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EXHIBIT 2.1
MERGER AGREEMENT
BY AND BETWEEN
DESIGN WORKS HOLDING COMPANY,
DESIGN WORKS, INC.,
CROWN CRAFTS DESIGNER, INC.
AND CROWN CRAFTS, INC.
DATED AS OF JULY 23, 2001
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TABLE OF CONTENTS
PAGE
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ARTICLE I. MERGER AND PURCHASE OF SPECIFIED ASSETS
SECTION 1.01 The Merger................................................................................6
SECTION 1.02 Specified Assets.........................................................................10
SECTION 1.03 Excluded Assets and Liabilities..........................................................10
SECTION 1.04 Assumed Liabilities......................................................................12
SECTION 1.05 Payment of Merger Consideration and Purchase Price.......................................13
SECTION 1.06 Allocation of Purchase Price; Tax Basis..................................................13
SECTION 1.07 Transfer Taxes...........................................................................14
SECTION 1.08 Proration................................................................................14
SECTION 1.09 Consent of Third Parties.................................................................14
SECTION 1.10 Seller License Agreement.................................................................15
SECTION 1.11 Physical Inventory.......................................................................15
ARTICLE II REPRESENTATIONS AND WARRANTIES
SECTION 2.01 Representations and Warranties of Seller.................................................15
SECTION 2.02 Representations and Warranties of Buyer..................................................26
ARTICLE III ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 3.01 All Reasonable Efforts...................................................................27
SECTION 3.02 Public Announcements.....................................................................27
SECTION 3.03 No Implied Representations or Warranties.................................................28
SECTION 3.04 Confidentiality..........................................................................28
SECTION 3.05 Environmental Permits....................................................................29
SECTION 3.06 Discharge of Liens and Encumbrances......................................................29
SECTION 3.07 Conveyance of Title to Owned Real Property...............................................31
SECTION 3.08 Sublease to Buyer........................................................................29
SECTION 3.09 Shared Services Agreement................................................................30
SECTION 3.10 Books and Records........................................................................30
SECTION 3.11 Fairness Opinion.........................................................................30
SECTION 3.12 Estoppel Certificates; Landlord Waivers..................................................30
SECTION 3.13 Board of Directors.......................................................................30
SECTION 3.14 Severance Protection Agreements; Retention...............................................30
SECTION 3.15 Letters of Credit........................................................................30
SECTION 3.16 Right of First Refusal...................................................................31
SECTION 3.17 Non-Competition Agreement................................................................31
SECTION 3.18 Buyer Financing..........................................................................31
SECTION 3.19 Misdirected Payments.....................................................................31
SECTION 3.20 Primary Coverage; Excess Coverage........................................................31
ARTICLE IV EMPLOYEES AND EMPLOYEE BENEFIT PLANS
SECTION 4.01 Employment of Seller's Employees.........................................................31
SECTION 4.02 Welfare and Fringe Benefit Plans.........................................................32
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SECTION 4.03 Workers' Compensation and Health Benefits................................................33
ARTICLE V CLOSING
SECTION 5.01 Time and Place...........................................................................33
SECTION 5.02 Closing Matters with Respect to Seller...................................................33
SECTION 5.03 Closing Matters with Respect to Buyer....................................................36
SECTION 5.04 Passage of Title and Liabilities at Closing..............................................37
ARTICLE VI INDEMNIFICATION
SECTION 6.01 Agreement of Seller to Indemnify.........................................................37
SECTION 6.02 Agreement of Buyer to Indemnify..........................................................38
SECTION 6.03 Definitions and for Indemnification......................................................39
SECTION 6.04 Defense of Third Party Claims............................................................40
SECTION 6.05 Settlement of Third Party Claims.........................................................41
SECTION 6.06 Duration.................................................................................41
SECTION 6.07 Limitations..............................................................................41
SECTION 6.08 Sole and Exclusive Remedy................................................................42
ARTICLE VII MISCELLANEOUS
SECTION 7.01 Expenses.................................................................................42
SECTION 7.02 Descriptive Headings.....................................................................42
SECTION 7.03 Notices..................................................................................42
SECTION 7.04 Counterparts.............................................................................43
SECTION 7.05 Governing Law............................................................................43
SECTION 7.06 Assignability............................................................................43
SECTION 7.07 Waivers and Amendments...................................................................44
SECTION 7.08 Third Party Rights.......................................................................44
SECTION 7.09 Entire Agreement.........................................................................44
SECTION 7.10 Time of Essence..........................................................................44
SECTION 7.11 Severability.............................................................................44
SECTION 7.12 Exhibits and Schedules...................................................................44
SECTION 7.13 Construction.............................................................................44
SECTION 7.14 Arbitration..............................................................................44
EXHIBITS
Exhibit A: Certificate of Merger
Exhibit B: Form of Seller License Agreement
Exhibit C: Form of Sublease
Exhibit D: Form of Shared Services Agreement
Exhibit E: Form of Non-Competition Agreement
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SCHEDULES
Schedule 1.01(e)(i) Personal Property
Schedule 1.01(e)(ii) Contracts
Schedule 1.01(e)(vii) Intellectual Property
Schedule 1.01(e)(x) Disputed Claims
Schedule 1.01(e)(xi) Prepayments
Schedule 1.02(i) Leased Real Property
Schedule 1.02(ii) Owned Real Property
Schedule 1.03(a) Excluded Assets
Schedule 1.03(c) Excluded Liabilities
Schedule 1.04(a)(ii) Purchase Commitments
Schedule 1.04(a)(vii) Deferred Compensation Agreements
Schedule 1.04(a)(ix) Other Seller and CCD Liabilities
Schedule 1.06 Allocation of Purchase Price
Schedule 2.01(c) Violations, Consents
Schedule 2.01(e) Insurance
Schedule 2.01(g) Tax Bills
Schedule 2.01(h)(i) Liens to be Removed - Owned Real Property
Schedule 2.01(h)(ii) Liens to be Removed - Leased Real Property
Schedule 2.01(h)(iii) Liens to be Removed - New York Apartment Property
Schedule 2.01(h)(vii) Tax Reassessments
Schedule 2.01(i)(i) Environmental Reports
Schedule 2.01(i)(ii) Environmental Matters
Schedule 2.01(i)(iii)(B) Storage Tanks
Schedule 2.01(i)(iii)(C) Transformers
Schedule 2.01(j) Employee Benefit Plans
Schedule 2.01(k) Consents and Approvals
Schedule 2.01(l) Leased Personal Property
Schedule 2.01(m) Contracts
Schedule 2.01(n) Licenses and Permits
Schedule 2.01(o)(vi) Health and Safety Matters
Schedule 2.01(o)(vii) Employee Threshold Number
Schedule 2.01(p) Product Warranties
Schedule 2.01(s) Related Party Transactions
Schedule 2.01(t) CCD Stock Matters
Schedule 2.01(v) Accounts Receivable
Schedule 2.01(w) Permitted Liens
Schedule 4.01(a) Transferred Employees
(Schedules to this agreement have been omitted; the Registrant agrees to
furnish supplementally to the Commission, upon request, a copy of these
schedules.)
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MERGER AGREEMENT
This MERGER AGREEMENT is made and entered into as of July 23, 2001
(the "Agreement"), by and between DESIGN WORKS HOLDING COMPANY, a Delaware
corporation ("Buyer"), DESIGN WORKS, INC., a Delaware corporation ("Merger
Subsidiary"), CROWN CRAFTS, INC., a Georgia corporation ("Seller"), and CROWN
CRAFTS DESIGNER, INC., a Delaware corporation ("CCD").
RECITALS:
WHEREAS, Seller is engaged in the business of, among other things,
designing, manufacturing, marketing, importing, selling and distributing
various types of adult bedding products for the retail market through
unincorporated divisions, wholly-owned subsidiaries and otherwise;
WHEREAS, Seller desires to sell and transfer to Buyer certain assets,
rights and properties, including certain real property, primarily relating to
the Business (as hereinafter defined); and
WHEREAS, Buyer desires to acquire said assets, rights, and properties
from Seller, subject to certain liabilities of Seller relating to the Business;
WHEREAS, Buyer and Seller wish to effectuate the transfer of said
assets, rights and properties through the merger of Seller's wholly-owned
subsidiary, CCD, with Merger Subsidiary, a wholly-owned subsidiary of Buyer, in
the manner and upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and intending to be
legally bound thereby, Buyer and Seller hereby agree as follows:
DEFINITIONS
In addition to the words and terms elsewhere defined herein, the
following terms shall have the meanings specified below when used in this
Agreement:
"ACCOUNTS RECEIVABLE" shall mean all rights to payment described in
Section 1.01(v).
"ACQUIRED ASSETS" shall have the meaning set forth in Section 1.01(e)
of this Agreement and shall include the Discontinued Business Accounts.
"AFFILIATE" shall mean, with respect to any Person, any other Person
that controls or is controlled by or is under common control with, such Person
as determined in accordance with Rule 12b-2 of the General Rules and
Regulations of the Securities Exchange Act of 1934, as amended.
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"AGREEMENT" shall mean this Merger Agreement, together with the
Exhibits and Schedules attached hereto, as the same may be amended from time to
time in accordance with the terms hereof.
"ASSUMED LIABILITIES" shall mean all contracts, obligations and
liabilities required to be assumed by Buyer at Closing in accordance with
Section 1.04 of this Agreement.
"BUSINESS" shall mean the adult bedding business of Seller and its
Affiliates consisting of (i) the ▇▇▇▇▇▇ ▇▇▇▇▇ Home Product Line owned by CCD,
(ii) the Royal Sateen product line and the related agreement with Kitan
Consolidated Industries, Limited ("Kitan"), (iii) the Kitan private label
product line primarily sold to Costco, (iv) the private label "I Love Daisies"
product line sold to ▇. ▇. Penney, (v) the private label "Denim" product line
sold to Linens & Things and others, and (vi) any discontinued adult bedding
product lines which were shipped from North Carolina.
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of
Georgia.
"BUYER" shall mean Design Works Holding Company, a Delaware
corporation.
"▇▇▇▇▇▇ ▇▇▇▇▇ LICENSE" shall mean any and all agreements between
Seller and ▇▇▇▇▇▇ ▇▇▇▇▇, Inc. with respect to (i) the use by Seller of any
▇▇▇▇▇▇ ▇▇▇▇▇ names, marks or logos, (ii) the advertising, marketing and sale of
products bearing any ▇▇▇▇▇▇ ▇▇▇▇▇ or IDC name, ▇▇▇▇ or logo, and (iii) any
other related matters.
"CCD" shall mean Crown Crafts Designer, Inc., a Delaware corporation.
"CCD STOCK" shall mean all of the issued and outstanding capital stock
and other equity securities, if any, of CCD.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger of CCD
and Merger Subsidiary to be filed with the Secretary of State of the State of
Delaware substantially in the form attached hereto as Exhibit "A".
"CLOSING" shall mean the consummation of the transactions contemplated
by this Agreement.
"CLOSING DATE" shall mean Monday, July 23, 2001.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACTS" shall mean those contracts and agreements described in
Section 1.01(e)(ii) of this Agreement.
"DISCONTINUED WOVEN PRODUCTS ACCOUNTS" shall mean all disputed
accounts receivable and all rights to collect or receive the proceeds of
disputed customer charge-backs, disputed customer credits, disputed customer
adjustments and the like existing, potentially existing,
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available or potentially available with respect to or arising out of the woven
products business formerly conducted by Seller, excluding only accounts
receivable and disputed claims primarily related to the ▇▇▇▇▇▇▇ Weavers
business and post-closing claims relating to woven products sold to Aladdin
Manufacturing Corporation.
"EFFECTIVE TIME" shall mean the time on the Closing Date on which the
Certificate of Merger is filed by CCD and Merger Subsidiary with the Secretary
of State of the State of Delaware.
"EMPLOYEE BENEFIT PLAN" shall have the meaning set forth in Section
2.01(j)(i) of this Agreement.
"ENVIRONMENTAL LAW" shall mean all Laws, which are administered,
interpreted or enforced by the United States Environmental Protection Agency
and/or state and local agencies with primary jurisdiction over pollution or
protection of the environment.
"ENVIRONMENTAL PERMITS" means any licenses, permits, registrations,
governmental approvals and consents which are required under or issued pursuant
to any Environmental Law, including any permits, approvals or consents required
to emit any Hazardous Materials to the air, to operate, modify, install, or
construct any air pollution control equipment, or to treat, store, dispose of
or transport Hazardous Materials.
"EQUIPMENT" shall mean all machinery, presses, equipment, boilers,
heating and cooling systems, racking systems, fork lifts, trailers, motorized
production or material handling equipment, molds, tooling, mechanical and
electrical parts, repair parts, tools, office equipment, computer hardware and
accessories, machine tools, instruments, controls, mechanical and electrical
systems, and telephone system, including all such tangible personal property
described in Schedule 1.01(e).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCESS COVERAGE" shall mean the coverage provided by that certain
policy no. ▇▇▇-▇▇-▇▇ issued by American International South Insurance Company
to Seller provided coverage for the periods September 1, 2000 to September 1,
2001.
"EXCLUDED ASSETS" shall mean the assets described in Section 1.03(a)
of this Agreement to be retained by Seller and/or its Affiliates and not to be
included in the Acquired Assets.
"EXCLUDED LIABILITIES" shall mean the liabilities, obligations and
commitments described in Section 1.03(c) and/or Schedule 1.03(c) of this
Agreement which are to be retained and/or assumed by Seller and/or its
Affiliates, such that (i) as of the Closing Date, CCD and the Surviving
Corporation will have no liability, obligation or responsibility for any of the
Excluded Liabilities, except liabilities arising in the ordinary course of the
business of CCD for which Seller shall have assumed primary liability and
undertaken indemnity obligations at Closing, and (ii) Buyer shall never assume
or become liable for any Excluded Liability.
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"GAAP" means generally accepted United States accounting principles,
consistently applied.
"HAZARDOUS MATERIAL" or "HAZARDOUS MATERIALS" shall have the meaning
set forth in Section 2.01(i)(iv)(B) of this Agreement.
"INFANT BUSINESS" shall mean any business conducted by or related to
▇▇▇▇▇▇▇▇▇ Weavers, Inc., Crown Crafts Infant Products, Inc., Hamco, Inc.,
Burgundy Interamericana S.A. de C.V., Crown Crafts de Mexico S.A. de C.V., and
any infant, juvenile or retail lines of business of Seller, including "Pillow
Buddies".
"INTELLECTUAL PROPERTY" shall mean the intangible personal property
described in Section 1.01(e)(vii) and Schedule 1.01(e)(vii) of this Agreement.
"INVENTORY" shall have the meaning set forth in Section 1.01(e)(iv)
of this Agreement.
"KNOWLEDGE" shall mean, with respect to any matter, (i) in the case
of Seller, the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
or ▇▇▇▇▇▇ ▇▇▇▇▇▇ or any other officer or management employee of Seller having
primary responsibility for such matter, except that the knowledge of any
employee, officer or director of Buyer or any of its Affiliates who is also an
employee, officer or director of Seller shall not be attributed to Seller, and
(ii) in the case of Buyer, the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any other officer or management
employee of Buyer having primary responsibility for such matter, as well as the
actual knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇, a consultant to Buyer.
"LAW" shall mean any foreign, federal, state, local or other law,
rule, regulation or governmental requirement of any kind, and the rules,
regulations and orders promulgated thereunder.
"LEASES" shall mean those Real Property leases described in Section
1.02(i) and Schedule 1.02(i) of this Agreement.
"LIEN" shall mean, with respect to any Acquired Assets, (a) any
mortgage, pledge, lien, security interest, hypothecation, charge, claim,
reservation, condition, easement, right of way, covenant, lease, sublease,
right of occupancy, encroachment, title defect, imposition, security interest,
tenancy, option, mineral rights agreement, or any other exception to title of
any land, community property interest, equitable interest, option, right of
first refusal, other encumbrance, restriction or adverse claim of any land, or
any restriction on use, voting right, transfer, right to receipt of income, or
exercise of any other attribute of ownership, including tax liens for taxes
then due and owing, and (b) the interest of a vendor or lessor under any
conditional sale agreement, financing lease or other title retention agreement
relating to such asset.
"MERGER" shall have the meaning set forth in Section 1.01 of this
Agreement.
"MERGER CONSIDERATION" shall mean the consideration paid by or for the
benefit of Buyer in connection with the Merger.
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"MERGER SUBSIDIARY" shall mean the Buyer's wholly-owned subsidiary
Design Works, Inc., a Delaware corporation.
"NEW YORK APARTMENT PROPERTY" shall have the meaning set forth in
Section 1.01(e)(ii).
"NON-BUSINESS ASSETS" shall mean any asset, account receivable,
inventory, real property, tangible or intangible personal property, equipment,
leasehold improvement, contract or agreement, intellectual property, marketing
material, prepayment, record or product line other than the Acquired Assets,
the Specified Assets and the Business, which primarily relate to (i) the woven
products business sold to Aladdin Manufacturing Corporation, (ii) the ▇▇▇▇▇▇▇
Weavers business, (iii) all assets or property (other than inventory) located
in Plant Number 1, Timberlake, North Carolina, and (iv) all real property,
inventory and other assets or property located at the Roxboro, North Carolina
outlet store.
"OWNED REAL PROPERTY" shall have the meaning set forth in Section
1.02(ii) and on Schedule 1.02(ii) of this Agreement.
"OWNERSHIP AGREEMENT" shall have the meaning set forth in Section
1.01(e)(ii).
"PAST DUE AMOUNTS" shall mean any and all amounts payable by Seller of
every kind and nature which, according to the original terms applicable thereto
(established by invoice, agreement or otherwise), became due (without the
imposition of interest, penalties or a higher cost or the extension of time)
before the Closing Date but were not paid before the Closing Date, it being
understood, in this regard, that all Kitan invoices (other than Kitan invoices
relating to any goods held on consignment) shall be deemed "due on receipt".
"PERMITTED LIENS" shall mean those liens, encumbrances, charges,
security interests and claims described on Schedule 2.01(w).
"PERSON" shall mean a natural person, corporation, trust, partnership,
limited liability company, joint venture, governmental entity, agency or branch
or department thereof, or any other form of business organization (whether or
not regarded as a legal entity under applicable Law).
"PERSONAL PROPERTY" shall mean the tangible personal property
described in Section 1.01(e)(i) and Schedule 1.01(e)(i).
"PREPAYMENTS" shall have the meaning set forth in Section 1.01(e)(xi).
"PRIMARY COVERAGE" shall mean that Executive Protection Policy no.
8114-82-63-I-ATL issued to Seller by Federal Insurance Company for the policy
period September 1, 200 to September 1, 2001.
"PURCHASE PRICE" shall mean the purchase price paid for the Specified
Assets in accordance with Section 1.05 of this Agreement.
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"REAL PROPERTY" shall have the meaning set forth in Section 1.02(ii).
"RECORDS" shall mean those books, records and documents described in
Section 1.01(e)(iii) of this Agreement.
"REPORTABLE EVENT" has the meaning set forth in ERISA ss.4043.
"SELLER" shall mean Crown Crafts, Inc., a Georgia corporation.
"SELLER LICENSE AGREEMENT" shall have the meaning set forth in Section
1.10 of this Agreement.
"SHARED SERVICES AGREEMENT" shall mean that certain agreement referred
to in Section 3.09 which is to be executed at Closing by Buyer and Seller
substantially in the form set forth on Exhibit "D" pursuant to which Buyer and
Seller agree to share certain services and facilities.
"SPECIFIED ASSETS" shall have the meaning set forth in Section 1.02 of
this Agreement.
"SUBLEASE" shall have the meaning set forth in Section 3.08 of this
Agreement.
"SURVIVING CORPORATION" shall mean CCD upon and after CCD's merger
with the Merger Subsidiary as provided in Section 1.01 of this Agreement.
"THREATENED" shall mean, as to a Person, that such Person has
Knowledge that a demand or statement has been made (orally or in writing) or a
notice has been given (orally or in writing) that a claim, proceeding, dispute,
action, or other matter may be asserted, commenced, taken, or otherwise pursued
in the future against such Person.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section
4.01(b) and shall include those employees of Seller or CCD who remain or become
employees of Buyer or the Surviving Corporation as of the Closing Date.
ARTICLE I. MERGER AND PURCHASE OF SPECIFIED ASSETS
SECTION 1.01 THE MERGER. On and subject to the terms and conditions of
this Agreement, and in consideration of the Merger Consideration to be paid to
Seller at Closing, Merger Subsidiary shall merge with and into CCD (the
"Merger") and CCD shall be the surviving corporation ("Surviving Corporation").
CCD and the Merger Subsidiary shall file with the Secretary of State of the
State of Delaware a Certificate of Merger in the form attached hereto as
Exhibit "A". The Merger shall become effective on the Closing Date at the time
CCD and Merger Subsidiary file the Certificate of Merger with the Secretary of
State of the State of Delaware ("Effective Time"). The Merger shall have the
effect set forth in the Delaware General Corporation Law. At any time on or
after the Closing Date, the Surviving Corporation may take any action
(including executing and delivering any document) in the name and on behalf of
either the Merger Subsidiary or CCD in order to carry out the transactions
contemplated by this Agreement. The parties further agree as follows:
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(a) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Surviving Corporation shall be amended and restated as of
the Effective Time to read as did the Certificate of Incorporation of the
Merger Subsidiary immediately before the Effective Time, and the name of the
Surviving Corporation shall be changed to Design Works, Inc.
(b) BYLAWS. The Bylaws of the Surviving Corporation shall be
amended and restated as of the Effective Time to read as did the Bylaws of the
Merger Subsidiary immediately before the Effective Time.
(c) DIRECTORS AND OFFICERS. The directors and officers
of the Merger Subsidiary shall become the directors and officers of the
Surviving Corporation at and as of the Effective Time (retaining their
respective positions and terms of office).
(d) CONVERSION OF SHARES. At, and as of, the Effective Time,
(i) the CCD Stock shall be converted into the right of Seller, as holder of the
CCD Stock immediately prior to the Effective Time, to be paid the Merger
Consideration, (ii) none of the CCD Stock shall be deemed to be outstanding and
Seller shall have no rights with respect thereto other than the right to
receive the Merger Consideration, and (iii) each share of the Merger Subsidiary
Stock shall be converted into one share of Common Stock, $.0001 par value per
share, of the Surviving Corporation.
(e) ACQUIRED ASSETS. Seller covenants, agrees, represents and
warrants that immediately before and at the Effective Time, CCD shall hold good
and legal title, free and clear of all Liens except Permitted Liens, in, to and
under the Discontinued Woven Products Accounts and all of the following assets,
rights and properties of Seller, its subsidiaries and Affiliates, wherever
located, primarily relating to or primarily used or held for use in connection
with the Business as the same may exist on the day next preceding the Closing
Date (collectively the "Acquired Assets", which shall in no event include the
Excluded Assets):
(i) TANGIBLE PERSONAL PROPERTY. Except as provided
in Section 1.03(a), (A) all furniture, office
fixtures, artwork, store fixtures, appliances and
other items of tangible personal property, whether
owned or leased, located on or in the Sublease
premises (but only to the extent identified on
Schedule 1.01(e)(i)), on or in the Real Property or
the New York Apartment Property, or "in store", (B)
all motor vehicles, and other items of tangible
personal property, wherever located, which are
identified on Schedule 1.01(e)(i), (C) the tangible
personal property subject to the leases described on
Schedule 1.01(e)(ii) or which are later disclosed to
Buyer and accepted by Buyer in writing within ten
(10) days after such disclosure, and (D) all laptop
computers, computer accessories, office equipment,
supplies, and other tangible personal property in
the possession of, or under the care, custody or
control, of Transferred Employees (collectively, the
"Personal Property").
(ii) CONTRACTS. All contracts, agreements,
vendor arrangements or agreements, confidentiality
agreements, leases of Personal Property and
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licenses, together with the commitments, purchase
orders, license agreements, work orders and other
agreements listed on Schedule 1.01(e)(ii), as
amended, including the ▇▇▇▇▇▇ ▇▇▇▇▇ License, any and
all License Agreements between Seller and Springs
Industries, Inc., Pacific Coast Feather and Fremaux,
all agreements between Seller and Kitan, and that
certain Agreement as to Use of Cooperative Apartment
dated as of January 30, 1992 between Seller and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the "Ownership Agreement")
with respect to the New York Apartment (the "New
York Apartment Property") (collectively, the
"Contracts").
(iii) RECORDS. All books, records and documents,
including records relating to the Real Property, the
New York Apartment Property, the Acquired Assets,
environmental compliance records, purchasing and
sales records, personnel records of all Transferred
Employees, accounting and payroll records, customer
lists, supplier lists, parts lists, correspondence,
manuals, engineering data, designs, drawings,
blueprints, plans, specifications, lists, computer
media, software and software documentation, and
other written materials, and including the
Certificate or Articles of Incorporation, Bylaws,
corporate minutes, minute books, stock books,
corporate seals and other corporate, business and
legal records of CCD (collectively, the "Records").
(iv) INVENTORY. Except as provided in Section
1.03(a), all inventories, raw materials, work in
process, finished goods, supplies (including office
supplies), spare parts, packaging materials and
samples whether held at a location controlled by
Seller, Seller's independent contractors or
suppliers or their contractors or suppliers, in
storage, in customs, or in transit, including all
deposits in respect thereof, bills of lading,
documents of title, and documents required to clear
customs, and shipping and storage documentation
(collectively, the "Inventory").
(v) ACCOUNTS RECEIVABLE. All rights to payment, in
whatever form, which arise or accrue before the
Closing Date with respect to the Business whether
disputed or undisputed, including all rights to
payment for goods sold or services rendered, all
royalties, commissions, supplier credits, licensor
credits, rebates, amounts "due from factor" in CIT
account nos. 1613, 1620 and 1626 (excluding any
receivables relating to "Pillow Buddies", "Mohawk"
or "▇▇▇▇▇▇▇ Weavers") and all accounts, general
intangibles, notes, instruments, chattel paper and
promissory notes together with any and all
adjustments with respect thereto (collectively the
"Accounts Receivable").
(vi) MARKETING MATERIALS. All forms, labels,
shipping materials, brochures, artwork, photographs,
advertising materials and any similar items.
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(vii) INTELLECTUAL PROPERTY. Except as provided in
Section 1.03(a), all patents, inventions,
copyrights, trademarks, service marks, trade names,
logos, corporate names, product line names, designs,
screens, film, art and artwork libraries, packaging,
trade secrets, confidential business information,
research, marketing, technical know-how, technical
data, licenses and license rights, formulas,
compositions, manufacturing or production processes,
designs, drawings, patterns, computer software and
related documentation and source codes, all business
application software developed by Crown Crafts, Inc.
prior to Closing except software specific to the
Infant Business or ▇▇▇▇▇▇▇▇▇ Weavers, UPC codes, and
all translations, adaptations, derivations, and
combinations thereof, all license agreements, rights
of use, applications, registrations, and renewals in
connection therewith and all rights to royalties or
other payments with respect thereto or arising
therefrom, including the matters described on
Schedule 1.01(e)(vii) and any and all such rights
arising from Contracts (collectively the
"Intellectual Property").
