as
of the date thereof and the periods then ended and were prepared in accordance
with generally accepted accounting principles, consistently applied. The Closing
Pro Forma Statement of Net Assets and the Final Statement of Net Assets will be
true and correct in all material respects, and will be prepared, unless
otherwise provided herein in a manner consistent with the Financial Statements
of the Sellers. As of the dates of the Financial Statements, the Closing Pro
Forma Statement of Net Assets and the Final Statement of Net Assets, the Sellers
had or will have, as the case may be, no material liabilities or obligations
relating to the Business, fixed or contingent, not adequately reflected in such
statements or balance sheets, the notes thereto or the exhibits hereto.
3.15 No Adverse Change. Except as set forth in Schedule 3.15, since
January 3, 1998, there has not been: (a) any material adverse change in the
Business of the Sellers; (b) any loss, damage, condemnation or destruction to
the properties of the Sellers materially adversely affecting the Business of the
Sellers or the Assets; (c) any labor dispute or disturbance, litigation or, to
the Knowledge of the Sellers, any event or condition that could materially
adversely affect the Business of the Sellers but not including events or
conditions that affect all or part of the general economy; (d) any Lien made on
any of the properties or assets of the Sellers in connection with the Business;
or (e) any sale, transfer or other disposition of assets of the Sellers in
connection with the Business other than in the ordinary course of business.
3.16 Taxes. Except as set forth in Schedule 3.16, the Sellers have
filed all required Tax returns and reports relating to the Business and the
Assets, Contracts, and Licenses. The Sellers'
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records to be transferred to Buyer contain all information and documents
(including, without limitation, properly completed Forms W-9) necessary to
comply with all information reporting and tax withholding requirements under
federal and state laws, rules and regulations, and such records identify with
specificity all accounts subject to backup withholding under Section 3406 of the
Code. The Sellers have paid (or has made adequate provision for and will timely
pay) in connection with the Business all Taxes (including additions to Tax,
penalties and interest), withholdings and other governmental charges the
nonpayment of which could adversely affect any of the Assets, Contracts, or
Licenses or the use thereof or could cause Buyer to incur any liability. Except
as set forth on Schedule 3.16, no taxing authority has asserted any claim for
the assessment of any such tax liability (including additions to Tax, penalties
and interest), withholding or other governmental charges. None of the Assets is
subject to, and none of the Contracts is, a "safe harbor lease" under former
Section 168(f)(8) of the Code. None of the Sellers is a foreign person within
the meaning of Section 1445 of the Code.
3.17 Employment Agreements and Benefits. Schedule 1.16 is a true and
complete list of all Employee Benefit Plans which are in effect with obligations
to be performed relating to the compensation and other benefits of present and
former employees, salesmen, consultants and other agents of the Sellers in
connection with the Business, including collective bargaining agreements and
pension, retirement, bonus, stock option, profit sharing, health, disability,
life insurance, hospitalization, education or other similar plans or
arrangements (whether or not subject to the Employee Retirement Income Security
Act of 1974, as amended, and all regulations and rules promulgated thereunder
("ERISA")), true copies of which have been delivered to Buyer. None of the
Employee Benefit Plans listed on Schedule 1.16, will be breached by the Sellers'
execution, delivery and performance of this Agreement. Except as
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provided in Section 8.3(c) hereof, no Employee Benefit Plan requires Buyer to
assume any employment, compensation, fringe benefit, pension, profit sharing or
deferred compensation plan in respect of any employee of the Sellers. To the
Knowledge of the Sellers, there are no union organizing campaigns pending or
threatened at any of the facilities being transferred to Buyer hereunder.
Schedule 1.16 lists the name and current compensation for all present employees
of the Sellers in connection with the Business with annual compensation in
excess of $60,000. To the Knowledge of the Sellers, no present employee of the
Sellers in connection with the Business is a party to any contract or agreement
that contains (a) a covenant limiting the freedom of any such employee to
compete in any line of business or with any Person or in any geographic area or
market, or (b) an obligation of confidentiality with respect to information of
the Sellers in connection with the Business.
3.18 Employee Benefit Plans. (a) Schedule 1.16 identifies each "pension
plan" (as defined in Section 3(2) of ERISA) (the "Pension Plans") and each
"welfare plan" (as defined in ERISA Section 3(l)) (the "Welfare Plans")
maintained by the Sellers or to which any Seller contributes on behalf of the
employees of either Logo or LogoAH (the Pension Plans and Welfare Plans are
hereafter referred to as the "Employee Plans"). A true and complete copy of each
Employee Plan has been furnished to Buyer.
(b) Schedule 1.16 identifies each Pension Plan that is intended to be
qualified under Section 401(a) of the Code. To the Knowledge of the Sellers,
each such Pension Plan complies with applicable Law as of the date hereof. To
the Knowledge of the Sellers, there are no facts or circumstances that would
jeopardize or adversely affect the qualification under Code Section 401(a) of
any Pension Plan that is intended to be so qualified.
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(c) As of the Closing Date, full payment has been made, or will be made
pursuant to the terms of the applicable plan, to each Employee Plan of all
contributions that are required under the terms thereof and under ERISA. No
"accumulated funding deficiency" (as defined in ERISA Section 302 or Code
Section 412), whether or not waived, exists with respect to any Pension Plan.
With the exception of the Pension Plan for employees of Tultex (the "Sellers'
Pension Plan"), no Pension Plan is a "defined benefit plan" (as defined in Code
Section 414) and the Sellers have not maintained or contributed to any other
defined benefit plan or any other plan that is subject to the provisions of
Title IV of ERISA.
(d) No employees of the Business are currently accruing benefits under
the Sellers' Pension Plan.
(e) Each Employee Plan has been administered in accordance with its
terms and the terms of any applicable collective bargaining agreement. In
addition, to the Knowledge of the Sellers, each Employee Plan complies with, and
has been administered in accordance with the provisions of ERISA (including the
rulings and regulations promulgated thereunder) or in a manner that would result
in no adverse impact on Buyer or the Assets or any plan of Buyer into which
assets may be transferred pursuant to this Agreement. To the Knowledge of
Sellers, all reports, returns and other documentation that are required to have
been filed with the Internal Revenue Service, the Department of Labor, the
Pension Benefit Guaranty Corporation or any other governmental agency (federal,
state or local) have been filed on a timely basis. Except as set forth in
Schedule 3.5, no lawsuits or complaints to, or by, any person or governmental
entity have been filed, or are to the Knowledge of the Sellers contemplated or
threatened, with respect to any Employee Plan.
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(f) The Sellers do not and have not contributed to or maintained a
"multiemployer plan" (as defined in ERISA Section 3(37)).
(g) The insurance policies issued on the lives of Thomas K. Shine
(General American Life Insurance Company Policy No. 3,231,214) and Michael R.
Kistler (General American Life Insurance Company Policy No. 3,231,213),
respectively, pursuant to the LOGO 7, Inc. Omega Plan comprised of the Executive
Compensation Agreements entered into thereunder by and between LOGO 7, Inc., and
Thomas K. Shine and Michael R. Kistler, respectively (collectively, the "Omega
Agreements"), are in force, all premiums due on such life insurance policies
have been paid, and there are no outstanding loans in respect of, nor have there
been any withdrawals of the cash surrender values on, any such life insurance
policy.
(h) The applicable Seller has discharged all obligations of the
"Corporation" under terms of that certain (a) Agreement dated March 15, 1990 by
and between LOGO 7, Inc., an Indiana corporation, Thomas Shine, and Bruce
Jacobson, as trustee, and (b) Agreement dated March 15, 1990 by and between LOGO
7, Inc., an Indiana corporation, Michael Kistler, and Bruce Jacobson, as trustee
(collectively, the "Trust Agreements").
(i) The disability income insurance policies issued in respect of
Thomas K. Shine (Paul Revere Insurance Group Disability Income Policy No.
010238990503) and Michael R. Kistler (Paul Revere Insurance Group Disability
Income Policy No. 010238990603), respectively (collectively, the "Existing
Disability Income Arrangements"), are in force and all premiums due on such
insurance policies have been paid.
3.19 Compliance with Law. Except as set forth in Schedule 3.19, the
Sellers' conduct of the Business and their use of the Assets does not violate or
conflict with any Law, including, without limitation, Laws relating to
environmental quality and the discharge, storage, handling or
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use of hazardous materials, waste or pollutants. The Permits constitute all
governmental approvals, authorizations, permits and licenses, including those
related to environmental quality, required to conduct the Business of the
Sellers, and are in full force and effect, are being complied with in all
material respects and will remain in effect immediately following the Closing.
The Sellers and Buyer will cooperate in obtaining necessary consents and
approvals to the transfer of the Permits to Buyer.
3.20 Transactions With Affiliates. Except as set forth in Schedule
3.20, since January 3, 1998, each Seller has not with respect to the Business,
in the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any property or assets or obtained any services from, or sold, leased
or otherwise disposed of any property or assets or provided any services to
(except with respect to remuneration for services rendered as a director,
officer or employee of a Seller), any shareholder of a Seller or any Affiliate
of a Seller. Except as set forth in Schedule 3.20, the Sellers in connection
with the Business do not owe any amount or have any contractual obligation or
commitment to any Affiliate (other than compensation for current services not
yet due and payable and reimbursement of expenses arising in the ordinary course
of business), and no Affiliate owes any amount or has any contractual obligation
to any Seller in connection with the Business (other than for advances arising
in the ordinary course of business),. Since January 3, 1998, Logo and LogoAH
have not declared, paid or set aside any dividend or other distribution on or
with respect to their capital stock other than as described on Schedule 3.20.
3.21 Real Property.
(a) Legal Descriptions. Complete and accurate legal descriptions of the
Real Property are set forth on Schedule 3.21(a).
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(b) No Condemnation or Improvement. There is no state of facts or event
which could reasonably be expected to form the basis for any condemnation
proceedings that could affect the Real Property or any possible future
improvements by any public authority, any part of the cost of which could be
assessed against the Real Property, or any contemplated future assessments of
any kind.
(c) Utilities. In the past three years no Seller has experienced any
material interruption in the delivery of adequate service of any utilities or
other public authorities required in the operation of the Business. The Real
Property has adequate water supply, storm and sanitary sewage facilities,
telephone, gas, electricity, fire protection, and, without limitation, other
public utilities.
(d) Condition of Real Property. To the Knowledge of the Sellers, the
roof and the foundation of the Real Property are watertight and free from leaks,
seepages and moisture.
(e) Environmental Matters. Except as described on Schedule 3.21(e):
(i)The Sellers' assets with respect to the Business do not contain
any Hazardous Substances and there are no underground storage tanks located on
(nor, to the Knowledge of the Sellers, have any underground storage tanks been
removed from) the Real Property or any former owned or leased facility of any of
the Sellers used in connection with the Business;
(ii) There has been no Release of any Hazardous Substances at any
or from any of the Sellers' current or former facilities used in connection with
the Business;
(iii) To the Knowledge of the Sellers, there has been no Release of
any Hazardous Substances at any or from any properties adjacent to any of the
Sellers' current or former facilities used in connection with the Business;
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(iv) To the Knowledge of the Sellers, there are no
asbestos-containing materials or urea formaldehyde-containing materials
incorporated into the buildings or interior improvements that are a part of the
Real Property, or into other assets or products of the Sellers, nor is there any
electrical transformer, fluorescent light fixture with ballasts, or other
equipment containing polychlorinated biphenyls on the Real Property; (v) There
has been no generation, Treatment or Storage of any Hazardous Substances by any
of the Sellers with respect to the Business;
(vi) There has been no Disposal or arrangement for Disposal of
Hazardous Substances by any Seller in connection with the Business on any
property not owned or leased by any Seller; and
(vii) No Seller uses any Hazardous Substances in the conduct of its
Business.
Schedule 3.21(e) also contains an accurate and complete list of all Hazardous
Substance and other environmental reports prepared for any Seller or in any of
the Sellers' possession with respect to the Assets or the Business in the past
ten years.
3.22 No Broker. No Seller is committed to any liability for any
brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement.
3.23 No Capital Stock. No capital stock of any corporation is included
in the Assets.
3.24 Worker Adjustment and Retraining Notification Act ("WARN").
Schedule 3.24 lists each and every employee of Logo and LogoAH, respectively,
that, since February 1, 1998, (i) incurred an employment termination, other than
a discharge for cause, voluntary departure or retirement; (ii) was laid off for
any reason; or (iii) experienced a reduction in hours of work of more
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than fifty percent (50%) from February 1, 1998 to the date of this Agreement,
and Schedule 3.24 shall be updated to provide the same information through the
Closing Date.
3.25 Disclosure. Except to the extent of any subsequent correction or
supplement with respect thereto furnished prior to the date hereof, no written
statement, certificate, exhibit, list or other written information listed on
Schedule 3.25 and furnished by or on behalf of any Seller at any time to Buyer,
in connection with this Agreement when considered as a whole, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. Each
document delivered or to be delivered by any Seller to Buyer is or will be a
true and complete copy of such document, unmodified except by another document
delivered by a Seller to Buyer prior to the date hereof.
3.26 Investment Intent. (a) Tultex understands that the investment in
the Notes (as defined in Section 2.3) (i) is suitable only for an investor who
is able to bear the economic consequences of losing its entire investment, (ii)
is an investment which involves a high degree of risk, and (iii) there are
substantial restrictions on the transferability of, and there will be no
immediate public market for, the Notes, and accordingly, it may not be possible
for Tultex to liquidate the investment in case of emergency. (b) Tultex has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of this speculative investment and of making an
informed investment decision. Tultex is an "ACCREDITED INVESTOR" as defined in
Rule 501 of Regulation D of the Securities Act. (c) The Notes are being acquired
by Tultex solely for its own personal account, for investment purposes only, and
not with a view to, or in connection with, any resale or distribution thereof.
Tultex has no contract, undertaking, understanding, agreement or arrangement,
formal or informal, with any person to
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sell, transfer or pledge to any person the Notes, or any part thereof, or any
interest therein or any rights thereto. Tultex has no present plans to enter
into any such contract, undertaking, agreement or arrangement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers that:
4.1 Organization. Buyer is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware, and has
full corporate power and authority to enter into and perform its obligations
under this Agreement.
4.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement are within the corporate power and authority of
Buyer and have been duly authorized by all necessary corporate action by Buyer.
This Agreement is, and the other documents and instruments required hereby will
be, when executed and delivered by Buyer, enforceable against Buyer in
accordance with their respective terms.
4.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement by Buyer do not and will not conflict with or violate any Law,
judgment, order or decree binding on Buyer, or the Certificate of Incorporation
or By-laws of Buyer or any contract or agreement to which Buyer is a party or by
which it is bound.
4.4 No Broker. Buyer has not had any dealings, negotiations or
communications with any broker or other intermediary in connection with the
transactions contemplated by this Agreement other than McDonald & Company
Securities, Inc., whose fees and expenses Buyer is solely responsible.
