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- 6 FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarter ended September 30, 2000
Commission file number 1-19254
Lifetime Hoan Corporation
(Exact name of registrant as specified in its charter)
Delaware 11-2682486
(State or other jurisdiction (I.R.S. Employer Idenitfication No.)
of incorporation or organization)
One Merrick Avenue, Westbury 11590
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 683-6000
Not applicable
(Former name, former address and former 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 for such shorter
periods 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
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value 10,496,139 shares outstanding as of
October 31, 2000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30,
2000 December 31,
(unaudited) 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $356 $1,563
Accounts receivable, less allowances
of $3,126 in 2000 and $2,609 in 1999 22,501 22,443
Merchandise inventories 55,939 54,046
Prepaid expenses 1,916 2,641
Deferred income taxes 803 1,257
Other current assets 2,858 354
TOTAL CURRENT ASSETS 84,373 82,304
PROPERTY AND EQUIPMENT, net 13,421 12,597
EXCESS OF COST OVER NET ASSETS AQUIRED,net 15,934 10,140
OTHER INTANGIBLES, net 9,878 10,170
OTHER ASSETS 1,228 1,173
TOTAL ASSETS $124,834 $116,384
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $18,638 $8,073
Accounts payable and trade acceptances 9,120 5,553
Accrued expenses 16,347 13,691
Income taxes 312 371
TOTAL CURRENT LIABILITIES 44,417 27,688
MINORITY INTEREST 702 888
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, shares authorized 25,000,000:
shares issued and outstanding
10,532,139 in 2000 and 11,817,646 in 1999 105 118
Paid-in capital 61,364 71,957
Retained earnings 19,172 16,671
Notes receivable for shares issued to stockholder (908) (908)
Deferred compensation (18) (30)
TOTAL STOCKHOLDERS' EQUITY 79,715 87,808
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $124,834 $116,384
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Net Sales................. $33,505 $22,950 $86,661 $67,670
Cost of Sales............. 17,585 12,254 45,354 34,943
Gross Profit.............. 15,920 10,696 41,307 32,727
Selling, General and
Administrative Expenses.... 11,896 9,893 32,896 27,383
Other Expense(Income)...... 39 140 7 (180)
Income Before Income Taxes 3,985 663 8,404 5,524
Income Taxes............... 1,706 270 3,589 2,210
NET INCOME................. $2,279 $393 $4,815 $3,314
EARNINGS PER COMMON SHARE-BASIC $0.22 $0.03 $0.43 $0.26
EARNINGS PER COMMON SHARE-Diluted $0.21 $0.03 $0.43 $0.26
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
1999 2000
OPERATING ACTIVITIES
Net income $4,815 $3,314
Adjustments to reconcile net income to net cash
Provided by(used in) operating activities:
Depreciation and amortization 2,493 2,157
Deferred tax (benefit) 454 (235)
Provision for losses on accounts receivable 74 375
Reserve for sales returns and allowances 4,110 1,239
Minority interest...................... (185) -
Changes in operating assets and liabilities,
excluding the effects of the M. Kamenstein,
Inc. acquisition:
Accounts receivable (1,091) (939)
Merchandise inventories 1,409 (16,659)
Prepaid expenses, other current assets
and other assets (1,365) (15)
Accounts payable, trade acceptances
and accrued expenses 483 2,166
Income taxes payable (182) (974)
NET CASH PROVIDED BY(USED IN)
OPERATING ACTIVITIES 11,015 (9,571)
INVESTING ACTIVITIES
Purchase of property and equipment, net (1,668) (2,333)
Repurchase of Common Stock................ (10,653) -
Acquisition of Roshco, Inc. - (916)
NET CASH (USED IN) INVESTING ACTIVITIES (12,321) (3,249)
FINANCING ACTIVITIES
Proceeds from short-term borrowings, net 2,135 5,900
Proceeds from the exercise of stock options 47 80
Cash dividends paid (2,083) (2,362)
NET CASH PROVIDED BY FINANCING ACTIVITIES 99 3,618
(DECREASE) IN CASH AND CASH
EQUIVALENTS (1,207) (9,202)
Cash and cas equivalents at beginning of period 1,563 9,438
period
CASH AND CASH EQUIVALENTS AT END OF PERIOD $356 $236
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary
for a fair presentation have been included.
Operating results for the nine month period ended
September 30, 2000 are not necessarily indicative of
the results that may be expected for the year
ending December 31, 2000. It is suggested that
these condensed financial statements be read in
conjunction with the financial statements and
footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31,1999.
Note B - Inventories
Merchandise inventories, principally finished goods,
are priced at the lower of cost (first-in, first-out
basis) or market.
Note C - Line of Credit Agreement
The Company has available an unsecured $30,000,000
line of credit with a bank (the "Line"), increased
from $25,000,000, which may be used for short-term
borrowings or letters of credit. As of September
30, 2000, the Company had $6,572,000 of letters
of credit and trade acceptances outstanding
and $16,100,000 of borrowings. The line is
cancelable by either party at any time. Borrowings
under the Line bear interest payable daily
at a negotiated short-term borrowing rate. The
average daily borrowing rate for the quarter
was 7.80%. The Company is also charged a nominal
fee on the entire Line.
In addition to the line above, the Prestige
Companies (the Company's 51% controlled European
subsidiaries) have three lines of credit with three
separate banks for a total available credit facility
of approximately $2,800,000. As of September 30,
2000, the Prestige Companies had approximately
$2,500,000 of borrowings against these lines.
Interest rates on these lines of credit range from
6.125% to 8.9%.
Note D - Capital Stock
Cash Dividends: On August 4, 2000, the Board
of Directors declared a regular quarterly cash
dividend of $0.0625 per share to shareholders of
record on August 5, 2000 paid on August 19, 2000.
On October 26, 2000, the Board of Directors of the
Company declared another regular quarterly cash
dividend of $0.0625 per share to shareholders of
record on November 6, 2000, payable on November 20,
2000.
Earnings Per Share: Basic earnings per share has
been computed by dividing net income by the
weighted average number of common shares
outstanding of 10,567,000 for the three months
ended September 30, 2000 and 12,600,000 for the
three months ended September 30, 1999. For the
nine month periods ended September 30, 2000 and
September 30, 1999, the weighted average numbers of
common shares outstanding were 11,159,000 and
12,597,000 respectively. Diluted earnings per share
has been computed by dividing net income by the
weighted average number of common shares
outstanding, including the dilutive effects of
stock options, of 10,646,000 for the three months
ended September 30, 2000 and 12,767,000 for the
three months ended September 30, 1999. For the
nine month periods ended September 30, 2000 and
September 30, 1999, the diluted weighted average
numbers of common shares outstanding were
11,243,000 and 12,794,000, respectively.
Note E - M. Kamenstein, Inc. Acquisition
Effective as of September 1, 2000, the Company
acquired M. Kamenstein, Inc. ("Kamenstein"), a
privately held 107 year old housewares company
whose products include pantryware, teakettles, and
home organization accessories. Kamenstein's revenue
were approximately $21.0 million for the twelve month
period ended August 31, 2000. In acquiring
Kamenstein, the Company assumed bank debt and
other indebtedness of approximately $10 million. The
Company is obligated to make additional contingent
payments based on annual gross profit dollars
earned on sales of the business for a period of
3 years. Kamenstein contributed $2.0 million in
sales to the Company's total net sales for the third
quarter of 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth income statement data
of the Company as a percentage of net sales for the
periods indicated below.
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 20001999
Net Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 52.5 53.4 47.7 51.6
Gross profit 47.5 46.6 52.3 48.4
Selling, general and admin. expenses 35.5 43.1 38.0 40.5
Other expense (income) 0.1 0.6 0.1 (0.3)
Income before income taxes 11.9 2.9 9.6 8.2
Tax provision 5.1 1.2 4.1 3.3
Net Income 6.8 % 1.7 % 5.5 % 4.9 %
Three Months Ended September 30, 2000
Compared to Three Months ended September 30, 1999
Net Sales
Net sales for the three months ended September 30,
2000 were $33.5 million, $10.6 million or 46.0%
greater than the comparable 1999 quarter. The
increase in net sales reflects the positive impact
of the Company's return to normalized shipping rates
and turnaround times for customer orders, as
all of its 1999 warehouse issues have been
resolved. Net sales for the 2000 quarter also
benefited from the Company's September 1999
acquisition of a 51% controlling interest in each of
the Prestige Companies based in Italy and Germany and
from the September 2000 acquisition of Kamenstein
which combined, contributed sales of approximately
$3.7 million.
Gross Profit
Gross profit for the three months ended September
30, 2000 was $15.9 million, an increase of $5.2
million or 48.8% greater than the comparable 1999
period. Gross profit as a percentage of net sales
increased to 47.5% from 46.6% due to a favorable
change in the overall sales product mix and
customer mix in the Company's core business,
partially offset by Prestige Germany and
Kamenstein product sales which generate lower gross margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the
three months ended September 30, 2000 were approximately
$11.9 million, an increase of $2.0 million or 20.2%
from the comparable 1999 quarter, however, as a percentage
of net sales these expenses decreased to 35.5%
compared to 43.1% in the 1999 quarter. The
higher expenses were primarily attributable to the
added expenses related to the Prestige Companies and
Kamenstein acquisitions.
Nine Months Ended September 30, 2000
Compared to Nine Months ended September 30, 1999
Net Sales
For the nine months ended September 30, 2000 net
sales were $86.7 million, an increase of $19.0
million or 28.1% compared to the corresponding 1999
period. The net sales increase was primarily
attributable to the resumption of normalized shipping
patterns in 2000 as compared to 1999, when
problems related to the installation of a new warehouse
management system severely hampered the Company's ability
to ship merchandise. The 2000 period also benefited
from the addition of approximately $8.2 million in
net sales from the acquisition in September 1999 of
the Prestige Companies and the September 2000
acquisition of Kamenstein.
Gross Profit
Gross profit for the nine months ended September
30, 2000 was $41.3 million, an increase of $8.6
million or 26.2% from the comparable 1999 period.