(viii) CERTAIN RIGHTS. All guarantees, warranties,
indemnities and similar rights with respect to, or
covering, any of the Acquired Assets.
(ix) INTANGIBLE PERSONAL PROPERTY AND GOODWILL.
Except as provided in Section 1.03(a), the Business
and all intangible personal property and goodwill of
the Business not otherwise described in Section
1.01(e), including all licenses, permits, vendor or
customer numbers or codes and all other rights,
permissions and identifications of every kind or
nature, including RN numbers of CCD.
(x) DISPUTED CLAIMS. Except as provided in Schedule
1.01(e)(x), all rights to collect or receive the
proceeds of any and all causes of action, lawsuits,
judgments, disputed customer charge-backs, supplier
charge-backs, claims and demands of any nature
existing, potentially existing, available or
potentially available with respect to the Business
or the ownership, use, function or value of the
Acquired Assets.
(xi) PREPAYMENTS. All credits, prepaid royalties,
prepaid expenses, rental payments, association fees,
deferred charges, advance payments, security
deposits, funds advanced to customers and prepaid
items relating to, or arising out of, the operation
of the Business or with respect to any of the Real
Property, the New York Apartment Property or other
Acquired Assets, including those listed on Schedule
1.01(e)(xi) (the "Prepayments"), and such amounts
shall not be subject to proration except as
expressly provided in Section 1.08.
(f) SELLER'S ASSIGNMENT OF ACQUIRED ASSETS TO CCD. At the
Closing, Seller shall sell, transfer and assign, and cause its subsidiaries and
Affiliates to sell, transfer and assign to CCD before the Effective Time, all
of the respective rights, title and interest of each in and to any and all of
the Acquired Assets such that CCD is vested immediately before the Effective
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Time and the Surviving Corporation becomes vested at the Effective Time with
good and legal title in and to all of the Acquired Assets free and clear of all
Liens except Permitted Liens.
SECTION 1.02 SPECIFIED ASSETS. As of the Closing Date, the Buyer shall
cause the Surviving Corporation to purchase all of the Specified Assets for the
Purchase Price, which Specified Assets shall consist of the following assets
and real property: (i) all real property leased or subleased by Seller and/or
CCD described on Schedule 1.02(i) (collectively, the "Leased Real Property")
and all real property leases (collectively, the "Leases"), licenses, permits,
approvals and qualifications relating thereto; (ii) all real property owned by
Seller described on Schedule 1.02(ii) (collectively, the "Owned Real Property")
(the Leased Real Property and the Owned Real Property are referred to
collectively as the "Real Property"); and (iii) all easements, licenses, rights
and appurtenances relating to the Real Property or the New York Apartment
Property.
SECTION 1.03 EXCLUDED ASSETS AND LIABILITIES.
(a) EXCLUDED ASSETS. As of the Closing Date, neither the
Surviving Corporation, the Buyer nor CCD will own, hold title to, acquire, have
or retain any rights, title or interest in or to any of the following assets or
any of the assets identified on Schedule 1.03(a) (collectively the "Excluded
Assets"):
(i) the name and ▇▇▇▇ Crown Crafts, Inc., in
whole or in part, or any name or ▇▇▇▇ derived
therefrom, other than as provided in Section 1.10
hereof and any related internet domain names;
(ii) the income tax net operating loss
carryforward of CCD (which shall be assigned by CCD
to Seller at or prior to Effective Time);
(iii) the Non-Business Assets;
(iv) except as may otherwise be provided in the
Sublease, all real property and real property leases
which are not included in the Specified Assets,
together with all structures, fixtures, mechanical
systems, easements, permits, licenses, rights and
appurtenances relating thereto;
(v) all shares of stock or other equity
securities of subsidiary corporations or other
corporations or entities, which are not included in
the Specified Assets;
(vi) the Infant Business and all assets, accounts
receivable, inventories, real property, equipment,
leasehold improvements, contracts and agreements,
intellectual property, marketing materials,
prepayments, records, product lines or other
tangible or intangible personal property of any kind
or nature, wherever located, primarily relating to
or primarily used or held for use in connection with
the Infant Business;
(vii) all claims or potential claims for refunds or
credits with respect to any taxes attributable to
any period before the Closing Date, without
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regard to whether such claims or credits arise with
respect to the Business; or
(viii) all leased personal property (including motor
vehicles) that is not listed on Schedule 1.01(e)(ii)
or later disclosed to Buyer and accepted by Buyer in
writing as provided in Section 1.01(e)(ii).
(b) QUITCLAIM OF ASSETS BY CCD. CCD shall quitclaim to Seller
all of its right, title and interest in and to any and all of the Excluded
Assets such that, as of the Closing Date, CCD will not have, hold, acquire or
retain any right, title or interest in or to any of the Excluded Assets, and
the Surviving Corporation and Buyer shall never have, hold, acquire or retain
any right, title or interest in or to any of the Excluded Assets.
(c) EXCLUDED LIABILITIES. As of the Closing Date, neither
CCD, the Buyer nor the Surviving Corporation shall retain, have or assume any
liability, obligation or responsibility for, or with respect to, any of the
following liabilities, obligations or commitments or any of the liabilities,
obligations or commitments identified on Schedule 1.03(c) (collectively the
"Excluded Liabilities"):
(i) all liabilities, obligations and commitments of
Seller or CCD relating to or arising out of the
operation of the Business or the ownership or use of
the Acquired Assets and the Specified Assets prior
to the Closing Date other than those expressly
included in the Assumed Liabilities;
(ii) all Past Due Amounts of every kind and nature,
however arising, whether related or unrelated to the
Business, including those liabilities and
obligations which, but for being Past Due Amounts,
would be included in the Assumed Liabilities;
(iii) any claw-back of any payment received by
Seller or CCD prior to the Closing Date whether
arising with respect to the Business or otherwise
and whether based on preferential payment,
fraudulent transfer or any other void or voidable
transaction of any kind or nature;
(iv) all liabilities and obligations of Seller or
CCD to file reports, returns, statements or the like
or to pay or make deposits with respect to any taxes
arising during or from, or attributable to, any
period prior to the Closing Date;
(v) all liabilities of Seller for severance
payments arising on or before the Closing Date;
(vi) all accrued but unpaid salaries, wages,
bonuses, incentive compensation, holiday pay, sick
pay, or other compensation or payroll items
(including deferred compensation) in respect of the
Transferred Employees of Seller and CCD prior to the
Closing Date;
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(vii) all liabilities or obligations arising from
the participation by Transferred Employees in, the
accrual of benefits or compensation under, or the
failure to participate in or to accrue compensation
or benefits under, any Plan or other employee or
retiree benefit or compensation plan, program,
practice, policy, agreement or arrangement of Seller
or CCD prior to the Closing Date;
(viii) all liabilities or obligations relating to or
arising in connection with any and all claims for
workers' compensation benefits as set forth in
Section 4.03;
(ix) all liabilities and obligations of Seller
and/or its Affiliates which do not relate to or
arise out of the operation of the Business or the
ownership or use of the Acquired Assets or the
Specified Assets, including customer charge-backs,
customer credits and customer adjustments arising
with respect to the Infant Business;
(x) all liabilities and obligations of Seller and/or
its Affiliates with respect to the Discontinued
Woven Products Accounts for customer rebates or
customer charge-backs, customer credits or customer
adjustments first asserted on or after the Closing
Date; and
(xi) all product liability claims arising from or
with respect to goods shipped by Seller or any of
its Affiliates (other than CCD) prior to the Closing
Date except that, in the event either Buyer or the
Surviving Corporation is able to obtain product
liability insurance coverage, without additional
premium cost, for claims against CCD arising out of
the shipment of goods or products prior to Closing,
then such liabilities shall not be Excluded
Liabilities for purposes of this Agreement.
(d) SELLER'S ASSUMPTION OF LIABILITIES. Seller shall assume
and agree to pay, perform or otherwise discharge any and all liabilities,
obligations commitments of CCD with respect to all of the Excluded Liabilities
such that (i) as of the Closing Date, CCD and the Surviving Corporation will
have no liability, obligation or responsibility for any of the Excluded
Liabilities, except liabilities (which arose in the ordinary course of the
business of CCD), for which Seller shall have assumed liability and undertaken
indemnity obligations at Closing, and (ii) Buyer never assumes or becomes
liable for any Excluded Liability.
SECTION 1.04 ASSUMED LIABILITIES.
(a) On the terms and subject to the conditions set forth
herein, and in consideration of the Merger Consideration, immediately before
and at the Effective Date, CCD shall, except for the Excluded Liabilities,
assume and be or become liable for the payment and/or performance of, and Buyer
shall cause the Surviving Corporation to pay and discharge directly when due,
the following Contracts, obligations and liabilities (collectively, the "CCD
Liabilities"): (i) all of the obligations of Seller and CCD outstanding as of
the Closing Date to fill
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customer orders with respect to the Business; (ii) all commitments of Seller
and CCD outstanding as of the Closing Date for the purchase of raw materials,
supplies and services with respect to the Business (A) as set forth on Schedule
1.04(a)(ii) but only to the extent that such commitments do not include any
Past Due Amounts and (B) any such commitments outstanding as of the Closing
Date that are not set forth on such schedule and of which Buyer has Knowledge
as of the Effective Time (each an "Unlisted Commitment") to the extent that
such Unlisted Commitment does not exceed $10,000 and does not include any Past
Due Amounts and provided that the aggregate of all such Unlisted Commitments
shall not exceed $200,000; (iii) all of the obligations and liabilities of
Seller and CCD arising out of shipments made pursuant to customer routing
guides, the terms and conditions of all customer purchase orders and the
agreements, contracts and commitments set forth on Schedule 1.01(e)(ii); (iv)
all obligations arising on or after the Closing Date under Contracts, including
the ▇▇▇▇▇▇ ▇▇▇▇▇ License, but only to the extent that such obligations do not
include any Past Due Amounts, liabilities under any Personal Property leases
not listed on Schedule 1.01(e)(ii) or liabilities arising from Contracts of
which Buyer does not have Knowledge as of the Effective Time; (v) all
obligations arising on or after the Closing Date under Leases; (vi) all
commissions payable to non-employee salespersons of Seller and CCD in respect
of orders booked by Seller for the Business but not shipped prior to the
Closing Date; (vii) all obligations of Seller under the deferred compensation
agreements with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ identified on Schedule 1.04(a)(vii); (viii)
all trade accounts payable of Seller and CCD arising from the conduct of the
Business in the ordinary course but only to the extent such payables do not
include any Past Due Amounts other than any Past Due Amounts that came due at
anytime after July 20, 2001; (ix) all other liabilities of Seller and CCD
arising from the conduct of the Business in the ordinary course and identified
on Schedule 1.04(a)(ix) but only to the extent such liabilities do not include
any Past Due Amounts; (x) all liabilities and obligations pertaining to the
operation and ownership of the Business arising on or after the Closing Date;
and (xi) all customer charge-backs, customer credits and customer adjustments
arising with respect to the Business. Notwithstanding the foregoing, any other
provision hereof, or any Schedule or Exhibit hereto, or any disclosure to
Buyer, the Assumed Liabilities shall not, in any circumstance, include any
Excluded Liability.
(b) At the Closing, (i) the Surviving Corporation shall
assume and agree to pay and perform on a timely basis all of the Assumed
Liabilities, if any, for which it is not then liable by executing and
delivering to Seller an assumption agreement in a form reasonably satisfactory
to Seller and (ii) Seller shall assume and agree to pay and perform on a timely
basis all of the Excluded Liabilities, if any, for which it is not then liable.
SECTION 1.05 PAYMENT OF MERGER CONSIDERATION AND PURCHASE PRICE. At
the Closing, Buyer shall cause the Surviving Corporation to pay Seller, by wire
transfer in immediately available funds to an account designated by Seller in
writing, the sum of Eight Million Five Hundred Thousand Dollars ($8,500,000),
which shall be comprised of the Merger Consideration ($6,348,912.66) and the
Purchase Price ($2,151,087.34). The Merger Consideration and the Purchase Price
shall be subject to adjustment as provided in Section 1.08(b) below.
SECTION 1.06 ALLOCATION OF PURCHASE PRICE; TAX BASIS. The parties
agree (i) that the Purchase Price shall be allocated as set forth in Schedule
1.06 and (ii) that any Acquired Assets transferred to CCD by Seller or any of
its Affiliates in connection with the
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consummation of the transactions contemplated hereby shall be transferred at
book value. The Purchase Price allocation shall be determined by Buyer and
agreed to by Seller. Buyer and Seller agree that neither will take a position
on any income tax return, before any governmental agency charged with the
collection of any income tax or in any judicial proceeding that is in any
manner inconsistent with the terms of this Section 1.06 without the written
consent of the other party.
SECTION 1.07 TRANSFER TAXES. Buyer and Seller shall each pay an equal
share of all sales, real estate, transfer, documentary, stamp and use taxes, if
any, arising out of the transfer or conveyance of the Acquired Assets.
SECTION 1.08 PRORATION.
(a) The liabilities and obligations of Seller for property
taxes relating to the Real Property or the New York Apartment Property shall be
prorated as of the Closing Date with liabilities accrued before the Closing
Date charged to Seller and prepayments attributable to periods on or after the
Closing Date credited to Seller:
(b) The liabilities and obligations of Seller and/or CCD for
personal property taxes shall be prorated as of the Closing Date based on the
return value of the Acquired Assets, determined in the same manner as the
property tax evaluation, as of the Closing Date and amounts so apportioned
shall be paid by the Surviving Corporation.
SECTION 1.09 CONSENT OF THIRD PARTIES.
(a) Seller and Buyer shall use their reasonable efforts to
obtain all necessary consents for the assignment to the Surviving Corporation
of all Contracts listed on Schedule 1.01(e)(ii), including consents to the
assignment of or otherwise necessary with respect to the ▇▇▇▇▇▇ ▇▇▇▇▇ License,
the agreements between Seller and Kitan, the Leases, the "CDS" contract and any
material Personal Property leases, license agreements or other Contracts
included in the Acquired Assets.
(b) Notwithstanding anything to the contrary in this
Agreement, this Agreement shall not constitute an agreement to assign or
transfer any license, instrument, Contract, Lease, permit, governmental
approval or other agreement or arrangement or any claim, right or benefit
arising thereunder or resulting therefrom if an assignment or transfer or an
attempt to make such an assignment or transfer without the consent of a third
party would constitute a breach or violation thereof or affect adversely the
right of Buyer or Seller thereunder; and any transfer or assignment to Buyer by
Seller of any interest under any such instrument, contract, lease, permit or
other agreement or arrangement that requires the consent of a third party shall
be made subject to such consent or approval being obtained. In the event any
such consent or approval is not obtained on or prior to the Closing Date, Buyer
and Seller shall continue to use all reasonable efforts to obtain any such
approval or consent after the Closing Date until such time as such consent or
approval has been obtained, and Seller will cooperate with Buyer in any lawful
and economically feasible arrangement to ensure that Buyer shall receive the
interest of Seller in the benefits under any such instrument, contract, lease
or permit or other agreement or arrangement, including performance by Seller as
agent, if economically
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feasible; provided that Buyer shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent Buyer
would have been responsible therefor hereunder if such consent or approval had
been obtained; and provided further that nothing herein shall require Seller to
pay or forfeit any fees or make any other type of payment to any of the
licensors described in Section 1.08(a) other than payments due under existing
agreements in order to obtain their consent to the transfer or assignment of
the licenses listed thereon, it being understood that any such fees and
payments which are paid with Buyer's consent shall be the sole responsibility
of Buyer. Nothing in this Section 1.09 shall be deemed a waiver by Buyer of the
requirement of this Agreement that CCD shall have received on or before the
Effective Date an effective assignment of all of the Acquired Assets nor shall
this Section 1.09 be deemed to constitute an agreement to exclude from the
Acquired Assets any assets described under Section 1.01(e) of this Agreement.
SECTION 1.10 SELLER LICENSE AGREEMENT. At the Closing, Buyer, CCD and
Seller shall execute and deliver a license agreement substantially in the form
of Exhibit "B" hereto which will grant Surviving Corporation (i) a royalty free
right to use Seller's adult bedding brand and logo for three (3) years from the
Closing with respect to Costco Wholesale Corporation and otherwise for two (2)
years from the Closing, provided that Buyer and Surviving Corporation shall use
their best efforts to change said brand and logo as soon as reasonably
practicable after the Closing Date; and (ii) a royalty free right to use
Seller's RN numbers related to the Business until the earlier of two (2) years
from the Effective Date or when all labels and inserts included in the Acquired
Assets are depleted, whichever first occurs (the "Seller License Agreement").
Notwithstanding the foregoing, in the event of (i) a sale of majority ownership
or control of Seller to any Person (other than Seller's lender banks) who,
prior to such sale, was not an Affiliate of Seller, (ii) a merger,
consolidation or reorganization of Seller as a result of which the shareholders
of Seller immediately before any such merger, consolidation or reorganization
own less than a majority of the combined voting power of the entity resulting
from any such merger, consolidation or reorganization, or (iii) a sale,
exchange or other disposition of a majority of Seller's assets to any Person
who, prior to such sale, exchange or other disposition, was not an Affiliate of
Seller; then, in each such case, Surviving Corporation shall cease using
Seller's adult bedding brand and logo on any goods shipped more than one
hundred eighty (180) days after the consummation of any of the foregoing
transactions.
SECTION 1.11 PHYSICAL INVENTORY. Immediately prior to the Closing
Date, Seller, at its own expense, shall conduct (or cause to be conducted) a
physical count of the Inventory, which shall be observed by representatives of
Buyer's accounting firm, Buyer, Buyer's financing source and Seller and/or
Seller's designee. Buyer shall, at its own expense, reconcile, document and
book the physical inventory.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF SELLER. As a material
inducement to enter into this Agreement and all other documents to be executed
in connection with this Agreement (the "Related Agreements"), Seller represents
and warrants to Buyer as follows, and acknowledges and confirms that Buyer is
relying upon such representations and warranties in connection with the
execution, delivery and performance of this Agreement, notwithstanding any
investigation made by Buyer or on its behalf:
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(a) ORGANIZATION AND STANDING. Each of Seller and CCD validly
exists under the laws of its jurisdiction of organization. At Closing, Seller
shall deliver to Buyer complete and correct copies of the Articles or
Certificate of Incorporation and Bylaws of Seller, and CCD in effect on the
date hereof.
(b) AUTHORIZATION AND BINDING EFFECT; NO VIOLATION. Seller
has all requisite power and authority to execute, deliver and perform this
Agreement and the Related Agreements. This Agreement has been duly and validly
authorized, executed and delivered by Seller, and constitutes the legal, valid
and binding obligation of Seller, enforceable in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, reorganization,
insolvency and other similar Laws (as hereinafter defined) or equitable
principles relating to or affecting the enforcement of rights of creditors
generally. All other actions and proceedings required by the Articles of
Incorporation and Bylaws or otherwise of Seller and CCD in order to authorize
the execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly taken.
(c) VIOLATIONS AND CONSENTS. Except as set forth on Schedule
2.01(c), the execution, delivery and performance by Seller (and/or CCD) of this
Agreement does not and will not (i) contravene or breach or constitute a
default under any term or provision of the Articles of Incorporation or Bylaws
of Seller, (ii) constitute a violation of any statute, ordinance, judgment,
order, decree, regulation or rule of any court, governmental authority or
arbitrator or, any license, permit or franchise applicable or relating to
Seller, CCD, the Business or the Acquired Assets, or (iii) result in the
creation of any Lien other than a Permitted Lien upon any of the Acquired
Assets pursuant to the provisions of any of the foregoing, or (iii) require any
governmental approval or other consent to be obtained by Seller or CCD.
(d) FINANCIAL STATEMENTS. Seller has heretofore furnished to
Buyer a balance sheet (the "Balance Sheet") as of April 1, 2001 and a statement
of gross profit for the CCD portion of the Business for the year ending April
1, 2001 (the "Financial Statements"). To the best Knowledge of Seller, (i) the
Financial Statements, subject to the notes thereto, have been prepared from the
books and records of Seller and CCD and present fairly in all material respects
the information contained therein for the periods covered thereby, (ii) the
Balance Sheet has been prepared in accordance with GAAP, and (iii) except as
disclosed in the notes thereto, the Financial Statements do not contain any
items of extraordinary income or other income not earned in the ordinary course
of business.
(e) INSURANCE. Schedule 2.01(e) contains a complete and
correct list and summary description of all insurance policies maintained by
Seller and CCD for the benefit of or in connection with the Acquired Assets or
the Business. Such policies are in full force and effect, all premiums due
thereon have been paid, and Seller has complied in all material respects with
the terms and provisions thereof. Except for workers' compensation and medical
insurance claims arising in the ordinary course of business, there are no
claims pending or, to the best Knowledge of Seller, Threatened, under any of
said policies in respect of the Business, no disputes with underwriters are
pending or, to the best Knowledge of Seller, Threatened and all premiums due
and payable in respect of such policies have been paid. Seller has not been
refused any insurance with respect to the Business by any insurance carrier to
which it has applied for insurance or with which it has carried insurance
during the past five (5) years.
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(f) LITIGATION AND COMPLIANCE.
(i) There is no action, suit, claim or proceeding
pending or, to the best Knowledge of Seller,
Threatened with respect to CCD, the Business or the
Acquired Assets or with respect to the transactions
contemplated by this Agreement.
(ii) There are no pending or, to the best Knowledge
of Seller, Threatened actions for condemnation or
other taking by any governmental or
quasi-governmental authority with respect to any
portion of the Real Property.
(iii) Seller and CCD are in material compliance
with, are not in default or violation under, and, to
the best Knowledge of Seller, no valid basis exists
for any claim of noncompliance, default or violation
with respect to, any Law applicable to the Business
or CCD. Seller and CCD are not subject to any
judgment, order or decree entered in any lawsuit or
proceeding that has or may have a material adverse
effect upon the Business. All governmental licenses,
consents, authorizations and permits required in
connection with the Business and the operations of
CCD have been obtained and are in full force and
effect, other than those that, if not obtained or in
full force and effect, could not reasonably be
expected to have a material adverse effect on the
Business or CCD.
(g) TAXES AND OTHER PAYMENTS. With respect to all periods
prior to the Closing Date, Seller has paid, or will timely pay, all federal,
state, local and foreign taxes, including sales, use, real property and
personal property taxes, penalties and other payments required, as the case may
be, to be paid or currently due in respect of the Business, the Acquired Assets
and CCD for all periods prior to the Closing Date; the payment of any such tax
is not in default; and Seller has duly filed, or will timely file, all tax
reports, returns, statements and the like required to be filed by Seller in
respect of the Business and CCD for all periods prior to the Closing Date.
Seller has not received any notice with respect to, and has no Knowledge of,
any pending or impending special assessments with respect to the Real Property
or any tax deficiency outstanding, proposed or assessed against it, nor has it
executed any waiver of any statute of limitations on the assessment or
collection of any tax. There are no tax liens upon, pending against or, to the
best Knowledge of Seller, Threatened, against Seller or CCD in respect of the
Acquired Assets. Seller has made and transmitted, or will make and transmit in
a timely manner, to the appropriate taxing authorities all required employee
withholding payments with respect to the Business and CCD. True and correct
copies of all real and personal property tax bills for the year 2000 in the
possession of Seller relating to the Acquired Assets are attached hereto as
Schedule 2.01(g).
(h) REAL PROPERTY.
(i) Except for Liens to be satisfied and
released on or before the Closing Date and described
on Schedule 2.01(h)(i) and Permitted Liens,
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Seller has, and on the Closing Date will have, good,
valid and marketable fee simple title to the Owned
Real Property, free and clear of all Liens. There
are no outstanding options or rights of first
refusal to purchase the Owned Real Property or any
portion thereof or interest therein granted by
Seller, and, to the best Knowledge of Seller, no
other Person whatsoever has any deed, contract,
lease or other evidence of any right or interest in
or to the Owned Real Property other than Permitted
Liens.
(ii) Seller has delivered to Buyer correct and
complete copies of all Leases. To the best Knowledge
of Seller, each Lease is legal, valid, binding,
enforceable, and in full force and effect, except as
may be limited by bankruptcy, insolvency,
reorganization and similar laws affecting creditors
generally and by the availability of equitable
remedies. To the best Knowledge of Seller, Seller is
not in default, violation or breach in any respect
under any Lease, and, to the best Knowledge of
Seller, no event has occurred and is continuing that
constitutes or, with notice or passage of time or
both, would constitute a material default, violation
or breach under any Lease. To the best Knowledge of
Seller, each Lease grants the tenant under the Lease
the exclusive right to use and occupy the demised
premises thereunder. Except for Liens to be
satisfied and released on or before the Closing Date
and described on Schedule 2.01(h)(ii) and Permitted
Liens, to the best Knowledge of Seller, Seller has
good and valid title to the leasehold estate or
other interest granted under each Lease free and
clear of all Liens arising by, through or under
Seller. To the best Knowledge of Seller, Seller
enjoys peaceful and undisturbed possession under the
Leases for the Leased Real Property. The remaining
term on each Lease is set forth on Schedule
2.01(h)(ii).
(iii) To the best Knowledge of Seller, (i) the
Ownership Agreement is legal, valid, binding,
enforceable and in full force and effect, except as
may be limited by bankruptcy, insolvency,
reorganization and similar laws affecting creditors
generally and by the availability of equitable
remedies, (ii) Seller is not in default, violation
or breach in any respect under the Ownership
Agreement, and (iii) except for Liens to be
satisfied and released on or before the Closing Date
and described on Schedule 2.01(h)(iii) and Permitted
Liens, Seller's rights and interests under the
Ownership Agreement in and to the New York Apartment
Property are free and clear of Liens arising by,
through or under Seller.
(iv) To the best Knowledge of Seller, there are no
eminent domain or other similar proceedings pending
or Threatened affecting any portion of the Real
Property. To the best Knowledge of Seller, there is
no writ, injunction, decree, order or judgment
outstanding, nor any action, claim, suit or
proceeding pending or Threatened relating to the
ownership, lease, use, occupancy or operation by any
Person of any Real Property.
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(v) To the best Knowledge of Seller, the use and
operation of the Real Property in the conduct of the
Business does not violate any instrument of record
or agreement affecting the Real Property. To the
best Knowledge of Seller, there is no violation of
any covenant, condition, restriction, easement or
order of any governmental authority having
jurisdiction over such property or any other Person
entitled to enforce the same affecting the Real
Property or the use or occupancy thereof.
