Are you familiar with the terms of the Everalst/Active Apparel Group "merger" a few years back? I owned AAGP back in the last millennium, buying from $3 down to $1 and was the only bid @ $.50 for weeks without seeing a trade. Then one morning in 1998 I saw it spike up to $4 and happily cashed it in. An hour later it peaked around $20. Turned out they were going to have an online presence at some now defunct online shopping mall.
Then there's this deal with Everlast. AAGP had licensed the name and it looked better on a good looking lady's chest than it ever looked on a boxer's waistband. So AAGP took on the Everlast name and what I see as a fatal obligation, though they modified it somewhat in their favor recently.
sec.gov
11. Series A Redeemable Participating Preferred Stock and Note Payable:
On October 24, 2000, the Board of Directors designated the issuance of
45,000 shares (1,000,000 total preferred shares authorized) $.01 par value
of Series A Redeemable Preferred Stock (the "preferred shares"). These
preferred shares were issued pursuant to the merger agreement among the
Company, Everlast Holding Corp. and Active Apparel New Corp., a
wholly-owned subsidiary of the Company, and are recorded at their fair
value. The preferred shares have priority liquidation and dividend rights
over other securities issued.
As part of the merger agreement, the Company is to redeem 5,000 shares
($5,000,000 redemption value) on every December 31 until all of the shares
have been redeemed. The Company has the option to redeem all of the
preferred shares at the end of any quarter or an additional amount greater
than the mandatory redemption at the end of any year (December 31st). The
Company is required to pay 105% of the redemption value for any optional
redemption that is made.
On January 13, 2004 we announced that we had entered into an Agreement
on December 14, 2003 with the Principal Preferred Stockholder, modifying
its annual minimum redemptions.
Under the terms of the Agreement, in lieu of a cash payment for the
redemption of a portion of their Series A Preferred Stock, $2,000,000 for
each of the four years commencing December 14, 2003, e through December 14,
2006, will be converted into four term loans ("Notes"). The Notes are
evidenced by four promissory notes from the Company which shall provide for
the payment of interest and deferred finance costs. Interest and deferred
finance costs are to be paid at the combined annual rate of 9.5% per annum
on the aggregate $8 million of notes during each of the years 2004 through
2007, and 10% during 2008 payable each December 14th until maturity on
December 14, 2008. The Company shall have the right to pre-pay the
promissory notes in full, with no prepayment fees, prior to December 14,
2008 together with all unpaid interest and deferred financing costs due at
the time of pre-payment. There are no changes to the existing preferred
dividend formula currently being used on the outstanding redeemable
percentage of the Series A Preferred Stock, mentioned below. As a further
condition of this refinance, the Company paid financing costs aggregating
$800,000 of which $700,000 was paid by December 2003.
If the Company fails to make a mandatory redemption payment within
thirty days after it is due, all licenses and trademarks obtained pursuant
to the merger will be assigned back to the former stockholders of Everlast,
effective 60 days following the assignment, if not remedied.
Commencing on the date of issue, the preferred shares accrue dividends
equal to two-thirds (2/3) of the "net after tax profits" multiplied by the
"outstanding redeemable percentage." Net after tax profits is defined in
the agreement as net income after taxes (pursuant to generally accepted
accounting principles) plus goodwill amortization as it relates to the
merger, plus compensation from the granting and the exercise of the
Company's employee stock options. Outstanding redeemable percentage is
defined in the agreement as the aggregate redemption value of the preferred
shares outstanding as of January 1st divided by $45 million......... |