Gross profit as a percentage of net sales was 47.7%
for the nine months ended September 30, 2000 as
compared to 48.4% in the comparable 1999 period. The
decrease in gross margin as a percent of net sales
is primarily related to Prestige Germany and Kamenstein
product sales, which generate lower gross margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the
nine months ended September 30, 2000 were $32.9 million,
an increase of $5.5 million or 20.1% from the comparable
1999 period. This increase was primarily attributable
to the added selling, general and administrative
expenses from the acquisitions of the Prestige Companies
in September 1999 and Kamenstein in September 2000
along with increased selling and operating expenses
related to the increase in net sales in the Company's
regular business.
Forward Looking Statements: This Quarterly Report
on Form 10-Q contains certain forward-looking
statements within the meaning of the "safe harbor"
provisions of the Private Securities Litigation
Reform Act of 1995, including statements concerning
the Company's future products, results of operations
and prospects. These forward-looking statements involve
risks and uncertainties, including risks relating to
general economic and business conditions, including
changes which could affect customer payment practices
or consumer spending;industry trends; the loss of
major customers; changes in demand for the Company's
products; the timing of orders received from customers;
cost and availability of raw materials; increases in costs
relating to manufacturing and transportation of products;
dependence on foreign sources of supply and foreign
manufacturing; risks relating to Year 2000 issues;
and the seasonal nature of the business as
detailed elsewhere in this Quarterly Report on Form
10-Q and from time to time in the Company's
filings with the Securities and Exchange Commission.
Such statements are based on management's current
expectations and are subject to a number of factors
and uncertainties which could cause actual results
to differ materially from those described in the
forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $30,000,000 unsecured line of
credit with a bank (the "Line"), increased from
$25,000,000, which may be used for short-term
borrowings or letters of credit and trade
acceptances. Borrowings under the Line bear
interest payable daily at a negotiated short-term
borrowing rate. The Company is also charged a
nominal fee on the entire Line. As of September 30,
2000, the Company had $6,572,000 of letters of
credit and trade acceptances outstanding and
$16,100,000 of borrowings and, as a result, the
availability under the Line was $7,328,000. The
average daily borrowing rate for the three months
ended September 30, 2000 was 7.80%. The Line is
cancelable by either party at any time.
In addition to the line above, the Prestige
Companies (the Company's 51% controlled European
subsidiaries) have three lines of credit with three
separate banks for a total available credit facility
of approximately $2.8 million. As of September 30,
2000, the Prestige Companies had approximately $2.5 million of
borrowings against these lines. Interest rates on
these line of credits range from 6.125% to 8.9%.
At September 30, 2000, the Company had cash and cash
equivalents of $356,000 versus $1.6 million at December 31, 1999.
Working capital, including cash and cash equivalents,
declined by $14.7 million during the first nine
months of 2000. The decline was primarily the
result of the Company repurchasing 1,295,000 shares
of its common stock for approximately $10.7 million
and the paying off of approximately $8.0 million
of indebtedness related to the Kamenstein acquisition.
On October 26, 2000, the Board of Directors
declared another regular quarterly cash dividend
of $0.0625 per share to shareholders of record on
November 6, 2000, to be paid on November 20, 2000.
The dividend to be paid will be approximately $658,000.
Effective as of September 1, 2000, the
Company acquired Kamenstein, a privately held 107
year old housewares company whose products
include pantryware, teakettles, and home
organization accessories. Kamenstein's
revenues were approximately $21.0 million for the
twelve month period ended August 31, 2000. In
acquiring Kamenstein, the Company assumed bank debt
and other indebtedness of approximately $10 million.
The Company is obligated to make additional
contingent payments based on annual gross profit
dollars earned on sales of the business for a
period of 3 years. Kamenstein contributed $2.0
million in sales to the Company's total net sales
for the third quarter of 2000.
The Company expects that all capital expenditures to
be incurred in 2000 will be financed from current
operations, cash and cash equivalents and, if
needed, short term borrowings.
The Company believes that its cash and cash
equivalents,
internally generated funds and its existing credit
arrangements will be sufficient to finance its
operations for at least the
next 12 months.
The results of operations of the Company for
the periods discussed have not been significantly
affected by inflation or foreign currency
fluctuation. The Company negotiates a
significant majority of its purchase orders with
its foreign manufacturers in United States dollars.
Thus, notwithstanding any fluctuation in foreign
currencies, the Company's cost for any purchase
order is not subject to change after the time the
order is placed. However, any weakening of the
United States dollar against local currencies
could lead certain manufacturers to increase their
United States dollar prices for products. The
Company believes it would be able to compensate
for any such price increase.
Impact of Year 2000
In prior years, the Company has discussed the nature
and progress of its plans to become Year 2000
computer compliant. In early 1999, the Company
completed the installation of a new financial
accounting reporting system and a separate new
warehouse management system. As a result of those
two installations, the Company experienced no
significant disruptions in mission critical
information technology and non-information
technology systems and believes those systems
successfully responded to the Year 2000 date
change. The Company is not aware of any material
problems resulting from Year 2000 issues,
either with its products, its internal systems, or
the products and services of third parties. The
Company will continue to monitor its mission
critical computer applications and those of its
suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may
arise are addressed promptly.
PART II - OTHER INFORMATION
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the third quarter of 2000:
(a)Exhibit No. Description
27 Financial Data Schedule
10.31 Asset Purchase Agreement between MK
Acquisition Corp, a wholly owned
subsidiary of Lifetime Hoan
Corporation, and M. Kamenstein,
Inc., dated September 28, 2000.
(b)Reports on Form 8-K in the third quarter of 2000: NONE
Exhibit 27. Financial Data Schedule
Lifetime Hoan Corporation
Financial Data Schedule
Pursuant to Item 601(c) of Regulation S-K
This schedule contains summary financial information extracted
from the financial statements included in the form 10-Q
and is qualified in its entirety by reference to such financial statements
for the Nine Months ended September 30, 2000.
(in thousands, except per share data)
item Number Item Description Amount
5-02(1) Cash and Cash Items $ 356
5-02(2) Marketable Securities $ 0
5-02(3)(a)(1) Notes and Accounts Receivable - Trade $ 22,586
5-02(4) Allowances for Doubtful Accounts $ 85
5-02(6) Inventory $ 55,939
5-02(9) Total Current Assets $ 84,373
5-02(13) Property, Plant and Equipment $ 21,549
5-02(14) Accumulated Depreciation $ 8,128
5-02(18) Total Assets $ 124,834
5-02(21) Total Current Liabilities $ 44,417
5-02(22) Bonds, Mortgages and Similar Debt $ 0
5-02(28) Preferred Stock-Mandatory Redemption $ 0
5-02(29) Preferred Stock-No Mandatory Redemption $ 0
5-02(30) Common Stock $ 105
5-02(31) Other Stockholders' Equity $ 79,610
5-02(32) Total Liabilities and Stockholders Equity $ 124,834
5-03(b)1(a) Net Sales of Tangible Products $ 86,308
5-03(b)1 Total Revenues $ 86,661
5-03(b)2(a) Cost of Tangible Goods Sold $ 45,354
5-03(b)2 Total Costs and Expenses Applicable
to Sales and Revenues $ 45,354
5-03(b)3 Other Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts and Notes $ 87
5-03(b)(8) Interest and Amortization of Debt Discount $ 0
5-03(b)(10) Income Before Taxes and Other Items $ 8,404
5-03(b)(11) Income Tax Expense $ 3,589
5-03(b)(14) Income/Loss Continuing Operations $ 4,815
5-03(b)(15) Discontinued Operations $ 0
5-03(b)(17) Extraordinary Items $ 0
5-03(b)(18) Cumulative effect - Changes in
Accounting Principles $ 0
5-03(b)(19) Net Income or Loss $ 4,815
5-03(b)(20) Earnings Per Share - Primary $ 0.43
5-03(b)(20) Earnings Per Share - Fully Diluted $ 0.43
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.
Lifetime Hoan Corporation
November 10,2000
/s/ Milton L. Cohen
__________________________________
Milton L. Cohen
Chairman of the Board of Directors
(Principal Executive Officer)
November 10,2000
/s/ Robert McNally
__________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
EXHIBIT 10.31
ASSETS PURCHASE AGREEMENT
DATED SEPTEMBER 28, 2000
BETWEEN
MK ACQUISITION CORPORATION
AND
M. KAMENSTEIN, INC.
ASSETS PURCHASE AGREEMENT
AGREEMENT dated this 28th day of September, 2000 between
MK ACQUISITION CORPORATION ("Buyer"), a Delaware corporation and
a wholly-owned subsidiary of Lifetime Hoan Corporation, a
Delaware corporation ("Buyer's Parent"), and M. KAMENSTEIN, INC.
("Seller"), a Delaware corporation.
WHEREAS, Seller is engaged in the creation, design,
development, importation, distribution and sale of pantryware,
storage and organization products, teakettles, buffet serveware
and small furniture accessories and packaging and selling spices
in bottles and related spice-racks and holders (the "Business").
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, substantially all of the properties,
assets and business of Seller, all upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Purchase and Sale of Assets. Upon the terms and
provisions of this Agreement, Buyer is purchasing and accepting
delivery from Seller of, and Seller is selling, conveying,
assigning, transferring and delivering to Buyer, at the Closing
provided for in Section 5 which is taking place simultaneously
with the execution of this Agreement, all of Seller's existing
properties and assets of every kind and nature, real, personal,
tangible or intangible, wherever located, including, but not
limited to, the properties and assets listed on Schedule 1(a) to
this Agreement, and the Business as a going concern, including,
without limitation, Seller's corporate name, including the right
to use such name, and all of its other goodwill and the Owned Real
Property (as defined herein) and the Real Property Leases (as
defined herein); provided, however, notwithstanding the foregoing,
the properties and assets to be sold by Seller to Buyer do not
include those properties and assets listed in Schedule 1(b) to
this Agreement, (which property and assets listed under items (1)
and (2) on such Schedule are not the property of Seller and were
not purchased by Seller). The properties, assets and business
being sold by Seller to Buyer pursuant to this Agreement are
hereinafter collectively called the "Assets." Those properties and
assets listed in Schedule 1(b) to this Agreement are hereinafter
called the "Excluded Assets."