(vi) To the best Knowledge of Seller, the Real
Property complies with all applicable building,
zoning, subdivision and other land use and similar
applicable Laws affecting the Real Property
(collectively, the "Real Property Laws"), and Seller
has not received any notice of violation or claimed
violation of any Real Property Law. To the best
Knowledge of Seller, there is no pending or
anticipated change in any Real Property Law that
will have or result in a material adverse effect
upon the ownership, alteration, use, occupancy or
operation of the Real Property or any portion
thereof. To the best Knowledge of Seller, no current
use by Seller of the Real Property is dependent on a
nonconforming use or other governmental approval the
absence of which would materially limit the current
use of such properties or assets held for use in
connection with, necessary for the conduct of, or
otherwise material to, the Business.
(vii) Each parcel included in the Owned Real
Property is assessed for real property tax purposes
as a wholly independent tax lot, separate from
adjoining land or improvements not constituting a
part of that parcel. Except as set forth on Schedule
2.01 (h)(vii), Seller has not received actual notice
of any contemplated or actual reassessments of the
Owned Real Property or any part thereof for general
real estate tax purposes. No assessments for public
improvements impact fees or similar exactions have
been made against the Owned Real Property that
remain unpaid.
(i) ENVIRONMENTAL MATTERS.
(i) Schedule 2.01(i)(i) contains a true, complete
and accurate listing of, and Seller has delivered,
or caused to be delivered, to Buyer true and
complete copies of, all environmental site
assessments, test results, analytical data, boring
logs, and other environmental reports and studies
conducted by, at the expense of, or on behalf of
Seller or CCD or that are otherwise in the
possession of Seller or CCD, including a Phase I
environmental assessment and compliance audit with
respect to the Roxboro, North Carolina Leased Real
Property.
(ii) Other than as set forth on Schedule
2.01(i)(ii):
(A) (1) there has not been, during the
period which Seller and/or CCD has owned,
leased, operated, managed or occupied the
Real Property (" Ownership Period"), any
Pollution at the Real
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Property or any facilities used for or in
connection with the Business, (2) to the
best Knowledge of Seller, there was no
Pollution (as hereinafter defined) at the
Real Property prior to the date of
commencement of the Ownership Period, and
(3) during the Ownership Period, there have
been no actions, activities, circumstances,
conditions, events or incidents that could
reasonably be expected to form the basis of
any claim against Seller under any
Environmental Law (as hereinafter defined);
(B) during the Ownership Period, the use,
storage, disposal and transportation of all
Hazardous Materials (as hereinafter
defined) by Seller and/or CCD to, at and
from the Real Property has been in
compliance with all applicable Laws, Seller
has not directly or indirectly disposed of
any Hazardous Material at a CERCLA
(Superfund) (as hereinafter defined) or
HSRA (as hereinafter defined) site, and
Seller has not received any notice alleging
that any Pollution exists upon any portion
of the Real Property;
(C) Seller and/or CCD, as the case may be,
has obtained all permits, licenses,
approvals, consents, orders, and
authorizations which are required under
Environmental Laws ("Environmental
Permits") in connection with the Business
or the ownership, use or lease of the
Acquired Assets, and which, if not so
obtained, would cause a material adverse
effect on the ownership, operation or
disposal of the Business or the Acquired
Assets, taken as a whole, and paragraph (C)
of Schedule 2.01(i)(ii) contains a complete
list and description of all such
Environmental Permits,
(D) except as described in paragraph (C) of
Schedule 2.01(i)(ii), Seller and/or CCD, as
the case may be, are in material compliance
with each such Environmental Permit
(including any information provided on the
applications therefor), and no
Environmental Permit restricts Seller from
operating the Business or any equipment or
other Personal Property covered by such
Environmental Permit as currently being
conducted; and
(E) neither Seller nor CCD has entered into
or received, nor is Seller or CCD in
default under, any consent decree,
compliance order, or administrative order
issued by any agency, or any judgment,
order, writ, injunction or decree of any
federal, state, or municipal court or other
governmental authority relating to
Environmental Laws;
(iii) With respect to CCD, the Business and the
Acquired Assets:
(A) there are no actions, suits,
claims, arbitration proceedings, or
complaints pending or, to the best
Knowledge of Seller,
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Threatened by any governmental authority,
municipality, community, citizen or other
entity against Seller or CCD relating to
environmental protection, compliance with
Environmental Laws or the condition of any
of the Real Property, nor is Seller aware
of any unasserted action, suit, claim,
proceeding or complaint the assertion of
which is probable. Neither Seller nor CCD
has been notified of any potential
liability of Seller or CCD under, or
received any requests for information or
other correspondence concerning any site or
facility under, nor has Seller or CCD
received any notice that it is considered
potentially liable under, CERCLA or HSRA,
or any similar law;
(B) all above-ground and underground
storage tanks, oil/water separators, sumps,
and septic systems located on the Real
Property have been identified in Schedule
2.01(i)(iii)(B), together with a
description of the materials stored therein
and a statement as to whether such tanks
are currently used by Seller;
(C) all transformers located on the
Real Property containing polychlorinated
biphenyls (PCBs) have been identified in
Schedule 2.01(i)(iii)(C);
(D) no lien has arisen or is, to the
best Knowledge of Seller, Threatened on or
against any of the Acquired Assets under or
by reason of any Environmental Laws; and
(E) Seller and CCD are in material
compliance with all Environmental Laws.
(iv) For purposes of this Agreement:
(A) "Environmental Law" shall mean all Laws
which are administered, interpreted or
enforced by the United States Environmental
Protection Agency and/or state and local
agencies with primary jurisdiction over
pollution or protection of the environment.
(B) "Hazardous Material" or "Hazardous
Materials" shall mean any and all
substances, wastes, materials, chemicals,
pollutants, contaminants, equipment or
fixtures defined or classified as "toxic,"
"hazardous," "hazardous waste" or other
words of similar import by or otherwise
regulated under any Environmental Law,
including asbestos, petroleum and
petroleum-based products or byproducts and
any constituents thereof, polychlorinated
biphenyls (PCBs), and all substances,
wastes and materials defined or classified
as a "solid waste" or "hazardous waste" as
those terms are defined in the Solid Waste
Disposal Act, as amended by the Resource
Conservation and Recovery Act, as amended
(42 U.S.C.
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6901 et seq.) ("RCRA"); any "pollutant" or
"toxic pollutant" as those terms are
defined under the Clean Water Act, as
amended (33 U.S.C. 1251 et seq.); any "air
pollutant" or "hazardous air pollutant" as
those terms are defined under the Clean Air
Act, as amended (42 U.S.C. 7401 et seq.);
"hazardous substance" as that term is
defined in the Comprehensive Environmental
Response, Compensation and Liability Act
(42 U.S.C. 9601 et seq.) and amendments
thereto ("CERCLA"); any "regulated
substance" as that term is defined in the
Georgia Hazardous Site Response Act,
O.C.G.A ss.ss.12-8-90 et seq. ("HSRA"), and
any other substance, waste or material
regulated under applicable state Laws
relating to the prevention and control of
water, land, groundwater or air pollution
and contamination.
(C) "Pollution" shall mean the presence,
discharge, disposal, dumping, spillage,
burial, migration, leakage, placement,
release or emission of any Hazardous
Materials in, at, from, upon, over, under
or across any parcel of land.
(j) EMPLOYEE BENEFIT PLANS AND RELATED MATTERS.
(i) Schedule 2.01(j) sets forth a true and complete
list of each "Employee Benefit Plan", as such term
is defined in Section 3(3) of ERISA, whether or not
subject to ERISA, and each bonus, incentive or
deferred compensation, severance, termination,
retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other
equity-based, performance or other employee or
retiree benefit or compensation plan, program,
arrangement, agreement, policy or understanding,
whether written or unwritten, that provides or may
provide benefits or compensation in respect of any
employee or former employee employed or formerly
employed in the operation of the Business or the
beneficiaries or dependents of any such employee or
former employee (such employees, former employees,
beneficiaries and dependents collectively the
"Employees" for purposes of this Section 2.01(j)) or
under which any Employee is or may become eligible
to participate or derive a benefit and that is or
has been maintained or established by Seller, CCD or
any other trade or business, whether or not
incorporated, which, together with Seller, is or
would have been at any date of determination
occurring within the preceding six (6) years treated
as a single employer under section 414 of the Code
(such other trades and businesses collectively the
"Related Persons"), or to which Seller or any
Related Person contributes or is or has been
obligated or required to contribute or with respect
to which Seller or the Business may have any
liability or obligation (collectively, the "Plans").
Seller has made correct and complete copies of all
such Plans available to Buyer for review.
(ii) (A) No Plan is subject to section 412
of the Code or Section 302 or Title IV of
ERISA.
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(B) No liability has been or is
expected to be incurred by Seller, CCD or
any Related Person or the Business (either
directly or indirectly, including as a
result of an indemnification obligation)
under or pursuant to Title I or IV of ERISA
or the penalty, excise tax or joint and
several liability provisions of the Code
relating to Employee Benefit Plans that
could, following the Closing Date, become or
remain a liability of the Business or become
a liability of Buyer or of any Employee
Benefit Plan established or contributed to
by Buyer and no event, transaction or
condition has occurred or exists that could
reasonably be expected to result in any such
liability to the Business or, following the
Closing Date, the Surviving Corporation or
the Buyer.
(C) No Lien exists or can reasonably be
expected to exist, and no tax has been
imposed or can reasonably be expected to be
imposed, with respect to any Plan.
(D) No Plan is a "multi-employer plan"
within the meaning of section 4001(a)(3) of
ERISA or is a " multiple employer plan"
within the meaning of section 4063 or 4064
of ERISA.
(E) No Transferred Employee is or may
become entitled to post-employment benefits
of any kind by reason of employment in the
Business, including death or medical
benefits (whether or not insured), other
than (a) coverage provided pursuant to the
terms of any Plan specifically identified as
providing such coverage in Schedule 2.01(j)
or mandated by section 4980B of the Code,
(b) retirement benefits payable under any
Plan qualified under section 401(a) of the
Code, (c) deferred compensation incurred
after the Closing Date in the ordinary
course of business consistent with the prior
practice of Seller pursuant to the terms of
a Plan or (d) retention benefits payable by
Seller previously approved by its Board of
Directors.
(k) CONSENTS AND APPROVALS. Except as specified in
Schedule 2.01(k), the execution, delivery and performance of this Agreement and
the Related Agreements by Seller, and the consummation of the transactions
contemplated hereby and thereby, will not require any notice to, action of,
filing with, or consent, authorization, order or approval from, any court,
administrative agency or other governmental authority or agency, or any other
Person.
(l) LEASED PERSONAL PROPERTY. Except as set forth on
Schedule 2.01(l), neither Seller nor CCD is in default as to its obligations
with respect to any leases or bailment agreements relating to any Personal
Property.
(m) CONTRACTS. Except as set forth on Schedule 2.01(m),
all material Contracts, commitments, licensing agreements, purchase orders, work
orders, and other
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arrangements, including all amendments thereto, which relate primarily to the
Business or the Acquired Assets and to which Seller or CCD is a party or is
subject or by which Seller, CCD or the Acquired Assets are bound, all of which
are valid and binding obligations of the respective parties thereto, enforceable
in accordance with their respective terms, are in full force and effect, and are
validly assignable as contemplated herein without the consent of any other
Person.
(n) LICENSES AND PERMITS. To the best of their Knowledge,
Seller and CCD lawfully obtained and currently possess the licenses and permits
necessary to own and operate the Business, including state bedding licenses and
permits, and all such licenses and permits are current as of the Closing Date.
Seller and CCD have fulfilled and performed all of their material obligations
thereunder, other than those that, if not obtained or currently possessed, could
not reasonably be expected to have a material adverse effect on the Business,
and Seller has delivered to Buyer true and complete copies of all such licenses
and permits, which are listed on Schedule 2.01(n) (the "Scheduled Licenses and
Permits"). Each of the Scheduled Licenses and Permits is valid and in full force
and effect and may be assigned and transferred in accordance herewith except as
otherwise described on Schedule 2.01(n).
(o) LABOR RELATIONS; OSHA; EMPLOYEES.
(i) Neither Seller nor CCD is a party to, or
bound by, any collective bargaining agreements, and
there are no labor unions or other organizations
representing, purporting to represent or attempting
to represent any employees employed in the operation
of the Business.
(ii) Except as provided in Section 1.04 with
respect to Assumed Liabilities, within fourteen (14)
days of the Closing Date, Seller will have paid in
full to all employees employed in the operation of
the Business all due and owing wages, salaries,
commissions, bonuses, fringe benefit payments and all
other direct and indirect compensation of any kind
for all services performed by them through the
Closing Date.
(iii) Seller and CCD are in compliance in all
material respects with (a) all Laws dealing with
employment and employment practices of any kind
relating to CCD or the Business, (b) all of the terms
and conditions of employment of any kind relating to
CCD or the Business, and (c) all wage and hour
requirements and regulations applicable to any
employee employed by CCD or any employee employed by
Seller in the operation of the Business.
(iv) There is no unfair labor practice, safety,
health, discrimination or wage claim, charge,
complaint, suit, arbitration or proceeding pending
or, to the best Knowledge of Seller, Threatened
against or involving Seller or CCD before the
National Labor Relations Board, Occupational Safety
and Health Administration, Equal Employment
Opportunity Commission, Department of Labor, or any
other federal, state or local agency.
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(v) There is no grievance pending or, to the
best Knowledge of Seller, Threatened which might have
an adverse effect on CCD or the conduct of the
Business.
(vi) Except as set forth in Schedule 2.01(o)(vi),
Seller is in material compliance with the
Occupational Safety and Health Act of 1970, the rules
and regulations promulgated thereunder and all
applicable state laws, rules and regulations
regarding workplace and employee health and safety at
all locations of the Business, including the Owned
Real Property and the Leased Real Property; and
Seller has not received any notice that past or
present conditions of the any of the Acquired Assets
violate any applicable legal requirements or
otherwise can be made the basis of any claim,
citation, proceeding or investigation based on or
related to violations of employee health and safety
requirements.
(vii) To the best Knowledge of Seller, Schedule
2.01(o)(vii) sets forth the maximum number of
employees (the "Threshold Number") of each facility
included in the Acquired Assets that may be
terminated in connection with the transactions
contemplated hereby without requiring compliance with
the Workers Adjustment and Retraining Notification
Act of 1988, as amended, including the notification
requirements thereof.
(p) PRODUCT WARRANTIES. To the best Knowledge of Seller,
except for warranties under applicable law or as otherwise set forth on Schedule
2.01(p), (i) neither Seller nor CCD has made any warranties, express or implied,
written or oral, with respect to any products designed, manufactured, marketed,
imported, sold or distributed in connection with the Business, and (ii) there is
no claim pending or, to the best Knowledge of Seller, Threatened against Seller
or CCD under any warranty and, to the best Knowledge of Seller, there is no
basis for any such claim.
(q) BROKERS. Except for Wachovia Securities, Inc., whose
fees will be paid by Seller, Seller has not employed any investment banker,
broker, investment advisor or finder in connection with the transactions
contemplated hereby.
(r) BULK SALES. The transactions contemplated by this
Agreement will not violate any state bulk sales law or any other Law.
(s) RELATED PARTY TRANSACTIONS. Except as set forth on
Schedule 2.01(s), there are no Contracts or Assumed Liabilities under which the
Surviving Corporation or Buyer will assume, acquire or retain any liability,
obligation or commitment of or to Seller or any of its Affiliates (including any
director or officer of Seller or any of their respective relatives).
(t) CCD STOCK. The authorized capital stock of CCD
consists of 10,000 shares of common stock, $.001 par value per share. There are
no other classes of securities issued or authorized to be issued by CCD. As of
the date hereof, there are 100 shares of common stock outstanding, all of which
shares are owned by Seller. Except as set forth on Schedule 2.01(t), there is
not outstanding, nor is Seller or CCD bound by, any subscriptions,
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warrants, options, preemptive rights, calls, commitments, synthetic stock, or
agreements or rights of any character requiring CCD to issue, or entitling any
person or entity to acquire, any additional CCD Stock or any other equity
security of CCD, including any right of conversion or exchange under any
outstanding security or other instrument, and CCD is not obligated to issue nor
are Seller or CCD obligated transfer any shares of CCD Stock for any purpose.
There are no outstanding obligations of CCD to repurchase, redeem or otherwise
acquire any outstanding shares of its capital stock of the Issuer.
(u) [RESERVED]
(v) ACCOUNTS RECEIVABLE. To the best Knowledge of Seller,
Schedule 2.01(v) is a true and complete list of Accounts Receivable as of
Seller's fiscal month-end next preceding the Closing Date.
(w) TITLE; PERMITTED LIENS. All of the Acquired Assets
are owned by Seller and/or CCD and are free and clear of all Liens of any kind
whatsoever other than any matters described in Schedule 2.01(w) (the "Permitted
Liens"). At Closing, Seller shall convey to Buyer good title to all of the
Acquired Assets owned by Seller free and clear of all Liens of any kind
whatsoever except Permitted Liens, and Seller shall convey good title to the CCD
Stock to Buyer free and clear of all Liens of any kind whatsoever.
(x) AMOUNTS PAYABLE. Prior to the Closing Date, all
obligations, accounts payable, required prepayments (including required
Prepayments under the ▇▇▇▇▇▇ ▇▇▇▇▇ License) and other liabilities of the Seller
relating to the Business or CCD, including all obligations, accounts payable and
other liabilities which, upon Closing Date, will become Assumed Liabilities,
shall be paid on a current, timely basis, according to terms and there shall be
no Past Due Amounts with respect thereto on the Closing Date.
(y) SOLVENCY. Seller shall have closed a restructuring of
its debt with its primary lenders prior to Closing such that, as of the Closing
Date and immediately thereafter, and after giving effect to its debt
restructuring, to the best Knowledge of Seller, Seller, separately, and Seller
and its Affiliates, on a combined basis, shall not be insolvent and shall not be
left with an unreasonably small capital following the transactions contemplated
by this Agreement; and, as of the Closing Date, Seller and its Affiliates shall
not have an intent to incur or a belief that it or they will incur debts that
would be beyond their means to pay as such debts mature, as determined for
purposes of 11 USC ss. 101(32), 11 USC ss. 548, O.C.G.A. ▇▇.▇▇. 18-2-21 and
18-2-22 or other laws of similar import and applicability.
SECTION 2.02 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer, for
itself and its successors and assigns, represents and warrants to Seller as
follows, and acknowledges and confirms that Seller is relying upon such
representations and warranties in connection with the execution, delivery and
performance of this Agreement, notwithstanding any investigation made by or on
behalf of Seller:
(a) DUE ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all
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requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby.
(b) AUTHORIZATION AND BINDING EFFECT. The execution,
delivery and performance of this Agreement by Buyer have been duly authorized by
the Board of Directors of Buyer, and this Agreement constitutes the legal, valid
and binding obligation of Buyer enforceable in accordance with its terms, except
as may be limited by bankruptcy, reorganization, insolvency and other similar
Laws or equitable principles relating to or affecting the enforcement of rights
of creditors generally. All other corporate proceedings required by the
Certificate of Incorporation or Bylaws of Buyer or otherwise for the execution
and delivery of this Agreement and the agreements contemplated hereby, and for
the consummation of the transactions contemplated hereby and thereby, have been
duly taken.
(c) NO VIOLATION. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
constitutes or will constitute a violation of, is or will be in conflict with,
or constitutes or will constitute (i) a default under, any term or provision of
the Certificate of Incorporation or Bylaws of Buyer or (ii) a violation of any
statute, ordinance, judgment, order, decree, regulation or rule of any court,
governmental authority or arbitrator or any license, permit or franchise
applicable or relating to Buyer. No governmental approval or other consent is
required to be obtained by Buyer in connection with the execution and delivery
of this Agreement and the transactions contemplated hereby.
(d) BROKERS. Buyer has not employed any investment
banker, broker or finder in connection with the transactions contemplated
hereby.
ARTICLE III. ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 3.01 ALL REASONABLE EFFORTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper and advisable under applicable
laws and regulations to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement. If at any time after the
Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement, including the execution of additional instruments,
the parties to this Agreement shall take all such necessary action.
SECTION 3.02 PUBLIC ANNOUNCEMENTS. Buyer and Seller will consult
with each other and will mutually agree (the agreement of each party not to be
unreasonably withheld or delayed) upon the content and timing of any press
release or other public statements with respect to the transactions contemplated
by this Agreement and shall not issue any such press release or make any such
public statement prior to such consultation and agreement, except as may be
required by applicable Law or by obligations pursuant to any listing agreement
with any securities exchange or any stock exchange regulations; provided,
however, that each party will give prior notice to the other party of the
content and timing of any such press release or other public statement required
by applicable Law or by obligations pursuant to any listing agreement with any
securities exchange or any stock exchange regulations.
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SECTION 3.03 NO IMPLIED REPRESENTATIONS OR WARRANTIES. Buyer
hereby acknowledges and agrees that Seller is not making any representation or
warranty whatsoever, express or implied, except those representations and
warranties of Seller explicitly set forth in this Agreement or in the Schedules
hereto or in any certificate contemplated hereby and delivered by Seller in
connection herewith. Subject to the foregoing, the Acquired Assets being
acquired by Buyer at the Closing as a result of this Agreement and the
transactions contemplated hereby shall be acquired by Buyer on an "as is, where
is" basis and in their then present condition, and Buyer shall rely solely upon
its own examination thereof. In any event, except as explicitly set forth
herein, neither Seller nor any of its officers, directors, employees, Affiliates
or representatives has made or is making any representation, express or implied,
as to the value of the Business or the Acquired Assets, or any warranty of
merchantability, suitability or fitness for a particular purpose or quality,
with respect to any of the Acquired Assets, or as to the condition or
workmanship thereof, or as to the absence of any defects therein, whether latent
or patent.
SECTION 3.04 CONFIDENTIALITY.
(a) All information furnished by one party (the
"disclosing party") to the other party (the "receiving party") in connection
with this Agreement and the transactions contemplated hereby shall be kept
confidential by the receiving party (and shall be used by it only in connection
with this Agreement and the transactions contemplated hereby), except to the
extent that such information (i) is or becomes generally available to the public
other than as a direct or indirect result of disclosure by the receiving party
(or any of its directors, officers, employees, agents, advisors or Affiliates
(the "Agents")), (ii) becomes available to the receiving party on a
non-confidential basis from a source other than the disclosing party or any of
its Agents (provided that such source is not known by the receiving party to be
bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the disclosing party or any other
Person with respect to such information), or (iii) is required to be disclosed
in any document filed with the Securities and Exchange Commission, the Internal
Revenue Service or any other governmental authority.
(b) If the receiving party or any of its Agents is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) to disclose any of the confidential
information, the receiving party shall use all reasonable efforts to provide the
disclosing party with prompt written notice of any such request or requirement
so that the disclosing party may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Agreement. If, in the
absence of a protective order or other remedy or the receipt of a waiver by the
disclosing party, the receiving party or any of its Agents are nonetheless,
based on the advice of counsel, required to disclose confidential information to
any tribunal or else stand liable for contempt or suffer other censure or
penalty, the receiving party or its Agents may, without liability hereunder,
disclose to such tribunal only the portion of the confidential information which
such counsel advises the receiving party is legally required to be disclosed.
The receiving party shall exercise its best efforts to preserve the
confidentiality of the confidential information, including by cooperating with
the disclosing party to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the confidential
information by such tribunal.
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(c) If the transactions contemplated by this Agreement
shall fail to be consummated, the receiving party shall promptly cause all
copies of documents or extracts thereof containing information and data as to
the disclosing party to be returned to the disclosing party. If the transactions
contemplated by this agreement are consummated, all information with respect to
the Business shall be owned by and become the property of Buyer and the
Surviving Corporation, and Buyer and Surviving Corporation shall be deemed for
all purposes hereunder to be the disclosing party and Seller shall be deemed to
be the receiving party with respect to such information. Without limiting the
foregoing, Seller and its Affiliates shall following the Closing (i) promptly
turn over to the Surviving Corporation all information concerning the Business
and not retain any such information except as necessary for securities
compliance and tax filing purposes; and (ii) except as provided in Section
3.04(a), maintain the confidentiality of all information concerning the
Business, including information concerning the identity of suppliers, historical
financial information, costing, pricing, programs and policies of the Business.
SECTION 3.05 ENVIRONMENTAL PERMITS. Seller shall cause the
Environmental Permits, if any, to be assigned or transferred, to the extent
assignable or transferable, and reissued at the Closing to the Surviving
Corporation to the extent permitted by law or the terms of such Environmental
Permits.
SECTION 3.06 DISCHARGE OF LIENS AND ENCUMBRANCES. All liens,
claims, charges, security interests, pledges, assignments or encumbrances
relating to the Acquired Assets that are not Permitted Liens shall be satisfied,
terminated and discharged by Seller on or prior to the Closing Date, and
evidence reasonably satisfactory to Buyer and its counsel of such satisfaction,
termination and discharge shall be delivered to Buyer at or prior to the
Closing.
SECTION 3.07 CONVEYANCE OF TITLE TO OWNED REAL PROPERTY. Seller
shall convey title to the Owned Real Property to the Surviving Corporation by
limited or "special" warranty deed in a form customarily used in the locality in
which the Owned Real Property is located, subject, however, to Permitted Liens.
Each such deed shall be executed in accordance with the requirements of the laws
of the state in which such Owned Real Property is located and shall be in such
form as will permit the deed to be recorded. Seller shall transfer and assign to
the Surviving Corporation the Leases and the Ownership Agreement, all of its
rights in, to and under the Leases and the Ownership Agreement to the Leased
Real Property and the New York Apartment Property, as the case may be, (and its
rights in and to all deposits thereunder and all buildings, other structures,
and improvements permitted to be retained or removed by the lessee thereunder)
by transfer and assignment in form reasonably acceptable to Buyer and its
counsel and to Seller with warranties consistent with those made by Seller in
this Agreement and those contained in a limited or "special" warranty deed.
SECTION 3.08 SUBLEASE TO BUYER. Seller hereby agrees to sublease
to the Surviving Corporation, and Buyer hereby agrees to cause the Surviving
Corporation to sublease from Seller, a portion of the second floor office space
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, by the
execution and delivery at Closing of a sublease substantially in the form
attached hereto as Exhibit "C" (the "Sublease"). The rent to be paid by the
Surviving Corporation under the Sublease shall be $11,011.32 per month. Any
increase in maintenance charges with respect to the second floor office space
after January 1, 2002 shall be shared equally by Buyer and Seller.