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4.5 Financing. Buyer has available to it all equity funds, a
substantial majority of which are on deposit in an escrow account, pursuant to
terms and conditions contained in those certain subscription agreements and
related side letter agreements (which have been accepted by Buyer simultaneously
with the execution of this Agreement), a copy of each of which was reviewed by
the Sellers on or prior to the date hereof (the "Subscription Agreements"), and
a customary bank letter agreement for its debt financing, evidencing the
proposed financing to complete the transaction contemplated herein. Buyer has
provided to Sellers true, accurate and complete evidence of its available equity
funds pursuant to the Subscription Agreements and proposed debt funding pursuant
to that certain bank letter agreement from Buyer's senior lender to enable Buyer
to pay the Purchase Price and the Final Purchase Price, if greater, and to
effect the consummation of the transactions described herein.
4.6 Disclosure. Except to the extent of any subsequent correction or
supplement with respect thereto furnished prior to the date hereof, no written
statement, certificate, exhibit, list or other written information furnished by
or on behalf of Buyer at any time to any Seller, in connection with this
Agreement when considered as a whole, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Each document
delivered or to be delivered by Buyer to the Sellers is or will be a true and
complete copy of such document, unmodified except by another document delivered
by Buyer to the Sellers prior to the date hereof.
4.7 Employment Agreement. Thomas K. Shine has entered into an
Employment Agreement with Buyer, effective as of the Closing, in form acceptable
to Buyer.
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4.8 License Agreement. Buyer has entered into a license agreement with
its strategic partner in form acceptable to Buyer.
ARTICLE V
CERTAIN MATTERS PENDING THE CLOSING
The Sellers covenant to Buyer that from and after the date of this
Agreement and until the Closing Date:
5.1 Carry on in Ordinary Course. Tultex, in connection with the
Business, Logo and LogoAH each shall (i) carry on the Business, including
transactions with any of their Affiliates, in the ordinary course and
substantially in the same manner as heretofore carried on, including, without
limitation, (a) collection of the Accounts Receivable only in accordance with
usual procedures, (b) payment of the Accounts Payable as they become due, and
(c) funding of the working capital requirements of the Business, (ii) use their
reasonable best efforts to preserve their properties, business and relationships
with suppliers and customers, it being agreed that "reasonable best efforts",
whenever required in this Agreement, shall not require the payment of any sum of
money or providing any consideration to or for the benefit of any person to
obtain or in connection with obtaining any consents to the assignment of any
Licenses or Contracts or the extension or modification of any Licenses, (iii)
without Buyer's consent, not issue additional equity securities or any rights,
options or warrants with respect thereto, except for the granting of options or
sale of securities of Tultex under the Employee Benefit Plans in the ordinary
course, (iv) without Buyer's consent, not agree to any contract involving the
expenditure of $10,000 or more during its term (other than those contemplated by
Sections 6.10 and 6.11) or to make any single expenditure in excess of $10,000
which it is not obligated to make under obligations of the Sellers in connection
with the Business existing prior to the execution of this Agreement, as
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shown on the Closing Pro Forma Statement of Net Assets, and (v) without Buyer's
consent, not sell any of the Assets, other than Inventory in the ordinary course
of business, consistent with past practice. The Sellers will advise Buyer in
writing of any material adverse change in the financial condition, business or
affairs of the Sellers' Business, or any declaration or payment of any dividend
with respect to their capital stock or any repurchase of their capital stock.
5.2 Indebtedness. Except for Accounts Payable incurred in the ordinary course of
business, Tultex, in connection with the Business, and each of Logo and LogoAH,
shall not (i) create, incur or assume any indebtedness for borrowed money except
under existing credit lines, (ii) create a Lien on any of their properties or
assets, or (iii) create or assume any other indebtedness or issue any debt
securities.
5.3 Compensation. The Sellers shall not grant any bonuses or
increases in the rate of pay of any of the employees of the Business, except for
bonuses or increases in the ordinary course of business. This provision shall
not prohibit the Sellers from fulfilling pre-existing contractual obligations to
the employees of the Business. The Sellers shall not institute any new employee
benefit plan or grant any increases in employee fringe benefits to any employee
of the Business other than as described in Schedule 1.16.
5.4 Compliance with Law. The Sellers shall comply with all applicable Laws and
with all orders of any court or of any federal, state, municipal or other
governmental department, non-compliance with which could cause a material
adverse change in the Assets or the Business of the Sellers.
5.5 Access. Buyer and its authorized agents, officers and representatives shall
have reasonable access to the properties, books, records, contracts, information
and documents of the Business to conduct such examinations and investigations of
the Sellers' Business as it deems
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necessary, provided that such examinations and investigations: (i) shall be
offered to be conducted only in the presence of a designated representative of a
Seller; and (ii) shall not unreasonably interfere with such Seller's operations
and activities. The Sellers shall cooperate in all reasonable respects with
Buyer's examinations and investigations.
5.6 Cooperation. Buyer and the Sellers will cooperate in all respects
in connection with the giving of any notices to any governmental authority or
securing the permission, approval, determination, consent or waiver of any
governmental authority required by Law in connection with the consummation of
the transactions contemplated under this Agreement. Subject to the terms and
conditions of this Agreement, Buyer and the Sellers agree to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper and advisable to consummate, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement.
5.7 Publicity. All general notices, releases, statements and
communications to employees, suppliers, distributors and customers of the
Sellers' Business and to the general public and the press relating to the
transactions covered by this Agreement shall be made only at such times and in
such manner as may be mutually agreed upon by Buyer and the Sellers; provided,
however, that either party shall be entitled to make a public announcement in a
manner approved by the other party, such approval not to be unreasonably
withheld, of the proposed transaction if, in the opinion of its legal counsel,
such announcement is required to comply with Law.
5.8 Confidentiality. If the transactions provided for herein are not
consummated, the Buyer and the Sellers and each of their respective directors,
officers, agents and representatives will hold in strict confidence, and not
utilize in any manner, all information obtained from each
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other and their
directors, officers, agents or representatives (hereinafter in this Section 5.8
referred to as the "Disclosing Persons"), except, however, any such information
that: (i) is now or hereafter becomes available to the public; (ii) was in fact
known by Buyer or the Sellers, as the case may be, prior to disclosure to Buyer
or the Sellers, as the case may be, by the Disclosing Persons; or (iii) is
required to be disclosed by Buyer or the Sellers by subpoena or order of a court
of competent jurisdiction, or by order of a regulatory authority of competent
jurisdiction. In addition, if the transactions provided for herein are not
consummated, Buyer and the Sellers will forthwith cause to be returned to the
other the originals and all copies of materials supplied by the Disclosing
Persons to Buyer or the Sellers, as the case may be, and their directors,
agents, officers and representatives relating to the transactions contemplated
hereby. The obligations under this Section 5.8 shall survive termination of this
Agreement.
5.9 Articles of Incorporation and By-Laws. Prior to Closing, the
Sellers will not amend their Articles of Incorporation (or its equivalent) or
By-laws (or its equivalent) in any manner adverse to Buyer or the consummation
of the transactions contemplated herein, or merge or consolidate with or into
any other corporation.
5.10 No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to its terms, no Seller nor any of their executive officers,
directors, representatives, agents or affiliates shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations (with any
person other than Buyer) concerning any merger, sale of substantial assets,
tender offer, sale of shares of stock or similar transaction involving the
Business or the Assets or disclose, directly or indirectly, any information not
customarily disclosed to the public concerning the Business of the Sellers,
afford to any other person access to the properties, books or records of the
Business of the Sellers or otherwise assist any person
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preparing to make or who has made such an offer, or enter into any agreement
with any third party providing for a business combination transaction, equity
investment or sale of significant amount of assets, involving the Business. The
Sellers will immediately upon receipt notify Buyer in writing the terms of any
proposal which they may receive in respect to any of the foregoing transactions,
any documentation it intends to provide in connection therewith, and keep Buyer
informed of the status of any developments in this regard.
5.11 Updating of Schedules. Each of the parties hereto shall notify the
other of any changes, additions or events which shall cause any change in or
addition to any Schedules delivered by it under this Agreement, promptly after
the occurrence of same and at the Closing by delivery of updates of all
Schedules. No notification made pursuant to this Section 5.11 shall be deemed to
cure any breach of any representation or warranty made in this Agreement unless
the Person receiving such notification specifically agrees thereto in writing
nor shall any such notification be considered to constitute or give rise to a
waiver by Buyer of any condition set forth in this Agreement. If any warranty or
representation made in this Agreement is determined to be incorrect prior to the
Closing Date or if any condition or event occurs which causes any warranty or
representation to be incorrect as of the Closing Date or if any provision in
this Agreement is breached before the Closing Date, the party making such
incorrect warranty or representation or committing such breach shall be
entitled, up to the Closing Date, to cure such warranty or representation by
doing such things as are necessary to cause such warranty or representation as
made on the date of this Agreement to be correct or by causing the breach in any
provision to be cured prior to the Closing Date, and in the event of such cure,
if the failure to cure would have been a reason to prevent the Closing such
incorrections or breach shall not be deemed the failure of a condition precedent
to closing or a reason for the closing not to occur.
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Each party shall notify the other as soon as reasonably possible after it
discovers such an incorrectness or breach. The right to cure granted herein
shall not include any material revision, addition to, or deletion from, any
Schedule without the consent of the party for whose benefit the Schedule was
provided.
5.12 Subordination Agreement and Establishment of a System for
Collection of Accounts Receivable following the Closing. The Sellers will
negotiate in good faith a subordination/intercreditor agreement with respect to
the Notes with Buyer's senior lender(s) (the "Subordination Agreement"). In
addition, the Sellers, together with Buyer and its senior lender(s), shall
establish a system, satisfactory to Buyer and its senior lender(s), to ensure
the immediate transfer to Buyer following the Closing of the Accounts Receivable
collected by the Sellers pursuant to the terms and conditions contained in the
Services Agreement.
5.13 Proration of Obligations to the Contracts and Licenses. The
parties hereto shall use their best efforts to mutually agree upon the amount of
expense to be allocated between the Sellers, on the one hand, and the Buyer on
the other with respect to obligations (and refunds and adjustments, if any)
under the Contracts and Licenses being assumed by Buyer hereunder, with the
understanding and approach that Buyer is to be responsible only for that portion
of the obligation that relates to the benefits of such agreements to be received
by Buyer after the Closing. Specifically, the parties shall agree to a daily
proration of all consistent, periodic payments under such agreements and an
equitable adjustment for any non-consistent, periodic payments due thereunder.
The agreed upon amount for such obligation shall be set forth on and become a
part of the Final Statement of Net Assets.
5.14 Third Party Consents. Promptly upon execution of this Agreement,
Sellers agree to use best efforts (which shall not include the payment of any
fees by Sellers to the other partie
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to the Contracts and Licenses) to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper and advisable to obtain
the necessary consents for the assignment of the Contracts and Licenses to
Buyer. Buyer agrees to cooperate with Sellers in connection with the foregoing
covenant.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 Compliance with Agreement. The Sellers shall have performed and
complied in all respects with all of their obligations under this Agreement that
are to be performed or complied with by them prior to or on the Closing Date.
6.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken by the Sellers in connection with the
transactions contemplated by this Agreement, and all documents incident thereto
and hereto, shall be reasonably satisfactory in form and substance to Buyer and
Buyer's counsel, and the Sellers shall have made available to Buyer for
examination the originals or true and correct copies of all documents which
Buyer may reasonably request in connection with the transactions contemplated by
this Agreement.
6.3 No Litigation. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks restraint, prohibition, damages or other relief in connection with this
Agreement, or with the consummation of the transactions contemplated hereby, or
with the Contracts or the Licenses if in the reasonable judgment of Buyer such
restraint, prohibition, damages or other relief would have a material adverse
effect on the Business or the Assets.
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6.4 Representations and Warranties. The representations and warranties
made by the Sellers in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on the Closing Date. An immaterial inaccuracy in a representation or
warranty shall not provide an excuse not to close.
6.5 Authorization of Transaction. All action necessary to authorize the
performance of this Agreement by the Sellers shall have been duly and validly
taken by the Sellers.
6.6 Material Adverse Effect. Between the date of this Agreement and the
Closing Date, there shall have been no material adverse effect on the financial
condition, results of operations, Assets or Business of the Sellers.
6.7 Deliveries at Closing. The Sellers shall have delivered to Buyer,
each properly executed and dated as of the Closing Date:
(a) the Opinion of Sellers' Counsel;
(b) the Sellers' Closing Certificate;
(c) all documentation necessary to effectuate a change of the
applicable Sellers' corporate name to one not using the word "Logo" or any name
confusingly similar thereto, and to permit Buyer to use such names in all states
where Logo and LogoAH are qualified to do business as a foreign corporation;
(d) good standing certificates dated no more than ten (10)
days prior to the Closing Date from each Sellers' state of incorporation and
each state in which each Seller is qualified to do business as a foreign
corporation with respect to the Business;
(e) a supply agreement in substantially the form of Exhibit
6.7(e) (the "Supply Agreement"), signed by Tultex;
(f) a transition services agreement providing for the
rendering of services by Tultex to Buyer following the Closing in form and
substance mutually acceptable to Tultex, Buyer and Buyer's senior lender(s) (the
"Services Agreement"), signed by Tultex;
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(g) a License Agreement in substantially the form of Exhibit
6.7(g) (the "License Agreement"), signed by Tultex;
(h) the Subordination Agreement in form and substance
satisfactory to Sellers, Buyer and Buyer's senior lender(s); and
(i) evidence, reasonably satisfactory to Buyer, of Sellers'
compliance with their covenants and obligations contained in the Sellers'
Indebtedness.
6.8 Regulatory Approvals. All regulatory approvals necessary for the
consummation of the transactions contemplated by this Agreement shall have been
received, and all applicable waiting periods, if any, shall have expired
6.9 Title to Assets. Buyer shall have received all documentation and
evidence satisfactory to it as to the accuracy of the representations contained
in Section 3.4, including, without limitation, bills of sale, certificates of
title, endorsements, assignments, affidavits, UCC-3 termination statements, and
such other instruments of transfer.
6.10 Consents and Amendments to the Licenses. Buyer shall have received
consents to the assignment of, and certain amendments to (including, but not
limited to, extensions for terms not to expire before December 31, 2001, except
for the National Football League which extension shall not expire before March,
2001), the Licenses from Major League Baseball, the National Hockey League, the
National Basketball Association and the National Football League (collectively
the "Major League Licenses") and the License with the Collegiate Licensing
Company, in a form acceptable to Buyer.
