EXHIBIT 99.2
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT is made as of this 31st day of May, 2001,
by and between Empire of Carolina, Inc., a Delaware corporation ("Carolina"),
Empire Toys (HK), Ltd., a Hong Kong corporation ("Empire HK"), and Empire
Industries, Inc., a North Carolina corporation ("Empire Industries")(Carolina,
Empire HK and Empire Industries are sometimes collectively called "Seller") and
Alpha International, Inc., an Iowa corporation ("Buyer").
Preliminary Statements
A. Seller desires to sell and Buyer desires to purchase certain
assets of Seller.
B. The parties desire to set forth herein the terms and conditions
of Seller's sale of such assets to Buyer.
C. Carolina and Empire Industries have filed a voluntary petition for relief
under Chapter 11 of Title 11, United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Southern District of
Florida (the "Bankruptcy Court") under Case Nos. 00-35179 and
00-35180-BKC-PGH. Empire HK has not filed for bankruptcy protection
and the parties do not contemplate that Empire HK will
file for bankruptcy protection prior to the Closing.
NOW, THEREFORE, in consideration of the mutual promises of the parties
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties, the parties agree to
the following:
1. Assets and Assumed Liabilities. By an Assignment (a form of which is
attached hereto as Exhibit 1-A), ▇▇▇▇ of Sale (a form of which is attached
hereto as Exhibit 1-B), or other document of transfer as the case may be in form
reasonably satisfactory to Seller and Buyer, Seller agrees to sell, assign, or
otherwise transfer ownership, as the case may be, and Buyer agrees to purchase,
be an assignee, or otherwise acquire ownership, as the case may be, of all of
Seller's right, title and interest in the assets described in Section 1.1
through and including Section 1.8 of this Agreement (collectively, the
"Assets"), which shall be transferred to Buyer, free of all liens and
encumbrances as of the Closing; provided however, (i) that no representation or
warranty (express or implied) is being made, or shall be made, by Seller to
Buyer with respect to any claims, liens, security interests or other rights
(collectively, the "Empire Claimant Rights") that any vendor, creditor or
obligee of Empire HK, including, without limitation, any claimants located in
Hong Kong, the People's Republic of China or Australia (other than the United
States of America) (collectively, the "Empire Claimants") may now or hereafter
have in and to any of the Assets in the possession or control of such Empire
Claimants and (ii) no representation or warranty (express or implied) is being
made, or shall be made, by Seller to Buyer with respect to any of the Assets
located in any other country other than the United States of America:
1.1 Products and Product Lines. Seller's toy products and product lines
(hereinafter, collectively, "Product Lines") set forth in Seller's catalogues
and price lists listed or attached hereto collectively as Exhibit 1.1.
1.2 Unfilled Purchase Orders. All of Seller's unfilled purchase orders
(collectively, the "Purchase Orders"), including all master purchase orders, all
pre-payments and deposits paid by the customers thereunder or due from the
customers thereunder on account thereof, as of the date of Closing with respect
to the Product Lines; provided however that Buyer shall be required to assume
all of Seller's obligations under each of the Purchase Orders at the Closing.
Seller shall provide Buyer with a list and copies of said Purchase Orders, if
any, at least one (1) week prior to the Closing.
1.3 Name. All of Seller's rights and ownership interests, (subject to
the rights in and to the name of Seller previously granted to General Foam
Plastics Corp.), in and to the name "Empire" which have not been previously
transferred by Seller to any individual or legal entity (collectively, a
"Person") with respect to the Product Lines and any toy products developed by
Seller which are consistent with the types of products contained in the Product
Lines.
1.4 Intellectual Property. All of Seller's intellectual and industrial
property with respect to the Product Lines which have not been previously
transferred by Seller to any Person, including without limitation registered and
unregistered trademarks, service marks, copyrights, trade dress, and designs;
design, engineering, and manufacturing drawings; trade secrets and other
confidential design, engineering, manufacturing or other information; patents;
and common law rights; and including without limitation those registrations set
forth in Exhibit 1.4 hereto.
1.5 Tools, Molds, and Equipment. All tooling, molds, and equipment
(collectively, the "Equipment") used in the design, engineering, or manufacture
of the Product Lines expressly listed on Exhibit 1.5 hereto, excluding any
Equipment previously transferred by Seller to any Person. After the Closing,
Buyer, at Buyer's sole cost and expense, shall be solely responsible for the
costs of packing, insuring and shipping all Equipment currently in the United
States or any other location throughout the world to such location as Buyer
shall specify.
1.6 Contract and License Rights and New York/Florida Real Property
Leases. All of Seller's executory contracts and licenses in or in connection
with the Product Lines, including specifically without limitation those
contracts and licenses set forth in Exhibit 1.6 hereto and all of Seller's
rights as tenant under the real property lease located in the State of New York
and the real property leases located in the State of Florida; excluding any such
contracts, real property leases and licenses previously assigned by Seller to
any Person (collectively, such licenses, leases and contracts of Seller, the
"Contracts"). Buyer shall be solely responsible to assume all cure amounts with
respect to such Contracts at the Closing.
1.7 Choses in Action. Both pre-petition and post-petition litigation
claims (i) to recover damages for breach of warranties with respect to any
materials incorporated by Seller prior to the Closing into any of the inventory
included in the Assets, (ii) to protect, defend or enforce any intellectual
property rights included in the Assets, and (iii) to enforce any of the Purchase
Orders or Contracts included in the Assets (collectively, the "Assigned
Claims"), but expressly excluding the choses in action described in the
definition of "Excluded Assets;"
1.8 Empire HK Stock, Inventory and Other Assets. All of Seller's United
States inventory located at those locations set forth on Exhibit 1.8(a) and
those other tangible assets of the Seller expressly set forth in Exhibit 1.8(b)
hereto, excluding such assets which have been previously transferred by Seller
to any Person (the inventory of Seller located in Hong Kong being hereinafter
called the "Hong Kong Inventory" ) (the U.S. Inventory and the Hong Kong
Inventory are sometimes collectively referred to herein as the ("Inventory") and
aall of Seller's right, title and interest in and to the Empire HK capital
stock.; expressly excluding the Excluded Assets (hereinafter defined) and any
other assets previously transferred by Seller to any Person. 1.9 Assumed
Liabilities. Effective as of the Closing, Buyer shall assume all of the Assumed
Liabilities (hereinafter defined) by a written assumption agreement in form and
substance reasonably acceptable to Seller and Buyer. As used herein, the term
"Assumed Liabilities" shall mean the collective reference to (i) any and all
liabilities and obligations of Empire HK to any person or legal entity as of the
Closing Date including without limitation, the liabilities listed on Exhibit
1.9 attached hereto; (ii) any and all liabilities and obligations
relating to or arising out of the acquisition, ownership or use of any of the
Assets at any time after the Closing, including, without limitation, all
liabilities and obligations under or primarily related to the Purchase Orders
and the Contracts assumed hereunder and all other tangible and intangible
property to the extent included in the Assets, (iii) any fee, commission or
other payment payable to any investment banker, broker or finder either (a)
retained by Buyer or any of Buyer's affiliates or agents or (b) claiming by,
through or under Buyer or any of Buyer's affiliates or agents; (iv) any and all
liabilities and obligations of Seller (including, without limitation, all
obligations to cure any pre-petition or post petition breaches of Seller) under
any of the Contracts existing as of the Closing Date; (v) any and all
liabilities and obligations, if any, of Seller and/or Empire HK arising out of,
or related to, the termination of any existing employees of Empire HK under Hong
Kong law, including, without limitation, in the event Empire HK is placed into
winding up or is deregistered; (vi) any and all liabilities and obligations, if
any, for transfer taxes, sales taxes, or similar tax imposed by any Hong Kong or
Chinese authority or law having jurisdiction over Empire HK or any of the Assets
in connection with, or as a result of, the transfer of the Assets owned by
Empire HK to Buyer, (vii) any liabilities and costs (including, without
limitation, the return of any security deposit) which may be required to be paid
in order to obtain ownership or possession of any molds located in Australia
included in the Assets and (viii) any breach by Buyer of the representations,
warranties and covenants of Buyer set forth in this Agreement.