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SECTION 3.09 SHARED SERVICES AGREEMENT. Buyer and Seller hereby
agree that the expenses of certain services and facilities shall be shared by
the Surviving Corporation and Seller on the terms set forth in a Shared Services
Agreement to be executed and delivered at Closing by the Surviving Corporation
and Seller substantially in the form attached hereto as Exhibit "D" (the Shared
Services Agreement").
SECTION 3.10 BOOKS AND RECORDS. Buyer agrees to give, and to cause
the Surviving Corporation to give, Seller reasonable access during normal
business hours to books and records purchased hereunder in order that Seller can
satisfy all reporting obligations and file all required tax returns.
SECTION 3.11 FAIRNESS OPINION. At Closing, Wachovia Securities
shall deliver a fairness opinion with respect to the transactions contemplated
by this Agreement, which is acceptable in form and substance to Seller.
SECTION 3.12 ESTOPPEL CERTIFICATES; LANDLORD WAIVERS. Seller shall
deliver to Buyer at or before Closing estoppel certificates addressed to Buyer
from the lessor of each Lease, and the consent of the lessor to the Sublease,
dated within thirty (30) days of the Closing Date, identifying the Lease
documents and any amendments thereto, stating that the Lease is in full force
and effect and, to the best knowledge of the lessor, that the tenant is not in
default under the Lease and no event has occurred that, with notice or lapse of
time or both, would constitute a default by the tenant under the Lease, other
than any such default that could not reasonably be expected to have an adverse
effect on the Business, and containing any other information reasonably
requested by Buyer. In addition, Seller shall deliver to Buyer, at or before
Closing, such consents, waivers and certifications as are reasonably required by
the lender which has committed to provide inventory financing and accounts
receivable factoring to Buyer and/or the Surviving Corporation in a form
reasonably satisfactory to such lender.
SECTION 3.13 BOARD OF DIRECTORS. At Closing, the members of the
Board of Directors of Seller (the "Board") in office immediately prior to the
Closing (the "Pre-Closing Members") shall take all steps necessary to elect or
appoint E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇; ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ to the Board, and the Pre-Closing Members shall immediately thereafter
resign from the Board.
SECTION 3.14 SEVERANCE PROTECTION AGREEMENTS; RETENTION. At
Closing,(i) those certain Severance Protection Agreements between Seller and
each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be terminated by mutual
written consent; and (ii) each Transferred Employee shall be paid all amounts
that remain in such Transferred Employee's account established under the
"retention agreement" between Seller and such Transferred Employee.
SECTION 3.15 LETTERS OF CREDIT. At Closing, Buyer or the Surviving
Corporation shall cause all letters of credit issued on behalf of Seller in
respect of the Business to be replaced by letters of credit issued on behalf of
the Surviving Corporation or, in lieu thereof, will pay Seller cash in the
amount of such letters of credit, which cash will be returned to Buyer by Seller
upon issuance of such replacement letters of credit.
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SECTION 3.16 RIGHT OF FIRST REFUSAL. At Closing, Seller shall
grant Buyer and the Surviving Corporation a right of first refusal to purchase
any furniture or office equipment located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ which is offered for sale by Seller on or after the
Closing Date and before the expiration of the Sublease. Seller agrees that the
public areas of Suite 200 will be shared with Buyer and the Surviving
Corporation and that all furniture and furnishings in those areas will remain in
place until the earlier of the expiration of the Sublease term or date on which
there are no longer any employees of Seller employed at such location.
SECTION 3.17 NON-COMPETITION AGREEMENT. At Closing, the Buyer and
Seller shall execute a Non-Competition Agreement substantially in the form
attached hereto as Exhibit "E".
SECTION 3.18 BUYER FINANCING. Contemporaneously with the Closing
the Buyer and the Surviving Corporation shall close a revolving credit and
factoring facility to be provided by a bank or commercial finance company to
Buyer which is to be secured only by Acquired Assets, shall have a maximum
availability of no less than Nine Million Nine Hundred Thousand Dollars
($9,900,000), and shall provide an initial advance at Closing of not less than
Eight Million Five Hundred Thousand Dollars ($8,500,000).
SECTION 3.19 MISDIRECTED PAYMENTS. Buyer and Surviving
Corporation, on the one hand, and Seller and its Affiliates, on the other hand,
agree that if either receives, or the factor of either receives, payments on
accounts receivable or disputed accounts with respect to which the other is
entitled hereunder to receive payment, that such payments will be delivered to
the party entitled thereto (or credited to its factoring account) within 10 days
of receipt of such payment.
SECTION 3.20 PRIMARY COVERAGE; EXCESS COVERAGE. Seller shall use
its reasonable commercial efforts to obtain, at its own expense, either (i) a
renewal of the Primary Coverage for an additional 12-month period on the same
terms and conditions as the Primary Coverage or (ii) replacement coverage from a
different insurer on terms at least as favorable as the Primary Coverage and
providing such coverage for the twelve (12) months immediately following the
termination of the Primary Coverage. Additionally, Seller shall use its
reasonable commercial efforts to obtain, at its own expense, either (i) a
renewal of the Excess Coverage for an additional 12-month period on the same
terms and conditions as the Excess Coverage or (ii) replacement coverage from a
different insurer on terms at least as favorable as the Excess Coverage
providing such coverage for the twelve (12) months immediately following the
termination of the Excess Coverage.
ARTICLE IV. EMPLOYEES AND EMPLOYEE BENEFIT PLANS
SECTION 4.01 EMPLOYMENT OF SELLER'S EMPLOYEES.
(a) Those employees of Seller and CCD listed on Schedule
4.01(a) hereof will be given the opportunity to remain, or become, as the case
may be, employees of the Buyer or the Surviving Corporation on the Closing Date
("Transferred Employees").
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(b) For a period of two (2) years from the Closing Date,
Buyer will not, and will not permit any of its Affiliates to, solicit, offer to
employ or retain the services of or otherwise interfere with the relationship of
Seller with any Person employed by or otherwise engaged to perform services for
Seller in connection with its operation of the Infant Business. For a period of
two (2) years from the Closing Date, Seller will not, and will not permit any of
its Affiliates to, solicit, offer to employ or retain the services of or
otherwise interfere with the relationship of Buyer with any Person employed by
or otherwise engaged to perform services for Buyer in connection with the
operation of the Business.
SECTION 4.02 WELFARE AND FRINGE BENEFIT PLANS.
(a) From and after the Closing Date, all Transferred
Employees and their eligible dependents shall be eligible to participate in all
Employee Benefit Plans, programs, policies and arrangements that Buyer or its
Affiliates establish for such Transferred Employees as of the normal enrollment
dates for such plans, programs, policies and arrangements. For purposes of such
benefit plans, programs, policies and arrangements, Buyer or such Affiliate
shall recognize the prior service of such employees with Seller for purposes of
eligibility, vesting and benefit accruals thereunder; provided, however, that
such prior service shall not be credited for purposes of benefit accrual under
any defined benefit pension plan of Buyer or its Affiliates.
(b) No Transferred Employee (or eligible dependent
thereof) who is eligible and who elects to be covered under any medical or
disability insurance plan of Buyer or its Affiliates shall be excluded from
coverage under such plan on the basis of a pre-existing condition that was not
also excluded under the applicable Plan (as defined in Section 2.01(j)). To the
extent that a Transferred Employee has satisfied in whole or in part any annual
deductible or paid any out-of-pocket or co-payment expenses under a medical plan
of Seller for a plan year, such individual shall be credited therefor under the
corresponding provisions of the corresponding plan of Buyer or its Affiliates in
which such individual participates for the plan year in which the Closing Date
occurs.
(c) Seller shall be solely responsible for and retain all
liabilities under all post-retirement welfare Plans covering Transferred
Employees and employees whose employment is terminated in connection with the
closing of the transactions contemplated hereby. Seller shall continue on and
after the Closing Date to be solely responsible for COBRA continuation coverage,
and shall take all actions necessary to maintain such coverage, for Transferred
Employees whose COBRA qualifying event occurred before the Closing Date and for
non-Transferred Employees (and their eligible dependents). Buyer shall be solely
responsible for COBRA continuation coverage, and shall take all actions
necessary to maintain such coverage, for Transferred Employees whose COBRA
qualifying event occurred on or after the Closing Date. The term "COBRA" refers
to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(d) Notwithstanding any other provision of this Agreement
to the contrary, Seller shall indemnify, reimburse, defend and hold harmless
Buyer from and against any and all liabilities incurred by Buyer that are based
upon, arising out of or otherwise related to any Plan (as defined in Section
2.01(j)).
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SECTION 4.03 WORKERS' COMPENSATION AND HEALTH BENEFITS. From and
after the Closing Date, Seller shall remain solely responsible for any and all
liabilities to or in respect of any Employee, including a Transferred Employee,
(i) relating to or arising in connection with any and all claims for workers'
compensation benefits arising in connection with any occupational injury or
disease occurring or existing prior to the Closing Date; and (ii) relating to or
arising in connection with any and all claims for health insurance benefits
arising in connection with any injury or disease occurring prior to the Closing
Date. Buyer shall be and become solely responsible for any and all liabilities
in respect of any Transferred Employee (i) relating to or arising in connection
with any and all claims for workers' compensation benefits arising in connection
with any occupational injury or disease occurring on or after the Closing Date
and (ii) relating to or arising in connection with any and all claims for health
insurance benefits arising in connection with any injury or disease occurring on
or after the Closing Date.
ARTICLE V. CLOSING
SECTION 5.01 TIME AND PLACE. The Closing will take place at the
offices of counsel to Seller (or at such other place as the parties may agree)
on the Closing Date commencing at 9:00 a.m. or at such other time and place as
is agreed by the parties.
SECTION 5.02 CLOSING MATTERS WITH RESPECT TO SELLER. At Closing,
Seller shall or shall cause CCD or one or more of its other Affiliates to:
(i) deliver to Buyer and/or the Surviving Corporation a
general instrument of sale, conveyance, assignment, transfer
and delivery to CCD with full covenants of warranty as to good
and marketable title to all the Acquired Assets (other than
the Specified Assets) in a form reasonably satisfactory to
Buyer;
(ii) deliver to Buyer and/or the Surviving Corporation
such specific instruments of sale, conveyance, assignment,
transfer and delivery to CCD with limited warranties in a form
reasonably satisfactory to Buyer as to good and marketable
title to such of the Acquired Assets included within such
specific instrument of sale, conveyance, assignment, transfer
and delivery as Buyer shall reasonably request, including
transfer letters for UPC codes, transfers and assignments of
CIT accounts, bedding permits, vendor numbers used by the
Business;
(iii) deliver to Buyer and/or the Surviving Corporation all
of Seller's contracts, books, records and other data relating
to the Acquired Assets and the Business (except Seller's
minute and stock books and all other records which Seller is
required by law to keep in its possession, as to which Seller
will furnish to Buyer, at Buyer's cost, at any time or from
time to time after the Closing Date, copies or transcripts);
(iv) file with the Secretary of State of the State of
Delaware a Certificate of Merger in the form attached hereto
as Exhibit "A" and take all other and further actions as are
necessary or appropriate to effectuate the Merger on the
Closing Date;
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(v) deliver to Buyer and/or the Surviving Corporation a
certificate of Seller certifying to Buyer that each of the
obligations and actions required to be performed by Seller,
CCD or any of the Seller's other Affiliates pursuant to this
Agreement have been duly performed and complied with in all
material respects, and that the representations and warranties
of Seller contained in this Agreement are true and correct in
all material respects as of the Closing Date (except as to any
representation or warranty which specifically relates to an
earlier date);
(vi) deliver to Buyer and/or the Surviving Corporation the
Non-Competition Agreement duly executed by Seller;
(vii) deliver to Buyer and/or the Surviving Corporation the
Shared Services Agreement duly executed by Seller;
(viii) deliver to Buyer and/or the Surviving Corporation the
Seller License Agreement duly executed by Seller;
(ix) deliver to Buyer and/or the Surviving Corporation the
Sublease duly executed by Seller;
(x) surrender all of the CCD Stock to the Surviving
Corporation for cancellation;
(xi) deliver to the Surviving Corporation a stock power or
powers, executed in blank, for all of the CCD Stock to be
surrendered;
(xii) deliver to Buyer and/or the Surviving Corporation an
executed limited or "special" warranty deed in the form
contemplated by Section 3.07 hereof conveying good and
marketable fee simple title to all of the Owned Real Property,
executed and acknowledged by Seller and in a proper form for
recording;
(xiii) deliver to Buyer and/or the Surviving Corporation
instruments of sale, conveyance, assignment, transfer and
delivery to the Surviving Corporation, all in a form
reasonably satisfactory to Buyer, to the Leased Real Property
and the New York Apartment Property (and the related Owners
Agreement);
(xiv) affidavit(s) of title as to the Real Property stating
that, with respect to matters arising by, through or under
Seller, but not otherwise, (a) to the best of Seller's
Knowledge, there are no parties in possession of any of the
Owned Real Property or Leased Real Property other than Seller
(or otherwise specifically setting forth any such other
parties' rights and the source and extent of such parties'
rights), and (b) Seller has not caused any work to be
performed on any of the Owned Real Property or Leased Real
Property within one hundred (100) days of the date of such
affidavit(s), or if Seller has caused any such work to be
performed within one hundred (100) days of such date(s), that
all such work has been completed and fully paid for (with
respect to work in progress, to and through a date reasonably
proximate to the Closing Date);
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(xv) deliver to Buyer and/or the Surviving Corporation
such other documentation as Buyer's and/or the Surviving
Corporation's title insurance company may reasonably request
in order to permit Buyer's title insurance policy to be issued
without exceptions as to (a) matters arising by, through or
under Seller but not otherwise in the "gap", (b) mechanic's or
materialman's liens arising from work performed at the
instance of Seller, (c) third parties in possession as a
result of the action of Seller (other than specifically
enumerated third parties as set forth above that are
reasonably acceptable to Buyer pursuant to the terms of this
Agreement), and (d) rights or claims of real estate brokers
claiming by, through or under Seller;
(xvi) deliver to Buyer and/or the Surviving Corporation a
duly executed certificate stating that Seller is a Georgia
resident or that Seller is otherwise exempt from withholding
under O.C.G.A. ss. 48-7-128, as applicable;
(xvii) deliver to Buyer and/or the Surviving Corporation a
duly executed certificate stating that Seller is not a
"foreign person" for United States income tax purposes, in
accordance with Section 1445 and Section 897 of the Internal
Revenue Code of 1986, as amended;
(xviii) deliver to Buyer and/or the Surviving Corporation
such other evidence of the performance of all covenants and
the satisfaction of all conditions required of Seller by this
Agreement at or prior to the Closing Date as Buyer or its
counsel may reasonably require;
(xix) deliver to Buyer and/or the Surviving Corporation all
consents, landlord waivers and the like which are required by
Buyer's financing source to close financing for the Buyer and
the Surviving Corporation contemporaneously with the Closing
of the transactions contemplated by this Agreement;
(xx) deliver to Buyer and/or the Surviving Corporation all
written consents required to carry out the obligations of this
Agreement, including those set forth in Sections 1.09 and 3.05
of this Agreement, together with a good standing certificate
of Seller and CCD, as of a date within twenty (20) days prior
to the Closing Date, from the State of Delaware and the State
of Georgia, respectively; and
(xxi) deliver to Buyer an agreement by Seller to execute or
re-execute such documents and take such other actions after
the Closing upon Buyer's written request as are reasonably
necessary or appropriate to consummate and carry into effect
the transactions contemplated by this Agreement, including the
assignment of any right to payment on accounts receivable and
disputed accounts included in the Acquired Assets.
The documents and certificates to be delivered hereunder by or on behalf of
Seller on the Closing Date shall be in form and substance reasonably
satisfactory to Buyer and its counsel.
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SECTION 5.03 CLOSING MATTERS WITH RESPECT TO BUYER. At Closing,
Buyer shall cause the Surviving Corporation to:
(i) file with the Secretary of State of the State of
Delaware a Certificate of Merger in the form attached hereto
as Exhibit "A" and take all other and further actions as are
necessary or appropriate to effectuate the Merger as of the
Effective Date;
(ii) deliver to Seller the Merger Consideration and the
Purchase Price, as adjusted pursuant to Section 1.08, by
transfer of immediately available funds to such account at
such bank as Seller shall direct;
(iii) deliver to Seller an Assumption Agreement or other
instrument of assumption of the Assumed Liabilities as
provided in Section 1.04(b) in a form reasonably satisfactory
to Seller;
(iv) deliver to Seller a certificate of Buyer certifying
to Seller that each of the obligations and actions required to
be performed by Buyer or Merger Subsidiary pursuant to this
Agreement have been duly performed and complied with in all
material respects, and that the representations and warranties
of Buyer contained in this Agreement are true and correct in
all material respects as of the Closing Date (except as to any
representation or warranty which specifically relates to an
earlier date);
(v) deliver to Seller the Non-Competition Agreement duly
executed by Buyer;
(vi) deliver to Seller the Shared Services Agreement duly
executed by Buyer;
(vii) deliver to Seller the Seller License Agreement duly
executed by Buyer;
(viii) deliver to Seller all releases required by this
Agreement, including a release from ▇▇▇▇▇▇ ▇▇▇▇▇, Inc.,
releasing Seller and its Affiliates from any liability to
▇▇▇▇▇▇ ▇▇▇▇▇, Inc. or any of its Affiliates except liability
for any Past Due Amounts under the ▇▇▇▇▇▇ ▇▇▇▇▇ License and
any liability or obligations arising from Seller's
confidentiality obligations;
(ix) deliver to Seller an agreement by Buyer to execute or
re-execute such documents and take such other actions after
the Closing upon Seller's written request as are reasonably
necessary or appropriate to consummate and carry into effect
the transactions contemplated by this Agreement, including the
assignment of any right to payment on accounts receivable and
disputed accounts retained by Seller; and
(x) deliver to Seller all written consents required by
Section 3.14 hereof.
The documents and certificates to be delivered hereunder by or on behalf of
Buyer on the Closing Date shall be in form and substance reasonably satisfactory
to Seller and its counsel.
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SECTION 5.04 PASSAGE OF TITLE AND LIABILITIES AT CLOSING. Upon
delivery of the instruments of Merger, sale, conveyance, assignment, transfer
and assumption at the Closing, (i) full title to the Acquired Assets shall pass
to and vest in the Surviving Corporation effective as of 12:01 a.m. on the
Closing Date; (ii) full title to the Excluded Assets shall pass to and vest in
(to the extent not already held and vested in) Seller and its Affiliates, as the
case may be; (iii) all liabilities, obligations and responsibilities for the
Assumed Liabilities shall pass to and become vested in the Surviving
Corporation; and (iv) all liabilities, obligations and responsibilities for the
Excluded Liabilities shall pass to and vest in (to the extent not already held
and vested in) the Seller and its Affiliates, as the case may be. At the
Closing, Seller will put Buyer in full, complete and quiet possession and
enjoyment of all of the Acquired Assets and the Specified Assets and from and
after the Closing Date the ownership and operation of the Acquired Assets and
the Specified Assets and the Business shall be for the account and risk of
Buyer. Buyer shall be under no liability for any debt, liability or obligation
of Seller incurred on or after the Closing Date or arising out of any
transaction by Seller or any event occurring with respect to Seller on or after
the Closing Date.
ARTICLE VI. INDEMNIFICATION
SECTION 6.01 AGREEMENT OF SELLER TO INDEMNIFY. Subject to the
terms and conditions of this Article VI, and the definitions set forth in
Section 6.03 hereof, Seller agrees to indemnify, defend and hold harmless Buyer
and the Surviving Corporation, their officers, directors, shareholders, other
Affiliates, employees and agents (collectively, the "Buyer Indemnitees") from,
against, for, and in respect of any and all Losses asserted against, relating
to, imposed upon, or incurred by the Buyer Indemnitees by reason of, resulting
from, based upon, or arising out of:
(a) the breach of any representation or warranty of
Seller contained in or made pursuant to this Agreement or any Related Agreement
or in any certificate, Schedule or Exhibit furnished by Seller in connection
herewith;
(b) the breach of any covenant or agreement of Seller
contained in or made pursuant to this Agreement or any Related Agreement;
(c) any Excluded Liabilities; and
(d) any Environmental Losses resulting from events or
conditions existing prior to the Closing Date arising from, based upon or
related to Seller's failure to comply with Environmental Laws in existence as of
the day next preceding the Closing Date; provided that Seller shall be entitled
to control any cleanup related thereto, including any removal, containment or
other remediation or response action (the "Work"). (By way of example only,
Buyer shall not have any right to indemnification hereunder in the event that
environmental regulations are first enacted after the Closing Date which render
a practice performed by Seller on the Closing Date (which practice was in full
compliance with all Environmental Laws then in existence) illegal, resulting in
a clean-up obligation being imposed on Buyer with respect to Seller's
pre-Closing activities).
All Work and related activities undertaken by Seller and its
contractors and consultants upon the Real Property shall be accomplished in an
expeditious, safe and diligent manner in
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accordance with all applicable federal, state and local laws, ordinances, rules,
and regulations, and in a manner that will not unreasonably interfere with the
use of the Acquired Assets by Buyer and the Surviving Corporation. Seller shall
take and shall cause its contractors and consultants to take all reasonable
measures to minimize any disruption or inconvenience caused by the Work and
related activities to Buyer and the Surviving Corporation. Work and related
activities shall not interfere with Buyer's access to or egress from the Real
Property. Seller shall, at Seller's sole cost and expense, repair damage caused
by the Work and related activities and restore the affected portion of the Real
Property upon which any Work and related activities are performed to a condition
equivalent to the condition existing prior to the commencement of the Work.
Seller is solely responsible for the identification and avoidance of any and all
utilities or structures on the Real Property, and any damages related thereto
that may be caused by the Seller or its contractors or consultants. Seller shall
remove and shall cause its contractors and consultants to remove from the Real
Property all equipment, debris, contaminated soil, and all other materials
related to the Work in an environmentally appropriate and legal manner and to
Buyer's reasonable satisfaction. Seller is solely responsible for
containerizing, storing, handling and disposing of all substances and wastes
generated from the performance of the Work, in accordance with all applicable
federal, state and local laws, ordinances, rules, and regulations; provided,
however, that in no event shall any storage, temporary or otherwise, of such
substances and wastes be allowed by Seller to occur on the Real Property for
more than thirty (30) days. Seller agrees that it is the generator, under
applicable federal, state and local laws, ordinances, rules, and regulations, of
all substances and wastes generated from the performance of the Work.
SECTION 6.02 AGREEMENT OF BUYER TO INDEMNIFY. Subject to the terms
and conditions of this Article VI, Buyer and the Surviving Corporation, jointly
and severally, agree to indemnify, defend and hold harmless Seller and its
officers, directors, shareholders, other Affiliates, employees and agents
(collectively, the "Seller Indemnitees") from, against, for, and in respect of
any and all Losses asserted against, relating to, imposed upon, or incurred by
the Seller Indemnities arising out of:
(a) the breach of any representation or warranty of Buyer
contained in or made pursuant to this Agreement or any Related Agreement or in
any certificate, Schedule, or Exhibit furnished by Buyer in connection herewith
or therewith;
(b) the breach of any covenant or agreement of Buyer
contained in or made pursuant to this Agreement or any Related Agreement; and
(c) (i) any Assumed Liability, (ii) the notification or
other requirements of the Workers Adjustment and Retraining Notification Act of
1988, as amended (but only with respect to requirements arising or resulting
from a failure by Buyer or the Surviving Corporation to offer to hire a number
of employees at any facility included in the Acquired Assets equal to the
difference between the number of employees at such facility less the Threshold
Number with respect to such facility), and (iii) the ownership of the Acquired
Assets or the operation of the Business by Buyer or the Surviving Corporation on
or after the Closing Date, except for any Losses against which Buyer is entitled
to indemnification pursuant to Section 6.01 (without regard to any of the
limitations contained in Section 6.07).
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SECTION 6.03 DEFINITIONS AND PROCEDURES FOR INDEMNIFICATION.
(a) For purposes of this Article VI, the meanings of the
following terms are set forth below:
(i) "ENVIRONMENTAL LOSSES" shall mean any Losses
related to, arising out of or in connection with compliance with or a failure to
comply with Environmental Laws as in existence as of the Closing Date. Without
limiting the generality of the foregoing, Environmental Losses shall include
fines, penalties, judgments, awards, settlements, losses, damages (whether
actual, punitive or consequential), interest, costs, fees, expenses,
disbursements and general financial responsibility for (x) cleanup costs,
including any removal, remedial or other response actions and natural resource
damages, and (y) any other compliance or other remedial measures, including any
capital expenditures incurred in connection therewith, and any costs and
expenses (including attorney's fees) incurred and relating solely to the
investigation and defense of claims for which Buyer may be liable hereunder; and
(ii) "LOSSES" shall mean any and all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs, diminution of value, removal and remediation requirements and expenses,
including interest, penalties and reasonable attorneys' and other professional
fees and expenses.
(iii) "INDEMNITOR" means the party against whom
indemnification hereunder is sought.
(iv) "INDEMNITEE" means the party seeking
indemnification hereunder.
(b) A claim for indemnification hereunder (an
"Indemnification Claim") shall be made by the Indemnitee by delivery of a
written declaration to the Indemnitor requesting indemnification and specifying
the basis on which indemnification is sought and the amount of asserted Losses
and Environmental Losses and, in the case of a Third Party Claim (as hereinafter
defined), containing (by attachment or otherwise) such other information as the
Indemnitee shall have concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party
Claim, the procedures set forth in Section 6.04 hereof shall be observed by the
Indemnitee and the Indemnitor.
(d) If the Indemnification Claim involves a matter other
than a Third Party Claim, the Indemnitor shall have thirty (30) Business Days to
object to such Indemnification Claim by delivery of a written notice of such
objection to the Indemnitee specifying in reasonable detail the basis for such
objection. Failure to timely so object shall constitute a final and binding
acceptance of the Indemnification Claim by the Indemnitor and the
Indemnification Claim shall be paid in accordance with Section 6.03(d) hereof.
If an objection is timely made to an Indemnification Claim by the Indemnitor,
then the Indemnitee and the Indemnitor shall negotiate in good faith for a
period of sixty (60) Business Days from the date the Indemnitee receives such
objection before commencing arbitration pursuant to Section 7.14 with respect to
such Indemnification Claim.
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(e) Upon the final, non-appealable determination of the
amount of an Indemnification Claim that is binding on both the Indemnitor and
the Indemnitee, the Indemnitor shall pay the amount of such Indemnification
Claim by check within ten (10) Business Days of the date such amount is
determined.
