Exhibit 10.20
Document # 3.5
EXHIBIT 1
ASSET PURCHASE AGREEMENT UPON EXERCISE OF OPTION
------------------------------------------------
AGREEMENT dated as of ________ herein, together with the Exhibits attached
hereto and the lists to be delivered pursuant hereto referred to as the
"Agreement") by and among Lakeland Industries, Inc, a Delaware corporation
("Parent"), RFB Lakeland Industries Private Limited, an Indian corporation
controlled by Parent ("Buyer"), RFB Latex Limited, an Indian corporation
("Seller") and each of the individual
shareholders
of Seller who have
executed
this Agreement (the "Principal
Shareholders").
In
reliance upon the
representations and
warranties
made herein and in
consideration of the mutual agreements
herein contained, Buyer and Parent, on
the one hand, and Seller and the Principal Shareholders, on the other hand,
hereby agree as follows:
1.
Transfer
of Business,
Properties
and Assets of Seller
and Certain
Related Matters.
(a) Sale and Transfer of Business, Properties and Assets. Subject
to
the
terms and conditions of this Agreement, and in reliance on the
representations,
warranties, and
agreements of Buyer
and Parent made or
deemed to
be made hereunder, and in consideration of the purchase by
Buyer
described
below, Seller hereby agrees to sell, transfer, convey, assign
and
deliver to Buyer at the Closing all of its then existing Industrial
Glove
business, properties and assets,
as a going
concern, including,
without limitation,
the properties, assets and other rights referred to in
the bill
of sale (the "Bill of Sale") in the form of Exhibit A hereto,
but
excluding
the Excluded Assets (such business, properties, assets and
other
rights of
Seller to be purchased
and sold hereunder being hereinafter
referred
to as the "Purchased
Assets"). As used in
this Agreement,
the
term
Excluded Assets shall mean those assets
listed on Exhibit B hereto,
and the
Purchased Assets means those assets listed on Exhibit C
(b) Purchase
Price. Subject to the terms and
conditions
of this
Agreement,
and in reliance on the representations,
warranties,
undertakings and agreements of Seller made or deemed to be made
hereunder,
and in
consideration of such sale, conveyance, transfer, assignment and
delivery,
Buyer agrees
(i) To pay to
Seller's Bank's in accordance with the Option
Agreement which is
made a part hereof an amount equal to, but
no greater than $2,650,000 being hereinafter referred to as
the ("Initial Purchase Price"),
(ii) Sellers
Balance Sheet as of the Closing
Date (the "Audited
Closing Balance
Sheet") and the Profit
& Loss Statement
for
the period from March 31, 2006, to the Closing Date of the
Seller (the
"2006 Interim P&L") are both to be prepared
pursuant to Generally Accepted Accounting Principles (GAAP) as
applied in the United
States. The
Audited Closing Balance
Sheet shall be audited by
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Buyer's independent
accountants
or a local
CPA firm to be
mutually agreed upon.
(iii) An amount of $100,000 USD shall be reserved (the "Reserve")
at
closing in an escrow
account that
shall be applied
towards
indemnifying Buyer
against any breach by Seller of its
representations and
warranties set forth
in this Agreement.
The escrow shall be
set up by Buyer and
Seller. The
Reserve
shall be liquidated as follows: 50% six months after the date
of the closing and the balance one year following the closing.
In the case any item shall be charged to this reserve, Seller
shall be given notice
and the opportunity to contest and
collect or resolve the item.
(c) Allocation of Purchase Price. The Purchase Price described in
Section
1(b) above will be
initially allocated to the book or tangible
value of
the buildings and equipment being purchased and $100,000 USD
then
shall be
allocated to Seller's and the Principal Shareholders' agreement
not to
compete with the business transferred to Buyer as set forth in
Section 11
hereof. Buyer and
Parent, on the one
hand, and Seller, on the
other
hand, represent, warrant, and agree that such allocation was
determined
through arm's length negotiations. Buyer and Parent, on the one
hand,
and Seller,
on the other hand,
each agrees that it
will adopt and
utilize
the amounts allocated
to each asset or class of assets described
in the
immediately preceding
sentence for purposes of all federal, state
and other
income tax returns filed by it and that it will not voluntarily
take any
position inconsistent
therewith upon examination of any such tax
return,
in any claim, in any
litigation or otherwise with respect to such
income tax
returns. Notwithstanding any other provision of this Agreement,
the
foregoing
representation,
warranty and agreement
shall survive the
Closing
Date without limitation.