2. Excluded Assets. At the Closing, Seller shall retain, and shall not
transfer, the Excluded Assets. As used herein, the term "Excluded Assets" shall
mean the collective reference to the following:
(a) All cash and cash equivalents of Seller, all accounts receivables
and promissory notes of Seller;
(b) The consideration delivered by Buyer to Seller pursuant to this
Agreement and all rights of Seller under this Agreement;
(c) Each entity comprising "Seller" franchise to be a corporation, its
certificate of incorporation, corporate seal, stock books, minute books and
other corporate records having exclusively to do with the corporate organization
and capitalization;
(d) The capital stock of Empire Industries and any other subsidiaries
of Carolina (other than Empire HK capital stock owned by any Seller);
(e) The Contracts, licenses and leases listed on Exhibit 2(e) attached
hereto;
(f) Both pre-petition and post-petition litigation claims of Seller
which are not expressly included in the Assigned Claims, including, without
limitation, all claims directly or indirectly related to or arising from (i) the
Assets or the business of the Seller (including relationships with current and
former employees, representatives, agents and other persons or legal entities),
other than the Assigned Claims (ii) any directors and officers liability
insurance policy held by Seller, or any other similar policy or (iii) claims
arising under or related to (a) that certain Asset Purchase Agreement dated May
19, 1995 by and between ▇▇▇▇▇ ▇. Inc. and Carolina, as amended and/or (b) ▇▇▇▇▇
▇. Inc.; and (iv) claims relating to intellectual property, whether or not such
intellectual property is included in the Assets provided that such claims arise
with respect to acts or omissions preceding the Closing.
(g) Causes of action arising directly out of the commencement of the
Chapter 11 Case, including without limitation actions to avoid a transfer of
property of Seller or an interest of Seller in property arising under Sections
544, 546, 547, 548 or 550 of the Bankruptcy Code;
(h) Unearned insurance premiums listed on Exhibit 2(h);
(i) Reserved;
(j) The items of Inventory listed on Exhibit 2(j);
(k) Any of the assets of Seller previously sold and transferred to
General Foam, Inc. as described on Exhibit 2(i); or
(l) All other tangible and intangible assets of any of the legal
entities comprising "Seller."
3. Excluded Liabilities. Except as expressly set forth in this
Agreement and except for the Assumed Liabilities, Buyer does not assume, nor
agree to pay or discharge, and shall not be liable for any debts, obligations,
expenses, responsibilities or liabilities whatsoever of the Seller
(collectively, the "Excluded Liabilities"). All Excluded Liabilities are and
shall remain the responsibility of Seller.
4. Closing and Purchase Price. The consummation of the transactions
contemplated by this Agreement are hereinafter referred to as the "Closing." The
Closing shall occur on the earlier to occur of (i) July 3, 2001 and (ii) two (2)
business days after the Bankruptcy Court entry of an order (and prior to the
time it becomes a final order so long as it is not the subject of a stay
proceeding) designating Buyer to be the highest and best bidder for the Assets
and approves the consummation of the transactions described in this Agreement.
The Closing shall occur at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ P.A., ▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other date,
place or time as may be agreed upon in writing between the parties; provided,
however, that the Closing shall not occur until after each of the conditions set
forth herein have been materially satisfied or waived by the relevant party.
4.1 Instruments of Transfer and Assumption. At the Closing, Seller
shall execute and deliver to Buyer the Assignments, the Bills of Sale,
assignments of trade name and other instruments of transfer, as the case may be,
in form and substance reasonably satisfactory to Seller and Buyer in order to
effectively transfer the Assets. At the Closing, Buyer shall execute and deliver
to Seller such assumption agreements and other certificates and instruments, as
the case may be, in form and substance reasonably satisfactory to Seller and
Buyer. At the Closing, the Assets shall be transferred to Buyer subject to all
of the Empire Claimant Rights. In addition, no representation or warranty
(express or implied) is being made, or shall be made, by Seller to Buyer with
respect to any of the Assets located in any other country other than the United
States of America:
4.2 Further Assurance. Seller and Buyer, at any time after the Closing,
shall execute, acknowledge and deliver any other assignments, conveyances and
other assurances, documents and instruments of transfer or assumption,
reasonably requested by any party and will take any other action consistent with
the terms of this Agreement that may reasonably be requested by any party for
the purpose of accomplishing the agreements set forth herein.
4.3 Purchase Price/Closing Payment/Purchase Price Allocation. The
"Purchase Price" (herein so called) payable by Buyer to Seller for the Assets
shall be the sum of (i) the Closing Payment (hereinafter defined), plus, (ii)
the assumption by Buyer of the Assumed Liabilities.
(a) At the Closing, Buyer shall pay to Seller the sum of $5,000,000.00
in cash, subject to adjustment as provided below, in immediately available funds
via wire transfer to the account designated in writing by Seller (the "Closing
Payment").
(i) The amount of the Closing Payment shall be decreased by the
book value of any of the U.S. Inventory existing as of the
date of this Agreement which is sold prior to the Closing (the
"Inventory Reduction Value" which together with the adjustment
to the purchase price, if any, pursuant to Section 4.4 are
sometimes collectively referred to herein as the
"Adjustments").
(c) The parties hereto agree that the Purchase Price shall be allocated
to the Assets being sold by Seller as set forth on Exhibit 4.3(c).
Prior to the Closing, Seller shall provide to Buyer an "Inventory
Statement" (herein so called) which shall set forth the Adjustments and the
amount of the Closing Payment as adjusted by the Adjustments. In the event Buyer
disputes the calculation of the Adjustments, Seller and Buyer shall cooperate
and work together in good faith to reach agreement as to the Adjustments and the
Closing Payment as adjusted by the Adjustments. If the parties are unable to
resolve such dispute on or prior to the Closing, then, either party may petition
the Bankruptcy Court to finally resolve such dispute.
4.4 Substitution of Letters of Credit. LaSalle National Bank, N.A. (the
"Bank") has issued a letter of credit with the face amount of HKD $3,000,000
(the "Bank LC") to secure a credit facility (the "HKSB Credit Facility")
provided by Hong Kong and Shanghai Banking Corporation Limited ("HKSB") to
Empire HK. Under the HKSB Credit Facility, HKSB has, among other things, issued
letters of credit to certain creditors and vendors of Empire HK from time to
time in connection with the ongoing business of Empire HK (collectively, the
"HKSB LCs"). It is contemplated that, at the Closing, the HKSB Credit Facility
shall be terminated by Empire HK. At the Closing, Buyer shall provide substitute
cash collateral or substitute letters of credit acceptable to the creditors and
vendors of Empire HK which are the holders or beneficiaries of the HKSB LCs, at
no cost or expense to the Bank or to Seller (collectively, the "Substitute
Letters of Credit"). In addition, at the Closing, the Bank LC shall be
terminated without any continuing liability to the Bank or any draw down by any
creditor or vendor of Empire HK. In the event Buyer fails to deliver the
Substitute Letters of Credit at Closing such that the Bank may terminate the
Bank LC without continuing liability to the Bank and without any draw down of
the Bank LC, then, the Purchase Price shall be increased by the face amount of
the Bank LC and such excess portion of the Purchase Price shall delivered by
Seller to the Bank at closing in order to secure the Bank's continuing liability
under the Bank LC.
