SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-21764
SUPREME INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-1162998
(State of other jurisdiction of (IRS Employer Identification
Incorporation or organization) Number)
7495 NW 48TH STREET
MIAMI, FLORIDA 33166
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 592-2830
Former name, former address and fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock is 4,349,033
(as of June 12, 1996).
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SUPREME INTERNATIONAL CORPORATION
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1:
Consolidated Balance Sheets
as of April 30, 1996 (Unaudited) and January 31, 1996 ............. 1
Consolidated Statements of Income (Unaudited)
for the three months ended April 30, 1996 and April 30, 1995 ...... 2
Consolidated Statements of Cash Flows (Unaudited)
for the three months ended April 30,1996 and April 30,1995 ........ 3
Notes to Consolidated Financial Statements ................................. 4
ITEM 2:
Management's Discussion and Analysis
of Financial Condition and Results of Operations .................. 5
PART II: OTHER INFORMATION ................................................. 8
Signatures ................................................................. 9
<PAGE>
SUPREME INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30, 1996 AND JANUARY 31, 1996
<TABLE>
<CAPTION>
APRIL 30,
1996 JANUARY 31,
ASSETS (UNAUDITED) 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash ....................................................................................... $ 269,771 $ 258,533
Accounts receivable, net ................................................................... 27,681,430 18,101,151
Inventories ................................................................................ 27,436,418 30,352,993
Deferred income taxes ...................................................................... 828,313 828,313
Other current assets ....................................................................... 751,988 1,153,785
----------- -----------
Total current assets ............................................................. 56,967,920 50,694,775
PROPERTY AND EQUIPMENT, net .................................................................. 2,053,748 2,078,327
INTANGIBLE ASSETS, net ....................................................................... 718,901 674,199
OTHER ........................................................................................ 502,137 288,123
----------- -----------
TOTAL ........................................................................................ $60,242,706 $53,735,424
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ........................................................................... $ 5,158,503 $ 1,523,560
Accrued expenses ........................................................................... 1,442,183 1,189,171
Other current liabilities .................................................................. 1,165,699 221,666
----------- -----------
Total current liabilities ......................................................... 7,766,385 2,934,397
LONG-TERM DEBT ............................................................................... 8,929,937 6,967,943
----------- -----------
Total liabilities ................................................................. $16,696,322 $ 9,902,340
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value; 1,000,000 shares authorized;
no shares issued or outstanding ........................................................ $ -- $ --
Common stock - $.01 par value; 10,000,000 shares authorized;
4,533,333 shares issued less 184,300 of treasury stock at April 30, 1996
and 4,533,333 shares issued and outstanding
at January 31, 1996 .................................................................... 43,490 45,333
Additional paid-in capital ................................................................. 27,419,474 29,319,261
Retained earnings .......................................................................... 16,083,420 14,468,490
----------- -----------
Total stockholders' equity ......................................................... 43,546,384 43,833,084
----------- -----------
TOTAL ........................................................................................ $60,242,706 $53,735,424
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
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SUPREME INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED APRIL 30,
--------------------------
1996 1995
----------- -----------
NET SALES ....................................... $37,355,127 $35,042,696
COST OF GOODS SOLD .............................. 29,163,236 26,387,150
----------- -----------
GROSS PROFIT .................................... 8,191,891 8,655,546
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES .... 5,375,898 5,431,618
----------- -----------
OPERATING INCOME ................................ 2,815,993 3,223,928
INTEREST EXPENSE ................................ 213,063 651,130
----------- -----------
INCOME BEFORE INCOME TAXES ...................... 2,602,930 2,572,798
PROVISION FOR INCOME TAXES ...................... 988,000 977,663
----------- -----------
NET INCOME ...................................... $ 1,614,930 $ 1,595,135
=========== ===========
NET INCOME PER SHARE ............................ $ 0.37 $ 0.45
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES ........ 4,385,923 3,533,333
=========== ===========
See notes to consolidated financial statements.
2
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SUPREME INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................................................... $ 1,614,930 $ 1,595,135
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization .......................................... 57,166 84,061
Changes in assets and liabilities:
Increase in accounts receivable, net .................................. (9,580,279) (7,053,663)
Decrease (Increase) in inventories .................................... 2,916,575 (1,723,545)
Decrease in other current assets ..................................... 401,797 166,133
Increase in other assets .............................................. (214,014) (38,448)
Increase (Decrease) in accounts payable and accrued expenses .......... 3,887,955 (548,642)
Increase in other current liabilities ................................. 944,033 390,073
----------- -----------
Net cash provided (used) by operating activities .... 28,163 (7,128,896)
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed and intangible assets .............................. (77,289) (190,798)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in borrowings under credit facilities ................... -- (760,068)
Borrowings on long-term debt, current portion ........................ -- 6,086,739
Proceeds from long-term debt ......................................... 1,961,994 1,687,932
Purchase of treasury stock ........................................... (1,901,630) --
----------- -----------
Net cash provided by financing activities ........... 60,364 7,014,603
----------- -----------
NET INCREASE (DECREASE) IN CASH ............................................ 11,238 (305,091)
CASH AT BEGINNING OF PERIOD ............................................... 258,533 341,626
----------- -----------
CASH AT END OF PERIOD ..................................................... $ 269,771 $ 36,535
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest ....................................... $ 176,760 $ 404,384
=========== ===========
Income taxes ................................... $ 14,549 $ 756,750
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
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SUPREME INTERNATIONAL CORPORATION
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q
and therefore do not include all information and footnotes
necessary for a fair presentation of financial position, results
of operations and changes in cash flows in conformity with
generally accepted accounting principles. The unaudited
consolidated financial statements should be read in conjunction
with the audited financial statements and related notes included
in the Registrant's Annual Report on Form 10-K for the year ended
January 31, 1996. In the opinion of management, the unaudited
consolidated financial statements contain all adjustments
necessary for a fair presentation for the interim period
presented and all such adjustments are of a normal and recurring
nature. The results of operations for the three months ended
April 30, 1996 are not necessarily indicative of the results
which may be expected for the entire fiscal year.
In February 1996, Supreme International Corporation's (the
"Company") Board of Directors authorized a stock repurchase
program for up to 500,000 shares of its outstanding common stock.
See schedule related to treasury stock in Note 5.
2. INVENTORY
Inventories are stated at lower of cost or market on a First-in
First-out basis and consist of:
APRIL 30, 1996 JANUARY 31, 1996
----------- -----------
Finished goods ........................ $21,750,112 $26,673,903
Raw materials and in process .......... 5,019,399 3,040,737
Merchandise in transit ................ 666,907 638,353
----------- -----------
TOTAL ................................. $27,436,418 $30,352,993
=========== ===========
3. LETTER OF CREDIT FACILITIES
APRIL 30, 1996 JANUARY 31, 1996
------------ ------------
Total letter of credit facilities .......... $ 35,000,000 $ 35,000,000
Borrowings ................................ -- --
Outstanding letters of credit ............. (13,506,820) (11,758,074)
------------ ------------
Total Available ............................ $ 21,493,180 $ 23,241,926
============ ============
4
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4. EARNINGS PER SHARE
Earnings per common share and common equivalent share were
computed by dividing net income by the weighted average number of
shares of common stock and common stock equivalents outstanding
during the year. The number of common shares was increased by the
number of shares issuable on the exercise of warrants and stock
options when the market price of the common stock exceeds the
exercise price of the warrants or options. This increase in the
number of common shares was reduced by the number of common
shares that are assumed to have been purchased with the proceeds
from the exercise of the warrants or options; those purchases
were assumed to have been made at the average price of common
stock during the year. Earnings per share assuming full dilution
was determined in the same manner as earnings per common share
and common equivalent share except that the period-end stock
price was used.
5. STOCKHOLDERS' EQUITY
The following is a schedule of the transactions in the common
stock and the additional paid-in capital as a result of the stock
repurchase program:
COMMON STOCK
-------------------- ADDITIONAL
SHARES AMOUNT PAID-IN
CAPITAL
Balance, February 1, 1996 ........ 4,533,333 $ 45,333 $29,319,261
Less purchase of 184,300
shares of common stock ........ 184,300 1,843 1,899,787
----------- ----------- -----------
Balance, April 30, 1996........... 4,349,033 $ 43,490 $ 27,419,474
=========== =========== ============
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains, in addition to
historical information, forward looking statements with respect
to Supreme International Corporation (the "Company") that involve
risks and uncertainties. The Company's actual results could
differ materially. Factors that could cause or contribute to such
difference include, but are not limited to, risks related to
fashion trends; the retail industry; reliance on key customers;
contract manufacturing; foreign sourcing; imports and import
restrictions; competition; seasonality; rapid expansion of
business; dependence on key personnel and other factors discussed
in the Company's filings with the Securities and Exchange
Commission
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1996 AS COMPARED TO THREE MONTHS
ENDED APRIL 30, 1995
Net sales for the three months ended April 30, 1996
increased $2,312,431 or 6.6% to $37,355,127 from $35,042,696 for
the three months ended April 30, 1995. Such increase is
attributable to the broad-based growth in the Company's product
lines to existing customers as well as the addition of new
customers.
