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): September 29, 1997
BRAZOS SPORTSWEAR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 0-18054 91-1770931
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
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4101 FOUNDERS BOULEVARD
CINCINNATI, OHIO 45103-2553
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
(513) 753-3400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
3860 VIRGINIA AVENUE
CINCINNATI, OHIO 45227
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 29, 1997, Brazos Sportswear, Inc. (the "Company") purchased
substantially all of the assets of CS Crable Sportswear, Inc. The total
consideration paid by the Company was approximately $13.5 million. The Company
also entered into a lease agreement with respect to Crable's former facility and
has relocated its corporate headquarters to that facility, which is located at
4101 Founders Boulevard, Cincinnati, Ohio 45103-2553. In connection with the
acquisition, the Company expanded its revolving credit facility from $50 million
to $70 million.
Crable was a manufacturer and marketer of licensed sportswear for colleges
and professional sports teams, with annual revenues of approximately $30
million.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. As of the date of this
Form 8-K, it is impracticable to determine whether financial statements
will be required to be filed with respect to the Crable acquisition.
The Company will file any such required information by amendment to
this Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION. As of the date of this Form 8-K, it is
impracticable to determine whether pro forma information will be
required to be filed with respect to the Crable acquisition. The
information required hereunder, if any, will be filed concurrently with
the filing of the financial statements discussed above.
(c) EXHIBITS.
EXHIBIT NO. EXHIBIT
- ----------- -------
10.1 Asset Purchase Agreement, dated September 29, 1997,
between CS Crable Sportswear, Inc. and Brazos, Inc.
10.2 First Amendment to Third Amended and Restated Loan
and Security Agreement dated September 29, 1997
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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, thereunto duly authorized.
DATED this 13th day of October, 1997.
BRAZOS SPORTSWEAR, INC.
By: /s/ F. CLAYTON CHAMBERS
F. Clayton Chambers,
Vice President and Chief
Financial Officer
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
DATED SEPTEMBER 29, 1997
BY AND BETWEEN
BRAZOS, INC.
AND
CS CRABLE SPORTSWEAR, INC.
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of September 29, 1997 (this
"AGREEMENT"), is by and between BRAZOS, INC., a Texas corporation (the "BUYER"),
and CS CRABLE SPORTSWEAR, INC., an Ohio corporation (the "SELLER").
WHEREAS, the Seller is currently engaged in the business of decorating,
selling and distributing sportswear products (the "BUSINESS"); and
WHEREAS, the Seller desires to sell substantially all of its assets, and
the Buyer desires to acquire such assets, and to assume only such liabilities as
are expressly set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements, and subject to the terms
and conditions herein contained, the parties hereto hereby agree as follows:
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable of Seller as of
the Effective Time, a list of which is attached hereto as Schedule A.
"ADVERSE CONSEQUENCES" shall mean any actions, suits, proceedings,
hearings, investigations, complaints, claims, causes of action, demands,
injunctions, judgments, orders, decrees, rulings, damages, penalties, fines,
liabilities, awards, obligations, taxes, liens, losses, costs, fees and
expenses, including court costs and reasonable attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"APPLICABLE ENVIRONMENTAL LAWS" means any applicable federal, state or
local law, statute, ordinance, rule, regulation, order or notice requirement
pertaining to human health, the environment, or to the storage, treatment,
discharge, release or disposal of hazardous wastes or hazardous substances,
including, without limitation (i) the Comprehensive Environmental Response,
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Compensation and Liability Act of 1980 (42 U.S.C. ss.ss. 9601 ET SEQ.), as
amended from time to time ("CERCLA") (including, without limitation, as amended
pursuant to the Superfund Amendments and Reauthorization Act of 1986), and
regulations promulgated under CERCLA, (ii) the Resources Conservation and
Recovery Act of 1976 (42 U.S.C. ss.ss. 6901 ET SEQ.), as amended from time to
time ("RCRA"), and regulations promulgated under RCRA, and (iii) the Federal
Water Pollution Control Act (U.S.C.A. ss. 9601 ET SEQ.), as amended and
regulations promulgated under its authority.
"ARBITRATOR" shall mean an individual reasonably agreed to by Buyer and
Seller who is a member/partner of a Cincinnati office of an internationally
recognized accounting firm (i.e. "Big Six") which does not have any regular
ongoing client relationship with Buyer or Seller.
"ASSUMED LIABILITIES" means (i) the Seller's outstanding purchase orders,
all of which are listed on Schedule B relating to Unreceived Inventory; (ii) all
liabilities and obligations relating to the Contracts, but only to the extent
said liabilities and obligations are attributable to sales and/or other
activities of the Business after the Effective Time; (iii) liabilities for
credits owned to certain customers of the Seller as shown on Schedule A; (iv)
all sales, transfer or excise taxes imposed on the transfer of the Purchased
Assets; and (v) the Vacation Liability; PROVIDED, HOWEVER, the Assumed
Liabilities shall not include any Excluded Liabilities.
"BALANCE SHEET DATE" shall have the meaning ascribed to such term in
Section 2.1.4 of this Agreement.
"BUSINESS" shall have the meaning ascribed to such term in the preamble
hereto.
"CLOSE-OUT INVENTORY" shall mean any Inventory owned by the Seller at the
Effective Time that the Seller has designated for sale either (i) at a close-out
event commonly referred to by the Seller as a "tent sale" or (ii) through the
Seller's other normal close-out channels of distribution whether booked or not.
A list of Close-Out Inventory is attached hereto as Schedule C.
"CLOSING" shall mean the consummation of the transactions contemplated by
this Agreement.
"CLOSING DATE" shall mean the date of this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONTRACTS" means all contracts, agreements, licenses, permits, leases and
subleases owned or held by the Seller and used or useful in the operation of the
Business.
"DISPUTED MATTERS" shall have the meaning ascribed to such term in Section
1.3.3(d) of this
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Agreement.
"EFFECTIVE TIME" shall mean 12.01 a.m. Eastern Daylight Time on the
Closing Date.
"EMPLOYEE AGREEMENTS" means all collective bargaining and other similar
contracts and agreements with the Seller's employees, including amendments,
supplements and written or oral understandings, and all employment, compensation
or consulting agreements, whether written or oral, of the Seller with any
person.
"EMPLOYEE PLANS" means all bonus, incentive compensation, deferred
compensation, profit-sharing, retirement, pension, welfare, group insurance,
death benefit, or other fringe benefit plans, arrangements or trust agreements
of the Seller.
"ENCUMBRANCE" shall mean any security interest, mortgage, pledge, claim,
lien, charge, option, right of first refusal, preferential purchase right,
defect, encumbrance or other right or interest of any other person.
"EQUIPMENT" shall mean all machinery, equipment, furniture, fixtures and
other fixed assets owned by the Seller as of the Effective Time, excluding all
automobiles, trucks, trailers and other vehicles except the Vehicles. The
Equipment is listed on Schedule D-1 attached hereto. Equipment shall also
include the telephones, telephone system and related equipment owned by Midland
as shown on Schedule D-2 attached hereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ESTIMATED PURCHASE PRICE" shall have the meaning ascribed to such term in
Section 1.3.2 of this Agreement.
"EXCLUDED ASSETS" means (i) all assets in possession of the Seller but
owned by third parties; (ii) the corporate charter, corporate seal, related
organizational documents and minute books of the Seller; (iii) the cash or other
consideration paid or payable by the Buyer to the Seller pursuant to Section 1.3
hereof; (iv) cash and cash equivalents (including marketable securities and
short term investments) owned by the Seller as of the Effective Time, (v) any
rights of the Seller under this Agreement or any other agreement between the
Seller and the Buyer or any Affiliate of the Buyer; and (vi) all automobiles,
trucks, trailers and other vehicles owned or leased by the Seller except the
Vehicles.
"EXCLUDED LIABILITIES" means (a) all liabilities of the Seller which are
not Assumed Liabilities, (b) any federal and state income taxes or, sales or use
taxes, franchise taxes, payroll taxes
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and any other taxes and tax liability relating to revenues earned on the
operation of the Business prior to the Effective Time, (c) the Financial
Advisory Fee, and (d) all attorneys' and accountants' fees and expenses and any
other fees and expenses incurred by the Seller in connection with the
consummation of the transactions contemplated hereby.
"FINAL STATEMENT" shall mean the Revised Statement described in Section
1.3.3(a), as prepared by the Buyer and as may be subsequently adjusted to
reflect any subsequent written agreement between the parties with respect
thereto, or if submitted to the Arbitrator, the Revised Statement issued by the
Arbitrator.
"FINANCIAL ADVISORY FEE" shall mean the financial advisory fee payable by
Midland to Carleton, McCreary, Holmes & Co.
"GAAP" means generally accepted accounting principles.
"GROSS BOOK VALUE" shall mean gross book value as determined by GAAP
consistently applied by Seller; provided that (i) gross book value of Accounts
Receivable and Inventory shall be calculated without reduction for reserves
and/or allowances that may appear on the Seller's books and records, and (ii)
gross book value of Normal Booked Inventory shall include the capitalized cost
of any embellishment of such inventory, calculated in accordance with the
Seller's 1997 cost standards as previously provided to the Buyer. The
capitalized cost of embellishment to Seller's Normal Booked Inventory (as of
September 25, 1997) is shown on Schedule E attached hereto.
"INTELLECTUAL PROPERTY" means all copyrights, patents, patent
applications, service marks, trademarks tradenames, trade secrets, written
know-how and all other similar proprietary data and intellectual property, and
the goodwill associated therewith, owned by the Seller or used in the operation
of the Business, including, without limitation, the name "CS Crable Sportswear,
Inc." and all derivations thereof and rights thereto.
"INVENTORY" shall mean all inventories of raw materials, supplies, goods
in process and finished goods owned by the Seller, including, without
limitation, Supplies Inventory, Normal Booked Inventory, Normal Unbooked
Inventory, Close-Out Inventory, Prepaid Inventory and Unreceived Inventory.
"MATERIAL CONTRACTS" shall mean Contracts which are to be performed in
whole or in part after the date hereof, and which involve or may involve
aggregate payments by or to the Seller of $10,000 or more after such date and
which are not terminable with thirty days notice.
"MIDLAND" shall mean The Midland Company, an Ohio corporation, and the
parent
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corporation of the Seller.