4.5. Assumption of Assumed Liabilities. At the Closing, Buyer shall
execute and deliver an Assumption Agreement whereby Buyer shall assume the
Assumed Liabilities.
4.6 Authority Documents. At the Closing, Buyer shall deliver to Seller
(i) a secretary's certificate certifying that each of the board of directors of
Buyer has approved the execution, deliver and consummation of this Agreement and
each of the documents contemplated by this Agreement, (ii) an incumbency
certificate executed by an authorized officer of Buyer, (iii) certified articles
of incorporation and bylaws of Buyer issued by the secretary of state of
formation of Buyer, (iv) evidence that Buyer is in good standing in the state of
Buyer's formation and (v) such other evidence of authority and corporate
authorization reasonably required by Seller.
4.7 Transfer of Possession; Exception Regarding Certain Empire HK
Assets. At the Closing, Seller will put Buyer into full possession of the Assets
to be transferred hereunder; provided however that (i) Seller shall have no
obligation to deliver possession of any of the Assets in the possession or
control of any Empire Claimant and (ii) the Assets shall be transferred subject
to any Empire Claimant Rights. Buyer hereby assumes all risks with respect to
Buyer (i) obtaining possession and control of any Assets in the possession of
any Empire Claimant after the Closing and (ii) the condition and state of repair
and usefulness of such Assets if Buyer ever obtains possession of such Assets.
In no event shall the Purchase Price be reduced or adjusted, in any way
whatsoever, in the event Buyer is unable, for any reason or for no reason, to
obtain possession of all of the Assets in the possession or control of any
Empire Claimant after the Closing or in the event such Assets, when obtained,
are damaged or not useable or saleable.
4.8 Deposit. On or before 5:00 p.m. Fort Lauderdale, Florida Time on
May 31, 2001, Buyer will deposit the sum of Two Hundred Fifty Thousand Dollars
($250,000.00) into the trust account of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ via wire transfer
(such funds, together with all interest thereon, collectively, the "Deposit") to
be held in escrow in accordance with the terms of this Agreement. In the event
▇▇▇▇▇▇▇▇▇ Traurig ("Escrow Agent") elects to cease to serve as escrow agent,
then, Escrow Agent shall deliver the Deposit to the Bankruptcy Court or such
other escrow agent acceptable to Seller and Buyer. If the Closing occurs, then,
the Deposit shall be credited against the Purchase Price. If the Closing does
not occur, then the Deposit shall be disbursed in accordance with the terms of
Section 11.2 of this Agreement.
4.9 Tax Treatment. The Purchase Price shall be allocated as set forth
in Exhibit 4.3(c). Each party agrees to report this transaction for Federal and
State tax purposes in accordance with this allocation of the Purchase Price.
Seller and Buyer agree to comply with the applicable United States Internal
Revenue Service Regulations regarding the reporting of the sale of the Assets.
4.10 Conditions to the Closing. The obligations of Seller to consummate
the purchase and sale of the Assets and to take the other actions required to be
taken by it at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Seller in whole or in part):
(a) Each of the representations and warranties of Buyer in this
Agreement must have been accurate in all material respects as of the date of
this Agreement, and must be accurate in all material respects as of the Closing
Date as if made on the Closing Date, in each case, to the best of Buyer's
knowledge.
(b) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been duly performed and complied with in all material respects, in
each case, to the best of Buyer's knowledge.
(c) No action or proceeding has been, or prior to or at the Closing
shall have been, instituted or threatened before any court or other governmental
body by any public authority, any individual or entity with whom Seller has a
contractual relationship, or other third party, pertaining to the acquisition by
Buyer of the Assets to be transferred hereunder, the results of which could
prevent, materially delay or make illegal the consummation of such transfer;
provided however, that no representation or warranty (express or implied) is
being made, or shall be made, by Seller to Buyer with respect to any claims,
liens, security interests or other rights that any Empire Claimant may have in
and to any of the Assets, whether in the possession or control of any Empire
Claimant or otherwise.
(d) The Bankruptcy Court shall have issued an order approving the
transaction contemplated by this Agreement and the sale of the Assets owned by
Carolina and Empire Industries to Buyer, as the highest and best bidder pursuant
to the Bankruptcy Code, free and clear of all liens, charges and encumbrances
with respect to those Assets owned by Carolina and Empire Industries (but not
owned by Empire HK); provided however, that such order shall not cover any
portion of the Assets owned by Empire HK.
(e) The Bank and each of the other secured lenders of Seller shall have
consented to the transaction contemplated by this Agreement.
4.11 Purchase Order Fulfillment Prior to Closing.
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a. Commencing on the date hereof through and until the earlier to occur
of (i) the Closing Date and (ii) the termination of this Agreement by either
party (such earlier date, the "Termination Date"), Buyer shall have the limited
right and authority to perform and fulfill the orders under all open or
unperformed purchase orders of Empire HK listed on Exhibit 4.11 (collectively,
the "Open PO"). Buyer agrees to fund, at Buyer's sole cost and expense, any
prepayments to vendors required under any Open PO (collectively, the "PO
Prepayments") and to perform and fulfill the orders set forth in each Open PO at
Buyer's sole cost, expense and risk utilizing Buyer's own employees and
facilities in accordance with this Section 4.11. Buyer shall name Empire HK as
an additional insured under Buyer's insurance policies with respect to Buyer's
activity with respect to the Open PO. All risk of loss with respect to any
product manufactured, ordered or delivered under any Open PO shall be borne by
Buyer.
b. All "Open PO Profits" (hereinafter defined) calculated for each Open
PO from the performance by Buyer of such Open PO shall be allocated as follows:
(a) 50% of the Profits shall be held IN TRUST by Buyer for the benefit of Empire
HK by Buyer and paid to Empire HK as set forth herein and (b) 50% of the Profits
shall be retained by Buyer. Such Open PO Profit payment shall be made within
three business after Buyer receives payment the applicable vendor under the Open
PO. As used herein, the term "Open PO Profit" shall mean the excess of (i) the
sales price actually received by Buyer for the products covered by the
particular Open PO over (ii) the actual costs actually paid or incurred by Buyer
to unrelated third parties to produce, assemble, manufacture, deliver and insure
such products for and to the applicable purchasers or customers for the
particular Open PO. In calculating the Open PO Profit, no allocation shall be
made for Buyer's general administrative expenses, corporate overhead or
corporate salaries.