(d) Payment of Purchase Price. At the Closing, Buyer will deliver
to
Seller
Banks a check
drawn against immediately available funds in an
amount
equal to $2,550,000, pursuant to the amount determined under
Section
1(b). The remainder of the Initial Purchase Price, $100,000,
shall
be paid by
Seller at Closing but held in escrow pursuant to Section
1(b)(v).
Buyer, however, will pay the Principal
Shareholders
on their
designee
separately
on additional $100,000 USD for Plot 50 and the
building
and improvements on.
(e) Instruments of
Conveyance, Transfer,
Assumption,
Etc. Seller
shall
properly execute and
deliver to Buyer at the Closing: (i) the Bill
of Sale;
(ii) assignments and consents to assignments, in form reasonably
satisfactory to Buyer
with respect to each of the
contracts and other
agreements
and rights to be assigned to Buyer hereunder which require for
such
assignment the consent
or waiver of any third party [and as to which
Buyer
shall have requested
the obtaining of such consent or waiver]; and
(iii)
Noida SEZ leases in proper form for recordation and otherwise
reasonably
satisfactory
in form and
substance to counsel for Buyer and
Parent to
the real property
being leased
hereunder in
accordance
with
Section
4(i). Simultaneously with
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the
Closing, Seller shall
take all steps requisite to put Buyer in actual
possession
and operating control of the Purchased Assets, including,
without
limitation,
disclosure
to such persons as Buyer and Parent
may
designate
of Seller's trade secrets, formulae and other proprietary
information pertaining
to the business of Seller. Seller and Buyer shall
each
properly execute and deliver to the other at the Closing the
following
additional documents, each dated the Closing Date (all of
which,
together
with this Agreement, and the Bill of Sale are hereinafter
sometimes
referred to as the "Agreements"):
(f) Further
Assurances. At the
Closing and from time to time after
the
Closing,
(i) at the request of Buyer and without further
consideration, Seller
shall promptly execute and deliver to Buyer
such
certificates and other
instruments of sale,
conveyance,
assignment and
transfer,
and take such other action, to sell, convey, assign and
transfer
to and
vest in Buyer or to put Buyer in possession of the Purchased
Assets
2.
Closing. The Closing
of the transactions provided for in Section 1
hereof will
take place at the offices of Buyer's Indian
Counsel, at 10:00 A.M.
or at such other place, time as may be
agreed upon by Buyer,
Parent and Seller, but in any event, no
later than
February 15, 2007 unless extended by mutual
agreement of both Buyer and Seller.
3.
Termination.
Anything contained in this Agreement other
than in this
Section 3 to the contrary notwithstanding,
this
Agreement may be terminated prior to the Closing Date
(a) by Buyer and/or
Parent if, due to causes beyond the
control of any of the
parties to this
Agreement,
the
Closing does not occur
on or before such
later date as
may be agreed upon in
writing by the parties
hereto).
Termination pursuant
to this Section 3 shall be without
liability of any
kind on the part of either party
hereto, and in such
event each party shall bear and pay
all costs and expenses incurred by it in connection with
this Agreement and the transactions contemplated hereby.
4.
Representations
and Warranties by Seller and the Principal
Shareholders.
Seller and
the Principal
Shareholders represent
and warrant jointly
and
not
severally that:
(a)
Seller is a
corporation
duly organized, validly
existing and in good
standing under the laws of the
Republic of India and
has all power and
authority to
carry on its business as now being conducted and to own
its properties and is
duly licensed or qualified and in
good standing
as a foreign corporation in each
jurisdiction in which
its failure to qualify would have
a materially
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adverse effect on the
business, financial condition,
operations or prospects of Seller.