2. Consideration. As consideration for the Assets:
2.1 Cash Payments. Buyer is paying or will pay
in cash:
To Seller at the Closing a cashiers check payable to the
Internal Revenue Service ("IRS") in the amount of
$176,462.18 (the "Closing IRS Payment") to be applied by
Seller at or immediately following the Closing to the
payment in full of all of Seller's outstanding
obligations to the IRS pursuant to that certain Offer in
Compromise (IRS Form 656), as amended, by Seller to the
IRS, as accepted by the IRS on January 11, 1999;
To Seller at the Closing (i) a cashiers check payable to
the Commonwealth of Massachusetts Department of
Revenue in the amount of $2,000.00 to be applied by
Seller to the payment in full of Seller's franchise tax
obligations to the Commonwealth of Massachusetts for
the third quarter of fiscal year 2000, and (ii) a
cashiers check payable to the New York State Department
of Corporations in the amount of 500.00 to be applied
by Seller to the payment in full of Seller's franchise
tax obligations to the State of New York for the third
quarter of fiscal year 2000 (together, the "Closing
Franchise Tax Payments"); and
To New England Partners payments calculated as described
in Schedule 2.1(C) (the "NEP Earn-Out"); provided,
however, that the NEP Earn-Out shall be subject to the
set-off provisions of Section 14.
2.2 Assumption by Buyer of Debts, Liabilities
and Obligations of Seller. As further consideration for the
Assets and the Business, Buyer is assuming and undertaking to
perform only the debts, liabilities and obligations of Seller
listed in Schedule 2.2 (the "Assumed Liabilities"), and to pay to
or on behalf of Seller, and Seller's sole stockholder ("Seller's
Parent"), the following amounts:
(i) to Peter Kamenstein $1,000,000.00 in cash
(the "Kamenstein Installment Payments") in partial
satisfaction by Seller of the amount owing to Peter
Kamenstein by Seller pursuant to that certain loan
agreement dated June __, 1999 Peter Kamenstein, Seller
and Seller's Parent as follows:
DATE AMOUNT
At the Closing(the "Closing Kamenstein") $ 333,334.00
First Anniversary of the Closing $ 333,334.00
Second Anniversary of the Closing $ 333,334.00
TOTAL $ 1,000,000.00
The parties hereto acknowledge and agree that the
Kamenstein Installment Payments shall not be subject to the set-
off provisions of Section 14 of this Agreement.
(ii) to Peter Kamenstein at the Closing
$101,700.00 in cash in full satisfaction of all
amounts owing to Peter Kamenstein pursuant to that
certain commercial revolving promissory note dated as
of June 16, 2000 between Peter Kamenstein, Seller and
Seller's Parent (the "Kamenstein Loan Payment").
(iii) to Bank of America at the Closing
$7,716,247.29 in cash (the "Pay-Off Amount") in full
satisfaction of all amounts owing to Bank of America
by Seller's Parent pursuant to that certain loan and
security agreement dated as of September 26, 1997
among Seller, Seller's Parent and Bank of America
(formerly known as Nations Bank) pursuant to which
Bank of America provided a $15,000,000.00 revolving
credit facility, as amended from time to time (the "BA
Loan").
(iv) to Seller at the Closing $128,532.04 in cash
as reimbursement for all amounts relating to the lease
prepayment to the end of the term with respect to that
certain commercial lease between B.G.H. Realty Trust
and Seller, dated February 22, 1996, as amended, for
the premises located at 46 Industrial Road,
Leominster, Massachusetts 01453 (the "Leominster Lease
Payment").
Except for the Assumed Liabilities, Buyer is not assuming
or undertaking to perform or paying, and will not assume or
undertake to perform or pay, any other debt, liability or
obligation of Seller of any kind whatsoever. The Assumed
Liabilities shall in no event include any franchise or income tax
liability.
In addition, Buyer has entered in to an agreement of even
date herewith with Bank of America, Seller, and Seller's Parent in
the form attached hereto as Exhibit 2.2 ("Agreement Regarding
Certain Proceeds") with respect to certain proceeds which are
being made available by Bank of America for purposes of completing
the transactions contemplated in this Agreement, and further, that
an amount equal to such proceeds shall be included in the amounts
calculated by Bank of America as being the Pay-Off Amount, and the
rights and obligations of the parties with respect to such
proceeds are contained in such agreement. To the extent the full
amount of the Deposit Advance (as such term is defined in the
Agreement Regarding Certain Proceeds), is not required by Seller
to cover the payment of the unpresented checks of Seller listed on
Annex 1(b) to Schedule 1(b) of this Agreement (each, an
"Unpresented Check"), Seller shall deliver to Buyer such portion
of the Deposit Advance that is not so required by the earlier of
(i) November 8, 2000 or (ii) 5 business days of the date on which
Seller is advised that the last Unpresented Check has cleared the
Deposit Account (as such term is defined in the Agreement
Regarding Certain Proceeds). In the event any Unpresented Check
remains unpresented on October 31, 2000, Buyer and Seller agree to
coordinate with each other in advising the holders of such
Unpresented Checks that payment will no longer be made against
them, and Buyer shall re-issue replacement checks drawn on its own
account and coordinate with Seller in delivering them to such
holders.
2.3 Allocation of Consideration.
(A) The consideration for the Assets shall be
allocated as set forth in Schedule 2.3.
(B) The parties hereto covenant and agree with each
other that this allocation was arrived at by arm's length
negotiation and that none of them will take a position on any
income tax return, before any governmental agency charged with the
collection of any income tax, transfer tax or in any judicial
proceeding that is in any manner inconsistent with the terms of
this Section 2.3 without the written consent of the other party to
this Agreement.
2.4 Debts, Liabilities and Obligations Arising After
the Closing. Notwithstanding anything in this Agreement to the
contrary, Buyer agrees to perform and/or pay any and all debts,
liabilities and obligations of any kind whatsoever with respect to
the Assets and the Business arising from and after the Closing.
2.5 Buyer's Employees Following Closing. At Buyer's
request, from and after the Closing through October 13, 2000
Seller has agreed to maintain employees of the Business on
Seller's payroll register, pay them thereunder, and handle all
related functions as required by law or otherwise. Buyer
acknowledges and agrees that it will fund Seller's payroll
register to permit Seller to pay such employees as outlined above.
Buyer will use its best efforts to establish its own payroll
register as soon after Closing as possible.
3. Promissory Note; Buyer's Parent Guaranty. (a) As
evidence of Buyer's obligation to pay to Peter Kamenstein in cash
the balance of the Kamenstein Installment Payments remaining
unpaid following the Closing, Buyer is executing and delivering to
Peter Kamenstein at the Closing a promissory note of Buyer payable
to Peter Kamenstein in the form attached hereto as Exhibit 3(a),
of even date herewith (the "Promissory Note").
(b) Buyer, on behalf of Buyer's Parent, is executing
and delivering to Peter Kamenstein at the Closing a fully executed
guaranty, of even date herewith, with respect to the payment of
the Promissory Note, which guaranty shall be substantially in the
form attached hereto as Exhibit 3(b) (the "Guaranty").
4. Change of Seller's Name. Within five (5) business
days after the Closing, Seller will change its corporate name to
Finally Done, Inc. Seller, at the request and cost of Buyer, will
take such action as may be reasonably necessary or appropriate to
permit Buyer to change Buyer's corporate name after the Closing in
the state of Delaware to a name containing the word "Kamenstein"
and to qualify to do business as a foreign corporation under such
name in those jurisdictions in which Seller is authorized to do
business as a foreign corporation at Closing.
5. Closing. The closing of the transactions
contemplated by this Agreement ("Closing") is taking place at the
office of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York,
New York 10178 at 10:00 o'clock in the forenoon, local time, on
September 28, 2000. Notwithstanding that the Closing is occurring
on September 28, 2000, the transactions being consummated at the
Closing shall, for accounting purposes only, be deemed to have
occurred as of 12:01 a.m. on September 1, 2000.
5.1 Documents being Delivered by Seller to Buyer. At
the Closing, Seller is signing, notarizing (if necessary), and /or
delivering to Buyer:
(A) a quit claim deed or deeds conveying to Buyer
Seller's good and marketable fee simple title to all of the
Owned Real Property subject to Permitted Real Estate
Encumbrances (as hereinafter defined), executed and ack
nowledged by Seller and in proper form for recording, with
the exception of all necessary revenue stamps, which can
only be obtained and attached at the time of recording such
deed or deeds by Buyer in the Form of Exhibit 5.1(A) hereto
(the "Deed");
(B) a bill of sale, assignment and assumption
agreement with full covenants of warranty as to Seller's
good and marketable title to all the Assets (other than the
Owned Real Property and except for the Permitted
Encumbrances set forth on Schedule 6.9) in the form of
Exhibit 5.1(B) (the "Bill of Sale, Assignment and
Assumption Agreement");
(C) Assignments of Trademarks in the forms of
Exhibits 5.1(C)(i) through (vii) attached hereto (the
"Trademark Assignments");
(D) Assignments of Patents in the forms of Exhibits
5.1(D)(i) through (xv) attached hereto (the "Patent
Assignments");
(E) Assignment of Copyrights in the form of Exhibit
5.1(E)(i) attached hereto (the "Copyright Assignment");
(F) (i) a lease assignment and assumption agreement
with respect to all of Seller's rights, title and interest
in and to that certain lease agreement dated September,
1993 between Taxter Park Associates (now known as Mack-
Cali Realty Corporation), and Seller with respect to
Seller's executive offices located at 565 Taxter Road,
Elmsford, New York 10523 in the form of Exhibit 5.1(F)(i)
attached hereto (the "Elmsford Lease Assignment") and (ii)
a lease assignment and assumption agreement with respect to
all of Seller's right, title and interest in and to that
certain lease agreement dated July 31, 2000 between Salem
Village Craftsmen, Inc., d/b/a Shaker Workshops with
respect to the premises at 14 South Pleasant Street,
Ashburnham, Massachusetts 01430 in the form of Exhibit
5.1(F)(ii) attached hereto (the "Ashburnham Lease
Assignment);
(G) affidavits of title and documents related thereto
(if any) reasonably requested by Buyer's title insurance
company;
(H) estoppel certificates (dated not more than 30
business days prior to the Closing from each landlord under
a Real Property Lease; provided, however, after using
reasonable efforts, if Seller is unable to obtain and
deliver estoppel certificates from each landlord, Buyer
agrees to accept estoppel certificates from each tenant
under the Real Property Leases;
(I) a certificate pursuant to the Foreign Investment
in Real Property Tax Act in the form of Exhibit 5.1(I)
attached hereto (the "FIRPTA Affidavit");
(J) a good standing tax waiver from the Commonwealth
of Massachusetts;
(K) a consent to the transactions contemplated hereby
from each landlord under a Real Property Lease to the
extent the same is required pursuant to the terms of such
Real Property Lease;
(L) any applicable Seller-related real property
transfer tax forms in connection with the transactions
contemplated by this Agreement;
(M) all Seller's contracts, books, records and other
data relating to the Assets and Seller's operations (except
Seller's minute and stock books and all other records which
Seller is required by law to keep in its possession, as to
which Seller, upon the request of Buyer, will furnish to
Buyer copies or transcripts, at Buyer's cost, at any time
or from time to time after the Closing) (hereinafter the
"Books and Records); provided, however that Seller shall
have reasonable access to the Books and Records from and
after the Closing for the purpose of preparing financials,
tax filings and returns and other such requirements of
Seller; and provided further that Seller need not
physically deliver to Buyer the Books and Records at the
Closing and instead shall deliver to Buyer the Books and
Records as soon after the Closing as is reasonably
practicable;
(N) a certificate of Seller's Secretary in the form
of Exhibit 5.1(N) attached hereto, certifying as to certain
corporate matters, together with all of the attach ments
referred to therein;
(O) an opinion from legal counsel of Seller in the
form of Exhibit 5.1(O) attached hereto ;
(P) an employment agreement between Buyer and Peter
D. Kamenstein in the form of Exhibit 5.1(P) attached
hereto (the "Kamenstein Employment Agreement"); and
(Q) a worldwide assignment of rights in the form of
Exhibit 5.1(Q) attached hereto (the "Worldwide
Assignment").