c. In the event the Closing fails to occur for any reason or for no
reason, then, effective on the Termination Date, Buyer's right to perform such
Open PO as set forth in this Section 4.11 shall automatically terminate without
notice to Buyer and Empire HK shall have the sole and exclusive right and
authority to retain 100% of the revenues and profits from those Open PO
transactions in which the applicable product covered by such Open PO has not
been shipped to the applicable customer. For those Open PO transactions in which
some of the products have been shipped and some of the products have not been
shipped as of the Termination Date, the parties agree that Buyer shall
participate and share in the Open PO Profits in the transactions, on a 50/50
Open PO Profit basis, in which the products have been shipped and Buyer shall
not participate or share in the Open PO Profit, in any way whatsoever, in the
transactions in which the products have not been shipped. At the request of
Seller, Buyer shall provide a certification by Buyer's independent accounting
firm certifying as to the calculation of Open PO Profit for each Open PO in
which the 50%/50% sharing arrangement is applicable.
d. In the event Buyer is entitled to a Break Up Fee under Section 11.3
of this Agreement, then, in addition to the payment of such Break Up Fee, Buyer
shall receive a reimbursement of all PO Prepayments delivered by Buyer under any
Open PO which has not been finally performed by Buyer prior to the Termination
Date; provided however that to the extent Buyer receives a sharing of Open PO
Profits for such Open PO, then, such PO Prepayment for such Open PO shall be
prorated by Empire HK in an equitable manner to reflect that a portion of the
Open PO has been performed and paid for by the customer/vendor in question. In
the event Buyer is not entitled to receive a Break Up Fee under Section 11.3 of
this Agreement, then, Buyer shall not be reimbursed for any PO Prepayments. Any
dispute with respect to the calculation of Open PO Profit or the amount of PO
Prepayments to be reimbursed to Buyer or otherwise under this Section 4.11 shall
be finally resolved by the Bankruptcy Court. This Section 4.11 shall survive the
termination of this Agreement for all purposes.
5. Representations and Warranties of Seller. The representations and
warranties by Seller in this Agreement shall be true and correct in all material
respects as of the Closing as though made on and as of the Closing, Seller
represents and warrants to Buyer as follows:
5.1 Authority. Seller has full legal right, power and authority to
execute and deliver this Agreement, to carry out the transactions contemplated
hereby, and to convey the Assets to Buyer, including without limitation Seller's
good title thereto. All company and other actions required to be taken by Seller
to authorize the execution, delivery and performance of this Agreement and all
transactions contemplated hereby will be duly and properly taken prior to the
Closing Date.
5.2 Validity. This Agreement and the other documents to be delivered at
the Closing have been, or will be, duly executed and delivered and are, or will
be, the lawful, valid and legally binding obligations of Seller, enforceable in
accordance with their respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, rearrangement, reorganization or similar
debtor relief legislation affecting the rights of creditors generally, and
subject to applicability of general principles of equity.
5.3 Due Organization. Carolina is duly organized, validly existing and
in good standing under the laws of the State of Delaware with full power and
authority to own or lease its properties and to carry on its business. Empire
Industries is duly organized, validly existing and in good standing under the
laws of the State of Delaware with full power and authority to own or lease its
properties and to carry on its business. Empire HK is duly organized, validly
existing and in good standing under the laws of the Special Administrative
Region of Hong Kong, with full power and authority to own or lease its
properties and to carry on its business.
5.4 No Action. To Seller's Knowledge (hereinafter defined), there is no
outstanding order, writ, injunction or decree of any court, governmental agency
or arbitration tribunal affecting Seller's ownership or operation of the Assets.
Except for the bankruptcy cases of Carolina and Empire Industries pending before
the Bankruptcy Court, Seller is not currently engaged in material legal
proceedings, including without limitation, legal proceedings restraining the
Closing.
5.5 Compliance with Laws. To Seller's Knowledge, Seller is in material
compliance, insofar as the operation or ownership of the Assets is concerned,
with all United States applicable laws, regulations and administrative orders to
which Seller or the Assets may be subject. To Seller's Knowledge, Seller has all
material permits, licenses, franchises and other authorizations required by
United States law necessary to own or operate the Assets as now being operated.
To Seller's Knowledge, Seller has, and at Closing will have, all government
permits and approvals necessary to carry on Seller's present business in the
United States of America. No representation or warranty (express or implied) is
being given by Seller with respect to the laws of Hong Kong, the People's
Republic of China, or any other jurisdiction (other than the United States of
America) or any permits and approvals required under such laws. No
representation or warranty (express or implied) is being given by Seller with
respect to whether any permits or governmental licenses held by Seller with
respect to the Assets are transferable to Buyer.
5.6 Insurance of Assets. Seller currently has in effect the insurance
coverage set forth in Exhibit 5.6 hereto. Except as set forth therein, to
Seller's Knowledge, there are no claims pending under any such policies, nor
have any events occurred which form the basis for any such claim.
5.7 Taxes. To Seller's Knowledge, Seller has filed all required
material property, sales and unemployment tax returns and reports required to be
filed by United States law, accurately reflecting all taxes, charges and
assessments owed by Seller thereunder, and all of such taxes relating to the
ownership and operation of the Assets through the Closing Date have been paid or
adequately provided for and will be paid when due. No extensions of time or
requests therefor or for any waiver thereof have been made or are presently
pending or effective with respect to any such returns, reports or taxes, except
that Seller has filed an extension for calendar year 2000 taxes.
5.8 Consents. To Seller's Knowledge, the execution, delivery and
performance of this Agreement by Seller does not require any consent, approval
or action of, or make any filing with or give notice to, any corporation,
partnership, person, union, firm or other entity or any public, governmental or
judicial authority located in the United States of America. No representation or
warranty (express or implied) is being given by Seller with respect to (i) the
laws of Hong Kong, the People's Republic of China, or any other jurisdiction
other than the laws of the United States of America or (ii) whether any consents
are required from any vendors or contracting parties doing business with any
Seller in any location throughout the world (other than in the United States of
America). No representation or warranty (express or implied) is being given by
Seller with respect to whether any permits or governmental licenses held by
Seller with respect to the Assets are transferable to Buyer.
5.9 No Licenses. Seller has not prior, and as of the Closing shall not
have, licensed, transferred, or otherwise invested third parties with any rights
to the Product Lines, other than the manufacture of the Product Lines for
Seller's own account, which rights shall either be terminated by Seller or be
assigned by Seller to Buyer as of the Closing.
5.10 Survival of Representations and Warranties of Seller. All of the
foregoing warranties and representations of Seller set forth in Section 5.1
through Section 5.9 shall be true and correct, in all material respects, at
Closing and shall survive the Closing for a period of ninety (90) days after the
Closing Date.
5.12 Knowledge of Seller. Each reference to Seller's "Knowledge" in
this Agreement shall constitute a reference to the actual knowledge (and not the
constructive knowledge) of ▇▇. ▇▇▇▇▇ ▇▇▇▇▇.
6. Representations and Warranties of Buyer. The representations and
warranties by Buyer in this Agreement shall be true and correct in all material
respects as of the Closing as though made on and as of the Closing, Buyer
represents and warrants to Seller as follows:
6.1 Authority of Buyer. Buyer has full legal right, power and authority
to execute and deliver this Agreement, to carry out the transactions
contemplated hereby, and to purchase the Assets and assume the Assumed
Liabilities. All company and other actions required to be taken by Buyer to
authorize the execution, delivery and performance of this Agreement and all
transactions contemplated hereby will be duly and properly taken prior to the
Closing Date.
6.2 Due Organization. Buyer is duly organized, validly existing and in
good standing under the laws of the State of Iowa, with full power and authority
to own or lease its properties and to carry on its business.
6.3 Validity. This Agreement and the other documents to be delivered at
the Closing have been, or will be, duly executed and delivered and are, or will
be, the lawful, valid and legally binding obligations of Buyer, enforceable in
accordance with their respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, rearrangement, reorganization or similar
debtor relief legislation affecting the rights of creditors generally, and
subject to applicability of general principles of equity.
