Rights Agreement ("Rights Agreement") made as of October 21, 1997,
between Oak Hill Sportswear Corporation, a New York Corporation ("Buyer"), and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), an individual resident in California.
Concurrently with the execution of this Rights Agreement. Buyer is
purchasing all the outstanding shares of the capital stock of ▇▇▇▇▇▇▇
Contracting, Inc., a Nevada corporation (the "Company"), pursuant to a Stock
Purchase Agreement, dated as of October 21, 1997, between the Buyer, and
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Sellers (the "Stock Purchase Agreement"). This
is a Rights Agreement contemplated by Section 2.4(b)(iii) of the Stock
Purchase Agreement.
The Buyer agrees with ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇, intending to be legally
bound, agrees with Buyer. as follows:
1. DEFINITIONS
For purposes of this Rights Agreement, the terms defined in the first
paragraph and the preamble thereof have the meanings specified therein and the
following terms have the meanings specified or referred to in this Section 1.
"Company's Statement of Income" -- (a) for any Fiscal Year for which the
statement of income of the Company is consolidated by the Buyer with its
audited consolidated financial statements, the consolidating statement of
income of the Company used for purposes of such consolidation; and (b) for any
Fiscal Year for which the statement of income of the Company is not
consolidated by Buyer with its audited consolidated financial statements. the
statement of income of the Company as audited by the Company 's independent
auditors.
"Fiscal Year"--a twelve month period ending, December 31st.
"Pre-Tax Income" -- the Company's income from ordinary business operations
(which will not include capital gains and other extraordinary income or gains
and will be reduced by extraordinary losses), before federal and state income
taxes, as determined from the Company's Statement of Income, calculated
without taking into account (i) the payment of Incentive Compensation (as
defined in the Employment Agreements) or Additional Incentive Compensation (as
defined in the Employment Agreements), or (ii) the Buyer's corporate overhead.
"▇▇▇▇▇▇▇ Shares"-- the 200,000 shares referred to in Section 2.4(b)(ii)(a) of
the Stock Purchase Agreement.
2. CONTINGENT RIGHTS
If the Company's Pre-Tax Income for Fiscal Year 1998 exceeds
$2,700,000, the Buyer shall, on written notice of ▇▇▇▇▇▇▇ to Buyer, repurchase
from ▇▇▇▇▇▇▇, within ten days of such request, up to (but no more than) 25,000
shares of the ▇▇▇▇▇▇▇ Shares during each of the second, third and fourth
quarters of Fiscal Year 1999 and the first quarter of Fiscal Year 2000, at a
purchase price equal to $5.00 multiplied by the number of such shares to be
purchased. No such request will be valid if given within 45 days of any other
notice under this Section 2 or under Section 3. In no event will the Buyer be
required to purchase more than 25,000 of such shares during any such quarter.
3. ADDITIONAL CONTINGENT RIGHTS
If the Company's Pre-Tax Income for Fiscal Year 1999 exceeds
$2,700,000, the Buyer shall, on written notice of ▇▇▇▇▇▇▇ to Buyer, repurchase
from ▇▇▇▇▇▇▇, within ten days of such request, up to (but no more than) 25,000
shares of the ▇▇▇▇▇▇▇ Shares during each of the second, third and fourth
quarters of the Fiscal Year 2000 and the first quarter of the Fiscal Year
2001, at a purchase price equal to $5.00 multiplied by the number of such
shares to be purchased. No such request will be valid if given within 45 days
of any other notice under this Section 3 or under Section 2. In no event will
the Buyer be required to purchase more than 25,000 of such shares during any
such quarter.
4. MISCELLANEOUS
4.1 Reclassification, Etc. If the number of shares of the Common
Stock of the Buyer shall be increased or reduced by split up,
reclassification, distribution of a dividend payable in stock, or the like,
the nurnber of shares subject to the rights referred to in Sections 2 and 3
and the purchase price per share referred to therein shall be proportionately
adjusted.