6.11 Consents to Contracts. All consents required for Buyer's
assumption of the Contracts, Licenses and Sellers' transfer of the Assets to
Buyer shall have been received, including, but not limited to, the Real Property
Lease, provided, however, the foregoing condition shall be deemed satisfied if
all Contracts and Licenses are validly assigned to Buyer
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except for those which, individually or in the aggregate, that both Buyer and
its senior lender(s), in the exercise of their reasonable business judgment,
believe would not have a material adverse effect on Buyer's ownership or conduct
of the Business after the Closing, results of operations, financial condition,
prospects or ability to pay its indebtedness when it becomes due
6.12 Real Property. (a) The applicable Seller shall have delivered to a
title company of Buyer's choice (the "Title Company") a general warranty deed
(the "Deed") executed in recordable form warranting fee simple title to the
Owned Real Property in Buyer free of all Liens, (b) Buyer shall have received
unconditional title insurance commitments dated as of the Closing Date and
signed at the Closing by an authorized agent of the Title Company to serve as an
owner's policy of title insurance for the Owned Real Property and a leasehold
policy of title insurance for the Real Property Lease. The title policies shall
be on ALTA Form B (Revised 10-17-70) and otherwise in form acceptable to Buyer
insuring in Buyer good title to the Owned Real Property and to the Real Property
Lease, without any exception for facts that would be disclosed by a survey and
without any exceptions for non-filed mechanics', laborers', materialmen's, other
general exceptions, or Liens; (c) Buyer shall have received an estoppel
certificate from the lessor of the Leased Real Property and from all other
holders of interests in the Leased Real Property superior to the Real Property
Lease to the effect that Tultex has not breached any of its obligations to them
and that so long as Buyer fulfills Tultex's post-Closing obligations under the
Real Property Lease, Buyer will be entitled to occupy the premises for the
remainder of the term and to all other rights of Tultex under the Real Property
Lease; (d) Buyer shall have received a survey of the Owned Real Property; and
(e) Buyer shall have received from the applicable Seller(s) a FIRPTA affidavit
of such Seller as to such Seller's status as a domestic corporation.
6.13 Environmental Review. Buyer shall have received an environmental
review of the
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Assets, the results of which are satisfactory to Buyer.
6.14 Purchase of Preferred Stock. Tultex shall have purchased at par
simultaneously with the Closing a minimum of $6,000,000 of par value of the
$7,500,000 of Preferred Stock (and shall have paid all accrued and unpaid
dividends with respect thereto), owned by the three owners thereof
(collectively, the "Owners") in the amounts mutually agreed to by the Owners. In
addition, Tultex will covenant, in a separate written instrument with the
Owners, to purchase at par the remaining $1,500,000 of Preferred Stock (and pay
all accrued and unpaid dividends with respect thereto) as soon as permitted by
the covenants of the Sellers' Indebtedness, upon the written request of the
Owners.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following express conditions precedent:
7.1 Compliance with Agreement. Buyer shall have performed and complied
in all material respects with all of its obligations under this Agreement that
are to be performed or complied with by it prior to or on the Closing Date.
7.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken by Buyer in connection with the transactions
contemplated by this Agreement, and all documents incident thereto and hereto,
shall be reasonably satisfactory in form and substance to the Sellers and the
Sellers' counsel, and Buyer shall have made available to the Sellers for
examination the originals or true and correct copies of all documents which the
Sellers may reasonably request in connection with the transactions contemplated
by this Agreement.
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7.3 No Litigation. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
7.4 Representations and Warranties. The representations and warranties
made by Buyer in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on the Closing Date. An immaterial inaccuracy in a representation or
warranty shall not provide an excuse not to close.
7.5 Deliveries at Closing. Buyer shall have delivered to the Sellers,
each properly executed and dated as of the Closing Date:
(a) the Opinion of Buyer's Counsel;
(b) the Buyer's Closing Certificate;
(c) a good standing certificate dated no more than 10
days prior to the Closing Date from Buyer's state of incorporation;
(d) the Supply Agreement, signed by Buyer;
(e) the Services Agreement, signed by Buyer; and
(f) the License Agreement, signed by Buyer.
7.6 Regulatory Approvals. All regulatory approvals necessary for the
consummation of the transactions contemplated by this Agreement shall have been
received and all applicable waiting periods, if any, shall have expired.
7.7 Payment of the Purchase Price. The Sellers shall have received the
Five Million Dollar Subordinated
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Promissory Note, the Convertible Five Million Dollar Subordinated Promissory
Note, the Two Million Five Hundred Thousand Dollar Subordinated Promissory Note,
and the portion of the Purchase Price payable at the Closing in immediately
available funds by wire transfer as calculated pursuant to Article II hereof.
ARTICLE VIII
INDEMNITIES AND ADDITIONAL COVENANTS
8.1 Sellers' Indemnity. (a) In the event that the purchase and sale
transaction set forth herein is consummated, from and after the Closing Date,
and with such indemnity limited to $30,000,000, the Sellers, jointly and
severally, hereby indemnify and hold Buyer, its successors and assigns harmless
from and against, and agree to defend promptly Buyer, its successors and assigns
from and reimburse Buyer, its successors and assigns for, any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind,
including, without limitation, reasonable attorneys' fees and other legal costs
and expenses (hereinafter referred to collectively as "Losses"), that Buyer may
at any time suffer or incur, or become subject to, as a result of or in
connection with (i) any breach or inaccuracy of any of the representations and
warranties made by the Sellers in or pursuant to this Agreement; (ii) any breach
or nonperformance of any covenant or obligation made or incurred by the Sellers
in or pursuant to this Agreement; (iii) the operation and ownership of the
Assets by the Sellers prior to the Closing Date; and (iv) any liability of the
Sellers not specifically assumed by Buyer pursuant to Section 2.4, specifically
including, without limitation, any liability for the matters set forth on
Schedule 3.8, provided, that the Sellers shall not be required to indemnify
Buyer pursuant to this Section unless and until the amount of all Losses for
which indemnification is sought first exceeds $150,000, in which event Buyer may
seek indemnification for all such Losses, including such initial $150,000. The
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Sellers shall further indemnify Buyer to the extent that any Liability assumed
by Buyer exceeds the amount of such Liability specified on the Final Statement
of Net Assets.
(b) The amounts for which the Sellers shall be liable under
Section 8.1(a) of this Agreement shall be: (i) net of the amount of any income
tax benefit or the present value (based on a discount rate of 9% per annum) of
any income tax benefit realized or to be realized by Buyer by reason of the
facts and circumstances giving rise to the Sellers' indemnification liability;
(ii) calculated by taking into account any income tax required to be paid by
Buyer as a result of the accrual or receipt of any payment made to Buyer
pursuant to Section 8.1(a) of this Agreement; and (iii) net of any insurance
proceeds received by Buyer in connection with the facts giving rise to the right
of indemnification. For purposes of the preceding sentence, the amount of any
state or local income tax benefit or cost shall reflect the federal income tax
effect of such benefit or cost. The amounts for which the Sellers shall be
liable under Section 8.1(a) shall bear interest at the rate of 9% per annum from
the later of (i) the date that the underlying Loss is incurred by Buyer, or (ii)
the date that notice thereof is given to a Seller.
(c) In the event a claim against Buyer arises that is covered
by the indemnity provisions of Section 8.1(a) of this Agreement, notice shall be
promptly given by Buyer to the Sellers, and the Sellers shall have the right to
control all settlements (unless Buyer agrees to assume the cost of settlement
and to forego such indemnity) and to select lead counsel to defend any and all
such claims at the sole cost and expense of the Sellers; provided, however, that
the Sellers may not effect any settlement that could result in any cost, expense
or liability to Buyer unless Buyer consents in writing to such settlement or the
Sellers agree to indemnify Buyer therefor. Buyer may select counsel to
participate in any defense, in which event Buyer's counsel shall be at the sole
cost and expense of Buyer. In connection with any such claim, action or
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proceeding, the parties shall cooperate with each other and provide each other
with access to relevant books and records in their possession.
It is intended that the Five Million Dollar Subordinated Note
will serve as a source of payment for amounts to which Buyer is entitled from
the Sellers under this Agreement and shall be available to satisfy obligations
of the Sellers to Buyer arising as a result of this Agreement. Accordingly, the
Sellers agree that any amounts otherwise payable to or held for the benefit of
the Sellers under the Five Million Dollar Subordinated Note shall be available
to satisfy claims of Buyer under this Agreement (although the right and ability
of Buyer to recover amounts due it shall not be limited to amounts owed to
Sellers under the Five Million Dollar Subordinated Note). Buyer will notify the
Sellers in writing if Buyer decides to satisfy obligations to which Buyer is
entitled from the Sellers under, or as result of, this Agreement by offsetting
such obligations (or portions thereof) against obligations (or portions thereof)
owing under the Five Million Dollar Subordinated Note.
8.2 Buyer's Indemnity. (a) In the event that the purchase and sale
transaction set forth herein is consummated, from and after the Closing Date,
and with such indemnity limited to a maximum amount of $30,000,000, Buyer hereby
indemnifies and holds the Sellers harmless from and against, and agrees to
defend promptly the Sellers from and reimburse the Sellers for, any and all
Losses, that the Sellers may at any time suffer or incur, or become subject to,
as a result of or in connection with: (i) any breach or inaccuracy of any of the
representations and warranties made by Buyer in or pursuant to this Agreement;
(ii) any breach or nonperformance of any covenant or obligation made or incurred
by Buyer in or pursuant to this Agreement; (iii) the operation and ownership of
the Assets by Buyer from and after the Closing Date; and (iv) any Liability of
the Sellers assumed pursuant to Section 2.4 hereof, provided, that Buyer shall
not be
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required to indemnify the Sellers pursuant to this Section unless and
until the amount of all Losses for which indemnification is sought first exceeds
$150,000 in which event the Sellers may seek indemnification for all such
Losses, including the initial $150,000
(b) The amounts for which Buyer shall be liable under Section
8.2(a) of this Agreement shall be: (i) net of the amount of any income tax
benefit or the present value (based on a discount rate of 9% per annum) of any
income tax benefit realized or to be realized by the Sellers by reason of the
facts and circumstances giving rise to Buyer's liability; (ii) calculated by
taking into account any income tax required to be paid by the Sellers as a
result of the accrual or receipt of any payment made to the Sellers pursuant to
Section 8.2 (a) of this Agreement; and (iii) net of any insurance proceeds
received by the Sellers in connection with the facts giving rise to the right of
indemnification. For purposes of the preceding sentence, the amount of any state
or local income tax benefit or cost shall reflect the federal income tax effect
of such benefit or cost. The amounts for which Buyer shall be liable under
Section 8.2(a) shall bear interest at the rate of 9% per annum from the later of
(i) the date that the underlying Loss is incurred by a Seller, or (ii) the date
that notice thereof is given to Buyer.
(c) In the event a claim against the Sellers arises that is
covered by the indemnity provisions of Section 8.2 (a) of this Agreement, notice
shall be promptly given by the Sellers to Buyer, and Buyer shall have the right
to control all settlements (unless the Sellers agree to assume the cost of
settlement and to forego such indemnity) and to select lead counsel to defend
any and all such claims at the sole cost and expense of Buyer; provided,
however, that Buyer may not effect any settlement that could result in any cost,
expense or liability to the Sellers unless the applicable Seller or Sellers
consent in writing to such settlement and Buyer agrees to indemnify the
applicable Seller or Sellers therefor. The Sellers may select counsel to
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participate in any defense, in which event the Sellers' counsel shall be at the
sole cost and expense of the Sellers. In connection with any such claim, action
or proceeding, the parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession.
8.3 Employee Benefit Plans. (a) Except as provided in Section 8.3(c)
hereof, Buyer and the Sellers acknowledge and agree that, on and after the
Closing Date, Buyer will not assume or accept any of the Employee Benefit Plans
or the obligations of the Sellers under any such Employee Benefit Plan or Plans.
As soon as practicable after the Closing Date, Buyer will establish new employee
benefit plans or otherwise provide benefits for those employees hired by Buyer
as it determines to be appropriate.
(b) Sellers agree that each of the Hired Employees (as defined
in Section 8.4 below) shall become fully vested in his account balance under the
Tultex Corporation Employee Savings Plan (the "Sellers' Savings Plan") as of the
Closing Date. The Sellers agree that it will make any necessary amendments to
the Sellers' Savings Plan in order to fully vest the Hired Employees. Buyer
shall, as soon as practicable following the Closing Date, establish and identify
a tax-qualified plan ("Buyer's Savings Plan") that will accept a transfer from
the Sellers' Savings Plan of the full account balances of the Hired Employees.
The Sellers agree to make such transfer upon reasonable notice from Buyer, but
in any event, not later than ninety (90) days following the earlier of receipt
by Buyer of a favorable determination letter issued by the Internal Revenue
Service with respect to Buyer's Savings Plan or adoption by Buyer of a Master or
Prototype plan which is the subject of a favorable Opinion Letter issued by the
Internal Revenue Service and for which an individual determination letter is not
required. Buyer's Savings Plan shall provide for vesting and eligibility
provisions which are no less favorable to Hired
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Employees than those of Seller's Savings Plan. Each Hired Employee shall receive
credit under the Buyer's Savings Plan for service with Sellers prior to the
Closing Date for purposes of determining such employee's vesting and eligibility
service.
(c) Regardless of Sections 8.3(a) and 3.17 hereof, Buyer and
the Sellers acknowledge and agree that, on the Closing Date, Buyer will become
the sponsor of the Omega Agreements, the Trust Agreements and the Existing
Disability Income Arrangements. On the Closing Date, the Sellers shall transfer
to Buyer any amounts deferred by the persons covered by the Omega Agreements
(including any reserves relating thereto) that have not been used to purchase
insurance policies thereunder or to pay premiums on such policies thereunder,
and shall also transfer to Buyer the insurance policies purchased pursuant to
the Omega Agreements subject to the representations contained in Section 3.18.
In addition, regardless of Section 8.4 hereof, for purposes of the Omega
Agreements, pursuant to the employment agreement entered into by and between
Buyer and Thomas K. Shine and pursuant to an acknowledgment to be entered into
among Buyer, the Sellers and Michael R. Kistler prior to the Closing Date,
Thomas K. Shine and Michael R. Kistler shall not be deemed to have terminated
employment with Logo 7, Inc. on the Closing Date and shall not be entitled to a
distribution pursuant to section 2.01 of the Omega Agreements as a result of
such individual's being employed with Buyer on and after the Closing Date.