5.2 Documents and Payments being Delivered by
Buyer. At the Closing, Buyer is signing, notarizing
and/or delivering:
(A) to Seller:
(1) the Closing IRS Payment;
(2) the Closing Franchise Tax Payments;
(3) the Elmsford Lease Assignment;
(4) the Ashburnham Lease Assignment; (5) the Trademark
Assignments;
(6) the Patent Assignments; (7) the Copyright Assignment;
(8) The Bill of Sale, Assignment and Assumption Agreement; (9) a certificate of
Buyer's Secretary in the form of Exhibit
5.2(A)(ix) certifying as to certain corporate matters, together
with all of the attachments referred to therein;
(10) an opinion of legal counsel of Buyer in the form
attached hereto as Exhibit 5.2(A)(x);
(11) the Leominster Lease Payment; and
(12) the Worldwide Assignment.
(B) To Peter Kamenstein:
(i) the Closing Kamenstein Payment by wire
transfer of immediately available funds to such account at
such bank as Peter Kamenstein has directed;
(ii) the Kamenstein Loan Payment by wire
transfer of immediately available funds to such account at
such bank as Peter Kamenstein has directed;
(iii) the Promissory Note;
(iv) the Guaranty;
(v) the Kamenstein Employment Agreement; and
(C) To Bank of America:
(i) the Pay-Off Amount by wire transfer of
immediately available funds to such account as
Bank of America has directed.
5.3 [Intentionally Omitted]
5.4 Passage of Title at Closing. Upon delivery
of the instruments of sale, conveyance, assignment,
transfer and delivery as contemplated in this Agreement,
all of Seller's right, title and interests in and to the
Assets is passing to Buyer at the Closing. Except as
otherwise contemplated in this Agreement or as otherwise
set forth on Annex 1(a) to Schedule 1(a) to this Agreement,
at the Closing Seller is (i) putting Buyer in full
possession of all of the non-Real Property Assets and (ii)
putting Buyer in full, complete, vacant (except for the
Assets and Business located thereon) and quiet possession
and enjoyment of all of the Real Property (subject to the
Permitted Real Estate Encumbrances) and from and after the
Closing the ownership and operation of the Assets and the
Business shall be for the account and risk of Buyer.
5.5 Assignment of Seller's Contracts.
(A) Nothing in this Agreement shall be deemed to
constitute an assignment or an attempt to assign any
contract or other agreement to which Seller is a party if
the attempted assignment thereof without the consent of the
other party to such contract or agreement would constitute
a breach thereof or affect in any way the rights of Seller
thereunder. Buyer acknowledges that Seller has not
obtained as at the Closing the consents of the other
parties to the assignment of those contracts and other
agreements listed on Annex 6.5 to Schedule 6.5. After the
Closing Seller shall use its best efforts to obtain the
consent of any such other party to each such contract or
agreement. To the extent such other party requires the
cooperation and agreement of Buyer in agreeing to such a
consent, Buyer shall use its best efforts to cooperate with
such party. If after Seller has used its best efforts to
obtain the consent of any such other party to such contract
or agreement, such consent shall not be obtained, or an
attempted assignment thereof at the Closing would be
ineffective and would affect the rights of Seller
thereunder, Seller will cooperate with Buyer in any
reasonable arrangement designed to provide for Buyer the
benefits under any such contract or agreement, including
the enforcement, at the cost and for the benefit of Buyer,
of any and all rights of Seller against such other party
thereto arising out of the breach or cancellation thereof
by such other party or otherwise. This Section shall not be
applicable to the Real Property Leases.
(B) If Seller's Parent is a guarantor of any
obligation of Seller under any contract or other agreement
to which Seller is a party and which is being assigned to
Buyer pursuant to this Agreement, Buyer (and, if necessary,
Buyer's Parent) shall cooperate with Seller and the other
party to such contract or other agreement by providing to
such other party financial statements and other data and
information relating to Buyer (and if necessary , Buyer's
Parent) and, if so requested by Seller or such other party
as a condition of releasing Seller's Parent as a guarantor
of the performance of any of Seller's obligations under
such contract or other agreement, Buyer's Parent shall
permit itself to be substituted for Seller's Parent as the
guarantor of the performance of such obligations.
6. Representations and Warranties by Seller. Seller
represents and warrants to Buyer as follows:
6.1 Corporate Organization. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate
power and authority to carry on its business as now being
conducted by Seller and to own and operate the properties and
assets now owned and being operated by it. Simultaneously with
the execution and delivery of this Agreement by Seller, Seller is
delivering to Buyer complete and correct copies of its Certificate
of Incorporation and By-Laws as in effect on the date hereof.
Seller is duly qualified or licensed to do business and is in good
standing as a foreign corporation in the jurisdictions set forth
in Schedule 6.1. Seller is not required to be qualified or
licensed to do business as a foreign corporation in any other
jurisdiction except such jurisdictions, if any, in which the
failure to be so qualified or licensed will not have a material
adverse effect on the conduct of its business or the ownership or
use of any of its properties or assets.
6.2 [Intentionally Omitted]
6.3 Subsidiaries and Other Equity Investments.
Seller does not own, directly or indirectly, any shares of capital
stock of any corporation or any equity investment in any
partnership, limited liability company, association or other
business organization.
6.4 Corporate Authority. Seller has the
corporate power to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate and shareholder action, no other corporate proceeding on
the part of Seller is necessary to authorize the execution and
delivery of this Agreement or the performance of any of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered on behalf of Seller, and is a legal, valid
and binding obligation of Seller enforceable against Seller in
accordance with its terms. Simultaneously with the execution and
delivery of this Agreement by Seller, Seller is delivering to
Buyer a true and complete copy, certified by its Secretary, of the
resolutions which have been duly adopted by its Board of Directors
authorizing such execution and delivery and such purchase and the
consummation of such other transactions.
6.5 No Violation. Except as set forth on
Schedule 6.5, neither the execution, delivery or performance of
this Agreement by Seller nor consummation of any of the
transactions contemplated hereby (i) will violate or conflict with
the Certificate of Incorporation or By-Laws of Seller, (ii) will
result in any breach of or default under any provision of any
contract or agreement of any kind to which Seller is a party or by
which Seller is bound or to which any property or asset of Seller
is subject, (iii) is prohibited by or requires Seller to obtain or
make any consent, authorization, approval, registration or filing
under any statute, law, ordinance, regulation, rule, judgment,
decree or order of any court or governmental agency, board,
bureau, body, department or authority, or of any other such
person, (iv) will cause any acceleration of maturity of any note,
instrument or other obligation to which Seller is a party or by
which Seller is bound or with respect to which Seller is an
obligor or guarantor, or (v) will result in the creation or
imposition of any lien, claim, charge, restriction, equity or
encumbrance of any kind whatsoever upon or give to any other
person any interest or right (including any right of termination
or cancellation) in or with respect to any of the properties,
assets, business, agreements or contracts of Seller.
6.6 Financial Statements. Seller has delivered
to Buyer copies of the following financial statements:
(i) The audited consolidated balance sheets of Seller
and Seller's Parent as at December 31, 1997 and 1998 and
the related consolidated statements of operations,
stockholders' deficiencies and cash flows for the year
ended December 31, 1998 and the period May 15, 1997 through
December 31, 1997, and the reports thereon of Deloitte &
Touche, Stamford, Connecticut, certified public
accountants, and the audited consolidated balance sheet of
Seller and Seller's Parent as of December 31, 1999 and the
related consolidated statements of operations,
stockholders' deficiencies and cash flows for the year
ended December 31, 1999 (the "1999 Financial Statement").
The 1999 Financial Statement shall be certified by the
President and Chief Financial Officer of Seller as set
forth in the certificate attached hereto as Exhibit 6.6
("Financial Statement Certification"); and
(ii) The unaudited consolidated balance sheet of
Seller and Seller's Parent as at August 31, 2000 and the
related consolidated statements of operations,
stockholders' deficiencies and cash flows, and without
notes or supporting schedules for the eight -month period
ended on that date, certified by the President and Chief
Financial Officer of Seller as set forth in the Financial
Statement Certification.
