Exhibit 10.19
OPTION TO PURCHASE
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AND OTHER AGREEMENT
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Agreement entered in this 17th day of October 2005 by and among
RFB Latex Limited, a company incorporated under the Companies Act 1956 having
its registered office at K-185, Sarai Julena, New Friends Colony, New Delhi
(Hereinafter referred to as "Seller", which expression shall unless repugnant to
context hereof mean and include its successors, administrators and permitted
assigns);
RFB Lakeland Industries Private Limited, a company incorporated under the
Companies Act, 1956 having its registered office at A-33, New Friends Colony,
New Delhi -
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110 065 (hereinafter referred to as "Buyer", which expression shall unless
repugnant to context hereof mean and include its successors, administrators and
permitted assigns);
RFB International, a partnership firm having its place of business at 50, Noida
Special Economic Zone, Noida through its partners Mr. P.S.Ratra and Mr. K. S.
Ratra (hereinafter referred to RFB, which expression shall unless repugnant to
context hereof mean and include its successors, administrators and permitted
assigns);
And
Mr. P. S. Ratra and Mr. K. S. Ratra both sons of Late Sh. G. S. Ratra, resident
of A-33, New Friends Colony, New Delhi - 110 065 hereinafter referred to as
Promoters, which expression shall unless repugnant to context hereof mean and
include their legal heirs, representatives, successors and permitted assigns);
Whereas Buyer has paid Seller and Promoters certain Cost Sharing fees, and
Supplier Fees and in consideration, therefore, Seller, RFB and Promoters have
agreed to offer this Option and the additional contract terms hereunder to
Buyer.
1. (a) The In accordance with and subject to the terms of this Agreement,
Seller grants Buyer an irrevocable Option to purchase the Real
Property Leases on Plots 81, 50 and 24 as renewed and extended by
the President of India through Development Commissioner, Noida
Special Economic Zone, Noida, clear title to the buildings thereon,
and all of the glove making equipment
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located therein, and any real property or personal property rights
attached thereto. (hereinafter referred to collectively as the
"Property"). See Exhibit C to the Asset Purchase Agreement for a
listing of equipment and lease hold improvement, building
specification and plot sizes (the "Purchased Assets").
(b) The Option exercise date will be November 15, 2006. 90 business days
prior to the Option exercise date, Buyer will have prepared a Lien
Search and Lease Validation or Title Search on the Property.
(hereinafter referred to as "Property Searches"). Upon the
conclusion of such Property Searches, Buyer and Seller will enter
into negotiation with any and all lien holders, and leaseholders or
any other party asserting a right or claim to the Property.
Currently, Seller represents that the Lessor of Plots 50, 81 and 24
is the President of India through Development Commissioner, Noida
Special Economic Zone and that the IDBI Bank holds a first charge in
all the Property except Plot 50 and a consortium comprised of the
Central Bank of India and the Canara Bank together hold a second
charge in all the Property, except Plot 50.
(c) Upon presentation to Seller of the Property Searches, Buyer will
purchase the IDBI note and accompanying security interest or liens
on the Property and will purchase a release of the Central Bank of
India and Canara Bank's Liens or Security Interest in the Property
and arrange new leases on the property with the Noida Special
Economic Development Zone on Plots 50, 81 and 24.
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(d) Seller and Consultants shall cooperate fully with Buyer to procure
the release of all liens on the Property and the extension or
renewal of the Leases with the Noida Special Economic Zone.
(e) Should the liens not be released and leases extended within this 90
day period the Supply Agreement and Consulting Agreements will
remain in effect on a month to month basis until such time as Buyer
effects these note purchases, lien releases and renewed property
leases.
(f) Buyer shall not be required to expend anymore money than $2,650,000
to effectuate the purchase of the IDBI Note and the releases of all
other bank or creditor liens. Additionally, buyer shall separately
pay RFB or their designee $100,000 USD or its equivalent in INR for
Plot 50.
(g) Any excess monies required to purchase the IDBI Note or effectuate a
release of all liens on the Property will be borne by Seller or its
principal shareholders, which monies in excess of $2,650,000 will be
paid by Buyer, and that additional sum so paid by Buyer will be
reimbursed by Seller or its principal shareholders to Buyer in the
form of a Promissory Note with a first or second security interest
in all the assets of Seller. The Note shall bear interest at 250
basis points over LIBOR adjusted quarterly for five years and
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be fully secured by the assets of Seller in accordance with Indian
law. Such note shall be prepayable any time without penalty.
2. (a) The Option to Purchase herein will be in accordance with the terms
of the Asset Purchase Agreement attached hereto and made a part
hereof as Exhibit 1, and the Employment Agreements attached hereto
and made a part hereof as Exhibit 2 covering the post option
employment period of Kamal and Prabhdeep Ratra which are made a part
hereof, and further the Share Holders Agreement attached hereto as
Exhibit 3.
(b) If the Option to Buy the Property is exercised then in the second
year after the Option Exercise date the cost sharing arrangement on
employees salaries shall be calculated according to sales. Buyer's
sales will be divided by Buyer's and Seller's total sales for the
fiscal year ending January 31, 2008 and any intervening months
between the Option exercise date and January 31, 2007 and that
percent will be multiplied times the total payroll at Seller. Upon
exercise of the Option, an estimate will be used for monthly payment
purposes on this cost sharing arrangement between the Option
exercise date and January 31, 2008, and a reconciliation between the
estimate and the actual sale percent multiplied by Seller's payroll
will be calculated prior to March 31, 2008 and one or the other
parties shall pay the difference in cash between the estimate used
and the above described sales calculation. If after January 31,
2008, should Buyer and Seller not be able to agree on which of
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Seller's employees will leave Seller to become employees of Buyer,
then after January 31, 2008, Buyer and Seller shall, by a lottery in
each department, determine who will join the Buyer and who will stay
with the Seller. This will be accomplished in the following way: The
number of Seller's employees needed to run Buyer's then business
will be agreed upon at each functional department. Once that
employee head count is determined by Buyer, the names of each of
Seller's employees in that department will be put in a hat (a
lottery system) and chosen at random up to the number of people
needed by Buyer to run Buyer's business effectively. Buyer, however,
may elect to continue the cost sharing arrangement after January 31,
2008.
(c) Should Buyer notify Seller that it does not intend to exercise its
Option to Buy 90 days before the exercise option date, then Buyer
shall have the further option to withhold any payments it owes
Seller during months 10, 11 and 12 and debit that against 62% of the
actual cost of the moulds purchased by Buyer and given to Seller for
use that Seller may inherit as part of the non-exercise of the
Option. Should Buyer opt to take custody of the moulds as described
in paragraph (d) below then Buyer will make the payments due in
months 10, 11 and 12 to Buyer within 60 days after the Option
exercise date.
(d) If the Buyer does not exercise the Option described herein and does
not give Seller a 90 day notice as described in (c) above, then
Buyer will have the
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option to remove all the moulds and other equipment it purchased
directly or alternatively to require Seller to take it at 50% of
actual mould cost and 80% of any new equipment cost and repairs. The
purchase price will be paid by Seller for this equipment and moulds
by the use of a 5 year Promissory Note fully secured behind the
Seller's then current bank liens bearing interest at 250 basis
points over LIBOR adjusted quarterly and prepayable at any time
without penalty.
For RFB Latex Limited ("Seller") RFB Lakeland Private Limited ("Buyer")
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Through its Director Mr. P. S. Ratra Through its Director Christopher J. Ryan
RFB International Promoters
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P.S. Ratra
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Through its Partners P.S.Ratra --------------------------------
and K. S. Ratra K.S.Ratra