4.2 Right of Set-off. Buyer may set off any amount to which it may be
entitled from ▇▇▇▇▇▇▇ under the Stock Purchase Agreement or this Rights
Agreement, upon notice to ▇▇▇▇▇▇▇ specifying in reasonable detail the basis
for such set-off. The exercise of such right of set-off by Buyer in good
faith, whether or not ultimately determined to be justified, will not
constitute an event of default under this Rights Agreement. Neither the
exercise of nor the failure to exercise such right of set-off will constitute
an election of remedies or limit Buyer in any manner in the enforcement of any
other remedies that may be available to it. If the Buyer exercises any set-off
hereunder, it will (a) within 5 days thereof deposit the amount thereof with a
mutually agreeable escrow agent (or if they are unable to agree on such agent,
deposit it with a commercial escrow agent; each of the parties will be
responsible for 50% of the fees of said agent), and (b) if the set-off is in
respect to a third party claim referred to in Section 7.8(a) of the Stock
Purchase Agreement within 5 days thereof afford ▇▇▇▇▇▇▇ the right to control
the defense thereof. Upon a confirmed, final arbitration award, the amount due
will be immediately released to the prevailing party, along with other amounts
due under the award.
4.3 No Assignment. No right of ▇▇▇▇▇▇▇ under this Rights Agreement or
any interest therein shall be assignable or transferable, consensually or by
operation of law, except pursuant to testamentary or intestate disposition,
and any purported assignment or transfer (except testamentary or intestate)
thereof or any interest therein shall extinguish and discharge such right and
make it null and void.
4.4 Binding Effect. This Agreement shall be binding upon Buyer and
any entity with which it may merge or consolidate.
4.5 Notices. All notices and other communications under this Rights
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand (with confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other party):
If to Buyer: Oak Hill Sportswear Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
1370 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇▇: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/▇ ▇▇▇▇▇▇▇ Contracting, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
The Law offices of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
4.6 Entire Agreement: Amendments. This Rights Agreement, the Stock
Purchase Agreement, and the documents executed in connection with the Stock
Purchase Agreement, contain the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, between the parties hereto with respect to
the subject matter hereof. This Rights Agreement may not be amended orally,
but only by an agreement in writing signed by the parties hereto.
4.7 Governing Law. This Rights Agreement will be govemed by the laws
of the State of California without regard to conflicts of laws principles.
4.8 Jurisdiction. Any action or proceeding seeking to enforce the
provisions of Section 4.9 of this Agreement or confirm an arbitration award
thereunder may be brought against either of the parties in the courts of the
State of California, County of Los Angeles, or, if it has or can acquire
jurisdiction, in the United States District Court for the Southern District of
California, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. process in any
action or proceeding referred to in the preceding sentence may be served on
either party anywhere in the world.
4.9 Arbitration (a) Any claims by the Buyer against ▇▇▇▇▇▇▇, or
▇▇▇▇▇▇▇ against the Buyer arising out of or in connection with this Agreement
shall be determined by arbitration as provided in this Section 4.9; ▇▇▇▇▇▇▇
and Buyer submit to the jurisdiction of the Los Angeles section of
JAMS/Endispute, sitting in Los Angeles, California, and ▇▇▇▇▇▇▇ appoints
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. (and the event of his unavailability, any member of
said firm) Ferruzzo & Ferruzzo, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, and Buyer appoints ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq., Greenberger & ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (and in the event of his
unavailability, any member of said firm) as their respective agents to receive
on their respective behalfs service of any process that may be served in such
action. The arbitration may be commenced by a demand for arbitration with
notice of claims served on a party's agent for service of process as provided
for in Section4.4, with a simultaneous copy thereof pursuant to Section 4.4and
to the JAMS/Endispute office in Los Angeles, California. Except as otherwise
provided for herein, the arbitration shall be conducted in accordance with the
JAMS/Endispute Comprehensive Rules and Procedures then in effect. There shall
be one arbitrator agreed upon by the parties, or if the parties cannot agree
on the identity of the arbitrator within five days of the arbitration demand,
the arbitrator shall be selected by the JAMS/Endispute Administrator. To the
extent practicable, an arbitrator shall be a retired judge with at least 10
years of experience in negotiating, documentating and/or business litigation
and or the same amount of experience in transactions similar to the
Contemplated Transactions. Any issue about whether a claim is covered by this
Agreement to arbitrate shall be determined by the arbitrator.