"NORMAL BOOKED INVENTORY" shall mean any garment Inventory (whether
finished, unfinished or in process) owned by the Seller as of the Effective Time
to fulfill a binding written order received by the Seller (including bulk orders
and allowing for reasonable substitutions of similar garments made in the
ordinary course of business, but excluding orders which are past canceled
dates), but excluding Close-Out Inventory. A list of Normal Booked Inventory is
included on Schedules F-1 and F-2 attached hereto.
"NORMAL UNBOOKED INVENTORY" shall mean any garment Inventory (whether
finished, unfinished or in process) owned by the Seller as of the Effective Time
that is not Normal Booked Inventory, Prepaid Inventory or Close-Out Inventory. A
list of Normal Unbooked Inventory is included on Schedules F-1 and F-2 attached
hereto.
"NOTICE OF DISAGREEMENT" shall have the meaning ascribed to such term in
Section 1.3.3(a) of this Agreement.
"PRELIMINARY STATEMENT" shall have the meaning ascribed to such term in
Section 1.3.2 of this Agreement.
"PREPAID INVENTORY" shall mean garment inventory in transit which has not
been received as of the Effective Time and for which Seller has provided Buyer
evidence of payment satisfactory to Buyer. A list of Prepaid Inventory is
attached hereto as Schedule G.
"PREPAIDS" shall mean all prepaid royalties, deposits, commissions and
expenses which Seller has paid under any Contract, or otherwise, but which has
not been fully utilized as of the Effective Time, which are for the benefit of
the Business. A list of Prepaids is attached hereto as Schedule H.
"PURCHASED ASSETS" means the assets purchased and sold pursuant to this
Agreement.
"RECORDS" means all books, records, customer lists and telephone numbers,
account ledgers, sales and promotional literature, files, data, supplier lists
and all other records of the Seller relating to the ownership or operation of
the Business, except records which are Excluded Assets.
"REVISED STATEMENT" shall have the meaning ascribed to such term in
Section 1.3.3(a) of this Agreement.
"SUPPLIES INVENTORY" shall mean any of the supplies that are owned by the
Seller as
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Inventory as of the Effective Time and which are used for the embellishment of
the Seller's garment Inventory. A list of Supplies Inventory is attached hereto
as Schedule I.
"TRANSFERRED EMPLOYEES" shall mean all employees of Seller prior to the
Effective Time who become employees of Buyer as of the Effective Time.
"UNAUDITED BALANCE SHEET" shall have the meaning ascribed to such term in
Section 2.1.4 of this Agreement.
"UNDISPUTED PORTION" shall mean the portion of the difference between the
Estimated Purchase Price and the Purchase Price shown on the Revised Statement
that is not disputed in good faith by the Seller in the Notice of Disagreement.
"UNRECEIVED INVENTORY" shall mean goods ordered by the Seller pursuant to
outstanding purchase orders but not yet received by the Seller as of the
Effective Time that, if in the Seller's possession, would constitute Inventory
and shall not include Prepaid Inventory. A list of Unreceived Inventory is
attached hereto as Schedule J.
"UNRECEIVED INVENTORY CREDIT" shall mean 35% of the Gross Book Value of
any Unreceived Inventory that would have been Unbooked Normal Inventory if it
had been in the Seller's possession as of the Effective Time.
"VACATION LIABILITY" shall mean the liability of Seller for accrued
vacation for employees of Seller as detailed by individual and in amounts as
shown on Schedule K hereto.
"VEHICLES" means that certain Ford Truck, VIN No. 1FDLF47GXREA08852 and
that certain Plymouth Voyager VIN No. 2P4GH4537SR178221 owned by the Seller.
"WARN LAWS" shall mean the Worker Adjustment and Retraining Notification
Act and any other similar laws, rules or regulations relating to employees'
rights upon termination of employment.
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ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and
conditions set forth in this Agreement, as of the Effective Time, the Seller
hereby sells, conveys, transfers, assigns and delivers to the Buyer all
Equipment, Inventory, Accounts Receivable, Contracts, Intellectual Property (all
of which is described on Schedule L attached hereto), Records and all other
assets of the Seller existing as of the Effective Time, whether tangible or
intangible, whether or not described in the Schedules attached hereto, but
excluding the Excluded Assets.
1.2 [INTENTIONALLY OMITTED]
1.3 CONSIDERATION FOR PURCHASED ASSETS; ESTIMATED PURCHASE PRICE; FINAL
PURCHASE PRICE.
1.3.1 PURCHASE PRICE. As consideration for the sale of the Purchased
Assets to the Buyer and for the other covenants and agreements of the
Seller, the Buyer shall pay to the Seller an amount (the "Purchase Price")
equal to the following:
(i) the sum of the following:
(a) 95% of the Gross Book Value of the Accounts
Receivable;
(b) 100% of the Gross Book Value of the Supplies
Inventory;
(c) 100% of the Gross Book Value of Normal Booked
Inventory (plus the capitalized cost of embellishment shown on
Schedule E attached hereto);
(d) 65% of the Gross Book Value of Normal Unbooked
Inventory;
(e) 65% of the Gross Book Value of Prepaid Inventory;
(f) 50% of the Gross Book Value
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of Close-Out Inventory;
(g) 100% of the depreciated book value of the Equipment;
and
(h) 100% of the Gross Book Value of the Prepaids.
LESS:
(ii) the sum of the following:
(A) $590,000, which is a negotiated
figure representing Seller's adjusted, estimated
budgeted operating losses for the months of October and
November, 1997, an estimate of uncollectible Accounts
Receivable over the amount of uncollectible Accounts
Receivable included in the 5% discount for purchase of
Accounts Receivable, the amount of the fixed overhead
component of the capitalized cost of embellishment of
Normal Booked Inventory, Vacation Liability,
consideration for waiver of certain contingencies and
other items; and
(B) the Unreceived Inventory Credit.
1.3.2 ESTIMATED PURCHASE PRICE. Schedule 1.3.2 is a statement (the
"PRELIMINARY STATEMENT") setting forth in reasonable detail each component
of the Purchase Price calculation set forth in Section 1.3.1 and the
Seller's and Buyer's good faith estimate of the Purchase Price (the
"ESTIMATED PURCHASE PRICE"). At the Closing, the Buyer shall pay to the
Seller the Estimated Purchase Price by wire transfer (or other means
acceptable to Seller) of immediately available funds to an account
designated by the Seller in writing.
1.3.3 FINAL PURCHASE PRICE
(a) On or before thirty (30) days after the Closing Date, the Buyer
shall deliver to the Seller a statement (the "REVISED STATEMENT") setting
forth the Buyer's calculation of the actual Purchase Price, which shall be
calculated in accordance with the requirements of
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this Agreement and shall contain supporting documentation which is
substantially similar to that used in the calculation of the Estimated
Purchase Price. To the extent reasonably required by the Buyer, the Seller
shall assist in the preparation of the Revised Statement. Upon request of
the Seller, the Buyer shall provide the Seller such data and information
and access to such books, records and information systems as the Seller
may reasonably request supporting the amounts reflected on the Revised
Statement in order to permit the Seller to perform or cause to be
performed an audit of the Revised Statement. The Revised Statement shall
become the Final Statement binding upon the parties unless the Seller
gives written notice of its disagreement (a "NOTICE OF DISAGREEMENT") to
the Buyer within thirty (30) days following receipt thereof. Any such
Notice of Disagreement shall specify in detail the dollar amount, nature
and basis of any disagreement so asserted.
(b) In the event of a Notice of Disagreement, the Buyer and the
Seller agree that the Buyer or the Seller, as the case may be, shall be
entitled to a post-closing settlement payment of not less than the
Undisputed Portion, which Undisputed Portion shall be paid by the Buyer or
the Seller to the other, as the case may be, in accordance with Section
1.3.4.
(c) During the thirty (30) days following the date of receipt by the
Buyer of the Notice of Disagreement, the Buyer and the Seller shall
attempt to resolve, in writing, any differences that they may have with
respect to any matter specified in the Notice of Disagreement.
(d) If at the end of such thirty (30) day period, the Buyer and the
Seller have failed to reach written agreement with respect to all of such
matters, then all such matters as specified in any Notice of Disagreement
as to which such written agreement has not been reached (the "DISPUTED
MATTERS") shall be submitted to and reviewed by the Arbitrator. The
Arbitrator shall act promptly to resolve all Disputed Matters within sixty
(60) days after the date of submission of the Disputed Matters thereto.
Upon the resolution by the Arbitrator to its satisfaction of all Disputed
Matters, the Arbitrator shall cause to be prepared and shall deliver to
the Buyer and the Seller a further Revised Statement, which shall be the
Final Statement binding upon the Buyer and the Seller. The fees and
expenses, if any, of the Arbitrator shall be paid one-half by the Buyer
and one-half by the Seller.
1.3.4 POST-CLOSING SETTLEMENT. In the event of any differences
between the Estimated Purchase Price, as shown on the Preliminary
Statement, and the Purchase Price, as shown on the Final Statement,
payments in respect of such differences shall be made in full, by the
Buyer or the Seller, as applicable, by wire transfer in immediately
available funds as follows:
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(a) The Undisputed Portion, if any, shall be paid within seven
(7) days following the date of receipt by Buyer of the Notice of
Disagreement or following any subsequent mutual written agreement
which resolves any Disputed Matters; and
(b) The amount of said differences, if any, resulting from the
determination of the final Purchase Price set forth in the Final
Statement (less the amount of the previously paid Undisputed
Portion), shall be paid within seven (7) days following receipt by
the parties of the Final Statement.
1.3.5 OTHER CONSIDERATION.
1.3.5.1 ASSUMED LIABILITIES. As additional consideration for
the sale of the Purchased Assets, Buyer hereby assumes only the
Assumed Liabilities. In the event that Seller makes payment on any
purchase order which is listed on Schedule B attached hereto, then
Buyer shall reimburse Seller for such payment upon receipt by Buyer
of evidence reasonably satisfactory to Buyer that such payment was
made by Seller.
1.3.5.2 UNRECEIVED INVENTORY CREDIT REIMBURSEMENT. In the
event that (i) any Unreceived Inventory is not received by the Buyer
within one hundred twenty (120) days from the Closing Date (in which
event Buyer shall have no obligation to purchase such Unreceived
Inventory), or (ii) the Buyer cancels any purchase order relating to
any Unreceived Inventory prior to receipt thereof, the Buyer shall,
within ten (10) business days from the expiration of said one
hundred twenty (120) day period or the cancellation of said purchase
order, as applicable, reimburse the Seller the amount of the
Unreceived Inventory Credit attributable to said Unreceived
Inventory.