8.4 Obligations to Employees. Except as provided in Section 8.3(c)
hereof, on the Closing Date, the Sellers shall terminate all employees of the
Business of the Sellers (the "Terminated Employees"). Buyer will offer
employment to substantially all of the Terminated Employees (which shall mean
all such employees except for 15 or less of the Terminated Employees, in Buyer's
sole discretion). Conditioned upon Buyer's compliance with the
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preceding sentence, Sellers shall be liable for and hold Buyer harmless against
all costs and obligations, if any, arising out of WARN, or any other plant
closing law, in connection with the transaction contemplated herein. The
employment by Buyer of Terminated Employees who accept the terms of employment
offered by Buyer will commence at the Closing (the "Hired Employees"). Each
Seller agrees in this regard to cooperate with Buyer by permitting Buyer
throughout the period prior to the Closing to meet with the employees of the
Business at such reasonable times as shall be approved by a representative of
the Sellers and to distribute to such employees of the Business such forms and
other documents relating to employment by Buyer after the Closing as Buyer shall
reasonably request. The Sellers shall be responsible for all obligations to its
employees arising on or before the Closing Date which are not Liabilities
assumed by Buyer, except that any severance pay obligations that are identified
on Schedule 8.4 that arise because Buyer does not hire a Terminated Employee
shall be Buyer's responsibility, unless such employee is offered employment with
Buyer and declines such offer by Buyer. Nothing in this Section 8.4 shall be
deemed to require Buyer to retain any of the Hired Employees for any period of
time or at any particular compensation rate or in any particular position. Buyer
agrees to provide the Hired Employees with first day medical benefits coverage
and agrees to apply, in connection therewith, preexisting condition requirements
that applies to such medical benefits coverage in a manner that insures that no
such employees (or dependents of such employees) will be subject to a
preexisting condition limitation that is greater than that which would have
applied to such employees and dependents had a change in coverage not occurred
all in accordance with applicable Law. With respect to any Terminated Employee,
the appropriate Seller shall make all required deposits for all withholding,
social security and unemployment insurance Taxes through the Closing and shall
file timely quarterly and annual reports with respect to such Taxes in
accordance
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with applicable Law whether such reports are due prior to or after the Closing.
The Sellers will timely provide all notices and any continuation of health
benefit coverage required to be provided to any of the Sellers' employees,
former employees, or the beneficiaries or dependents of such employees or former
employees, under Part 6 of Subtitle B of Title I of ERISA or Section 4980B(f) of
the Code (herein collectively referred to as "COBRA"), to the extent such
notices and continuation of health benefit coverage are required to be provided
by the Sellers by reason of events occurring prior to or on the Closing Date or
by reason of the transactions contemplated by this Agreement. For the purposes
of the foregoing, the Sellers will treat all Terminated Employees (and such
employees' beneficiaries and dependents) as of the Closing Date as having
incurred a "qualifying event" (within the meaning of ERISA Section 603 and Code
Section 4980B(f)(3)) on the Closing Date. The Sellers will continue the health
benefit coverage required by COBRA and the provisions of this Agreement
irrespective of the elimination of any health benefit plan of the Sellers.
8.5 Transfer Taxes and Fees. The Sellers shall pay all transfer, sales,
recording and filing taxes and fees resulting from the transfer of the Assets to
Buyer.
8.6 Allocation of Purchase Price. The sum of the Purchase Price and the
amount of Liabilities assumed by Buyer pursuant to Section 2.4 hereof shall be
allocated among the Assets, Contracts and Licenses in the manner to be set forth
on Schedule 8.6. This allocation is intended to comply with the allocation
method required by Section 1060 of the Code. The parties shall cooperate to
comply with all substantive and procedural requirements of Section 1060 and the
regulations thereunder, and the allocation shall be adjusted only if and to the
extent necessary to comply with the requirements of Section 1060. Neither Buyer
nor the Sellers will take or permit
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any affiliated person to take, for income tax purposes, any position
inconsistent with the allocation set forth on Schedule 8.6 or, if applicable,
such adjusted allocation
8.7 Records. Buyer shall preserve and keep, free of charge, all books,
papers and records included in the Assets relating to Sellers' Business for
periods prior to the Closing Date for a period of no less than six years
following the Closing Date. Buyer agrees to permit the Sellers and its
attorneys, accountants, agents and designees access, during normal business
hours, to such books, papers and records from and after the Closing Date for all
reasonable purposes and to copy same, at the Sellers' expense. Any such
examination shall be at the expense of the Sellers, shall be performed at the
place where such books, papers and records are regularly maintained and shall
not unreasonably interfere with Buyer's normal business activities. Buyer shall
notify the Sellers at any time that it intends to destroy any or all of such
books, papers and records, and the Sellers shall have the right to review and
remove any of such books, papers and records at the Sellers' expense. Buyer
shall, upon the reasonable request from Sellers, periodically (but no more
frequently than semi-annually) provide Sellers the names and addresses of its
employees with frozen accrued benefits under Sellers' Pension Plan who are
listed by the Sellers on Schedule 8.7.
8.8 Further Assurances. At the Closing, the Sellers appoint Buyer the
attorney of the Sellers with full power of substitution, in the name of Buyer,
or the name of any Seller, on behalf of and for the benefit of Buyer, to collect
all Accounts Receivables and other items hereby transferred and assigned to
Buyer, to endorse, without recourse, all checks in the name of any Seller the
proceeds of which Buyer is entitled to hereunder, to prosecute, in the name of
any Seller or otherwise, all proceedings that Buyer may deem proper to enforce
any claim of any kind in or to the Assets, to defend and compromise all actions,
in respect of any of the Assets, and to do everything
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in relation thereto as Buyer may deem advisable. The Sellers agree that the
foregoing powers are coupled with an interest, shall be irrevocable, and shall
not be affected by the dissolution of any Seller or for any other reason. Each
Seller further agrees that Buyer shall retain for its own account any amounts
collected pursuant to the foregoing powers, and the Sellers shall pay or
transfer to Buyer, if and when received, any amounts which shall be received by
any Seller after the Closing in respect of any Accounts Receivables or other
Assets or rights hereby transferred to Buyer hereunder. Each Seller further
agrees that, at any time and from time to time after the Closing, it will, upon
the request of Buyer and at the Sellers' expense, do all such further acts as
may be required to further transfer, assign and confirm to Buyer, or to aid and
assist in the collection, gaining of possession by Buyer of or maintaining, any
of the Assets, or to vest in Buyer good and marketable title to the personal
property included in the Assets and fee simple title to the Owned Real Property.
8.9 Bulk Sales Compliance. Buyer waives compliance by the Sellers with
the provisions of the bulk sales laws of any state, and the Sellers covenant and
agree to pay and discharge when due all claims of creditors that could be
asserted against Buyer by reason of such non-compliance to the extent that such
claims are not specifically assumed by Buyer. Without regard to the limitation
set forth in Section 8.1, the Sellers agree to indemnify and hold Buyer harmless
from and against and shall on demand reimburse Buyer for any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind,
including, without limitation, reasonable attorneys' fees and other legal costs
and expenses, suffered by Buyer by reason of the Sellers' failure to pay and
discharge any such claims to the extent that such claims or liabilities are not
specifically assumed by Buyer. Notwithstanding the foregoing, the Sellers shall
file with
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state or local governmental agencies all notices and statements necessary to
limit Buyer's liability for any unpaid tax of the Sellers.
8.10 Change of Name. Logo and LogoAH covenant that, immediately after
Closing, each shall either dissolve or shall amend its Articles of Incorporation
to change its name, and that in the latter case its new name will not contain
any variation of any Intangible, specifically including "Logo" or any name
confusingly similar thereto. The Sellers agree that from and after Closing each
shall not make use of any Intangible or any variation thereof in its business,
except (i) pursuant to the License Agreement, and (ii) Tultex shall have the
right to use the "LogoAthletic" name in connection with its operation of the
Retail Outlets for a period of two (2) years after the Closing Date.
8.11 Survival of Representations, Warranties and Certain Indemnities.
The representations, warranties and indemnities for Losses pursuant to Section
8.1(a)(i) and Section 8.2(a)(i) shall survive the Closing for a period up to the
first anniversary date of the Closing notwithstanding any investigation by the
parties hereto, except that there shall be no limit on the survival period for
the representations and warranties contained in Sections 3.2 and 3.4 hereof, and
the survival for the representations and warranties contained in Sections 3.16
and 3.18 will be the expiration of the applicable statute of limitations
(including extensions) for either the assessment or collection of Taxes or for
the initiation of any action by a current or former Employee Benefit Plan
participant. Notwithstanding the limitations set forth in Section 8.1, there
shall be no limit on the amount of indemnities for Losses for a breach of the
representations and warranties contained in Sections 3.2 and 3.4 hereof.
8.12 Restricted Stock. At the Closing, Tultex agrees to fully vest, and
cause the lapse or termination of any restriction on, all of the 6,400 shares of
restricted stock of Tultex that
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Michael R. Kistler acquired rights to pursuant to a resolution adopted by the
Tultex Board of Directors. Tultex will not otherwise pursuant hereto be
obligated to vest the restricted stock owned by any other employees of the
Business.
8.13 Obligations to Lenders. In connection with (a) the Credit
Agreement, dated May 15, 1997, as amended and modified, for a $187 million
credit facility provided by a syndicate of banks with NationsBank, N.A. as the
administrative agent (the "Credit Facility"), (b) the Indenture for $110 million
of 10 5/8% Senior Notes due in the year 2005 (the "1995 Indenture"), and (c) the
Indenture for $75 million of 9 5/8% Senior Notes due in the year 2007 (the "1997
Indenture" and collectively with the Credit Facility and the 1995 Indenture, the
"Sellers' Indebtedness"), the Sellers covenant and agree to take any and all
necessary action to comply with all of the terms, conditions and covenants
contained in all of the documentation for the Sellers' Indebtedness with respect
to actions necessary both before and after the consummation of the transactions
contemplated herein. Without limiting the generality of the foregoing, (i) with
respect to the Credit Facility, the Sellers covenant and agree to fully comply
with the covenants and obligations contained in Sections 6 and 7 thereof, (ii)
with respect to the 1995 Indenture, the Sellers covenant and agree to fully
comply with the covenants and obligations contained in Articles 8 and 10
thereof, and (iii) with respect to the 1997 Indenture, the Sellers covenant and
agree to fully comply with the covenants and obligations contained in Articles 7
and 9 thereof.
8.14 Lease of Certain Equipment and Use of Software. For the period
commencing on the Closing Date and ending twenty (20) months thereafter, Buyer
will sublease from Tultex and Tultex shall make available and shall lease to
Buyer that certain computer and other related equipment set forth and identified
on Schedule 8.14 (the "Leased Equipment") for the periods
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identified on such schedule. In consideration for the Leased Equipment, Buyer
will pay Tultex Five Thousand Dollars ($5,000) each month during said twenty
month period. Buyer, in its sole discretion and upon written notice to Tultex,
shall have the right to purchase any or all of the Leased Equipment at the
applicable expiration of the lease term, and during the period of ninety (90)
days thereafter, for each piece of the Leased Equipment as set forth on Schedule
8.14 for payment of the residual value of such piece of the Leased Equipment as
determined pursuant to the master lease agreement(s) associated therewith. In
addition, Tultex will make arrangements (by either (i) transferring specific
site licenses to Buyer, or (ii) entering into sublicense agreements with Buyer
and the applicable vendor), in form acceptable to Buyer and without any
additional expense to Buyer, for Buyer's lawful use following the Closing of the
software currently used by Logo and LogoAH with respect to the Leased Equipment,
such software to include, without limitation, the Microsoft Suite software, the
Novell Network software, the software associated with the Macintosh equipment,
and the Attachmate eternal emulation software (collectively, the "Software"),
which arrangements shall permit Buyer to use such Software on all hardware that
such Software is currently used on or loaded into. The licenses associated with
the transfer and use of the Software to Buyer at the Closing shall become part
of Schedule 1.28 and shall be included in the definition of "License" hereunder.
ARTICLE IX
RESTRICTIVE COVENANTS
9.1 Confidentiality. Each Seller agrees not to and will cause their
Affiliates not to disclose or use, directly or indirectly, any Confidential
Information, at any time after the Closing. If the disclosure of Confidential
Information is required by Law, each Seller agrees to use their best efforts to
provide Buyer an opportunity to object to the disclosure and as much prior
written notice
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as is possible under the circumstances. For purposes of this Section 9.1,
"Confidential Information" means (i) all information belonging to, used by, or
that is in the possession of any Seller relating to the Business to the extent
such information is not intended to be disseminated to the public or is
otherwise not generally known to competitors of the Sellers, including, but not
limited to, information relating to products, services, strategies, pricing,
customers, representatives, suppliers, distributors, technology, finances,
employee compensation, computer software and hardware, inventions, developments,
or Trade Secrets, and (ii) all information relating to the acquisition
hereunder, including without limitation all strategies, negotiations,
discussions, terms, conditions and other information relating to this Agreement
and each other document and agreement delivered in connection herewith. Each
Seller acknowledges that following the Closing all of the Confidential
Information referred to in (i) above will be the exclusive proprietary property
of Buyer, whether or not prepared in whole or in part by the Sellers and whether
or not disclosed to or entrusted to the custody of any of the Sellers.
9.2 Sellers' Noncompetition. Until the fifth (5th) anniversary of the
Closing Date, without the prior written consent of Buyer, each Seller agrees
with Buyer that each will not and will cause their Affiliates not to:
(a) develop, manufacture, sell, or distribute
products or perform services in competition
with Buyer in the Business (as defined
below); or
(b) perform any advisory or consulting services
for, invest in or otherwise become
associated with in any capacity, any Person
which develops, manufactures, sells, or
distributes products or performs services in
competition with Buyer in the Business (as
defined below);
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within those geographical areas or markets that the Sellers presently conduct or
have in the three years prior to the Closing Date conducted the Business, which
the parties agree is North America. For purposes of this Section 9.2, "Business"
means manufacturing, marketing, distributing and/or selling licensed apparel
associated with Major League Baseball, the National Hockey League, the National
Basketball Association or the National Football League. Nothing in this Section
9.2 shall prevent any Seller from acquiring an equity interest of less than one
percent in a corporation whose shares are listed on a national securities
exchange or regularly quoted in the over-the-counter market. The noncompetition
covenant set forth in this Section 9.2 shall not prevent or restrict the
acquisition of Tultex by an acquirer whose primary business is something other
than selling licensed apparel.
9.3 Equitable Relief. Each Seller agrees that money damages alone will
not be a sufficient remedy for any breach by any of them of the provisions of
this Article IX, and that in addition to all other remedies, Buyer shall be
entitled to specific performance and injunctive or other equitable relief as a
remedy for any such breach, and each Seller waives the securing or posting of
any bond in connection with such remedy, and each Seller agrees not to assert as
a defense in any proceeding where Buyer seeks such relief that Buyer has an
adequate remedy at law.
9.4 Acknowledgment of Consideration. The Sellers acknowledge that
payment of the Purchase Price and Buyer's other obligations hereunder constitute
adequate consideration for their obligations under this Article IX.
9.5 Reformation. If any of the covenants contained in this Article IX
is found by a court of competent jurisdiction to be invalid or unenforceable as
against public policy or for any other reason, such court is directed to
exercise its discretion to reform such covenant to the end that each Seller
shall be subject to confidentiality, noncompetition and noninterference
covenants that are
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reasonable under the circumstances and are enforceable by Buyer. In any event,
if any provision of this Article IX is found unenforceable for any reason, such
provision shall remain in force and effect to the maximum extent allowable and
all non-affected provisions shall remain fully valid and enforceable.
9.6 Reasonableness of Terms. Buyer and each Seller stipulate and agree
that the covenants and other terms contained in this Article IX are reasonable
in all respects, including time period, geographical area and scope of
restricted activities (it being acknowledged that the Business is being carried
on within a consolidating industry), that the Buyer would not have purchased the
assets hereunder had each Seller not agreed to these covenants, and that the
restrictions contained herein are designed to protect the assets and business
acquired by Buyer hereunder and ensure that the Sellers do not engage in unfair
competition against Buyer.