Cost of goods sold increased to $29,163,236 for the three
months ended April 30, 1996 from $26,387,150 for the three months
ended April 30, 1995, reflecting the increased level of sales. As
a percentage of sales, cost of sales increased to 78.1% for the
three months ended April 30, 1996 from 75.3% for the three months
ended April 30, 1995. Gross profits were $8,191,891 (21.9% of
sales) for the three months ended April 30, 1996, as compared to
5
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$8,655,546 (24.7% of sales) for the three months ended April 30,
1995. Gross profits as a percentage of sales was adversely
impacted during the 1996 period by increased sales to discount
store customers during the period.
Selling, general and administrative expenses decreased by
$55,720 or 1.0% from $5,431,618 for the three months ended April
30,1995 to $5,375,898 for the three months ended April 30, 1996.
As a percentage of sales, selling, general and administrative
expenses were 14.4% for the three months ended April 30, 1996
and 15.5% for the three months ended April 30, 1995.
Interest expense decreased to $213,063 for the three
months ended April 30, 1996 from $651,130 for the three months
ended April 30, 1995. This decrease was due to the repayment of a
portion of the amount outstanding under the Company's $35.0
million revolving credit agreement with a bank following
completion by the Company of a public offering in September 1995.
Income before taxes for the three months ended April 30,
1996 was $2,602,930 compared to income before taxes for the three
months ended April 30, 1995 of $2,572,798. Net income for the
three months ended April 30, 1996 was $1,614,930 ( $0.37 per
share) as compared to net income for the three months ended April
30, 1995 of $1,595,135 ( $0.45 per share). Net income per share
was computed using the weighted average number of common shares
outstanding of 4,385,923 and 3,533,333 at April 30, 1996 and
1995, respectively. The increase in the weighted average number
of common shares outstanding was due to the completion of the
public offering described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth in sales and other
working capital requirements principally from operating cash
flows and borrowings under a $35.0 million revolving credit
agreement with a bank (the "Revolving Credit Agreement"). The
amount available for borrowings under the Revolving Credit
Agreement is determined pursuant to a formula based upon the
levels of eligible accounts receivable and finished goods
inventory, subject to a maximum of $35.0 million. The Revolving
Credit Agreement bears interest at the bank's prime rate or LIBOR
plus 1.5%. Substantially all the assets of the Company are
pledged as collateral under the Revolving Credit Agreement. As of
April 30, 1996, $8,929,937 was outstanding under the Revolving
Credit Agreement, and the Company had $26,070,063 available for
additional borrowings based on eligible receivables and
inventory.
Cash flows provided by operating activities were $28,163
for the three months ended April 30, 1996 principally
representing cash provided by net income of $1,614,930, a
decrease in inventories of $2,916,575 and increases in current
liabilities of $4,831,988, offset by cash used to finance
increases in accounts receivable of $9,580,279. For the three
months ended April 30, 1995, cash flows used in operating
activities were $7,128,896 primarily consisting of cash provided
by net income of $1,595,135 offset by an increase in accounts
receivable of $7,053,663 and an increase in inventories of
$1,723,545.
Cash flows used in investing activities were $77,289 and
$190,798 for the three months ended April 30, 1996 and 1995,
respectively, representing normal requirements for capital
expenditures.
Cash flows provided by financing activities were $60,364
for the three months ended April 30, 1996 primarily as a result
of proceeds from long-term debt of $1,961,994 offset by the
purchase of treasury stock of $1,901,630. During the three months
ended April 30, 1996, the Company repurchased an aggregate of
184,300 shares of its common stock in the open market. For the
three months ended April 30, 1995, cash flows provided by
financing activities were $7,014,603 principally due to proceeds
from long-term debt of $ 7,774,671 offset by a reduction
6
<PAGE>
in borrowings under credit facilities of $760,068. At April 30,
1996, the Company had cash of $269,771, as compared to $258,533
at January 31, 1996, as a result of the activities described
above.
The Revolving Credit Agreement contains significant
financial and operating covenants, including requirements that
the Company maintain minimum net worth levels and certain
financial ratios, prohibitions on the ability of the Company to
incur certain additional indebtedness and restrictions on its
ability to make capital expenditures, to incur or suffer to exist
certain liens, to pay dividends or to take certain other
corporate actions. Amounts will only be available under the
Revolving Credit Agreement if such financial maintenance and
other covenants are satisfied and the borrowing base calculation
(which is based upon the amount of eligible accounts receivable
and eligible inventory) are satisfied. The Company is currently
in compliance with all covenants under the Revolving Credit
Agreement.
The Company had working capital of $49,201,535 at April
30, 1996. Outstanding indebtedness of $8,929,937 is classified as
long-term debt under the Revolving Credit Agreement and therefore
is not included for purposes of calculating working capital. At
January 31, 1996 the Company had working capital of $47,760,378
with outstanding indebtedness under the Revolving Credit
Agreement of $6,967,943. The Company's current ratio was 7.3 at
April 30, 1996 compared to 17.3 at January 31, 1996.
The Company maintains three facilities with a combined
limit of $35.0 million for letters of credit. The facilities
further provide the Company with an aggregate sublimit of $7.2
million for advances to refinance letters of credit up to 120
days. These facilities are secured by the consignment of
merchandise in transit under each letter of credit. Indebtedness
under these facilities bears interest at variable rates
substantially equal to the lenders' specified base lending rates
plus a 1.5% per annum acceptance commission fee. Letters of
credit under these facilities totaled $13,506,820 and $11,758,074
as of April 30, 1996 and January 31,1996, respectively.
In May 1996, the Company acquired all the assets of Jolem
Imports, Inc., a Miami-based manufacturer and distributor of
men's and boys' casual apparel. Also in May 1996, the Company
announced that it has entered into a definitive purchase
agreement to acquire certain assets of Munsingwear Inc., a
manufacturer of men's casual apparel sold primarily to
department stores and golf pro shops for approximately $18.0
million. See Part II - Item 5.
Management believes that the combination of the borrowing
availability under the Revolving Credit Agreement, existing
working capital and funds anticipated to be generated from
operating activities will be sufficient to meet the Company's
anticipated operating and capital needs for the foreseeable
future.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
The Company does not believe that inflation significantly
affected its results of operations for the three months ended
April 30, 1996 and 1995.
The Company's purchases from foreign suppliers are made in U.S.
dollars. Accordingly, the Company, to date, has not been
materially adversely affected by foreign currency fluctuations.
7
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PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings
Not applicable.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
ITEM 5. Other Information
On May 22, 1996, the Company entered into a definitive
purchase agreement to acquire certain assets of Munsingwear Inc.,
("Munsingwear"), a manufacturer of men's casual apparel sold primarily to
department stores and golf pro shops, for approximately $18.0 million.
Under the terms of the agreement, the Company will
acquire trademarks and tradenames used in Munsingwear's apparel business,
including Munsingwear(R) Penguin Sport, Grand Slam(R) and Grand Slam Tour, as
well as use of the Munsingwear Penguin logo. Additionally, the Company will
acquire all rights (including royalty rights) under Munsingwear's domestic and
certain international licensing agreements following the closing of said
transaction. As part of the transaction, the Company has entered into an
agreement to assist Munsingwear in the management of its retail and golf apparel
productions pending the closing, for which the Company will receive a management
fee. Consummation of the transaction is subject to the satisfaction of certain
conditions including; among others, completion of satisfactory due diligence by
the Company, approval by the shareholders of Munsingwear and other regulatory
approvals.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.24 Purchase and Sale Agreement dated May 22, 1996, between the
Company and Munsingwear Inc.
27.1 Financial Data Schedule (for SEC use only.)
(b) Reports on Form 8-K - None
8
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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.
Date: June 12, 1996 By: /S/ RICHARD L. DUNN
Richard L. Dunn
Chief Financial Officer
9
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SUPREME INTERNATIONAL CORPORATION
FORM 10-Q - APRIL 30, 1996
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
10.24 Purchase and Sale Agreement dated May 22, 1996, between the
Company and Munsingwear Inc.
27.1 Financial Data Schedule (for SEC use only.)
EXHIBIT 10.24
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into
as of this 22nd day of May, 1996, by and among SUPREME INTERNATIONAL
CORPORATION, a Florida corporation ("Purchaser"), and MUNSINGWEAR, INC., a
Delaware corporation (the "Company").
The Company is in the business of designing, sourcing, producing and
distributing shirts and other apparel products to retailers (including
department stores, national chains, specialty and discount stores) and
professional golf shops utilizing the various trademarks and trade names listed
on Schedule 1.1.1 hereto (the "Business").
Purchaser is in the business of designing, importing and marketing
men's sportswear.