(b) The provisions of Section 1283.05 of the Code of
Civil Procedure, as amended or replaced as of the arbitration, are
incorporated into this Agreement and shall be applicable to the arbitration.
Depositions may be taken and discovery may be obtained in any arbitration
under this Agreement in accordance with said statute, as amended or replaced
as of the arbitration. The arbitrator shall not be bound by rules of evidence,
but may consider such writings and oral presentations as reasonable business
people would use in the conduct of their day-to-day affairs, and may require
the parties to submit some or all of their case by written or such other
manner of presentation as the arbitrator may determine to be appropriate.
Pre-trial memoranda shall be exchanged no later than five days before the
hearing starts. The parties intend to limit live testimony and
cross-examination to the extent necessary to ensure a fair hearing on material
issues without unnecessarily prolonging the arbitration.
(c) The arbitrator shall take such steps as he or
she may consider necessary to start the hearing within 60 days of the
appointment of the arbitrator and to conclude the hearing within 20 days; and
the arbitrator's written decision shall be made not later than ten days after
the conclusion of the hearing. A stenographic record shall be kept of the
hearing, except that the arbitrator may employ telephonic conference calls
with the parties' attorneys to decide discovery and procedural issues, and no
stenographic record shall be required thereof. The parties have included these
time limits in order to expedite the proceeding, but they are not
jurisdictional, and the arbitrator shall for good cause (including the
inability of a party to complete its discovery despite diligent efforts in
connection therewith) allow reasonable extensions or delays, which shall not
affect the validity of the award. The arbitrator's written decision shall
contain a brief statement of the claims(s) determined and the award made on
each claim. In making the decision and award, the arbitrator shall apply
applicable California law. Absent fraud, collusion or willful misconduct by
the arbitrator, the award shall be final, and judgment may be confirmed and
entered in any court having jurisdiction thereof. The arbitrator may award
injunctive relief or any other substantive or procedural direction available
from a judge in an action, in law or equity. The arbitrator shall award the
predominantly prevailing party its reasonable attorneys' fees and
disbursements and expenses (including stenographic, witnesses', experts', and
investigation fees and expenses) in connection with the arbitration. Until the
arbitrator's award of costs, the fees and disbursements of JAMS/Endispute, the
arbitrator, stenographic recording expenses and similar arbitration expenses
shall be borne and paid 50% by ▇▇▇▇▇▇▇ and 50% by the Buyer.
(d) Notwithstanding any term in this Agreement to
the contrary, each party hereto, on or prior to the commencement of
arbitration hereunder, shall first notify the other party in writing of its or
his intention to seek arbitration and the specific bases upon which its claims
are made. Within seven days thereof, the party in receipt of such notification
may request that JAMS/Endispute provide mediation services with a mediator in
accordance with its Rules and as selected by the Administrator, and on such
request the other party shall submit to such mediation; the fees and
disbursements of said mediation shall be borne 50% by ▇▇▇▇▇▇▇ and 50% by the
Buyer). The pendency of a request for mediation, or of a mediation, shall not
stay a demand for arbitration pursuant to Section 4.9(a), or any arbitration
procedures, hearing or determination pursuant to Section 4.9(b), 4.9(e), or
4.9(d).
In Witness Whereof, the parties have executed this Rights Agreement
as of the date first above written.
OAK HILL SPORTSWEAR CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