SECTION 6.04 DEFENSE OF THIRD PARTY CLAIMS. Should any claim be
made, or suit or proceeding (including any binding arbitration or an audit by
any taxing authority) be instituted against the Indemnitee which, if prosecuted
successfully, would be a matter for which the Indemnitee would be entitled to
indemnification under this Agreement (a "Third Party Claim"), the obligations
and liabilities of the parties hereunder with respect to such Third Party Claim
shall be subject to the following terms and conditions:
(a) The Indemnitor shall have thirty (30) days (or such
lesser time as may be necessary to comply with statutory response requirements
for litigation claims, provided the notice from the Indemnitee specifies the
last day for response within such lesser time, and the statutory provision
requiring such shortened response period) from receipt of the Indemnification
Claim (the "Notice Period") to notify the Indemnitee, (i) whether or not the
Indemnitor disputes its liability to the Indemnitee with respect to such claim,
and (ii) notwithstanding any such dispute, whether or not the Indemnitor
desires, at its sole cost and expense, to defend the Indemnitee against such
claim.
(b) In the event that the Indemnitor notifies the
Indemnitee within the Notice Period that it desires to defend the Indemnitee
against such claim then, except as hereinafter provided, the Indemnitor shall
have the right to defend the Indemnitee by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by the Indemnitor to a final
conclusion in such a manner as to minimize the risk of the Indemnitee becoming
subject to liability for any other significant matter. If the Indemnitee desires
to participate in, but not control, any such defense or settlement, it may do so
at its sole cost and expense. If any such claim or the litigation or resolution
of any such claim involves (i) the administration of the tax returns and
responsibilities of the Indemnitee under the tax laws or (ii) a dispute with a
then-current significant (being one of the fifteen (15) largest, as measured by
revenue volume of business with the Business during the preceding twelve (12)
months) customer or supplier of the Business, then the Indemnitee shall have the
right to control the defense or settlement of any such claim or demand and its
reasonable costs and expenses shall be included as part of the indemnification
obligation of the Indemnitor. If the Indemnitee should elect to exercise such
right, the Indemnitor shall have the right to participate in, but not control,
the defense or settlement of such claim at its sole cost and expense.
(c) Except where the Indemnitor (A) timely elects to
defend the Indemnitee against such claim or demand under this Section 6.04, or
(B) Indemnitor disputes its liability in a timely manner under this Section
6.04, the Indemnitor shall be conclusively liable for the amount of any Loss or
Environmental Loss resulting from such claim whether or not the claim is
defended.
(d) The Indemnitee and the Indemnitor shall cooperate
with each other in all reasonable respects in connection with the defense of any
Third Party Claim, including making available records relating to such claim and
furnishing, without expense to the Indemnitor,
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management employees of the Indemnitee as may be reasonably necessary for the
preparation of the defense of any such claim or for testimony as witness in any
proceeding relating to such claim.
SECTION 6.05 SETTLEMENT OF THIRD PARTY CLAIMS. No settlement of a
Third Party Claim involving the asserted liability of the Indemnitee under this
Article VI shall be made without the prior written consent by or on behalf of
the Indemnitee, which consent shall not be unreasonably withheld or delayed.
Consent shall be presumed in the case of settlements of $25,000 or less where
the Indemnitee has not responded within ten (10) Business Days of written notice
of a proposed settlement.
SECTION 6.06 DURATION. The indemnification rights of the parties
hereto for Losses resulting from a breach of representations and warranties, or
for breaches of covenants, contained in this Agreement or any related agreement
(other than for Environmental Losses, Losses arising from tax and employee
benefit matters and Losses arising from the breach of any agreement or
undertaking with respect to the payment of Excluded Liabilities and Assumed
Liabilities) is subject to the condition that the Indemnitor shall have received
written notice of the Losses for which indemnity is sought within two (2) years
after the Closing Date. The indemnification rights of the parties hereto for
Environmental Losses or Losses resulting from a breach of representations and
warranties or of covenants that are related to tax or employee benefit matters
shall be subject to the condition that the Indemnitor shall have received
written notice of the Losses for which indemnity is sought within three (3)
years after the Closing Date. The indemnification rights of the parties hereto
for Losses resulting from a breach of any representation and warranty with
respect to title to any of the Acquired Assets or with respect to the breach of
any agreement or undertaking with respect to payment of the Excluded Liabilities
and the Assumed Liabilities is subject to the condition that notice of the
Losses for which indemnity is sought shall be received by the Indemnitor within
two (2) years after the Closing Date.
SECTION 6.07 LIMITATIONS.
(a) The Indemnitor shall be obligated to indemnify the
Indemnitee only when the sum of the aggregate of all Losses and Environmental
Losses suffered or incurred by the Indemnitee as to which a right of
indemnification is provided under this Article VI exceeds One Hundred Fifty
Thousand Dollars ($150,000) ("Minimum Claim Amount") and then only to the extent
such aggregate sum exceeds Seventy Five Thousand Dollars ($75,000) (the
"Deductible"); provided, however, that, notwithstanding the foregoing, the
Proration Items and Losses suffered or incurred by the Indemnitee which are
subject to indemnification under Sections 6.01(c) (Excluded Liabilities) or
6.02(c)(i) (Assumed Liabilities) shall not be subject to the Minimum Claim
Amount or the Deductible. In no event shall the aggregate liability of Seller,
or the aggregate liability of Buyer, under this Article VI exceed One Million
Five Hundred Thousand Dollars ($1,500,000), except that Losses suffered or
incurred by the Indemnitee which are subject to indemnification under Sections
6.01(c) (Excluded Liabilities) or 6.02(c)(i) (Assumed Liabilities) shall not be
subject to any limitation.
(b) The Indemnitor shall not be liable for Losses in
excess of the actual Losses suffered by the Indemnitee as a result of the act,
circumstance, or condition for which
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indemnification is sought net of any insurance proceeds received by the
Indemnitee or any tax benefits realized by the Indemnitee as a result of the
Losses for which indemnification is claimed.
(c) No Indemnitor shall be liable under this Article VI
for any Loss resulting from or related to any statement made in any
representation, warranty, covenant or agreement of the Indemnitor set forth
herein if the Indemnitee had Knowledge on or before the Closing Date of facts
contrary to such statement of the Indemnitor and the Indemnitee failed to
disclose such Knowledge to the Indemnitor in writing.
SECTION 6.08 SOLE AND EXCLUSIVE REMEDY. Subject to any proration
made pursuant to Section 1.08 hereof, the indemnification obligations of Seller
and Buyer under this Article VI shall constitute the sole and exclusive remedies
of Seller and Buyer, respectively, with respect to the matters described in
Sections 6.01 and 6.02, respectively.
ARTICLE VII. MISCELLANEOUS
SECTION 7.01 EXPENSES. Except as provided in Section 1.07, Seller,
on the one hand, and Buyer, on the other hand, shall bear their respective
expenses, costs and fees (including attorneys' fees) in connection with the
transactions contemplated hereby, including the preparation, execution and
delivery of this Agreement and compliance herewith, whether or not the
transactions contemplated hereby shall be consummated.
SECTION 7.02 DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are for convenience only and shall not control or affect the
meaning or construction of any provision of this Agreement.
SECTION 7.03 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if (a) delivered by
hand, (b) mailed by registered or certified mail (return receipt requested) (c)
by deposit with a nationally recognized courier, such as Federal Express, for
next Business Day delivery, or (d) telecommunicated and immediately confirmed
both orally and in writing, to the parties at the following addresses (or at
such other addresses for a party as shall be specified by like notice) and shall
be deemed given on the date on which so hand-delivered or so telecommunicated or
the next Business Day following deposit with such courier or on the third
Business Day following the date on which so mailed, if deposited in a
regularly-maintained receptacle for United States mail:
If to Buyer or Merger Subsidiary:
Design Works Holding Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to (which shall not constitute notice to Buyer or Merger
Subsidiary):
Sims, Moss, ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
1000 ▇▇▇▇▇▇▇▇▇ Road, N.E.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopier: 770-481-7210
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
If to Seller:
Crown Crafts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to (which shall not constitute notice to Seller):
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
2700 International Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
SECTION 7.04 COUNTERPARTS. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 7.05 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia without regard
to principles of conflicts of laws.
SECTION 7.06 ASSIGNABILITY. This Agreement shall not be assignable
otherwise than by operation of law by any party without the prior written
consent of the other parties hereto, and any purported assignment by any party
without the prior written consent of the other parties shall be void; provided
that Buyer may assign this Agreement to a wholly-owned subsidiary corporation;
and provided further that in such event, Buyer shall unconditionally guarantee
the performance of all obligations of such subsidiary under this Agreement.
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SECTION 7.07 WAIVERS AND AMENDMENTS. Any term or provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits thereof, and any term or provision of this Agreement may be amended or
supplemented at any time by the mutual consent of the parties hereto, except
that any waiver of any term or condition, or any amendment or supplementation,
of this Agreement must be in writing. A waiver of any breach or failure to
enforce any of the terms or conditions of this Agreement shall not in any way
affect, limit or waive a party's rights hereunder at any time to enforce strict
compliance thereafter with every term or condition of this Agreement.
SECTION 7.08 THIRD PARTY RIGHTS. Notwithstanding any other
provision of this Agreement, this Agreement shall not create benefits on behalf
of any employee of Seller, third party or other Person, and this Agreement shall
be effective only as between the parties hereto, their successors and permitted
assigns.
SECTION 7.09 ENTIRE AGREEMENT. This Agreement (including the
Exhibits, Schedules, documents and instruments referred to herein) constitutes
the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them with
respect to the subject matter hereof.
SECTION 7.10 TIME OF ESSENCE. Wherever time is specified for the
doing or performance of any act or the payment of any funds, time shall be
considered of the essence.
SECTION 7.11 SEVERABILITY. In the event that any one or more of
the provisions contained in this Agreement shall be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement shall remain in
full force and effect.
SECTION 7.12 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
attached hereto are incorporated herein and made a part hereof in the same
manner as if such exhibits and schedules were set forth at length.
SECTION 7.13 CONSTRUCTION. Except where the context of this
Agreement clearly requires another interpretation, plural words have been used
to include the singular and vice versa and masculine, feminine and neuter words
have been used interchangeably. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation." The conjunction "and/or" means one or the other or
both or any one or more or all, of the things or Persons in connection with
which the conjunction is used.
SECTION 7.14 ARBITRATION.
(a) Any dispute, controversy or claim arising out of or
relating to this Agreement or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms shall be settled
by binding arbitration held in Atlanta, Georgia in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect, except as specifically otherwise provided in this Section 7.14. The
interpretation and enforceability of this Section 7.14 shall be governed
exclusively by the Federal Arbitration Act, 9 U.S.C. ss. 1-16.
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(b) If the matter in controversy (exclusive of attorney's
fees and expenses) shall appear, as at the time of the demand for arbitration,
to exceed $250,000 then the panel to be appointed shall consist of three neutral
arbitrators; otherwise, said panel shall consist of one neutral arbitrator.
(c) The arbitrator(s) shall allow such discovery as the
arbitrator(s) determine appropriate under the circumstances and shall resolve
the dispute as expeditiously as practicable, and if reasonably practicable,
within one hundred twenty (120) days after the selection of the arbitrator(s).
The arbitrator(s) shall give the parties written notice of the decision, with
the reasons therefor set out, and shall have thirty (30) days thereafter to
reconsider and modify such decision if any party so requests within ten (10)
days after the decision. Thereafter, the decision of the arbitrator(s) shall be
final, binding, and nonappealable with respect to all Persons, including Persons
who have failed or refused to participate in the arbitration process.
(d) The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or preliminary
relief.
(e) The successful or prevailing party in any proceeding
under this Section 7.14 shall be entitled to recover reasonable attorneys' fees,
costs of the arbitration and all expenses incurred in such proceeding, plus
interest thereon at the Applicable Federal Rate (as defined in Section 1274(d)
of the Code).
(f) Judgment upon the award rendered by the arbitrator(s)
may be entered in any court having in personam and subject matter jurisdiction.
(g) All proceedings under this Section 7.14, and all
evidence given or discovered pursuant hereto, shall be maintained in confidence
by all parties.
(h) The fact that the dispute resolution procedures
specified in this Section 7.14 shall have been or may be invoked shall not
excuse any party from performing its obligations under this Agreement and during
the pendency of any such procedure all parties shall continue to perform their
respective obligations in good faith, subject to any right to terminate this
Agreement that may be available to any party.
(i) All applicable statutes of limitation shall be tolled
while the procedures specified in this Section 7.14 are pending. The parties
will take such action, if any, required to effectuate such tolling.
[Signatures on next page]
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IN WITNESS WHEREOF, Seller, CCD, Merger Subsidiary and Buyer have each
caused this Agreement to be executed, sealed and delivered as of the date first
written above.
BUYER:
DESIGN WORKS HOLDING COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Its: President
-------------------------------------
(Corporate Seal)
MERGER SUBSIDIARY:
DESIGN WORKS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Its: President
-------------------------------------
(Corporate Seal)
SELLER:
CROWN CRAFTS, INC.
By: /s/ E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Its: Executive Vice President
-------------------------------------
(Corporate Seal)
CCD:
CROWN CRAFTS DESIGNER, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Its: President
-------------------------------------
(Corporate Seal)
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EXHIBIT A
CERTIFICATE OF MERGER
OF
DESIGN WORKS, INC.,
A DELAWARE CORPORATION,
WITH AND INTO
CROWN CRAFTS DESIGNER, INC.,
A DELAWARE CORPORATION
Crown Crafts Designer, Inc., a Delaware corporation, and Design Works,
Inc., a Delaware corporation, DO HEREBY CERTIFY as follows:
1. The constituent corporations in the merger are Crown Crafts
Designer, Inc., a Delaware corporation, and Design Works, Inc., a Delaware
corporation.
2. A Merger Agreement by and among the constituent corporations
and other parties dated as of July 23, 2001 (the "Merger Agreement"), has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the provisions of Section 251 of
the General Corporation Law of Delaware.
3. The name of the surviving corporation is Crown Crafts
Designer, Inc.
4. The certificate of incorporation of Crown Crafts Designer,
Inc., as the surviving corporation, shall be amended in its entirety to read as
set forth in Exhibit A attached hereto and incorporated herein by this
reference.
5. The surviving corporation is a corporation of the State of
Delaware.
6. The executed Merger Agreement is on file at the principal
place of business of the surviving corporation at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
7. A copy of the Merger Agreement will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
8. This Certificate of Merger, and the merger provided for
herein, shall become effective upon the filing hereof with the Secretary of
State of the State of Delaware.
[Signatures Next Page]
52
IN WITNESS WHEREOF, the undersigned have caused this Certificate of
Merger to be executed as of the ___ day of July, 2001.
CROWN CRAFTS DESIGNER, INC.
a Delaware corporation
By:
----------------------------------------
Its:
---------------------------------------
DESIGN WORKS, INC.,
a Delaware corporation
By:
----------------------------------------
Its:
---------------------------------------
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EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
DESIGN WORKS, INC.
ARTICLE I
NAME
The name of the corporation is Design Works, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of this Corporation's registered office in the State of
Delaware is ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, P. O. ▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
County of Kent; and the name of the registered agent of the corporation in the
State of Delaware at such address is Incorporating Services, Ltd.
ARTICLE III
PURPOSES AND POWERS
The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware. The Corporation shall have all power necessary or convenient
to the conduct, promotion, or attainment of such acts or activities.
ARTICLE IV
CAPITAL STOCK
The total number of shares of capital stock that this Corporation
shall be authorized to issue is 1,000,000 shares, divided into two classes as
follows: (i) 900,000 shares of common stock, par value $0.0001 per share (the
"Common Stock"); and (ii) 100,000 shares of serial preferred stock, to be
designated in series and having a par value of $0.0001 per share (the
"Preferred Stock").
Common Stock. The Common Stock shall be subject to all of the rights,
privileges, preferences and priorities of the Preferred Stock as set forth
herein and in the certificates of designations filed to establish the
respective series of Preferred Stock. Each share of Common Stock shall have the
same relative rights as, and be identical in all respects to, all the other
shares
54
of Common Stock.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of shares of any class of stock having preference over
the Common Stock as to the payment of dividends, the full amount of dividends
and of sinking fund or retirement payments, if any, to which such holders are
respectively entitled in preference to the Common Stock, then dividends may be
paid on the Common Stock and on any class or series of stock entitled to
participate therewith as to dividends, out of any assets legally available for
the payment of dividends thereon, but only when and as declared by the Board of
Directors of the Corporation.
In the event of any dissolution, liquidation, or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common Stock,
and holders of any class or series of stock entitled to participate therewith,
in whole or in part, as to the distribution of assets in such event, shall
become entitled to participate in the distribution of any assets of the
Corporation remaining after the Corporation shall have paid, or provided for
payment of, all debts and liabilities of the Corporation and after the
Corporation shall have paid, or set aside for payment, to the holders of any
class of stock having preference over the Common Stock in the event of
dissolution, liquidation or winding up the full preferential amounts (if any)
to which they are entitled.
Each holder of shares of Common Stock shall be entitled to attend all
special and annual meetings of the stockholders of the Corporation and, share
for share and without regard to class, together with the holders of all other
classes of stock entitled to attend such meetings and to vote (except any class
or series of stock having special voting rights), to cast one vote for each
outstanding share of Common Stock so held upon any matter or thing (including,
without limitation, the election of one or more directors) properly considered
and acted upon by the stockholders.
Preferred Stock. The Board of Directors is authorized, subject to
limitations prescribed by the General Corporation Law of Delaware and the
provisions of this Certificate of Incorporation, to provide, without
stockholder approval, by resolution or resolutions from time to time and by
filing a certificate pursuant to the applicable provision of the General
Corporation Law of Delaware, for the issuance of the shares of Preferred Stock
in series, to establish from time to time the number of shares to be included
in each such series, and to fix the powers, designations, preferences and
relative, participating optional or other rights of the shares of each such
series and the qualifications, limitations and restrictions thereof.
ARTICLE V
BOARD OF DIRECTORS
The Board of Directors shall fix the number of directors of the
Corporation from time to time in the manner provided in the bylaws of the
Corporation. Unless and except to the extent that the Bylaws of the Corporation
shall otherwise require, the election of directors of the Corporation need not
be by written ballot. Each director shall serve until the next annual meeting
of stockholders following the time of his appointment or election to the Board
of Directors and until his or her successor shall be elected and qualified, or
until his or her earlier
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death, resignation, removal or incapacity.
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that his paragraph shall not eliminate or limit
the liability of a director: (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (c) under Section 174 of the General Corporation Law of Delaware; or (d)
for any transaction from which the director derived an improper personal
benefit. Any repeal or modification of this paragraph shall be prospective only
and shall not adversely affect any right or protection of, or any limitation of
the liability of, a director of this Corporation existing at, or arising out of
facts or incidents occurring prior to, the effective date of such repeal or
modification.
ARTICLE VI
INDEMNIFICATION
Each person who was or is a party or is threatened to be made a party
to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and
whether by or in the right of the Corporation or otherwise (a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director, officer, employee, or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company,
trust or other enterprise, including service with respect to an employee
benefit plan, shall be (and shall be deemed to have a contractual right to be)
indemnified and held harmless by the Corporation (and any successor to the
Corporation by merger or otherwise) to the fullest extent authorized by, and
subject to the conditions and (except as provided in the Corporation's bylaws)
procedures set forth in the General Corporation Law of Delaware, as the same
exists or may hereinafter ben amended (but such amendment shall not be deemed
to limit or prohibit the rights of indemnification hereunder for past acts or
omissions of any such person insofar as such amendment limits or prohibits the
indemnification rights that said law permitted the Corporation to provide prior
to such amendment) against all expenses, liabilities and losses (including
attorney's fees, judgments, fines, ERISA taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith.
ARTICLE VII
COMPROMISE OR ARRANGEMENTS
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders
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or class of stockholders of the Corporation, as the case may be, to be summoned
in such manner as said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all of the
creditors or class or creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE VIII
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right, at any time and from time to time,
to amend, alter, change, or repeal any provision contained in this Certificate
of Incorporation. Notwithstanding the foregoing, Articles V and VI and this
Article XIII may not be altered, amended, or repealed except by the affirmative
vote of at least two-thirds of the shares entitled to vote thereon and the
affirmative vote of a majority of the members of the entire Board of Directors.
All rights, preferences, and privileges of any nature conferred upon
stockholders, directors or any other person whomsoever by and pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the rights reserved in this Article VIII.
ARTICLE IX
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the
General Corporation Law of Delaware, the Board of Directors of the Corporation
is expressly authorized and empowered to adopt, amend, and repeal the bylaws of
the Corporation.
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EXHIBIT B
TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (the "Agreement") is made and entered
into and is effective as of the 23rd day of July, 2001, by and among DESIGN
WORKS HOLDING COMPANY, a Delaware corporation ("Design Works"), DESIGN WORKS,
INC., a Delaware corporation ("Licensee"), and CROWN CRAFTS, INC., a Georgia
corporation ("Crown Crafts").
WHEREAS, Design Works, Licensee and Crown Crafts are among the parties
to that certain Merger Agreement dated as of July 23, 2001 (the "Merger
Agreement"), pursuant to which Design Works and Licensee will acquire certain
assets of Crown Crafts;
WHEREAS, the parties desire that Licensee be permitted to utilize
certain brands, logos and other rights of Crown Crafts, upon and subject to the
terms and conditions hereinafter set forth, following the consummation of the
transactions contemplated in the Merger Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the respective meanings given to such terms in the Merger Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereby agree as follows:
SECTION 1.0 GRANT OF LICENSE. Crown Crafts hereby grants to
Licensee and its direct and indirect subsidiaries, whether acting as principal
or agent (i) a limited, nonexclusive and nontransferable license to use the
Crown Crafts' adult bedding brand and logo for a period of three (3) years from
the Effective Time with respect to products manufactured and/or licensed by
Kitan Consolidated Industries, Limited ("Kitan") and sole to Costco Wholesale
Corporation and otherwise for a period of two (2) years from the Effective
Time; provided, however, that Design Works and Licensee shall each use their
reasonable best efforts to change said brand and logo as soon as reasonably
practicable after the Effective Time, and (ii) a limited, nonexclusive and
nontransferable license to use Crown Crafts' RN numbers related to the Business
until the earlier of two (2) years from the Effective Time or when all labels
and inserts included in the Acquired Assets are depleted, whichever first
occurs (collectively, the "Proprietary Rights"). Notwithstanding the foregoing,
in the event of (i) a sale of majority ownership or control of Crown Crafts to
any Person (other than Crown Crafts' lender banks) who, prior to such sale, was
not an Affiliate of Seller, (ii) a merger, consolidation or reorganization of
Crown Crafts as a result of which the shareholders of Crown Crafts immediately
before any such merger, consolidation or reorganization own less than a
majority of the combined voting power of the entity resulting from any such
merger, consolidation or reorganization, or (iii) a sale, exchange or other
disposition of a majority of Crown Crafts' assets to any Person who, prior to
such sale, exchange or other disposition was not an Affiliate of Crown Crafts;
then, in each case, Licensee
58
shall cease using Crown Crafts' adult bedding brand and logo on any goods
shipped more than one hundred eighty (180) days after the consummation thereof.
SECTION 2.0 LIMITATIONS. This Agreement includes no right or
license from Crown Crafts to Licensee in the Proprietary Rights except for the
limited purposes referred to in Section 1.0. Licensee has no right to assign,
transfer, or sublicense any of its rights acquired under this Agreement except
that Licensee may grant a limited sublicense to Kitan, but only to the extent
necessary to facilitate the sale by Licensee, whether acting as principal or
agent, of products manufactured or licensed by Kitan. Licensee may not use the
Proprietary Rights in any manner except for the limited purposes referred to in
Section 1.0. All goodwill in the Proprietary Rights that arises out of
Licensee's use of such Proprietary Rights shall inure to the benefit of Crown
Crafts.
SECTION 3.0 CROWN CRAFTS WARRANTY AND INDEMNITY. Crown Crafts
warrants that it is the owner of the Proprietary Rights and has full power to
make this Agreement and to grant the licenses as provided herein. Crown Crafts
agrees to indemnify, defend and hold harmless Licensee, its affiliates and
their respective directors, employees, shareholders, agents, successors and
assigns from and against any and all actions, causes of action, claims,
liabilities, losses, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees) brought by any third party for actual
or alleged infringement of any trademark, copyright or other intellectual
property right based upon Licensee's authorized use of the Proprietary Rights
as provided herein.
SECTION 4.0 TERMINATION. Crown Crafts may terminate this
Agreement upon written notice to Licensee for any material breach of this
Agreement by Licensee, unless within a period of thirty (30) days after such
notice, Licensee remedies the breach. Immediately upon expiration or
termination of this Agreement, all rights of Licensee under this Agreement will
automatically cease.
SECTION 5.0 MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without regard to principles
of conflicts of laws.
(b) Nothing in this Agreement shall be construed to
establish Licensee or Crown Crafts as a partner, joint venturer, agent or other
representative of the other. Each is an independent company retaining complete
control over and complete responsibility for its own operations and employees.
Nothing in this Agreement shall be construed to grant either party any right or
authority to assume or create any obligation on behalf or in the name of the
other; to accept summons or legal process for the other; or to bind the other
in any manner whatsoever.
(c) Any notice or other communication required or
permitted hereunder shall be in writing and shall be given pursuant to the
notice provisions of the Merger Agreement.
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(d) In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force
and effect.
(e) Any term or provision of this Agreement may be
waived at any time by the party that is entitled to the benefits thereof, and
any term or provision of this Agreement may be amended or supplemented at any
time by the mutual consent of the parties hereto, except that any waiver of any
term or condition, or any amendment or supplementation, of this Agreement must
be in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive a
party's rights hereunder at any time to enforce strict compliance thereafter
with every term or condition of this Agreement.
(f) This Agreement constitutes the entire agreement
concerning the subject matter hereof, and supersedes all other prior agreements
and understandings, both written and oral, among the parties, or any of them
with respect to the subject matter hereof.
[Signatures Next Page]
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IN WITNESS WHEREOF, the parties have caused this Trademark License
Agreement to be executed by their duly authorized officers as of the date set
forth above.
CROWN CRAFTS, INC.
By:
----------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
DESIGN WORKS HOLDING COMPANY
By:
----------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
DESIGN WORKS, INC.
By:
----------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
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EXHIBIT C
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (the "Sublease") is made and entered into
effective as of the 23rd day of July, 2001, by and between CROWN CRAFTS, INC.,
a Georgia corporation, herein referred to as "CCI," and CROWN CRAFTS DESIGNER,
INC., a Delaware corporation, hereinafter referred to as "CCDI."