The parties hereto desire that Purchaser acquire certain assets of
the Company related to the Business, which assets are described in Section 1.1,
in consideration of the payment of the "Purchase Price," as such term is defined
herein, and in consideration of Purchaser's other agreements in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and of
the representations, warranties and agreements of the parties contained herein,
the parties hereto do hereby agree as follows:
1. ASSET PURCHASE.
1.1 PURCHASE AND SALE OF ASSETS. The Company hereby agrees to sell,
transfer and assign to Purchaser or its designee, and Purchaser or its designee
hereby agrees to acquire from the Company, on the terms and conditions set forth
herein, the following assets of the Company (collectively, the "Assets"):
1.1.1 TRADEMARKS AND TRADE NAMES. all of the Company's
rights in and to the common law and registered trade names and trademarks
worldwide listed on Schedule 1.1.1 attached hereto and made a part hereof,
including all variants thereof and all goodwill associated therewith, and all
registrations, applications and other rights associated with the foregoing,
whether issued or pending, for distribution through all channels (collectively,
the "Trademarks"), but excluding the trademarks and tradenames for the Peoples
Republic of China, Vietnam, Macau, North Korea and such other Trademarks as are
listed on Schedule 1.1.1 (collectively, the "Excluded Trademarks"), which
exclusion shall not prohibit Purchaser from manufacturing and exporting goods
utilizing the Trademarks in or from any such countries (the "Trademark Sourcing
Rights"), except as described on Schedule 1.1.1(a) attached hereto and made a
part hereof, which Schedule shall be provided to Purchaser by the Company within
seven days after the date hereof;
1.1.2 CUSTOMER LISTS AND RECORDS. all current customer
lists, and records for the Business, set forth on Schedule 1.1.2 attached hereto
and made a part hereof;
<PAGE>
1.1.3 LICENSES AND OTHER AGREEMENTS. all of the Company's
rights in and to existing and pending licensing agreements and all cash royalty
income payable after Closing (as hereinafter defined) listed on Schedule 1.1.3
attached hereto and made a part hereof, and all licensing agreements and other
agreements currently under negotiation as listed on Schedule 1.1.3, but subject
to change of control provisions (collectively, the "Licenses"), except for the
licensing agreements currently existing or being negotiated for the U.S.
Territories of Guam and the Northern Mariana Islands (collectively, the
"Excluded Licenses"), which exclusion shall not prohibit Purchaser from
manufacturing and exporting goods utilizing the Licenses in or from such
countries (the "License Sourcing Rights"), except as described on Schedule
1.1.3(a) attached hereto and made a part hereof, which Schedule shall be
provided to Purchaser by the Company within seven days after the date hereof;
1.1.4 ADVERTISING MATERIALS. all of the Company's rights in
and to advertising materials related to the Business and trade show booths and
booth locations, including without limitation, locations at the MAGIC and PGA
shows listed on Schedule 1.1.4 attached hereto and made a part hereof (the
"Advertising Materials");
1.1.5 ARCHIVES AND DISKS. all of the Company's rights in
and to originals of product advertising and design archives and embroidery disks
listed on Schedule 1.1.5 attached hereto and made a part hereof and all design
equipment owned by Munsingwear and utilized in connection with the Business (the
"Archives and Disks");
1.1.6 CORPORATE NAME. all of the Company's rights in and to
the corporate name "Munsingwear" and all derivations and variations of the term
Munsingwear set forth on Schedule 1.1.6 attached hereto and made a part hereof;
and
1.1.7 OTHER RECORDS. all books, files, papers, and records
owned by the Company and used in the operation of the Business (other than the
Company's tax and general accounting records and its minute and stock books),
including data bases, docketing programs, files and print-outs relating to the
Trademarks, to the extent legally transferable by the Company, subject to the
provisions of Section 11.5 of this Agreement;
1.1.8 COPYRIGHTS. all of the Company's rights in and to the
common law and registered copyrights associated with any of the Assets, all
rights to the Company's labels, labeling, advertising and promotional materials
used in the Business which are capable of being subject to copyright, and all
registrations, applications and other rights associated with the foregoing
whether issued or pending (collectively, the "Copyrights"); and
1.1.9 SOURCING RIGHTS. the Trademark Sourcing Rights and
the Licensing Sourcing Rights.
It is specifically understood and agreed by the parties
hereto that, except as set forth in Section 1.2, Purchaser is acquiring, and the
Company is selling, all of the tangible and
-2-
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intangible assets owned by the Company or in which the Company has an interest
and used by the Company in the Business.
1.2 EXCLUDED ASSETS. All assets of the Company not otherwise included
in the Assets shall not be purchased by Purchaser, including, without
limitation, the following (all of which are collectively referred to as the
"Excluded Assets"):
(a) the right to design, source, produce and distribute
shirts and other apparel products pursuant to the License Agreement described in
Section 7.2 solely through the channels of distribution set forth on Exhibit B
to the License Agreement (the "ASI Premium/Specialty Markets") in the United
States and Canada;
(b) the Company's Fairmont, North Carolina manufacturing
plant and equipment;
(c) all of the Company's rights in and to the Excluded
Trademarks and the Excluded Licenses;
(d) all of the Company's accounts receivable incurred prior
to the Closing Date or related to the Inventory, as defined in the Management
Agreement attached hereto as Exhibit 7.1;
(e) all of the Company's inventory, including raw
materials, work-in-process and finished goods, as of the Closing Date;
(f) the Company's Minneapolis, Minnesota headquarters and
equipment; and
(g) the Company's New York office and professional golf
endorsements.
1.3 ASSUMPTION OF LIABILITIES. Except for liabilities arising from
the Licenses included in the Assets and trademark litigation in which the
Company is a party, as set forth on Schedule 3.14 attached hereto and made a
part hereof (the "Trademark Litigation"), Purchaser shall not assume or in any
way be liable or responsible for any liabilities or obligations of the Company
whatsoever, including, without limitation, any state, federal and local income,
business, occupation, sales, withholding and similar taxes (collectively "Tax
Liabilities"). Without limiting the generality of the foregoing, Purchaser shall
have no liability or responsibility for any Tax Liabilities arising as a result
of or in connection with the transactions contemplated by this Agreement, any
liabilities related to the Company's business, pending or threatened litigation,
any unknown or undisclosed claims, liabilities or obligations, any obligations
for contributions to employment insurance, disability or other employee benefit
programs, unpaid commissions for sales, collection of accounts receivable or
payment of accounts payable. With respect to Trademark Litigation, Purchaser
shall only assume the fees and costs of such litigation incurred after the
Closing Date.
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2. PURCHASE PRICE AND CLOSING.
2.1 PURCHASE PRICE.
2.1.1 PURCHASE PRICE. As the purchase price (the "Purchase
Price") for the Assets, Purchaser shall pay to the Company, at the election of
Purchaser (a) $18.0 million in cash (including the Deposit, as hereinafter
defined) payable at the Closing, or (b) $18.4 million (including the Deposit),
payable $9.0 million in cash at the Closing and $9.4 million by delivery at
Closing of a $9.4 million non-interest bearing senior note (the "Note") payable
six months after Closing, secured by an irrevocable letter of credit issued by
NationsBank, N.A., or a comparable financial institution, or other security,
reasonably satisfactory to the Company, which letter of credit or other security
may be utilized as the sole collateral for a non-recourse loan from NationsBank,
N.A. to Purchaser immediately following the Closing in the amount of $9.0
million. The Company hereby acknowledges receipt of the amount of $1,000,000
(the "Deposit") as a good faith deposit to be applied and credited toward the
total Purchase Price. The remaining unpaid cash portion of the Purchase Price
shall be paid at the Closing by wire transfer or certified or cashier's check.
2.1.2 DEPOSIT. In the event the transactions contemplated
by this Agreement are not consummated due to Purchaser's default hereunder, the
Company shall retain the Deposit as liquidated damages. For such purposes, the
parties acknowledge and agree that it would be extremely difficult or impossible
to fix the precise amount of damages suffered by the Company in such event, and
agree that the sum of $1,000,000 is a reasonable approximation of the amount of
damages which would be suffered. If this Agreement is terminated for any reason
other than Purchaser's default, the Company shall refund the Deposit to
Purchaser within five days of Purchaser's written request therefor.
2.2 TIME AND PLACE. The closing of the transactions contemplated
hereby (the "Closing") shall be held at the offices of Lindquist & Vennum, 4200
IDS Center, Minneapolis, Minnesota 55402, at 10:00 a.m. on August 31, 1996, or
at such other place and at such other time as the parties may mutually agree
(the "Closing Date"). The Closing shall be deemed completed when the parties
have delivered the consideration and documents to be delivered by them as
specified below.
2.3 DELIVERIES BY PURCHASER. Purchaser shall, at the Closing,
deliver or cause to be delivered to the Company:
2.3.1 PURCHASE PRICE. Payment of the balance of the
Purchase Price, in accordance with Section 2.1.
2.3.2 LICENSE AGREEMENT. The license agreement described in
Section 7.1 in the form of Exhibit 2.3.2 attached hereto and made a part hereof.
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2.3.3 OPINION OF COUNSEL. The opinion of counsel to
Purchaser in the form and with respect to the matters identified in Exhibit
2.3.3 attached hereto and made a part hereof.
2.3.4 SECRETARY'S CERTIFICATE. A certificate of the
Secretary of Purchaser certifying as to (a) a copy of the resolutions of the
Board of Directors of Purchaser approving the transactions contemplated hereby
and (b) the incumbency and authority of the officers of Purchaser executing this
Agreement on behalf of Purchaser and the documents executed and delivered by
Purchaser in connection therewith.
2.3.5 CERTIFICATE. A certificate of the authorized officers
of Purchaser, certifying that (a) the representations and warranties of
Purchaser herein remain true and correct at the Closing Date and (b) Purchaser
has complied with all agreements and covenants contained herein which are to be
performed prior to the Closing Date.
2.3.6 OTHER DOCUMENTS. Such other certified resolutions,
documents and certifi- cates as are required to be delivered by Purchaser
pursuant to the provisions of this Agreement.
2.4 DELIVERIES BY THE COMPANY. The Company shall, at the Closing,
deliver or cause to be delivered to Purchaser:
2.4.1 BILL OF SALE. A bill of sale, in form and substance
satisfactory to Purchaser, transferring title to the Assets to Purchaser.