All of such financial statements are complete and present fairly
and accurately in all material respects the consolidated financial
position of Seller and Seller's Parent as at the respective dates
of said balance sheets and the consolidated results of operations
and changes in financial position of Seller and Seller's Parent
for the respective periods then ended in conformity with generally
accepted accounting principles, except for the lack of footnotes
thereto and preparation not consistent with the prior year. All
accounts receivable as of August 31, 2000 are reflected on such
August 31, 2000 balance sheet with provision for adequate reserves
for doubtful amounts, or are fully insured, covered by a letter of
credit or have been preapproved by Buyer. Except as set forth on
Schedule 6.6 with respect to Quality Control Inventory (i.e. items
deemed defective and to be returned to Seller or discarded),
inventories reflected on such balance sheets represent only good
and serviceable items priced at the lower of cost (first in, first
out method) or market values. Adequate provision for
obsolescence, shrinkage, excess quantities, defective materials
and deterioration has been made for all inventory exposed thereto;
and, with the exception of (i) Winchendon real property taxes of
approximately $5,500 plus interest for fiscal year 2000 and (ii)
consulting fees of approximately $2,800 incurred in fiscal year
1999, as at August 31, 2000 there was no liability of any nature
or in any amount that should properly be reflected or reserved
against in a balance sheet prepared in conformity with generally
accepted accounting principles which is not fully reflected or
reserved against in such consolidated balance sheet of Seller and
Seller's Parent as at August 31, 2000.
6.7 No Undisclosed Liabilities, Etc. Since
August 31, 2000 (except (i) for the transactions contemplated by
this Agreement and (ii) as set forth in Schedule 6.7):
(1) Seller has not incurred any material liability or
obligation (absolute, accrued, contingent or otherwise) of any
nature, other
than liabilities and obligations incurred in the ordinary course
of business, that would properly be reflected or reserved against
in a balance sheet prepared in conformity with generally accepted
accounting principles applied on a basis consistent with that used
in the preparation of the consolidated balance sheet of Seller and
Seller's Parent as at August 31, 2000 as referred to in Section
6.6;
(2) All inventories acquired or finished by Seller have been
acquired or finished in the ordinary course of the Business in
quantities that are not materially greater or less than those
required for the current operation of the Business and except for
a reasonable allowance for defective materials and deterioration,
consist of good and serviceable items; and
(3) Seller has not acquired any material amount of accounts
receivable that are or are believed to be uncollectible, and the
frequency and amounts of payments received by Seller with respect
to the accounts receivable reflected on the consolidated balance
sheet of Seller and Seller's Parent as at August 31, 2000 referred
to in Section 6.6, do not, in retrospect, render inadequate the
insurance or letter of credit coverage for doubtful accounts or
the reserves for doubtful accounts set forth on such balance
sheet.
6.8 Absence of Certain Changes. Since August
31, 2000 (except (i) for the execution and delivery of this
Agreement and the transactions contemplated herein, and (ii) as
set forth in Schedule 6.8), Seller has not:
(i) had any change in its condition (financial
or otherwise), operations, liabilities (including the
Assumed Liabilities), the Assets or the Business, other
than changes in the ordinary course of business, which have
had or are reasonably likely to have, a materially adverse
effect on its condition (financial or otherwise),
operations, liabilities (including the Assumed
Liabilities), the Assets or the Business (a "Material
Adverse Effect");
(ii) suffered any damage, destruction or loss of
physical property (whether or not covered by insurance)
which has had, or is reasonably likely to have, a Material
Adverse Effect;
(iii) incurred or agreed to incur any indebtedness for
borrowed money without the prior written approval of Buyer;
(iv) paid or obligated itself to pay in excess of
$10,000 in the aggregate for fixed assets;
(v) suffered any material loss or waived any
material right;
(vi) sold, transferred or otherwise disposed of, or
agreed to sell, transfer or otherwise dispose of, any
assets having a book value at the time of sale, transfer or
disposition of $10,000 or more in the aggregate, or can
celed, or agreed to cancel, any debts or claims, other than
in the ordinary course of business;
(vii) mortgaged, pledged or subjected to any charge,
lien, claim or encumbrance, or agreed to mortgage, pledge
or subject to any charge, lien, claim or encumbrance, any
of its properties or assets other than in the ordinary
course of business;
(viii) declared, set aside or paid any dividend
(whether in cash, property or stock) with respect to any of
its capital stock or redeemed, purchased or otherwise
acquired, or agreed to redeem, purchase or otherwise
acquire, any of its capital stock;
(ix) increased, or agreed to increase, the compensa
tion or bonuses or special compensation of any kind of any
of its officers, employees or agents over the rate being
paid to them on January 1, 2000 other than normal merit
and/or cost-of-living increases pursuant to customary
arrangements consistently followed, or adopted or increased
any benefit under any insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with
any such officer, employee or agent other than increases
pursuant to customary arrangements consistently followed,
or otherwise required by law;
(x) lost any major customer or had any material
order canceled or knows of any threatened cancellation of
any material order, or has been notified by any major
customer of its loss of listing;
(xi) made or permitted any material amendment or
termination of any material contract, agreement or license
to which it is a party other than in the ordinary course of
business;
(xii) had any resignation or termination of employ
ment of any of its key officers or employees or knows of
any impending or threatened resignation or resignations or
termination or terminations of employment that has had or
could result in a Material Adverse Effect;
(xiii) had any labor trouble or knows of any
impending or threatened labor trouble;
(xiv) experienced any shortage or difficulty in
obtaining any raw material;
(xv) made any change in its accounting methods or
practices with respect to its condition, operations,
properties, assets, liabilities or the Business;
(xvi) made any charitable or political contribution
or pledge; or
(xvii) entered into any transaction not in the
ordinary course of its business.
6.9 Title to and Condition of the Assets. Seller
has good and marketable title to all of the Assets, (including fee
title to the Owned Real Property set forth in Schedule 6.10,
subject to the Permitted Real Estate Encumbrances and, for the
other Assets, subject to the Permitted Encumbrances and the
Assumed Liabilities) including, without limitation, (i) all Assets
used or usable in the Business and (ii) Assets reflected in the
unaudited consolidated balance sheet of Seller and Seller's Parent
referred to in Section 6.6(ii) (except in connection with the
transactions contemplated herein or as sold or otherwise disposed
of in the ordinary course of business), subject to no mortgage,
pledge, conditional sales contract, lien, security interest, right
of possession in favor of any third party, claim, restriction,
lease or other encumbrance (hereinafter the "Encumbrances"),
except (i) the lien of Seller's
current taxes not yet due and payable and (ii) as set forth in
Schedule 6.9 (collectively, the "Permitted Encumbrances").
Subsequent to August 31, 2000, Seller has not sold or disposed of
any of its properties or assets or obligated itself to do so,
except in connection with the transactions contemplated herein (as
with respect to the prepayment of the Leominster Lease) or in the
ordinary course of business (but there has been no sale or
agreement to sell the Owned Real Property or any Real Property
Lease). The machinery, furniture, office and other equipment of
Seller that are used in the Business are in good operating
condition and repair, subject only to the ordinary wear and tear
of the Business. The facilities located on Owned Real Property
and the facilities used by Seller under any Real Property Lease
are in good operating condition and repair, subject only to the
ordinary wear and tear of the Business.
6.10 Real Property.
(i) Schedule 6.10 sets forth all of the interests in real
property owned by Seller (the "Owned Real Property"), including
legal descriptions of all Owned Real Property, all of the
interests in real property (other than the real estate located in
Leominster, Massachusetts) leased to Seller (the "Leased Real
Property", and, together with the Owned Real Property, the "Real
Property") the location of each parcel of Real Property and the
general use of the facility thereon, if any, and the name of the
owner or the name of the lessor. Seller has delivered to Buyer
(i) a copy of each deed or lease by which Seller acquired title to
or its interest in the Owned Real Property described in Schedule
6.10, (ii) a copy of all title abstracts and title insurance
policies Seller has for the Real Property described in Schedule
6.10, (iii) a copy of the most recent survey or surveys Seller has
for the Real Property described in Schedule 6.10, (iv) a copy of
all certificates of occupancy for the improvements on the Owned
Real Property described in Schedule 6.10 and a copy of any zoning
variance granted with respect to any of such Real Property
described in Schedule 6.10 pursuant to applicable zoning laws or
ordinances to the extent in Seller's possession and (v) a copy of
each lease (the "Real Property Leases") by which Seller acquired
its interest in the Real Property described in Schedule 6.10 all
of which documents are true and complete copies thereof. Seller
has not received any written notice of violation from any
governmental agency, board, bureau, body, department or authority
of any United States jurisdiction, with respect to Seller's
ownership or use of any of the Real Property described in Schedule
6.10. Except as set forth in Schedule 6.10 (the "Permitted Real
Property Encumbrances"), there is no easement, right-of-way
agreement, license, sublease, mortgage, pledge, lien, security
agreement, lease, right of possession, restriction, encumbrance or
like instrument with respect to any of the Owned Real Property or
Seller's interest in any of the Real Property Leases described in
Schedule 6.10. Each lease pursuant to which Seller leases any
Real Property is in full force and effect and is valid and
enforceable in accordance with its terms. Except as set forth on
Schedule 6.10, there is not under any such lease any default by
Seller, or any event that with notice or lapse of time or both
would constitute such a default by Seller and with respect to
which Seller has not taken adequate steps to prevent such default
from occurring; if any such event has occurred, the steps taken by
Seller to cure or prevent such default from occurring are set
forth in Schedule 6.10. To the best of Seller's knowledge, there
is not under any such lease any default by any other party thereto
or any event that with notice or lapse of time or both would
constitute such a default thereunder by such party. Except as set
forth on Schedule 6.10, each parcel of Real Property used in the
Business
is reflected in the consolidated balance sheet of Seller and
Seller's Parent as at August 31, 2000 referred to in Section 6.6
in the manner and to the extent required by generally accepted
accounting principles.
(ii) Except as contemplated by this Agreement, to Seller's
knowledge, no landlord or tenant under any Real Property Lease has
exercised any option or right to (i) cancel or terminate such Real
Property Lease or shorten the term thereof, (ii) lease additional
premises, (iii) reduce or relocate the premises demised by such
Real Property Lease or (iv) purchase any property.