1.3.5.3 CUSTOMER CREDITS. The parties acknowledge that the 5%
discount on the Accounts Receivable component of the Purchase Price
is a negotiated figure that represents an estimate of historical
levels of chargebacks, markdowns, cooperative advertising
reductions, advertising allowances, volume rebates and other amounts
charged by customers to the Seller in the ordinary course of
business through reductions in Accounts Receivable. The Gross Book
Value of Accounts Receivable shown on the Final Statement will
include reductions to account for credits owed to certain customers.
The Buyer shall assume the obligation to repay any such credits but
only to the extent such credits are shown on the Final Statement.
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1.3.5.4 UNUSED PREPAIDS/GUARANTEED MINIMUM ROYALTIES. Within
30 days after December 31, 1997, Buyer shall make a reconciliation
of Prepaids versus the amounts of such Prepaids which inured to the
benefit of Buyer. In the event such reconciliation shows that not
all of the Prepaids inured to the benefit of Buyer, then Seller
shall immediately pay the difference to Buyer. At the same time,
Buyer shall prepare a reconciliation of royalties paid by Buyer and
Seller during calendar year 1997 versus guaranteed minimum royalties
required to be paid under the Contracts during calendar year 1997.
In the event such reconciliation shows that royalties actually paid
were less than guaranteed minimum royalties, then Seller shall pay
the difference to the Buyer. Buyer shall prepare such
reconciliations and Seller shall consider, pay and/or dispute such
reconciliations in the same manner as the parties have agreed to
determine the Final Purchase Price as provided for in Section 1.3.3
hereof.
1.4 EMPLOYEES. (a) Upon Closing or thereafter, the Buyer may offer
employment to any or all of the Seller's employees; provided that the Buyer
shall be under no obligation to hire or retain any of the Seller's employees.
All transferred employees shall be employees-at-will of the Buyer.
(b) In addition, Seller agrees to retain the employees (not to
exceed twenty (20)) listed on Schedule 1.4(b) until the earlier of (i) sixty
(60) days following the Closing Date, or (ii) the date specified in a written
notice (received by Seller at least ten (10) days before the Termination Date)
from the Buyer to the Seller (said earlier date, the "TERMINATION DATE"). The
Buyer agrees to reimburse the Seller for the actual salary incurred by the
Seller plus twenty-five percent (25%) relating to each employee listed on
SCHEDULE 1.4(B) during the period between the Closing Date and the Termination
Date applicable to such employee.
(c) From and after the Effective Time, Seller shall remain solely
responsible for any and all employee benefit liabilities in respect of the
Seller's employees (including the Transferred Employees) and their dependents
and beneficiaries to the extent relating to or as a result of: (i) the
employment of any such employee by Seller on or prior to the Effective Time or
the termination of such employment at or prior to the Effective Time, including,
without limitation, employee benefit liabilities under any Employee Plan that
provides severance pay, and (ii) the participation in or accrual of benefits or
compensation under, or the failure to participate in or to accrue compensation
or benefits under, any Employee Plan on or prior to the Effective Time.
(d) For purposes of eligibility waiting periods under any group
medical plan maintained by Buyer that covers the Transferred Employees, the
Transferred Employees and their dependents shall be credited with employment
service with the Seller prior to the Effective Time,
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but they shall not be credited with prior service credit with Seller for
purposes of any pre-existing condition limitation or actively-at-work
requirement under Buyer's medical plan.
(e) From and after the Effective Time, the Seller shall remain
solely responsible for any and all benefit liabilities, notice and other
requirements under Section 4980B of the Code to provide continuation of health
care coverage under any of the applicable Employee Plans in respect of the
Seller's employees (including the Transferred Employees) and their dependents to
the extent related to a "qualifying event" (as described in Code Section
4980B(f)(3)) occurring on or before the Effective Time, including, without
limitation, a qualifying event that results from termination of employment with
Seller.
(f) Nothing in this Section 1.4 or otherwise in this Agreement,
express or implied, shall confer upon any Transferred Employee or other
employee, or their dependents and beneficiaries, any rights or remedies of any
nature or kind, including but not limited to, any right to employment or
continued employment for any specified period, or make any such person a third
party beneficiary of this Agreement.
(g) Seller agrees to furnish Buyer with Seller's records for each of
the Transferred Employees, and their dependents and beneficiaries, as may be
necessary or appropriate to assist in the administration of their employee
benefits and fringe benefits by Buyer.
1.5 ACCESS. After the Closing Date the Buyer shall allow the Seller, upon
reasonable prior notice, to have access during normal business hours to the
Records purchased by the Buyer from the Seller, and provided that such access
does not unreasonably interfere with the business and operations of the Buyer.
The Seller may make copies of said Records at its sole expense. At such time as
Buyer decides to destroy any of the Records, Buyer shall so notify Seller and
give Seller the opportunity to take possession of such Records. For a period of
one hundred twenty (120) days after the Closing Date, the Buyer shall allow the
Seller, upon reasonable prior notice, to have access during normal business
hours to the information relating to the Purchased Assets contained in, and the
right to use, the computer and other record keeping systems constituting a part
of the Purchased Assets, provided that such access does not unreasonably
interfere with the business and operations of the Buyer. The Seller shall
reimburse the Buyer for all reasonable, out-of-pocket costs incurred by the
Buyer relating to such access to and rights to use said systems. The Seller may
use such access and rights to assist in the closing of the Seller's books and
records relating to the Business, to make calculations of royalties and/or
commissions owed relating to pre-Closing transactions, to assist in the
preparation or audit of the Revised Statement or for any other reasonable
purpose relating to the Business or the transactions contemplated hereby.
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1.6 PRORATED ITEMS.
1.6.1 ADJUSTMENT OF COSTS.
(a) Seller shall bear and be responsible for all costs
incurred in connection with the operation of the Business prior to
the Effective Time, including without limitation, utilities,
rentals, service contracts, employee costs, maintenance expenses,
royalties and minimum royalties and commissions related to sales
prior to the Effective Time and except as otherwise provided
therein, Seller shall pay all such costs in the ordinary course of
business. Buyer shall bear and be responsible for all such costs
incurred by the Buyer in connection with the operation of the
Business after the Effective Time. Seller shall be entitled to (a)
all manufacturer's rebates due to the Seller which may be paid after
the date hereof and (b) prompt reimbursement of all prepayments
(except for the Prepaids for which Seller has received a credit on
the Purchase Price under this Agreement) made by the Seller prior to
the date hereof that relate to the Business and the use of the
Purchased Assets, including, but not limited to, insurance and
registration prepayments on the Vehicles.
(b) Seller agrees to pay all creditors of Seller in full on or
prior to any due date for such payment (except for any amounts which
Seller is disputing in good faith); in the event Seller fails to
make such payments, Buyer may make such payments on Seller's behalf
and such amount shall be promptly reimbursed by Seller to Buyer.
1.6.2 PRORATION OF TAXES.
(a) Seller shall be liable for and shall pay when due all
personal property taxes and all other taxes on the Business or any
of the Purchased Assets that may be levied or imposed against the
Buyer, the Seller or the Purchased Assets for the period before the
Effective Time. Buyer shall be liable for all personal property
taxes and all other taxes on the Business or any of the Purchased
Assets that may be levied or imposed against Buyer, Seller or the
Purchased Assets for the period after the Effective Time.
(b) Seller shall remain responsible for all income taxes,
sales or use taxes, franchise taxes, payroll taxes, and any other
taxes which may be due by it for revenues earned with respect to the
Business prior to the Effective Time. Buyer shall be responsible for
all income taxes, sales or use taxes, franchise taxes, or any other
taxes which may be due by it for revenues earned with respect to the
Business
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after the Effective Time.
(c) Whichever party is liable hereunder for the payment of a
tax shall prepare any necessary forms and returns, and shall bear
all costs incident to the determination and payment thereof. Such
party shall further have all available rights to contest the tax,
but shall protect, defend, indemnify and hold harmless the other
party from any Adverse Consequences or any limitation on the use and
enjoyment of the Purchased Assets resulting therefrom.
1.6.3 PAYMENT OF TAXES AND OTHER EXPENSES. If either party receives
an invoice for any tax or other expense which is allocable to the other
party in part or in full hereunder, the recipient shall forward a copy of
the invoice promptly to the other party. If the other party is fully
liable for such invoice it shall pay it in full promptly; provided,
however, that such party may contest any tax or other expense in good
faith through appropriate proceedings. If either party receives an invoice
for taxes or other expenses that are allocable partly to it and partly to
the other party, then the party receiving such notice shall promptly
advise the other party that such invoice has been received and shall
request the appropriate reimbursement from that party. The party owing
such reimbursement shall pay such reimbursement within ten (10) days after
receipt of an invoice for the reimbursable amount. Notwithstanding the
foregoing, whenever time permits, each party will make every reasonable
effort to determine each party's appropriate allocable share of any tax
due and to pay the allocable share to the party responsible under this
paragraph for paying the tax in a timely fashion in order to avoid any
late payment penalty.
1.6.4 EMPLOYEES. The Seller shall pay all costs and expenses
relating to its employees employed in connection with the Business or the
Purchased Assets that are incurred prior to the Effective Time including,
but not limited to, salaries, wages, federal withholding and social
security taxes, employee benefit plans, severance payments or expenses
related thereto (which may be incurred after the date hereof) and
unemployment compensation taxes. Buyer shall pay all such costs and
expenses relating to the Transferred Employees after the Effective Time.
1.6.5 COMPLETION OF PRORATIONS. The parties will use their
reasonable best efforts to substantially complete all prorations (except
for property tax prorations) within ninety (90) days of the Closing Date.
1.7 CLOSING; EFFECTIVE TIME. The Closing shall take place at 10:00 a.m.
local time on the Closing Date, at the offices of the Seller located at 7000
Midland Boulevard, Amelia, Ohio 45102- 2607 and shall be effective as of the
Effective Time.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER
2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
represents and warrants as follows:
2.1.1 ORGANIZATION AND STANDING. The Seller is a corporation duly
organized and validly existing under the laws of the State of Ohio, has
full requisite corporate power and authority to carry on its business as
currently conducted, and to own and operate the properties owned and
operated by it and is duly qualified or licensed to do business and is in
good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature
of the business conducted by it would make such qualification or licensing
necessary.