2.4.2 ASSIGNMENTS OF TRADEMARKS, LICENSES AND COPYRIGHTS.
Assignments, in form and substance satisfactory to Purchaser (and in a form that
may be recorded in the applicable governmental records), transferring title to
the Trademarks, Licenses and Copyrights, including the Trademark Sourcing Rights
and the License Sourcing Rights.
2.4.3 OPINIONS OF COUNSEL. The opinions of counsel to the
Company in the form and with respect to the matters identified in Exhibit 2.4.3
attached hereto and made a part hereof.
2.4.4 CONSENTS. Copies of all consents received from third
parties relating to the transactions contemplated hereby.
2.4.5 SECRETARY'S CERTIFICATE. A certificate of the
Secretary of the Company certifying as to (a) a copy of the resolutions of the
Board of Directors and shareholders of the Company, approving the transactions
contemplated hereby and (b) the incumbency and authority of the officers of the
Company executing this Agreement on behalf of the Company and the documents
executed and delivered by the Company in connection therewith.
2.4.6 AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION. An amendment to the Company's Certificate of Incorporation
changing its name to a name that is not
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confusingly similar to or a colorable imitation of the name "Munsingwear" or
any of the Trademarks.
2.4.7 CERTIFICATE. A certificate of the authorized officers
of the Company, certifying (a) that the representations and warranties of the
Company made herein remain true and correct at the Closing Date and (b) that the
Company has complied with all agreements and covenants contained herein which
are to be performed prior to the Closing Date.
2.4.8 POSSESSION. Possession of all of the Assets, together
with all files, books and records relating to the Assets.
2.4.9 OTHER DOCUMENTS. Such other certified resolutions,
documents and certificates as are required to be delivered by the Company
pursuant to the provisions of this Agreement.
2.5 INTERVENING LITIGATION. If prior to the Closing Date any
preliminary or permanent injunction or other order issued by a court of
competent jurisdiction or by any other govern- mental authority shall restrain
or prohibit this Agreement or the consummation of the transactions contemplated
herein for a period of 15 days or longer, the Closing shall be adjourned at the
option of either party for a period of 30 days, even though the adjourned date
is after August 31, 1996. If at the end of such 30-day period such injunction or
order shall not have been favorably resolved, either party may, by written
notice thereof to the other, terminate this Agreement, without liability or
further obligation hereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In order to induce Purchaser to enter into and perform its
obligations under this Agreement, and subject to the exceptions set forth on the
Schedules attached hereto and made a part hereof (which exceptions shall be
deemed representations and warranties hereunder), the Company hereby makes each
of the representations and warranties to Purchaser as set forth below, each of
which shall be deemed material (and Purchaser, in executing, delivering and
consummating this Agreement, has relied and will rely upon the correctness and
completeness of each of such representations and warranties notwithstanding any
independent investigation):
3.1 CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and proposed to be conducted, and
to own, operate and lease its properties and assets. The Company is duly
qualified or licensed to do business in good standing in the jurisdictions set
forth on Sche- dule 3.1(a) attached hereto and made a part hereof, those being
every jurisdiction in which the conduct of the Company's business, the ownership
or lease of its properties, or the transactions contemplated by this Agreement,
require it to be so qualified or licensed and the failure to be so qualified or
licensed would have a material adverse effect on (a) the Assets, (b) the
Business or (c) Purchaser's use of the Assets or conduct of the Business
subsequent to the Closing Date
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(a "Material Adverse Effect"). True, complete and correct copies of the
Company's charter and bylaws as presently in effect have been previously
delivered to Purchaser. The Company has no subsidiaries. The corporate minute
books of the Company have been made available to Purchaser, are complete and
correct and contain all of the proceedings of the shareholders and directors of
the Company.
3.2 CORPORATE AUTHORITY. The Company has full corporate power and
authority to (a) own the Assets, (b) to carry on the Business as presently
conducted and (c) execute, enter into and carry out the provisions of this
Agreement and the agreements contemplated hereby. All corporate action on the
part of the Company necessary for the authorization, execution, delivery and
performance of all obligations of the Company under this Agreement and the
agreements contemplated hereby has been, or, with respect to approval by
shareholders of the Company prior to the Closing will be taken, all of which
actions have been or will be in full compliance with applicable law, and this
Agreement and the agreements contemplated hereby constitute the valid and
legally binding obligation of the Company, enforceable in accordance with their
respective terms, except as such validity, binding nature and enforceability may
be affected by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditor's rights.
3.3 ASSETS. Schedules 1.1.1 through 1.1.5 hereto contain a complete
and accurate description of the Assets and specify the nature of all of the
Assets as of the date hereof. The property identified in said Schedules (i.e.,
the Assets) constitutes all of the personal property of any nature owned by the
Company and used in the operation of the Business as conducted at this date and
those assets which are necessary in order for Purchaser to operate the Business
following the Closing Date, except, in either case, for the Excluded Assets. The
Company presently has, and shall deliver to Purchaser at the Closing, good,
valid and marketable title to every one of the Assets, whether tangible or
intangible, free and clear of all liens, pledges, claims, conditional sales
contracts, security interests or agreements, licenses, leases, mortgages or
encumbrances of any nature whatsoever, subject to the Licenses and as set forth
on the aforesaid Schedules. Except for the Licenses, the Company has not granted
to any person any license or right, whether exclusive or nonexclusive, to
market, sell, lease, license or use any of the Assets, and has not sold,
transferred or conveyed, any of the right, title and interest, or any option to
purchase or acquire any of its right, title or interest, in and to any of the
Assets. All of the Licenses included in the Assets are transferable without the
consent of the licensor thereof, except for those Licenses for which such
consent has been received by the Company, or which will be delivered at the
Closing. All of such consents are identified in Schedule 3.3 attached hereto and
made a part hereof.
3.4 CUSTOMER RELATIONSHIPS. Attached hereto as Schedule 1.1.2 is a
list of the Company's customers with respect to the Business as of the date
hereof (the "Customers"). The Company is not aware that any of its Customers
intends to reduce materially or terminate, during the 12 month period following
the date of this Agreement, the amount of its business with the Company compared
to that conducted during the fiscal year ended January 6, 1996, which reduction,
individually or in the aggregate, would have a Material Adverse Effect.
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3.5 INTELLECTUAL PROPERTY. Schedule 1.1.1 and Schedule 1.1.8 hereto
set forth a true, correct and complete list of the Trademarks and Copyrights
(the "Intellectual Property"). The Intellectual Property constitutes all of the
intellectual property used by the Company in the Business, except for the
Excluded Assets. The Company is the owner of, or otherwise has the free and
unrestricted right to use, each of the Intellectual Property, free and clear of
all liens, encumbrances, security interests, pledges, claims, equities and other
restrictions or charges of any kind or nature whatsoever, except as set forth on
Schedules 1.1.1, 1.1.3, 3.5 and 3.14. The consummation of the transactions
contemplated hereby will not cause the termination, expiration, breach or
modification of any of the Intellectual Property. Except as set forth on
Schedule 3.14 attached hereto and made a part hereof, there are no pending or
threatened claims against the Company alleging that the use of the Intellectual
Property infringes or conflicts with the rights of others under patents,
trademarks, copyrights, trade secrets or other proprietary rights and the
Company's use of the Intellectual Property in the Business does not infringe or
conflict with the trademarks or copyright rights of others. The Company has
taken all reasonable steps to maintain its interest in the Trademarks, to
protect its interests from infringement by third parties, and to protect against
dissemination any trade secrets or confidential information relating to the
Assets. Subject to Schedule 1.1.3, the Company has not entered into any
consents, settlement agreements, undertakings or other agreements that relate to
the use, registration or scope of protection to be afforded to the Intellectual
Property. Subject to Schedule 1.1.3, no interest in any Intellectual Property
has been assigned, transferred, licensed or sublicensed by the Company to any
other party. Although Purchaser is not acquiring the Excluded Trademarks at
present, and thus may not sell goods utilizing the Trademarks in countries
covered by an Excluded Trademark, except as described on Schedule 1.1.1(a),
Purchaser may manufacture and export goods utilizing any of the Trademarks in
and from any country protected by an Excluded Trademark.
3.6 LICENSES. Schedule 1.1.3(a) hereto sets forth a true, correct and
complete list of the Licenses, including a schedule designating the recordal of
licenses and security interest agreements with business and governmental bodies,
along with documentation and expiration dates, where appropriate. A complete and
accurate copy of each License has been delivered to Purchaser. All of the
Licenses are valid, binding and enforceable in accordance with their respective
terms (except as such validity, binding nature and enforceability may be
affected by applicable by bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditor's rights) and were entered into in the ordinary course of business on
an "arms-length" basis. The Company is not in breach of or in default under any
License, no action or claim is pending, and to the Company's knowledge, no
notice of any such claim or action has been received which threatens to revoke,
modify or terminate any License, except as set forth in Schedule 3.14, and to
the best of the Company's knowledge, no occurrence or circumstance exist which
constitutes (with or without the giving of notice or the lapse of time or both)
a breach or default by the other party thereto. The consummation of the
transactions contemplated hereby, except as set forth on Schedule 3.3, will not
cause the termination, expiration, breach or modification of any of the Licenses
and the Company has not been notified or advised by any party to a License of
such parties intention or desire to terminate or modify any License. Except as
set forth on Schedule 1.1.3(a), no
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License prohibits or will prohibit Purchaser from manufacturing and exporting
goods utilizing the Trademarks in or from the country which is the subject of
such License.