(b) Seller has full
corporate power and
authority to
enter into each of the
Agreements to the extent it is a
party thereto
and to consummate the transactions
contemplated
hereby. The
execution,
delivery
and
performance by Seller of each of the Agreements to which
Seller is a party
have been duly authorized by all
requisite corporate
action; each of the Agreements to
which Seller
is a party
has been duly executed and
delivered by Seller
and (assuming
due execution and
delivery by the other party thereto) constitutes a valid
and binding
obligation
of Seller, enforceable in
accordance with its terms, subject, as to enforcement of
remedies, to
applicable
bankruptcy,
reorganization,
insolvency,
moratorium, and
other laws affecting
creditors' rights generally from time to time in effect.
(c) The instruments
of conveyance and transfer to be
executed by Seller and delivered to Buyer at the Closing
will be valid in accordance with their terms and
effective to assign, transfer and convey to Buyer at the
Closing all of the then existing business, buildings,
equipment, leases and other such properties, assets and
other rights of Seller used in its business, including
such title as is
specified in Sections
4(h) and 4(i),
but excluding the Excluded Assets.
(d) Seller is not a party to, subject to or bound by any
agreement or
any judgment, award, order, write,
injunction or decree of any court, governmental body or
arbitrator which would
conflict with or be
breached by
the execution, delivery or performance by Seller of this
Agreement or which
could prevent the
carrying out of
this Agreement.
(e) Except
as disclosed on Lists 9 and 10, neither
Seller nor
any of the
properties,
assets and other
rights referred
to in the Bill of Sale
is a party to,
subject to or bound by any agreement or any judgment,
award, order, writ, injunction or decree of any court or
of any governmental
body or of any arbitrator which
could prevent the use by Buyer of the properties, assets
and other rights referred to in the Bill of Sale or
materially adversely
affect the conduct by Buyer of the
business of
Seller, in each case in accordance with
present practices,
after the Closing Date
or which, by
operation of law, or
pursuant to its terms, would be
breached, terminate, lapse, or be subject to termination
upon the consummation of the transactions contemplated
herein absent the
consent or other
action of any third
person or agency.
(f) Except as
disclosed on List 9,
there is no action,
suit or governmental,
administrative,
arbitration
or
regulatory proceeding
or investigation
pending or, to
the best of
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Seller's knowledge,
threatened
against or relating
to
Seller which could have a materially adverse effect on
its business,
financial
condition,
operations
or
prospects, the
Purchased Assets or the transactions
contemplated by this Agreement.
(g) Seller has delivered to Buyer (A) complete, correct
and detailed lists,
in form and
substance reasonably
acceptable to Buyer,
as of the date of this
Agreement,
specifying with
respect to the
business, properties,
assets and obligations of the Seller each and every item
in the following
categories referred to
below, and (B)
true and complete
copies of the documents and other
materials that underlie such lists:
(i) List I - presently outstanding contracts,
agreements,
commitments and bids (other than
those included in List
4); written and
oral
leases (other than
leases disclosed in
List
7); security deposits under leases; licenses;
franchises;
dealership, service,
agency and
other agreements which, in each case, involve
the receipt
or payment of more than
(pound)1,000 Rupees;
and, with respect to
each item in each category referred to above,
a specification as to
whether the consent of
any third person or
agency is required
for
the effective
assignment thereof;
(ii) List 2 - machinery, equipment, tools, dies,
furniture,
furnishings,
leasehold
improvements,
vehicles, buildings
and other
tangible physical assets and fixtures and the
location of such
(other than items in any of
the foregoing
categories
having a value of
not more than (pound)100 Rupees in the
aggregate);
(iii) List 3 -
(A) the policies of insurance
presently in force (other than those required
to be set forth
in List 4) and, without
restricting the
generality of the foregoing,
those covering
Seller's public and product
liability and
its personnel, properties,
buildings, machinery,
equipment,
furniture,
fixtures and
operations,
specifying
with
respect to each such policy, the name of the
insurer, type of
coverage, term of policy,
limits of liability and annual premium, (B)
Seller's premiums
and losses,
by year, by
type of coverage,
for the past
five years
based on information
received from
Seller's
insurance carrier(s),
(C) all outstanding
insurance claims by
Seller for damage to
or
loss of its property
or income which have