6.4 Certain Proceedings. There is no pending or threatened legal or
administrative proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the transactions contemplated by this
Agreement.
6.6 No Brokers or Finders. Except as set forth in Exhibit 6.6, neither
Buyer nor any of their respective directors, officers, employees or agents have
retained, employed or used any investment banker, broker or finder in connection
with the transactions provided for herein or the negotiation thereof.
6.7 AS IS, WHERE IS, WITH ALL FAULTS. EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, BUYER ACKNOWLEDGES THAT SELLER HAS SPECIFICALLY DISCLAIMED ANY
EXPRESS OR IMPLIED WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST,
PRESENT OR FUTURE, OF, AS TO, OR CONCERNING (I) THE NATURE AND CONDITION OF ANY
OF THE ASSETS AND THE SUITABILITY THEREOF FOR ANY AND ALL ACTIVITIES AND USES
WHICH BUYER MAY ELECT TO CONDUCT THEREON, AND (II) THE COMPLIANCE OF THE ASSETS
OR ITS OPERATION WITH ANY APPLICABLE LAWS OR ANY ENVIRONMENTAL LAWS.
BUYER ACKNOWLEDGES THAT, EXCEPT AS SET FORTH IN THIS AGREEMENT AND SUBJECT TO
THE REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN SECTION 5, BUYER IS
RELYING SOLELY ON ITS OWN INVESTIGATION OF THE ASSETS AND NOT ON ANY INFORMATION
PROVIDED OR TO BE PROVIDED BY SELLER OR ANY OTHER PARTY IS A SOPHISTICATED BUYER
OF CORPORATE ASSETS GENERALLY, HAS FULLY INSPECTED THE ASSETS AND THE BUSINESS
OF SELLER, IS THOROUGHLY FAMILIAR WITH THE CONDITION OF THE ASSETS AND THE
BUSINESS OF SELLER (INCLUDING, WITHOUT LIMITATION, THE BANKRUPTCY FILING BY
SELLER CONTEMPLATED BY THIS AGREEMENT AND THE EFFECT SUCH FILING MAY HAVE UPON
THE FINANCIAL CONDITION, ASSETS, BUSINESS AND PROSPECTS OF SELLER) AND HEREBY
ACCEPTS THE ASSETS IN THEIR "AS IS, WHERE IS, WITH ALL FAULTS CONDITION."
EXCEPT AS SET FORTH IN THE AGREEMENT, BUYER EXPRESSLY ACKNOWLEDGES THAT SELLER
HAS NOT MADE AND DOES NOT HEREBY MAKE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, ARISING BY OPERATION OF LAW OR OTHERWISE, WHATSOEVER WITH RESPECT TO
ANY OF THE ASSETS, INCLUDING WITHOUT LIMITATION ANY REPRESENTATION OR WARRANTY
REGARDING CONDITION, HABITABILITY, SUITABILITY, QUALITY OF CONSTRUCTION,
WORKMANSHIP, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND EXCEPT
AS SET FORTH IN SECTION 5 OF THIS AGREEMENT, BUYER ACKNOWLEDGES THAT IT IS
ENTERING INTO THIS AGREEMENT WITHOUT RELYING UPON ANY STATEMENT OR
REPRESENTATION MADE BY SELLER OR BY ANY OTHER PERSON. BUYER ACKNOWLEDGES AND
AGREES THAT SELLER HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATIONS OR
WARRANTIES (EXPRESS OR IMPLIED), EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT.
6.8 Disclosure. No representation or warranty of Buyer in this
Agreement omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not
misleading in any material respect.
6.9. Survival of Representations and Warranties of Buyer. All of the
foregoing warranties and representations of Buyer set forth in Section 6.1
through Section 6.8 shall be true and correct, in all material respects, at
Closing and shall survive the Closing for all purposes.
7. Casualty; Risk of Loss; Indemnification.
---------------------------------------
7.1 Risk of Loss - Prior to Closing. The Seller shall bear the risk of
all loss or damage to any of the Assets from all causes, and all loss or damage
arising out of or related to the operation of Seller's business from the date
hereof until the Closing. If at any time prior to the Closing with respect to
such Assets, any material portion of such Assets are damaged or destroyed as a
result of fire, other casualty or for any reason whatsoever, Seller shall
immediately give notice thereof to Buyer. Prior to the occurrence of the
Closing, Buyer shall have the right, in its sole and absolute discretion, within
10 days of receipt of such notice, to (i) elect not to proceed with the Closing
with respect to such Assets and terminate this Agreement with respect to such
Assets, or (ii) proceed to Closing with respect to such Assets and consummate
the transactions contemplated hereby and receive any and all insurance proceeds
received by the Company on account of any such casualty. In the event Buyer
elects to terminate this Agreement under this Section 7.1(i), then, (i) the
Deposit shall be returned to Buyer and (ii) no Break-Up Fee (hereinafter
defined) shall be payable to Buyer. In the event the Closing occurs, then, Buyer
shall have no further rights under this Section 7.1.
7.2 Risk of Loss - On and After Closing. If the Closing occurs, then,
title to the Assets (including, without limitation, the Equipment) and risk of
loss for all of the Assets (including, without limitation, all Assets in the
possession or control of any Empire Claimant) shall pass to Buyer at the Closing
for all purposes. Buyer shall make arrangements to insure, at Buyer's sole cost
and expense, the Equipment and other Assets as of the Closing.
7.3 Access to Information. After the Closing for a period of two (2)
years, Seller shall continue to permit Buyer and Buyer's agents, including its
accountants, to have reasonable access at Buyer's expense to Seller's books,
records and data relating to the Assets and Seller's business for the period
prior to the Closing upon Buyer's reasonable showing of need, including Buyer's
preparation of financial reports, tax returns or audits, and the defense or
prosecution of litigation or arbitration. Seller shall provide Buyer with
reasonable assistance by the provision of employees to act as witnesses and, at
Buyer's sole cost, to prepare documents, reports and other information
reasonably requested by Buyer in support thereof. After the Closing for a period
of two (2) years, Buyer shall continue to permit Seller and Seller's agents,
including its accountants, to have reasonable access at Seller's expense to
Buyer's books, records and data relating to the Assets and Buyer's business for
the period prior to the Closing upon Seller's reasonable showing of need,
including Seller's preparation of financial reports, tax returns or audits, and
the defense or prosecution of litigation or arbitration. Buyer shall provide
Seller with reasonable assistance by the provision of employees to act as
witnesses and, at Seller's sole cost, to prepare documents, reports and other
information reasonably requested by Seller in support thereof.