9.7 Buyer's Noncompetition Covenant. Until the fifth (5th) anniversary
of the Closing Date, without the prior written consent of Tultex, Buyer agrees
with Tultex that it will not compete and will cause its Affiliates not to
compete with Tultex in North America in the business of manufacturing blank
jersey and fleece products for sale. Nothing in this Section 9.7 shall prevent
Buyer from acquiring an equity interest of less than one percent in a
corporation whose shares are listed on a national securities exchange or
regularly quoted in the over-the-counter market. The noncompetition covenant set
forth in this Section 9.7 shall not prevent or restrict the acquisition of Buyer
by an acquirer whose primary business is something other than selling
activewear.
Buyer agrees that money damages alone will not be a sufficient
remedy for any breach by it of the provisions of this Section 9.7, and that in
addition to all other remedies, Tultex shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach, and
Buyer waives the securing or posting of any bond in connection with such
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remedy, and Buyer agrees not to assert as a defense in any proceeding where
Tultex seeks such relief that Tultex has an adequate remedy at law. Buyer
acknowledge that Tultex's obligations hereunder constitute adequate
consideration for its obligations under this Section 9.7. If the non-competition
covenant contained in this 9.7 is found by a court of competent jurisdiction to
be invalid or unenforceable as against public policy or for any other reason,
such court is directed to exercise its discretion to reform such covenant to the
end that Buyer shall be subject, are reasonable under the circumstances and are
enforceable by Tultex. In any event, if any provision of this Section 9.7 is
found unenforceable for any reason, such provision shall remain in force and
effect to the maximum extent allowable and all non-affected provisions shall
remain fully valid and enforceable. Buyer agrees that the covenants and other
terms contained in this Section 9.7 are reasonable in all respects, including
time period, geographical area and scope of restricted activities, that Tultex
would not have sold the assets hereunder had Buyer not agreed to these
covenants, and that the restrictions contained herein are designed to ensure
that Buyer does not engage in unfair competition against Tultex.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated (a) by written
agreement of Buyer and the Sellers; or (b) by Buyer or the Sellers at any time
after July 15, 1998 if the Closing shall not have taken place on or before such
date. If this Agreement is terminated pursuant to paragraph (a) of this Section,
all provisions of this Agreement except Section 5.8 (Confidentiality) and
Section 11.2 (Expenses) shall become void without any liability on the part of
any party. If this Agreement is terminated pursuant to paragraph (b) of this
Section, Sections 5.8 and 11.2 shall survive termination and all rights and
remedies of each party hereunder and all other provisions hereof
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<PAGE>
related thereto shall survive termination to the extent required so that any
party responsible for any breach or nonperformance of its obligations hereunder
prior to termination shall remain liable for the damages resulting therefrom.
For purposes of the preceding sentence, the failure of the Sellers to satisfy a
condition to closing set forth in Article VI or of Buyer to satisfy a condition
to closing set forth in Article VII, so long as (i) any such condition is not
also a covenant of such party, and (ii) such party has used all reasonable
efforts to satisfy such condition, in and of itself shall not be deemed a breach
or nonperformance by such party of its obligations hereunder.
10.2 Waiver of Conditions. Subject to applicable Law, (i) if any of the
conditions specified in Article VI hereof has not been satisfied, Buyer may
nevertheless elect to proceed with the transactions contemplated thereby; and
(ii) if any of the conditions specified in Article VII hereof has not been
satisfied, the Sellers may nevertheless elect to proceed with the transactions
contemplated hereby.
ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement, Amendment. This Agreement and the documents
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof, and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions of the parties, whether oral or written, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein or therein. No amendment, supplement, modification, waiver or termination
of this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision of this Agreement,
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whether or not similar, nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
11.2 Expenses. Each of the parties hereto shall pay the fees and
expenses of their respective counsel, accountants and other experts incident to
the negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby. All expenses of the Sellers for their counsel,
accountants and other experts and outside vendors or contractors incident to the
negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby shall not have an adverse impact on Buyer in
computing the Final Purchase Price.
11.3 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Delaware.
11.4 Assignment. This Agreement and each party's respective rights
hereunder may not be assigned or transferred in any way by any party without the
prior written consent of the other parties. Notwithstanding the foregoing, Buyer
may assign all or any part of its right to receive any amount owed to it
hereunder to any of Buyer's senior lender(s) to the extent provided for in the
Collateral Assignment to PNC Bank, National Association; in which event, the
Sellers will execute and deliver any documents reasonably requested by the
assignee(s) in connection with such assignment, but no such assignment will
relieve Buyer of its obligations hereunder.
11.5 Notices. All notices shall be in writing delivered as follows:
(a) If to Buyer, to: TKS Acquisition, Inc.
8677 Logoathletic Court
Indianapolis, Indiana 46219
Attn: Thomas K. Shine
With a copy to: Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
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<PAGE>
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attention: Thomas F. McKee, Esq.
(b) If to the Sellers, to: Tultex Corporation
101 Commonwealth Boulevard
Martinsville, Virginia 24112
Attn: O. Randolph Rollins, Esq.
With a copy to: Hunton & Williams
Riverfront Plaza
9510 East Byrd Street
Richmond, Virginia 23219-4074
Attn: Lathan M. Ewers, Jr., Esq.
or to such other address as may have been designated in a prior notice. Notices
sent by registered or certified mail, postage prepaid, return receipt requested,
shall be deemed to have been given two business days after being mailed, and
otherwise notices shall be deemed to have been given when received by the person
to whom the notice is addressed or any other person with apparent authority to
accept notices on behalf of the person to whom the notice is addressed.
11.6 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Article and
Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
11.7 Interpretation. Unless the context requires otherwise, all words
used in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the singular
and all words in any gender shall extend to and include all genders.
11.8 No Reliance. Except for permitted successors and assigns pursuant
to Section 11.4, no third party is entitled to rely on any of the
representations, warranties and agreements of
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Buyer and the Sellers contained in this Agreement. The Buyer and the
Sellers assume no liability to any third party (except for permitted successors
and assigns pursuant to Section 11.4) because of any reliance on the
representations, warranties and agreements of Buyer and the Sellers contained in
this Agreement.
11.9 Consent Not To Be Unreasonably Withheld. Whenever any waiver,
approval or consent shall be provided for from any party hereunder, it is agreed
and understood that such waiver, consent or approval shall not be unreasonably
withheld or delayed.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Asset Purchase
Agreement to be duly executed as of the day and year first above written.
TULTEX CORPORATION
By:__________________________
Title:________________________
LOGOATHLETIC, INC.
By:__________________________
Title:________________________
LOGOATHLETIC/HEADWEAR, INC.
By:__________________________
Title:________________________
("Sellers")
TKS ACQUISITION, INC.
By:__________________________
Thomas K. Shine, President
("Buyer")
70
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, CONSTITUTE "RESTRICTED SECURITIES" AS DEFINED IN RULE
144 UNDER SUCH ACT, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH
SUCH ACT AND THE TERMS SET FORTH HEREIN. ANY ATTEMPT TO TRANSFER THE SECURITIES
REPRESENTED BY THIS CERTIFICATE WITHOUT COMPLIANCE WITH SUCH ACT AND THE TERMS
SET FORTH HEREIN SHALL BE VOID
THIS NOTE IS EXPRESSLY SUBORDINATED TO ALL OBLIGATIONS OF THE MAKER TO PNC BANK,
NATIONAL ASSOCIATION, AS AGENT FOR ITSELF AND OTHER LENDERS AS MORE SPECIFICALLY
PROVIDED IN THAT CERTAIN SUBORDINATION AGREEMENT, DATED JULY 15, 1998, EXECUTED
BY THE PAYEE AND MAKER IN FAVOR OF PNC BANK, NATIONAL ASSOCIATION, AS AGENT FOR
ITSELF AND OTHER LENDERS.
TKS ACQUISITION, INC.
NON-NEGOTIABLE SUBORDINATED PROMISSORY NOTE
$5,000,000.00 July 15, 1998
FOR VALUE RECEIVED, the undersigned, TKS ACQUISITION, INC., a Delaware
corporation with its principal office located at 8677 Logoathletic Court,
Indianapolis, Indiana 46219 (hereinafter referred to as "Maker" which term
includes any successor corporation), hereby promises to pay to TULTEX
CORPORATION, a Virginia corporation (hereinafter referred to as "Payee" which
term includes any successor corporation), on or before July 15, 2003 ("Maturity
Date"), at Payee's offices located at 101 Commonwealth Boulevard, Martinsville,
Virginia 24112, the principal sum of FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00), together with simple interest in arrears at a rate per annum of
seven and 2/10th (7.2 %) percent, calculated on the basis of the actual days
elapsed but computed as if each year consisted of 365 days.
Subject to Maker's rights contained in the Purchase Agreement (as
defined below), the principal of and all accrued but unpaid interest on this
Note are due and payable as follows: (a) interest is due and payable as it
accrues semi-annually on the 30th day of June and the 31st day of December each
year, commencing December 31, 1998, and on the Maturity Date; and (b) the entire
outstanding principal balance of this Note, together with accrued and unpaid
interest, is due and payable on the Maturity Date. To the extent that any
interest is not paid on or before the fifth (5th) day after it becomes due and
payable, Payee may, at its option, add such accrued interest to the principal of
this Note. If any payment of principal or interest on this Note is due and
payable on a day other than a "business day," such payment shall be due and
payable on the next succeeding business day. For purposes of this Note, the term
"business day" shall mean any day excluding Saturday, Sunday, and any day on
which banks in Indianapolis, Indiana are authorized by law or other governmental
action to close.
1. Prepayment. Maker may prepay all or any part of the principal or
accrued interest
<PAGE>
at any time and from time to time, without premium or penalty. All partial
prepayments shall be applied first to accrued and unpaid interest and then to
principal.
2. Subordination. Notwithstanding anything contained herein to the
contrary, payment under this Note is expressly subordinated and subject in right
of payment to any and all advances, indebtedness, liabilities, and obligations
of Maker arising under that certain Revolving Credit, Term Loan and Security
Agreement, dated as of July 15, 1998 (as the same may hereafter be amended,
supplemented or otherwise modified from time to time, the "Bank Credit
Agreement"), executed by and between Maker and PNC Bank, National Association,
as agent for itself and other lenders ("Bank"), as more specifically set forth
in that certain Subordination Agreement, dated as of July 15, 1998 (as the same
may hereafter be amended, supplemented or otherwise modified from time to time,
the "Subordination Agreement"), executed by and among Maker, Payee, and Bank.
Each holder of this Note, by accepting same, agrees to and shall be bound by all
the terms and conditions of this Note, including, without limitation, the
subordination provisions contained herein. Maker agrees to provide Payee with
its quarterly financial statements in the same format as those provided to the
Bank.
3. Default. Upon the occurrence of an Event of Default, the holder of
this Note may, at its option, subject to the terms of the Subordination
Agreement, declare the outstanding principal balance of and accrued but unpaid
interest on this Note at once due and payable; provided, however, that if an
Event of Default occurs pursuant to sub-clause (a) below, such accrued but
unpaid interest may (in accordance with the Subordination Agreement) be added to
and become principal instead.
"Event of Default" whenever used in this Note, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) default in the payment of any interest upon this Note when it
becomes due and payable, and continuance of such default for a period of thirty
(30) days; or
(b) default in the payment of the principal of this Note at its
maturity; or
(c) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Maker a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement or composition of
or in respect of the Maker under Federal bankruptcy laws or any other applicable
Federal or State law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of the Maker or of any substantial part of
its property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
sixty (60) consecutive days; or
(d) the institution by the Maker of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it or a petition or answer
or consent seeking reorganization or relief under Federal bankruptcy laws or any
other applicable Federal of State law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or similar official) of the Maker or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the Maker in
furtherance of any such action.
2
<PAGE>
The failure to exercise the option to accelerate the maturity of this
Note or any other right, remedy, or recourse available to the Payee upon the
occurrence of an Event of Default shall not constitute a waiver of the right of
the Payee to exercise the same at that time or at any subsequent time with
respect to such Event of Default or any other Event of Default. The rights,
remedies, and recourses of the Payee, as provided in this Note, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefor shall arise, at the sole discretion of
the Payee. The acceptance by the Payee of any payment under this Note which is
less than the payment in full of all amounts due and payable at the time of such
payment shall not (a) constitute a waiver of or impair, reduce, release or
extinguish any right, remedy, or recourse of the Payee, or nullify any prior
exercise of any such right, remedy, or recourse; or (b) impair, reduce, release,
or extinguish the obligations of Maker as provided herein.
4. Waiver. Maker waives presentment and demand for payment, protest,
notice of protest and nonpayment, and notice of the intention to accelerate, and
agree that its liability on this Note shall not be affected by, and hereby
consents to, any renewal or extension in the time of payment hereof.
5. Interest. Regardless of any provision contained in this Note, or any
other document executed or delivered in connection therewith, Payee shall never
be deemed to have contracted for or be entitled to receive, collect or apply as
interest on this Note (whether termed interest herein or deemed to be interest
by judicial determination or operation of law), any amount in excess of the
maximum rate allowed by applicable law, and, in the event that Payee ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance of this Note, and, if the principal balance of this Note is
paid in full, any remaining excess shall forthwith be paid to Maker.
6. Notice. Any notice hereunder shall be in writing and shall be deemed
give when delivered by hand or two (2) days after being deposited in the United
States mail, postage prepaid, addressed to the Maker or Payee at the address set
forth above; provided, that if either party shall have designated a different
address by notice to the other, then to the last address so designated.
7. Governing Law; Consent to Jurisdiction. Except to the extent that
the laws of the United States may apply to the terms hereof, the substantive
laws of the State of Delaware shall govern the validity, construction,
enforcement and interpretation of this Note. Maker and any holder agree for any
proceeding or action brought with respect to this Note shall be brought in the
Federal District Court for the Southern District of Indiana or the Superior
Court of Marion County, Indiana, and each party consents to being subject to the
jurisdiction of such court and to have any such proceedings take place in the
prescribed venue.
8. Entire Understanding. This Note, the Subordination Agreement, and
the Purchase Agreement represent the final agreement between Maker and Payee and
may not be contradicted by evidence of prior, contemporaneous, or subsequent
oral agreements of the parties. There are no unwritten oral agreements between
the parties.
9. Non-Negotiable. Neither this Note nor any rights under this Note may
be sold, transferred, pledged, assigned or otherwise disposed of by Payee,
except to a successor
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<PAGE>
corporation to Payee. This Note will be binding upon and inure to the benefit of
the successors and permitted assigns of the parties hereto.