been referred to
insurers or which Seller
believes to
be covered by commercial
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insurance,
(D)
general
comprehensive
liability policies
carried by Seller for the
past five years,
including excess
liability
policies,
and (E)
any
agreements,
arrangements or
commitments
under
which
Seller indemnifies any other person (with the
exception of
any obligation arising in
connection with
lease, purchase or sale
transactions arising
in the ordinary
course
of Seller's
business) in which the maximum
exposure exceeds
(pound)1,000
Rupees or is
required to carry
insurance for the
benefit
of any other person;
(iv) List 4 - names,
current annual
compensation
rates (including
bonuses and
commissions),
accrued bonus, accrued sick leave and accrued
severance pay
of all present salaried
employees of Seller
that Buyer may hire from
Seller now or in the
future in accordance
with the Option Agreement, aggregate accrued
vacation pay; the current base salary rate of
each of
such
individuals;
employment,
managerial, advisory or consulting agreements
and
confidentiality
or other agreements
protecting proprietary processes, formulae or
information; copies of all pension,
profit-sharing,
thrift, or other
retirement
or pension plans
governmentally
required or
private, individual
or group bonus or
other
deferred or incentive plans, severance plans,
hospitalization,
insurance, vacation,
death
benefit, collective
bargaining,
union
or
other employee
association
agreements,
or
other similar
plans in each
case covering
employees of Seller
that may move to Buyer's
Company and as
amended to date, and all
amendments thereto prior to the Closing Date,
agreements,
arrangements,
commitments or
understandings
providing for
any employee
benefit.
(v) List
5 - individual refundable deposits,
prepaid expenses, deferred charges and "other
assets" in excess of (pound)2000 Rupees;
(vi) List 6 - liens, encumbrances, charges,
restrictions, claims
and security
interests
with respect
to the business, assets and
property to be transferred hereunder which do
not constitute real property;
(vii) List 7 -
each and every parcel of real
property or interest therein, owned or leased
in whole or in part by
Seller and
complete
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and correct
copies of each and
every of the
following, if
any, in the possession of
Seller will be made
available for review
by
Buyer: (A)
title reports, title binders,
survey
documents and
data
affording
information or
opinions with respect to,
certifying to,
or evidencing the extent,
current title,
title
history,
title
marketability, use,
possession,
restriction
or regulation,
if any (governmental or
otherwise), and
compliance with
applicable
laws, of (x) the
real property or (y) any
City, State,
County or Country
interest in
(or in the nature of) real property or in a
land or building lease
or chattel real;
(B)
deed or title-holding or trust agreements, if
any, under which any
of the parcels may have
been conveyed
to Seller or under
which the
same may be held for the benefit of Seller;
and (C) leases; except as noted in such list,
all such buildings, structures, leasehold
improvements and
the equipment therein
currently are used by
or useful to Seller in
the ordinary course of
business and,
except
as so noted and except
for normal
wear and
tear, there
are no material defects with
respect thereto
which
would impair the
day-to-day use
by Buyer of any such
buildings, structures, leasehold improvements
or equipment or which would subject Buyer to
material liability under applicable law;
(viii) List 8 -
except for
any Excluded Assets
listed on Exhibit B, trademark registrations
and applications and
notices of infringement
therefore, service
mark registrations (which
list shall
include but not be limited to
indications of length
of use of each
trade
and service mark as well as identification of
product(s) on which
each trade and
service
mark is used, and registration numbers,
registration and renewal dates, affidavit of
use
filings), patents
and
patent
applications,
copyrights, and
applications
therefore
(including
information as
to
expiration dates of
all the foregoing
where
applicable) presently
owned, in whole or
in
part, by
Seller and used or useful in
Seller's Industrial
Glove business; and
all
trademark licenses,
service mark
licenses,
copyright
licenses,
royalty
agreements,
patent licenses,
assignments,
grants and
contracts with
employees or others
relating
in whole
or in
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part to disclosure,
assignment,
registering
or patenting
of any trademarks, service
marks, copyrights, inventions, discoveries,
improvements,
processes,
formulae, trade
secrets or other
know-how and used or useful
in Seller's business. To the best of Seller's
knowledge, except as
noted in such list: (i)
the foregoing
trademarks,