7.4 Indemnification.
---------------
(a) Indemnity By Seller. Seller will indemnify and hold harmless the
Buyer (for purposes of this paragraph, the term the "Buyer" shall include the
directors, officers, shareholders, employees and agents of the Buyer and any
persons or entities owned or controlled by, owning or controlling, or under
common control or affiliated with Buyer) from and against, and reimburse them
for, all claims, demands, liabilities, losses, damages, causes of action,
judgments, penalties, costs and expenses (including, without limitation,
reasonable attorney's fees) which may be imposed upon, asserted against or
incurred or paid by them by reason of, on account of or in connection with (i)
any of the Excluded Liabilities, (ii) any fee, commission or other payment
payable to any investment banker, broker or finder either (a) retained by Seller
or (b) claiming by, through or under Seller and (iii) subject to Section 11.4
and if, and only if, the Closing occurs, any breach by Seller of any
representation or warranty of Seller set forth in this Agreement (collectively,
the "Seller Indemnified Liabilities"). In the event that Buyer shall be named in
any lawsuit or legal proceeding with respect to any Seller Indemnified
Liabilities, then, Seller, at Seller's sole expense, will indemnify, assume the
defense thereof and will hold harmless and defend Buyer from all Seller
Indemnified Liabilities, including interest, penalties and reasonable attorneys'
fees and disbursements related thereto. If Buyer is so named, Seller shall
promptly give Buyer written notice of Seller's choice of legal counsel to defend
in such lawsuit or legal proceeding, and Buyer may reasonably disapprove, within
five days of receipt of such written notice, such selection of legal counsel, in
which case Seller shall be obligated to retain new legal counsel, again subject
to Buyer's reasonable disapproval) and substitute such counsel in the
proceeding. The foregoing covenants of Seller set forth in this Section 7.4
shall survive the Closing for all purposes.
(b) Indemnity by Buyer. Buyer will indemnify and hold harmless the
Seller (for purposes of this paragraph, the term the "Seller" shall include the
directors, officers, shareholders, employees and agents and secured lenders of
any of the entities comprising "Seller" and any persons or entities owned or
controlled by, owning or controlling, or under common control or affiliated with
Seller) from and against, and reimburse them for, all claims, demands,
liabilities, losses, damages, causes of action, judgments, penalties, costs and
expenses (including, without limitation, reasonable attorney's fees) which may
be imposed upon, asserted against or incurred or paid by them by reason of, on
account of or in connection with any of the following matters (collectively, the
"Buyer Indemnified Liabilities"): (i) the Assumed Liabilities, (ii) any claims
and liability to any Person arising out of, or related to, any Open PO or
Buyer's performance of any Open PO, including, without limitation, any and all
manufacturer's liability claims, any product liability claims or any other
liability of any kind whatsoever with respect to any Open PO or any product
ordered, manufactured or delivered thereunder and (iii) any breach by Buyer of
any of Buyer's representations, warranties or covenants set forth in this
Agreement. In the event that Seller shall be named in any lawsuit or legal
proceeding with respect to any Buyer Indemnified Liabilities, then, Buyer will
indemnify, assume the defense thereof and will hold harmless and defend Seller
from all Buyer Indemnified Liabilities, including interest, penalties and
reasonable attorneys' fees and disbursements related thereto. If Seller is so
named, Buyer shall promptly give Seller written notice of Buyer's choice of
legal counsel to defend in such lawsuit or legal proceeding, and Seller may
reasonably disapprove, within five days of receipt of such written notice, such
selection of legal counsel, in which case Buyer shall be obligated to retain new
legal counsel, again subject to Seller's reasonable disapproval) and substitute
such counsel in the proceeding. The foregoing covenants of Buyer set forth in
this Section 7.4 shall survive the Closing for all purposes.
8. Employees
---------
8.1 Termination and Re-engagement of Employees.
------------------------------------------
(a) Seller shall, not less than seven (7) working days before Closing,
terminate the employment, effective on the Closing Date, of: (i) those United
States employees of the Seller so designated by the Buyer in writing ("Relevant
Employees") and (ii) all employees and independent contractors of Empire HK
(collectively, the "Hong Kong Employees").
(b) Buyer shall, not less than seven (7) days before the date of
Closing, make a written offer of employment to (i) each such Relevant Employee
and (ii) to each Hong Kong Employee, such employment with the Buyer to commence
immediately upon the termination of the employment of each such Relevant
Employee and each such Hong Kong Employee. Seller shall not vary the terms and
conditions of employment of any Relevant Employee from the date hereof until the
Closing, without the prior written consent of Buyer.
(c) At Buyer's sole cost, Seller and Buyer shall cause to be advertised
in the Hong Kong Government Gazette and in English in the iMail and in Chinese
in the Hong Kong Economic Times and Sing Tao Yat Po and in such other
publications reasonably required by Seller and Buyer after consultation with
Hong Kong legal counsel, a notice of transfer in respect of this Agreement and
the transaction provided for herein signed by each of Empire Toys (HK), Ltd. and
the Buyer so as to be in compliance with Section 5 of the Transfer of Businesses
(Protection of Creditors) Ordinance (Cap. 49 of the Laws of Hong Kong).
8.2 Hong Kong Provident Funds. Seller shall co-operate with Buyer to
the extent necessary to transfer the mandatory provident funds of Empire HK to
Buyer to the extent required by applicable law. Empire HK shall retain and shall
not transfer the voluntary provident fund of Empire HK.
9. Due Diligence. Buyer shall have reasonable access to Seller's
employees, vendors, business records, facilities, tooling and equipment wherever
located, as Buyer may reasonably require and Seller shall provide such
information and access necessary therefore. Seller or Seller's agents shall be
afforded at least 48 hours prior notice of any proposed site visit of any
property of Seller by Buyer or Buyer's advisors and shall be permitted to be
present at any such site visit. Buyer shall treat all information obtained by
Buyer pursuant to the terms of this Agreement as strictly confidential as set
forth in Section 10. Buyer agrees to indemnify and hold Seller harmless of and
from any and all liability or damage sustained by Seller caused as a result or
arising out of any inspections by Buyer or its authorized representatives
pursuant to this Section 9. This Section 9 shall survive the termination of this
Agreement and/or the Closing for all purposes.
10. Confidentiality. Between the date of this Agreement and the Closing
Date, Buyer, and Seller will maintain in confidence, and will cause their
respective directors, officers, employees, agents, and advisors to maintain in
confidence, any information obtained in confidence from another party in
connection with this Agreement or the transactions contemplated by this
Agreement, unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transactions
contemplated by this Agreement, or (c) the furnishing or use of such information
is required by legal proceedings or by the Bankruptcy Court. If the transactions
contemplated by this Agreement are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request.
11. Termination, Break-Up Fee and Procedure for Claims.
--------------------------------------------------
11.1 Termination Events. This Agreement may, by written notice given
prior to or at the Closing, be terminated:
(a) by either Buyer or Seller if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been waived by the non-breaching party or such breach has not been cured (if
such breach may be cured) within five (5) days of written notice by the
non-breaching party to the breaching party;
(b) by Seller, if any of the conditions in Section 4.10 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such condition on or
before the Closing Date;
(c) by Buyer or Seller, if the Bankruptcy Court enters an order
approving the sale by Seller of all or any portion of the Assets in connection
with an Alternative Transaction (hereinafter defined);
(d) by Buyer under Section 7.1;
(e) by mutual consent of the parties hereto;
(f) by either party if the Closing has not occurred (other than through
the failure of any party seeking to terminate this Agreement to comply fully
with its obligations under this Agreement) on or before July 3, 2001, or such
later date as the parties may agree upon; or
(g) by Buyer in the event that Buyer establishes that the aggregate
amount of the Assumed Liabilities that will exist at Closing would exceed
$1,500,000.00 determined in accordance with generally accepted accounting
principles (an "Excessive Liability Termination"); provided, however that any
written notice of an Excessive Liabilities Termination by Buyer to Seller (a
"Liability Termination Notice") shall only be effective if such written notice
is accompanied a certification of McGladery & ▇▇▇▇▇▇ or a "big 5" accounting
firm addressed to Seller and Buyer stating the amount by which the Assumed
Liabilities exceed $1,500,000.00 in the aggregate ( the "Excess Liability
Amount"); and provided further that upon receipt of a Liability Termination
Notice, Seller shall have the right, within ten (10) days of such Liability
Termination Notice, to:
(i) agree in writing to reduce the Closing Payment by an
amount equal to the Excess Liability Amount set forth in the
Liability Termination Notice in which case the Liability
Termination Notice shall be deemed null and void and Buyer's
right of termination under this Section 11.1(g) shall be
deemed waived for all purposes;
(ii) notify Buyer that Seller disputes the Excess Liability
Amount set forth in the Liability Termination Notice, in which
case Buyer and Seller shall cooperate and work in good faith
to reach agreement on the Excess Liability Amount and an
adjustment to the Closing Payment in the same manner as
contemplated in subsection 11.1 (g) (i) immediately above and,
if such agreement is reached, then the Liability Termination
Notice shall be deemed null and void and Buyer's right of
termination under this Section 11.1(g) shall be deemed waived
for all purposes; or
(ii) notify Buyer that Seller disputes the Excess
Liability Amount set forth in the Liability Termination Notice
and, on or before five business days after such notice, Seller
may petition the Bankruptcy Court to finally determine the
existence, and the amount, of the Excess Liability Amount.