2.1.2 AGREEMENT AUTHORIZED AND NON-INTERFERENCE. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Seller, and this Agreement is a valid
and binding obligation of the Seller, enforceable (subject to normal
equitable principles) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
debtor relief or similar laws affecting the rights of creditors generally.
The execution and delivery of this Agreement by the Seller, and the
consummation of the transactions contemplated hereby, will not conflict
with or result in a violation or breach of any term or provision of, nor
constitute a default under (i) the articles of incorporation, bylaws, code
of regulations, or other organizational documents of the Seller, (ii) any
indenture, mortgage, deed of trust, credit agreement or other contract or
agreement of any nature whatsoever to which the Seller is a party or by
which it or its properties are bound, or (iii) any provision of any law,
rule, regulation, order, permit, certificate, writ, judgment, injunction,
decree, determination, award or other decision of any court, arbitrator or
other governmental authority to which the Seller or the Purchased Assets
are subject.
2.1.3 SUBSIDIARIES. The Seller has no subsidiary corporations or any
interest in any other organization, incorporated or unincorporated,
partnership or any other entity of any type.
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2.1.4 FINANCIAL STATEMENTS. The Seller has delivered to the Buyer
copies of the Seller's unaudited balance sheet and related statements of
income, retained earnings and cash flows, as at and for the Seller's
fiscal years ended December 31, 1995 and 1996, and also has delivered to
the Buyer copies of the Seller's unaudited balance sheet (the "UNAUDITED
BALANCE SHEET") and related income statement as at and for the eight
months ended August 30, 1997 (the "BALANCE SHEET DATE"). Such financial
statements are true, correct and complete in all material respects and
present fairly and fully the financial condition of the Seller as of the
dates indicated and the results of operations for the respective periods
indicated, and, except as shown on Schedule 2.1.4 attached hereto, have
been prepared in accordance with GAAP applied on a consistent basis;
provided, however, that such financial statements have been prepared in
accordance with GAAP for a subsidiary of a parent corporation which
prepares consolidated audited financial statements and therefore lack
footnotes and other presentation items and the financial statements as of
and for the eight months ended August 30, 1997 are subject to normal year
end adjustments.
2.1.5 LIABILITIES. The Seller does not have any liabilities or
obligations, either accrued, absolute, contingent, or otherwise, or have
any knowledge of any potential liabilities or obligations that would
adversely affect the value and conduct of the Business, other than those
(i) reflected or reserved against in the Unaudited Balance Sheet of the
Seller or (ii) incurred in the ordinary course of business since the
Balance Sheet Date or (iii) shown on Schedule 2.1.5.
2.1.6 MATERIAL CONTRACTS; NO UNDISCLOSED DEFAULTS. Schedule 2.1.6
hereto contains a true and complete list of all Material Contracts to
which Seller is a party. Except as may be specified in Schedule 2.1.6,
neither the Seller nor, to the best of the Seller's knowledge, any other
party is in default in any obligation or covenant on its part to be
performed under any Material Contract.
2.1.7 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as shown on
Schedule 2.1.7 attached hereto, other than as a result of the transactions
contemplated by this Agreement, since the Balance Sheet Date, there has
not been:
2.1.7.1 FINANCIAL CHANGE. Any material adverse change in the
financial condition, operations, assets, liabilities, business or
prospects of the Seller; provided that the Buyer acknowledges that
the Seller has disclosed to the Buyer that the Seller has
experienced operating losses before and after the Balance Sheet
Date. Any operating losses incurred by Seller since the Balance
Sheet Date shall not be deemed a breach of the foregoing
representation;
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2.1.7.2 PROPERTY DAMAGE. Any material damage, destruction, or
loss to the business or properties of the Seller (whether or not
covered by insurance);
2.1.7.3 LABOR MATTERS. Any labor dispute between the Seller
and its employees or, to Seller's knowledge, any event which would
result in a worker's compensation claim materially outside of
Seller's historical experience; or
2.1.7.4 OTHER MATERIAL CHANGES. Any other event or condition
known to the Seller that particularly pertains to and materially and
adversely affects the operations, assets or Business of Seller.
2.1.8 TAXES. Proper and accurate federal, state and local income,
sales, use, franchise, gross revenue, turnover, excise, payroll, property,
employment, customs duties and any and all other tax returns, reports, and
estimates have been filed with appropriate governmental agencies, domestic
and foreign, by the Seller for each period for which any returns, reports,
or estimates were due. All taxes shown by such returns to be payable have
been paid. All sales taxes have been properly collected and accounted for
through the date hereof by the Seller, and the Seller has made all
required deposits of such taxes with all taxing authorities.
2.1.9 INTELLECTUAL PROPERTY. Schedule L attached hereto contains a
true and complete list of all Intellectual Property. The Seller owns or
possesses licenses to use all Intellectual Property that is either
material to, or necessary for the operation of, the Business, and said
Intellectual Property is owned or licensed by the Seller free and clear of
any Encumbrance except as set forth on Schedule L attached hereto. The
Seller has not granted to any other person any license to use any
Intellectual Property except as set forth on Schedule L attached hereto.
The Seller has not received any notice of infringement, misappropriation,
or conflict with the intellectual property rights of others in connection
with the use by the Seller of the Intellectual Property except as set
forth on Schedule L attached hereto.
2.1.10 TITLE TO PROPERTIES; CONDITION OF ASSETS. The Seller has good
and marketable title to the Purchased Assets, free and clear of any
Encumbrance of any nature whatsoever, except liens for current taxes not
yet due and payable and except for Encumbrances set forth on Schedule
2.1.10 attached hereto. Except as set forth on Schedule 2.1.10 attached
hereto, all leases pursuant to which the Seller leases (whether as lessee
or lessor) any substantial amount of real or personal property are in good
standing, valid and effective, and to the best knowledge of the Seller,
there is not, under any such leases, any
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existing or prospective default or event of default or event which, with
notice or lapse of time, or both, would constitute a default by the
Seller. The buildings and premises of the Seller that are used in its
business are in reasonable operating condition, subject only to ordinary
wear and tear. Schedules D-1 and D-2 attached hereto contain true and
complete lists of all Equipment. Except as set forth on Schedule 2.1.10
attached hereto, all Equipment is in reasonable operating condition and
repair, ordinary wear and tear and maintenance excepted.
2.1.11 LITIGATION, ETC. Except as set forth on Schedule 2.1.11,
there is no suit, action, or legal, administrative, arbitration, or other
proceeding or governmental investigation pending or, to the knowledge of
the Seller, threatened to which the Seller is or may be a party or, to the
knowledge of the Seller, might become a party or which particularly
affects the Seller or the Purchased Assets. There are no pending or, to
the knowledge of the Seller, threatened changes in the zoning or building
ordinances directly affecting the leasehold interests of the Seller.
2.1.12 HAZARDOUS WASTES AND SUBSTANCES. To the best knowledge of
Seller and except as set forth in the Environmental and Health and Safety
Compliance Audit, CS Crable Sportswear, Inc., Batavia, Ohio dated May 16,
1997, a copy of which has been provided to Buyer, and except as shown on
Schedule 2.1.12 attached hereto, none of the current or past operations or
assets of the Seller have been conducted or used in such a manner as to
constitute a violation of any Applicable Environmental Laws. No notice
(whether formal or informal, written or oral) has been served on the
Seller from any entity, governmental agency or individual regarding any
existing, pending or threatened investigation or inquiry related to
violations under any Applicable Environmental Laws or regarding any claims
for remedial obligations or contribution for removal costs or damages
under any Applicable Environmental Laws. Schedule 2.1.12 contains a list
of all permits, licenses or similar authorizations pursuant to any
Applicable Environmental Laws held by Seller in effect as of the date of
this Agreement which constitute all such permits, licenses and
authorizations necessary to operate and use any of the Purchased Assets
for their current purposes and uses. To the best knowledge of Seller, no
asbestos or asbestos containing material currently is being used or has
ever been used by the Seller in its operations and no friable asbestos is
situated on or under properties owned or leased by it.
2.1.13 COMPLIANCE WITH OTHER LAWS. To the best knowledge of Seller,
the Seller is not in violation of or in default with respect to, or in
alleged violation of or alleged default with respect to, any applicable
law, rule or regulation, or any writ, order or decree of any court or any
governmental commission, board, bureau, agency, or instrumentality, and
the Seller is not delinquent with respect to any report required to be
filed with any governmental
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commission, board, bureau, agency or instrumentality.
2.1.14 EMPLOYMENT PRACTICES. Schedule 2.1.14 attached hereto
contains a true and complete list of all Employee Agreements. Except as
set forth on Schedule 2.1.14 attached hereto, there are no labor or
employment disputes or controversies pending or, to the Seller's best
knowledge, threatened against the Seller or any of the employees of the
Seller, and the Seller has not taken or failed to take any action which
action or omission would provide a reasonable basis for any such
controversy. To the Seller's best knowledge, there are no organizational
efforts presently being made or threatened by or on behalf of any labor
union with respect to any employees of the Seller except as set forth on
Schedule 2.1.14 hereto. To the best knowledge of Seller, the Seller has
complied with all requirements under the Occupational Safety and Health
Act, all laws, rules and regulations with respect to worker's compensation
insurance or, if applicable, all requirements relating to obtaining
"non-subscriber status" thereunder, and all other laws relating to the
employment of labor, including, without limitation, laws relating to equal
employment opportunity and employment discrimination, employment of
undocumented immigrants or undocumented or ineligible workers, wages,
hours, collective bargaining and the collection or payment of social
security and withholding taxes, or both, and similar taxes. The Seller is
not liable for any arrearage of wages or any taxes or penalties for
failure to comply with any of the fore going.
2.1.15 FINDER'S FEE. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on by the Seller
and its counsel directly with the Buyer and its counsel, without the
intervention of any other person as the result of any act of the Seller,
and so far as is known to the Seller, without the intervention of any
other person in such manner as to give rise to any valid claim against any
of the parties hereto for a brokerage commission, finder's fee or any
similar payments, except for the Financial Advisory Fee.