3.7 ERISA. For purposes of this Agreement, the term "Benefit Plan"
means any employee benefit plan, including, without limitation, any employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), maintained or contributed to
by the Company or with respect to which the Company has had any direct or
indirect, fixed or contingent liability. Neither the Company, nor Purchaser
following the date of this Agreement, shall have, at any time hereafter, any
unpaid liability for contributions or payments to any Benefit Plan. No Benefit
Plan is (i) a "multi-employer" plan within the meaning of the Internal Revenue
Code of 1986, as amended or ERISA or the regulations promulgated thereunder or
(ii) a "multiple employer plan," as defined in ERISA. The Company has received
no notice that it is not in full compliance with any of the requirements of
ERISA and its regulations and to the best of the Company's knowledge there
exists no event described in Section 4043 of ERISA, excluding Subsections
4043(b)(2) and 4043(b)(3) thereof, with respect to the Company.
3.8 FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in its annual report on Form 10-K for the fiscal year ended
January 6, 1996 (the "1995 10-K") and, upon delivery to Purchaser, the Audited
Financial Statements (as hereinafter defined) required by Section 5.4, fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements). All such financial statements comply
with the requirements of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC").
3.9 ABSENCE OF CHANGES. Since January 6, 1996, there has not been:
3.9.1 MATERIAL CHANGES. any adverse change in the Assets or
in the liabilities, financial condition or operations of the Business except for
changes in the ordinary course of business which have not and may not, either
individually or in the aggregate, result in a Material Adverse Effect;
3.9.2 SALE OF ASSETS: PERMITTED LIENS. any sale,
assignment, transfer or lease of any of the Assets, other than in the ordinary
course of business, or any lien or encumbrance created on any of the Assets
except for liens for taxes not yet due and payable and except for continuations
of existing mortgages, deeds of trust, security interests or other encumbrances;
3.9.3 TRANSACTIONS OUTSIDE ORDINARY COURSE OF BUSINESS. any
other transaction relating to the Business other than in the ordinary course of
the Business, except as contemplated by this Agreement or the Right of First
Refusal Agreement described in Section 7.3;
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3.9.4 OTHER EVENTS. any other event or condition of any
character which has or is likely to have a Material Adverse Effect; or
3.9.5 AGREEMENTS. any agreement or commitment by the
Company to do any of the things described in this Section 3.9.
3.10 TAXES. The Company has accurately prepared and timely filed in
all material respects all federal, state and local income tax returns and other
tax returns which are required to be filed, and has paid, or made provision for
the payment of, all taxes which have or may have become due pursuant to said
returns or applicable law or pursuant to any assessment which has been levied
upon its assets, business or operations. The Company has not waived or extended
any applicable statute of limitations relating to the assessment of federal,
state or local taxes and no examinations of the federal, state or local tax
returns of the Company are currently in progress nor, to the best knowledge of
the Company, is any such examination threatened.
3.11 SEC FILINGS. The Company has delivered to Buyer a true and
correct copy of the 1995 Form 10-K. As of its filing date, the 1995 Form 10-K
did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
3.12 NO DEFAULT. The Company is not in violation, breach, or default
of any term or provision of its Certificate of Incorporation or Bylaws, or of
any term or provision of any state or federal judgment, decree or order
applicable to or binding upon it. The execution, delivery and performance of and
compliance by the Company with this Agreement and the other agreements
contemplated hereby (assuming approval by the Company's shareholders), will not
result in any such violation or constitute a default under (or an event which
with notice or lapse of time or both would constitute an event of default) or
result in (a) the termination, expiration, breach or modification, or accelerate
the performance required by, any such term or provision or any term or provision
of (i) except as set forth on Schedule 3.3, any of the Licenses, or (ii) any
other agreement related to the Business; or (b) the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the Assets, which violation,
conflict, default, termination, acceleration or creation in the cases of
subsections (a)(ii) and (b), would have a Material Adverse Effect.
3.13 COMPLIANCE WITH LAWS. The Company is in compliance with, and has
received no notice of any violation of, any applicable federal, foreign, state
or local statute, law, rule, ordinance or regulation affecting the use of the
Assets and conduct of the Business.
3.14 LITIGATION. Except as set forth on Schedule 3.14, no litigation,
proceeding, suit, action or controversy is pending or threatened by or against
the Company before any court or administrative or governmental agency relating
to the Assets of the Business nor which if adversely determined would have a
Material Adverse Effect, nor, to the knowledge of the
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Company, is there any basis for any such litigation, proceeding or controversy
by or against the Company before any court or administrative or governmental
agency.
3.15 CONSENTS. The Company has obtained or, prior to the Closing will
obtain, all consents, authorizations, approvals, orders, registrations and
qualifications from, and made all filings with, any third party, including,
without limitation, all customers, and any public, governmental, administrative
or regulatory authority, agency or body required on the part of the Company in
connection with the execution, delivery or performance of this Agreement and the
other agreements contemplated hereby by the Company. Such consents,
authorizations, approvals, orders, registrations, qualifications and filings are
identified on Schedule 3.3.
3.16 FINDERS. Except as set forth on Schedule 3.16, the Company has
not employed or engaged any broker, finder or similar intermediary in connection
with the transactions contemplated herein, and no such person is entitled, as a
result of the Company's actions, to any fee or commission payable by the Company
based upon the consummation of the transactions contemplated hereby.
3.17 ADVERTISING MATERIALS. Schedules 1.1.4 and 1.1.5 include a list
of all Advertising Materials and Archives and Disks used by the Company in
connection with the Business. All of the items on such Schedule are suitable for
the purposes for which they are intended and in good condition and repair,
ordinary wear and tear excepted.
3.18 DISCLOSURE. No representation or warranty by the Company
contained in this Agreement nor any other written statement or certificate
furnished or to be furnished by the Company pursuant hereto or in connection
with the transactions contemplated hereby, when read together, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein or herein not
misleading in light of the circumstances under which they were made.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
In order to induce the Company to enter into and perform its
obligations under this Agreement, Purchaser hereby represents, warrants and
covenants to the Company as set forth below.
4.1 CORPORATE ORGANIZATION. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida with full corporate power and authority to carry on its business as
it is now being conducted and proposed to be conducted, and to own, operate and
lease its properties and assets. Purchaser is duly qualified or licensed to do
business in good standing in the jurisdictions in which the conduct of
Purchaser's business, the ownership or lease of its properties, or the
transactions contemplated by this Agreement, require it to be so qualified or
licensed and the failure to be so qualified or licensed would have a material
adverse effect on Purchaser's assets, liabilities, operations or financial
position, except for consents which will be obtained by Purchaser prior to
Closing.
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4.2 CORPORATE AUTHORITY. Purchaser has full corporate power and
authority to (a) own its properties and assets, (b) carry on its business as
presently conducted and (c) to enter into and carry out the provisions of this
Agreement and the other agreements contemplated hereby. All corporate action on
the part of Purchaser necessary for the authorization, execution, delivery and
performance of all obligations of Purchaser under this Agreement and the other
agreements contemplated hereby, has been taken, all of which actions have been
in full compliance with applicable law, and this Agreement and the other
agreements contemplated hereby constitute the valid and legally binding
obligation of Purchaser, enforceable in accordance with their respective terms,
except as such validity, binding nature and enforceability may be affected by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditor's rights.
4.3 CONSENTS. Purchaser has obtained or, prior to the Closing will
obtain, all consents, authorizations, approvals, orders, registrations and
qualifications from, and has made all filings with, any third party, including,
without limitation, any public, governmental, administrative or regulatory
authority, agency or body required on the part of Purchaser in connection with
the execution, delivery or performance of this Agreement and the other
agreements contemplated hereby by Purchaser.
4.4 NO DEFAULT. Purchaser is not in violation, breach, or default of
any term or provision of its Articles of Incorporation or Bylaws, or of any term
or provision of any state or federal judgment, decree or order applicable to or
binding upon it. The execution, delivery and performance of and compliance by
Purchaser with this Agreement and the other agreements contemplated hereby by
Purchaser will not result in any such violation or constitute a default under
(or an event which with notice or lapse of time or both would constitute an
event of default) or result in (a) the termination, expiration, breach or
modification of, or accelerate the performance required by, any such term or
provision or any term or provision of any contract material to the operation of
Purchaser's business, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of Purchaser, which
violation, conflict, default, termination, acceleration or creation would have a
material adverse effect on Purchaser's assets, liabilities, operations or
financial position, except for consents which will be obtained by Purchaser
prior to Closing.
4.5 FINDERS. Purchaser has not employed or engaged any broker, finder
or similar intermediary in connection with the transactions contemplated herein,
and no such person is entitled, as a result of Purchaser's actions, to any fee
or commission payable by Purchaser based upon the consummation of the
transactions contemplated hereby.