10. Offset Rights Under Purchase Agreement. This Note is expressly
conditioned upon and subject to the terms and conditions contained in Section
8.1 of that certain Asset Purchase Agreement, dated as of June 12, 1998, by and
among Maker, Payee and others (as the same may hereafter be amended,
supplemented or otherwise modified from time to time, the "Purchase Agreement"),
which terms and conditions in such section of the Purchase Agreement are hereby
incorporated herein by this reference.
11. Severability. If any provision of this Note or the application
thereof to any person or circumstance should, for any reason and to any extent,
be invalid or unenforceable, the remainder of this Note and the application of
such provision to other persons or circumstances shall not be affected thereby,
but rather shall be enforced to the greatest extent permitted by law.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first written above.
MAKER:
TKS ACQUISITION, INC.
By:__________________________
Thomas K. Shine, President
Acknowledged and Agreed as of
the date first written above.
PAYEE:
TULTEX CORPORATION
By: ____________________
Its: ____________________
4
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, CONSTITUTE "RESTRICTED SECURITIES" AS DEFINED IN RULE
144 UNDER SUCH ACT, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH
SUCH ACT AND THE TERMS SET FORTH HEREIN. ANY ATTEMPT TO TRANSFER THE SECURITIES
REPRESENTED BY THIS CERTIFICATE WITHOUT COMPLIANCE WITH SUCH ACT AND THE TERMS
SET FORTH HEREIN SHALL BE VOID
THIS NOTE IS EXPRESSLY SUBORDINATED TO ALL OBLIGATIONS OF THE MAKER TO PNC BANK,
NATIONAL ASSOCIATION, AS AGENT FOR ITSELF AND OTHER LENDERS AS MORE SPECIFICALLY
PROVIDED IN THAT CERTAIN SUBORDINATION AGREEMENT, DATED JULY 15, 1998, EXECUTED
BY THE PAYEE AND MAKER IN FAVOR OF PNC BANK, NATIONAL ASSOCIATION, AS AGENT FOR
ITSELF AND OTHER LENDERS.
TKS ACQUISITION, INC.
NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$5,000,000.00 July 15, 1998
FOR VALUE RECEIVED, the undersigned, TKS ACQUISITION, INC., a Delaware
corporation with its principal office located at 8677 Logoathletic Court,
Indianapolis, Indiana 46219 (hereinafter referred to as "Maker" which term
includes any successor corporation), hereby promises to pay to TULTEX
CORPORATION, a Virginia corporation (hereinafter referred to as "Payee" which
term includes any successor corporation), on or before July 15, 2003 ("Maturity
Date"), at Payee's offices located at 101 Commonwealth Boulevard, Martinsville,
Virginia 24112, the principal sum of FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00), together with simple interest in arrears at a rate per annum of
seven and 2/10th (7.2%) percent, calculated on the basis of the actual days
elapsed but computed as if each year consisted of 365 days.
The principal of and all accrued but unpaid interest on this Note are
due and payable as follows: (a) interest is due and payable as it accrues
semi-annually in arrears on the 30th day of June and the 31st day of December
each year, commencing December 31, 1998, and on the Maturity Date; and (b) the
entire outstanding principal balance of this Note, together with accrued and
unpaid interest, is due and payable on the Maturity Date. To the extent that any
interest is not paid on or before the fifth (5th) day after it becomes due and
payable, Payee may, at its option, add such accrued interest to the principal of
this Note. If any payment of principal or interest on this Note is due and
payable on a day other than a "business day," such payment shall be due and
payable on the next succeeding business day. For purposes of this Note, the term
"business day" shall mean any day excluding Saturday, Sunday, and any day on
which banks in Indianapolis, Indiana are authorized by law or other governmental
action to close.
1. Prepayment. Maker may prepay all or any part of the principal or
accrued interest at any time and from time to time, without premium or penalty.
All partial prepayments shall be
<PAGE>
applied first to accrued and unpaid interest and then to principal.
2. Subordination. Notwithstanding anything contained herein to the
contrary, payment under this Note is expressly subordinated and subject in right
of payment to any and all advances, indebtedness, liabilities, and obligations
of Maker arising under that certain Revolving Credit, Term Loan and Security
Agreement, dated as of July 15, 1998 (as the same may hereafter be amended,
supplemented or otherwise modified from time to time, the "Bank Credit
Agreement"), executed by and between Maker and PNC Bank, National Association,
as agent for itself and other lenders ("Bank"), as more specifically set forth
in that certain Subordination Agreement, dated as of July 15, 1998 (as the same
may hereafter be amended, supplemented or otherwise modified from time to time,
the "Subordination Agreement"), executed by and among Maker, Payee, and Bank.
Each holder of this Note, by accepting same, agrees to and shall be bound by all
the terms and conditions of this Note, including, without limitation, the
subordination provisions contained herein. Maker agrees to provide Payee with
its quarterly financial statements in the same format as those provided to the
Bank.
3. Default. Upon the occurrence of an Event of Default, the holder of
this Note may, at its option, subject to the terms of the Subordination
Agreement, declare the outstanding principal balance of and accrued but unpaid
interest on this Note at once due and payable; provided, however, that if an
Event of Default occurs pursuant to sub-clause (a) below, such accrued but
unpaid interest may (in accordance with the Subordination Agreement) be added to
and become principal instead.
"Event of Default" whenever used in this Note, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) default in the payment of any interest upon this Note when it
becomes due and payable, and continuance of such default for a period of thirty
(30) days; or
(b) default in the payment of the principal of this Note at its
maturity; or
(c) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Maker a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement or composition of
or in respect of the Maker under Federal bankruptcy laws or any other applicable
Federal or State law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of the Maker or of any substantial part of
its property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
sixty (60) consecutive days; or
(d) the institution by the Maker of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it or a petition or answer
or consent seeking reorganization or relief under Federal bankruptcy laws or any
other applicable Federal of State law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or similar official) of the Maker or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the Maker in
furtherance of any such action; or
2
<PAGE>
(e) a change in control of the Maker (a "change of control" will be
deemed to have occurred in the event that (a) any person or persons acting
together that would constitute a group (for purposes of Section 13(d) of the
Securities Exchange Act of 1934, or any successor provision thereto), together
with any affiliates or related persons thereof, other than any of the
stockholders, and/or their affiliates or related persons, of Maker as
constituted on even date herewith, shall beneficially own (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, or any successor provision
thereto) at least 50% percent of the voting stock of Maker; (b) any sale, lease
or other transfer (in one transaction or a series or related transactions) by
Maker or any of its subsidiaries of all or substantially all of the consolidated
assets of Maker to any person, other than a wholly owned subsidiary of Maker or
any of the stockholders, and/or their affiliates or related persons, of Maker as
constituted on even date herewith; or (c) the stockholders of Maker approve any
plan or proposal for the liquidation or dissolution of Maker); or
(f) in the event of a qualifying initial public offering of Maker (a
"qualifying initial public offering" will be deemed to have occurred at the
completion of a sale of the Maker's Common Stock in which the aggregate gross
proceeds equal at least $20,000,000, pursuant to a registration statement which
has been filed and declared effective under the Securities Act, excluding
registration statements on Form S-4, S-8 or similar limited purpose forms and
also excluding registration statements relating to a bona fide debt offering
that may include warrants or other similar supplemental equity securities issued
to non-Affiliates of the Maker as part of an offering of units comprised of such
equity security and a debt security of the Maker).
The failure to exercise the option to accelerate the maturity of this
Note or any other right, remedy, or recourse available to the Payee upon the
occurrence of an Event of Default shall not constitute a waiver of the right of
the Payee to exercise the same at that time or at any subsequent time with
respect to such Event of Default or any other Event of Default. The rights,
remedies, and recourses of the Payee, as provided in this Note, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefor shall arise, at the sole discretion of
the Payee. The acceptance by the Payee of any payment under this Note which is
less than the payment in full of all amounts due and payable at the time of such
payment shall not (a) constitute a waiver of or impair, reduce, release or
extinguish any right, remedy, or recourse of the Payee, or nullify any prior
exercise of any such right, remedy, or recourse; or (b) impair, reduce, release,
or extinguish the obligations of Maker as provided herein.
4. Waiver. Maker waives presentment and demand for payment, protest,
notice of protest and nonpayment, and notice of the intention to accelerate, and
agree that its liability on this Note shall not be affected by, and hereby
consents to, any renewal or extension in the time of payment hereof.
5. Interest. Regardless of any provision contained in this Note, or any
other document executed or delivered in connection therewith, Payee shall never
be deemed to have contracted for or be entitled to receive, collect or apply as
interest on this Note (whether termed interest herein or deemed to be interest
by judicial determination or operation of law), any amount in excess of the
maximum rate allowed by applicable law, and, in the event that Payee ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance of this Note, and, if the principal balance of this Note is
paid in full, any remaining excess shall forthwith be paid to Maker.
3
<PAGE>
6. Notice. Any notice hereunder shall be in writing and shall be deemed
give when delivered by hand or two (2) days after being deposited in the United
States mail, postage prepaid, addressed to the Maker or Payee at the address set
forth above; provided, that if either party shall have designated a different
address by notice to the other, then to the last address so designated.
7. Governing Law; Consent to Jurisdiction. Except to the extent that
the laws of the United States may apply to the terms hereof, the substantive
laws of the State of Delaware shall govern the validity, construction,
enforcement and interpretation of this Note. Maker and any holder agree for any
proceeding or action brought with respect to this Note shall be brought in the
Federal District Court for the Southern District of Indiana or the Superior
Court of Marion County, Indiana, and each party consents to being subject to the
jurisdiction of such court and to have any such proceedings take place in the
prescribed venue.
8. Entire Understanding. This Note, the Subordination Agreement, and
the Purchase Agreement represent the final agreement between Maker and Payee and
may not be contradicted by evidence of prior, contemporaneous, or subsequent
oral agreements of the parties. There are no unwritten oral agreements between
the parties.
9. Non-Negotiable. Neither this Note nor any rights under this Note may
be sold, transferred, pledged, assigned or otherwise disposed of by Payee,
except to a successor corporation to Payee. This Note will be binding upon and
inure to the benefit of the successors and permitted assigns of the parties
hereto.
10. Conversion Option. This Note, which may be prepaid by Maker at any
time, will be non-convertible until March 31, 2001 (or upon the date which
coincides with the end of Maker's fiscal quarter ending nearest to March 31,
2001) (the "Initial Convertible Date"), whereafter this Note shall be
convertible only upon the terms and subject to the conditions set forth herein.
In order to convert this Note, Payee must request in writing to Maker, at any
time during the period (the "Initial Conversion Period") commencing on the
Initial Conversion Date and ending on the later of (i) forty five (45) days
thereafter, or (ii) ten (10) days after Maker delivers its quarterly financial
statements to Payee for the fiscal quarter ending nearest to March 31, 2001,
that this Note be converted into shares of Maker's Common Stock at the
Conversion Price Per Share (as defined below) (the "Payee Notice"). Maker, at
its sole option, within forty five (45) days after receiving the Payee Notice,
may elect to prepay this Note in full by payment of the unpaid principal amount
hereof, together with all accrued but unpaid interest. If Payee elects not to
exercise its option to convert this Note during the Initial Conversion Period
and Maker has not previously prepaid this Note, Payee will have the option to
request conversion of the Note by delivery to Maker of a Payee Notice at any
time during the period commencing on March 31, 2002 (the "Second Conversion
Date") and ending on the later of (i) forty five (45) days thereafter, or (ii)
ten (10) days after Maker delivers its quarterly financial statements to Payee
for the fiscal quarter ending nearest to March 31, 2002 (the "Second Conversion
Period"). If Payee elects not to exercise its option to convert this Note during
the Initial Conversion Period or the Second Conversion Period and Maker has not
previously prepaid this Note, Payee will have the option to request conversion
of the Note by delivery to Maker of a Payee Notice at any time during the period
commencing on March 31, 2003 (the "Third Conversion Date") and ending on the
later of (i) forty five (45) days thereafter, or (ii) ten (10) days after Maker
delivers its quarterly financial statements to Payee for the fiscal quarter
ending nearest to March 31, 2003 (the "Third Conversion Period"). Maker will
have the right, at its sole option, during the Second Conversion Period or the
Third Conversion Period commencing on the date of its receipt of such
4
<PAGE>
Payee Notice to convert this Note or to prepay this Note as provided herein. In
any event, this Note otherwise shall become due and payable upon maturity as
provided herein. If Payee exercises its option to convert and Maker does not
elect to prepay this Note, Payee shall be entitled to receive upon the
conversion therefor the number of shares of Maker's Common Stock determined by
dividing the unpaid principal amount of this Note, together with accrued but
unpaid interest, by the Conversion Price Per Share.
For purposes of this Note, the "Conversion Price Per Share" shall mean
the greater of (i) $4,886.36 per share, or (ii) a value that is determined by
multiplying (a) ____ (a value that will be determined following the Closing
based upon dividing the Final Purchase Price, plus $4,000,000 of transaction
expenses, by the trailing twelve (12) month's EBITDA, pursuant to Schedule A,
attached hereto) times (b) the trailing 12 month EBITDA of Maker (as of the
quarter ending nearest to March 31 of the year Payee elects to convert) less the
amount of any outstanding debt, excluding this Note, and dividing that sum by
the then number of issued and outstanding shares. The parties hereto agree to
execute a new promissory note with the multiple in clause (a) completed, as soon
as such number is available following the Closing.
11. Exercise of Conversion Option. If Payee exercises its option to
convert and Maker does not elect to prepay this Note, no later then within
thirty (30) days after the date that is forty-five (45) days after the date of
delivery of the applicable Payee Notice, Payee shall surrender this Note,
properly endorsed, together with payment of any applicable taxes, and Payee
shall be entitled to receive, as soon as practicable thereafter, a share
certificate or certificates for the number of duly authorized and validly
issued, fully paid and nonassessable Common Shares into which this Note has been
converted pursuant to Section 10 hereof, registered in its name.
12. Disclosure. If Payee exercises its option to convert and Maker does
not elect to prepay this Note, the Maker shall deliver to Payee such information
concerning Maker as has been reasonably requested by Payee. Payee shall be
provided the opportunity to review and discuss such materials and the current
operations of Maker generally with its executive and financial officers, its
legal counsel and its independent accountants and to ask questions and satisfy
itself as to the accuracy of the information contained in such materials. Payee
covenants and agrees by its acceptance hereof that it shall, prior to the
conversion of this Note, confirm in writing that it is able to bear the economic
risk of converting this Note into Common Stock and of holding such Common Stock.
13. Date of Conversion. If any certificate for Common Stock is issued
to the Payee, the Payee shall, for all purposes, be deemed to have become the
holder of record of such shares on the Initial Convertible Date, the Second
Convertible Date or the Third Convertible Date, as the case may be, irrespective
of the date of issue or delivery of the share certificate(s).