WITNESSETH:
WHEREAS, The Northwestern Mutual Life Insurance Company entered into
that certain Master Lease with International Business Machines Corporation
("Sublandlord"), dated May 1, 1991, with respect to the buildings at 1500 and
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, which Master Lease has been amended
and supplemented by that certain Supplemental Agreement dated June 17, 1991,
that certain First Amendment to Master Lease and Supplemental Agreement dated
November 1, 1991, that certain First Amendment to Master Lease and Supplemental
Agreement dated November 1, 1991, that certain Second Supplemental Agreement
dated October 26, 1992, that certain Second Amendment to Master Lease dated May
10, 1993, that certain Third Supplemental Agreement dated May 10, 1993, and
that certain Third Amendment to Master Lease dated November 18, 1993 (as
amended and supplemented, the "Master Lease"), a true and correct copy of which
Master Lease is attached hereto as Exhibit A and is incorporated herein by this
reference;
WHEREAS, Trinet Essential Facilities XXIII, Inc. ("Master Lessor")
acquired and holds the entire right, title and interest of The Northwestern
Mutual Life Insurance Company in and to the Master Lease;
WHEREAS, Sublandlord and CCI entered into that certain Sublease dated
December 17, 1993 (the "Master Sublease") for the second floor and a portion of
the first floor of the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (the "Master
Sublease Premises"), which Master Sublease has been amended by that certain
First Sublease Amendment dated October 31, 1994 and that certain Second
Sublease Amendment dated December 9, 1994;
WHEREAS, CCI and WorldCrest Group, Inc. entered into that certain
Sublease dated May 18, 2000 for the first floor portion of the Master Sublease
Premises;
WHEREAS, on May 22, 2000 Sublandlord assigned its rights under the
Master Sublease to the Prime Landlord;
WHEREAS, CCI now desires to sublease the second floor of the Master
Sublease Premises identified on Exhibit B attached hereto and incorporated
herein by this reference less and except as many offices as necessary in the
discretion of CCI for the current employees of CCI who will remain with CCI
after the sale of CCI's Adult Bedding Division, such offices to be located as
they are on the date hereof or as mutually agreed (the "Sub-Subleased
Property") together with a right to use conference rooms, break rooms,
restrooms and other common areas
62
and facilities (the "Common Areas") to CCDI, and CCDI desires to accept such
sublease, subject to and upon the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the foregoing, the sum of
Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. SUBLEASE
CCI hereby leases to CCDI, and CCDI hereby rents and leases from CCI,
the Sub-Subleased Property and CCI and CCDI agree to cooperatively share the
Common Areas and to use their reasonable best efforts to coordinate the use
thereof.
2. TERM
This Sublease shall commence on the date hereof (the "Commencement
Date") and shall expire at 12:00 a.m. midnight on the 29th day of June, 2002;
provided, however, that this Sublease may be sooner terminated as provided in
the Master Sublease; and provided further, however, that CCI and CCDI may
terminate this Sublease without the consent of Master Lessor provided notice of
such termination is delivered to Master Lessor. Notwithstanding anything herein
to the contrary, CCI shall not voluntarily terminate the Master Sublease prior
to the expiration thereof in accordance with the terms thereof, without first
obtaining the written consent of CCDI, which consent shall not be unreasonably
withheld.
3. RENT
As consideration for the sublease hereunder, CCDI shall pay to CCI as
rent, without notice, demand, deduction or setoff, the sum of $11,011.32 per
month, in advance, on or before the third (3rd) business day prior to the first
(1st) day of each and every successive calendar month during the term hereof,
except for the first month's (or partial month's) rent which shall be payable
on the Commencement Date. Rent shall be paid by CCDI to CCI at CCI's offices at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place
as CCI shall direct. Rent for any partial calendar month during the term hereof
shall be prorated on a per diem basis.
4. SUBJECT TO MASTER LEASE AND MASTER SUBLEASE.
CCI and CCDI hereby acknowledge and agree that this Sublease is and
shall during the term hereof be in all respects subject and subordinate to the
Master Lease and the Master Sublease and Master Lessor's rights and remedies
thereunder, and, in connection with the exercise by Master Lessor of any of
such rights or remedies, Master Lessor shall have no obligation to give any
notice or take any action other than the notices and actions, if any, required
by the terms of the Master Lease or the Master Sublease. CCI and CCDI hereby
further acknowledge and agree that if the Master Lease or the Master Sublease
shall terminate for whatever reason, this Sublease shall terminate
automatically by operation of law without any separate action on the part of
the Master Lessor.
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5. TERMS AND CONDITIONS.
This Sublease and CCDI's use and occupancy of the Sub-Subleased
Property pursuant hereto shall be subject to and upon all the terms and
conditions set forth in the Master Sublease, and by acceptance hereof CCDI
hereby agrees to be bound by each and every obligation of the "Sublessee"
thereunder.
6. MASTER LESSOR OPERATING COSTS.
From and after January 1, 2002, any and all increases in operating
costs of Master Lessor for calendar year 2002 over calendar year 2001 which
shall, pursuant to the Master Lease or the Master Sublease, be passed through
by Master Lessor to CCI shall be borne one-half by CCI and one-half by CCDI.
Additionally, from and after the date hereof, any and all special request
charges which Master Lessor shall, pursuant to the Master Lease or the Master
Sublease, impose upon CCI shall be borne one-half by CCI and one-half by CCDI
until the earlier to occur of (i) December 31, 2001 or (ii) CCI's vacating the
Sub-Subleased Property, after which time all of such charges shall be borne
entirely by CCDI.
7. CONSENTS.
The validity of this Sublease shall be subject to the prior written
consent hereto of the Master Lessor.
8. COUNTERPARTS.
This Sublease may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
[Signatures Next Page]
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IN WITNESS WHEREOF, CCDI and CCI have signed, sealed and delivered
this Sublease effective as of the date set forth above.
CROWN CRAFTS, INC.,
a Georgia corporation
By:
----------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
[CORPORATE SEAL]
CROWN CRAFTS DESIGNER, INC.,
a Delaware corporation
By:
----------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
[CORPORATE SEAL]
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CONSENT OF MASTER LESSOR
The undersigned Master Lessor hereby consents to the foregoing
Sublease and agrees that the Sublease shall not create a default or give rise
to an event of default under the Master Sublease.
MASTER LESSOR:
TRINET ESSENTIAL FACILITIES XXIII, INC.
By:
----------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
[CORPORATE SEAL]
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EXHIBIT D
SHARED SERVICES AGREEMENT
THIS SHARED SERVICES AGREEMENT (the "Agreement"), dated as of the 23rd
day of July, 2001, is made and entered into by and between CROWN CRAFTS, INC., a
Georgia corporation ("Crown"), and DESIGN WORKS, INC., a Delaware corporation
("Design Works").
W I T N E S S E T H:
WHEREAS, Crown, Design Works, Design Works Holding Company, the parent
corporation of Design Works, and Crown Crafts Designer, Inc., a wholly-owned
subsidiary of Crown, have entered into a Merger Agreement (the "Merger
Agreement") dated as of July 23, 2001, pursuant to which, among other things,
Design Works will merge with and into Crown Crafts Designer, Inc. as of the
Closing Date;
WHEREAS, prior to the Closing Date, Crown used certain technology and
personnel resources to support the operation of the Business and the Infant
Business, including hardware, software, internet and computer networks and
services, local and long distance telephone systems, cellular telephones and
record storage systems available to Crown under certain agreements with third
parties, certain management, human resources, accounting and financial
personnel, and certain other resources (collectively, the "Shared Services"),
and effective as of the Closing Date, certain of the Shared Services will be
transferred to Design Works;
WHEREAS, in order to support the Business of Design Works beginning on
the Closing Date, and to support the Infant Business of Crown after the Closing
Date, each party hereto desires that other party hereto make available certain
of the Shared Services owned, held or assumed by such party for the term of this
Agreement, all in accordance with the terms and conditions hereof; and
WHEREAS, the execution and delivery of this Agreement, which is
attached as Exhibit D to the Merger Agreement, is a condition to the
consummation of the transactions contemplated thereby;
NOW, THEREFORE, in consideration of the promises and covenants
contained herein, and intending to be legally bound hereby, Crown and Design
Works hereby agree as follows:
ARTICLE 1. SHARED SERVICES.
SECTION 1.01 EDI SERVICES.
(a) Baseline EDI Services. Design Works will provide to Crown the
electronic data interchange services more particularly described on Schedule
1.01 attached hereto (collectively, the "Baseline EDI Services") from the
Closing Date through the date selected by Crown to
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terminate the Baseline EDI Services hereunder (the "EDI Termination Date"),
provided that (i) the EDI Termination Date is the last business day of any
calendar month; (ii) Design Work receives at least sixty days' prior written
notice of the EDI Termination Date; and (iii) the EDI Termination Date cannot
occur until such time as Crown as transferred its Human Resources ("HR")
database off of the AS-400 (as hereinafter defined). Any such notice of the EDI
Termination Date shall be irrevocable. Design Works shall use commercially
reasonable efforts to provide the Baseline EDI Services to Crown on a continuous
basis during the term hereof; provided, however, that Design Works shall only be
obligated to provide up to a maximum of 16 2/3 hours per month on a cumulative
basis for all Design Works employees for the addition of new documents to the
profiles of Crown's existing customers, and any time spent by Design Works
employees over such cumulative maximum will be charged to Crown at the Project
Rate (as hereinafter defined) for such Design Works employees.
(b) EDI Project Services. In addition to the EDI Baseline
Services, Design Works will provide to Crown for the period set forth in Section
1.01(a) hereof such additional services related to the Conversion (as
hereinafter defined) and migration off of Design Works' EDI system (referred to
herein as "EDI Project Services"; the Baseline EDI Services and the EDI Project
Services are sometimes referred to herein collectively as the "EDI Services") as
shall be mutually agreed to by the parties hereto and reduced to writing in a
Statement of Work in advance of the provision of such EDI Project Services.
Design Works will use commercially reasonable efforts to allocate a sufficient
number of Design Works employees to the provision of EDI Project Services;
provided, however, that (i) Design Works will not be required to provide the
services of its employees hereunder if providing such services would materially
restrict such employees' ability to perform their regular services for Design
Works; and (ii) Design Works shall not be required hereunder to provide more
than the services of one full-time employee. All time spent by Design Works
employees in the provision of EDI Project Services for Crown (including all time
spent in research, preparation, meetings and conference calls with ROI Systems,
Inc. ("ROI")) shall be charged to Crown at the Project Rate in one-half hour
time increments for each Design Works employee.
(c) Conditions of and Exclusions to EDI Services.
(i) Crown will provide the services of one full-time
Crown employee that is knowledgeable in the Infant Business
who will be responsible for ensuring Crown's compliance with
the vendor guidelines of its customers and for notifying
Design Works of any changes required in the EDI services for
any Crown customer.
(ii) Design Works will promptly notify Crown of all orders
commingling Design Works products and Crown products.
(iii) Crown shall be responsible for all changes of
customer setups, for pointing to new mailboxes in the Value
Added Area Network, and for Crown's EDI technical
architecture.
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(iv) Enhancements to or upgrades of the EDI Services,
computer program source codes and executables shall not be
included in the EDI Services provided by Design Works
hereunder.
(v) Crown shall submit all questions or issues related to
the implementation of the EDI Services to ROI before
submitting such questions or issues to Design Works.
(vi) Design Works shall not be obligated hereunder to
convert or upgrade to a new or different EDI translator
software package to interface with Crown's translator software
package or to meet Crown's computer requirements unless Design
Works, in its discretion, elects to do so or the parties
hereto reach a separate agreement concerning the sharing of
the costs associated with such conversions or upgrades.
(vii) Design Works is providing the EDI Services hereunder
on a commercially reasonable efforts basis. Without limiting
the generality of the foregoing or of Article 3 of this
Agreement, Design Works shall not be liable for any errors or
omissions in the EDI Services, or any customer chargebacks.
Furthermore, Crown shall have sole responsibility for
monitoring and ensuring compliance with the EDI requirements
of its customers.
(d) Cost of EDI Services. As compensation to Design Works for the
provision of the EDI Services, Crown shall pay Design Works the amount per month
set forth below in accordance with the terms of Article 2 hereof for each month
during the term set forth in Section 1.01(a) hereof:
(i) $10,000 per month for each of months 1 through 6;
(ii) $15,000 per month for each of months 7 and 8;
(iii) $20,000 per month for each of months 9 and 10;
(iv) $30,000 per month for each of months 11 and 12; and
(v) $50,000 per month for month 13 and each month
thereafter.
SECTION 1.02 IT SERVICES.
(a) Frame Relay Cost and Internet. From the Closing Date through
the date of the expiration of Crown's Connectivity Agreement and WANS MNS
Agreement on June 16, 2002, Design Works will use commercially reasonable
efforts to operate and maintain the frame relay infrastructure and internet
connectivity operated by Crown prior to the Closing, and the employees
associated therewith (collectively, the "Network"), for Crown in the manner that
it was operated and maintained by Crown prior to the Closing. Notwithstanding
the foregoing, the parties hereto acknowledge that interruptions in service and
system-down situations may occur
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with the Network that are beyond Design Works' control, and that such
interruptions and system-down situations may result in the Network being
inoperable from time to time. Design Works shall use commercially reasonable
efforts to minimize such interruptions and system-down situations and to restore
the operation of the Network as quickly as practicable under the circumstances.
(i) The parties hereto agree to share equally (i.e., on a
50/50 basis) the costs more particularly described on Schedule
1.02(a) hereto relating to the Network.
(ii) The parties hereto agree that, at the Closing, Design
Works will become the owner of the existing Network
infrastructure that is located at all Design Works sites,
including Design Works' Atlanta office, and that Crown will
retain the ownership of the all existing Network
infrastructure located at all of Crown's Infant Business
sites, but excluding Crown's Atlanta office. If either party
hereto establishes its own frame relay or similar WAN
infrastructure before June 16, 2002, then such party will
remain obligated to pay its share of the costs set forth on
Schedule 1.02(a) hereto through June 16, 2002. Any disconnect
charges, termination charges or other charges for termination
of the Network services are to be paid by the terminating
party. All communications with AT&T, the Network service
provider, regarding the day-to-day operations of the Network
must be initiated through Design Works' Director of
Information Technology; provided, however, that Crown may
participate in all conferences with Design Works and AT&T
regarding the day-to-day operation of the Network.
(iii) Design Works will provide to Crown up to ten hours
per month of the work time of Messrs. ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇, or other Design Works employees who perform duties
similar to the duties of Messrs. Bruno and ▇▇▇▇▇, to provide
desktop support services to Crown employees at its Atlanta
office during the term set forth in Section 1.02(a) hereof.
All time spent by Messrs. Bruno and ▇▇▇▇▇ or such other Design
Works employees after the first ten hours in the provision of
desktop support services to Crown personnel hereunder shall be
charged to Crown at the Maintenance Rate (as hereinafter
defined). Crown shall direct all requests for Network or
desktop support services to the e-mail HELP desk facility,
which will generate a reply upon completion of the service
showing all time spent on each request submitted.
(iv) Design Works will not provide Network services to
Aladdin Manufacturing Corporation ("Aladdin") following the
Closing. Receipts for any services performed for Aladdin by
Crown prior to the Closing will remain the property of Crown,
and any charges by AT&T or other Network service providers for
disconnect services or other services arising as a result of
Aladdin's migration off of the Network will be obligations of
Crown.
(v) At the Closing, Design Works shall assume all lease
and maintenance obligations, and thereafter Design Works shall
pay the lease and maintenance
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costs of the telecomunications equipment leased from Siemens
Corporation through the expiration of such lease and
maintenance agreements.
(b) Internet Domain Name Services and Sharing. The parties hereto
agree that the internet domain name and address "▇▇▇▇▇▇▇▇▇▇▇.▇▇▇" is the
property of Crown, and will remain the exclusive property of Crown after the
Closing. The parties hereto agree that Design Works may share such domain name
and address with Crown for a period of three months after the Closing and may
receive forwarded email messages which were sent to ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ for an
additional three months after the expiration of the first three-month period
hereunder.
(c) Dial-Up Networking. Each party hereto will be responsible for
the cost of all dial-up internet access service provider agreements as set forth
on Schedule 1.02(c) hereto. If the parties hereto negotiate a new agreement for
dial-up internet access, such new agreement will provide that Design Works and
Crown will be billed separately for such service.
(d) SAP System.
(i) Crown agrees to provide transition services to Design
Works with respect to the SAP America, Inc. ("SAP") FI and CO
computer software modules for accounting and financial
reporting that Crown operated prior to the Closing (the "SAP
System") in accordance with Section 11.3 of that certain SAP
America Inc. R/3 Software End-User License Agreement dated as
of June 8, 1998, as amended (as so amended, the "SAP
Agreement"), for a period of six (6) months after the Closing;
provided, however, that Design Works may extend such period
for an additional six (6) months by providing written notice
of such extension to Crown no later than twenty (20) days
prior to the expiration of the initial six (6) month period
and so long as Design Works pays all payments, fees and
charges of SAP arising out of or related to such extension.
After the Closing and during such period (as the same may be
extended hereunder) Crown will cooperate in all reasonable
respects with Design Works in its efforts to obtain the
assignment of the SAP Agreement in accordance with its terms;
provided, however, that Crown will not be obligated to
compromise or settle any claims that Crown has against SAP or
to pay any fees, costs or expenses in connection with such
transfer or assignment, including, without limitation, any
transfer or assignment fees payable to SAP, and all such fees,
costs and expenses will be the exclusive obligation of Design
Works; and provided further, however, that if Crown shall so
compromise or settle any claims against SAP and/or ▇▇▇▇▇,
Crown shall use its best efforts to secure as part of such
settlement SAP's consent to assign the SAP Agreement to Design
Works. Prior to such assignment, and to the extent necessary
to grant Design Works the rights contemplated herein under the
SAP Agreement, and subject to SAP's Vendor Consent, if
necessary, Crown hereby grants to Design Works an exclusive,
irrevocable, royalty-free sublicense of all of Crown's
licensed rights under the SAP Agreement during the term set
forth in this Section 1.02(d) and any extension thereof. If
any Dispute over the nature, quality or scope of the SAP
System arises hereunder, the prior practice of Crown, SAP and
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the vendors under the SAP Agreement will be final and binding
on the parties hereto.
(ii) During the term set forth in this Section 1.02(d) and
any extension thereof, Design Works shall use commercially
reasonable efforts to operate and maintain the SAP System for
both parties hereto in substantially the same manner that it
was operated and maintained by Crown prior to the Closing.
Notwithstanding the foregoing, the parties hereto acknowledge
that interruptions in service and system-down situations with
the SAP System may occur that are beyond Design Works'
control, and that such interruptions and system-down
situations may result in the SAP System being inoperable from
time to time. Design Works shall use commercially reasonable
efforts to minimize such interruptions and system-down
situations and to restore the operation of the SAP System as
quickly as practicable under the circumstances. Crown shall
remain a user of the SAP System until the completion of the
final accounting of Crown on a consolidated basis through the
date of the Closing, at which time, Crown will terminate its
use of the SAP System. For so long as Crown and Design Works
share the SAP System, Crown and Design Works agree to share
equally (i.e., on a 50/50 basis) the costs and expenses
described on Schedule 1.02(d) attached hereto in connection
with the use and support of the SAP System (it being
understood that all charges from SAP from periods prior to the
Closing Date, as and when finally determined, will remain the
sole responsibility of Crown); provided, however, that if ad
hoc analyses or investigations are conducted to support
customer, governmental or legal inquiries of Crown for any
period, and such analyses or investigations require access to
SAP System historical data, the development of inquiry
programs or responses to questions about the information
produced, then Crown shall pay the Maintenance Rate for up to
the first two hours of all Design Works employee time spent
performing such services hereunder and the Project Rate for
all Design Works employee time after the first two hours spent
performing such services hereunder; and provided further,
however, that all amounts due under the SAP System agreement
with ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ for software maintenance of the EMC disk
will remain an obligation of Crown after the Closing. During
the term of this Section 1.02(d), Design Works will not
terminate or migrate off of the SAP System without giving
Crown six months prior written notice. During such notice
period, neither party hereto shall be obligated to pay any
maintenance costs with respect to the SAP System. If (and only
if) Crown has terminated the services set forth in this
Section 1.02(d), then Crown will pay Design Works $1,000.00
per month through December 31, 2001, payable by the 15th day
of each month, for access to SAP reports, plus the Maintenance
Rate of any Design Works employee if assistance is needed by
Crown to run such SAP reports.
(e) Design Works' AS-400 Computer. Design Works shall use
commercially reasonable efforts to operate and maintain its IBM AS-400 mainframe
computer system (the "AS-400") for accounting and financial reporting and HR
record-keeping for both parties hereto in the manner that it was operated and
maintained by Crown prior to the Closing from the date
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hereof through the EDI Termination Date, at which time Crown will have
transferred its HR database and record-keeping services off of the AS-400 and
the Shared Services provided under this Section 1.02(e) shall cease.
Notwithstanding the foregoing, the parties hereto acknowledge that interruptions
in service and system-down situations may occur that are beyond Design Works'
control, and such interruptions and system-down situations with the AS-400 may
result in the AS-400 being inoperable from time to time. Design Works shall use
commercially reasonable efforts to minimize such interruptions and system-down
situations and to restore the operation of the AS-400 as quickly as practicable
under the circumstances. If Design Works must repair, replace or install
replacement drives or peripheral equipment on the AS-400 prior to the
termination of Crown's use thereof, Crown will pay its pro-rata share (based on
the number of months that Crown uses the AS-400 pursuant hereto and the total
number of months that such drives or peripheral equipment may be depreciated
under generally accepted accounting principles) of the costs and expenses
associated therewith as set forth on Schedule 1.02(e) attached hereto; provided,
however, that if such drives or peripheral equipment were repaired, replaced or
installed primarily to facilitate the performance by Design Works of services
for Crown hereunder, Crown shall be responsible for all of the costs and
expenses associated therewith unless Crown elects to terminate the AS-400
services provided hereunder upon 30 days prior written notice to Design Works.
If Design Works is required to perform ad hoc analyses or investigations to
support customer, governmental or legal inquiries of Crown for any period, and
such analyses or investigations require the use of the AS-400, Crown shall pay
Design Works the Project Rate for all Design Works employees used to perform
such services. Further, if Design Works is required to provide periodic services
to support the historical archiving of all of Crown's legal entity electronic
information, then Crown shall pay the Maintenance Rate for up to the first two
hours of all Design Works employee time spent performing such services hereunder
and the Project Rate for all Design Works employee time after the first two
hours spent performing such services hereunder. Notwithstanding the terms of
Section 3.01 hereof to the contrary, Design Works will warrant that all AS-400
program problems and failures with ongoing services will be corrected as soon as
practicable, but Design Works will not be responsible for customer chargebacks
incurred by Crown as a result of such problems or failures. During the term of
this Section 1.02(e), Design Works shall not terminate or migrate off of the
AS-400 without giving Crown 12 months prior written notice.
(f) Long Distance Telephone Service. Until such time as Design
Works transfers its long distance telephone service to another carrier, Crown
shall provide Design Works with access to Crown's long distance telephone
service, and Design Works shall pay its pro-rata share (calculated by dividing
the number of Design Works employees occupying its Atlanta offices as of the
date of the Closing by the total number of employees of both Design Works and
Crown that occupy their respective Atlanta offices as of the date of the
Closing) of the actual cost of Crown's long distance service, including, without
limitation, all taxes, special charges, fees and assessments, under Crown's AT&T
long distance telephone service agreement. All other costs, fees and expenses
shall be the obligation of Crown. The parties hereto agree that the pro rata
calculation set forth in this Section 1.02(f) will be revised at the end of each
consecutive 90-day period during the term of this Section 1.02(f) to accurately
reflect the employee census numbers at the parties' respective Atlanta offices;
provided, however, that Crown shall have no obligation to make payments under
this Section 1.02(f) for periods after Crown has vacated its Atlanta
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offices. During the term of this Section 1.02(f), Crown shall not terminate its
AT&T long distance service without giving Design Works 90 days prior notice.
(g) Atlanta Phone Systems, Coverage and Dial Tone.
(i) Until such time as Design Works transfers its local
telephone service to another carrier, Crown shall provide
Design Works with access to Crown's local and dial tone
telephone service, and Design Works shall pay its pro-rata
share (calculated by dividing the number of Design Works
employees occupying its Atlanta offices as of the date of the
Closing by the total number of employees of both Design Works
and Crown that occupy their respective Atlanta offices as of
the date of the Closing) of the actual cost of Crown's local
telephone service, including, without limitation, all taxes,
special charges, fees and assessments, under Crown's AT&T
local telephone service agreement. All other costs, fees and
expenses shall be the obligation of Crown. The parties hereto
agree that the pro rata calculation set forth in this Section
1.02(g) will be revised at the end of each consecutive 90-day
period during the term of this Section 1.02(g) to accurately
reflect the employee census numbers at the parties' respective
Atlanta offices; provided, however, that Crown shall have no
obligation to make payments under this Section 1.02(g) for
periods after Crown has vacated its Atlanta offices. During
the term of this Section 1.02(g), Crown shall not terminate
its AT&T local telephone or dial tone service without giving
Design Works 90 days prior notice. At the Closing, Design
Works will assume Crown's dial tone service agreement and will
thereafter be responsible for such dial tone service agreement
through the date of its termination or expiration.
(ii) As set forth in Section 1.02(a)(v) hereof, Crown's
lease agreement with respect to its Siemens 9200 switch (the
"PBX Switch") and the maintenance contract associated
therewith will be transferred and assigned to Design Works at
the Closing, the total cost of which equals $6,206 per month.
Crown shall be obligated to pay its pro-rata share, as
calculated and adjusted in Section 1.02(g)(i) above, of such
total monthly cost, as well as any other charges from the
service vendor of the PBX Switch that are not covered by such
lease or maintenance agreement. All ad hoc charges from the
vendor of the PBX Switch to reconfigure telephones or to set
up new users will be charged to the party who initiated such
service, and shall be invoiced and paid as provided in Article
2 hereof. All costs and expenses associated with establishing
a routing tree and an auto-attendant within the PBX Switch
system to distribute calls between Design Works and Crown
during the term hereof will be shared equally (i.e., on a
50-50 basis).
(iii) Notwithstanding the foregoing, Design Works shall
keep the telephone numbers at all Design Works locations,
including its Atlanta office main number.
(h) Cell Phones. Design Works will cancel all of its AT&T cell
phone agreements, effective as of the end of the next succeeding billing period
after the Closing, and will return all AT&T cell phones to Crown on such date.
At the Closing, Design Works will receive all cell
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phones and assume all cell phone agreements of Crown with respect to Design
Works employees with any carrier other than AT&T, and Crown will assign the
agreements relating to such cell phones to Design Works.