2.1.16 COMPLIANCE WITH ERISA.
(a) Schedule 2.1.16 attached hereto sets forth a brief
description of the Employee Plans which the Seller maintains, to which the
Seller contributes or has an obligation to contribute for Seller's
employees, or with respect to which the Seller has any liability or
reasonable expectation of liability, as of the Effective Time. For
purposes of this Section 2.1.16, all references to the Seller shall be
deemed to refer to the Seller and any trade or business, whether or not
incorporated, which together with the Seller would be deemed or treated as
a "single employer" with the meaning of Code Section 414 or ERISA Section
4001 including, without limitation, Midland. None of the Employee Plans
(i) is a plan of the
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type described in Section 4063 of ERISA or Section 413(c) of the Code,
(ii) is a "multiemployer plan" (as defined in Section 3(37) of ERISA),
(iii) provides for medical, life or other types of insurance benefits to
current or future retired or former employees of the Seller (other than as
required under Code Section 4980B or similar state law), (iv) obligates
the Seller to pay any severance or similar benefits solely as a result of
a change in control or ownership within the meaning of Code Section 280G,
or (vi) is a "voluntary employees' beneficiary association" within the
meaning of Code Section 501(c)(9) other than Midland's medical benefit
plan.
(b) Each Employee Plan is, in all material respects, in
compliance, and has been administered, maintained and funded in all
material respects in accordance, with the applicable provisions of ERISA
and the Code and all other applicable laws, rules and regulations. There
are no pending or, to the best knowledge of Seller, threatened, actions,
suits, investigations, or claims with respect to any Employee Plan (other
than routine claims for benefits) which could reasonably be expected to
result in liability to the Seller, and there are no changes in
contributions or benefit levels that have been implemented, with respect
to any Employee Plan that have not been disclosed to Buyer.
(c) All contributions or premiums which are due prior to
the Effective Time with respect to the Employee Plans have been or will be
timely paid by the Seller.
(d) Each Employee Plan which is intended to be qualified
under Code Section 401(a), (i) has been timely amended to reflect all
requirements of the Tax Reform Act of 1986 ("TRA 86") and all subsequent
federal legislation which is required to be adopted prior to the Effective
Time and (ii) has received from the Internal Revenue Service a favorable
determination letter which considers the terms of the Employee Plan as
amended for such tax law changes. To the best knowledge of Seller, nothing
has occurred since the date of such determination letter that would
adversely affect the qualified status of each such Employee Plan or the
tax-exempt status of any related trust.
(e) During the five years preceding the Closing Date, (i)
no under-funded pension plan subject to Title IV of ERISA or the minimum
funding requirements of Code Section 412 or ERISA Section 302 has been
transferred out of the Seller and (ii) the Seller has not participated in
or contributed to, or had an obligation to participate in or contribute
to, any multiemployer plan (as defined in ERISA Section 3(37)), and (iii)
there has been no "reportable event" within the meaning of Section 4043 of
ERISA with respect to any Employee Plan that is subject to Title IV of
ERISA.
(f) The Seller has not incurred, and has no reason to
expect that it will incur,
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any material liability to the Internal Revenue Service, the Department of
Labor, the Pension Benefit Guaranty Corporation (PBGC), or otherwise under
ERISA or the Code, with respect to any Employee Plan.
(g) With respect to each Employee Plan, the Seller has made
available to Buyer true, complete and correct copies of all documents
pursuant to which the Employee Plan is maintained, funded and
administered.
2.1.17 LICENSES. To the best knowledge of Seller, the Seller has all
permits and licenses necessary or appropriate to its Business as currently
conducted. The aforesaid are current and in full force and effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
3.1 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants as follows:
3.1.1 ORGANIZATION AND STANDING. The Buyer is a corporation duly
organized and validly existing under the laws of the State of Texas, has
full requisite corporate power and authority to carry on its business as
currently conducted, and to own and operate the properties owned and
operated by it and is duly qualified or licensed to do business and is in
good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature
of the business conducted by it would make such qualification or licensing
necessary.
3.1.2 AGREEMENT AUTHORIZED AND ENFORCEABLE. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Buyer; and this Agreement constitutes
the valid and binding obligation of the Buyer, enforceable (subject to
normal equitable principles) against Buyer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief, or similar laws affecting the rights of
creditors generally. The execution and delivery of this Agreement by the
Buyer, and the consummation of the transactions contemplated hereby, will
not conflict with or result in a violation or breach of any term or
provision of, nor constitute a default under (i) the articles of
incorporation, bylaws or other organizational documents of the Buyer, (ii)
any indenture, mortgage, deed of trust, credit agreement or other contract
or agreement of any nature whatsoever to which the Buyer is a party or by
which
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it or its properties are bound, or (iii) any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment, injunction,
decree, determination, award or other decision of any court, arbitrator or
other governmental authority to which the Buyer or the Assets are subject.
3.1.3 FINDER'S FEE. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on by the Buyer and
its counsel directly with the Seller and its counsel, without the
intervention of any other person as the result of any act of the Buyer,
and so far as is known to the Buyer, without the intervention of any other
person in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or any similar
payments, except for the Financial Advisory Fee.
ARTICLE 4
CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE BUYER AND THE SELLER
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The obligations of
the Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the following conditions, any of which may be waived in writing by
the Buyer:
4.1.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER TRUE AT THE DATE
HEREOF. The representations and warranties of the Seller herein contained
shall be true and correct as of the date hereof, except as affected by
transactions permitted or contemplated by this Agreement; the Seller shall
have performed and complied in all respects with all covenants required by
this Agreement to be performed or complied with by it prior to the date
hereof.
4.1.2 OPINION OF COUNSEL FOR THE SELLER. The Buyer shall have
received an opinion, dated the date hereof, from Henry N. Thoman, counsel
to the Seller, with respect to the legal matters set forth in Sections
2.1.1 and 2.1.2 hereof and stating that the Seller is duly incorporated
and in good standing under the laws of the State of Ohio.
4.1.3 TENDER OF THE ASSETS; NECESSARY ASSIGNMENTS, ETC. On the date
hereof, the Seller shall have executed and delivered to the Buyer all
necessary or appropriate instruments of transfer, bills of sale,
certificates of title and other documents to transfer the Purchased Assets
to the Buyer. Midland shall have executed and delivered to the Buyer a
lease covering the operating facility currently leased by the Seller
located at 4101 Founders Boulevard, Batavia, Ohio 45103-2553, and
containing such terms as are satisfactory to the Buyer. Seller shall have
executed and delivered to the Buyer a Non-Competition Agreement
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satisfactory to the Buyer. Midland shall have executed and delivered to
the Buyer a covenant agreement in a form satisfactory to Buyer.
4.1.4 ADDITIONAL DOCUMENTS. On the date hereof, the Seller shall
deliver to the Buyer such certificates and resolutions of the Seller as
the Buyer shall reasonably request.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER. The obligations of
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the following conditions any of which may be waived in writing by
the Seller:
4.2.1 REPRESENTATIONS AND WARRANTIES OF THE BUYER TRUE AT THE DATE
HEREOF. The representations and warranties of the Buyer herein contained
shall be true and correct as of the date hereof, except as affected by
transactions permitted or contemplated by this Agreement; the Buyer shall
have performed and complied in all respects with all covenants required by
this Agreement to be performed or complied with by it prior to the date
hereof.
4.2.2 CONSIDERATION FOR ASSETS, ETC. On the date hereof, the Buyer
shall have delivered to the Seller the Estimated Purchase Price. In
addition, the Buyer shall have executed a document evidencing the Buyer's
assumption of the Assumed Liabilities.
4.2.3 OPINION OF COUNSEL FOR BUYER. The Seller shall have received
an opinion, dated the date hereof, from Porter & Hedges, L.L.P., counsel
to the Buyer, with respect to the legal matters set forth in Sections
3.1.1 and 3.1.2 (and assuming Texas law) hereof and stating that the Buyer
has been duly incorporated and is validly existing and in good standing
under the laws of the State of Texas.
4.2.4 ADDITIONAL DOCUMENTS. On the date hereof, the Buyer shall
deliver to the Seller such certificates and resolutions of the Buyer as
the Seller shall reasonably request.
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ARTICLE 5
INDEMNIFICATION
5.1 INDEMNIFICATION OF BUYER. In addition to any other remedies available
to the Buyer under this Agreement, or at law or in equity, the Seller shall
protect, indemnify, defend and hold harmless the Buyer, and its officers,
directors, employees, agents and shareholders, against and with respect to any
and all Adverse Consequences that such indemnitees shall incur or suffer, which
arise, result from or relate to (i) any breach of, or failure by the Seller to
perform any of its representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
to the Buyer by or on behalf of the Seller under this Agreement, (ii) the
ownership, use or operation of the Business or Purchased Assets prior to the
Effective Time, (iii) the Financial Advisory Fee, or (iv) Excluded Liabilities.
5.2 INDEMNIFICATION OF SELLER. The Buyer shall protect, indemnify, defend
and hold harmless the Seller and its officers, directors, employees, agents and
shareholders against and with respect to any and all Adverse Consequences that
such indemnitees shall incur or suffer, which arise, result from or relate to
(i) any breach of, or failure by the Buyer to perform, any of its representa
tions, warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or to be furnished to the
Seller by or on behalf of the Buyer under this Agreement, (ii) the ownership,
use or operation by the Buyer of the Business or the Purchased Assets from and
after the Effective Time, (iii) the Assumed Liabilities, (iv) any act or
omission or failure to act (except where such act, omission or failure to act
was at the direction of Seller or Midland) of any employee listed on Schedule
1.4(b) between the Effective Time and the Termination Date of any such employee,
or (v) actions taken by Buyer or actions taken by Seller at the request or
reasonably related to the request of Buyer pursuant to Section 6.1 hereof. In
the event that the transactions contemplated by this Agreement result, directly
or indirectly, in a loss of employment that may result in liability under the
WARN Act or similar statutes related to workers' rights, then Buyer shall
protect, indemnify and hold harmless Seller and its officers, directors,
employees, agents and shareholders against and with respect to any and all
Adverse Consequences that such indemnitees shall incur or suffer with respect
thereto.