14. Representations and Deliveries Required of Payee. Payee shall not
have the right to convert this Note, and Maker shall not be obligated to deliver
Common Stock as provided herein, unless Payee represents and warrants, and
agrees with Maker in writing (a) that the Common Stock to be delivered to it
upon conversion of this Note is being acquired for its account, for investment
and not with a view to or for resale or transfer in connection with the
distribution thereof, and not with any present intention of distributing or
reselling such Common Stock; (b) that Payee will not sell, transfer, pledge or
otherwise dispose of any Common Stock unless the sale or other disposition
thereof is pursuant to the terms of that certain Stockholders' Agreement
executed by and among
5
<PAGE>
Maker and its stockholders (the "Stockholders' Agreement"); and (c) that Payee
will agree to be bound by all the other terms and conditions contained in the
Stockholders' Agreement and become a party thereto.
15. Indemnification. Payee, by its acceptance of this Note, further
understands and agrees that the Common Stock to be issued upon conversion hereof
will be issued by Maker in reliance on an exemption from registration. Payee
further acknowledges and confirms that it is fully informed as to the applicable
limitations regarding the resale of the Common Stock to be issued hereunder.
Consequently, Payee agrees to indemnify and hold Maker harmless against any and
all loss, liability, claim, damage and expense (including reasonable attorneys'
fees and court costs) whatsoever arising out of any private or governmental
litigation, commenced or threatened, or claim against Maker based upon Payee's
proposed or actual resale or transfer of such Common Stock in violation of the
representations and warranties and agreements contained herein.
16. Payee Has No Rights as Stockholder. Payee shall not, by reason of
the ownership or possession of this Note, have the right to receive dividends,
to vote, or to exercise any other rights whatsoever as a stockholder of the
Maker.
17. Severability. If any provision of this Note or the application
thereof to any person or circumstance should, for any reason and to any extent,
be invalid or unenforceable, the remainder of this Note and the application of
such provision to other persons or circumstances shall not be affected thereby,
but rather shall be enforced to the greatest extent permitted by law.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first written above.
MAKER:
TKS ACQUISITION, INC.
By:__________________________
Thomas K. Shine, President
Acknowledged and Agreed as of
the date first written above.
PAYEE:
TULTEX CORPORATION
By: ____________________
Its: ____________________
6
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, CONSTITUTE "RESTRICTED SECURITIES" AS DEFINED IN RULE
144 UNDER SUCH ACT, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH
SUCH ACT AND THE TERMS SET FORTH HEREIN. ANY ATTEMPT TO TRANSFER THE SECURITIES
REPRESENTED BY THIS CERTIFICATE WITHOUT COMPLIANCE WITH SUCH ACT AND THE TERMS
SET FORTH HEREIN SHALL BE VOID
THIS NOTE IS EXPRESSLY SUBORDINATED TO ALL OBLIGATIONS OF THE MAKER TO PNC BANK,
NATIONAL ASSOCIATION, AS AGENT FOR ITSELF AND OTHER LENDERS AS MORE SPECIFICALLY
PROVIDED IN THAT CERTAIN SUBORDINATION AGREEMENT, DATED JULY 15, 1998, EXECUTED
BY THE PAYEE AND MAKER IN FAVOR OF PNC BANK, NATIONAL ASSOCIATION, AS AGENT FOR
ITSELF AND OTHER LENDERS.
TKS ACQUISITION, INC.
NON-NEGOTIABLE SUBORDINATED PROMISSORY NOTE
$2,500,000.00 July 15, 1998
FOR VALUE RECEIVED, the undersigned, TKS ACQUISITION, INC., a Delaware
corporation with its principal office located at 8677 Logoathletic Court,
Indianapolis, Indiana 46219 (hereinafter referred to as "Maker" which term
includes any successor corporation), hereby promises to pay to TULTEX
CORPORATION, a Virginia corporation (hereinafter referred to as "Payee" which
term includes any successor corporation), on or before July 15, 2003 ("Maturity
Date"), at Payee's offices located at 101 Commonwealth Boulevard, Martinsville,
Virginia 24112, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($2,500,000.00), together with simple interest in arrears at a
rate per annum of seven and 2/10th (7.2%) percent, calculated on the basis of
the actual days elapsed but computed as if each year consisted of 365 days.
The principal of and all accrued but unpaid interest on this Note are
due and payable as follows: (a) interest is due and payable as it accrues
semi-annually on the 30th day of June and the 31st day of December each year,
commencing December 31, 1998, and on the Maturity Date; and (b) the entire
outstanding principal balance of this Note, together with accrued and unpaid
interest, is due and payable on the Maturity Date. Notwithstanding the
foregoing, the outstanding principal balance of this Note may begin to amortize
and become payable, together with the interest due as provided in clause (a)
above, in forty-eight (48) equal monthly payments commencing on the date that is
thirteen (13) months after the date hereof, if such payments are permitted under
the Subordination Agreement (defined below). To the extent that any interest is
not paid on or before the fifth (5th) day after it becomes due and payable,
Payee may, at its option, add such accrued interest to the principal of this
Note. If any payment of principal or interest on this Note is due and payable on
a day other than a "business day," such payment shall be due and payable on the
next succeeding business day. For purposes of this Note, the term "business day"
shall mean any day excluding Saturday, Sunday, and any day on which banks in
<PAGE>
Indianapolis, Indiana are authorized by law or other governmental action to
close.
1. Prepayment. Maker may prepay all or any part of the principal or
accrued interest at any time and from time to time, without premium or penalty.
All partial prepayments shall be applied first to accrued and unpaid interest
and then to principal.
2. Subordination. Notwithstanding anything contained herein to the
contrary, payment under this Note is expressly subordinated and subject in right
of payment to any and all advances, indebtedness, liabilities, and obligations
of Maker arising under that certain Revolving Credit, Term Loan and Security
Agreement, dated as of July 15, 1998 (as the same may hereafter be amended,
supplemented or otherwise modified from time to time, the "Bank Credit
Agreement"), executed by and between Maker and PNC Bank, National Association,
as agent for itself and other lenders ("Bank"), as more specifically set forth
in that certain Subordination Agreement dated as of July 15, 1998 (as the same
may hereafter be amended, supplemented or otherwise modified from time to time,
the "Subordination Agreement"), executed by and among Maker, Payee, and Bank.
Each holder of this Note, by accepting same, agrees to and shall be bound by all
the terms and conditions of this Note, including, without limitation, the
subordination provisions contained herein. Maker agrees to provide Payee with
its quarterly financial statements in the same format as those provided to the
Bank.
3. Default. Upon the occurrence of an Event of Default, the holder of
this Note may, at its option, subject to the terms of the Subordination
Agreement, declare the outstanding principal balance of and accrued but unpaid
interest on this Note at once due and payable; provided, however, that if an
Event of Default occurs pursuant to sub-clause (a) below, such accrued but
unpaid interest may (in accordance with the Subordination Agreement) be added to
and become principal instead.
"Event of Default" whenever used in this Note, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) default in the payment of any interest upon this Note when it
becomes due and payable, and continuance of such default for a period of thirty
(30) days; or
(b) default in the payment of the principal of this Note at its
maturity; or
(c) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Maker a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement or composition of
or in respect of the Maker under Federal bankruptcy laws or any other applicable
Federal or State law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of the Maker or of any substantial part of
its property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
sixty (60) consecutive days; or
(d) the institution by the Maker of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it or a petition or answer
or consent seeking reorganization or relief under Federal bankruptcy laws or any
other applicable Federal of State law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or similar official) of the Maker or of any substantial
part of its property, or the making by it of
2
<PAGE>
an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Maker in furtherance of any such action.
The failure to exercise the option to accelerate the maturity of this
Note or any other right, remedy, or recourse available to the Payee upon the
occurrence of an Event of Default shall not constitute a waiver of the right of
the Payee to exercise the same at that time or at any subsequent time with
respect to such Event of Default or any other Event of Default. The rights,
remedies, and recourses of the Payee, as provided in this Note, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefor shall arise, at the sole discretion of
the Payee. The acceptance by the Payee of any payment under this Note which is
less than the payment in full of all amounts due and payable at the time of such
payment shall not (a) constitute a waiver of or impair, reduce, release or
extinguish any right, remedy, or recourse of the Payee, or nullify any prior
exercise of any such right, remedy, or recourse; or (b) impair, reduce, release,
or extinguish the obligations of Maker as provided herein.
4. Waiver. Maker waives presentment and demand for payment, protest,
notice of protest and nonpayment, and notice of the intention to accelerate, and
agree that its liability on this Note shall not be affected by, and hereby
consents to, any renewal or extension in the time of payment hereof.
5. Interest. Regardless of any provision contained in this Note, or any
other document executed or delivered in connection therewith, Payee shall never
be deemed to have contracted for or be entitled to receive, collect or apply as
interest on this Note (whether termed interest herein or deemed to be interest
by judicial determination or operation of law), any amount in excess of the
maximum rate allowed by applicable law, and, in the event that Payee ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance of this Note, and, if the principal balance of this Note is
paid in full, any remaining excess shall forthwith be paid to Maker.
6. Notice. Any notice hereunder shall be in writing and shall be deemed
give when delivered by hand or two (2) days after being deposited in the United
States mail, postage prepaid, addressed to the Maker or Payee at the address set
forth above; provided, that if either party shall have designated a different
address by notice to the other, then to the last address so designated.
7. Governing Law; Consent to Jurisdiction. Except to the extent that
the laws of the United States may apply to the terms hereof, the substantive
laws of the State of Delaware shall govern the validity, construction,
enforcement and interpretation of this Note. Maker and any holder agree for any
proceeding or action brought with respect to this Note shall be brought in the
Federal District Court for the Southern District of Indiana or the Superior
Court of Marion County, Indiana, and each party consents to being subject to the
jurisdiction of such court and to have any such proceedings take place in the
prescribed venue.
8. Entire Understanding. This Note, the Subordination Agreement, and
the Purchase Agreement represent the final agreement between Maker and Payee and
may not be contradicted by evidence of prior, contemporaneous, or subsequent
oral agreements of the parties. There are no unwritten oral agreements between
the parties.
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<PAGE>
9. Non-Negotiable. Neither this Note nor any rights under this Note may
be sold, transferred, pledged, assigned or otherwise disposed of by Payee,
except to a successor corporation to Payee. This Note will be binding upon and
inure to the benefit of the successors and permitted assigns of the parties
hereto.
10. Severability. If any provision of this Note or the application
thereof to any person or circumstance should, for any reason and to any extent,
be invalid or unenforceable, the remainder of this Note and the application of
such provision to other persons or circumstances shall not be affected thereby,
but rather shall be enforced to the greatest extent permitted by law.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first written above.
MAKER:
TKS ACQUISITION, INC.
By:__________________________
Thomas K. Shine, President
Acknowledged and Agreed as of
the date first written above.
PAYEE:
TULTEX CORPORATION
By: ____________________
Its: ____________________
4
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT ("Agreement") is entered into as of the ___ day
of July, 1998, by and between TKS ACQUISITION, INC., a Delaware corporation
("TKS"), and TULTEX CORPORATION, a Virginia corporation ("Tultex").
RECITALS
A. Immediately prior to the execution and delivery of this Agreement,
TKS acquired substantially all of the assets relating to the licensed sports
apparel business of Tultex, LogoAthletic, Inc., and LogoAthletic/Headwear, Inc.,
pursuant to an Asset Purchase Agreement, dated as of June 12, 1998 (the
"Transaction").
B. TKS and Tultex desire to set forth the terms and conditions and to
establish a mutually beneficial supply arrangement whereby Tultex will
manufacture and deliver to TKS fleece and T-shirt products (private label and
color assortment) (collectively, the "Tultex Products") following, and as a
condition precedent to, the consummation of the Transaction.
C. TKS and Tultex desire to set forth the terms and conditions and to
establish a mutually beneficial supply arrangement whereby TKS will manufacture
and deliver to Tultex, or its subsidiary, headwear (collectively, the "TKS
Products") following, and as a condition precedent to, the consummation of the
Transaction.
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants contained herein, and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, TKS and Tultex hereby
agree as follows:
ARTICLE 1. GENERAL OBLIGATIONS AND DUTIES
1.1 Appointment and Acceptance of Tultex. Upon the terms and subject to
the conditions hereinafter set forth, TKS hereby appoints Tultex, and Tultex
hereby accepts such appointment, as a supplier to TKS of the Tultex Products.
Tultex will manufacture and deliver the Tultex Products for and at the direction
of TKS in such amounts, types and assortments as TKS requests as further
provided herein. There shall be no minimum purchasing requirements for the
Tultex Products to be purchased by TKS hereunder. TKS may purchase on or before
November 15, 1998, in its sole discretion, from Tultex and Tultex will sell to
TKS all of the Tultex Products described on Schedule 1.1 hereto on the terms and
conditions set forth herein.
1.2 Appointment and Acceptance of TKS. Upon the terms and subject to
the conditions hereinafter set forth, Tultex hereby appoints TKS, and TKS hereby
accepts such appointment, as a supplier to Tultex of the TKS Products. TKS will
manufacture and deliver the TKS Products for and at the direction of Tultex in
such amounts, types and assortments as Tultex requests as further provided
herein. There shall be no minimum purchasing requirements for the TKS Products
to be purchased by Tultex hereunder.
<PAGE>
1.3 Compliance With Laws. In the performance of the terms and
conditions of this Agreement or of any purchase order, Tultex and TKS will
comply fully with all applicable federal, state and local laws and regulations.
ARTICLE 2. TERMS OF SALE OF THE TULTEX PRODUCTS
2.1 Terms; Conditions and Ordering of the Products. Unless otherwise
mutually agreed to by the parties hereto, notwithstanding the provisions of any
order, invoice or other document or instrument, or any statement by any agent or
employee of TKS or Tultex, all sales of Tultex Products by Tultex to TKS will be
subject and pursuant to the terms of this Agreement and, to the extent not
inconsistent herewith, to the terms of TKS's purchase orders delivered to Tultex
from time to time (the "TKS Purchase Order"). Each order by TKS for any of the
Tultex Products, regardless of how evidenced, shall be subject to this Agreement
and, to the extent not inconsistent herewith, to each applicable TKS Purchase
Order. When TKS desires to purchase any of the Tultex Products from Tultex, TKS
shall transmit to Tultex a TKS Purchase Order specifying the applicable Tultex
Products, the required quantities, delivery dates, and such other or additional
information regarding the order as may be reasonably necessary for Tultex to
fill the order. Tultex shall use commercially reasonable efforts to fill the TKS
Purchase Order in accordance with the terms thereof.
2.2 Risk of Loss; Title. Title and risk of loss with respect to the
Tultex Products purchased by TKS will pass to TKS upon Tultex's delivery of the
Tultex Products to a carrier for delivery to TKS. Tultex covenants that the
Tultex Products shall not be subject to any liens, security interests, charges
or other encumbrances of any nature whatsoever at the time that title and risk
of loss pass from Tultex to TKS pursuant to the terms hereof.
2.3 Delivery; Freight. Delivery of the Tultex Products will be made
within the time provided in the applicable TKS Purchase Order, and delivery will
occur when the Tultex Products are received by TKS. TKS will pay for all freight
and delivery charges for delivery of the Tultex Products to TKS.
2.4 Warranties. Tultex hereby warrants that all of the Tultex Products
will be (i) in conformity with the relevant TKS Purchase Order, (ii)
merchantable and fit for its intended use, and (iii) free from defects, whether
latent or patent, in material and workmanship. TKS and Tultex shall each
cooperate in good faith with the other to resolve any dispute that may arise
between them with respect to a breach of any warranty relating to the Tultex
Products supplied hereunder. In addition, Tultex covenants and agrees to process
all TKS Purchase Orders in good faith with priority given to the orders
hereunder that is no less favorable to TKS than Tultex gives to any other
customer and consistent with past practice.
2.5 Price. The prices for the various Tultex Products will be as
follows:
T-shirts
(bullet) Cost for (i) all TKS Purchase Orders, or those purchase orders of
LogoAthletic, Inc. assumed
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by TKS, that have an acknowledged delivery date for Tultex Products on
or prior to July 4, 1998, and (ii) all T-shirts set forth on Schedule
1.1.
(bullet) Cost plus 10% for all Tultex Products ordered by TKS Purchase Orders,
or those purchase orders of LogoAthletic, Inc. assumed by TKS (other
than Tultex Products reflected in the amounts set forth on Schedule
1.1 which will be sold at Cost) with respect to which the earlier of
the acknowledged delivery date or 120 days after the date of such
purchase order falls between July 4, 1998 and October 4, 1998.
(bullet) Cost plus 15% for all Tultex Products ordered by TKS Purchase Orders,
or those purchase orders of LogoAthletic, Inc. assumed by TKS (other
than Tultex Products reflected in the amounts set forth on Schedule
1.1 which will be sold at Cost) with respect to which the earlier of
the acknowledged delivery date or 120 days after the date of such
purchase order falls between October 4, 1998 and January 4, 1999.
(bullet) Cost plus 17.5% for all Tultex Products ordered by TKS Purchase Orders
(other than Tultex Products reflected in the amounts set forth on
Schedule 1.1 which will be sold at Cost) with respect to which the
earlier of the acknowledged delivery date or 120 days after the date
of such purchase order falls between January 4, 1999 and April 30,
1999.
(bullet) Except for items set forth on Schedule 1.1, for all Tultex Products
ordered by TKS Purchase Orders with respect to which the earlier of
the acknowledged delivery date or 120 days after the date of such
purchase order falls after April 30, 1999, the price shall be as
mutually agreed to by the parties.
Fleece
(bullet) Cost for (i) all TKS Purchase Orders, or those purchase orders of
LogoAthletic, Inc. assumed by TKS, that have an acknowledged delivery
date for Tultex Products on or prior to July 4, 1998, and (ii) all
fleece products set forth on Schedule 1.1.
(bullet) Cost plus 17.5% for all Tultex Products ordered by TKS Purchase
Orders, or those purchase orders of LogoAthletic, Inc. assumed by TKS
(other than Tultex Products reflected in the amounts set forth on
Schedule 1.1 which will be sold at Cost) with respect to which the
earlier of the acknowledged delivery date or 120 days after the date
of such purchase order falls between July 4, 1998 and April 30, 1999.
(bullet) Except for items set forth on Schedule 1.1, for all Tultex Products
ordered by TKS Purchase Orders with respect to which the earlier of
the acknowledged delivery date or 120 days after the date of such
purchase order falls after April 30, 1999, the price shall be as
mutually agreed to by the parties.
As used herein, Tultex's "Cost" shall mean the costs for each of the
Tultex Products as set forth on Schedule 2.5 hereto.
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2.6 Invoice. Tultex shall issue a separate invoice to TKS for each
shipment. The invoice shall be issued no earlier than the date on which Tultex
delivers the Tultex Products to the applicable carrier for delivery to TKS.
2.7 Payment. Payment to Tultex shall be due sixty (60) days after the
date of Tultex's invoice.
2.8 Unavailability of the Tultex Products. Tultex shall promptly notify
TKS if for any reason Tultex is unable to supply TKS's requests for any Tultex
Products at any time during the term of this Agreement. Tultex will use its best
efforts to make the Tultex Products available to TKS throughout the term of this
Agreement.
ARTICLE 3. TERMS OF SALE OF THE TKS PRODUCTS
3.1 Terms; Conditions and Ordering of the Products. Unless otherwise
mutually agreed to by the parties hereto, notwithstanding the provisions of any
order, invoice or other document or instrument, or any statement by any agent or
employee of TKS or Tultex, all sales of TKS Products by TKS to Tultex will be
subject and pursuant to the terms of this Agreement and, to the extent not
inconsistent herewith, to the terms of Tultex's purchase orders delivered to TKS
from time to time (the "Tultex Purchase Order"). Each order by Tultex for any of
the TKS Products, regardless of how evidenced, shall be subject to this
Agreement and, to the extent not inconsistent herewith, to each applicable
Tultex Purchase Order. When Tultex desires to purchase any of the TKS Products
from TKS, Tultex shall transmit to TKS a Tultex Purchase Order specifying the
applicable TKS Products, the required quantities, delivery dates, and such other
or additional information regarding the order as may be reasonably necessary for
TKS to fill the order. TKS shall use commercially reasonable efforts to fill the
Tultex Purchase Order in accordance with the terms thereof.
3.2 Risk of Loss; Title. Title and risk of loss with respect to the TKS
Products purchased by Tultex will pass to Tultex upon TKS's delivery of the TKS
Products to a carrier for delivery to Tultex. TKS covenants that the TKS
Products shall not be subject to any liens, security interests, charges or other
encumbrances of any nature whatsoever at the time that title and risk of loss
pass from TKS to Tultex pursuant to the terms hereof.
3.3 Delivery; Freight. Delivery of the TKS Products will be made within
the time provided in the applicable Tultex Purchase Order, and delivery will
occur when the TKS Products are received by Tultex. Tultex will pay for all
freight and delivery charges for delivery of the TKS Products to Tultex.
3.4 Warranties. TKS hereby warrants that all of the TKS Products will
be (i) in conformity with the relevant Tultex Purchase Order, (ii) merchantable
and fit for its intended use, and (iii) free from defects, whether latent or
patent, in material and workmanship. TKS and Tultex shall each cooperate in good
faith with the other to resolve any dispute that may arise between them with
respect to a breach of any warranty relating to the TKS Products supplied
hereunder. In addition, TKS covenants and agrees to process all Tultex Purchase
Orders in good
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faith and with priority given to the orders hereunder that is no less favorable
to Tultex than TKS gives to any other customer.
3.5 Price. The prices for the various TKS Products will be as follows:
All Headwear
(bullet) Cost plus 15%, plus custom's duty charges and freight, for all TKS
Products ordered by Tultex Purchase Orders with respect to which the
earlier of the acknowledged delivery date or 120 days after the date
of such purchase order falls between July 4, 1998 and April 30, 1999.
(bullet) For all TKS Products ordered by Tultex Purchase Orders with respect to
which the earlier of the acknowledged delivery date or 120 days after
the date of such purchase order falls after April 30, 1999, the price
shall be as mutually agreed to by the parties.
As used herein, TKS's "Cost" shall mean TKS's FOB price.
3.6 Invoice. TKS shall issue a separate invoice to Tultex for each
shipment. The invoice shall be issued no earlier than the date on which TKS
delivers the TKS Products to the applicable carrier for delivery to Tultex.
3.7 Payment. Payment to TKS shall be due sixty (60) days after the date
of TKS's invoice.
3.8 Unavailability of the TKS Products. TKS shall promptly notify
Tultex if for any reason TKS is unable to supply Tultex's requests for any TKS
Products at any time during the term of this Agreement. TKS will use its best
efforts to make the TKS Products available to Tultex throughout the term of this
Agreement.
ARTICLE 4. INDEMNIFICATION
4.1 Indemnification of TKS. Tultex hereby indemnifies and holds TKS
harmless from and against all claims, actions, costs, losses, liabilities and
damages, including, without limitation, reasonable attorneys' fees, on account
of or related, in whole or in part, to any breach by Tultex of any of its
covenants, agreements or obligations under this Agreement.
4.2 Indemnification of Tultex. TKS hereby indemnifies and holds Tultex
harmless from and against all claims, actions, costs, losses, liabilities and
damages, including, without limitation, reasonable attorneys' fees, on account
of or related, in whole or in part, to any breach by TKS of any of its
covenants, agreements or obligations under this Agreement.
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ARTICLE 5. TERM AND TERMINATION
5.1 Term. Unless terminated sooner pursuant to Section 5.2 hereof, this
Agreement will continue in full force and effect for a period commencing on the
date hereof until April 30, 1999. The term of this Agreement will continue
thereafter unless either party gives thirty (30) days written notice to the
other party to the effect that such party wishes this Agreement to terminate 30
days after receipt of such written notice.
5.2 Termination. This Agreement may be terminated by either party at
any time upon notice of termination to the other party, if such other party
shall have materially breached any of its obligations hereunder and shall have
failed to cure such breach within sixty (60) days after having received notice
of such breach from the terminating party. No such termination will affect any
rights of either party which accrued hereunder prior to or on account of such
termination, and any such termination will be in addition to and not in lieu of
any other rights or remedies available to the terminating party at law or in
equity. This Agreement shall terminate immediately upon written notice by either
party to the other party in the event that the party receiving such notice
hereunder shall have (a) evidenced a failure or inability generally to pay its
debts in the ordinary course of business as they become due, (b) otherwise
become insolvent, (c) ceased doing business as a going concern, (d) made a
general assignment for the benefit of creditors, or (e) filed, or have filed
against it without dismissal within sixty (60) days, a petition seeking the
reorganization, arrangement, composition, adjustment, liquidation, or
dissolution of such other party, or seeking the appointment of a trustee,
receiver, assignee, liquidator or similar officer of a material part of its
assets or properties. No such termination will affect any rights of either party
which accrued hereunder prior to or on account of such termination, and any such
termination will be in addition to and not in lieu of any other rights or
remedies available to the terminating party at law or in equity.
ARTICLE 6. MISCELLANEOUS
6.1 Relationship of the Parties. The parties acknowledge and agree that
Tultex and TKS are independent contractors in relation to each other, and that
neither party nor any of its employees or agents may be deemed to be in any
manner the employee or agent of the other party. Neither party nor any of its
employees or agents is authorized or empowered to incur obligations of any kind,
express or implied, on behalf of the other party or to make any promise,
warranty or representation on behalf of the other party.
6.2 Force Majeure. Neither party shall be liable to the other or deemed
to be in breach of this Agreement by reason of any delay or omission due to
fire, flood or other act of God, labor or transportation strike or stoppage, act
of war, precedent or priority granted at the request or for the direct or
indirect benefit of any governmental authority, import or export restriction, or
other like action, event or condition; provided, however, that prompt notice of
such delay or omission and its cause shall be given to the other party.
6.3 Further Assurances. From time to time after the date of this
Agreement, upon reasonable notice and without further consideration, each party
shall execute, acknowledge and
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deliver all other documents and instruments and shall take all other action as
may be reasonably necessary or appropriate in the reasonable discretion of the
other party to carry out the intent and purpose of this Agreement and consummate
or evidence the transactions contemplated by this Agreement.
6.4 Assignments; Binding Effect. Neither party may assign any of its
rights or delegate any of its responsibilities hereunder, whether by operation
of law or otherwise, without the prior written consent of the other party
hereto, and any attempted assignment or delegation shall be void and of no
effect. This Agreement shall be binding upon and inure to the benefit of each of
the parties and their respective successors and assigns.
6.5 Amendments. No amendment, supplement or modification of this
Agreement or any provision hereof will be binding unless in a writing signed by
each party hereto and specifically referring to this Agreement. The terms of
this Agreement shall take precedence over and shall supersede any conflicting or
inconsistent term contained in or incorporated by reference into any other
document or further agreement exchanged between the parties with respect to (i)
any sale of the Tultex Products by Tultex to TKS, including, without limitation,
any TKS Purchase Order or any order acceptance, confirmation or invoice of
Tultex, and (ii) any sale of the TKS Products by TKS to Tultex, including,
without limitation, any Tultex Purchase Order or any order acceptance,
confirmation or invoice of TKS.
6.6 Severability. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be held invalid or unenforceable by any court or other governmental
authority of competent jurisdiction, then the remainder of this Agreement and
the application of such provision to other persons or circumstances shall not be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.
6.7 Notices. All notices hereunder shall be given in writing and shall
be: (a) personally delivered; (b) sent by facsimile transmission or other
electronic means of transmitting written documents; or (c) sent to the parties
at their respective addresses indicated herein by registered or certified U.S.
mail, return receipt requested and postage prepaid, or by private overnight air
courier service. The respective addresses to be used for all such notices are as
follows (or as otherwise designated in a notice given pursuant hereto):
If to TKS, to: TKS Acquisition, Inc.
8677 Logoathletic Court
Indianapolis, Indiana 46219
Attn: Thomas K. Shine
Facsimile: 317-895-7252
If to Tultex, to: Tultex Corporation
101 Commonwealth Boulevard
Martinsville, Virginia 24112
Attention: O. Randolph Rollins, Esq.
Facsimile: 540-632-8751
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If personally delivered, notice shall be deemed given upon actual receipt; if
electronically transmitted pursuant to this paragraph, notice shall be deemed
given the next business day after transmission; if sent by overnight courier
pursuant to this paragraph, notice shall be deemed given upon receipt; and if
sent by U.S. mail pursuant to this paragraph, notice shall be deemed given as of
the date of delivery indicated on the receipt issued by the postal service, or,
if the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal.
6.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same document.
6.9 Headings. The section headings in this Agreement are intended
solely for convenience of reference and shall not limit the coverage of any
section or be given any effect in the construction or interpretation of this
Agreement.
6.10 Entire Agreement. This Agreement constitutes the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations among the parties concerning such subject matter are
merged into this Agreement, and there are no representations, warranties,
covenants, understandings or agreements, oral or otherwise, in relation thereto
between the parties other than those incorporated herein.
6.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
the conflict of laws provisions thereof. Notwithstanding the foregoing sentence,
the parties acknowledge that the existence of any warranty applicable to a
purchase and sale of goods hereunder may depend upon the construction of the
laws governing the purchase of the products hereunder, and such laws may be of a
jurisdiction other than the State of Delaware.
6.12 Non-Disclosure. Each party hereto agrees to hold and safeguard any
confidential or proprietary information relating to the other party in trust for
the other party (and its successors and assigns), and agrees that it shall not,
without the prior written consent of the other party, misappropriate, disclose
or make available to anyone outside of the parties hereto, at any time, either
during of following the term of this Agreement, any confidential or proprietary
information, except as required by applicable law.
[signature page follows]
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IN WITNESS WHEREOF, this Supply Agreement has been executed by the duly
authorized officers of each of the parties as of the day and year first written
above.
TULTEX CORPORATION
By: __________________________________
Print Name: ____________________________
Title: _________________________________
TKS ACQUISITION, INC.
By: __________________________________
Print Name: ____________________________
Title: _________________________________
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