service
marks,
copyrights, licenses,
assignments,
grants,
agreements and contracts are valid; (ii) the
foregoing trademark
registrations,
service
mark registrations,
copyright
registrations
and patents
have been duly
issued and have
not been cancelled,
abandoned or otherwise
terminated; (iii)
the foregoing trademark
applications,
service mark
applications,
copyright applications
and
patent
applications
have been duly filed; (iv)
Seller is not in
default under any of the
foregoing licenses or
agreements other
than
defaults, if any,
which will not result in
any material loss or
liability; and (v)
all
such licenses and
agreements are binding
in
accordance with their terms;
(ix) List 9 -
all litigation, governmental or
regulatory
proceedings,
investigations or
labor disputes
pending or to the best of
Seller's
knowledge,
threatened
against
Seller, the
officers or directors
of Seller
as such officers or directors, or any of the
business, assets or
properties of Seller
to
be transferred
pursuant hereto or to which
Seller or its officers
or directors as
such
officers or
directors,
is a party, as
plaintiff, defendant or otherwise; and
(x) List 10 - all federal, state, local and
foreign governmental
licenses and permits
necessary in
the conduct of Seller's
business; each
jurisdiction
in which the
nature of the business
of Seller requires
Seller to qualify to do business as a foreign
corporation; all
federal, state,
local and
foreign governmental
or judicial
consents,
orders,
decrees and
other
compliance
agreements under which Seller is operating or
bound with
regard to its
Industrial
Glove
Business; all
reports of inspection of
Seller's
businesses and
properties
from
January 1, 2005 to the date hereof under all
applicable Indian
federal, state and local
health and safety laws and regulations; and
copies of
all
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of the foregoing and correspondence relating
thereto.
(h) Except as
disclosed on List 6,
Seller has title to
the properties,
assets and other
rights referred to in
the Bill of Sale that do not constitute real property,
free and clear of all liens and encumbrances.
(i) Except for, (A) such imperfections of title,
which
do not materially
affect the use or value thereof, (B)
liens of current taxes not yet delinquent or being
contested in
good faith, and (C) except as may be
described in
List 7 hereto, Seller has good and
marketable title to
the properties
constituting
real
property to be transferred to Buyer hereunder. Except as
described in List 7 and except for normal wear and tear,
all of the buildings,
improvements and fixtures, owned
or leased by Seller are in a good state of repair,
maintenance and operating condition in order to conduct
the business of
the Seller as now conducted.
(j) Seller has filed (or has obtained extensions of the
time by which it is required to file) all Indian Union
income tax
returns and all other federal, state and
local tax returns required to be filed by it and has
paid all taxes shown due on the returns so filed as well
as all other taxes, assessments and governmental charges
which have become due, except such taxes, if any, as are
being contested in
good faith and as to which adequate
reserves have been provided.
(k)
Seller has in all respects performed all obligations
required to be performed by it under, is not in default
under, is not in
violation of, and has
no knowledge of
any default or
violations by any other party to, any of
the Pension
Plans and Welfare Plans (hereinafter,
collectively,
the "Seller's
Employee Plans") which
obligations, defaults
or violations are material to the
financial condition, results of operations, business or
prospects of Seller.
(i) There are no
actions, suits or claims pending
(other than routine
claims for
benefits in
the ordinary course), or, to the knowledge of
Seller, threatened
and Seller has no
reason
to expect any such
actions, suits or
claims
(other than routine
claims for
benefits in
the ordinary course)
to arise against any of
Seller's Employee Plans or against the assets
of any such
Plan which actions, suits or
claims might,
singly or in the aggregate,
materially and adversely affect the financial
condition, results of operations, business or
prospects of
Seller or of the future
operations of Buyer.
(ii) There are not and will not after the Closing
be any liens encumbrances, charges, claims
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or security
interests with respect to the
Purchased Assets,
and any additions
thereto
or improvements
thereon, arising out
of any
liabilities in
connection
with
any of
Seller's
governmental pension, social
security or Employee Plans.
(l) Except
as disclosed on List 8, none of the
processes, chemical or
production,
currently used by
Seller with
respect to the
business, properties and
assets to be transferred hereunder or any of its
properties or products contract