(iii) All licenses, permits, zoning variances,
approvals, special exemptions and permanent certificates of
occupancy (the "Real Estate Approvals"), if any, needed in
connection with the ownership, use, occupancy and maintenance of
any parcel of Owned Real Property by Seller are set forth in
Schedule 6.10 and Schedule 6.17. The Real Estate Approvals have
been duly issued and paid for and are in full force and effect in
accordance with the respective terms thereof. The Real Estate
Approvals have not been amended or modified. Except as set forth
on Schedules 6.9 and 6.10, the Seller has not assigned, pledged,
mortgaged, hypothecated or otherwise transferred any Real Estate
Approval. Each parcel of Real Property has been and is being
operated in accordance with all the terms, covenants and
conditions of the Real Estate Approvals. Seller has delivered to
Buyer true and correct copies of the Real Estate Approvals.
(iv) All current real estate tax bills for the Real
Property with respect to the Owned Real Property cover the whole
of the Owned Real Property and do not cover or apply to any other
property. No application or proceeding by Seller is pending with
respect to a reduction of the taxes on any Real Property.
(v) No assessments or special assessments have been
levied, or, to Seller's knowledge, are contemplated or pending,
against any parcel of Owned Real Property.
(vi) Public or private utilities currently adequately
serve all of Seller's utility requirements of each parcel of Owned
Real Property. All such utilities are installed and operating and
all installation and connection charges have been paid for in
full. In connection with all Leased Real Property, all utilities
currently adequately serve all of Seller's utility requirements.
(vii) The streets, roads, highways and avenues in front
of or adjoining any parcel of Real Property provide ingress and
egress adequate for the Business as currently operated by Seller.
(viii)Seller has not transferred any of its interests, if
any, in development rights applicable to any Owned Real Property.
(ix)Seller has not received any notice that it violated or
breached any of the terms of, any of the Permitted Real Property
Encumbrances.
(x) To Seller's knowledge no mortgage or other lien
encumbers the Leased Real Property at 565 Taxter Road, Elmsford,
New York and Seller has not subordinated the lease affecting such
location to the lien of any such mortgage.
6.11 [Intentionally Omitted]
6.12 Contracts. Except as set forth in Schedule
6.12, Seller is not a party to any written or oral:
(i) contract with any labor union;
(ii) employment or consulting contract or other
contract for services;
(iii) lease whether as lessor or lessee with respect
to any property, real or personal;
(iv) loan agreement or instrument relating to any
debt;
(v) contract of purchase or sale involving more
than $25,000;
(vi) contract with any agent, dealer or distributor;
(vii) stand-by letter of credit, guarantee or perfor
mance bond;
(viii) contract or agreement restricting the ability
of any person from freely engaging in any business or
competing anywhere in the world;
(ix) contracts or agreements relating to
chargebacks, offsets or similar holdbacks;
(x) contract not made in the ordinary course of
business involving more than $25,000;
(xi) other contract, except insubstantial contracts
for supplies or services not involving more than $10,000
and which can be terminated within one year without cost;
or
(xii) Software Licenses
Except as set forth in Schedule 6.12, Seller is not a party to any
material contract with any governmental authority. Seller is not
a party to any contract that has had or is reasonably likely to
have a Material Adverse Effect. Each contract or agreement listed
in Schedule 6.12 is in full force and effect and is valid and
enforceable by Seller in accordance with its terms. Except as set
forth in, and subject to, Section 6.5 of this Agreement, neither
Seller nor any other party is in default in the observance or the
performance of any term or obligation to be performed by it under
any contract listed in Schedule 6.12. To the best of Seller's
knowledge, no other person is in default in the observance or the
performance of any term or obligation to be performed by it under
any material contract with Seller. Except with respect to
Seller's practice of selling certain products through means of
close-outs, to Seller's knowledge there are no bids or contract
proposals made by Seller that, if accepted or entered into, might
result in a loss to Seller. Seller has delivered to Buyer true
and complete copies of all written contracts in its possession or
reasonably available to Seller listed in Schedule 6.12 as in
effect on the date hereof.
6.13 Litigation. Except as set forth in Schedule
6.13, there are no actions, suits, proceedings or investigations,
either at law or in equity, or before any commission or other
administrative authority in any United States or foreign
jurisdiction, of any kind now pending or, to the best of Seller's
knowledge, threatened or proposed in any manner, or any
circumstances which should or could reasonably form the basis of
any such action, suit, proceeding or investigation, involving
Seller or any of its properties or assets that (i) if asserted and
decided adversely to Seller, could have a Material Adverse Effect,
(ii) questions the validity of this Agreement, (iii) seeks to
delay, prohibit or restrict in any manner any action taken or
contemplated to be taken by Seller under this Agreement, or (iv)
affects any Real Property. Except as set forth in Schedule 6.13,
there is no arbitration proceeding pending or threatened or
proposed in any manner under any collective bargaining agreement
or other agreement. Except as set forth on Schedule 6.13, neither
Seller nor any of its properties or assets is subject to any
judicial or administrative judgment, order, decree or restraint.
6.14 Patents and Trademarks. Seller owns, licenses
or has the right to use, manufacture, have manufactured and sell
any product which it uses, manufactures, has manufactured, or
sells, and Seller owns, licenses or has the right to use, any
process used in the manufacture of any such product. Each of the
patents, trademarks and miscellaneous intellectual property listed
on Schedule 6.14(i) has been validly issued (where issued), is in
good standing, is freely assignable and is owned by Seller free
and clear of any and all liens, encumbrances and other
restrictions, and Seller has the exclusive rights to use all such
patents, trademarks and miscellaneous intellectual property in the
Business. All right, title and interest in each of the patents,
patent applications and copyrights listed on Schedule 6.14(ii) has
been validly assigned to Seller and Seller has no knowledge of any
facts which would adversely affect the validity of such patents,
patent applications and copyrights. To Seller's knowledge, all
copyrighted work set forth on Schedule 6.14(ii) is original and
not based on pre-existing work. The patents, trademarks,
copyrights and miscellaneous intellectual property identified on
Schedules 6.14(i) and 6.14(ii) constitute all of the intellectual
property necessary for the operation of the Business. To Seller's
knowledge, Seller is not infringing any patent, copyright,
trademark, trade name, know-how, trade secret or other proprietary
right of any other person and Seller does not know of any such
claim, or any basis of any such claim. Seller does not know of any
potential claim of infringement of any patent, copyright,
trademark, trade name, know-how, trade secret or other proprietary
right of any other person that has not been asserted but that, if
asserted, would materially and adversely affect the financial
condition, business or operations of Seller. Seller has delivered
to Buyer prior to the execution of this Agreement, documentation
with respect to any invention, process, design, or other know-how
or trade secret or proprietary information used in connection with
its operations or businesses, which documentation is accurate in
all material respects and reasonably sufficient in detail and
content to identify and explain such invention, process, design,
or other know-how or trade secret or proprietary information.
6.15 Compliance with Laws. Except as set forth on
Exhibit 6.16, Seller has complied with and is in compliance with
all applicable United States federal, state, local and foreign
statutes, laws, ordinances, regulations, rules, permits,
judgments, orders or decrees applicable to it or any of its
properties, assets, operations, products and businesses, and there
does not exist any basis for any claim of default under or
violation of any such statute, law, ordinance, regulation, rule,
judgment, order or decree except such defaults or violations, if
any, that in the aggregate do not and will not have a Material
Adverse Effect. Seller has not received any opinion or memorandum
or legal advice from any legal counsel to the effect
that it is exposed to any liability or disadvantage that is or may
be material to Seller.
6.16 Environmental Matters. Except as set forth on
Exhibit 6.16, Seller has complied with and is in compliance with
all United States federal, state, local and foreign statutes,
laws, ordinances, regulations, rules, permits, judgments, orders
and decrees applicable to it or any of its properties, assets,
operations and business relating to environmental protection
including, without limitation, standards relating to air, water,
land and the generation, storage, transportation, treatment or
disposal of solid wastes and hazardous wastes. Seller has
obtained and adhered to all necessary permits and other approvals,
including interim status under the Federal Solid Waste Disposal
Act, necessary to store, dispose of and otherwise handle hazardous
wastes and Seller has reported, to the extent required by all
federal, state, local and foreign statutes, laws, ordinances,
regulations, rules, permits, judgments, orders and decrees, all
past and present sites owned and operated by Seller where
hazardous wastes have been treated, stored or disposed of. Seller
knows of no location on any of the Real Property of Seller where
hazardous wastes or other harmful substances have entered or are
likely to enter into the soil or groundwater. Seller knows of no
on-site or off-site location to which Seller has transported
hazardous wastes or arranged for the transportation of hazardous
wastes, which site is the subject of any United States federal,
state, local or foreign enforcement action or any other
investigation which could lead to any claim against Seller or
Buyer for any clean-up cost, remedial work, damage to natural
resources or personal injury, including, but not limited to,
claims under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
6.17 Governmental Authorizations and Regulations.
Schedule 6.17 lists all licenses, franchises, permits and other
governmental authorizations held by Seller material to the conduct
of its business. To Seller's knowledge, such licenses,
franchises, permits and other governmental authorizations are
valid. Seller has not received any notice that any governmental
authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization.
6.18 SEC and Antitrust Filings. Seller has not
issued any security covered by a registration statement filed with
the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended or the Investment Company Act of 1940, as
amended, and no security issued by Seller has ever been registered
pursuant to the Securities Exchange Act of 1934, as amended.
Seller is not required to file a notification, application,
report, statement or take any other such action under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, or
any other antitrust law in respect of any action pursuant to or
contemplated by this Agreement.
6.19 Employee Benefit Plans and Other Arrangements.
Except as set forth in Schedule 6.19, Seller does not sponsor,
maintain, support, is not otherwise a party to, and does not have
any liability or contingent liability under, any plan, program,
fund, arrangement or contractual undertaking, whether for the
benefit of a single individual or for more than one individual,
and whether or not funded, including, without limitation, those in
the nature of (i) an employee pension benefit plan as that term is
defined in Section 3 (2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (ii) an employee
welfare benefit plan (as defined in section 3(1) of ERISA); or
(iii) any incentive or other benefit arrangement for employees,
their dependents and/or their beneficiaries.