5. COVENANTS OF COMPANY.
The Company further agrees as follows:
5.1 CONDUCT OF BUSINESS. From the date hereof and through the Closing
Date, the Company will use its best efforts to preserve the Assets and the
Business intact, to keep available
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to the Company the services of the Company's present employees engaged in the
Business, to preserve the Company's good will and relationships with the
Business customers, retailers, dealers, suppliers and others having dealings
with the Company with respect to the Business, and to operate the Business of
the Company diligently, in good faith and in accordance with past practices. The
Company shall also maintain and preserve its corporate existence and all rights,
privileges, franchises, Trademarks, licenses and other authority and rights
adequate for the conduct of the Business (including the timely prosecution of
actions against people or entities who infringe on the Company's Trademarks in a
manner consistent with past practices), and comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority
with respect to the Business. The Company shall not enter into any transaction
with respect to the Business (including, without limitation, any license
agreement for the Trademarks (other than pending license agreements described on
Schedule 1.1.3)), other than in the ordinary course of business, or create,
incur or permit to exist any mortgage, deed of trust, security interest or other
encumbrance of any kind upon or on any of the Assets other than continuations of
existing mortgages, deeds of trust, security interests or other encumbrances.
Purchaser acknowledges the Company has the right to enter into any transactions
prior to the Closing relating to any portion of its business other than the
Assets, subject to the rights granted by the Company to Purchaser in the Right
of First Refusal Agreement described in Section 7.3.
5.2 HART-SCOTT-RODINO FILING. The Company shall promptly prepare and
file with the Federal Trade Commission ("FTC") and with the United States
Department of Justice ("Justice Department"), the Notification and Report Form
required with respect to the transactions contemplated hereby under the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"). The Company shall furnish to Purchaser copies of the Notification and
Report Form, and shall promptly notify Purchaser of any request by the FTC or
Justice Department for additional information with respect to such filings.
Purchaser shall promptly respond to any such request. Such filings shall conform
to the requirements of the HSR Act and the rules promulgated thereunder
applicable to the Company. The filing fee payable in connection with such filing
shall be paid by Purchaser.
5.3 TRADE SECRETS AND CONFIDENTIALITY. The Company agrees that at all
times hereafter (including at all times after the Closing Date), it will not use
for its own benefit or disclose, communicate or divulge to, or use for the
direct or indirect benefit of any other person, firm, corporation, business or
entity any confidential information regarding the use of the Assets in the
Business, including but not limited to any information relating to the
customers, retailers, trade practices, trade secrets or know-how associated with
or relevant to the Business. The parties acknowledge that all of these items
constitute trade secrets.
5.4 FINANCIAL STATEMENTS.
5.4.1 AUDITED FINANCIAL STATEMENTS. The Company shall
prepare, within 60 days following the Closing, at its cost, audited consolidated
financial statements relating to the Assets and the Business, for such periods
as required by Regulation S-X promulgated by the Securities and Exchange
Commission (the "Audited Financial Statements"). The Audited Financial
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Statements shall (a) be prepared by a firm of independent accountants selected
by the Company, (b) be in conformity with generally accepted accounting
principles consistently applied throughout the periods covered hereby, and (c)
comply with the requirements of Regulation S-X. Upon delivery of the Audited
Financial Statements to Purchaser, the representations and warranties set forth
in Section 3.7 shall apply to the Audited Financial Statements.
5.4.2 INTERIM FINANCIAL INFORMATION. From the date hereof
and through the Closing Date, the Company shall supply Purchaser with such
interim unaudited financial information related to the Assets and the Business
as Purchaser may request and the Company regularly prepares in the ordinary
course of its business.
5.5 STOCKHOLDER MEETING; PROXY MATERIAL. The Company shall cause a
meeting of its stockholders to be duly called and held as soon as reasonably
practicable and in any event on or before August 31, 1996 for the purpose of
voting on the approval and adoption of this Agreement and the transactions
contemplated hereby. The directors of the Company shall, subject to their
fiduciary duties as advised by counsel, recommend approval and adoption of this
Agreement and the transactions contemplated hereby by the Company's
stockholders. In connection with such meeting, the Company (a) will promptly
prepare and file with the SEC, will use its best efforts to have cleared by the
SEC, and will thereafter mail to its stockholders as promptly as practicable, a
Proxy Statement and all other proxy materials for such meeting, (b) will use its
best efforts to obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby and (c) will otherwise comply
with all legal requirements applicable to such meeting.
5.6 CUSTOMERS. Following the Closing Date, the Company will use its
best efforts to ensure an orderly transition in transferring to Purchaser the
Company's relationships with the Customers, including, without limitation,
preparing and distributing to the Customers a mutually agreed notification of
the sale.
5.7 EMPLOYEES. Except for employees of the Company who are hired by
Purchaser, at all times hereafter (including all times after the Closing Date),
the Company shall be responsible for all costs relating to the termination of
employment of any of its employees, including, without limitation severance pay
and unpaid vacation in accordance with existing arrangements with such
employees.
5.8 TAXES. The Company shall pay all taxes, including, without
limitation sales and use taxes, resulting from the consummation of the
transactions contemplated hereby.
5.9 PRORATIONS. All charges, if any, that may be assessed by law
against the owner of the Assets, including without limitation personal property
taxes, shall be prorated at the Closing Date, with the Company paying and being
responsible for all charges relating to the period ending on the Closing Date,
and Purchaser paying and being responsible for all such charges accruing after
the Closing Date.
-14-
<PAGE>
5.10 MAIL; BANK ACCOUNTS. After the Closing, Purchaser and the
Company shall jointly review all mail, payments, deliveries or other
correspondence addressed to the Company which relate to the use of the Assets or
the Business. Any of such mail, payments, deliveries or correspondence as
relates to any of the Assets, shall be forwarded to, retained by, and shall be
the property of Purchaser. To the extent any of such materials relate to any
liabilities not being assumed by Purchaser hereunder, or to the affairs of the
Company unrelated to the Assets being acquired by Purchaser, such material shall
be retained by and shall be the property of the Company. In any event, each
party shall be entitled to receive and retain a photocopy of all such materials,
to the extent they relate to the Assets or the Business. All telephone inquiries
and other verbal communications made with respect to the use of the Assets in
the Business shall promptly be referred by the Company to Purchaser and its
representatives.
5.11 CHANGE OF NAME. Concurrently with the Closing, the Company shall
file with the appropriate authorities such documents as are required to change
its corporate name to a name which does not include the word "Munsingwear", any
derivative thereof or any colorable imitation, any of the Trademarks, any
derivative thereof or any colorable imitation, or any name deceptively similar
to any of the foregoing. Following the Closing, except pursuant to the License
Agreement described in Section 7.2, the Company shall not use any fictitious
name or trade name which includes the word "Munsingwear", any derivative thereof
or any colorable imitation, any of the Trademarks, any derivative thereof or any
colorable imitation, or any name deceptively similar to any of the foregoing.
5.12 DUE DILIGENCE INVESTIGATION. From the Date of this Agreement
until Closing or termination of this Agreement, the Company will grant to
Purchaser, its agents and representatives, reasonable access at reasonable times
(upon reasonable advance notice) to all of the properties, books, accounting,
financial and statistical records, corporate records and other business files of
the Company relating to the Company's use of the Assets in the Business for
purposes of examining the same in connection with the transactions contemplated
hereby. The Company shall and shall cause its officers, employees and auditors
to cooperate fully with such due diligence investigation.
6. COVENANTS OF PURCHASER.
6.1 HSR ACT FILINGS. Purchaser shall promptly prepare and file with
the FTC and with the Justice Department, the Notification and Report Form
required with respect to the transactions contemplated hereby under the
provisions of the HSR Act. Purchaser shall furnish to the Company copies of the
Notification and Report Form, and shall promptly notify the Company of any
request by the FTC or Justice Department for additional information with respect
to such filings. The Company shall promptly respond to any such request. Such
filings shall conform to the requirements of the HSR Act and the rules
promulgated thereunder applicable to Purchaser. The filing fee payable in
connection with such filing shall be paid by the Purchaser.
-15-
<PAGE>
6.2 TRADE SECRETS AND CONFIDENTIALITY. Purchaser agrees that at all
times hereafter (including at all times after the Closing Date), it will not use
for its own benefit or disclose, communicate or divulge to, or use for the
direct or indirect benefit of any other person, firm, corporation, business or
entity any confidential information regarding the use of the Company's
ASI/Premium Specialty Markets business, including but not limited to any
information relating to the customers, retailers, trade practices, trade secrets
or know-how associated with or relevant to the ASI/Premium Specialty Markets
business. The parties acknowledge that all of these items constitute trade
secrets.
6.3 EMPLOYEES. Purchaser shall provide the Company with a list of the
Company's employees whom Purchaser wishes to hire not less than ten days before
the Closing Date.
7. ADDITIONAL AGREEMENTS.
7.1 MANAGEMENT AGREEMENT. Upon execution of this Agreement, the
Company and Purchaser shall enter into the Management Agreement in the form of
Exhibit 7.1 attached hereto and made a part hereof.
7.2 LICENSE AGREEMENT. At Closing, the Company and Purchaser will
enter into the License Agreement in the form of Exhibit 2.4.4, pursuant to
which, among other matters, Purchaser will license to the Company use of the
"Munsingwear" and "Penguin" trademarks for sales to the ASI Premium/Specialty
Market.
7.3 RIGHT OF FIRST REFUSAL. Upon execution of this Agreement, the
Company and Purchaser shall enter into the Right of First Refusal Agreement in
the form of Exhibit 7.3, pursuant to which, among other matters, the Company
shall grant Purchaser a right of first refusal to (a) acquire the Excluded
Trademarks and Excluded Licenses, and (b) purchase the Company's ASI
Premium/Specialty Markets business.