Upon a determination, if any, that no Excess Liability Amount
exists, the Liability Termination Notice shall be deemed null
and void and Buyer's right of termination under this Section
11.1(g) shall be deemed waived for all purposes. Should the
Bankruptcy Court determine that an Excess Liability Amount
exists and the actual amount of the Excess Liability Amount,
then, within two (2) business days of such determination,
Seller may agree in writing to reduce the Closing Payment by
an amount equal to the Excess Liability Amount as finally
determined by the Bankruptcy Court, in which case the
Liability Termination Notice shall be deemed null and void and
Buyer's right of termination under this Section 11.1(g) shall
be deemed waived for all purposes. If the Seller does not
timely agree in writing to reduce the amount of the Closing
Payment by the amount of the Excess Liability Amount so
determined by the Bankruptcy Court, then the Liability
Termination Notice shall remain in full force and effect.
11.2 Effect of Termination.
---------------------
(a) In the event Buyer terminates this Agreement in accordance with
Section 11.1, then, Seller shall have no liability or obligation to Buyer with
respect to such termination; provided however that (i) the Escrow Agent shall
return the Deposit to Buyer and (ii) Section 11.3 may be applicable if the
conditions for the payment of the Break-Up Fee (hereinafter defined) set forth
in such Section 11.3 are satisfied.
(b) In the event Seller terminates this Agreement pursuant to Section
11.1(a), then, the Escrow Agent shall pay the Deposit to Seller as liquidated
damages to Seller and neither party shall have any further liability or
obligation under this Agreement.
(c) Failure to exercise any termination right under Section 11.1 in a
timely manner shall not waive such termination right, which shall continue
unimpaired until the Closing has occurred.
(d) In the event the Closing fails to occur for any reason or for no
reason, then, Buyer's sole and exclusive remedy for a breach by Seller of any of
Seller's representations, warranties or covenants set forth in this Agreement
shall be to elect not to close this Agreement and to receive a return of the
Deposit (provided however that Buyer has not breached Buyer's obligations under
this Agreement).
(e) In the event the Closing occurs, then, Buyer shall not be entitled
to deduct or offset or withhold payment of any amount payable to Seller as a
result of a breach by Seller of any of Seller's representations, warranties or
covenants set forth in this Agreement.
11.3 Break-Up Fee. In the event, and only in the event, (i) Buyer is
entitled to a return of the Deposit in accordance with Section 11.2 and (ii) all
or any portion of the Assets are sold by Seller to any person or legal entity
(other than Buyer or its affiliates) pursuant to a final order of the Bankruptcy
Court, which transaction or transactions (each, an "Alternative Transaction")
closes on or before 90 days after the date of this Agreement (such closing for
each Alternative Transaction, the "Alternative Closing"), then, and, except as
otherwise provided herein, Seller agrees (as Buyer's sole and exclusive remedy
under this Agreement or otherwise) to pay Buyer a one-time "Break-Up Fee"
(herein so called) equal to the lesser of (i) the reasonable out-of-pocket third
party expenses incurred by Buyer in connection with this Agreement and Buyer's
due diligence of the Assets and (ii) the sum of $100,000.00, which Break-Up Fee
shall be paid to Buyer at the Alternative Closing, if and only if, an
Alternative Closing occurs on or before 90 days after the date hereof. The
payment of the Break-Up Fee shall constitute Buyer's sole and exclusive remedy
in the event an Alternative Closing occurs. In the event the Closing under this
Agreement fails to occur for any reason or for no reason and the Alternative
Closing fails to occur within 90 days after the date hereof, for any reason or
for no reason, then, no Break-Up Fee or any other payment of any kind whatsoever
shall payable to Buyer by Seller. In the event Buyer terminates this Agreement
in accordance with Section 7.1 or Section 11.1(e), (f) or (g), then, no Break-Up
Fee or any other payment of any kind whatsoever shall be payable to Buyer by
Seller. In the event Seller terminates this Agreement in accordance with Section
11.1, then, no Break-Up Fee or any other payment of any kind whatsoever shall
payable to Buyer by Seller. If more than one Alternative Transaction closes,
then, only one Break Up Fee shall be paid to Buyer. This Section 11.3 and
Seller's obligation to pay the Break-Up Fee shall survive the termination of
this Agreement.
11.4 Procedure for Claims of Breach of Representation and Warranties of
Seller. In the event the Closing occurs, then, in the event Seller breaches any
of the representations and warranties of Seller set forth in Section 5 of this
Agreement, Buyer shall give written notice of such alleged breach on or before
the expiration of ninety (90) days after the Closing Date. Seller and Buyer
shall have thirty (30) days within which to resolve such claim of breach. In the
event such alleged breach is not resolved by the parties on or before the
expiration of such thirty (30) day period, then, either party shall be entitled,
as such party's sole and exclusive remedy, to petition the Bankruptcy Court to
finally resolve such dispute.
11.5 Alternative Transactions. Buyer acknowledges that Carolina and
Empire Industries are obligated to comply with the terms of the Bankruptcy Code
and applicable federal bankruptcy law with respect to obtaining the highest and
best bid for the Assets and business of Seller. Accordingly, in consideration of
Seller's agreement to pay the Break-Up Fee to Buyer in accordance with the terms
of Section 11.3, Buyer covenants and agrees that nothing in this Agreement or
otherwise shall limit the right of Seller, the Bank or any of Seller's secured
lenders from negotiating with any person or legal entity with respect to the
terms of any Alternative Transaction(s), from providing due diligence
information to any prospective purchaser, from executing and delivering any
definitive agreement with respect to any Alternative Transaction(s), from
approving or assisting in the approval of any Alternative Transaction(s) and/or
from seeking the approval of the Bankruptcy Court with respect to any
Alternative Transaction(s). In the event Seller desires to execute a definitive
agreement with any proposed purchaser on or before one business day prior to the
auction date set by the Bankruptcy Court, then, to the extent permitted by the
Bankruptcy Court, Seller shall give Buyer 24 hours notice of Seller's intention
to execute such definitive agreement. Notwithstanding the foregoing, no notice
shall be given to Buyer or required to be given if Seller executes a definitive
agreement with any prospective purchaser on or after the auction date set by the
Bankruptcy Court.