6.20 Consents and Approvals. Except as set forth in
Schedule 6.20, Seller has obtained all consents, authorization and
approvals under all statutes, laws, ordinances, regulations,
rules, judgments, decrees and orders of any court or governmental
agency, board, bureau, body, department or authority or of any
other person required to be obtained by Seller in connection with
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
6.21 Insurance. All of the Assets and the Business
are insured for the benefit of Seller, in amounts deemed adequate
by Seller's Board of Directors or management, against all risks
usually insured against by persons operating similar properties or
conducting similar operations in the localities where the Asset
and the Business are located or such operations are conducted
under valid and enforceable policies issued by reputable insurers.
Schedule 6.21 lists all such policies. Simultaneously herewith,
Seller is delivering to Buyer true and complete copies of all such
policies in its possession or reasonably available to Seller on
the date of the Closing as in effect at the Closing.
6.22 Bank Accounts; Powers of Attorney. Schedule
6.22 sets forth (i) the name of each bank in which Seller
maintains an account or safe deposit box and the names of all
persons authorized to draw thereon or to have access thereto, and
(ii) the names of all persons, if any, holding powers of attorney
from Seller and a summary statement of the terms thereof.
6.23 Product Warranties. Except as accrued in the
financial statements referred to in Section 6.6, Seller has no
liability for any product warranties.
6.24 Certain Disclosures. Schedule 6.24 contains:
(i) a list of all officers and other employees and
consultants of Seller;
(ii) a list of all products currently sold by
Seller and a description of all products which are under
development for manufacture or sale;
(iii) a list of those entities that were the twenty
five (25) largest customers of Seller in terms of dollar
amount of sales during Seller's fiscal year ended December
31, 1999 and during the period from January 1, 2000 through
the Closing;
(iv) a list of all suppliers of raw materials,
component parts or services of Seller in terms of dollar
amount of purchases during Seller's fiscal year ended
December 31, 1999 and during the period from January 1,
2000 through September 7, 2000;
(v) a list of all of the outstanding vendor purchase
orders of Seller on September 18, 2000;
(vi) a list of all of the outstanding customer
orders of Seller on September 18, 2000; and
(vii) a list of all material machinery and equipment
(including software licensees and programs related
thereto), owned, licensed, or used by Seller on September
18, 2000.
6.25 Brokers. Except as set forth in Schedule
6.25, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by
Seller and Seller's counsel directly with Buyer and Buyer's
counsel and without the intervention of any other person
and in such manner as not to give rise to any valid claim
against any of the parties for any finder's fee, brokerage
commission or like payment.
6.26 Security Interest Releases. Simultaneous
with the execution and delivery of this Agreement and the
Pay-Off Amount, Bank of America has (i) executed and
delivered a release releasing its liens and mortgages on
and security interests in and to the Assets relating to the
BA Loan, (ii) cancelled all guarantees Seller issued in
favor of such loans, and (iii) released Seller with respect
to such loans. As evidence of the foregoing, Bank of
America has executed, and upon the receipt of the Pay-Off
Amount, delivered to Seller for filing such UCC-3
Termination Statements, satisfactions of mortgage and such
other documents and instruments as are necessary to effect
the releases referred to above once filed by Seller as
required by this Agreement.
.
6.27 No Untrue Statements. No statement by Seller
contained in this Agreement or the Exhibits and Schedules hereto
contains any untrue statement of a material fact, or omits or will
omit to state a material fact necessary in order to make the
statements herein and therein contained not misleading. There is
no fact that affects, or in the future might reasonably be
expected cause a Material Adverse Effect that is not set forth in
this Agreement, the Exhibits or the Schedules.
70 Representations and Warranties by Buyer. Buyer
represents and warrants to the Seller as follows:
7.1 Corporate Organization. Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and
authority to carry on the Business now being conducted by Seller
and to acquire and own and operate the Assets and the Business and
to assume, perform and bear full responsibility for the Assumed
Liabilities. Simultaneously with the execution and delivery of
this Agreement, Buyer is delivering to Seller complete and correct
copies of its Certificate of Incorporation and By-Laws, as in
effect on the date hereof. Promptly following the Closing, Buyer
will qualify to do business in the jurisdictions set forth on
Schedule 6.1.
7.2 Corporate Authorization; No Violation. Buyer
has the corporate power to enter into this Agreement and to carry
out its obligations hereunder. Buyer's Board of Directors has
duly authorized the execution and delivery of this Agreement and
the purchase and the performance or consummation of the
transactions contemplated herein, and no other corporate
proceeding on the part of Buyer is necessary to authorize the
execution and delivery of this Agreement or the performance of the
transactions contemplated herein. This Agreement has been duly
executed and delivered on behalf of Buyer and is a legal, valid
and binding obligation of Buyer enforceable against Buyer in
accordance with its terms. Buyer has delivered to Seller a true
and complete copy, certified by its Secretary, of the resolutions
which have been duly adopted by its Board of Directors authorizing
such execution and delivery and such purchase and the consummation
of such other transactions.
Neither the execution, delivery or performance of this Agreement
by Buyer nor the consummation of any of the transactions
contemplated hereby (i) will violate or conflict with any
provision of the Certificate of Incorporation or By-Laws of Buyer;
(ii) will result in any breach of or default under any provision
of any contract or agreement of any kind to which Buyer is a party
or by which Buyer is bound or to which any of its properties or
assets are subject; or (iii) is prohibited by, or requires Buyer
to obtain or make any consent, authorization, approval,
registration or filing under any statute, law, ordinance,
regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority.
7.3 Litigation. There are no actions, suits,
proceedings or investigations, either at law or in equity, or
before any commission or other administrative authority in any
United States or foreign jurisdiction, of any kind now pending or
threatened or proposed in any manner, or any circumstances which
should or could reasonably form the basis of any such action,
suit, proceeding or investigation, involving Buyer or any of its
properties or assets that (i) questions the validity of this
Agreement or (ii) seeks to delay, prohibit or restrict in any
manner any action taken or contemplated to be taken by Buyer
under, or by reason of, this Agreement.
7.4 Brokers. Except as set forth in Schedule
7.4, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and
Buyer's counsel directly with Seller and Seller's counsel, without
the intervention of any other person and in such manner as not to
give rise to any valid claim against any of the parties for a
finder's fee, brokerage commission or like payment.
7.5 Antitrust Filings. Buyer is not required
to file any notification, application, report or other such action
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or any other antitrust law in respect of any action
pursuant to or contemplated by this Agreement.
7.6 Consents and Approvals. Buyer has obtained
all consents, authorizations and approvals under all statutes,
laws, ordinances, regulations, rules, judgments, decrees and
orders of any court or governmental agency, board, bureau, body,
department or authority or of any other person required to be
obtained by Buyer in connection with the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby.
7.7 Buyer has executed and delivered to Seller
for filing after the Closing all of the UCC-3 Amendments to Change
Debtor's Name as are necessary to evidence the release of Seller
as a debtor and fully substitute Buyer for Seller thereon with
respect to the liens and security interests being assumed by Buyer
under the Assumed Liabilities as set forth on Schedule 2.2 to this
Agreement, in the forms of Exhibits 7.7(i) through (xxxviii)
hereto.
7.8 No Untrue Statements. No statement by
Buyer contained in this Agreement or in the Exhibits or Schedules
hereto contains any untrue statement of a material fact, or omits
or will omit to state a material fact necessary in order to make
the statements herein and therein contained not misleading. There
is no fact which affects, or in the future might reasonably be
expected to affect, adversely (i) the Assets and/or the Business
as owned and operated by Buyer from and after the Closing and/or
(ii) the Assumed Liabilities.
80 Security Interest Releases. Immediately following the
Closing, Seller shall (i) file the UCC-3 Termination Statements
referred to in Section 6.26, satisfactions of mortgage and other
documents and instruments as are necessary to release Bank of
America's liens and mortgages on and security interests in and to
the Assets and the Excluded Assets relating to the BA Loan, (ii)
cancel all guarantees of Seller issued in favor of such loan, and
(iii) provide duly and fully executed releases of Seller with
respect to such loan and Buyer shall have received evidence
thereof satisfactory to Buyer, including, without limitation,
copies of all such documents.
90 [Intentionally Omitted]
100 [Intentionally Omitted] 110 [Intentionally Omitted]
120 Guarantee of Collectibility of Receivables of Seller.
(4) Subject to the limitations set forth in this Section 12,
Seller guarantees to Buyer that, except to the extent of the
reserve for returns and allowances shown on the consolidated
balance sheet of Seller and Seller's Parent as at August 31, 2000
referred to in Section 6.6, all accounts and notes receivable and
other receivables reflected on said balance sheet (the
"Receivables") will be valid and legally binding obligations of the
persons owing said amounts to Seller. Except to the extent
of the (i) reserve for doubtful accounts and (ii) reserve for
returns and allowances, each as shown on the consolidated balance
sheet of Seller and Seller's Parent as of August 31, 2000 referred
to in Section 6.6, Seller guarantees to Buyer that the full amount
of each Receivable will be paid to Buyer on or before ninety (90)
days from the date each Receivable becomes due in accordance with
its terms (the "Outside Collection Date"), provided that Buyer
shall have used reasonable efforts to collect the Receivables;
provided further, however that this guarantee shall not (i) apply
to the extent any Receivable has been expressly pre-approved by
Buyer (as set forth on Schedule 6.7 hereto), or is fully covered
by insurance, a letter of credit or similar financial arrangement
in favor of Buyer, or (ii) be applicable or effective if the
nonpayment of such Receivable results from any claim or offset
asserted against Buyer by the account debtor.
(5) If any part of any Receivable has not been paid on or
before its Outside Collection Date and such Receivable is subject
to Seller's guarantee of collectibility as set forth in Section
12(a) above (each, a "Stale Receivable," and collectively "Stale
Receivables"), Buyer may then (i) reassign to Seller such unpaid
part of the Stale Receivable, free and clear of any security
interest, lien or other encumbrance arising on or after the
Closing or (ii) set off against the Kamenstein Earn-Put or the
NEP Earn-Out an amount equal to the unpaid part of such
reassigned Stale Receivable.