5.3 INDEMNIFICATION PROCEDURE. In the event that any indemnified party
discovers or otherwise becomes aware of an indemnification claim arising under
Section 5.1 or Section 5.2 of this Agreement, such indemnified party shall give
written notice to the indemnifying party, specifying such claim, and may
thereafter exercise any remedies available to such party under this Agreement;
PROVIDED, HOWEVER, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of any obligations
hereunder, except to the extent the indemnifying party is materially prejudiced
thereby. Further, promptly after receipt by an
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indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Article, such indem nified party shall, if a claim in respect
thereof is to be made against any indemnifying party, give written notice to the
latter of the commencement of such action; PROVIDED, HOWEVER, that the failure
of any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligations hereunder, except to the extent the
indemnifying party is materially prejudiced thereby. In case any such action is
brought against an indemnified party, the indemnifying party shall be entitled
to participate in and to assume the defense thereof, jointly with any other
indem nifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after such notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof unless the indemnifying party has
failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such indemnified person. An indemnifying party who elects not to
assume the defense of a claim shall not be liable for the fees and expenses of
more than one counsel in any single jurisdiction for all parties indemnified by
such indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the same
general allegations. Notwithstanding any of the foregoing to the contrary, the
indemnified party will be entitled to select its own counsel and assume the
defense of any action brought against it if the indemnifying party fails to
select counsel reasonably satisfactory to the indemnified party, the expenses of
such defense to be paid by the indemnifying party. No indemnifying party shall
consent to entry of any judgment or enter into any settlement with respect to a
claim without the consent of the indemnified party, which consent shall not be
unreasonably withheld, or unless such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action, the defense of which has been assumed by an
indemnifying party, without the consent of such indemnifying party, which
consent shall not be unreasonably withheld.
5.4 LIMITATIONS ON INDEMNITIES. The indemnity obligations of each party
pursuant to this Agreement shall terminate on March 31, 1999 with respect to all
matters for which a written claim for indemnity has not been received by the
indemnifying party prior to March 31, 1999. In addition, an indemnified party
shall be only entitled to indemnification pursuant to this Agreement if the
amount of all Adverse Consequences incurred by such indemnified party under this
Article 5 exceeds the sum of $150,000. In the event that the amount of all
Adverse Consequences incurred by such indemnified party exceeds $150,000, then
the indemnifying party shall be obligated to indemnify the indemnified party for
only those Adverse Consequences incurred by the indemnified party which exceed
the sum of $75,000.00 in the aggregate. Neither party shall be liable under this
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Article 5 to any party for any Adverse Consequences incurred by such party in
excess of $2,500,000, except that said $2,500,000 limitation shall not apply to
(i) a breach by the Seller of its representations and warranties contained in
Sections 2.1.8 or 2.1.10, (ii) a breach by either party of its obligations under
Section 1.3, or (iii) the indemnities contained in clause (ii) or (iv) of
Section 5.1 or clause (ii) or (iii) of Section 5.2 but only to the extent such
indemnities result from claims made by third parties.
27
<PAGE>
ARTICLE 6
MISCELLANEOUS AND ADDITIONAL AGREEMENTS
6.1 RESTRICTED ASSETS.
(a) Buyer and Seller acknowledge that there are certain of Seller's
Material Contracts, licenses, leases, permits, rights or other agreements
or commitments which are not capable of being validly assigned,
transferred or subleased without the consent or waiver of the issuer
thereof or the other party thereto or a third person (including a
government or governmental unit), or with respect to which such
assignment, transfer or sublease or attempted assignment, transfer or
sublease could constitute a breach thereof or a violation of a law,
decree, order, regulation or other governmental edict (any such item is
hereinafter referred to as a "Restricted Asset"). The receipt of the
necessary consents and waivers for the assignment, transfer or sublease of
the Restricted Assets is not a condition precedent to Buyer's obligations
hereunder. If the necessary consents and waivers with respect to any
Restricted Asset are not received on or before the Closing Date, this
Agreement shall not constitute an assignment, transfer or sublease
thereof, or an attempted assignment, transfer or sublease thereof;
PROVIDED, HOWEVER, to the extent Seller may do so without incurring any
liability whatsoever, Seller shall assign and Buyer shall assume the
beneficial ownership and all rights and obligations under the Restricted
Assets so Buyer can enjoy the practical benefits of such assets until they
can be legally assigned by Seller and assumed by Buyer.
(b) Buyer, at its option, may use reasonable efforts, and Seller
shall cooperate with Buyer (i) to obtain the consents and waivers and
other agreements necessary to convey to Buyer such of the Restricted
Assets as Buyer may desire, and (ii) if such consents, waivers and other
agreements are obtained subsequent to Closing, to promptly convey to Buyer
the Restricted Assets for which the necessary consents and waivers have
been received; PROVIDED, HOWEVER, that any consideration paid therefor to
the person from whom the consent or waiver is requested shall be borne by
Buyer.
(c) To the extent that the consents and waivers necessary to assign,
transfer or sublease the Restricted Assets are not obtained, Seller shall,
during the six (6) month period commencing with the Closing Date (but, as
to any particular Restricted Asset, for the current term thereof only),
use reasonable efforts to (i) provide to Buyer the benefits of the
Restricted Asset not assigned, transferred or subleased, (ii) cooperate
with Buyer to reach a reasonable and lawful arrangement designed to
provide such benefits to Buyer during the six (6) month period commencing
on the Closing Date, and (iii) enforce, at the request of Buyer, any
rights of Seller under any Restricted Asset, against the issuer thereof or
the other party
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<PAGE>
or parties thereto (including the right to elect to terminate such of the
foregoing in accordance with the terms thereof upon the advice of Buyer);
PROVIDED, HOWEVER, that all costs and expenses of Seller incurred with
respect to any of the actions contemplated under this sub section (c)
shall be promptly paid or reimbursed by Buyer to Seller. At the end of
such six (6) month period or the current term of the Restricted Asset,
Seller shall have no further duties or obligations hereunder with respect
to such Restricted Asset. The failure to obtain any necessary consent or
waiver with respect to any Restricted Asset shall in no event be a breach
of this Agreement.
(d) To the extent that Buyer is provided the benefits pursuant to
this Section 6.1 of any Restricted Asset, Buyer shall perform for the
benefit of the issuer thereof, or the other party or parties thereto, the
obligations of Seller thereunder or in connection therewith; PROVIDED,
HOWEVER, that if Buyer shall fail to perform to the extent required
herein, Seller shall thereafter cease to be obligated under this Section
6.1 in respect of the Restricted Asset which is the subject of such
failure by Buyer to perform, and Buyer shall promptly pay or reimburse
Seller all costs incurred by Seller to remedy such failure to perform
during such period of failure of performance.
6.2 AMENDMENT TO ARTICLES OF INCORPORATION, ETC. The Seller shall file,
within fifteen (15) days after the date hereof, (a) with the Secretary of State
of the State of Ohio, an amendment to its articles of incorporation to change
the Seller's name to a name not similar to "CS Crable Sportswear, Inc." and (b)
such documents as are required to terminate or withdraw any assumed name filings
made by the Seller prior to the Closing Date. Buyer shall file, within fifteen
(15) days after the Closing Date, with the Secretary of State of the State of
Ohio, an assumed name certificate identifying Buyer as the user of the name "CS
Crable Sportswear, Inc."
6.3 FURTHER ASSURANCES. The parties, and their respective successors and
assigns, covenant and agree to take or cause to be taken all such further acts,
including the execution and delivery of documents, instruments, conveyances, and
powers of attorney, as may be requested to consummate the transactions
contemplated hereby. Without limiting the generality of the foregoing, the
Seller covenants and agrees to take any and all actions, and execute,
acknowledge and deliver any and all documents and assurances, as the Buyer may
reasonably require for the later assuring, assigning, transferring and assigning
unto the Buyer of the Purchased Assets, and to protect the right, title and
interest of the Buyer in and to, and its enjoyment of, the Purchased Assets.
6.4 NOTICES. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
if served personally on the party entitled thereto to whom notice is to be
given, or if mailed to the party entitled thereto to whom notice is to be given,
by first-class mail, registered or certified, postage prepaid, or if telefaxed
29
<PAGE>
to the party entitled thereto to whom notice is to be given, addressed as
follows (or such other address as the party entitled thereto may have prior
thereto specified by notice given as contemplated in this Section):
If to Seller: CS Crable Sportswear, Inc.
7000 Midland Boulevard
Amelia, Ohio 45102
Telephone: (513) 943-7100
Telecopy: (513) 943-7362
With copy to: The Midland Company
7000 Midland Boulevard
Amelia, Ohio 45102
Attn: Chief Counsel
Telephone: (513) 943-7100
Telecopy: (513) 943-7362
If to Buyer: Brazos, Inc.
3860 Virginia Avenue
Cincinnati, Ohio
Attn: F. Clayton Chambers
Telephone: (513) 272-3600
Telecopy: (513) 272-2812
With copy to: Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002-2730
Attention: Richard L. Wynne
Telephone: (713) 226-0600
Telecopy: (713) 228-1331
but if mailed or telefaxed, the same shall not be deemed effective unless and
until actually received by the party entitled thereto.
6.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one and the
same instrument.
6.6 AMENDMENTS AND WAIVERS. This Agreement may be amended, modified, or
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<PAGE>
superseded only by written instrument executed by each party hereto. Any waiver
of the terms, provisions, covenants, representations, warranties, or conditions
hereof by a party shall be made only by a written instrument executed and
delivered by an authorized officer of such party. The failure of either party at
any time or times to require performance of any provision hereof shall in no
manner affect the right to enforce the same. No waiver by either party of any
condition, or of the breach of any term, provision, covenant, representation, or
warranty contained in this Agreement in one or more instances shall be deemed to
be or construed as a further or continuing waiver of any such condition or
breach or a waiver of any other condition or the breach of any other term,
provision, covenant, representation, or warranty.
6.7 ENTIRE AGREEMENT; CONFLICTS. This Agreement (including the schedules
and exhibits hereto, all of which are by this reference fully incorporated into
this Agreement) and the Closing Agreement which has been executed and delivered
by the parties on the date hereof and the documents and materials expressly
referred to in schedules or exhibits hereto sets forth the entire Agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all prior agreements, arrangements, and understandings
relating to the subject matter hereof. In the event of any conflict or
inconsistency between the provisions of this Agreement and the contents or
provisions of any schedule or exhibit hereto, the provisions of this Agreement
shall be deemed controlling.
6.8 SUCCESSORS AND ASSIGNS. All of the terms, provisions, covenants,
representations, warranties, and conditions of this Agreement shall be binding
on and shall inure to the benefit of and be enforceable by the parties and their
respective successors and permitted assigns, but this Agreement and the rights
and obligations hereunder shall not be assignable or delegable by either party
without the prior written consent of the other party.
6.9 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.10 SEVERABILITY. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed this Agreement had
the terms, provisions, covenants and re strictions which may be hereafter
declared invalid, void, or unenforceable not initially been included herein.