12. Miscellaneous Provisions.
------------------------
12.1 Notices. All notices hereunder shall be in writing and shall be
deemed to have been duly given upon receipt, whether personally delivered, by
nationally recognized overnight courier, or by certified or registered mail,
postage prepaid, deposited in the United States Mail, return receipt requested,
addressed to the parties at the addresses set forth below or at such other
addresses as shall be specified in writing:
If to Seller: Empire of Carolina, Inc.
▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇, Esq.
With a copy to: ▇▇▇▇▇▇▇▇▇ Traurig
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇, Esq.
If to Buyer: Alpha International, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
12.2 Severability. Should any one or more of the provisions of this
Agreement or any of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each such other agreement shall be given effect separately from
the provision or provisions determined to be illegal or unenforceable and shall
not be affected thereby.
12.3 Counterparts. This Agreement and the other agreements contemplated
hereby may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
Agreement.
12.4 Time of Essence/Construction of Agreement. Time is of the essence
in the performance of this Agreement. This Agreement is the product of
negotiations between the Seller and Buyer and their respective attorneys, and no
provision shall be construed for or against either party by reason of ambiguity
in language. This Agreement shall be governed by the laws of the State of
Florida.
12.5 Submission to Jurisdiction and Venue/ Agent for Service of
Process. Any controversy or claim arising out of or relating to this Agreement,
the Assets or the transaction contemplated by this Agreement shall in each case
be settled by the Bankruptcy Court and each of the parties hereby irrevocably
submit to the jurisdiction of the Bankruptcy Court and agree that exclusive
venue for all such controversies and claims shall be with the Bankruptcy Court.
12.6 Expenses. Except as otherwise set forth in this Agreement, Seller
and Buyer shall each bear their own legal fees and expenses in connection with
this Agreement.
12.7 Headings. The section and other headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of the Agreement.
12.8 Attorneys. In any action between Seller and Buyer at law or in
equity arising out of or related to this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees and court costs, in addition to any
other relief to which that party may be entitled.
12.9 Entire Agreement. Except as may otherwise be specifically provided
herein, this Agreement, including any schedules and exhibits hereto, constitutes
the entire agreement of the parties and all prior representations, covenants,
proposals and understandings, whether written or oral, are superseded and merged
herein. This Agreement may be modified or amended only by an instrument in
writing executed by the parties hereto and specifically stating that is intended
as a modification or amendment to this Agreement. No oral statements or
representations not contained herein shall have any force or effect.
12.10 Assignment. This Agreement shall not be assigned except by legal
succession or by written consent of the other party. Subject to the foregoing,
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their successors and assigns.
12.11 No Third Party Beneficiaries. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to give any person any
legal or equitable right, remedy or claim under or in respect to this Agreement
or any provision contained herein. Without limiting the foregoing, in no event
shall any Empire Claimant or any creditor of Seller (other than the Bank and the
other lenders of Carolina and Empire Industries) constitute a third party
beneficiary under this Agreement. Each of the Bank and the other secured lenders
of Carolina and Empire Industries are, shall be, express third party beneficiary
of this Agreement.
12.12 Waiver. Waiver of any default or breach of this Agreement or of
any warranty, representation, covenant or obligation contained herein shall not
be construed as a waiver of any subsequent breach.
12.13 Exhibits. All exhibits hereto to this Agreement shall be deemed
incorporated into this Agreement as though set forth herein in full. The parties
note that Exhibit numbers correspond to Section numbers herein, and therefore
there are gaps in Exhibit numbering.
12.14 Dollars. Each reference to "dollars" or "$" in this Agreement
shall constitute a reference to U.S. Dollars.
SIGNATURES ON NEXT PAGE
IN WITNESS WHEREOF, the parties executed this Asset Purchase
------------------------------------------------------------
Agreement to be duly executed, as of the date first above written.
------------------------------------------------------------------
SELLER:
EMPIRE OF CAROLINA, INC.,
a Delaware corporation
By:
-----------------------------------------
[Name]
Title:
--------------------------------------
EMPIRE INDUSTRIES, INC.,
a North Carolina corporation
By:
-----------------------------------------
[Name]
Title:
--------------------------------------
EMPIRE TOYS (HK), LTD.
a Hong Kong corporation
By:
-----------------------------------------
[Name]
Title:
--------------------------------------
BUYER:
ALPHA INTERNATIONAL, INC.
an Iowa corporation
By:
-----------------------------------------
[Name]
Title:
--------------------------------------
ESCROW AGENT
▇▇▇▇▇▇▇▇▇ Traurig joins in the execution and
delivery of this Agreement for the purpose
of agreeing to serve as escrow agent for the
Deposit in accordance with the terms of this
Agreement.
Executed and Agreed
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
By:
------------------------------------
LIST OF EXHIBITS
1-A Assignment
1-B ▇▇▇▇ of Sale
1.1 Product Lines
1.4 Intellectual Property
1.5 Equipment
1.6 Contracts
1.8(a) U.S. Inventory locations
1.8(b) Other tangible assets
1.9 Other assumed liabilities related to Empire HK
2.(e) Excluded contracts
2.(h) Unearned insurance premiums
2.(i) Excluded deposits
2.(j) Excluded Inventory
2.(k) Excluded Assets Previously Sold to General Foam, Inc.
4.3(c) Purchase Price Allocation
5.6 Insurance policies
6.6 Brokers of Buyer
EXHIBIT 1-B
-----------
▇▇▇▇ OF SALE
------------
KNOW ALL MEN BY THESE PRESENTS:
Empire of Carolina, Inc., Empire Industries, Inc. and Empire Toys (HK)
Ltd. (collectively, "Empire"), for good and valuable consideration, receipt of
which is hereby acknowledged and pursuant to a certain Asset Purchase Agreement
by and between Empire and Alpha International, Inc., an Iowa corporation
("Buyer"), dated as of May , 2001 (the "Purchase Agreement"), hereby sells,
assigns, transfers, conveys and delivers to Buyer, and its successors and
assigns, all its right, title and interest in and to all of the assets described
in Attachment A attached hereto and incorporated herein by this reference (the
"Assets"), all as more fully set forth in the Purchase Agreement.
TO HAVE AND TO HOLD the same unto Buyer and its successors and assigns,
forever.
IN WITNESS WHEREOF, the undersigned authorized representative of Empire
has executed this ▇▇▇▇ of Sale on , 2001.
EMPIRE OF CAROLINA, INC.,
A Delaware corporation
By:
-------------------------------------
[Name]
Title:
-------------------------------------
EMPIRE INDUSTRIES, INC.,
a Delaware corporation
By:
-------------------------------------
[Name]
Title:
-------------------------------------
EMPIRE TOYS (HK), LTS.
A Hong Kong corporation
By:
-------------------------------------
[Name]
Title:
-------------------------------------
EXHIBIT 2(j)
------------
EXCLUDED INVENTORY
------------------
All product inventories for the following products:
Octozone Waterslides
Rainforest Rapids Waterslides
Yo-Yo Balls
EXHIBIT 4.3(c)
--------------
PURCHASE PRICE ALLOCATION
-------------------------
The Purchase Price shall be allocated to the Assets and Assumed Liabilities of
Seller as follows:
95% of the Closing Payment shall be allocated to the Product Lines; the
remaining 5%, together with the Assumed Liabilities, shall be allocated
collectively to the remaining Assets.