130 Survival of Representations and Warranties; Indemnification.
(6) Survival of Representations and Warranties. All
representations and warranties of Seller or Buyer contained in
this Agreement or in any Schedule or any document delivered at
Closing (not including the opinions of counsel), shall survive
the Closing for a period of eighteen (18) months. All such
representations and warranties shall not be affected by any
investigation made by or on behalf of Seller or Buyer at and
prior to the Closing.
(7) Seller's Indemnification. Subject to the limits of
subsection (C) hereof, Seller will indemnify and hold Buyer
harmless against and in respect of:
(i) any and all losses, costs, expenses or damages
to Buyer resulting from any misrepresentation of a
material fact by Seller contained in this Agreement (or
in any Schedule or in any document delivered in the form
of an Exhibit to this Agreement at Closing (but not
including the opinion of Seller's counsel) or resulting
from Seller's failure to
perform any provision of this Agreement to be
performed by Seller;
(ii) any and all debts, liabilities and
obligations of Seller of any nature, whether absolute,
accrued, contingent or otherwise, other than the
Assumed Liabilities; and
(iii) any and all expenses, taxes, debts,
liabilities and obligations of Seller to be incurred
by Seller in the preparation of this Agreement and the
performance by Seller of the terms and provisions of
this Agreement, except such expenses, taxes, debts and
liabilities as are otherwise expressly set forth in
this Agreement to be borne by Buyer.
(8) Limitation on Seller's Indemnification Obligations. Seller
shall have no obligation to indemnify Buyer pursuant to this
Section 13 unless and until the aggregate amount of
indemnification to which Buyer (but for this Section 13 (C))
otherwise shall have become entitled hereunder shall exceed
$50,000, at which time and from time to time thereafter, Buyer
shall be entitled to recover only such amounts as are in excess
of $50,000.
(9) Buyer's Indemnification. Buyer will indemnify and hold
Seller harmless against and in respect of:
(i) any and all losses, costs, expenses or
damages to Seller resulting from any
misrepresentation of a material fact by Buyer
contained in this Agreement (or in any Schedule or in
any document delivered in the form of an Exhibit to
this Agreement at Closing (but not including the
opinion of Buyer's counsel)) or resulting from Buyer's
failure to perform any provision of this Agreement to
be performed by Buyer;
(ii) any and all liabilities and obligations of
Buyer arising from the Assets or the Business from and
after the Closing;
(iii) any and all of the Assumed Liabilities;
(iv) any and all costs, expenses, damages or
losses to Seller resulting from Seller maintaining the
employees of the Business from and after the Closing
on Seller's payroll in accordance with Section 2.5 of
this Agreement; and
(v) any and all expenses, taxes, debts,
liabilities and obligations of Buyer incurred by Buyer
in the preparation of this Agreement and the
performance of the terms and provisions of this
Agreement.
140 Set-Off. If from time to time and at any time Buyer
shall be entitled to be paid by Seller any amount under the
provisions of either Section 12 or 13, Buyer shall be entitled, if
it so elects, to set-off such amount against any unpaid payments
of the Kamenstein Earn-Out (as that term is defined in the
Kamenstein Employment Contract) and/or the NEP Earn-Out. Such
right of set-off shall be in addition to and not in
substitution of any other rights Buyer shall be entitled to under
the provisions of either Section 12 or 13 or otherwise; provided,
however, that in the event there are unpaid amounts of the
Kamenstein Earn-Out and/or the NEP Earn-Out, Buyer shall first set
off against such amounts. Buyer shall provide written notice of
set-off to the party against whose earn-out the set off is
occurring; provided, however, that failure to provide such notice
shall not prejudice Buyer's rights hereunder.
150 Non-Competition. Except as contemplated in the
Kamenstein Employment Agreement, for a period of three years
commencing on the Closing, Seller will not, and Seller will not
permit any affiliate of Seller to, directly or indirectly,
manufacture, furnish, assemble, sell or distribute, within or
without the United States, any product manufactured, furnished,
assembled, sold or distributed by Seller at any time during the
one-year period ending on the Closing or otherwise attempt to
compete with Buyer with respect to the Business. If, at the time
of enforcement of this Section, a court shall hold that the
duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope
or area and that the court shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope
and area permitted by law.
160 Miscellaneous.
16.1 Assurance of Further Action. From time to time
after the Closing and without further consideration from Buyer,
but at Buyer's expense, Seller shall execute and deliver, or cause
to be executed and delivered, to Buyer such further instruments of
sale, conveyance, assignment, transfer and delivery and take such
other action as Buyer may reasonably request in order to more
effectively sell, convey, assign, transfer and deliver and reduce
to the possession of Buyer any and all of the Assets and
consummate the transactions contemplated hereby.
16.2 Expenses.
A. Except as set forth in subsection B of this
Section 16.2, Seller will pay all of Seller's legal and accounting
fees and other expenses incurred in the preparation of this
Agreement and the performance of the terms and provisions of this
Agreement and all sales, real estate, capital gains and income
taxes (other than real estate transfer taxes) incurred by Seller
as a result of the sale contemplated by this Agreement, it being
intended that Seller shall not make any expenditure for the same
prior to the Closing and that Buyer shall not assume any liability
with respect to the same. Notwithstanding the foregoing, Seller
may pay all taxes that are due and/or which may otherwise be
accruing for the period up through the Closing and listed on
Schedule 16.2 as a Buyer-acknowledged and permitted expenditure of
Seller at and prior to Closing
B. Buyer will pay all transfer and bulk sales
taxes, if any, incurred in connection with the transactions
contemplated in this Agreement (as contemplated in the list of
Assumed Liabilities on Schedule 2.2 hereto). Buyer shall also pay
up to $75,000 in the aggregate of Seller's legal fees and
expenses, accounting expenses, filing fees and UCC notification
costs incurred in connection with the transactions contemplated
herein, which payment shall be made upon Buyer's receipt of copies
of reasonably detailed invoices delivered to Seller with respect
to such fees, expenses and costs.
C. All rents, additional rents, all other charges
under the Real Property Leases, utilities and fuel expenses, real
estate taxes and personal property taxes and water and sewer rents
and all such other taxes, charges and assessments if any, relating
to the Real Property included in the Assets shall be apportioned
between Seller and Buyer on the date of Closing on the basis of
the tax year for which assessed. If the Closing shall occur
before the tax rate for any tax year is fixed, the apportionment
of taxes shall be upon the basis of the tax rate for the next
preceding year for which the tax rate is fixed applied to the
latest assessed valuation. Any errors in the foregoing shall be
rectified after the Closing. This section 16.2 shall survive the
Closing.
16.3 Waiver. The parties hereto may by written
agreement (i) extend the time for or waive or modify the
performance of any of the obligations or other acts of the parties
hereto or (ii) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document
delivered pursuant to this Agreement.
16.4 Notices. All notices, requests or other
communications hereunder shall be in writing and shall be deemed
to have been duly given if delivered or mailed first class
certified mail postage prepaid addressed as follows.
If to Buyer:
MK Acquisition Corporation
c/o Lifetime Hoan Corporation
One Merrick Avenue
Westbury, NY 11590
Attention: Jeffrey Siegel, President,
with a copy to:
Samuel B. Fortenbaugh, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue, 45th Floor
New York, New York 10178
If to Seller:
Finally Done, Inc.
665 Titicus Road
North Salem, New York 10560
Attn: Peter Kamenstein
with a copy to: Marie- Therese Allen, Esq.
Curtis, Mallet-Prevost, Colt &
Mosle LLP 101 Park Avenue, 35th Floor
New York, New York 10178
or to such other address as may have been furnished in writing to
the party giving the notice by the party to whom notice is to be
given.
16.5 Entire Agreement. This Agreement and the
Schedules and Exhibits attached hereto and made a part hereof
embodies the entire agreement between the parties and there have
been and are no agreements, representations or warranties, oral or
written among the parties other than those set forth or provided
for in this Agreement. This Agreement may not be modified or
changed, in whole or in part, except by a supplemental agreement
signed by each of the parties.
16.6 Rights Under this Agreement; Nonassignability.
This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but shall not
be assignable by either party without the prior written consent of
the other party hereto. Nothing contained in this Agreement is
intended to confer upon any person, other than the parties to this
Agreement and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
16.7 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to its conflicts of law principles.
16.8 Headings; References to Sections, Exhibits and
Schedules. The headings of the Sections, paragraphs and
subparagraphs of this Agreement are solely for convenience and
reference and shall not limit or otherwise affect the meaning of
any of the terms or provisions of this Agreement. The references
herein to Sections, Exhibits and Schedules, unless otherwise
indicated, are references to sections of and exhibits and
schedules to this Agreement.
16.9 Severability. If any provision of this
Agreement, including any phrase, sentence, clause, Section or
subsection is inoperative, invalid or unenforceable for any
reason, such circumstance shall not have the effect of rendering
the provision in question inoperative, invalid or unenforceable in
any other case or circumstance, or of rendering any other
provision or provisions contained herein invalid, inoperative or
unenforceable to any extent whatsoever.
16.10 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be an original,
but which together constitute one and the same instrument.
16.11 Dispute Resolution. Buyer and Seller agree
that any dispute or controversy arising out of or in connection
with this Agreement or any alleged breach thereof shall be settled
by arbitration in New York, New York pursuant to the rules of the
American Arbitration Association then in effect. If the two
parties cannot jointly select a single arbitrator to determine the
matter, one arbitrator shall be chosen by each party (or, if a
party fails to make a choice, by the American Arbitration
Association on behalf of such party) and the two arbitrators so
chosen will select a third. The decision of the single arbitrator
jointly selected by the parties, or, if three arbitrators are
selected, the decision of any two of them, will be final and
binding upon the parties and the judgment of a court of competent
jurisdiction may be entered thereon. Fees of the arbitrators and
costs of arbitration shall be borne by the parties in such manner
as shall be determined by the arbitrator or arbitrators.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
MK ACQUISITION CORPORATION
By /s/ Jeffrey Siegel
Jeffrey Siegel
President
M. KAMENSTEIN, INC.
By /s/ Peter Kamenstein
Peter Kamenstein
President