(i) Other Computer Software and Applications. At the Closing,
certain of the computer software and applications included in the Intellectual
Property transferred to Design Works in connection with the Business will be
needed by Crown after the Closing in connection with its operation of the Infant
Business, and certain of the computer software and applications retained by
Crown after the Closing in connection with the Infant Business will be needed by
Design Works in connection with its operation of the Business. Accordingly,
after the Closing and subject to the receipt of Vendor Consents, each of the
parties hereto grants to the other party hereto a royalty-free right to
continued access to and use of such computer software and applications in
connection with the operation of the Business or the Infant Business, as the
case may be; provided, however, that nothing in this Section 1.02(i) shall be
deemed to grant Crown any right of access or use of computer software and
applications related to the EDI Services (Crown's rights with respect the EDI
Services being governed exclusively be Section 1.01 hereof). If the parties
hereto cannot obtain Vendor Consents with respect to the rights granted pursuant
to this Section 1.02(i) on or prior to the Closing Date, then Design Works and
Crown shall continue to use all reasonable efforts to obtain any such Vendor
Consents after the Closing Date until such time as such Vendor Consents have
been obtained, and each of the parties hereto will cooperate in all reasonable
respects with the other party hereto in any lawful and economically feasible
arrangement to ensure that each party hereto shall receive the benefits under
any such instrument, contract, lease or other agreement or arrangement,
including performance by the other party hereto as agent, if economically
feasible; provided that each party hereto shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefits to the extent such
party would have been responsible therefor hereunder if such Vendor Consent had
been obtained; and provided further that nothing herein shall require either
party hereto to pay or forfeit any fees or make any other type of payment to any
third party other than payments due under existing agreements in order to obtain
their Vendor Consent, it being understood that any such fees and payments which
are paid with the consent of either party hereto shall be the sole
responsibility of the consenting party. Nothing in this Section 1.02(i) shall be
deemed to modify or supersede any of the provisions of this Agreement with
respect to other computer hardware and software specifically provided for
elsewhere herein.
(j) Third Party Agreements.
(i) Design Works and Crown acknowledge and agree that
certain of the services set forth in this Section 1.02,
including certain hardware, software, equipment, computer
networks, internet service access, local and long distance
telephone service and cell phone service, the maintenance and
support of the foregoing and certain personnel associated
therewith, are provided to the parties hereto by third party
vendors in accordance with agreements (the "IT Agreements")
between Crown and such vendors. Design Works and Crown further
acknowledge and agree that after the Closing, certain of the
IT Agreements will be assumed by Design Works pursuant to the
Merger Agreement. The parties hereto have identified on
Schedule 1.02(j) attached
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hereto certain of the IT Agreements; however, the term "IT
Agreements" as used in this Agreement shall include all
agreements between Crown and Design Works and third parties
which directly relate to or support the information and
technology operations of the Business and the Infant Business.
(ii) In furtherance of its obligation under this Section
1.02, the party hereto retaining or assuming such IT
Agreements, as the case may be, shall (A) maintain such IT
Agreements in full force and effect, and (B) subject to the
receipt of the Vendor Consents (as hereinafter defined), make
available (and cause the applicable IT Agreement vendors to
make available) to the other party hereto the services
available to the providing party hereto under such IT
Agreements. To the extent necessary to grant the party hereto
receiving such services under this Section 1.02 the rights
contemplated herein under the IT Agreements, and subject to
the receipt of the Vendor Consents, the party hereto retaining
or assuming, as the case may be, the IT Agreements hereby
grants to the other party hereto an exclusive, irrevocable
sublicense of all of the retaining or assuming party's
licensed rights under the IT Agreements during the term of
this Agreement.
(iii) The party hereto retaining or assuming such IT
Agreements shall use its commercially reasonable efforts to
obtain appropriate written authorizations ("Vendor Consents")
permitting such party to make available to the other party
hereto the services described in this Section 1.02 under the
IT Agreements. The party hereto retaining or assuming such IT
Agreements shall be responsible for making any payments
associated with obtaining the Vendor Consents, and shall
provide the other party hereto with written evidence of having
obtained such Vendor Consents no later than fifteen (15) days
following the Closing.
(iv) From and after the Closing Date, the party hereto
retaining or assuming such IT Agreements shall pay all
royalties, license fees and other contract charges and fees
due under the IT Agreements, and the other party hereto shall
pay the retaining or assuming party hereto for such other
party's use of the services as set forth in this Agreement.
SECTION 1.03 CLAIMS AND RECORD RETENTION.
(a) Claims Processing - Customer Deductions. After the Closing and
for a period of twelve consecutive months, Design Works will cooperate with
Crown in all respects to provide documentation with respect to customer issues
arising after the Closing. During such period, to the extent customer deductions
are made from payments to Design Works that relate to Crown's woven products
division, Design Works will provide sufficient documentation to Crown to show
that such deductions relate to such woven products division, and Crown will
reimburse Design Works for the full amount of such deductions by the 15th day of
the calendar month following the calendar month during which such deductions
were incurred. Also during such period, to the extent customer deductions are
made from payments to Crown that relate to the Business, Crown will provide
sufficient documentation to Design Works to show that such deductions relate to
the Business, and Design Works will reimburse Crown by the 15th day of the
following calendar
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month the full amount of such deductions. Design Works and Crown each agrees to
promptly remit to the other party hereto payments meant for the other party and
shall promptly notify the other party of questionable payments so that both
parties can determine who the rightful payee is. To the extent that either party
hereto receives returns of inventory from the customers of the other party
hereto, the parties agree to deliver such inventory returns to the party hereto
that owns such inventory returns at the following locations:
If to Design Works, to: Design Works, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Crown, to: Crown Crafts, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All freight and handling charges (including insurance) associated with such
inventory returns shall be paid by the party hereto that properly owns the
inventory being returned.
(b) Corporate Records Retention.
(i) All monthly rental costs associated with the storage
spaces located in Calhoun, Georgia at Bryan's Mini-Warehouses
and at Pine Street Rentals for storage of Crown's and Design
Works' corporate records, or any additional or substitute
facilities used for such purposes so long as the aggregate
cost of such storage spaces to Crown hereunder does not
increase above the rate paid by Crown for the current
facilities (collectively, the "Records Storage Space") will be
paid by Design Works, and all leases and rental agreements
with respect to the Records Storage Space will be assumed by
Design Works at the Closing. For so long as any Crown
corporate records are maintained at the Records Storage Space,
upon presentation of a monthly invoice from Design Works to
Crown for an amount equal to one half of the monthly rent for
the Records Storage Space, Crown will reimburse Design Works
for one half of such rental costs.
(ii) At Crown's request, Design Works will assist Crown in
locating Crown's corporate records at the Records Storage
Space. Crown agrees to pay Design Works the Maintenance Rate
for all time spent by Design Works employees pursuant to this
Section 1.03(b)(ii) using lowest rate qualified person
available on Schedule 2.01 hereto.
(iii) Beginning on the date that is six months after the
date hereof and at six-month intervals thereafter during the
term of this Agreement, Design Works will review the corporate
records of Crown located at the Records Storage Space to
determine if any corporate records may be disposed of. With
the prior written consent of Crown, Design Works will dispose
of all corporate records determined to be disposable, and
Crown will pay Design Works the Maintenance Rate for all time
spent by Design Works employees pursuant to this Section
1.03(b)(iii) using
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the lowest rate qualified person available on Schedule 2.01
hereto, plus one-half of all other costs associated with the
disposal thereof, including temporary labor, disposal fees and
landfill fees. All corporate records in electronic or hard
copy form will be maintained for the time periods prescribed
by the rules and regulations of the Internal Revenue Service.
(iv) Crown agrees to relocate all Crown corporate records
within twelve months of the Closing Date.
SECTION 1.04 HUMAN RESOURCES.
(a) Transition Services. For a period of three months after the
Closing, Design Works will make available to Crown the services of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ to assist Crown with the transition of its HR support services after the
Closing (not to exceed twenty hours per week). Design Works will also make ▇▇.
▇▇▇▇▇▇▇ available to Crown for a period of one year after the Closing to
maintain Crown's personnel records and files, so long as such services do not
interfere with her duties for Design Works. The parties hereto agree that all
time spent by Design Works' HR personnel in the performance of duties for Crown
hereunder will be charged to Crown at the Maintenance Rate. Design Works will
also provide to Crown at no additional charge to or expense of Crown one
complete copy of Crown's HR database in Design Works' standard flat-file format.
All costs associated with any queries, copies or extracts requested by Crown
after the delivery of such complete copy will be charged to Crown at the Project
Rate.
(b) Contracted HR Services. After the Closing, Design Works and
Crown will each separately contract with ▇▇▇▇▇▇ & Co, Crown's outside benefits
consultant prior to the Closing, or another benefits consultant of its choosing,
to create and maintain, or to obtain coverage for, healthcare and welfare
benefits plans, including 401(k) plans, meeting its needs. The costs, fees and
expenses of ▇▇▇▇▇▇ & Co or such other benefits consultant after the Closing will
be borne by the party hereto receiving such services based on its separate
agreement with ▇▇▇▇▇▇ & Co. or such other benefits consultant, and neither party
hereto shall be responsible for any obligation of the other party hereto with
respect to the healthcare or welfare benefits of such other party after the
Closing.
SECTION 1.05. ACCOUNTING AND FINANCIAL SERVICES. Schedule 1.05 attached
hereto sets forth a list of the accounting and finance staff of Design Works
available to provide services to Crown after the Closing. After the Closing and
through the date that Crown's books are closed and financial statements have
been prepared for the period from the end of the fiscal year prior to the
Closing through the date of the Closing, Design Works' accounting staff will
provide to Crown accounting and financial support services to enable Crown's
books to be so closed as of the Closing Date and will provide all assistance
reasonably requested by Crown to prepare and finalize financial statements for
such period. In exchange for the services provided in this Section 1.05, Crown
will pay Design Works a fee of $5,500 per week, payable weekly within ten
calendar days of the end of each such week (with a minimum aggregate payment to
Design Works of $33,350.00); provided, however, that if the times for the
performance of such services exceed the times set forth on Schedule 1.05 hereto,
then the parties hereto will negotiate in good faith an increase to the cost of
such services beyond such times or either party hereto may
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terminate services hereunder. All staff allocations and time conflicts shall be
reviewed and agreed to by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and representatives of Crown before any
final determination shall be made. The $5,500 weekly rate set forth above is
predicated upon the continuing employment of ▇▇▇▇ ▇▇▇▇▇▇ by Crown; if ▇▇. ▇▇▇▇▇▇
shall cease to be so employed, Design Works shall be entitled to an increased
weekly rate, which rate shall be determined by the mutual agreement of the
parties hereto. In addition, to the extent that any Crown employees remain on
the payrolls processed by Design Works' employee, ▇▇▇▇▇ ▇▇▇▇▇▇▇ (or her
replacement), after the Closing, Crown will pay Design Works at the end of each
pay period processed by ▇▇. ▇▇▇▇▇▇▇ (or her replacement) during the term hereof
an amount equal to $2,500 multiplied by a fraction, the numerator of which is
the number of Crown employees on the payroll and the denominator of which is the
total number of employees of Crown and Design Works; provided, however, that if
the Closing occurs at any time prior to the last day of any pay period, such
payment obligation shall not commence until the end of the pay period
immediately following the pay period during which the Closing occurs. Any
additional accounting and financial services performed by Design Works or Crown
personnel for the other party hereto (including research, preparation time,
meetings and conferences) will be charged to the party receiving such services
at the Maintenance Rate for all employee time spent up to the first two hours
and at the Project Rate for all employee time spent after the first two hours.
If either party shall request conferences or meetings hereunder, all time spent
by the other party's employees on such matter (including research and
preparation time) will be charged to the requesting party at the Maintenance
Rate for any request that takes one hour or less of the work time of an employee
and at the Project Rate for any request that takes more than one hour of the
work time of an employee (unless such time is chargeable to the requesting party
under any other section of this Agreement).
SECTION 1.06 LEGAL DEPARTMENT. Crown's in-house counsel and legal
department will remain with Crown after the Closing. Crown agrees to provide the
services of such counsel and legal department to Design Works for a period of
three months after the Closing, so long as not more than 25% of such counsel's
and legal department's work time is spent performing services for Design Works
hereunder. Any requests for services by Design Works that require one hour or
less of work time will be charged at the Maintenance Rate, and all requests for
services by Design Works that require more than one hour of work time will be
charged at the Project Rate.
SECTION 1.07 MISCELLANEOUS OFFICE EXPENSES. Office supplies at Crown's
Atlanta office will become the property of Design Works at the Closing. Crown
may use reasonable amounts of such office supplies at no charge during the
period that Crown and Design Works share the Atlanta office space.
SECTION 1.08 MATTERS RELATING TO ▇▇▇▇▇ AND SAP. All outstanding
obligations of Crown to ▇▇▇▇▇ Consulting, Inc. ("▇▇▇▇▇") and SAP prior to the
Closing that arise out of or relate to the acquisition, modification and
installation of SAP's enterprise-wide software shall remain an obligation of
Crown after the Closing. After the Closing and upon Crown's request, Design
Works will provide services of its employees for a reasonable time to consult
with counsel, negotiate settlement agreements or for any other purpose relating
to the subject matter of this Section 1.08. All files and documents related to
such matters in the possession of any Design Works employee will be turned over
to Crown at the Closing. All time spent by such Design Works employees on such
matters (other than all time spent by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ during the
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first 30 days after the Closing negotiating settlements with ▇▇▇▇▇ and/or SAP,
which will be provided to Crown free of charge) will be charged to Crown at the
Maintenance Rate for any request that takes one hour or less of the work time of
a Design Works employee and at the Project Rate for any request that takes more
than one hour of the work time of a Design Works employee. If Crown settles its
disputes with ▇▇▇▇▇ and SAP with respect to unpaid invoices during the six month
period following the Closing Date, Crown and Design Works agree to share equally
(i.e., on a 50/50 basis) all of the settlement proceeds paid to Crown as a
result of such settlement until Crown has paid $100,000 of such settlement
proceeds to Design Works, after which all additional settlement proceeds shall
be retained by Crown.
SECTION 1.09 CONVERSION TO CROWN'S SYSTEMS; SHARING OF INFORMATION.
(a) Conversion. Immediately upon the execution and delivery of
this Agreement, Design Works will reasonably cooperate with Crown in its
formulation of a reasonable plan to convert certain of the Shared Services to
its systems or the systems of third parties designated by Crown (the
"Conversion") at the sole cost and expense of Crown. Representatives of the
parties hereto may (at either party's request) meet periodically to review
Crown's Conversion plan hereunder and may regularly communicate on the progress
of the Conversion, the feasibility of the Conversion dates set forth in such
Conversion plan and such other matters which may affect the smooth and efficient
transition of such Shared Services to Crown hereunder. All issues and problems
experienced by Crown during the Conversion will be identified at such review
meetings, and the parties hereto will attempt to resolve all such issues and
problems thereat. If the parties hereto cannot resolve such issues and problems
at such review meetings, such issues and problems will be submitted to the
President or the Chief Financial Officer of each of the parties hereto, who will
attempt to resolve such issues and problems within three business days. If such
officers cannot resolve such issues and problems within such three-business day
period, then the resulting Dispute (as hereinafter defined), if any, will be
subject to the terms of Article 8 hereof. Each of the parties hereto will
cooperate with all reasonable requests of the other party made necessary to
effectuate the Conversion in a timely and efficient manner. All time spent by
Design Works or Crown employees on such matters (including research, meetings,
conferences and preparation therefor) will be charged to the party requesting
such services at the Maintenance Rate for any request that takes one hour or
less of the work time of a Design Works or Crown employee and at the Project
Rate for any request that takes more than one hour of the work time of a Design
Works or Crown employee.
(b) Operational Information. Each of the parties hereto shall
provide to the other party hereto, unless prohibited by law, the IT Agreements
or the Vendor Consents to which such party has access as of the Closing to
permit such other party hereto to have access to the Shared Services and for
Crown to commence the Conversion. Each of the parties hereto acknowledges and
agrees to comply with each of the covenants of the IT Agreements with respect to
the protection of security and operational information and will not disclose
such information except in accordance therewith. All program source code, tables
or objects stored in the AS-400 program libraries shall become and remain the
sole property of Design Works. If, prior to the Closing, Crown receives portions
of such source code in connection with the Conversion of Crown's EDI Services,
Crown may continue to have access to such portions of such source code after the
Closing.
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SECTION 1.10 SPECIAL SERVICES. Neither Crown nor Design Works shall
have any obligation whatsoever to provide any services or items not specifically
included herein. During the term of this Agreement, the parties hereto will
consult with each other in good faith, as required, with respect to the
furnishing of project work, special or additional services, extraordinary items
and the like by either of the parties hereto. However, no work, services or
items shall be done expect pursuant to a written agreement between the parties
hereto outlining the scope of the work to be done, signed by the Chief Financial
Officers of the parties hereto, and setting forth the estimated cost of such
projects, services or items under this Section 1.10.
SECTION 1.11 PERFORMANCE OBLIGATIONS.
(a) Vendor Interface. During the term of this Agreement, each of
the parties hereto will be responsible for interfacing with the vendors and
service providers under the IT Agreements to which it is a party with respect to
any performance issues which may arise in connection therewith, and such party
will diligently work with such vendors and service providers and the other party
hereto to resolve any disputes or concerns relating to performance under the IT
Agreements in a timely and efficient manner and to the reasonable satisfaction
of such other party hereto.
(b) Proving Party's Performance. The parties hereto acknowledge
and agree that the proper performance of their respective obligations with
respect to the Shared Services is critical to the successful operation of the
Business and the Infant Business by Design Works and Crown, respectively, after
the Closing. Notwithstanding the foregoing, each party hereto acknowledges that
the other party hereto is not in the business of providing the Shared Services
and that, except as otherwise set forth herein, such party does not, and will
not, warrant the performance of the Shared Services to the other party hereto.
In the event of an error or omission in the provision of any of the Shared
Services, the parties hereto agree to assist each other in promptly resolving
such error, omission or failure. Each of the parties hereto shall make the
Shared Services available to the other party hereto substantially in the same
manner as such services were provided to Crown prior to the Closing. Each of the
parties' obligations to provide any Shared Service hereunder is conditioned upon
it obtaining the Vendor Consents, as well as all necessary governmental
licenses, approvals and permits required to provide such Shared Services. In the
event that either of the parties hereto fails to reasonably perform its
obligations under this Agreement, and such failure results in a material adverse
impact to the other party hereto in its operation of the Business or the Infant
Business, as the case may be, such party shall notify the other party hereto in
writing of such failure of performance. If such failure continues for ten days
following receipt of such written notice, then the party sending such notice may
submit such failure of performance and the facts and circumstances underlying
such failure to the President or the Chief Financial Officer of each of the
parties hereto, who will attempt to cure such failure or to agree to a plan to
cure such failure within ten days thereafter. If such officers cannot cure such
failure or agree to a plan to cure such failure within such ten-day period, then
the party sending such notice shall have the right, immediately upon written
notice to the other party hereto, to (A) terminate this Agreement and be
relieved of any further obligations (including payment obligations) to the
failing party hereunder; and (B) engage a third party or parties (including,
without limitation, the vendors and service providers under the IT
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Agreements) to perform the Shared Services and other obligations of the
Providing Party hereunder until the expiration of the term for providing such
Shared Service (provided that the failing party shall have no responsibility for
the fees or expenses associated with the performance of such Shared Services by
such third party or parties).
ARTICLE 2. FIXED CHARGES, EXPENSES AND FEES.
SECTION 2.01 FIXED CHARGES AND ADDITIONAL EXPENSES.
(a) Maintenance and Project Rates. Except as otherwise provided
herein, certain of the employees of Crown and Design Works who perform services
hereunder will be billed to the other party hereto at either the Maintenance
Rate or the Project Rate in accordance with the provisions of Article 1 hereof.
As used in this Agreement, (i) the term "Maintenance Rate" shall mean the hourly
rate per employee set forth in the Column 1 of Schedule 2.01 attached hereto,
and (ii) the term "Project Rate" shall mean the hourly rate per employee set
forth in Column 2 of Schedule 2.01 attached hereto.
(b) Payment Terms. Unless otherwise noted, all amounts due between
the parties hereto shall be invoiced and paid as follows:
(i) The party providing the particular Shared Service
will prepare an invoice for each separate Shared Service by
the 30th day of the calendar month following the calendar
month during which the performance of such Shared Service
occurred and will submit such invoice to the Chief Financial
Officer of the other party hereto. The amount payable pursuant
to such invoice shall be due and payable in full by the other
party hereto on net 15-day terms. All special projects
pursuant to Section 1.10 hereof will be progress-billed.
(ii) If any amounts due hereunder are not paid in full
when due, and such failure continues for ten business days
after receipt of written notice of such failure to pay by the
non-breaching party hereto, then the non-breaching party may
terminate the Shared Service for which payment was not
received, terminate this Agreement and be relieved of any
further obligations (including payment obligations) to the
breaching party hereunder and accelerate all future payments
hereunder for the Shared Service for which payment was not
received.
(c) No Obligation without Vendor Consent. Notwithstanding the
foregoing, but subject to the terms of Section 1.02(i) hereof, the parties'
respective obligations to pay for the Shared Services hereunder is conditioned
on the party providing such Shared Service obtaining the Vendor Consents
required by Section 1.02(j) above.
ARTICLE 3. LIMITATIONS OF LIABILITY/WARRANTY.
SECTION 3.01 NO LIABILITIES OR WARRANTIES. Each of the parties hereto
agrees that neither the other party hereto nor any of its directors, officers,
agents, representatives and employees shall have any liability, whether direct
or indirect, in contract or tort or otherwise, to
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such party for or in connection with the Shared Services rendered or to be
rendered pursuant to this Agreement, the transactions contemplated hereby, or
any actions or inactions of the such other party or any of its directors,
officers, agents, representatives and employees in connection therewith, except
for Damages (as hereinafter defined) which have resulted from the fraud, gross
negligence or willful misconduct of such other party hereto or any of its
directors, officers, agents, representatives and employees relating thereto.
EXCEPT AS SET FORTH HEREIN, EACH OF THE PARTIES HERETO MAKES NO REPRESENTATIONS
OR WARRANTIES, EXPRESS OR IMPLIED, AND EACH OF THE PARTIES HERETO SPECIFICALLY
DISCLAIMS, ANY IMPLIED WARRANTIES, WITH RESPECT TO THE SHARED SERVICES OR THE
EMPLOYEES TO BE PROVIDED HEREUNDER, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
SECTION 3.02 LIMITATION. In no event shall either party hereto be
liable to the other for special, punitive, incidental or consequential damages,
including, without limitation, lost profits or loss of business reputation, that
arise out of or relate in any way to this Agreement.
SECTION 3.03 THIRD PARTY CONSULTANTS. If, because of employee turnover,
either party hereto is required to retain a third party consultant to render
services to the other party hereunder, the party retaining such consultant shall
be entitled to invoice the other party, and the other party shall pay, that
portion of the costs and expenses of such third party consultant that exceed the
costs of the employee for whom such consultant substitutes.
ARTICLE 4. INTEGRITY AND CONFIDENTIALITY OF DATA.
SECTION 4.01 ACCESS TO AND USE OF DATA. During the term of this
Agreement, and subject to the terms of any Vendor Consent, the parties hereto
shall continue to have access to and the use of all records, data files (and the
data contained therein other than computer software source code or any data
files pertaining thereto except as set forth in Section 1.09(b) hereof and in
Schedule 1.01 hereto), input materials, reports and other materials
(collectively, the "Data") received, computed, developed, processed or stored by
or for Crown prior to the Closing Date and all Data received, computed,
developed, processed or stored for either of the parties hereto by, or provided
by either of the parties hereto to, the other party hereto pursuant to this
Agreement after the Closing Date.
SECTION 4.02 CONFIDENTIALITY. The parties hereto acknowledge that, in
the course of the performance of their respective obligations pursuant to this
Agreement, each may obtain certain confidential or proprietary information of
the other or its affiliates or customers, including, without limitation, the
Data and the terms and conditions of this Agreement. Each party hereto hereby
agrees that all information communicated to it by the other party hereto, its
affiliates or customers, whether before or after the Closing, shall be kept and
was received in strict confidence and shall be used only in accordance with this
Agreement, and shall not be disclosed by the other party, its agents or
employees without the prior written consent of the non-disclosing party. In the
event that either party hereto either determines on the advice of its counsel
that it is required to disclose any information pursuant to applicable law or
receives any demand under lawful process to disclose or provide information of
the other party hereto that is
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subject to the confidentiality provisions hereof, such party shall notify the
other party hereto prior to disclosing and providing such information and shall
cooperate at the expense of the requesting party in seeking any reasonable
protective arrangements requested by such other party hereto. Subject to the
foregoing, the party hereto that receives such request may thereafter disclose
or provide information to the extent required by such law (as so advised by
counsel) or by lawful process. Furthermore, the parties hereto shall take
reasonable steps necessary to ensure that all information and records relating
to the Business and the Infant Business are kept strictly confidential.
Notwithstanding the above, this Agreement imposes no obligation on either party
hereto with respect to information that is or becomes a matter of public
knowledge through no fault of such party, is rightfully obtained by either party
hereto from a third party not in violation of any duty of confidentiality, is
disclosed by either party hereto to a third party without a duty of
confidentiality imposed upon the third party, or is independently developed by
either party hereto without reference to any proprietary or confidential
information of the other party hereto.
SECTION 4.03 EMPLOYEE CONFIDENTIALITY AGREEMENTS. Each party hereto
shall cause all of its employees and all other agents and representatives that
will have access to the Data of the other party hereto or any of its other
confidential or proprietary information after the Closing to sign a
confidentiality agreement restricting their ability to disclose the Data or
other confidential or proprietary information of such other party hereto without
the prior written consent thereof.
ARTICLE 5. INDEMNIFICATION.
SECTION 5.01 PROMISE TO INDEMNIFY. Each party hereto (referred to in
this Article 5 as the "Indemnifying Party") covenants and agrees to defend,
indemnify and hold harmless the other party hereto (referred to in this Article
5 as the "Indemnified Party") from and against all losses, liabilities,
obligations, costs, expenses, damages or judgments of any kind or nature
whatsoever (including, without limitation, reasonable attorneys' fees and other
costs and expenses incurred in connection therewith) (collectively, "Damages")
arising out of or resulting from (a) any breach of or failure by the
Indemnifying Party to comply with any agreement or covenant set forth in this
Agreement or any schedule or exhibit hereto (other than those, if any, the
performance of which shall have been waived in writing by the Indemnified
Party); (b) any error, omission or wrongful conduct of the Indemnifying Party in
the performance of the IT Agreements; or (c) any claim by any of the Indemnified
Party's employees that arises out of or is based upon any act, error or omission
by the Indemnifying Party; provided, however, that nothing in this Section 5.01
shall create any liabilities or warranties expressly excluded pursuant to
Section 3.02 hereof.