7.4 CONFIDENTIALITY. The confidentiality agreement dated March 1,
1996 heretofore executed by the Company and Purchaser shall remain in effect
until the earliest to occur of (a) the Closing Date or (b) April 30, 1998.
7.5 DISCLOSURE RESTRICTIONS. Purchaser and the Company will consult
with each other before issuing any press releases or otherwise making any public
statements with respect to the transactions contemplated hereby, and neither
shall issue any such press release or make any such public statement without the
prior consent of the other, except as may be required by applicable law.
7.6 ACQUISITION PROPOSALS. The Company shall not, and shall use its
best efforts to cause its officers, directors and employees and any attorney,
accountant, or other agent retained by it not to (i) initiate, encourage or
solicit, directly or indirectly, the making of any proposal or offer (an
"Acquisition Proposal") to acquire all or any significant part of the Assets,
whether by merger, purchase of securities or assets, tender offer or otherwise
(an "Acquisition
-16-
<PAGE>
Transaction"), or initiate, directly or indirectly, any contact with any
person in an effort to or with a view towards soliciting any Acquisition
Proposal or (ii) participate in any discussions or negotiations regarding,
or furnish to any other person any information with respect to, an
Acquisition Proposal. Notwithstanding the foregoing, the Company may (i) furnish
or cause to be furnished information subject to a confidentiality agreement in a
form substantially similar to that previously executed by Purchaser and (ii) in
response to an Acquisition Proposal, issue a communication to its security
holders of the type contemplated by Rule 14d-9(e) or 14e-2 under the Exchange
Act or otherwise communicate the Board's position with respect to such
Acquisition Proposal to the stockholders of the Company, and (iii) participate
in discussions and/or negotiations with persons who have sought the same, if the
Company's Board of Directors determines, based as to legal matters on the advice
of outside legal counsel, and as to financial matters on the opinion of an
investment banking firm, that the failure to furnish such information or to hold
discussions and/or negotiations with such entity or group or to take and
disclose such position would be inconsistent with the proper exercise of the
fiduciary duties of the Company's Board of Directors. In the event the Company
receives an Acquisition Proposal, it shall promptly inform Purchaser as to the
material terms thereof.
7.7 EXPENSES.
7.7.1 Except as set forth in this Agreement, each party
will be responsible for its own expenses in connection with the transactions
contemplated hereby.
7.7.2 The Company shall pay Purchaser the sum of $1.0
million (the "Termination Fee") in addition to returning Purchaser's Deposit,
promptly upon receipt of a written request therefor from Purchaser after the
termination of this Agreement as a result of the occurrence of any of the events
set forth below (a "Trigger Event"):
(i) the Company shall have entered into, or shall
have publicly announced its intention to enter into an agreement or an agreement
in principle with respect to any Acquisition Proposal; or
(ii) the Board of Directors of the Company shall
have withdrawn or materially modified its approval or recommendation of this
Agreement.
7.7.3 Any payment required by Section 7.7.2 shall become
payable within two business days after termination of the Agreement.
7.7.4 The Company acknowledges that the agreements
contained in this Section 7.7 are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, Purchaser
would not enter into this Agreement; accordingly, if the Company fails to
promptly pay the Termination Fee when due, the Company shall in addition thereto
pay to Purchaser all costs and expenses (including fees and disbursements of
counsel) incurred in collecting such Termination Fee, as the case may be,
together with interest on the amount of such Termination Fee (or any unpaid
portion thereof) from the date such payment was
-17-
<PAGE>
required to be made until the date such payment is received by Purchaser at the
prime rate reported in THE WALL STREET JOURNAL from time to time during such
period.
8. CONDITIONS TO CLOSING.
8.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligation of
Purchaser to purchase and pay for the Assets shall be subject to and conditioned
upon the satisfaction at the Closing of each of the following conditions (any of
which may be waived in the sole and absolute discretion of Purchaser):
8.1.1 REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Company made herein shall be true,
accurate and correct at the Closing Date.
8.1.2 COMPLIANCE WITH AGREEMENT. The Company shall have
complied with all agreements and covenants contained herein which are to be
performed prior to the Closing Date.
8.1.3 CORPORATE APPROVAL. This Agreement and the
transactions contemplated hereby shall have been approved by the directors and
stockholders of the Company in accordance with Delaware law.
8.1.4 CONSENTS. The Company shall have received, at or
prior to the Closing, all consents required from any third party with respect to
the sale of the Assets, and the consummation of the transactions contemplated
hereby.
8.1.5 HSR ACT. Any applicable waiting period under the HSR
Act relating to the purchase of the Assets shall have expired.
8.1.6 DUE DILIGENCE EXAMINATION. Within 45 days of the date
of this Agreement, Purchaser shall have determined that the results of the "due
diligence" examination performed by Purchaser are satisfactory to Purchaser, in
its reasonable discretion.
8.1.7 ABSENCE OF MATERIAL ADVERSE CHANGES. There shall have
been no Material Adverse Effect.
8.1.8 NO PROCEEDING OR LITIGATION. There shall not be in
effect any injunctions, orders or other decrees of any court or governmental
body or any material pending or threatened litigation or proceeding prohibiting,
restraining or otherwise preventing the consummation of the transactions
contemplated hereby.
8.1.9 ADDITIONAL INSTRUMENTS. The Company shall have
delivered to Purchaser such agreements and instruments, in recordable and/or
fileable form, as are necessary for the purpose of reflecting on the records of
any applicable governmental agency the transfer
-18-
<PAGE>
of those registered trademarks and pending applications which are included in
the Assets. Such agreements and instruments shall be in form and substance
reasonable satisfactory to Purchaser.
8.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to sell the Assets shall be subject to and conditioned upon the
satisfaction at the Closing Date of each of the following conditions (any of
which may be waived in the sole and absolute discretion of the Company):
8.2.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Purchaser made herein shall be true and correct as of the
Closing Date.
8.2.2 COMPLIANCE WITH AGREEMENT. Purchaser shall have
complied with all obligations set forth herein to be performed prior to the
Closing Date.
8.2.3 CORPORATE APPROVALS. This Agreement and the
transactions contemplated hereby shall have been approved by the directors of
Purchaser in accordance with Florida law.
8.2.4 CONSENTS. Purchaser shall have received at or prior
to the Closing, all consents required from any third party with respect to the
sale of the Assets and the consummation of the transactions contemplated hereby.
8.2.5 HSR ACT. Any applicable waiting period under the HSR
Act relating to the purchase of the Assets shall have expired.
8.2.6 NO PROCEEDING OR LITIGATION. There shall not be in
effect any injunc- tions, orders or other decrees of any court or governmental
body or any material pending or threatened litigation or proceeding prohibiting,
restraining or otherwise preventing the consummation of the transactions
contemplated hereby.
9. TERMINATION AND ABANDONMENT.
9.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of Purchaser and the Company;
(b) by Purchaser and the Company if this Agreement is not
consummated on or before August 31, 1996; PROVIDED THAT if any party has
breached or defaulted with respect to its respective obligations under this
Agreement on or before such date, such party may not terminate this Agreement
pursuant to this Section, and the other party to this Agreement may at its
option enforce its rights against such breaching or defaulting party and seek
any remedies against such party, in either case as provided hereunder and by
applicable law;
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<PAGE>
(c) by Purchaser, if as of the Closing Date, any of the
conditions specified in Section 8.1 have not been satisfied in any material
respect;
(d) by the Company, if as of the Closing Date, any of the
conditions in Section 8.2 have not been satisfied in any material respect;
(e) by either the Company or Purchaser, if there shall be
any law or regulation that makes consummation of the Agreement illegal or
otherwise prohibited or if any judgment, injunction, order or decree enjoining
Purchaser or the Company from consummating the Agreement is entered and such
judgment, injunction, order or decree shall become final and nonappealable;
(f) by Purchaser, if there has been a material breach on
the part of the Company of the representations, warranties or agreements of the
Company contained herein which cannot be or has not been cured within 10 days
after written notice by Purchaser to the Company of such breach;
(g) by the Company, if there has been a material breach on
the part of Purchaser of the representations, warranties or agreements of
Purchaser contained herein which cannot be or has not been cured within 10 days
after written notice by the Company to Purchaser of such breach; or
(h) by Purchaser, upon the occurrence of any Trigger Event
described in Section 7.7.2 hereof.
The party desiring to terminate this Agreement pursuant to
this Section 9.1 shall give written notice of such
termination to the other party in accordance with Section 12.3.
9.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to Section 9.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that the agreements contained
in Sections 7.4, 7.7 and 2.1.2 shall survive the termination hereof.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY THE COMPANY. The Company shall indemnify,
defend and hold harmless Purchaser against and in respect of any and all claims,
demands, losses, liabilities, judgments, costs, expenses and obligations,
including, without limitation, interest, penalties and reasonable attorneys's
fees (collectively, "Purchaser Losses"), suffered or incurred by Purchaser which
arise, result from or relate to: (a) any breach of, or failure by the Company to
fulfill or perform any of its representations, warranties, covenants or
agreements in this Agreement, or in any exhibit, schedule or other instrument
furnished under this Agreement, (b) the operation or conduct of the Business
through the Closing Date, or (c) any of the liabilities or obligations of the
Company, which are not expressly assumed hereunder; provided, however that
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<PAGE>
(a) indemnification shall not be payable by the Company
unless and until the aggregate amount of all claims for indemnification by
Purchaser hereunder exceeds $250,000 and unless the claims for indemnification
are received by the Company prior to the expiration of 18 months from the
Closing Date; and
(b) the Company's indemnification obligations under this
Section 10.1 shall be limited to $5,000,000 in total payments for all claims by
Purchaser.