6.11 HEADINGS AND CAPTIONS. The headings and captions contained in this
Agreement are solely for convenient reference and shall not be deemed to affect
the meaning or interpretation
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<PAGE>
of any article, section, or paragraph hereof.
6.12 SUCCESSOR LAWS. Reference made herein to any law or statute shall
include reference to any future law amending or superseding such law or statute
and to any future laws applicable to the same subject matter.
6.13 TIME OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
6.14 DISCLOSURE IN SCHEDULES. All matters disclosed in any schedules
hereto shall be deemed disclosure for the purposes of all schedules hereto to
the extent consistent with the context in which the disclosure is made.
6.15 PUBLIC ANNOUNCEMENTS. The parties agree that they shall consult with
each other before the making of any public announcement regarding the existence
of this Agreement, the contents hereof or the consummation of the transactions
contemplated hereby, and to obtain the prior approval of the other party as to
the content of such announcement, which approval shall not be unreasonably
withheld.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
BRAZOS, INC.
("BUYER")
By: /s/
Name:
Title:
CS CRABLE SPORTSWEAR, INC.
("SELLER")
By: /s/
Name:
Title:
32
EXHIBIT 10.2
FIRST AMENDMENT TO THIRD AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "AMENDMENT") is made and entered into this 29th day of
September, 1997, by and among FLEET CAPITAL CORPORATION ("FLEET"), a Rhode
Island corporation, with an office at 2711 Haskell Avenue, Suite 2100, LB 21,
Dallas, Texas 75204, BANKBOSTON, N.A. ("BOSTON"), a national banking
association, with an office at 100 Federal Street, Boston, Massachusetts 02110
(Fleet and Boston are collectively referred to as "LENDERS" or each individually
a "LENDER"), FLEET, as agent for Lenders (Fleet, in such capacity, the "AGENT"),
BRAZOS, INC. ("BRAZOS"), a Texas corporation, with its chief executive offices
at 3860 Virginia Avenue, Cincinnati, Ohio 45227, and MORNING SUN, INC. ("MORNING
SUN"), a Washington corporation, with its chief executive offices at 3500 20th
Street E., Building C, Tacoma, Washington 98401 (Brazos and Morning Sun being
hereinafter individually and collectively referred to as "BORROWER", as governed
by the provisions of SECTION 1.5 and SECTION 1.6 of the Loan Agreement [as
hereinafter defined]).
RECITALS
A. Borrower, Agent and Lenders entered into that certain Third Amended and
Restated Loan and Security Agreement, dated as of July 2, 1997 ("LOAN
AGREEMENT").
B. Borrower desires that Brazos enter into and close the purchase of
substantially all of the assets of CS Crable Sportswear, Inc., an Ohio
corporation ("CRABLE"), pursuant to the terms, conditions and provisions of that
certain Asset Purchase Agreement, dated September 29, 1997, by and between
Brazos and Crable (the "CRABLE ASSET PURCHASE AGREEMENT") (the "CRABLE ASSET
ACQUISITION").
C. In connection with the Crable Asset Acquisition, Borrower has requested
that Lenders and Agent consent to the Crable Asset Acquisition and to amend the
Loan Agreement in the manner set forth in this Amendment, and Lenders and Agent
are willing to do so upon the terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the Loan
Agreement, as amended hereby, unless otherwise stated.
<PAGE>
ARTICLE II
AMENDMENTS
2.01 AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT; AMENDMENT TO
DEFINITION OF BORROWING BASE. The definition of "Borrowing Base" set forth in
SECTION 1.1 of the Loan Agreement is hereby amended by (i) deleting the
reference therein to the dollar amount "$30,000,000" and substituting therefor
the dollar amount "$35,000,000", and (ii) deleting the reference therein to the
dollar amount "$500,000" and substituting therefor the dollar amount
"$1,000,000".
2.02 AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT; AMENDMENT AND
RESTATEMENT OF CERTAIN DEFINITIONS. The definition of "Existing Boston Revolving
Credit Note," "Existing Fleet Revolving Credit Note," "Revolving Credit
Commitment," and "Revolving Credit Notes" set forth in SECTION 1.1 of the Loan
Agreement is hereby amended and restated in their entirety to read as follows:
"EXISTING BOSTON REVOLVING CREDIT NOTE - that certain Second Amended and
Restated Revolving Credit Note, dated July 2, 1997, in the original
principal amount of $20,600,000.00 executed by Borrower and payable to the
order of Boston."
"EXISTING FLEET REVOLVING CREDIT NOTE - that certain Second Amended and
Restated Revolving Credit Note, dated July 2, 1997, in the original
principal amount of $29,400,000.00 executed by Borrower and payable to the
order of Fleet."
"REVOLVING CREDIT COMMITMENT - $70,000,000.00. Fleet's maximum portion of
the Revolving Credit Commitment is $41,160,000.00, i.e., Fleet's Revolving
Credit Commitment is $41,160,000.00. Boston's maximum portion of the
Revolving Credit Commitment is $28,840,000.00, i.e., Boston's Revolving
Credit Commitment is $28,840,000.00."
"REVOLVING CREDIT NOTES - those certain Third Amended and Restated
Revolving Credit Notes, to be executed by Borrower on or about the date of
the First Amendment, in favor of each Lender, to evidence Borrower's
indebtedness to such Lender for its Revolving Credit Percentage, the Third
Amended and Restated Revolving Credit Note in favor of Fleet to be in the
form of ANNEX I attached to the First Amendment, as the same may be
amended, renewed, extended, modified or restated from time to time, the
provisions of which are in amendment and restatement of, and in
replacement for, the provisions of the Existing Fleet Revolving Credit
Note, and the Third Amended and Restated Revolving Credit Note in favor of
Boston to be in the form of ANNEX II attached to the First Amendment, as
the same may be amended, renewed, modified, extended or restated from time
to time, the provisions of which are in amendment and restatement of, and
in replacement for, the provisions of the Existing Boston Revolving Credit
Note."
2.03 AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT; ADDITION OF CERTAIN
DEFINITIONS. SECTION 1.1 of the Loan Agreement is hereby amended by adding
thereto in alphabetical order the following definitions:
"CRABLE ASSET ACQUISITION - as defined in the preamble to the First
Amendment."
<PAGE>
"FIRST AMENDMENT - that certain First Amendment to Third Amended and
Restated Loan and Security Agreement, dated as of September 29, 1997,
executed by Borrower, Lenders and Agent."
2.04 AMENDMENT TO SUBSECTION 2.1(B) OF THE LOAN AGREEMENT. SUBSECTION
2.1(B) of the Loan Agreement is hereby amended and restated in its entirety to
read as follows:
"(B) The Revolving Credit Loans shall be used solely for (i) the purchase
price and other costs and expenses related to the consummation of the
Transaction, (ii) the purchase price and other costs and expenses related
to the consummation of the Crable Asset Acquisition and (iii) Borrower's
general operating capital needs to the extent not inconsistent with the
provisions of this Agreement."
2.05 AMENDMENT TO SUBSECTION 3.1(A) OF THE LOAN AGREEMENT. SUBSECTION
3.1(A) of the Loan Agreement is hereby amended by deleting the reference therein
to the phrase "two percent (2.00%)" and substituting therefor the phrase "one
and three-fourths percent (1.75%)".
2.06 ADDITION OF A NEW SUBSECTION 3.1(A-1) TO THE LOAN AGREEMENT. A new
SUBSECTION 3.1(A- 1), INTEREST RATE REDUCTION is hereby added to the Loan
Agreement, to read in its entirety as follows:
"(A-1)INTEREST RATE REDUCTION. So long as no Default or Event of Default
has occurred and is continuing, in the event that the ratio of (i) the
Consolidated net earnings before provision for income taxes and interest
expense, and excluding any non-cash charges associated with the
reorganization of Borrower's facilities ("READJUSTED EBIT") of Parent and
its Subsidiaries for the calendar year ending December 31, 1997, to (ii)
the Consolidated pro forma interest expense of Parent and its Subsidiaries
for such calendar year and prepared on the same pro forma basis, is equal
to or greater than 1.4 to 1.0, as reflected in pro forma Consolidated
financial statements of Parent and its Subsidiaries prepared by Parent and
verified by Agent's auditors, and approved by Agent, which approval shall
not be unreasonably withheld, then the Applicable Annual Rate as to
Eurodollar Revolving Credit Loans shall be reduced to the rate per annum
equal to one and one-half percent (1.50%) above the Eurodollar Base Rate
for the Eurodollar Interest Period applicable thereto. Readjusted EBIT and
the calculation of interest expense shall be prepared on a pro forma basis
consistent with the calculation of Adjusted EBITDA (other than
calculations made to add back depreciation and amortization in connection
with the calculation of EBITDA) as reflected in the supplemental financial
data included in footnote (9) to the pro forma combined statement of
operations of Parent, its Consolidated Subsidiaries (including Brazos),
Plymouth, Sun Sportswear, Morning Sun and Premier included at page 29 in
the Offering Memorandum dated June 26, 1997, which was prepared by Parent
in connection with the offer and sale of the Parent Senior Notes. A copy
of such Offering Memorandum has been previously provided to each of the
Lenders. Notwithstanding anything herein to the contrary, the calculation
of Readjusted EBIT shall only include cost reductions that have been
actually implemented and are verifiable. The calculation of Readjusted
EBIT will not include any pro forma adjustment for the results of
operations of Crable prior to the closing of the Crable Asset Acquisition.
The calculation of pro forma interest expense will not include any
adjustment related to the period prior to such for debt incurred in
connection
<PAGE>
with the Crable Asset Acquisition. Such reduction in the Applicable Annual
Rate shall be effective only for Eurodollar Revolving Credit Loans
requested after the date on which Agent has received and reviewed such pro
forma financial statements demonstrating compliance with the
above-described rate adjustment test. The rate reduction made pursuant to
this SUBSECTION 3.1(A-1) shall remain in effect only for so long as no
Event of Default has occurred."
2.07 AMENDMENT TO SUBSECTION 9.2(W) OF THE LOAN AGREEMENT. SUBSECTION
9.2(W) of the Loan Agreement is hereby amended by deleting the reference therein
to the dollar amount "$6,000,000.00" and substituting therefor the dollar amount
"$7,000,000.00".