SECTION 5.02 PROCEDURE FOR THIRD PARTY CLAIMS.
(a) If the Indemnified Party receives notice of the assertion by
any third party of any claim or of the commencement by any such third person of
any action, suit or proceeding (an "Action"), or if the Indemnified Party
determines the existence of any such claim or the commencement by any such third
party of any Action, whether or not the same shall have been asserted (any such
claim or Action being referred to herein as an "Indemnifiable Claim") with
respect to which the Indemnifying Party is or may be obligated to provide
indemnification, the
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Indemnified Party shall notify the Indemnifying Party in writing (the "Claim
Notice") of the Indemnifiable Claim within thirty days of the assertion thereof,
and within ten days of receipt of notice of the filing of any Action based upon
such assertion, or, with respect to a claim not yet asserted against the
Indemnified Party, promptly upon the determination by an executive officer of
the Indemnified Party of the existence of the same; provided, that the failure
to provide such notice shall not relieve or otherwise affect the obligation of
the Indemnifying Party to provide indemnification hereunder, except to the
extent that any Damages directly resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty days after receipt of
the Claim Notice to undertake, conduct and control, through counsel of its own
choosing, and at its expense, the settlement or defense thereof, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith if such cooperation is so requested and the request is reasonable,
provided that the Indemnifying Party shall hold the Indemnified Party harmless
from all of its out-of-pocket expenses, including reasonable attorneys' fees
(including the allocated costs and expenses of in-house counsel and legal
staff), incurred in connection with the Indemnified Party's cooperation. If the
Indemnifying Party assumes responsibility for the settlement or defense of any
such claim, (i) the Indemnifying Party shall permit the Indemnified Party to
participate in such settlement or defense through counsel chosen by the
Indemnified Party (subject to the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld); provided that, other than in the
event of a conflict of interest requiring the retention of separate counsel, the
fees and expenses of such counsel shall not be borne by the Indemnifying Party,
and (ii) the Indemnifying Party shall not settle any Indemnifiable Claim without
the Indemnified Party's consent, which consent shall not be unreasonably
withheld or delayed if the settlement involves only payment of money, and which
consent may be withheld for any reason if the settlement involves more than the
payment of money, including, without limitation, any admission by the
Indemnified Party. So long as the Indemnifying Party is vigorously contesting
any such Indemnifiable Claim in good faith, the Indemnified Party shall not pay
or settle such Indemnifiable Claim without the Indemnifying Party's consent,
which consent shall not be unreasonably withheld or delayed.
(c) If the Indemnifying Party does not notify the Indemnified
Party within thirty days after receipt of the Claim Notice that it elects to
undertake the defense of the Indemnifiable Claim described therein, the
Indemnified Party shall have the right to contest, settle or compromise the
Indemnifiable Claim in the exercise of its reasonable discretion; provided, that
the Indemnified Party shall notify the Indemnifying Party of any compromise or
settlement of any such Indemnifiable Claim.
ARTICLE 6. TERM; TERMINATION.
SECTION 6.01 TERM. The term of this Agreement shall commence
immediately upon the Closing and, unless otherwise terminated pursuant to this
Article 6, shall continue until the expiration of the longest term specified in
Article 1 hereof for the provision of the Shared Services.
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SECTION 6.02 TERMINATION. Notwithstanding the terms of Section 6.01
hereof, this Agreement may be terminated at any time prior to the expiration of
the term hereof (a) by mutual agreement of the parties hereto; or (b) by either
of the parties hereto as set forth in Sections 1.11(b) and 2.01(b)(ii) and
Article 7 hereof.
SECTION 6.03 EFFECT OF TERMINATION OR EXPIRATION. In the event of the
termination and abandonment of this Agreement pursuant to Section 6.02 hereof,
or the expiration of the term hereof in accordance with Section 6.01 hereof,
this Agreement shall become void and have no further force or effect, except
that the provisions of Articles 4, 5 and 8 hereof shall survive any such
termination and abandonment hereof.
ARTICLE 7. FORCE MAJEURE.
Any failure or omission by either party hereto in the performance of any
obligation under this Agreement shall not be deemed a breach of this Agreement
or create any liability if the same arises from any cause or causes beyond the
control of such party, including, without limitation, the following, which, for
purposes of this Agreement shall be regarded as beyond the control of each of
the parties hereto: acts of God, fire, storm, flood, earthquake, governmental
regulation or direction, acts of the public enemy, war, rebellion, insurrection,
riot, invasion, strike or lockout; provided, however, that such party shall
resume the performance hereof whenever such causes are removed. Notwithstanding
the foregoing, if such party cannot perform hereunder for a period of forty-five
days due to such cause or causes, the affected party may terminate this
Agreement by providing written notice to the other party hereto.
ARTICLE 8. DISPUTE RESOLUTION.
SECTION 8.01 ARBITRATION. If a dispute, controversy or claim
("Dispute") arises between the parties hereto relating to the interpretation or
performance of this Agreement or any documents or agreements ancillary hereto,
or a Dispute arises with respect to the grounds for the termination hereof, then
unless otherwise mutually agreed, such Dispute shall be submitted to final and
binding arbitration under the then-current Commercial Arbitration Rules of the
American Arbitration Association ("AAA") by three arbitrators in Atlanta,
Georgia. Such arbitrators shall be selected by the mutual agreement of the
parties hereto or, failing such agreement, shall be selected according to the
aforesaid AAA rules. The arbitrators will be instructed to prepare and deliver a
written, reasoned opinion stating their decision within thirty days of the
completion of such arbitration. The prevailing party in such arbitration shall
be entitled to expenses, including, without limitation, costs and reasonable
attorneys' and other professional fees, incurred in connection with such
arbitration (but excluding any costs and fees associated with prior negotiation
or mediation). The decision of the arbitrators shall be final and non-appealable
and may be enforced in any court of competent jurisdiction. The use of any
arbitration procedures will not be construed under the doctrine of laches,
waiver or estoppel to adversely affect the rights of either party hereto.
SECTION 8.02 COURT ACTION. Any Dispute regarding the following is not
required to be negotiated or arbitrated prior to seeking relief from a court of
competent jurisdiction: (a) breach of any obligation of confidentiality; (b)
infringement, misappropriation or misuse of any
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intellectual property right; or (c) any other claim where interim relief from
the court is sought to prevent serious and irreparable injury to one of the
parties hereto or to others; provided, however, that the parties to the Dispute
shall make a good faith effort to negotiate or arbitrate such Dispute, according
to the above procedures, while such court action is pending.
SECTION 8.03 CONTINUITY OF SERVICE AND PERFORMANCE. Unless this
Agreement is terminated in accordance with its terms or unless otherwise agreed
in writing, the parties hereto will continue to provide service and honor all
other commitments under this Agreement and each schedule, document and agreement
ancillary hereto during the course of dispute resolution pursuant to the
provisions of this Article 8 with respect to all matters not subject to such
Dispute.
ARTICLE 9. GENERAL PROVISIONS.
SECTION 9.01 MANAGEMENT OF THIS AGREEMENT. Crown's Chief Financial
Officer and Design Works' Chief Financial Officer shall endeavor to establish
appropriate mechanisms for the management of this Agreement.
SECTION 9.02 FURTHER ASSURANCES. Subject to Section 1.10 hereof, the
parties hereto agree to do such further acts and things, and to execute and
deliver such additional conveyances, assignments, agreements and instruments, as
either party hereto may at any time and from time to time reasonably request in
order to better assure and confirm unto each party hereto its respective rights,
powers and remedies conferred hereunder.
SECTION 9.03 EXPENSES. Except as otherwise specifically set forth in
this Agreement, each party hereto shall bear its own costs, charges and
expenses.
SECTION 9.04 ASSIGNMENT AND DELEGATION OF RIGHTS AND DUTIES. Neither
party hereto shall have the right to assign its rights or delegate its duties
hereunder without the prior written consent of the other party hereto, provided
that either party that delegates any duties hereunder remains liable for the
performance thereof. Subject to the foregoing limits, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
SECTION 9.05 RELATIONSHIP OF PARTIES. It is acknowledged and agreed by
the parties hereto that no joint venture, partnership, employment or, except as
otherwise provided herein, any other relationship is intended, accomplished or
embodied in this Agreement.
SECTION 9.06 COMMUNICATION/USE OF NAME. Except as otherwise provided
herein, each party hereto agrees not to use the name of the other party hereto
in communications with third parties, including, without limitation, advertising
or marketing material, related to this Agreement without the prior written
consent of such other party, which consent shall not be unreasonably withheld or
delayed.
SECTION 9.07 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if (a) delivered by hand, (b)
mailed by registered or certified mail (return receipt requested) (c) deposited
with a nationally recognized courier, such as
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Federal Express, for next business day delivery, or (d) telecommunicated and
immediately confirmed both orally and in writing, to the parties at the
following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which so
hand-delivered or so telecommunicated or the next business day following deposit
with such courier or on the third business day following the date on which so
mailed, if deposited in a regularly-maintained receptacle for United States
mail:
If to Design Works:
Design Works, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to (which shall not constitute notice to Design
Works):
▇▇▇▇ Moss Kline & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
1000 ▇▇▇▇▇▇▇▇▇ Road, N.E.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopier: 770-481-7210
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
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If to Crown:
Crown Crafts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to (which shall not constitute notice to Crown):
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
2700 International Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
SECTION 9.08 SOLE BENEFIT OF CROWN AND DESIGN WORKS. This Agreement is
for the sole and exclusive benefit of Crown and Design Works and shall not be
deemed to be for the direct or indirect benefit of any other person, including,
without limitation, their respective customers or employees. Neither their
respective customers nor their employees shall be deemed to be third-party
beneficiaries hereof.
SECTION 9.09 INCORPORATION OF THE IT AGREEMENTS. The parties hereto
understand and agree that the party receiving the Shared Services shall comply
with each of the confidential information and non-disclosure covenants set forth
therein; provided, however, that the parties hereto agree that the party
receiving the Shared Services is not hereby assuming any rights, duties or
obligations of the party providing the Shared Services under the IT Agreements
and is not agreeing to be bound by the provisions thereof.
SECTION 9.10 GOVERNING LAW. This Agreement shall be governed by,
construed and enforced in accordance with the internal laws of the State of
Georgia without regard to conflicts of laws principles.
SECTION 9.11 CONSTRUCTION. All article and sections headings contained
in this Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or interpretation of
this Agreement. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
text requires. All schedules attached hereto shall by this reference be deemed
to be incorporated in this Agreement as if set forth herein in full.
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SECTION 9.12 ENTIRE AGREEMENT. This Agreement and the schedules and
exhibits hereto constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof. This Agreement supersedes all prior
written and oral arrangements, agreements, or understanding with respect to the
subject matter hereof. This Agreement may not be amended except pursuant to a
writing signed by the parties hereto.
SECTION 9.13 WAIVER. Any term or provision of this Agreement may be
waived at any time by the party hereto entitled to the benefit thereof by
written instrument executed by such party. No failure of either party hereto to
exercise any power or right granted hereunder, or to insist upon strict
compliance with any obligation hereunder, and no custom or practice of the
parties hereto with regard to the terms of performance hereof, shall constitute
a waiver of the rights of such party to demand full and exact compliance with
the terms of this Agreement.
SECTION 9.14 SEVERABILITY. In the event that any provision of this
Agreement shall be found in violation of public policy or illegal or
unenforceable in law or equity, such finding shall in no event invalidate any
other provision hereof.
SECTION 9.15 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement. Executed counterparts may
be delivered via facsimile transmission.
SECTION 9.16 CAPITALIZED TERMS. Any capitalized terms not defined
herein shall have the meaning ascribed to them in the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Shared Services
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
DESIGN WORKS, INC.
By:
-------------------------------------------
Its:
-------------------------------------
CROWN CRAFTS, INC.
By:
-------------------------------------------
Its:
-------------------------------------
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EXHIBIT E
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (the "Agreement")
dated as of July 23, 2001, by and between DESIGN WORKS HOLDING COMPANY, a
Delaware corporation ("Buyer"), and CROWN CRAFTS, INC., a Georgia corporation
("Seller").
WHEREAS, Seller, Buyer, Design Works, Inc., a Delaware corporation and
wholly-owned subsidiary of Buyer ("Merger Sub"), and Crown Crafts Designer,
Inc., a Delaware corporation and wholly-owned subsidiary of Seller ("CCD"),
have entered into that certain Merger Agreement dated as of July 23, 2001 (the
"Merger Agreement"), to which a form of this Agreement is attached as Exhibit
"E," relating to the acquisition of certain assets and the assumption of
certain liabilities of the Business by Buyer through the merger of Merger Sub
with and into CCD;
WHEREAS, in order to protect the goodwill of the Business and the
other value to be acquired by Buyer pursuant to the Merger Agreement for which
Buyer is paying substantial consideration, Buyer and Seller have agreed that
Buyer's obligation to consummate the transactions contemplated by the Merger
Agreement are subject to the condition, among others, that Buyer and Seller
shall have entered into this Agreement;
WHEREAS, Buyer has separately bargained and paid additional
consideration for the covenants contained herein;
WHEREAS, Seller acknowledges that the provisions of this Agreement are
reasonable and necessary to protect the legitimate interest of Buyer and the
business and goodwill acquired by it pursuant to the Merger Agreement;
WHEREAS, Buyer acknowledges that, as a result of the transactions
contemplated by the Merger Agreement, it will have access to information and
resources that would allow it to more effectively compete with Seller and the
provisions of this Agreement are reasonable and necessary to protect the
legitimate interest of Seller and the Excluded Assets (as defined in the Merger
Agreement) and the goodwill associated therewith; and
WHEREAS, in order to induce Buyer to consummate the transactions
contemplated by the Merger Agreement, Seller is willing to enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used but not otherwise defined
herein shall have the meanings set forth below:
91
(a) "Affiliate" shall mean, with respect to any Person,
any other Person that controls or is controlled by
or is under common control with, such Person as
determined in accordance with Rule 12b-2 of the
General Rules and Regulations of the Securities
Exchange Act of 1934, as amended.
(b) "Business" shall mean the adult bedding business of
Seller and its Affiliates consisting of (i) the
▇▇▇▇▇▇ ▇▇▇▇▇ Home Product Line owned by CCD, (ii)
the Royal Sateen product line and the related
agreement with Kitan Consolidated Industries,
Limited ("Kitan"), (iii) the Kitan private label
product line primarily sold to Costco Wholesale
Corporation, (iv) the private label "I Love Daisies"
product line sold to ▇. ▇. Penney Company, Inc., (v)
the private label "Denim" product line sold to
Linens `n Things, Inc. and others, and (vi) any
discontinued adult bedding product lines which were
shipped from North Carolina.
(c) "Competitive Business" shall mean any Person engaged
in the business of designing, manufacturing,
marketing, importing, selling or distributing
Competitive Products.
(d) "Competitive Infant Business" shall mean any Person
engaged in the business of designing, manufacturing,
marketing, importing, selling or distributing
Competitive Infant Products.
(e) "Competitive Infant Products" shall mean any type of
products currently designed, manufactured,
distributed, marketed, imported, sold or distributed
by Seller in connection with the operation of the
Infant Business, without regard to (i) the prices at
which such products may be sold, (ii) any
tradenames, trademarks, brands, labels, logos or
other identifying characteristics used in selling
such products, or (iii) the types of businesses that
may purchase such products.
(f) "Competitive Products" shall mean any type of
products designed, manufactured, distributed,
marketed, imported, sold or distributed by Seller in
connection with the operation of the Business,
without regard to (i) the prices at which such
products may be sold, (ii) any tradenames,
trademarks, brands, labels, logos or other
identifying characteristics used in selling such
products, or (iii) the types of businesses that may
purchase such products.
(g) "Confidential Information" shall mean all customer
and supplier lists, marketing arrangements, business
plans, projections, financial information, training
manuals, pricing manuals, product development plans,
market strategies, internal performance statistics
and other competitively sensitive information of
Seller relating to the Business and
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not generally known by the public, other than Trade
Secrets, whether or not in written or tangible form.
(h) "Infant Business" shall mean any business conducted
by or related to ▇▇▇▇▇▇▇▇▇ Weavers, Inc., Crown
Crafts Infant Products, Inc., Hamco, Inc., Burgundy
Interamericana S.A. de C.V., Crown Crafts de Mexico
S.A. de C.V., and any infant, juvenile or retail
lines of business of Seller, including "Pillow
Buddies."
(i) "Permitted Activities" shall mean (i) owning not
more than 5% of the outstanding shares of
publicly-held corporations engaged in a Competitive
Business which have shares listed for trading on a
securities exchange registered with the Securities
and Exchange Commission or through the automatic
quotation system of a registered securities
association, or (ii) subject to this Agreement,
carrying on or transacting business with any
Competitive Business other than with respect to
Competitive Products.
(j) "Person" shall mean a natural person or any legal,
commercial or governmental entity, such as, but not
limited to, a corporation, general partnership,
joint venture, limited partnership, limited
liability company, trust, business association,
group acting in concert, or any person acting in a
representative capacity.
(k) "Protected Market" shall mean each of the United
States, Canada and Mexico.
(l) "Trade Secrets" shall mean the whole or any portion
or phase of any scientific or technical information,
design, process, procedure, formula or improvement
that is valuable and not generally known to the
competitors of the Business, whether or not in
written or tangible form.
2. NO COMPETING BUSINESS. Seller hereby agrees that for a period
of four (4) years from and after the date hereof, except as permitted by
Section 5 of this Agreement, it will not directly or indirectly, own, manage,
operate, control, invest or acquire an interest in, or otherwise engage or
participate in the establishment, management or operation of, any Competitive
Business in any Protected Market, without regard to (A) whether the Competitive
Business has its office, manufacturing or other business facilities within any
Protected Market, or (B) whether any activity of Seller referred to above
itself occurs or is performed within any Protected Market.
3. NO INTERFERENCE WITH THE BUSINESS. Seller hereby agrees that
for a period of two (2) years from and after the date hereof, except as
permitted by Section 5 of this Agreement, Seller will not, directly or
indirectly, solicit, induce or influence any customer, supplier, lender, lessor
or any other person that has a business relationship with the Business in any
Protected Market, or which had on the date of this Agreement a business
relationship with the Business in any Protected Market, to discontinue or
reduce the extent of such relationship with the Business in any Protected
Market; provided, however, that notwithstanding the foregoing, Seller agrees
that for a period of three (3) years from and after the date hereof Seller will
not, directly or
93
indirectly, engage in any transaction or conduct any business (including
Permitted Activities) with those Persons identified on Exhibit A attached
hereto, without the prior written consent of Buyer, which consent will not be
unreasonably withheld or delayed; provided, however, that, in the event Seller
enters into a licensing agreement with ▇▇▇▇▇▇ ▇▇▇▇▇, such supplier list shall
be unrestricted as to use for ▇▇▇▇▇▇ ▇▇▇▇▇ products.
4. NO DISCLOSURE OF PROPRIETARY INFORMATION.
(a) Seller hereby agrees that it will not, directly or
indirectly, disclose to anyone, or use or otherwise
exploit for its own benefit or for the benefit of
anyone other than Buyer, any Trade Secrets
(including the aforementioned supplier list) for so
long as they remain Trade Secrets, except as
permitted by Section 5 of this Agreement.
(b) Seller hereby agrees that for a period of two (2)
years from and after the date of this Agreement it
will not, directly or indirectly, disclose to
anyone, or use or otherwise exploit for its own
benefit or for the benefit of anyone other than
Buyer, any Confidential Information, except as
permitted by Section 5 of this Agreement.
5. PERMITTED ACTIVITIES. The restrictions set forth in Sections
2, 3 and 4 of this Agreement shall not apply to Permitted Activities (except as
otherwise expressly provided in Section 3) or to actions taken by Seller to the
extent that such actions are expressly approved by Buyer in writing.
6. BUYER'S RESTRICTIONS.
(a) Buyer hereby agrees that for a period of four (4)
years from and after the date hereof, except as
otherwise permitted by this Section 6 of this
Agreement or as expressly approved by Seller in
writing, it will not, directly or indirectly, own,
manage, operate, control, invest or acquire an
interest in, or otherwise engage or participate in
the establishment, management or operation of, any
Competitive Infant Business in any Protected Market,
without regard to (A) whether the Competitive Infant
Business has its office, manufacturing or other
business facilities within any Protected Market, or
(B) whether any activity of Buyer referred to above
itself occurs or is performed within any Protected
Market.
(b) Buyer hereby agrees that for a period of two (2)
years from and after the date hereof, except as
otherwise permitted by this Section 6, Buyer will
not, directly or indirectly, solicit, induce or
influence any customer, supplier, lender, lessor or
any other person that has a business relationship
with the Infant Business in any Protected Market, or
which had on the date of this Agreement a business
relationship with the Infant Business in any
Protected Market, to discontinue or reduce the
extent of such relationship with the Infant Business
in any Protected Market.
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(c) Buyer hereby agrees that for a period of four (4)
years from and after the date hereof, Buyer will not
directly or indirectly purchase, sell or distribute
infant blankets or throws made by those current
suppliers of such products to Seller set forth on
Exhibit B attached hereto and incorporated herein by
this reference, nor act as an agent for any such
supplier with regard to selling or distributing such
infant blankets or throws. Buyer specifically
authorizes Seller to use Sabtex as Seller's agent
provided that Sabtex is specifically instructed and
signs an agreement in a form that is mutually
satisfactory to both Seller and Buyer that states
that Seller cannot use any ▇▇▇▇▇▇ ▇▇▇▇▇ resources
without Buyer's written authorization.
(d) Notwithstanding the foregoing, Buyer may (i) own not
more than 5% of the outstanding shares of
publicly-held corporations engaged in a Competitive
Infant Business which have shares listed for trading
on a securities exchange registered with the
Securities and Exchange Commission or through the
automatic quotation system of a registered
securities association, (ii) carry on or transact
business with any Competitive Infant Business other
than with respect to Competitive Infant Products, or
(iii) in the event that Seller fails, for any
reason, to enter into a ▇▇▇▇▇▇ ▇▇▇▇▇ license with
respect to Infant Business on or before December 31,
2002, then Buyer may enter into such a license with
▇▇▇▇▇▇ ▇▇▇▇▇ and none of the restrictions set forth
in this Section 6 shall apply to Buyer with respect
to products covered by such license.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller represents
and warrants that this Agreement is a legal, valid and binding obligation
enforceable against Seller in accordance with its terms. Buyer represents and
warrants that this Agreement is a legal, valid and binding obligation,
enforceable against Buyer in accordance with its terms. Buyer agrees to assist
Seller in obtaining a ▇▇▇▇▇▇ ▇▇▇▇▇ license with respect to Infant Business.
Buyer will provide ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ for a reasonable time on a reimbursement of
expense basis only to help Seller obtain the such ▇▇▇▇▇▇ ▇▇▇▇▇ license. Such
reasonable time shall not exceed one (1) business day per month of ▇▇▇▇▇
▇▇▇▇▇▇▇▇'▇ time between the date hereof and the execution of such license
agreement or June 30, 2002, whichever shall first occur.
8. WAIVERS. Neither party will be deemed as a consequence of any
act, delay, failure, omission, forbearance or other indulgences granted from
time to time by it, or for any other reason (i) to have waived, or to be
estopped from exercising, any of its rights or remedies under this Agreement or
(ii) to have modified, changed, amended, terminated, rescinded, or superseded
any of the terms of this Agreement.
9. INJUNCTIVE RELIEF. Each party acknowledges (i) that any
violation of this Agreement will result in irreparable injury to the other
party, (ii) that damages at law would not be reasonable or adequate
compensation to such other party for violation of this Agreement and (iii) such
other party shall be entitled to have the provisions of this Agreement
specifically enforced by preliminary and permanent injunctive relief without
the necessity of proving actual
95
damages and without posting bond or other security as well as to an equitable
accounting of all earnings, profits and other benefits arising out of any such
violation.
10. NOTICES. All notices and other communications under this
Agreement shall be in writing and may be given by any of the following methods:
(i) personal delivery; (ii) facsimile transmission; (iii) registered or
certified mail, postage prepaid, return receipt requested; or (iv) overnight
delivery service requiring acknowledgment of receipt. Any such notice or
communication shall be sent to the appropriate party at its address or
facsimile number given below (or at such other address or facsimile number for
such party as shall be specified by notice given hereunder):
TO SELLER:
Crown Crafts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President
with a copy to (which shall not constitute notice to Seller):
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
TO BUYER:
Design Works Holding Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
with a copy to (which shall not constitute notice to Buyer):
Sims, Moss, ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
1000 ▇▇▇▇▇▇▇▇▇ Road, N.E.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
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All such notices and communications shall be deemed received upon (i) actual
receipt thereof by the addressee, (ii) actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt, or (iii) in the
case of a facsimile transmission, upon transmission thereof by the sender and
confirmation of receipt. In the case of notices or communications sent by
facsimile transmission, the sender shall contemporaneously mail a copy of the
notice or communication to the addressee at the address provided for above;
provided, however, such mailing shall in no way alter the time at which the
facsimile notice or communication is deemed received.
11. SUCCESSORS IN INTEREST. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their successors and
assigns, and any reference to a party hereto shall also be a reference to any
such successor or assign.
12. NUMBER; GENDER. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
13. CAPTIONS. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise
specified to the contrary, all references to Sections are references to
Sections of this Agreement.
14. CONTROLLING LAW; INTEGRATION; AMENDMENT. This Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of Georgia without reference to Georgia's choice of law rules.
This Agreement and the documents executed pursuant hereto or in connection
herewith supersede all negotiations, agreements and understandings among the
parties with respect to the subject matter hereof and constitutes the entire
agreement between the parties hereto. This Agreement may not be amended,
modified or supplemented except by written agreement of the parties hereto.
15. SEVERABILITY. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be
ineffective, to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction will not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by law, the parties hereto waive any provision of law which renders any such
provision prohibited or unenforceable in any respect. In the event that any
provision of this Agreement should ever be deemed to exceed the time,
geographic, product or any other limitations permitted by applicable law, then
such provision shall be deemed reformed to the maximum extent permitted by
applicable law.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
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17. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in
this Agreement is intended or shall be construed, to confer upon or give any
person other than the parties hereto, and their successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, or result in such person being deemed a third party beneficiary of
this Agreement.
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IN WITNESS WHEREOF, Buyer and Seller have each caused this Agreement
to be duly executed and delivered on its behalf by an officer thereunto duly
authorized, all as of the date first above written.
CROWN CRAFTS, INC.
By:
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Its:
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DESIGN WORKS HOLDING COMPANY
By:
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Its:
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