10.2 INDEMNIFICATION BY PURCHASER. Purchaser hereby covenants and
agrees with the Company, that Purchaser shall indemnify, defend and hold
harmless the Company against and in respect of any and all claims, demands,
losses, liabilities, costs, expenses and obligations, including, without
limitation, interest, penalties and reasonable attorneys' fees (collectively,
"Company Losses") suffered or incurred by the Company which arise, result from
or relate to any breach of or failure of Purchaser to fulfills or perform any of
its representations, warranties, covenants or agreements in this Agreement, or
in any exhibit or other instrument furnished or to be furnished under this
Agreement; provided, however, that
(a) indemnification shall not be payable by Purchaser
unless and until the aggregate amount of all claims for indemnification by the
Company hereunder exceeds $250,000 and unless the claims for indemnification are
received by Purchaser prior to the expiration of 18 months from the Closing
Date; and
(b) Purchaser's indemnification obligations under this
Section 10.1 shall be limited to $5,000,000 in total payments for all claims by
the Company.
10.3 DEFENSE OF CLAIMS. In the event that a claim, demand or
assessment is made or threatened against a party to this Agreement (for purposes
of this Section 10.3, the "Indemnitee") which the Indemnitee believes is subject
to indemnification by the other party (the "Indemnitor"), the Indemnitee shall
promptly notify the Indemnitor of such claim, demand or assessment and shall
provide the Indemnitor with a reasonable opportunity to defend the same at the
Indemnitor's own expense and with mutually acceptable counsel; provided that the
Indemnitee shall at all times also have the right to fully participate in the
defense of such claim, demand or assessment at its own expense. If the
Indemnitor shall, within a reasonable time after receipt of notice, fail to
defend the threatened claim, demand or assessment, Indemnitee shall have the
right, but not the obligation, to undertake the defense of, and to compromise
and settle the claim, demand or assessment; provided, however, that Indemnitee
shall not compromise or settle any such claim, demand or assessment without the
prior written consent of Indemnitor, which consent shall not be unreasonably
withheld. If the claim is one that cannot by its nature be defended solely by
Indemnitee, Indemnitor shall make available all information and assistance that
Indemnitee may reasonably request in connection with such defense.
11. POST-CLOSING OBLIGATIONS.
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<PAGE>
11.1 FURTHER ASSURANCES. The Company covenants and agrees to make,
execute and deliver to Purchaser any and all powers of attorney and other
authority which the Company may lawfully make, execute and deliver, in addition
to any such powers and authorities as are contained herein, which may be or
become necessary, proper or convenient to enable Purchaser to reduce to
possession, collect, enforce, own or enjoy any and all rights and benefits in,
to, with respect to, or in connection with, the Assets, or any part or portion
thereof, and upon Purchaser's request, to take in the Company's name, any and
all steps and to do any and all things which may be or become lawful and
necessary, proper, convenient or desirable to enable Purchaser to reduce to
possession, collect, enforce, own and enjoy any and all rights and benefits in,
to, with respect to, or in connection with, the Assets, and each and every part
and portion thereof. The Company also covenants and agrees with Purchaser, its
successors and assigns, that the Company will do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, any and all
further acts, instruments, papers and documents as may be necessary to carry out
and effectuate the intent and purposes of this Agreement.
11.2 PAYMENT OF LIABILITIES. The Company shall satisfy and discharge
as the same shall become due, all of its liabilities, obligations, debts,
accounts payable and commitments including but not limited to tax liabilities,
not specifically assumed by Purchaser.
11.3 EXISTING BOOKINGS. Following the Closing Date, the Purchaser
will use its best efforts to fulfill existing bookings and sourcing commitments
for the sale of apparel.
11.4 USE OF SOFTWARE. The Company shall grant Purchaser the right to
use the Business' software without charge until six months after the Closing
Date.
11.5 ACCESS TO RECORDS. The Company shall preserve for a period of at
least seven years after the Closing Date all original documents evidencing the
Assets or the Business or the use of the Assets in the Business, and all other
original books, files, papers, records and other data regarding Purchaser, in a
usual, regular and ordinary manner consistent with past practices of the
Company. The Company shall, subject to such reasonable limitations as may be
necessary to protect the Company's proprietary information, at Purchaser's sole
expense and on reasonable prior notice to the Company, (i) afford to Purchaser,
and its counsel, accountants, consultants and other representatives reasonable
access during normal business hours to examine, inspect and copy any books,
records and original documents of the Company to the extent necessary in order
for Purchaser to comply with or respond to any audit, investigation or other
governmental investigation or inquiry, and (ii) cooperate with reasonable
requests of Purchaser with respect to the use of such documents transferred
hereunder for such purposes.
12. MISCELLANEOUS.
12.1 SURVIVAL OF WARRANTIES. All agreements, representations and
warranties of the parties made herein (including the exhibits attached hereto)
shall survive the execution and
22
<PAGE>
delivery of this Agreement and the Closing, subject to any limitation with
respect thereto set forth herein, for a period of 18 months from the Closing
Date.
12.2 MODIFICATION. This Agreement may not be amended, waived or
modified except in writing executed by the parties hereto.
12.3 NOTICES. All notices under this Agreement shall be in writing,
and may be delivered by hand or sent by mail, facsimile transmission or
overnight courier. Notices sent by mail shall be sent by certified mail, return
receipt required, and shall be deemed received on the date of receipt indicated
by the receipt verification provided by the national postal service. Notices
delivered by overnight courier shall be deemed received on the date of receipt
indicated by the verification provided by the courier. Notices sent by facsimile
transmission shall be deemed received the day on which sent, and shall be
conclusively presumed to have been received in the event that the sender's copy
of the facsimile transmission contains the "answer back" of the other party's
facsimile transmission. Notices shall be effective upon receipt. Notice shall be
given, mailed or sent to the parties at the following addresses:
To the Company: Munsingwear, Inc.
8000 West 78 Street
Suite 400
Minneapolis, Minnesota 55439
Attn: Lowell Fisher, Chairman
With a copy to: Lindquist & Vennum
4200 IDS Center
Minneapolis, Minnesota 55402
Attn: John R. Houston, Esq.
Purchaser: Supreme International Corporation
7495 N.W. 48th Street
Miami, Florida 33166
Attn: George Feldenkreis, Chairman
With a copy to: Broad and Cassel
201 S. Biscayne Boulevard
Miami Center - Suite 3000
Miami, Florida 33131
Attn: Dale S. Bergman, Esq.
Any party hereto may designate any other address for notices given it
hereunder by written notice to the other party given at least ten (10) days
prior to the effective date of such change.
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<PAGE>
12.4 SEVERABILITY. Any provision of this Agreement which is deemed to
be invalid, illegal or unenforceable in any Jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
12.5 APPLICABLE LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by the laws of the State of Delaware.
12.6 ASSIGNABILITY. This Agreement may not be assigned by either
party hereto. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
12.7 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
12.8 HEADINGS. The various headings used in this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provision hereof.
12.9 ENTIRE AGREEMENT. This Agreement and the exhibits hereto
constitute the entire agreement between the parties relating to the subject
matter hereof, and supersedes all prior agreements, representations and
understandings.
12.10 FURTHER ASSURANCES. Subsequent to this date, each of the
parties hereto shall, without charge to the other, take such additional actions
and execute, deliver and file such additional instruments as may be reasonably
required to give effect to the transactions contemplated hereby.
12.11 ATTORNEYS' FEES IN EVENT OF DISPUTE. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other reasonable costs incurred in that action or
proceeding, in addition to any other relief to which she. he, it or they may be
entitled.
12.12 WAIVERS. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute a waiver of any other provision, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing, by the party making the waiver.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and entered into
this Agreement on the date first above written.
"Purchaser": SUPREME INTERNATIONAL CORPORATION, a
Florida corporation
By:/S/ GEORGE FELDENKREIS
Chairman of the Board and Chief
Executive Officer
"The Company": MUNSINGWEAR, INC., a Delaware corporation
By:/S/ LOWELL M. FISHER
Chief Executive Officer
-25-
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> APR-30-1996
<CASH> 269,771
<SECURITIES> 0
<RECEIVABLES> 27,681,430
<ALLOWANCES> 0
<INVENTORY> 27,436,418
<CURRENT-ASSETS> 56,967,920
<PP&E> 2,053,748
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,242,706
<CURRENT-LIABILITIES> 7,766,385
<BONDS> 8,929,937
0
0
<COMMON> 43,490
<OTHER-SE> 43,502,894
<TOTAL-LIABILITY-AND-EQUITY> 60,242,706
<SALES> 37,355,127
<TOTAL-REVENUES> 37,355,127
<CGS> 29,163,236
<TOTAL-COSTS> 29,163,236
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213,063
<INCOME-PRETAX> 2,602,930
<INCOME-TAX> 988,000
<INCOME-CONTINUING> 1,614,930
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,614,930
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