2.08 AMENDMENT TO EXHIBIT B OF THE LOAN AGREEMENT. EXHIBIT B of the Loan
Agreement, the Borrower's business locations, is hereby deleted in its entirety
and replaced with EXHIBIT B attached hereto as ANNEX III.
2.09 AMENDMENT TO EXHIBIT D OF THE LOAN AGREEMENT. EXHIBIT D of the Loan
Agreement, the corporate names of Borrower, is hereby deleted in its entirety
and replaced with EXHIBIT D attached hereto as ANNEX IV.
2.10 AMENDMENT TO EXHIBIT E OF THE LOAN AGREEMENT. EXHIBIT E of the Loan
Agreement, the Borrower's patents, trademarks, copyrights and licenses, is
hereby deleted in its entirety and replaced with EXHIBIT E attached hereto as
ANNEX V.
2.11 AMENDMENT TO EXHIBIT K OF THE LOAN AGREEMENT. EXHIBIT K of the Loan
Agreement, the Borrower's capitalized leases and summary of real estate lease
terms, is hereby deleted in its entirety and replaced with EXHIBIT K attached
hereto as ANNEX VI.
2.12 AMENDMENT TO EXHIBIT U OF THE LOAN AGREEMENT. EXHIBIT U of the Loan
Agreement, the form of Borrowing Base Report, is hereby deleted in its entirety
and replaced with EXHIBIT U attached hereto as ANNEX VII.
ARTICLE III
CONDITIONS
3.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lenders and Agent:
(a) Lenders shall have received each of the following, each of which
shall be in form and substance satisfactory to Lenders, in their sole
discretion:
<PAGE>
(i) this Amendment, duly executed by Borrower, together with
the Consent, Ratification and Release duly executed by Brazos Sportswear, Inc.;
(ii) (a) the Third Amended and Restated Revolving Credit Note,
in the form of ANNEX I attached hereto, duly executed by Borrower, in
favor of Fleet, and (b) the Third Amended and Restated Revolving Credit
Note, in the form of ANNEX II attached hereto, duly executed by Borrower,
in favor of Boston;
(iii) the written opinion of Porter & Hedges, L.L.P., counsel
to Borrower, regarding Borrower, the execution of this Amendment, the
other Loan Documents executed in connection herewith, the Crable Asset
Acquisition and the other transactions contemplated hereby, to be in form
and substance satisfactory to Lenders, in their sole discretion;
(iv) a certificate executed by the President of Borrower,
setting forth in reasonable detail the sources and uses of funds in the
transactions contemplated herein and in the Crable Asset Acquisition;
(v) a certificate regarding the Solvency of Borrower, which
includes a pro forma balance sheet and cash flow projections and analyses
for Borrower, executed by the President of Borrower;
(vi) a closing certificate signed by the President of
Borrower, dated as of the date of this Amendment, stating that (A) the
representations and warranties set forth in SECTION 8 of the Loan
Agreement, as amended by this Amendment, are true and correct as of such
date, other than for such representations and warranties which relate to a
specific date, (B) Borrower is on such date in compliance with all the
terms and provisions set forth in the Loan Agreement, as amended by this
Amendment, and (C) on such date no Default or Event of Default has
occurred or is continuing, except for such Defaults or Events of Default
as have been specifically disclosed in writing by Borrower to Agent;
(vii) a company general certificate, certified by the
Secretary or Assistant Secretary of the Borrower, acknowledging (A) that
the Borrower's Board of Directors has met and has adopted, approved,
consented to and ratified resolutions which authorize the execution,
delivery and performance by the Borrower of this Amendment and all other
Loan Documents to which the Borrower is or is to be a party, and (B) the
names of the officers of the Borrower authorized to sign this Amendment
and each of the other Loan Documents to which the Borrower is or is to be
a party hereunder (including the certificates contemplated herein)
together with specimen signatures of such officers;
(viii)written instructions from Borrower directing the
application of proceeds of the Loans to be made on the date hereof;
(ix) evidence satisfactory to Agent of the satisfaction (or
waiver by Brazos) of all conditions precedent to the Crable Asset Purchase
Agreement, and a copy of the fully executed Crable Asset Purchase
Agreement, together with all exhibits and schedules thereto, and evidence
that the Crable Asset Acquisition has been consummated in accordance with
the provisions of the Crable Asset Purchase Agreement;
<PAGE>
(x) copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation necessary
to perfect the Liens of Agent, for the benefit of Lenders, in the
Collateral (including the assets acquired in the Crable Asset Acquisition)
and evidence to Agent and Lenders that such Liens constitute valid and
first-priority perfected security interests and Liens;
(xi) landlord consent letters from such of the landlords as
shall be required by Agent, in form and substance satisfactory to Lenders,
as to each new location of Borrower resulting from the Crable Asset
Acquisition;
(xii) certified copies of Borrower's casualty insurance
policies, together with endorsements naming Agent, for the benefit of
Lenders, as loss payee and as mortgagee pursuant to a standard mortgagee
clause, and certified copies of Borrower's liability insurance policies,
together with endorsements naming Agent, for the benefit of Lenders, as a
co-insured; and
(xiii)such additional documents, instruments and information
as Lenders or their legal counsel may request.
(b) No Default or Event of Default shall have occurred and be
continuing, unless such Default or Event of Default has been specifically
disclosed in writing by Borrower to Lender.
(c) All conditions precedent in the Loan Agreement to the making of
a Loan pursuant to the Loan Agreement shall have been fully satisfied or waived
in writing by Agent and each Lender.
(d) The representations and warranties contained herein and in the
Loan Agreement and the other Loan Documents, as each is amended hereby, shall be
true and correct as of the date hereof, as if made on the date hereof, other
than for such representations and warranties which relate to a specific date.
(e) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments and
other legal matters incident thereto shall be satisfactory to Lenders and Agent
and their legal counsel.
ARTICLE IV
LIMITED WAIVER
By execution of this Amendment and upon satisfaction of the conditions set
forth in SECTION 3.01 of this Amendment, Agent and Lenders hereby waive any
Default and/or Event of Default arising under the Loan Agreement solely by
reason of Borrower's violation of SECTION 9.2(A) of the Loan Agreement resulting
from Crable Asset Acquisition. Except as specifically provided in this ARTICLE
IV, nothing contained in this Amendment shall be construed as a waiver by
Lenders or Agent of any covenant or provision of the Loan Agreement, the other
Loan Documents, this Amendment, or of any other contract or instrument between
Borrower, Agent and/or any Lender, and the failure of Agent and/or any Lender at
any time or times hereafter to require strict performance by Borrower of any
provision thereof shall not waive, affect or
<PAGE>
diminish any right of Agent and/or any Lender to thereafter demand strict
compliance therewith. Lenders and Agent hereby reserve all rights granted under
the Loan Agreement, the other Loan Documents, this Amendment and any other
contract or instrument between Borrower, Agent and/or any Lender.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Loan Agreement and the other Loan Documents, and, except as expressly
modified and superseded by this Amendment, the terms and provisions of the Loan
Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. Borrower, Lenders and Agent agree that the
Loan Agreement and the other Loan Documents, as amended hereby, shall continue
to be legal, valid, binding and enforceable in accordance with their respective
terms.
5.02 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lenders and Agent that (a) the execution, delivery and performance
of this Amendment and any and all other Loan Documents executed and/or delivered
in connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Articles of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any other Loan Document are true and correct
on and as of the date hereof and on and as of the date of execution hereof, as
though made on and as of each such date, other than representations and
warranties which relate to a specific date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lenders or has been specifically disclosed in writing by Borrower to Lenders;
(d) Borrower is in full compliance with all covenants and agreements contained
in the Loan Agreement and the other Loan Documents, as amended hereby, except as
has been otherwise specifically disclosed in writing by Borrower to Lenders; and
(e) the execution, delivery, and performance of this Amendment and any and all
other Loan Documents executed and/or delivered in connection herewith, and the
consummation of the Crable Asset Acquisition, does not violate any provision of
the Parent Senior Notes or any document executed in connection therewith,
including the Indenture.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in the Loan Agreement or any other Loan Document, including,
without limitation, any document furnished in connection with this Amendment,
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by any Lender or Agent or any closing shall
affect the representations and warranties or the right of any Lender or Agent to
rely upon them.
6.02 REFERENCE TO LOAN AGREEMENT. Each of the Loan Agreement and the other
Loan Documents, and any and all other agreements, documents or instruments now
or hereafter executed and
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delivered pursuant to the terms hereof or pursuant to the terms of the Loan
Agreement, as amended hereby, are hereby amended so that any reference in the
Loan Agreement and such other Loan Documents to the Loan Agreement shall mean a
reference to the Loan Agreement, as amended hereby.
6.03 EXPENSES OF LENDERS AND AGENT. As provided in the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lenders and
Agent in connection with the preparation, negotiation, and execution of this
Amendment and the other Loan Documents executed pursuant hereto and any and all
amendments, modifications, and supplements thereto, including, without
limitation, the costs and fees of Lenders' and Agent's legal counsel, and all
costs and expenses incurred by Lenders and Agent in connection with the
enforcement or preservation of any rights under the Loan Agreement, as amended
hereby, or any other Loan Documents, including, without, limitation, the costs
and fees of Lenders' and Agent's legal counsel.
6.04 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall
inure to the benefit of Lenders, Agent and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of Lenders
and Agent.
6.06 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
6.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by any
Lender or Agent to or for any breach of or deviation from any covenant or
condition by Borrower shall be deemed a consent to or waiver of any other breach
of the same or any other covenant, condition or duty.
6.08 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
6.10 FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS,
EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE
LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, 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. NO
MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER,
LENDERS AND AGENT.
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6.11 RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM ANY LENDER OR AGENT. BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDERS AND AGENT, ITS PREDECESSORS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS,
ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER,
KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART
ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST ANY LENDER OR AGENT, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS
ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND
ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR,
CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE
HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER
THE LOAN AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF
THIS AMENDMENT.
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IN WITNESS WHEREOF, this Amendment has been executed as of the date first
above-written, to be effective as of the respective date indicated above.
BRAZOS, INC.
By: /s/
Name:
Title:
MORNING SUN, INC.
By: /s/
Name:
Title:
FLEET CAPITAL CORPORATION,
as Agent
By: /s/
Name:
Title:
FLEET CAPITAL CORPORATION,
in its individual capacity
By: /s/
Name:
Title:
<PAGE>
BANKBOSTON, N.A.
By: /s/
Name:
Title:
